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[Markets] "Separatists Are Not People": Explosive AP Footage Of Ukrainian Far-Right "Summer Camp" For Kids

Years after a wave of independent media articles and analysts began detailing the neo-Nazi roots and ideology of some of the chief Ukrainian paramilitary groups behind the Kiev putsch in 2014, a rare Associated Press article has spotlighted a Ukrainian summer camp that teaches kids to hate and kill pro-Russian Ukrainians

The AP story begins shockingly enough:

The campers, some clad in combat fatigues, carefully aim their assault rifles. Their instructor offers advice: Don’t think of your target as a human being.

So when these boys and girls shoot, they will shoot to kill.

AP journalists and photographers observed the far-right "summer camp". via AP

The Ukrainian far-right party ‘Svoboda’ is hosting the camp called the "Temper of Will" where children as young as eight receive weapons training while being indoctrinated against "Russian aggression" as well as the "perversions" of the West like diversity and multiculturalism. Among the slogans the AP documented the children being exposed to include “White Europe is Our Goal.”

But perhaps the only truly shocking thing is that the mainstream would actually dive deep on a subject that exposes some of the very groups that receive both political and in some cases military support from the United States and Europe.

After all, the very militia running what is essentially a neo-Nazi and anti-Russian xenophobic camp is under a political party that holds seats in the Ukrainian parliament, while Andrey Parubiy - political leader of Svobada is the parliament’s chairman.

“We never aim guns at people,” instructor Yuri “Chornota” Cherkashin was quoted by the AP as teaching the campers. “But we don’t count separatists, little green men, occupiers from Moscow, as people. So we can and should aim at them.” The AP observed instructors explicitly teaching children that they should seek to wipe out pro-Russian Ukrainian separatists. 

Campers endure military boot camp style drills with formal survivalist classes and nationalist lessons in between, which further involves at times being woken in the middle of the night with blasts from stun grenades, and being expected to carry heavy AK-47 assault rifles all day. 

The AP captured raw footage of the youth training at the camp in western Ukraine:

One camper told the AP his purpose at the Svoboda sponsored camp was to "To study how to protect myself and my loved ones.” The AP confirmed that such camps have received official funding from the government's Ministry of Youth and Sports in order to receive a "national patriotic education" (more American tax dollars at work perhaps?).

Attempting to distance itself from the outright neo-Nazi slogans and ideology advanced at such camps, Ministry spokeswoman Natalia Vernigora claimed the money was distributed by a panel which looks for “signs of xenophobia and discrimination, [but] it doesn’t analyze activities of specific groups.”

Camp courses include preaching against the "decadence" of the West, according to the AP footage:

The timing of the AP's rare coverage is interesting as it comes at a moment when Washington is quietly increasing the quantity the lethal weapons and military supplies given to Ukraine.

Unfortunately, however, we don't expect such a bombshell story to continue driving headlines or make it onto prime time CNN coverage. 

Published:11/13/2018 6:09:19 PM
[Markets] Australian stocks trade cautiously after turbulent session on Wall Street Stocks in Australia were slightly lower in early trade. Overnight on Wall Street, stocks saw broad declines despite a renewal of trade talks between the U.S. and China. Oil prices fell more than 7 percent Tuesday to extend their losing streak to 12 straight sessions. Published:11/13/2018 6:09:19 PM
[Markets] Gold Ends Down But Bounces Back Above $1,200 Investing.com - Gold broke below its long-held perch of $1,200 an ounce on Tuesday before settling above that key psychological level, keeping alive bullion fans' hopes of a recovery as equity markets struggled again. Published:11/13/2018 5:39:53 PM
[Markets] This Wall Street guru was outsmarted by his own childhood stock picks Cambria Investments’ co-founder Meb Faber wrote a postcard to his father as a child outlining his fantasy portfolio.
Published:11/13/2018 5:39:53 PM
[Markets] Pound Rallies As Key Cabinet Ministers Begrudgingly Back May's Brexit Plan

After nearly two years of painstaking negotiations, UK Prime Minister Theresa May appears to have finally secured a Brexit deal that has received the begrudging support of her cabinet. The pound rallied Tuesday evening, breaking above $1.30 as traders' swallowed their doubts and embraced what, if accurate, could be a groundbreaking report from the Sun's chief political correspondent, Tom Newton Dunn.

According to Dunn, Brexit Secretary Dominic Raab, Foreign Secretary Jeremy Hunt, Home Secretary Sajid Javid, Environment Secretary Michael Gove, Transport Secretary Chris Grayling and Commons Leader Andrea Leadsom have all begrudgingly agreed to back May's 500-page plus revised Brexit plan after the prime minister pleaded with them to acquiesce "in the national interest."

Prepping the ground, The Sun has learned that Mrs May told the Cabinet’s regular weekly meeting [Tuesday] morning: “We will have to sit there as a Cabinet and consider what is in the national interest”.

A senior No10 source added that the PM will tell today’s showdown that the negotiation “has been pushed as far as it can go” and that the UK “cannot get any better deal than this one”.

The source added: “The PM is firmly of the view that the deal will not be improved by dragging it out any longer”.

[...]

They included Brexit Secretary Dominic Raab, Foreign Secretary Jeremy Hunt, Home Secretary Sajid Javid, Environment Secretary Michael Gove, Transport Secretary Chris Grayling and Commons Leader Andrea Leadsom.

The Sun understands that none of the key players are expected to resign today, with all grudgingly agreeing to go along with her plan at least for now.

The news sent the pound rallying Tuesday evening: GBP/USD climbed as much as 0.5% to 1.3036, breaching its 55-day moving average and nearing its Nov. 7 high of 1.3175.

GBP

While many members of May's conservative party, including avowed Brexiteers like Jacob Reese-Mogg, remain opposed to the current iteration of the so-called Brexit "backstop" - which calls for the entirety of the UK to remain inside the EU Customs Union until an agreement on a new trade deal can be reached, something Reese-Mogg and Boris Johnson have said risks transforming the UK into a vassal state - it appears May might finally have enough votes to push the deal through parliament.

May

Of course, resorting to the hard-sell approach of demanding votes in "the national interest" has always been part of May's plan, as details from May's strategy for selling the (then still unfinished) deal showed late last month.

Apparently, enough of May's allies agree, as the rhetoric circulating around Westminster was that, though May's draft deal "isn't perfect", it did include some key wins.

But Mrs May’s allies claimed that while the deal is not perfect, it was “the best anyone could get”, and she has pulled off some key wins.

They include throwing out a Brussels bid to enforce a customs border down the Irish Sea, and an independent panel to arbitrate over if the Irish border backstop should end when either side stops acting in good faith.

Theresa May last night pleaded with tortured Cabinet ministers to act in "the national interest" and back her compromise Brexit deal with the EU.

After meeting with her key cabinet ministers one by one on Tuesday, May successfully persuaded them to support the deal during a grueling three-hour meeting. If the cabinet formally approves the deal on Wednesday, then EU chief negotiator Michel Barnier will call for a meeting of the 28 EU leaders on Nov. 25 to finalized the draft agreement. After that, it will be put up for a vote in the House of Commons.

Aside from Reese-Mogg and BoJo, who appear to be digging in their heels, many of the Brexiteers have finally acquiesced, perhaps sensing that they had few alternatives aside from a "no-deal" Brexit. However, Democratic Unionist Party of Northern Ireland, upon whom May depends for 10 votes in Parliament, remains opposed to the draft agreement (though the text of the deal won't be released until it's formally approved by the cabinet, the highlights have already leaked).

DUP leader Arlene Foster, whose 10 MPs’ votes are crucial to Mrs May, last night declared that any new trade barriers between Northern Ireland and the UK are "not acceptable."

It would also be "democratically unacceptable" for Northern Ireland trade rules to be set by Brussels, she added.

Issuing an ominous warning to the PM, Ms Foster added: “These are momentous days and the decisions being taken will have long-lasting ramifications.

"The Prime Minister must win the support of the Cabinet and the House of Commons. Every individual vote will count."

If May fails to win support for the deal, either from her cabinet, or from Parliament, she could face a leadership challenge as simmering resentments against her administration break out into open hostility. And while the Sun and May would like us all to believe that this time is different - that she finally has a deal that might pass muster in the House of Commons - this wouldn't be the first time we've heard that, only for a "finalized" deal to collapse. Just remember: It's not over until the vote totals are in.

Published:11/13/2018 5:39:53 PM
[Markets] 5 reasons oil prices are in a history-setting tailspin Rampant expectations for a global oil supply glut sends the U.S. crude benchmark to its lowest finish of the year and pushes the global benchmark into a bear market on Tuesday, but some analysts say prices have fallen too far, too fast. Published:11/13/2018 5:08:26 PM
[Markets] Commodities Corner: 5 reasons oil prices are in a history-setting tailspin Rampant expectations for a global oil supply glut sends the U.S. crude benchmark to its lowest finish of the year and pushes the global benchmark into a bear market on Tuesday, but some analysts say prices have fallen too far, too fast.
Published:11/13/2018 5:08:26 PM
[Markets] Malaysian Prime Minister Fumes "Obviously We Have Been Cheated By Goldman Sachs"

Goldman Sachs famously avoided liability after the Libyan Investment Authority accused the bank of squandering more than $1.5 billion belonging to the country's sovereign wealth fund after the bank plied employees of the fund with "hookers and five-star hotels" before losing all of their money in complex derivatives trades. But as the DOJ ramps up an investigation into the bank's role in the sprawling 1MDB scandal (the federal government believes Goldman helped now-jailed former Malaysian Prime Minister Najib Razak siphon $4.5 billion from the fund), it's looking like the bank (and possibly its ex-CEO Lloyd Blankfein, whose involvement in the scandal was recently revealed by Bloomberg) may not escape culpability this time.

Malay

Yesterday, Goldman shares cemented their largest two-day drop since 2010, crashing to a two-year low after Malaysian Finance Minister Lim Guan Eng demanded a "full refund" of the $600 million in fees that Goldman charged Malaysia for the three 1MDB bond offerings underwritten by the bank. Eng also demanded that Goldman repay the "interest-rate differential" that Malaysia paid, which was 100 basis points over the benchmark rate. Goldman has argued that it demanded such high fees because it took many of the unrated bonds on to its balance sheet, increasing its exposure, because Malaysia said it wanted the money "right away" for "development projects". Of course, Goldman had sold the local currency bonds long before 1MDB defaulted in April 2016.

And on Tuesday, Malaysia turned up the heat when the country's 93-year-old Prime Minister Mahathir Mohamad accused Goldman bankers during an interview with CNBC of "cheating" Malaysia (though he also said the country wanted to "see the results" of the DOJ's investigation).

"There is evidence that Goldman Sachs has done things that are wrong," Mahathir said.

"Obviously we have been cheated through the compliance by Goldman Sachs people," he said, without specifying details.

The bank’s compliance controls "don’t work very well," he added.

A Goldman spokesman in Asia declined to comment on Mahathir's comments.

Meanwhile, Mahathir's appointed successor Datuk Seri Anwar Ibrahim told the Malaysian parliament that it needed to take "more aggressive measures" to reclaim the fees and losses "due to the effects on Malaysia’s image".

Former Prime Minister Najib Razak will get a fair trial: Malaysia's Mahathir from CNBC.

Speaking on Tuesday, Lim reiterated that Malaysia wanted to reclaim the fees paid to Goldman Sachs, and added that the country would seek damages as well.

"The Malaysian government will want to reclaim all the fees paid, as well as all the losses including the interest rate differential," he said.

Lim did not say how Malaysia would pursue repayment, other than that he would leave it up to the country's attorney general. Though Reuters reported back in June that the country was considering asking the DOJ to force Goldman to repay Malaysia.

Considering that the DOJ has already seized hundreds of millions of dollars' worth of assets allegedly purchased with stolen money, most of which were purportedly bought by Jho Low, the free-spending Malaysian financier at the center of the scandal, it's very possible that the DOJ might honor this request. But with prosecutors reportedly taking a close look at the role played by the bank's former co-head of investment banking Andrea Vella, per the FT, one thing is clear: This is far from over. And although Goldman has set aside hundreds of millions of dollars in legal reserves, investors will increasingly find themselves asking: Will this be enough?

Published:11/13/2018 5:08:26 PM
[Markets] Maryland Sues To Remove Whitaker As Acting Attorney General

Will the real attorney general please stand up?

As was widely expected following the publication of a New York Times story outlining the state's case, Maryland has challenged President Trump's appointment of acting Attorney General Matthew Whitaker in federal court, arguing that Deputy AG Rod Rosenstein should instead be elevated to replace Sessions.

In effect, the state is using an unusual legal maneuver to force federal judge Ellen L. Hollander of the Federal District Court for the District of Maryland - a 2010 Obama appointee - to decide who is the legitimate attorney general. Two months ago, the state's attorney general sued Jeff Sessions in his official capacity as AG, seeking a declaration from the court that ObamaCare is, in fact, constitutional, even without the tax penalty component, which was repealed by Congress. The lawsuit was an attempt to stop a federal judge in Texas from throwing out the law in its entirety.

Whitaker

Now, the state is asking Hollander to clarify who is the real attorney general so this person can stand in for Sessions as the object of Maryland's ObamaCare lawsuit. Because the government's enforcement of ObamaCare is set to change on Jan. 1 to reflect the removal of the tax penalty, the state is demanding that Hollander make this crucial ruling immediately to stop Whitaker from making illegitimate policy decisions as head of the DOJ.

This will force Hollander to rule on whether Trump's invocation of the Federal Vacancies Reform Act, a 1998 law which stipulates that a president may temporarily fill a vacant position that normally requires Senate confirmation with any senior official who has been in the department for at least 90 days. By appointing Whitaker, Trump overruled the natural line of succession at the DOJ, which would have installed Rosenstein as the acting AG until another AG candidate could win approval from the Senate.

Democrats have slammed Trump's decision to invoke the Vacancies Reform Act, which he previously used to successfully replace outgoing CFPB Director (and failed gubernatorial candidate) Richard Cordray with OMB head Mick Mulvaney. Chuck Schumer, the leader of Senate Democrats, has demanded that Trump explain why he installed Whitaker instead of handing the reins to Rosenstein.

Meanwhile, Dianne Feinstein is calling for the Senate Judiciary Committee to demand Sessions and Whitaker testify about the circumstances surrounding Sessions' ouster and Whitaker's ascension, according to the Hill.

The hearing is needed, Feinstein said, to "ensure that he will take no action to restrict or otherwise interfere with the Special Counsel’s work."

Whitaker has so far ignored Democrats' demands that he recuse himself from the Mueller probe, though he has said he wouldn't act to terminate it. GOP Sen. Majority Leader Mitch McConnell has said he would block any bills aimed at preserving the Mueller probe.

So, as the next round of Mueller indictments reportedly looms, all eyes will be on Maryland to see if a federal judge could upend the DOJ depth chart, unleashing line-of-succession chaos that could persist until Trump secures a replacement.

Published:11/13/2018 4:38:51 PM
[Markets] Oil Prices Continue to Fall, Large-Cap Stocks Close Lower on Tuesday Oil reports 12th consecutive day of declines Published:11/13/2018 4:38:51 PM
[Markets] "It's Coming..."

Authored by Sven Henrich via NorthmanTrader.com,

It’s coming. And don’t kid yourself into believing it won’t. It happens in every cycle. The economy comes out of a recession, things recover (these days with the help of central banks) and the cycle ultimately morphs into unrealistic positive expectations about the future and optimism reigns supreme as unemployment drops to cycle lows and corporate profits look great.

We just had this phase in 2018 on the heels of tax cuts and the official unemployment rate dropping to 3.7% with record earnings and over 20% profit growth thanks to tax cuts.

But then something happens at the end of each cycle. Corporations have a harder and harder time keeping pace with the high expectations. It’s called peak profit growth. One can squeeze only so much profit growth out of each cycle. And now, in this cycle, the artificially induced profit growth results in 2018 are not sustainable into 2019.

So what, you might ask, will companies do to maximize their profit growth in a challenging comparison environment, an environment where they are facing higher costs and margin pressures due to a myriad of reasons? Think rising rates, trade wars, difficulty to find new talent, etc.

You already know the answer: It’s called rightsizing, operational efficiency and a number of other clever guises designed to avoid the term layoffs. And no it doesn’t suddenly happen in size. It starts small, but it begins nevertheless. You just have to look for the signs.

Here’s one current example:

“Starbucks Corp., on a mission to boost profit and appease apprehensive investors, is dismissing about 5 percent of its non-restaurant workers.

The company said it’s laying off about 350 corporate employees, most of whom work in its Seattle headquarters. Starbucks had said in September that an unspecified number of job cuts were coming. The coffee chain is restructuring to speed innovation and pump slowing sales.”

And you get the talk of “oh how difficult it is, but we have no choice” blah blah blah:

“Today will be a difficult day for all of us,” Chief Executive Officer Kevin Johnson said in an internal email to employees viewed by Bloomberg News. “As we continue evolving our core areas of marketing, creative, product, technology and store development, we are making some significant changes to these areas, as well as other functions across our global business.”

We just have to do it right? Can’t afford those salaries of these people right?

Bullshit. These 350 people are losing their jobs in the face of this:

Starbucks is raising its dividend and increasing its share buyback program to return $10 billion more to shareholders by 2020 than previously promised, CEO Kevin Johnson told analysts on a conference call Thursday.

In November, the company announced it would return $15 billion to shareholders through buybacks and dividends through fiscal year 2020?.

Right. Oh yea, the writing is on the wall and it’s already beginning.

For reference we are here in the unemployment versus market cycle structure:

Now you may choose to believe we stay at 3.7% unemployment forever or you may not, but history suggests a reversion to the historic mean is coming.

But here’s the kicker: With the advance of AI, automation and robotics in recent years, and more technological improvement to come, when the next downcycle begins in earnest, corporations will not only have more incentive than ever to automate, they will have technological options at their disposable like never before.

Technology after all is improving rapidly and I’m sure you’ve seen some of the more recent impressive examples in the headlines:

There are a ton of studies on this from the scary to the don’t worry. I humbly submit that nobody knows how this will play out, but I do know one thing: Corporations will do what’s best for them and their primary purpose is not to guarantee you a job.

Rather it’s maximzing shareholder value. And whether you like it or not it’s buybacks and dividends while streamlining and finding ways to maximize margins.

And that may or may not impact you. Some of these changes coming will be positive and fascinating, but these changes will also impact real people with real jobs and the I think it’s fair to say the transition will be far from smooth for many.

But let there be no doubt: It’s coming. And then the cycle repeats itself.

*  *  *

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

Published:11/13/2018 4:12:24 PM
[Markets] The Wall Street Journal: Chinese auto maker Zotye plans to start U.S. sales in 2020 Chinese car maker Zotye Automobile International Co. plans to start selling a vehicle in the U.S. starting in 2020, despite new Trump administration tariffs imposed this year on vehicle imports from China.
Published:11/13/2018 4:12:24 PM
[Markets] Pat Buchanan Blasts Macron: "What Country Do You Put First?"

Authored by Patrick Buchanan via Buchanan.org,

“Patriotism is the exact opposite of nationalism; nationalism is a betrayal of patriotism.”

As for Trump’s policy of “America first,” Macron trashed such atavistic thinking in this new age:

“By saying we put ourselves first and the others don’t matter, we erase what a nation holds dearest, what gives it life, what makes it great and what is essential: its moral values.”

Though he is being hailed as Europe’s new anti-Trump leader who will stand up for transnationalism and globalism, Macron reveals his ignorance of America.

Trump’s ideas are not ideological but rooted in our country’s history.

America was born between the end of the French and Indian War, the Declaration of Independence in 1776 and the ratification of the Constitution in 1788. Both the general who led us in the Revolution and the author of that declaration became president. Both put America first. And both counseled their countrymen to avoid “entangling” or “permanent” alliances with any other nation, as we did for 160 years.

Were George Washington and Thomas Jefferson lacking in patriotism?

When Woodrow Wilson, after being re-elected in 1916 on the slogan “He Kept Us Out of War,” took us into World War I, he did so as an “associate,” not as an Allied power. U.S. troops fought under U.S. command.

After that war, the U.S. Senate rejected an alliance with France. Under Franklin Roosevelt, Congress formally voted for neutrality in any future European war.

The U.S. emerged from World War II as the least bloodied and least damaged nation because we remained out of the war for more than two years after it had begun.

We did not invade France until four years after France was occupied, the British had been thrown off the Continent, and Josef Stalin’s Soviet Union had been fighting and dying for three years.

The leaders who kept us out of the two world wars as long as they did — did they not serve our nation well, when America’s total losses were just over 500,000 dead, compared with the millions other nations lost?

At the Armistice Day ceremony, Macron declared, “By saying we put ourselves first and the others don’t matter, we erase what a nation holds dearest … its moral values.”

But Trump did not say that other countries don’t matter. He only said we should put our own country first.

What country does Emmanuel Macron put first?

Or does the president of France see himself as a citizen of the world with responsibility for all of Europe and all of mankind?

Charles de Gaulle was perhaps the greatest French patriot in the 20th century. Yet he spoke of a Europe of nation-states, built a national nuclear arsenal, ordered NATO out of France in 1966, and, in Montreal in 1967, declared, “Long live a free Quebec” — inciting French Canadians to rise up against “les Anglo-Saxons” and create their own nation.

Was de Gaulle lacking in patriotism?

By declaring American nationalists anti-patriotic, Macron has asserted a claim to the soon-to-be-vacant chair of Angela Merkel.

But is Macron really addressing the realities of the new Europe and world in which we now live, or is he simply assuming a heroic liberal posture to win the applause of Western corporate and media elites?

The realities:

In Britain, Scots are seeking secession, and the English have voted to get out of the European Union. Many Basques and Catalans wish to secede from Spain. Czechs and Slovaks have split the blanket and parted ways.

Anti-EU sentiment is rampant in populist-dominated Italy.

A nationalism their peoples regard as deeply patriotic has triumphed in Poland and Hungary and is making gains even in Germany.

The leaders of the world’s three greatest military powers — Trump in the U.S., Vladimir Putin in Russia and Xi Jinping in China — are all nationalists.

Turkish nationalist Recep Tayyip Erdogan rules in Ankara, Hindu nationalist Narendra Modi in India. Jair Bolsonaro, a Trumpian nationalist, is the incoming president of Brazil. Is not Benjamin Netanyahu an Israeli nationalist?

In France, a poll of voters last week showed that Marine Le Pen’s renamed party, Rassemblement National, has moved ahead of Macron’s party for the May 2019 European Parliament elections.

If there is a valid criticism of Trump’s foreign policy, it is not that he has failed to recognize the new realities of the 21st century but that he has not moved expeditiously to dissolve old alliances that put America at risk of war in faraway lands where no vital U.S. interests exist.

Why are we still committed to fight for a South Korea far richer and more populous than a nuclear-armed North? Why are U.S. planes and ships still bumping into Russian planes and ships in the Baltic and Black seas?

Why are we still involved in the half-dozen wars into which Bush II and Barack Obama got us in the Middle East?

Why do we not have the “America first” foreign policy we voted for?

Published:11/13/2018 3:39:07 PM
[Markets] Dow Drops 101 Points After Oil Crashes. Or Is It the Other Way Around? The Dow Jones Industrial Average’s gain today, that is. Is oil’s tumble to blame, or is it the other way around? Consider: The S&P 500 fell 0.2% to 2,722.18, while the Dow Jones Industrial Average has dropped 100.69 points, or 0.4%, to 25,286.49. Published:11/13/2018 3:39:07 PM
[Markets] Crude Carnage Kills Equity Dead-Cat-Bounce, Bond Yields Tumble

Chatter of a commodity fund liquidation did nothing to help what everyone hoped would be an excited dip-buying opportunity in stocks today...

 

China stocks extended Monday's buying panic with CHINEXT now up over 5% in two days...

 

European stocks were higher on the day (though markets closed a long time before the Italian budget headlines hit)...

 

Quite a significant China outperformance in the last week...

 

With everyone primed for a bounce (pre-market futures signaled it after China's exuberance and trade headlines), it didn't happen...

 

Trannies managed to get back to even on the week briefly before fading fast after Europe closed...

 

The liquidation in crude certainly did not help stocks...

 

Small Caps suffered a 'death cross' today... (the last death cross was Sept 2015, which did not end well for the bulls)...

 

The Dow managed to cling on above its 200DMA, but all the other major US indices are below that key technical level...

 

AAPL tumbled back below its 200DMA...

 

GE stock had its best day in 9 years today... but GE bonds did not...

 

FANG Stocks bounced off the opening drop but ended unch...

 

Having taken the day off to remember Veterans yesterday, bond traders were back and they were buying... The belly of the curve outperformed...

 

10Y Yield tumbled to two-week lows...non-stop slide since The Fed

 

Inflation Breakevens collapsed further, catching down to WTI...

 

The dollar drifted lower on the day...breaking a 3-day winning streak

 

Cable popped and dropped as hopes for a Brexit deal once again crashed on the shores of reality...

 

Offshore Yuan squeezed higher on the day after tagging 6.97 and headlines of big banks dumping dollars (under orders of PBOC)...

 

Spot the odd one out in commodity-land...

As UBS points out:

"There are also speculations that the move lower could have been caused by redemption ahead of the year-end cut off of the 15th November and that a large hedge fund had about 50k lots to liquidate. Considering that the sell off resumes as I write, it might have just be the product of someone's imagination."

WTI Crude collapsed for the 12th day in a row - another new record - crashing on Saudi production data (biggest daily drop since Jan 2015)...

Brent is down 24% from October highs...

Bloodbath...

In case $54.75 (lows today) is too rich still for your blood - how about some Western Canada Select Crude - which traded at a $15 handle today...

 

And notably WTI priced in silver has tumbled at key resistance...

 

And Silver at its cheapest to gold since 1993...

 

In case you're thinking of buying the dip in WTI? It has never, ever, been more oversold...

And oil vol has exploded...

 

And finally, in case you missed it last night, Japan has managed to break another record for extreme monetary policy malarkey - with the BoJ balance sheet now bigger than the country's GDP...

Published:11/13/2018 3:12:15 PM
[Markets] Dow ends lower for third straight session as oil futures extend rout Dow ends lower for third straight session as oil futures extend rout Published:11/13/2018 3:12:15 PM
[Markets] Trump’s big 2020 problem: The economy could be in a recession Most economists predict the economy will be weaker — or even in a recession — by the time voters go to the polls for the next presidential election. Published:11/13/2018 2:40:00 PM
[Markets] Stock market rebound loses steam as oil gets clobbered Stocks fail to build on early gains Tuesday as oil prices cratered and a resolution of the ongoing U.S.-China trade war remained elusive. Published:11/13/2018 2:39:59 PM
[Markets] In Latest Shock To Beijing, Chinese Credit Growth Is Lowest On Record

In recent months, China has been desperate to inject more credit into its financial system and failing that, to at least give the impression it is doing that. Recall that last month the PBoC adjusted its definition of aggregate financing (or Total Social Financing) by including net financing through local government special bond issuance, which in turn took place just two months after it added asset-backed securities (ABS) and non-performing loan write-offs into this measure.

Why did China revise its TSF yet again? Simple: the purpose was to "pump up" the credit numbers and telegraph to the market and consumers that Chinese credit is growing faster, and thus represent a stronger economy, than it is in reality. And indeed, the September jump in TSF was driven mainly by a faster local government bond issuance, while based on the previous definition, it fell to a weaker-than-expected RMB1,467bn from RMB1,518bn and below the RMB1,554 consensus, weighed upon by continued contraction of shadow banking financing and a decline in net corporate bond financing.

Fast forward to today when overnight the PBOC reported its latest money and credit data, and even under the latest and broadest definition, October money and credit data surprised sharply on the downside, mainly due to the ripple effects of the initially over-zealous deleveraging programme and despite pressure by regulators on banks to help keep cash-starved companies afloat, pointing to further weakening in the economy in coming months.

And while October is typically a slow month for Chinese credit, growth in key gauges such as total social financing and money supply fell to record lows, reinforcing views that policymakers will need to step up efforts to revive flagging investment.

According to the PBOC, new RMB loans dropped in half to RMB697bn in October from RMB1,380bn in September, with new loans to the corporate sector tumbling to RMB150bn from RMB677bn in September, in which new medium- to long-term loans eased to RMB143bn from RMB380bn, and new short-term loans fell to -RMB113bn from an increase of RMB110bn. New loans to the household sector also eased, to RMB564bn from RMB754bn in September, and its long-term loan component was down to RMB373bn from RMB431bn. New loans to non-bank financial institutions were -RMB27bn from  RMB60bn in September.

Household loans accounted for 80.9% of total new loans in October, versus 54.7% in the preceding month.

One reason for the sharp drop in new loan growth: Chinese banks have become wary of a fresh spike in bad loans after years of pressure from regulators to reduce riskier lending. Last Friday, Chinese bank shares tumbled on fears they will be saddled with more non-performing loans following an unprecedented regulatory directive to allocate one-third of new loans to private companies.

In its financial stability report earlier this month, the central bank highlighted the sharp rise in household debt in recent years, noting it needed to be monitored, which is bizarre coming just as Beijing is hoping to flood the system with even more cheap credit. Analysts have warned the jump could undermine Beijing’s efforts to spur consumer spending.

Outstanding short-term consumer loans rose 37.9 on-year in 2017 and the total household debt to GDP ratio was at 49 percent at the end of last year, the central bank said in the report.

Meanwhile, the far broader aggregate financing index tumbled to RMB729BN from RMB2,168BN in September...

... mainly weighed on by a sharp fall in local government special bond (LGSB) financing (RMB87bn from RMB739bn in September) and continued shadow banking shrinkage. 

In fact, China’s outstanding total social financing (TSF) slowed to 10.2 percent from a year earlier, another all-time low  suggesting the increased lending barely compensates for shrinking “shadow” loans.

The amount of newly increased broad TSF (non seasonally adjusted) was the lowest since October 2014.

As noted above, headline aggregate financing slumped to RMB729bn in October (Consensus: RMB1,300bn) from RMB2,168bn in September. Growth in outstanding aggregate financing slowed further by 0.4% points (pp) to 10.2% Y/Y in October. If central and local government bond financing is included, growth in the aggregate financing measure fell to 10.7% Y/Y to 11.2%.

By category, new entrusted loans and trust loans combined were -RMB222bn in October from -RMB234bn in September, indicating that shadow banking activity continued to contract. Net corporate bond financing rose to RMB138bn from RMB49bn in September, but was still some way off the average October level in 2015-17 of RMB233bn. Net equity financing remained sluggish, at RMB18bn from RMB27bn in September (average October level: RMB62bn).

One key reason for the decline was that local governments had maxed out their bond quotas after a rush of debt issuance in the third quarter, Capital Economics said. After a lengthy clampdown, Beijing has been pushing local governments to spend on infrastructure projects again as part of its growth boosting measures. China will release investment data on Wednesday along with industrial output and retail sales.

Meanwhile, looking at traditional outstanding loan growth eased to 13.1% y-o-y from 13.2% in September (Figure 1), while money supply growth was also markedly weak, in further evidence that companies are reluctant to make fresh investments as U.S. tariffs on Chinese goods add to uncertainties about the demand outlook at home. Broad M2 money supply grew 8.0 percent in October from a year earlier - a record low, and far below the consensus estimates of 8.4%, edging up from September. 

Including central and local government bond issuance, growth of the augmented aggregate financing measure dropped to 10.7% y-o-y in October from 11.2% in September. Both posted the lowest growth on record.

The weaker trend also suggested overall credit conditions in China tightened last month despite recent easing in monetary policy, including moves by the central bank to bring down market interest rates and four cuts in banks’ reserve requirements so far this year.  Indeed, one likely explanation for the shockingly poor new credit numbers is that according to the PBoC’s Q3 monetary policy report last week, weighted average lending rates for general loans and mortgage loans rose to 6.19% pa and 5.72% in Q3, respectively, from 6.08% and 5.60% in Q2, although those for corporate bill financing fell. Rising financing costs signal further downside pressures on investment and property sales, and as a result, Nomura believes that the economy has not yet bottomed.

In its China credit growth commentary, Bloomberg said that the "shockingly" weak new loans number, which was worse than any surveyed economist expected, "explains why policy makers have projected a sense of urgency lately to support growth. It suggests that the credit market is clogged as the government cracks down on shadow banking while lending to private firms has more or less frozen."

Looking ahead, headwinds to growth remain, especially from weakening domestic demand, rising credit defaults, the cooling property market and escalating China-US trade tensions. Although headline activity numbers may have held relatively well in recent months (benefiting from a front-loading of exports and a significant easing of the anti-pollution campaign this winter), Nomura expects a more visible growth slowdown starting from the spring next year.

“With credit growth still cooling, economic activity looks set to come under further pressure in the coming months,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note.  “We expect officials to step up policy easing in response, including benchmark lending rate cuts and off-budget fiscal stimulus.”

Most analysts, however, don’t expect policymakers to cut benchmark rates any time soon, but could step up tax cuts and infrastructure spending to put a floor under the slowing economy.

According to Nomura, further policy easing/stimulus measures that Beijing could pursue include:

  • More direct liquidity injections via RRR cuts, the medium-term lending facility (MLF) and open market operations;
  • Increasing commercial bank loan quotas;
  • More bond issuance and faster fiscal spending, especially on infrastructure investment;
  • Less restrictions on quasi-fiscal measures for infrastructure investment (e.g., public-private partnership projects and policy bank lending);
  • Cutting VAT, corporate income tax and social security tax to boost corporate investment and production; and  
  • Implicitly allowing some major Chinese cities to ease property price controls and scrap other measures that distort the property market.

“October credit data is weaker than expected,” said Merchants Securities analyst Luo Yunfeng. However, Luo believes the room for further policy easing is limited as Beijing remains concerned about controlling debt and financial risks, which were fuelled by past spending binges.

The question, of course, is what happens if China's credit remains clogged up: that could be a major problem for China, which as discussed over the weekend, already has over 50 million vacant apartments. What is strange is that unlike in 2009, 2012 and 2015 Beijing has shown little appetite for housing-led stimulus - the type that would also bolster the broader emerging markets - as shown see in this chart comparing China's credit impulse and the number of cities with rising home prices.

This means that infrastructure-led stimulus has far less bang for the buck, according to UBS. And if the new credit injections are unable to make their way into the economy, it's only a matter of time before home prices follow China's credit impulse deep in the red, potentially unleashing the biggest housing-led Chinese recession observed in over a generation, one which may or may not be accompanied by a working class insurrection.

Published:11/13/2018 2:39:59 PM
[Markets] Euro Slides After Italy's Salvini Says No Change To Budget Proposal; Midnight Deadline Looms

With the midnight deadline for Italy to resubmit its budget proposal to Brussels fast approaching, one of the two men who are effectively running Italy has just offered the clearest suggestion yet that Italy will not change its deficit and growth projections for its 2019 budget plan - setting Europe's third-largest economy on a path that could lead to billions of fines from Brussels and the prospect of a feared 'Italeave'.

In comments at the palace of the prime minister, where members of Italy's council of ministers have been holed up on Tuesday, Deputy Prime Minister and La Lega leader Matteo Salvini told a group of reporters that Italy would move forward with its budget plans, regardless of what Brussels thinks, according to Italy's ANSA newswire.

Salvini

Reiterating the long-held position of the Italian government, Salvini said Italy's fiscal stimulus is essential to creating more jobs, offering better pension benefits and cutting taxes for many - but not all - Italians.

"We are working on a budget which guarantees more jobs, more right to a pension, less taxes, not for everyone, but for many Italians. If Europe is ok with that, we’re pleased, otherwise we continue straight ahead."

If Italy doesn't submit a new budget proposal with a deficit below 0.8% of GDP, in accordance with EU fiscal rules, the European Commission could seek to punish the populist government by levying billions of euros in fines, a burden that would further strain the finances of a country with the second-largest debt burden in Europe relative to GDP (second only to Greece). Salvini's comments followed remarks from his co-Deputy PM Luigi Di Maio, the leader of the anti-establishment Five Star Movement, as well as the more measured Economic Minister Giovanni Tria, who both have said that cutting the stimulus would be tantamount to "suicide" for the Italian economy.

And presumably disappointing Q3 growth print, which suggested that the Italian economy stagnated last quarter, have only strengthened the populists' resolve.

Italy

The euro pared its earlier gains following Salvini's comments, which effectively confirmed what many have long expected: That the Italians will thumb their noses at the European Commission after it took the unprecedented step of rejecting Italy's budget proposal last month.

EUR

Meanwhile, Italian redenomination risk, which measures the likelihood that Italy will abandon the euro and resort to using the lira to pay down its debt, ticked higher as the prospect of all-out economic war with the European financial establishment prompted some to question Italy's future in the eurozone. 

Italy

The upshot: Based on CDS markets, the risk of Italy exiting the euro is soaring.

Published:11/13/2018 2:07:27 PM
[Markets] U.S. oil prices end at lowest in nearly a year after 12th straight daily loss U.S. oil prices end at lowest in nearly a year after 12th straight daily loss Published:11/13/2018 2:07:27 PM
[Markets] The Wall Street Journal: E-cigarette company Juul is quitting social media E-cigarette startup Juul Labs Inc. said it is shutting down its Facebook and Instagram accounts and curbing its use of other social media in the U.S., part of the company’s response to the Food and Drug Administration’s call for changes to curb underage e-cigarette use
Published:11/13/2018 2:07:27 PM
[Markets] Tech companies, banks lead stocks higher; oil price plunges U.S. stock indexes veered mostly higher in afternoon trading Tuesday, on course to recoup some of the market's big losses from a day earlier. Gains in technology companies, banks and industrial stocks ... Published:11/13/2018 1:40:36 PM
[Markets] Citigroup Moving Long Island Employees To Make Room For Amazon HQ2

Citigroup on Tuesday announced that they will move approximately 1,100 employees out of its offices at One Court Square in Long Island over the first two quarters of 2019. 

The financial giant currently leases 30 floors of the Long Island City tower's 42 floors, while Amazon wants to use 23 floors according to Bloomberg, citing a person with knowledge of the matter. 

According to the press release, Citigroup will move some of their employees to other floors at One Court Square, while others will end up at their Tribeca headquarters and other nearby offices. 

Citi CEO Michael Corbat said, "given what it would mean to New York and Long Island City to have Amazon establish a significant presence here, we want to do our part to make this possible." adding "As a company that has been based here since our founding 206 years ago, we couldn’t be happier to welcome Amazon to the great City of New York." 

Amazon formally announced plans on Tuesday to split its second headquarters between Arlington, VA and Long Island. They will also create over 5,000 jobs in Nashville, Tennessee with a new operations center. 

Between the two HQs, the tech giant invest $5 billion and create more than 50,000 jobs across the two locations, with more than 25,000 employees each in New York City and Arlington, according to a blog post. The new locations will join Seattle as the company’s three headquarters in North America.

***

Some more details: the new Washington, D.C. metro headquarters in Arlington will be located in National Landing, and the New York City headquarters will be located in the Long Island City neighborhood in Queens. Amazon’s investments in each new headquarters will spur the creation of tens of thousands of additional jobs in the surrounding communities. Hiring at both the new headquarters will begin in 2019. The Operations Center of Excellence will be located in downtown Nashville as part of a new development site just north of the Gulch, and hiring will also begin in 2019.

In other words, investing $5BN to grow while getting over $2BN back in direct incentives, with potential upside for more.

Finally, Amazon dedicates a section of its blog post to answer "what role did economic incentives play in Amazon picking these locations and what incentives have been agreed?" and answers: "Economic incentives were one factor in our decision—but attracting top talent was the leading driver. Our agreements with each location may be downloaded:"

  • New York City, New York here
  • Arlington, Virginia here and here
  • Nashville, Tennessee here and here

Read the full blog post from Amazon here.

 

Published:11/13/2018 1:40:36 PM
[Markets] Paul Brandus: A White House reporter’s take on the Acosta-Trump dustup The real issue here, outlined in the suit, is that in an open democracy, it “is critical to preserve the media’s ability to ask hard questions and hold the government accountable,” says Paul Brandus.
Published:11/13/2018 1:40:36 PM
[Markets] S&P 500, Nasdaq drift higher as tech shares rise; Dow grounded by Boeing U.S. stocks are mostly higher, one day after the Dow and the technology-laden Nasdaq suffered triple-digit losses. Published:11/13/2018 1:09:39 PM
[Markets] U.S. budget deficit widens to $100 billion in October U.S. budget deficit widens to $100 billion in October Published:11/13/2018 1:09:39 PM
[Markets] "Past The Point Of No Return" - Snider Cautions On Contango, Currency, & Contagion

Authored by Jeffrey Snider via Alhambra Investment Partners,

At the end of June, the crude curve really got out of hand. WTI futures had returned to backwardation many months before, and then the eurodollar/collateral explosion May 29 sapped some crude strength. Over the following month, curve backwardation would become extreme as the benchmark price seemed ready to skyrocket.

After getting up near $80 a barrel, the price reversed. During the several weeks of weakness, the futures curve remained in steep backwardation – the expectation that the recovery (narrative) would continue whatever any short-term profit taking.

But as prices did rebound through September, there was already trouble underlying. The curve was changing shape, flattening out even beyond normalizing that pretty ridiculous backwardation spike late June/early July.

WTI would nearly match its earlier high on October 3, by then the curve was already a little threatening becoming unlike its shape from July. Since that day, it’s been a steep incline down in price as the futures curve has shipped back into contango.

It has continued to flatten out at the back and “fish hook” at the front. These are quite concerning signs about perceived future imbalance in the oil markets. Those concerns are not altogether about the oil markets.

Of course, in the booming global economy of the mainstream this is the product of success; too much success. The US is pumping out a record amount of oil and the rest of the world (OPEC) has started to normalize to $100 oil expectations. It’s another supply glut.

Stop me if you’ve heard this before. It should sound very familiar, too familiar. We need only go back four years for all the same general soundbites: the economy is booming, the energy sector is pumping record amounts, and WTI contango is the least of anyone’s concerns.

Obviously, it didn’t quite turn out that way which raises the interesting question as to whether the same mistakes will be repeated. I’d bet they will, right up until the bitter (cycle) end.

If we look at one very close calendar spread, say the 3-month, it can give us a sense of just how far this imbalance might have been running. This particular spread is the difference in contract price between the front month futures price, whatever happens to be first on the board at any given time, and the one three months behind. If either contango or backwardation swings in the opposite direction at a 3-month interval, then that’s something to pay attention to.

This started to happen in October 2014. Oil prices had overall come down from highs in June, and the curve had flattened a little bit through September that year. Then early October.

You might remember those few weeks for other reasons, none of which had anything to do with US shale output. There were collateral disturbances in repo at the end of September 2014 and then the big, disruptive “buying panic” in UST’s on October 15. Global currency markets returned to life for all the wrong reasons, soon to make the disruptions of 2013 appear quaint and lovely by comparison.

When the oil curve started to reshape during that time, WTI (front month) was still ~$95 a barrel. On October 2, 2014, it had fallen to $91.02. Then as the futures market rethought the whole narrative the reappearance of contango would coincide with the oil market’s worst crash since the second half of 2008 (another period fraught with funding and dollar difficulties).

By the time the 3-month calendar spread reached $1 contango (the CL4 contract price $1 more than CL1, the front month) in mid-December, the oil price had dropped 38% from October 2 and was down 48% from the June high. Less than a month later, the 3-month spread was $2 contango with CL1 under $48.

A week after that, on January 15, 2015, the Swiss National Bank shocked the world by removing the franc’s peg to the euro. Though the dollar wasn’t directly involved in that effort, it was the reason for the trouble. I wrote the month before, all the while contango was deepening, about Switzerland’s therefore oil’s setback:

In that respect, the SNB is now in the same kind of conundrum (in opposite directions) as the Banco do Brasil in trying to ward off a currency problem that is not its own. The “dollar” missteps in the past six months are too immense for any one central bank to address. That is the problem here as this is not just a run of “dollar” disorder, though that is the primary symptom and means of “contagion”, but rather the global financial system is in a state of high pessimism and contraction. With currency crises raging all across the planet, it is a desperate warning that too much financial imbalance is unsustainable for the given economic reality as measured against prior economic expectations.

I could have written the same thing yesterday, exchanging Switzerland (no longer pegged to the euro) for China and its RRR fight. The action in oil as eurodollars in December 2014 and January 2015 announced the arrival of the severe stuff. It was only the beginning of what was to come, but by the start of 2015 there was really no chance for things to go any other way. It was past the point of no return.

How close are we to something like that? Inching closer every day, perhaps right on the cusp. Janet Yellen would say throughout the time that these were just “transitory” factors that wouldn’t impede expected global economic acceleration. She would spend the balance of 2016 confused, cautious, and regretting much. Jay Powell says the same thing now, only he hasn’t used the word “transitory” yet. Eurodollar futures are guessing he will at some point.

Contango and currency. But supply glut or something.

Published:11/13/2018 1:09:39 PM
[Markets] Outside the Box: 4 ways to find savings on health care in retirement How to find the Medicare plan that’s right for you.
Published:11/13/2018 1:09:39 PM
[Markets] Wall Street Expects S&P To Peak At 3,056; Will Rotate Into Bonds When Yield Hits 3.7%

One day after Bank of America released its latest, and quite bearish Credit Investor Survey, on Tuesday the bank has published its latest, and far broader, Fund Managers Survey which polled a total of 225 panellists with $641bn AUM during the period of November 2-8. According to the survey administrator, BofA CIO Michael Hartnett, there were three key takeaways:

  • Investors forecast the S&P500 to peak at 3056 (give or take) and are waiting for the 10-Year yield to reach 3.7% before rotating from stocks into bonds
  • Cash levels fell in Nov... To BofA this suggests that positioning is not bearish enough for Big Low (which will likely take place in Q2 2019 at the earliest)
  • Perhaps most notable is that the allocation to tech plunged to the lowest since Feb'09 even though investors still see "Long FANG-BAT" as the most crowded trade; Meanwhile, investors are long US$ & not yet long global recession

Some more detailed observations together with charts:

On when the market finally tops, investors think the S&P 500 will peak at 3056 (a weighted average of the responses) suggesting 12% upside from today's level, even though - like the market - this level appears to be rolling over …

…but as BofA notes, 1 in 3 FMS investors (30%) now think US stocks have already peaked, double last month's reading (16%). This likely also means that there are quite a few who see the S&P rising as high as 3500 or more.

Next, when looking at the big risk cited by credit investors, namely rising rates, Wall Street investors said they don't expect a rotation from equities to bonds until 3.7% on the 10-year Treasury (also the averaged weighted response); This is about 20bp higher than the response back in April 18.

Contrary to reports of asset liquidations, survey respondents said that their cash level actually fell to 4.7% from 5.1% (just above the avg of the past 10 years of 4.5%) and hovering just above neutral even as investors reportedly stay bearish. To BofA this means that the Cash Rule has been in "buy" territory for the past nine months. As a reminder, the FMS Cash Rule works as follows: when average cash balance rises above 4.5%, a contrarian buy signal is generated for equities. When the cash balance falls below 3.5%, a contrarian sell signal is generated.

The survey also reveals an interesting split: on one hand, the percentage of FMS investors saying they are net overweight tech has fallen to just 18%, the lowest since Feb'09...

... even though for the 10th consecutive month, "Long FAANG+BAT" (Facebook, Amazon, Apple, Netflix, Google + Baidu, Alibaba, Tencent) remains the answer to what investors believe is the most crowded trade (the August reading was most crowded trade outright since Long USD Dec '15).

One reason for the revulsion away from tech may be the following: When asked "What do you think will be the best performing asset class in 2019?" the most popular response by far is "non-US equities" (45%), followed by the S&P in distant second at 17%, and commodities third with 15% of respondents.

There was less certainty on the other side: when asked "What do you think will be the worst performing asset class in 2019?" 25% said Corporate bonds, followed immediately by Government bonds with 24%. The S&P was third with 18% of the answers.

In this vein, 61% of respondents expect high-quality to outperform low-quality (up from 59% last month) - a "deep late cycle" prediction, while 46% expect large cap stocks to outperform small cap stocks (up from net 42 last month, and a new 2-year high).

And in another confirmation of a late cycle market, the percentage saying value will outperform growth next 12 months jumped 19% MoM to 39%, the highest since Feb'17

In another surprising twist, even though investors have benefited greatly from corporate shareholder payout generosity, a net 33% of them also think corporate payout ratios are too high, a record high, reflecting concern about US corporate debt, which is also at a record high @46% of GDP.

Taking a step back and looking at the global economy, FMS macro expectations are bearish with 44% of survey respondents expecting global growth to decelerate in the next 12 months, the worst outlook on the global economy since Nov'08.

At the same time, 54% of FMS investors think Chinese growth will slowdown in 2019, the most bearish outlook since Sept'16.

And while they may be bearish, they are not too bearish, as just 1 in 11 (11%) of FMS investors expect a global economic recession in 2019.

One possible reason: too many still believe that inflation and not deflation remains the major concern for the economy: indeed, the consensus view among investors is for higher inflation; net 70% expect core CPI to rise over the next 12 months, but conviction has slipped since the recent peak of 82% in Apr '1.

A note for the contrarians: investors are concerned that US stocks, and global healthcare equities are most vulnerable to a deeper bear market; and last domino to drop in '19 likely US dollar (most overvalued since 2006); trading bulls should play year-end rally via China plays (Eurozone, industrials, materials). That's because in November, investors bought the Oct correction & increased exposure to US & EM stocks, REITs, and healthcare…but as noted above, the allocation to global tech sector collapsed to lowest level since Feb'09… and despite investors predicting that value will outperform, ominously there have been no signs of investor rotation from tech to "value", i.e. banks, small cap, industrials, EAF.

In other words, investors continue to say one thing, and do the opposite.

Commenting on the latest survey, BofA's Michael Hartnett said that "we remain bearish, as investor positioning does not yet signal ‘The Big Low’ in asset markets."

Published:11/13/2018 12:37:22 PM
[Markets] Market Snapshot: S&P 500, Nasdaq drift higher as tech shares rise; Dow grounded by Boeing U.S. stocks are mostly higher, one day after the Dow and the technology-laden Nasdaq suffered triple-digit losses.
Published:11/13/2018 12:37:22 PM
[Markets] Homeowners are thrilled Amazon is coming. Renters, first-time buyers and low-income residents aren’t. An influx of highly paid tech workers could exacerbate inequality in the D.C. region, housing advocates and others warn. Published:11/13/2018 12:07:54 PM
[Markets] Hedge-fund boss Ken Griffin fears Trump knocks on Fed eroding faith in dollar Hedge-fund boss Ken Griffin fears Trump knocks on Fed eroding faith in dollar Published:11/13/2018 12:07:54 PM
[Markets] Founder of hedge fund giant says Trump’s Fed attack threatens ‘confidence people have’ in the dollar Ken Griffin, founder of hedge fund Citadel, believes that President Trump’s comments about the Fed Chairman are “inappropriate,” and are a threat to confidence in the buck. Published:11/13/2018 12:07:53 PM
[Markets] California "Camp Fire" Deadliest, Most Destructive In State History As Death Toll Hits 42

Northern California's Camp Fire burning near Chico is not only the state's most destructive, it is also California's deadliest in state history. A total of 42 people have died in the blaze - one of two major wildfires burning throughout California with a combined death toll of 44. 

The Camp Fire's death toll has grown in staggering leaps. The first notice came on Thursday, when investigators found the remains of five people in Paradise who were apparently trapped in their cars by the blaze. Four more were found on Friday, and 20 more over the weekend. -NPR

The Camp Fire in Butte County about 80 miles north of Sacramento grew to 125,000 acres overnight, up from 117,000, and has destroyed over 6,500 structures. It is just 30% contained

Source: Sentinel-2 satellite

"This is an unprecedented event," said Butte County Sheriff Kory Honea on Monday night. "If you've been up there, you also know the magnitude of the scene we're dealing with. I want to recover as many remains as we possibly can, as soon as we can. Because I know the toll it takes on loved ones." 

President Trump has approved an expedited disaster declaration request for the California fires, stating in a tweet that he wanted "to respond quickly in order to alleviate some of the incredible suffering going on," adding "I am with you all the way. God Bless all of the victims and families affected."

The Camp Fire started last Thursday morning, storming through Paradise CA and leaving utter devastation in its wake.  

"Last night firefighters continued to hold established containment lines," CalFire said in a Tuesday update, adding that firefighters had "worked aggressively" to safeguard structures in harms way. That said, dry conditions and steep terrain are expected to continue to pose a challenge. 

More than 50,000 people have fled the Camp blaze, according to member station KQED. And even at a distance, the fire is posing health concerns: "Air quality throughout the Bay Area remains in the 'unhealthy' zone, according to federal measurements," KQED reports, adding that the conditions should persist through Friday. -NPR

Meanwhile, the Woolsey Fire in the Southern California Malibu region has destroyed over 95,000 acres, destroyed 435 structures and claimed 2 lives. It is 35% contained. 

An air tanker drops water on a fire along the Ronald Reagan Freeway in Simi Valley, Calif.
Ringo H.W. Chiu/AP

"We've got 60 to 70 mph offshore Santa Ana winds blowing for the next several days and those are just deadly," said CalFire Chief Ken Pimlott to NPR

Molten aluminum flowed from a car that burned in front of one of at least 20 homes destroyed just on Windermere Drive in the Point Dume area of Malibu, California, Saturday, Nov. 10, 2018.Reed Saxon / AP

The cause of the fires remain unknown, however two electric utility companies reported service issues just minutes before the two blazes began. 

Published:11/13/2018 12:07:53 PM
[Markets] Tech companies, banks lead US stocks higher; Oil price falls U.S. stock indexes veered higher in afternoon trading Tuesday, bouncing back from an uneven start. Gains in technology companies, banks and industrial stocks outweighed losses in household goods sellers, ... Published:11/13/2018 11:44:03 AM
[Markets] Outside the Box: These two stock-chart patterns show that bulls and bears are at loggerheads Bullish and bearish patterns are of low quality.
Published:11/13/2018 11:44:03 AM
[Markets] Major Markets Are All Flashing Warning Signs

Authored by Lance Roberts via RealInvestmentAdvice.com,

In this past weekend’s newsletter, I touched on the outcome of the mid-term elections and why it would likely not be as optimistic as the mainstream media was portraying it to be. To wit:

“It is likely little will get done as the desire to engage in conflict and positioning between parties will obliterate any chance for potential bipartisan agenda items such as infrastructure spending.

So, really, despite all of the excitement over the outcome of the mid-terms, it will likely mean little going forward. The bigger issue to focus on will be the ongoing impact of rising interest rates on major drivers of debt-driven consumption such as housing and auto sales. Combine that with a late stage economic cycle colliding with a Central Bank bent on removing accommodation and you have a potentially toxic brew for a much weaker outcome than currently expected.”

I also wrote:

“With portfolios reduced to 50% equity, we have a bit of breathing room currently to watch for what the market does next. It is EXTREMELY important the market rally next week above Wednesday’s highs or we will likely see another decline to potentially test the recent lows.”

Unfortunately, on Monday, nothing good happened. While the week is not over yet, the failure of the S&P 500 at the 50-dma now turns that previous support to important resistance. Furthermore, the failure of the market to hold the 200-dma also increases the downside risk of the market currently.

There is an important point here to be made about “bull markets” and “bear markets.”

While there is no “official” definition of what constitutes a “bull” or “bear” market, the generally accepted definition is a decline of 20% in the market.

However, since I really don’t want to subject my clients to a loss of 20% in their portfolios, I would suggest a different definition based on the “trend” of the market as a whole. As shown in the chart below:

  • If prices are generally “trending higher” then such is considered a “bull market.”

  • “bear market” is when the “trend” changes from positive to negative.

The vertical red and green lines denote the confirmation of the change in trend when all three indicators simultaneously align.

  • The price of the market moves below the long-term moving average. v

  • The long-term overbought condition is reversed (top indicator) v

  • The long-term MACD signal changes from “buy” to “sell” X

Importantly, note that just a violation of the long-term moving average is not confirmation of a change to the ongoing bull trend. Over the last decade, there were several violations of the long-term moving average which were quickly reversed by Central Bank interventions (QE2 and Operation Twist).

In late 2015, all indications of the start of a “bear market” coincided as the Federal Reserve had launched into their rate hiking campaign. However, that bear market was cut short through the injections of liquidity from the ECB’s own QE program.

Currently, with Central Banks globally beginning to reduce or extract liquidity from the financial markets, and the Federal Reserve committed to hiking rates, there seems to be no ready “backstop” for the markets currently.

However, since this is a monthly chart, we will have to wait until December 1st to update these indicators. However, if the market doesn’t begin to exhibit a more positive tone by then, all three indicators of a “bear market” will align for only the 4th time in 25-years. 

But it isn’t just the S&P 500 exhibiting these characteristics.

The S&P 400 has not only failed at a retest of the longer-term moving average but mid-caps are close to registering a “change in the trend”  as the 50-dma crosses below the 200-dma.

(Note: we have previously closed all mid-cap positions in our portfolios)

While the S&P 600 is not a close as the S&P 400 to registering a “change in trend,” it likely won’t be long before it does. The failure of small-caps at the 200-dma is confirming additional downward pressure on those companies as concerns over ongoing “tariffs” and “trade wars” are most impactful to small and mid-sized company profitability.

(Note: we have previously closed all small-cap positions in our portfolios)

The Russell 2000 is also confirming the same. The index is extremely close to registering a “change in trend” as the 50-dma approaches a cross of the 200-dma. Also, with the index failing at the 200-dma and turning lower, just as with small and mid-cap indices above, a break of recent lows will confirm a “bear market” has started in these markets.

But what is happening domestically should not be a surprise. The rest of the world markets have already confirmed bear market trends and continue to trade below their long-term moving averages. (The very definition of a bear market.) While it has been believed the U.S. can “decouple” from the rest of the world, such is not likely the case. The pressure on global markets is a reflection of a slowing global economy which will ultimately find its way back to the U.S.

(Note: we closed all international and emerging market positions in our portfolios at the beginning of this year.)

Just as a side note, China has been in a massive bear market trend since 2015 and is down nearly 50% from its previous highs.

While much of the mainstream media continues to suggest the “bull market” is alive and well, there are a tremendous number of warning signs which are suggesting that something has indeed “changed.” 

“The tailwinds that existed for the market over the last couple of years from tax cuts, to natural disasters, to support from Central Banks have now all run their course.

The backdrop of the market currently is vastly different than it was during the “taper tantrum” in 2015-2016, or during the corrections following the end of QE1 and QE2.  In those previous cases, the Federal Reserve was directly injecting liquidity and managing expectations of long-term accommodative support. Valuations had been through a fairly significant reversion, and expectations had been extinguished.

None of that support exists currently.”

The ongoing deterioration in the markets continues to confirm, as I wrote back in April, the bull market that started in 2009 has ended. However, we will likely not know for certain until we get into 2019, but therein lies the biggest problem. Waiting for verification requires a greater destruction of capital than we are willing to endure.

(Note: Just because the bull market has ended doesn’t mean it will never resume again. It is simply a transition to remove excesses from the market. Bear markets are a good thing as it creates long-term opportunities.)

We have already taken steps to reduce equity risk and will do more on rallies that fail to re-establish the previous bullish trends in the market. If I am right, the more conservative stance will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a “panic selling” situation.)

If I am wrong, and the bull market resumes, we simply remove hedges and reallocate equity exposure.

“There is little risk, in managing risk.” 

If you have taken NO actions in your portfolio as of yet, use rallies which fail at resistance to “do something.” I have reprinted our portfolio management rules as a guide.

RIA Portfolio Management Rules

  1. Cut losers short(Reduce the risk of fundamentally poor companies.)

  2. Set goals and be actionable. (Without specific goals, trades become arbitrary and increase overall risk.)

  3. Emotionally driven decisions void the investment process.  (Buy high/sell low)

  4. Follow the trend. (80% of portfolio performance is determined by the long-term, monthly, trend. While a “rising tide lifts all boats,” the opposite is also true.)

  5. Never let a “trading opportunity” turn into a long-term investment. (Refer to rule #1. All initial purchases are “trades,” until your investment thesis is proved correct.)

  6. An investment discipline does not work if it is not followed.

  7. “Losing money” is part of the investment process. (If you are not prepared to take losses when they occur, you should not be investing.)

  8. The odds of success improve greatly when the fundamental analysis is confirmed by the technical price action. (This applies to both bull and bear markets)

  9. Never, under any circumstances, add to a losing position. (As Paul Tudor Jones once quipped: “Only losers add to losers.”)

  10. Markets are either “bullish” or “bearish.” During a “bull market” be only long or neutral. During a “bear market”be only neutral or short. (Bull and Bear markets are determined by their long-term trend as shown in the chart below.)

  11. When markets are trading at, or near, extremes do the opposite of the “herd.”

  12. Do more of what works and less of what doesn’t. (Traditional rebalancing takes money from winners and adds it to losers. Rebalance by reducing losers and adding to winners.)

  13. “Buy” and “Sell” signals are only useful if they are implemented. (Managing a portfolio without a “buy/sell” discipline is designed to fail.)

  14. Strive to be a .700 “at bat” player. (No strategy works 100% of the time. However, being consistent, controlling errors, and capitalizing on opportunity is what wins games.)

  15. Manage risk and volatility. (Controlling the variables that lead to investment mistakes is what generates returns as a byproduct.)

It should be remembered that all good things do come to an end. Sometimes, those endings can be very disastrous to long-term investing objectives. This is why focusing on “risk controls” in the short-term, and avoiding subsequent major draw-downs, the long-term returns tend to take care of themselves.

Everyone approaches money management differently.

This is just our approach and we are simply sharing it with you.

We hope you find something useful in it.

Published:11/13/2018 11:44:02 AM
[Markets] Rising Inventories Spread Might Drag Oil Prices In the week ending on November 2, US crude oil inventories were 3% above their five-year average—one percentage point more than the previous week. Oil prices and the inventories spread usually move inversely, as you can see in the following chart. If the inventories spread expands more into the positive territory, it might drag down oil prices in the coming weeks. The inventories spread is the difference between inventories and their five-year average. Published:11/13/2018 11:09:52 AM
[Markets] One Third Of Central Americans Want To Live In A Different Country

Authored by Julie Ray and Neli Esipova via Gallup,

The several thousand Central American asylum seekers and migrants who are slowly making their way toward the U.S. border may be unusual because of the size of their group, but their desire to come to the U.S. is not. They actually represent a relatively small fragment of a much larger group of people in their own region -- and around the world -- who say they would like to move to the U.S. if they could.

In Gallup's most recent global estimate, between 2015 and 2017, 15% of the world's adults - more than 750 million people - said they would like to move to another country permanently if they could. In Central America, this percentage is one in three (33%), or about 10 million adults.

Three percent of the world's adults -- or nearly 160 million people -- say they would like to move to the U.S. This includes 16% of adults from Honduras, Nicaragua, Guatemala, El Salvador, Panama and Costa Rica, which translates into nearly 5 million people.

But unlike the caravan of Central American migrants who are currently on the move, most people who desire to migrate will never try to make their way to the U.S. Desire remains only that. Gallup typically finds that the percentage of those who have plans to move is substantially lower than the percentage who would like to move, and even fewer are actively making preparations to do so.

Central America is no different in this regard. For example, in Honduras, whose residents make up a large percentage of the migrant caravan, about half of adults (47%) say they would like to move to another country permanently if they could, but about 9% are planning to move in the next year -- and 2% are actively preparing to do so.

Implications

The caravan of asylum seekers and migrants is currently weighing whether it will remain in Mexico or push on to the U.S. Those who decide to push on speaks to the risks migrants are willing to take - and also the strong draw that the U.S. continues to be for millions.

For the past decade, Gallup's global studies have shown that the U.S., more so than any other country, has been the top desired destination for people who say they would like to move. Central Americans are no exception. People in this region who would like to move - if they could - say they would like to move to the U.S. more than any other place in the world.

However, this desire to move to the U.S. started to show signs of waning in Central America in 2017, and it seems to have persisted in a number of countries so far in 2018. This could possibly reflect changes in the climate toward migrants in the U.S. under the Trump administration -- but it is still too early to tell, and Gallup will continue to monitor it.

For complete methodology and specific survey dates, please review Gallup's Country Data Set details.

Published:11/13/2018 11:09:52 AM
[Markets] NewsWatch: Why Amazon’s ‘HQ2s’ won’t create another Seattle The online retail giant has chosen Crystal City, Va. and Long Island City, N.Y.
Published:11/13/2018 11:09:51 AM
[Markets] Maine Republican sues to halt ranked-choice vote count Maine Republican sues to halt ranked-choice vote count Published:11/13/2018 10:42:32 AM
[Markets] Nomura Warns "Only The G-20 Can 'Kick-Save' Global Risk Sentiment Now"

While Chinese, European, and US stocks bounced this morning on renewed optimism on positive trade-talk developments between China and US, Nomura's Charlie McElligott warns that global growth proxies continue to exhibit poor optics and fits with Chinese financing / 'credit impulse' data which is far worse than expected

Global growth 'tea leaves' still not painting a pretty picture:

  • Crude bleeds further, with both Brent and WTI -2.0% currently

  • Japanese stocks -2.1% (Nikkei was -3.5% at one point) and led lower by cyclicals—Industrials -2.7% / Energy -2.9% / Financials -3.0% / Tech -3.0% / Materials -3.2%, showing especially negative sensitivity to the Apple iPhone concerns

  • Asia EM Eq still weaker too across Taiwan, S Korea, Singapore, Malaysia and Vietnam despite EMFX marginally better

  • Chinese Industrial Metals futures continuing their horrid trajectory (negative implications for “inflation expectations”), with Nickel -12.9% over the past month; Zinc -9.3%, Deformed Bar -8.6% and Hot-Roiled Coil -10.7% over the same 1m span

The Chinese Aggregate Financing data, while expected significantly “weaker” in light of the recent push from Chinese officials to force higher lending quotas ...was still a negative-shock despite the lowered-expectations, with massive “misses” across all metrics (remember too that authorities boosted the Sep headline numbers with some accounting-fun, adding ‘local bond sales’ to the overall financing tally and creating a false-optic):

  • Aggregate Financing was 728.8B Yuan in Oct vs 1.3T Yuan survey and vs 2.17T Yuan the prior month

  • New Yuan Loans were 697B Yuan vs est 904.5B survey and 1.38T the prior month

  • Broad M2 money supply increased 8.0%, down from 8.3% in Sep

Further, some headlines from China just out which may in-act disappoint Chinese Equities further upon their reopen tomorrow:

  • *CHINA WON'T USE EXCESSIVE STIMULUS TO BOOST ECONOMY: LI

  • *CHINA WON'T DEVALUE YUAN TO SUPPORT EXPORTS: LI

As Nomura's Managing Director of Cross-Asset Strategy, McElligott suggests the key to risk-asset stabilization remains “movement” at the G20, where a best-case “detente” scenario would be a delay on the third tranche of tariffs planned to launch at the start of the new year - we would play for this with 'wingy' SPX Call Spreads.

"Here's the deal," McElligott explains: 'tighter financial conditions', 'Dollar Shortage' thesis, 'max QT' (between The Fed, ECB, and BoJ) and trade tariffs are all 'biting' at the same time...

...as fundamental data is getting downgraded...

..and removal of extraordinary liquidity are overriding these occasional bursts of optimism regarding the status of U.S. / China trade relations:

  • U.S. Dollar (BBDXY) is at 18 month highs

  • U.S. real yields (5Y TIPS) at 9 year highs

  • “Max Quantitative Tightening,” with G3 Central Bank balance-sheets seeing their YoY rate-of-change contracting to outright NEGATIVE in 4Q18

  • Fading U.S. economic momentum, with the diminishing returns of the tax-cut fiscal stimulus seeing QoQ expectations for US GDP growth consecutively lower from 4Q18 through 4Q19

  • Similarly weaker global GDP growth change expectations, with Japan, Europe and China all weaker in 2018 and EU / China expected lower again in 2019, with Japan expected just ‘flat’

  • Clear reversal and breakdown LOWER in global manufacturing PMIs, with the JPM’s aggregated Global Manu PMI index now down 9 of the last 10 months

Add-in the unwind-y behavior in the very exposed Tech sector (the Apple supply-chain beat-down saw additional victims overnight, with Japan Display -9.5% and Hon Hai Precision Industry slipping to the lowest level in five years, with Dialog Semi and AMS again lower in Europe this morning), further punishing long books that are crowded into the multi-year hiding place of “Growth” and you have the makings for atrocious sentiment.

The “kick save” required right now to turn this global risk-sentiment “bleed” is something at the G20 between Trump and Xi (and as previously noted, I plan on being “out” of my current tactical SPX long by then on “disappointment risk”) - which realistically at best is a smiling handshake photo opportunity and a lower-probability delay of the third $267B wave of tariffs (per the DC consultants, a reversal on the existing first two tranches / the $253B and $113B of tariffs is highly unlikely at this juncture)

This theoretical “tariff delay” scenario at the G20 is the obvious potential catalyst for “upside” SPX trades; however, vol remains expensive and call skew unattractive

This “Equities upside” play is further challenged too as investors have pivoted bearishly in light of the negative performance-driven “de-gross,” and NOBODY wants to sell puts to buy calls—thus the only trade which makes sense is “wingy” call spreads

I plan on being OUT of my tactical SPX “outright long” which I have pushed due to the resumption of “mechanical” demand sources in the market over the past two weeks into G20, as I believe there is a greater likelihood of disappointment at the event; HOWEVER, the most attractive UPSIDE hedge / TACTICAL play then becomes the Dec7 SPX 2815 / 2855 CS for 7.40, getting you 4.4 : 1 leverage (20d 10d call spread)

* * *

Looking further out, McElligott continues to believe that in-line with his “financial conditions tightening tantrum” phase 2 end-game, risk-markets will again fade as we push into the March 2019 Fed hike, which will push policy “restrictive” alongside higher Dollar and higher real yields as economic “slowdown” forces (tighter USD-liquidity).

Sometime in 2Q19, the Nomura strategist would then expect the UST curve to STEEPEN as the market then prices-in the end of Fed normalization, where then we should expect the more “risk-off” trading environment and acceleration of “low vol / defensive / value” trades within the Equities-space at this point in the cycle.

Published:11/13/2018 10:42:32 AM
[Markets] FA Center: These investment newsletters have made money whether the stock market is up or down You can invest for long-term gain or short-term excitement, but not both, writes Mark Hulbert.
Published:11/13/2018 10:42:32 AM
[Markets] Stocks - Wall Street Rises as Trade Tensions Ease Investing.com – Wall Street rose on Tuesday, as trade tensions between the U.S. and China eased.The S&P 500 rose 14 points, or 0.54%, to 2,740.89 as of 9:37 AM ET (14:37 GMT), while the Dow increased 60 points, or 0.24%, to 25,447.43 and the tech-heavy Nasdaq Composite was up 64 points, or 0.90% to 7,265.51.Trade war tensions eased on news that China’s trade negotiator could head to Washington ahead of a meeting of the two countries' leaders later this month. ... Published:11/13/2018 10:42:32 AM
[Markets] "The Collapse Has Begun" - GE Is Now Trading Like Junk

Two weeks after we reported that GE had found itself locked out of the commercial paper market following downgrades that made it ineligible for most money market investors, the pain has continued, and yesterday General Electric lost just over $5bn in market capitalization - while far less than the $49bn wiped out from AAPL the same day, it was arguably the bigger headline grabber.

The shares slumped -6.88% - after dropping as much as -10% at the lows - after the company’s CEO, in an interview with CNBC yesterday, failed to reassure market fears about a weakening financial position. The CEO suggested that the company will now urgently sell assets to address leverage and its precarious liquidity situation whereby it will have to rely on revolvers now that it is locked out of the commercial paper market.

Indeed, shares hit levels first seen in 1995 yesterday and have only been lower since, very briefly, during the financial crisis when they hit $6.66 in March 2009. For a bit of perspective, Deutsche Bank notes that the market cap of GE now is $69.5bn and it’s the 80th largest company in the S&P 500. Yet in August 2003, GE was the largest company in the index (and regularly the world between 1993-2005) at a market cap of $296bn, $12bn more than Microsoft in second place. Since then, the tech giant has grown to be a $826bn company well over 10 times the size, while GE’s market cap peaked (ironically) during the dot com bubble in August 2000 at $594BN before tumbling first in the tech crash and then the GFC.

But while most investors have been focusing on GE's sliding equity, the bigger concern is what happens to the company's giant debt load, especially if it is downgraded to junk.

First, some background: GE had about $115 billion of debt outstanding as of the end of September, down from $136 billion a year earlier. And while GE is targeting a net EBITDA leverage ratio of 2.5x, this hasn’t been enough to appease credit raters, which have expressed concern recently that GE’s beleaguered power business and deteriorating cash flows will continue to weaken the company’s financial position. As a result, Moody’s downgraded GE two levels last month to Baa1, three steps above speculative grade. S&P Global Ratings and Fitch Ratings assign the company an equivalent BBB+, all with stable outlooks.

The problem is that while the rating agencies still hold GE as an investment grade company, the market disagrees.

GE - a top 15 issuer in both the US and EU indices - was recently downgraded into the BBB bucket, and as recently as September it was trading 20bps inside BBB- bonds. However they crossed over at the end of that month and now trade up to 50bps wide to the average of the weakest notch of IG.

In other words, GE is already trading like junk, and has become the proverbial canary in the coalmine for what many have said could be the biggest risk facing the bond market: over $1 trillion in potential "fallen angel" debt, or investment grade names that end up being downgraded to high yield.

As Deutsche Bank's Jim Reid notes, GE's recent collapse has come at time when much discussion in recent months has been about BBBs as a percentage of the size of the HY market. Since 2005, BBBs have been steadily rising as a percentage of HY climbing back above the previous peak in 2014 (175%) before extending that growth to a current level of 274%. Meanwhile, the total notional of BBB investment grade debt has grown to $2.5 trillion in par value today, a 227% increase since 2009, and while it represents just over 50% of the entire IG index. 

Next, to get a sense of just how large the risk of fallen angels in the US is, consider that the BBB part of the IG index is now ~2.5x as large as the entire HY index.


So large BBB companies - and none are larger than GE - with a deteriorating credit story are prone to additional widening pressure as investors fear the risks of an eventual downgrade to HY and a swamping of paper into that market. This, as Deutsche Bank writes, isn’t helping GE at the moment and may be a dress rehearsal for what happens for weaker and large BBB issuers in the next recession.

Which brings us back to GE, which while not trading as a pure play junk bond just yet, is well on its way as the following chart of GE's spread in the context of both IG and HY shows.

Which is both sad, and ironic: as Bloomberg's Sebastian Boyd writes this morning, "the company's CEOs boasted of its AAA rating as a key strategic asset, but it was more than that. The rating, which it maintained for more than half a century, was symbolic of the company's status as a champion of American commerce. Now, Microsoft and Johnson & Johnson are the only U.S. corporates with the top rating from S&P."

And while rating agencies have yet to indicate they are contemplating further cuts to the company's investment grade rating, the bond market has clearly awoken, and nowhere more so than in the swap space, where GE's Credit Default Swaps have exploded in recent weeks.

What kind of an impact would GE's downgrade have? With $48 billion of bonds in the Bloomberg Barclays US Corporate index. GE would become almost 9% of the BB universe. And one look at Boyd's chart below shows that the market is increasingly pricing GE's index-eligible bonds as junk, especially in the context of the move over the past month.

An additional risk to the company's credit profile: GE has more debt coming due in the next 18 months than any other BBB rated borrower: that fact alone makes it the most exposed to higher rates according to Boyd.

Meanwhile, GE's ongoing spread blow out, and junk-equivalent price, has not escaped unnoticed, and as we have been warning for a while, could portend a broader repricing in the credit sector. As Guggenheim CIO commented this morning, "the selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun."

Then again, Minerd's concern pales in comparison to what some other credit strategists. In an interview with Bloomberg TV on November 8, Bruce Richards, chairman and chief executive officer of the multi-billion Marathon Asset Management warned that overleveraged companies "are going to get crushed" in the next recession.  Richards also warned that when the cycle does turn, "with no liquidity in the high-yield market to speak of, when these tens of billions or potentially hundreds of billions falls into junk land, it’s "Watch out below!" because there’s going to be enormous price adjustments."

Echoing what we said above, Richards noted that about $1 trillion of bonds are rated as BBB, as investment- grade, when they has leverage ratios worthy of junk, adding that "the magnifying glass is now shifting" toward ratings companies.

For now the "magnifying glass" appears to have focused on GE, and judging by the blow out in spreads for this "investment grade" credit, what it has found has been unexpected. Which brings us to the question we asked at the top: will GE be the canary in the credit crisis coalmine and, when the next crisis finally does strike, the biggest fallen angel of them all?

Published:11/13/2018 10:09:17 AM
[Markets] Dow down 160 points after Tuesday morning’s rebound bid runs out of steam Dow down 160 points after Tuesday morning’s rebound bid runs out of steam Published:11/13/2018 10:09:17 AM
[Markets] Trump Today: Trump Today: President attacks Macron over military vision, wine tariffs President Donald Trump went on the attack against French President Emmanuel Macron on Tuesday, blasting him in a string of tweets about the military, wine tariffs and his approval rating.
Published:11/13/2018 10:09:17 AM
[Markets] Amazon says it's creating 5,000 jobs with $150,000 average salary in Nashville Amazon says it's creating 5,000 jobs with $150,000 average salary in Nashville Published:11/13/2018 9:37:21 AM
[Markets] President Trump Could Make Oil’s Fall Worse On November 12, US crude oil December futures fell 0.4% and settled at $59.93 per barrel—the lowest closing level for active US crude oil futures since February 13. The Energy Select Sector SPDR ETF (XLE) fell 2.1% on November 12. The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) fell 2% and 2.3%, respectively. The fall in the broader market might have dragged energy stocks. Published:11/13/2018 9:37:21 AM
[Markets] The Biggest Threat To Dollar Dominance

Authored by Irina Slav via Oilprice.com,

Russian oil exporters are pressuring Western commodity traders to pay for Russian crude in euros and not dollars as Washington prepares more sanctions for the 2014 annexation of Crimea by Moscow, Reuters reported last week, citing as many as seven industry sources.

While it may have come as a surprise to the traders, who, Reuters said, were not too happy about it, the Russian companies’ move was to be expected as the Trump administration pursues a foreign policy where sanctions feature prominently. This approach, however, could undermine the dominance of the U.S. dollar as the global oil trade currency.

Early indications of this undermining became evident this spring, when Russia and Iran launched an oil-for-goods exchange program seeking to eliminate bilateral payments in U.S. dollars and plan to keep it going for five years. The sanction buddies discussed this sort of agreement earlier, back in 2014, when Iran was still under Western sanctions. Even after the notorious nuclear deal was reached, the two countries decided to go ahead with their barter deal, and the preliminary agreement was reached last year. According to it, Russia would receive 100,000 bpd of Iranian crude in exchange for US$45 billion worth of Russian goods.

In March, Iran banned purchase orders denominated in U.S. dollars and said that any merchant using dollars in their orders will not be allowed to conduct the import trade. A month later, Tehran announced that it will publish all its official financial reports in euros instead of dollars in a bid to encourage a switch to euros from dollars among state agencies and businesses.

Now, Russia’s biggest oil producers are renegotiating oil delivery contracts with commodity traders, and three of them, Rosneft, Gazprom Neft and Surgutneftegaz, have raised traders’ hackles by insisting they, the traders, commit to paying penalties beginning next year if U.S. sanctions disrupt sales and as a result the buyers fail to make payments. Also, there are discussions about using euros and other currencies instead of dollars to ensure payments are not disrupted.

It would make perfect sense for the seller of any commodity to ensure that they receive payment for their commodity. In an environment of sanctions, looking for ways around them is the only logical behavior. And Russia and Iran are not alone in this drive to distance themselves from the dollar.

Venezuela, for one, has bet on digital currency as a way of skirting Washington sanctions that have added to the pressure created by the 2014 oil price crash and years of PDVSA mismanagement—both factors which have plunged the Venezuelan economy into a possibly irrecoverable crisis. Just today, crypto media reported that Caracas would present its cryptocurrency, the Petro, to OPEC as a unit of account for oil trading next year. “We will use Petro in OPEC as a solid and reliable currency to market our crude in the world,” Finance Minister Manuel Quevedo said.

China is also openly promoting its currency for oil trade and all trade. The internationalization of the yuan is part of the New Silk Road initiative of President Xi and given China’s level of oil consumption, oil trade is a big part of this internationalization. Earlier this year, China launched its long-awaited yuan-denominated oil futures contract. While the general trading public remains cautious about buying into it, some have forecast that the yuan will eventually replace the greenback as the global oil currency. And it could be joined by the euro as long as the European Union survives in the long term. After all, Russia and Iran are among the biggest oil exporters globally. That’s a lot of barrels that might be soon traded in euro and not dollars.

Published:11/13/2018 9:37:21 AM
[Markets] Amazon confirms it's picked New York and Arlington County, Va., as 'HQ2' sites Amazon confirms it's picked New York and Arlington County, Va., as 'HQ2' sites Published:11/13/2018 9:09:31 AM
[Markets] Apple Slumps Back Below Key Technical Support, Loses $150 Billion In A Week

Apple has never lost more market cap in seven short days... ever. The 'no brainer' stocks

 

Following yet another downgrade overnight (from Goldman this time), the world's largest market cap company fell back below its 200DMA at the open, attempted to stage a comeback,

...then tumbled back below it...

Trillion dollar, bye bye.

Published:11/13/2018 9:09:30 AM
[Markets] Market Extra: Small-cap index perilously close to death cross — and that’s bad news for the broader stock market A closely followed gauge of small-capitalization stocks is a hair’s breadth of realizing a bearish pattern.
Published:11/13/2018 9:09:30 AM
[Markets] Trump reportedly set to oust homeland-security secretary Trump reportedly set to oust homeland-security secretary Published:11/13/2018 8:40:05 AM
[Markets] Apple's stock falls after Goldman cuts price target, iPhone unit estimates Shares of Apple Inc. dropped 1.4% in premarket trade Tuesday, after Goldman Sachs slashed its price target by 13% and cut iPhone unit estimates in the wake of a profit and sales warning from supplier Lumentum Holdings Inc. . Analyst Rod Hall lowered his price target to $209 from $240, and reiterated the neutral rating he's had on Apple since Feb. 6. He cut his fiscal 2019 revenue outlook by 3.5% to $269.94 billion, which compares with the FactSet consensus of $280.5 billion; he lowered his earnings estimate to $13.00 from $13.44, while the FactSet consensus is $13.45; and reduced his total iPhone units estimate by 6%, as declines in iPhone XR/XS Max/XS unit estimates offsets increases in lower-priced iPhone units. Apple's stock had tumbled 5.0% to a 3 1/2-month low on Monday, after Lumentum cut is earnings and revenue outlook after it recently received a request from "one of our largest" customers to "materially reduce shipments" of laser diodes for 3D sensing, and Lumentum has disclosed in the past that Apple was its largest customer. Sanderson said he's concerned Lumentum's warning suggests demand for new iPhone modes is deteriorating. "We note this could easily right itself given the bulk of demand comes in late December but we feel more prudent sell through forecasts are warranted due to the timing and magnitude of this warning," Sanderson wrote in a note to clients. Apple's stock has shed 16% since its Oct. 3 record close of $232.07 through Monday, while the Dow Jones Industrial Average has lost 5.4% over the same time. Published:11/13/2018 8:40:05 AM
[Markets] John Bolton Says "No Evidence" Implicating Crown Prince On Khashoggi Kill Tape

Hours after the New York Times reported that Turkey's long-rumored audio recording of Saudi journalist-turned dissident's murder inside the Saudi consulate included "strong evidence" that Saudi Crown Prince Mohammad bin Salman ordered the killing, National Security Advisor John Bolton said Tuesday that no such link existed, according to the Wall Street Journal.

Bolton

The recording didn't appear to implicate the Crown Prince, Bolton said. Turkish President Recep Tayyip Erdogan said over the weekend that Turkey had shared the tape with the US, Germany, the UK, France and Saudi Arabia. The Times had reported that one member of the kill team could be heard telling his superior to "tell your boss" that Khashoggi was dead. Intelligence sources quoted by the Times said they believe "your boss" was a reference to MbS - though he wasn't named and there's still no direct evidence of his involvement.

Bolton specified that he hadn't heard the recording himself and was merely referencing analyst reports: 

Mr. Bolton said he hadn’t personally heard the audio recording provided by Turkey but that U.S. officials believe it doesn’t appear to connect the crown prince to the murder. "That’s not the conclusion that I think the people who heard it have come to," he said at a media briefing in Singapore on Tuesday.

Meanwhile, the Saudis have continued to deny MbS's involvement.

"We categorically deny the reporting referencing the crown prince in this matter or that he had any knowledge whatsoever of it," a Saudi official said Tuesday. "Despite our multiple requests, the Turkish authorities have not provided us with the recordings, however, they allowed our intelligence services to hear recordings and at no moment was there any reference to the mentioned phrase in those recordings."

Bolton added that the US trusts Saudi Arabia to conduct its own investigation.

Mr. Bolton said the U.S. trusts that Saudi Arabia will investigate the killing. "We expect that they will continue the investigation and that’s very important to us and it’s very important to others in the region, too," he said. "The president has made it very clear that he expects that we’re going to get the truth from the Saudis."

Meanwhile, the record run of falling oil prices continues...

Published:11/13/2018 8:40:04 AM
[Markets] Earnings Outlook: Walmart earnings: Expectations for e-commerce growth are sky-high Known for its brick-and-mortar locations, analysts say Walmart is now an e-commerce leader, and is creating a new kind of retail.
Published:11/13/2018 8:40:04 AM
[Markets] Goldman Cuts Apple: Sees 3% Revenue Drop, 15 Million Fewer iPhones Sold On Weaker Chinese Demand

One day after Apple stock plunged  5% when 3D sensor supplier Lumentum (LITE) reduced its December quarter revenue guidance by 17%, citing "reduced shipments from one of its largest 3D sensing customers" (which is Apple), the pain is piling on, and moments ago Goldman Sachs cut its AAPL price target from $222 to $209, as a result of read throughs from the LITE announcement, which according to Goldman will result in 6% fewer (or 15 million units) iPhone units and a 3% drop in revenue.

Here is how Goldman analyst Rod Hall reads the Lumentum announcement:

Lumentum preannouncement. Lumentum reduced its FQ2 (to Dec) revenue guidance by 17% at the midpoint citing reduced shipments from one of its largest 3D sensing customers. We calculate this implies a ~23m cut to VCSEL units in December and March, which after inventory and yield adjustments implies ~15m lower FaceID based iPhone units in Dec/Mar quarters.

Note that LITE as a VCSEL supplier wouldn’t necessarily have a complete view of end demand for iPhones. However, given the extent of the cut and what we believe is ~100% share for LITE at Apple for the large VCSEL array, we are concerned that end demand for new iPhone models is deteriorating. We note this could easily right itself given the bulk of demand comes in late December but we feel more prudent sell through forecasts are warranted due to the timing and magnitude of this warning.

According to Goldman, the reason behind the cut is incremental weakness out of China: "On the FQ1’19 call, Apple indicated macro and FX driven consumer weakness in EMs such as Russia, Brazil, Turkey and India. We suspect that China also weakened during the quarter."

As a result of the above, Goldman is reducing its FQ1’19 iPhone units estimate by 5% and cutting its FQ1 total revenue forecast by 3% to $89bn. Hall then notes that his FQ1 revenue estimate is "now at the low end of Apple’s guidance given on Nov 1 ($89bn-$93bn)."

While Apple may have already contemplated some weakness in its guidance, we feel the timing and magnitude of the LITE  reduction suggests Apple is seeing incrementally worse demand data.

Bottom line: Goldman is reducing its 12-month price target to $209 from $222 based on ~16x P/E its CY’19 EPS estimate of $13.40

In response, AAPL stock is not happy, and is down another 1.2% in the premarket, having faded all earlier gains. It's time for more buybacks...

 

Published:11/13/2018 8:07:55 AM
[Markets] Small-cap index perilously close to death cross — and that’s bad news for the broader stock market A closely followed gauge of small-capitalization stocks is a hair’s breadth of realizing a bearish pattern. Published:11/13/2018 8:07:55 AM
[Markets] Capitol Report: Trump preparing to remove Homeland Security Secretary Nielsen | Interior Secretary Zinke says he’s ‘100% confident’ he’ll be cleared President Donald Trump has told advisers he has decided to remove Homeland Security Secretary Kirstjen Nielsen, the Washington Post reports, and her departure from the administration is likely to occur in the coming weeks, if not sooner.
Published:11/13/2018 8:07:54 AM
[Markets] U.S. small-business sentiment hits four-month low in October U.S. small-business sentiment hits four-month low in October Published:11/13/2018 8:07:54 AM
[Markets] AT&T's CEO: Acosta treatment by White House may violate free-press guarantee AT&T's CEO: Acosta treatment by White House may violate free-press guarantee Published:11/13/2018 7:39:14 AM
[Markets] Mr. Market's Biggest Headwind

Via Global Macro Monitor,

At the end of September, we posted our analysis of the structural changes taking place in the Treasury market,  The Gathering Storm In The Treasury Market 2.0,  which was very well received and still getting thousands of hits per week.

Crowding Out

Our analysis focused “crowding out”, mainly, the changing supply and demand dynamics in the Treasury market.  We flagged the sharp increase in new Treasury supply this year and the coming years, and the declining demand, mainly, what was once “free money” from:  1) foreign central banks;  2) U.S. government trust funds, such as Social Security which is now in deficit; and 3) The Fed, which is now a net seller of Treasury securities as quantitative tightening is full steam of head, forcing the Treasury to issue an additional maximum of $30 billion into the market to refinance the FED’s maturing Treasury portfolio.

We concluded the extra supply and declining demand is putting almost unprecedented stress and pressure on the world’s financial markets.  That is the marginal supply of liquidity/savings/capital, however, you label it, available for all global asset purchases is not unlimited unless complimented by quantitative easing, and is being sucked into the U.S. Treasury market.

Interest Rates

We also noted in the piece that the only possible case for Treasury yields to remain at current levels or to move lower was for haven flows to increase.  Selling in other asset markets, such as stocks and emerging markets, with the money moving into Treasuries.

Even still, we expect real yields to move higher.

Moreover,  as markets increasingly fret over the growing fiscal deficit and how it will be funded, we suspect the political conflict in the U.S. is going to get very loud and ugly over the next few years.

Place your bets on how to lower the deficit to relieve market pressures.   Cutting entitlements or raising taxes?   Or both?

Jim Grant

Finally,  Jim Grant nailed it last week, confirming, at least to us, our analysis. 

…the expected burden of Treasury security supply in the market this year... we are talking about the biggest dollar amount of securities for sale as a percentage of GDP since World War II, 1945.  – Jim Grant, @2.35 minute mark  

Fed's signal for 'gradual' rate increases was boring, but the right move: Fmr. Dallas Fed president from CNBC.

Keep it on your radar, folks.

 

Published:11/13/2018 7:39:13 AM
[Markets] Oil Prices Extend Record Losing Streak as OPEC Forecasts Lower Global Demand Investing.com - U.S. crude’s losing streak continued on Tuesday as the Organization of Petroleum Exporting Countries forecast that world demand would decrease in 2019. Published:11/13/2018 7:39:13 AM
[Markets] Israeli Tanks Prepare Imminent Gaza Offensive After "Green Light" For "Major Retaliation"

Commenting on Monday's flare-up of rocket fire after a prior Israeli commando raid into Gaza territory to assassinate Hamas leaders, the Jerusalem Post observed that Hamas' retaliation included "the most amount of rockets ever fired into Israel in 24 hours."

Various international reports have cited over 300 rockets and mortars fired into Israeli, which began with a sustained barrage of about 100 within the first hour of the launches alone. What's been dubbed as a "revenge" attack on heels of Monday funeral prayers for slain Hamas commanders killed by Israeli special forces were quickly met with widespread airstrikes on the strip, including on a Hamas television broadcast building, and some 70 targets in total across the strip. 

Meanwhile there appears preparations for what could be a major war and full Israeli invasion of Gaza underway as tank units have been observed mustering at entry points into Gaza.

Notably after cutting short his Paris trip Israeli Prime Minister Netanyahu held a lengthy meeting with his defense minister and military leaders to consider a response to the escalating violence and rocket attacks — one of which scored a direct hit Monday on what's now been identified as an IDF bus in southern Israel, which injured a 19-year old soldier. 

The Times of Israel reports that a major ground offensive is increasingly likely, and with more airstrikes to come:

The army was reportedly given a green light from policymakers to pummel terror groups in the Strip if they continued with the barrages, as the terror organizations in the Strip vowed to do.

Israel's Arutz Sheva reported of the defense and military meeting with Netanyahu: "in the prime minister's consultation with the heads of the defense establishment, operational decisions were made," and indicated "the IDF has been given a green light to launch a heavy retaliation." 

On Tuesday a full Security Cabinet meeting is expected to make final decisions regarding Israel's course of action. 

Meanwhile IDF Spokesperson Brigadier General Ronen Manelis warned on Tuesday: "Hamas is leading the Gaza Strip to destruction and will feel the intensity of the IDF's response in the coming hours."

In another indicator of what's to come possibly imminently, Major General Kamil Abu Rokon, the Coordinator of Government Activities in the Territories (COGAT), wrote public comments on an official communications social media account: “Residents of Gaza, look closely at the pictures from Protective Edge in 2014: A picture is worth a thousand words.”

Late in the day Monday Hamas took the provocative step of publishing video of its operation to destroy the Israeli troop bus which had injured one soldier.

A Hamas militant had attacked the bus in an ambush from somewhat close range using a sophisticated anti-tank missile. 

So far at least 3 Palestinians have died with many more wounded, and an Israeli special forces soldier was killed Sunday during a daring cross border raid on a Hamas HQ. Israeli sources are reporting extensive damage on communities in the south due to incoming rockets from Gaza, and multiple civilians injured. 

Published:11/13/2018 7:07:49 AM
[Markets] Tyson Foods shares sink after revenue miss and weak guidance Tyson Foods shares sink after revenue miss and weak guidance Published:11/13/2018 7:07:49 AM
[Markets] Trump Mocks Macron: "They Were Starting To Learn German In Paris Before The US Came Along"

President Trump isn't ready to forgive the "French diss" served up over the weekend by President Emmanuel Macron.

French

During a ceremony honoring the 100th anniversary of World War I at the Arc de Triomphe on Sunday, French President Emmanuel Macron insulted Trump to his face by launching into a screed about the dangers of toxic "nationalism" and subtly accusing the US of abandoning its "moral values".

This did not sit well with the US president, who was already facing criticism over his decision to show up late to a ceremony honoring the war dead (the administration blamed it on security concerns though it's widely suspected that Trump didn't want to get his hair wet), and Trump has let his displeasure be known in a series of tweets ridiculing Macron's suggestion that Europe build its own army, saying that France and other European members of NATO would be better served by paying their fair share for NATO while daring them to leave and pay for their own protection.

And in his most abrasive tweet yet mocking the increasingly unpopular Macron's imperial ambitions (no, really), Trump pointed out that, historically speaking, Europe has been its own worst enemy, and that while Macron wants to defend the Continent from the US, China and Russia, "it was Germany in WWI & WWII," adding that "they were starting to learn German in Paris before the US came along. Pay for NATO or not!"

Of course, Macron isn't the only French official calling for the creation of a "European army". The country's finance minister advocated for the creation of a Continental army during an interview with Germany's Handelsblatt - a comment that was derided by the paper's editors, who pointed out that Germans "weren't very supportive" of the idea. One wonders why...

Published:11/13/2018 6:44:02 AM
[Markets] Top 5 Things to Know in The Market on Tuesday Investing.com - Here are the top five things you need to know in financial markets on Tuesday, November 13: Published:11/13/2018 6:44:02 AM
[Markets] Need to Know: Stay bearish because the ‘Big Low’ for stocks hasn’t arrived yet, says Bank of America Our call of the day says it’s not the time to go fishing for cheap stocks. That’s because investors are still way too bullish.
Published:11/13/2018 6:44:02 AM
[Markets] Walmart's Flipkart CEO resigns amid allegations of 'serious personal misconduct' Walmart's Flipkart CEO resigns amid allegations of 'serious personal misconduct' Published:11/13/2018 6:44:02 AM
[Markets] Home Depot shares climb in premarket trading after better-than-expected earnings Home Depot shares climb in premarket trading after better-than-expected earnings Published:11/13/2018 6:06:58 AM
[Markets] Walmart's Flipkart CEO resigns amid allegations of 'serious personal misconduct' Walmart Inc.'s Flipkart Group, an India-based e-commerce company, disclosed Tuesday Chief Executive Binny Bansal has resigned, effective immediately. The resignation comes after an independent investigation into allegations of "serious personal misconduct." The company said Bansal "strongly denies" the allegations. "While the investigation did not find evidence to corroborate the complainant's assertions against Binny, it did reveal other lapses of judgement, particularly a lack of transparency, related to how Binny responded to the situation," Walmart and Flipkart said in a statement. "Because of this, we have accepted his decision to resign." Walmart had agreed in May to buy Softbank Group Corp.'s stake in Flipkart for $16 billion. Walmart's stock fell 0.6% in premarket trade. It has soared 16% over the past three months through Monday while the Dow Jones Industrial Average has gained 0.8%. Published:11/13/2018 6:06:57 AM
[Markets] The Wall Street Journal: OPEC report shows output from Russia, cartel offsets loss from Iranian sanctions OPEC and Russian crude production continued to climb in October, more than offsetting losses from Iran where U.S. sanctions have curbed output, the oil cartel said on Tuesday.
Published:11/13/2018 6:06:57 AM
[Markets] Stocks Rebound Despite Tech Slump, Record Oil Slide: US-China Trade in Focus Global stocks rebound as the prospects of U.S.-China trade talks supports markets in Asia and Europe even as tech shares continue to weaken following last night's Apple-inspired sell off. Big tech names such as Samsung, Japan Display and Taiwan Semiconductor trade sharply lower overnight amid global tech sector weakness and the specter of higher Fed interest rates. South China Morning Post reports Beijing's top negotiator will head to Washington to lay the ground for talks between President Donald Trump and China's Xi Jinping, although other reports say Trump is ready to slap fresh tariffs on imported cars as trade risks continue to affect investor sentiment. Published:11/13/2018 5:42:25 AM
[Markets] Trump Planning To Fire DHS Secretary Kirstjen Nielsen "ASAP"

Jeff Sessions has already packed up his things and left the DOJ for the last time, and it's likely that Commerce Secretary Wilbur Ross will be next to go given Trump's well-documented frustrations with Ross's job performance and the percolating scandals surrounding possible ethics violations. 

Nielsen

And to the list of likely Trump administration post-midterm departures, we can now add Secretary of Homeland Security Kirstjen Nielsen, whom Trump has reportedly decided to remove after months of explosive outbursts over what he has perceived as her "poor performance" on immigration - an issue that Trump sees (with some reason, as the midterms showed) as crucial to his political survival, according to the Washington Post. 

The report surfaced after Trump canceled a planned trip with Nielsen to visit US troops at the border in South Texas earlier this week. Trump reportedly told aides over the weekend that he wants Nielsen out ASAP, though the secretary is desperately trying to hang on until Dec. 6, which would mark her one-year anniversary in the job. Trump, who has complained about Nielsen for months, is looking for a replacement who will do a better job of implementing his immigration agenda.

Notably, a DHS spokesman refused to confirm or deny the report.

DHS officials who work with Nielsen declined to address her potential departure Monday. "The Secretary is honored to lead the men and women of DHS and is committed to implementing the President’s security-focused agenda to protect Americans from all threats and will continue to do so,” spokesman Tyler Q. Houlton said in a statement.

As early as May, reports surfaced suggesting that Nielsen had borne the brunt of President Trump's anger over a rebound in illegal border crossings (after crossings dropped to multiyear lows following Trump's 2016 election). That anger has only intensified by her resistance to Trump's rhetoric about the migrant caravans, as well as his order to send thousands of US troops to the border. Trump has also reportedly berated her during cabinet meetings, criticized her to other administration officials and tagged her as a "Bushie" due to her service in the Bush administration.

Trump became incensed last month when Nielsen tried to explain during the runup to the midterm vote why the president couldn't close the Southern border with Mexico or drastically limit immigration.

But despite her obvious reservations, Nielsen has stood up and defended controversial Trump Administration policies like the administration's "zero tolerance" policy for illegal aliens traveling with children. The border separations triggered widespread outrage toward the administration last spring, and Trump eventually caved and reversed the policy under pressure. However, before he did that, Nielsen stood up and delivered a convincing defense of the administration's measures.

At the peak of controversy over the Trump administration’s "zero tolerance" family-separation initiative, Nielsen nonetheless stood at the White House lectern and delivered a vigorous defense of the measures. The president loved her performance — especially when she said there was no administration policy on separations. Days later, under withering criticism, the president changed his mind and ordered an end to the separations.

But if Nielsen is swept out during Trump's second significant cabinet shakeup, all eyes will turn to Chief of Staff John Kelly, who has long been Nielsen's biggest champion. He has previously stuck his neck out to defend her to the president, and her dismissal will inevitably revive speculation that Kelly's name might also be on Trump's "naughty" list. As WaPo reported, though Kelly has tried his hardest to stop Trump from firing Nielsen, his future in the administration is also "shaky".

Published:11/13/2018 5:42:25 AM
[Markets] Tim Mullaney: What a serious budget deal could look like Nancy Pelosi and Donald Trump could make a deal on the budget that would accomplish something positive, writes Tim Mullaney.
Published:11/13/2018 5:42:25 AM
[Markets] Here Is How Walmart Plans To Seize Further Control Of Your Community 

At the most recent International Council of Shopping Centers (ICSC) conference in Atlanta, Walmart announced new plans to repurpose twelve of its locations into Town Centers -- an outdoor gathering area with seating, community activities, entertainment, dining facilities, jogging paths, fountains, green spaces, playgrounds, and even space for live music.

The idea behind Walmart's seismic shift is that it wants to recreate the downtown of small communities that it was instrumental in destroying.

“We want to provide community space, areas for the community to dwell,” said L.B. Johnson, vice president of realty operations for Walmart in his ICSC keynote speech.

According to Forbes, the mega-retailer has already started transforming its stores in Loveland, CO., as well as in Washington, Texas, Missouri, Iowa, Arkansas, California and Oregon, into new Town Centers.

“We want to provide pedestrian connectivity from our box to the experiential zones that are planned on our footprint,” Johnson continued on the podium.

“We want to augment these experiences and activities with more food and beverage, with health and fitness, essential services and entertainment.”

This new strategy provides the lower class with a reason to come to Walmart besides purchasing electronics or groceries.

“Give people something to do, then they will shop,” Ken Nisch, chairman of retail design firm JGA, told Forbes.

“But shopping can’t be the thing to do.”

It seems the Town Center concept is the final piece of the puzzle where corporate America has spent decades destroying rural communities across the country through deindustrialization and a prescription opioid crisis. Now, this overreaching strategy could take the more than 5,000 Walmart stores and turn them into Town Centers where the corporate takeover of communities would be complete.

According to the Walmart website, some Town Centers will have a "mobility hub" where people can ride public transportation, rent bicycles or scooters, or use ride-share - much like at an actual town center.

"A transformation is underway," Johnson said in his speech.

"We are working with the local community to really master plan a vision, not only for Walmart, but shared with the municipality. We are using terms like collaboration space." And, he added, "We are going to hold ourselves accountable to the community for improving well-being."

So, it all makes sense, corporations have spent decades deindustrializing regions of America. Now, Walmart wants to rebuild these communities under corporate control. It is also becoming increasingly clear that the system of government under which we live today is a government of the elites, by the bureaucrats and for the corporations. Through Town Centers, Walmart has accelerated the corporate takeover of America.

Published:11/13/2018 5:10:34 AM
[Markets] Why stock investors should want higher oil prices Both the bulls and the bears need to be on guard against drawing knee-jerk conclusions about the meaning of oil’s recent rout. On the other, many analysts are expressing concern that the lower price of oil (CLZ8)(UK:LCOF9)  reflects the slower economic demand of an imminent downturn. A close analysis of past data shows that sometimes a higher oil price has been good for the stock market, and sometimes not. Published:11/13/2018 5:10:34 AM
[Markets] The Moneyist: I earn $15 an hour and will inherit $150,000 — how do I secure my financial future? This woman has never been to college, rents and says this is the one chance to improve her circumstances.
Published:11/13/2018 4:36:23 AM
[Markets] Dow set for triple-digit rebound after tech-heavy sell-off In earnings news, home improvement retailer Home Depot will report results before the bell Tuesday, while cannabis firm Tilray posts its financials after the bell. On the data front, Federal budget data and senior loan officer survey figures are due at 2 p.m. ET. U.S. stock futures traded higher on Tuesday following a sharp downturn in the previous session. Published:11/13/2018 4:10:05 AM
[Markets] One British Company Wants To Implant Microchips Into "Hundreds Of Thousands" Of Global Workers

Authored by Michael Snyder via The American Dream blog,

It is really happening.  At one time, the idea that large numbers of people would willingly allow themselves to have microchips implanted into their hands seemed a bit crazy, but now it has become a reality.  Thousands of tech enthusiasts all across Europe have already had microchips implanted, and now a Swedish company is working with very large global employers to implement this on the corporate level.  In fact, Biohax recently told one of the biggest newspapers in the UK that they have been talking with a “major financial services firm” that has  “hundreds of thousands of employees”

Biohax, a Swedish company that provides human chip implants, told the Telegraph it was in talks with a number of UK legal and financial firms to implant staff with the devices.

One prospective client, which cannot be named, is a major financial services firm with “hundreds of thousands of employees.”

For security-obsessed corporations, this sort of technology can appear to have a lot of upside.  If all of your employees are chipped, you will always know where they are, and you will always know who has access to sensitive areas or sensitive information.

According to a top official from Biohax, the procedure to implant a chip takes “about two seconds”, and it is usually implanted in the hand

A syringe is used to place the chip in an area between the thumb and forefinger, according to the report. Osterlund said the procedure is similar to ear piercing and takes “about two seconds.” The microchips operate via “near field communication” technology, similar to what is used by no-contact bank cards.

“In a company with 200,000 employees, you can offer this as an opt-in,” Osterlund told the Telegraph.

Right now, many companies use security badges, and I once worked in a building that required a security badge.

But security badges can be lost, stolen or forged.  Theoretically, microchip implants are much more permanent and much more secure, and that is one of the big selling points.  The following is what the chief medical officer of Biohax recently told Fox News

“The chip implant is a secure way of ensuring that a person’s digital identity is linked to their physical identity. It enables access management in a way that protects individual self-sovereignty and allows users to control the privacy of their online activity,” Dr. Stewart Southey, the Chief Medical Officer at Biohax International, told Fox News.

Of course once this technology starts to be implemented, there will be some workers that will object.

But if it comes down to a choice between getting the implant or losing their jobs, how many workers do you think will choose to become unemployed?

Yes, there will be some that will sacrifice their jobs.  Personally, I will never let anyone put a chip in me.  But just like with so many other things, most of the population will simply choose to accept the “new technology”.

Sadly, the mainstream media is now openly telling us that this is coming.  For example, the following is an excerpt from a recent Fox News article entitled “Are you ready for a chip implant?”

You walk into a grocery store and pick up eggs. No smartphone? No problem. You swipe your hand across a reader, and the amount is deducted from your bank account.

If that sounds far-fetched, you obviously haven’t been to Sweden recently, where thousands of people have reportedlyhad chips implanted in their bodies.

And not too long ago, the NBC affiliate in Tampa profiled a mother that desperately wants to implant a microchip into her disabled child for safety reasons

For Steffany Rodroguez-Neely, life is busier than ever. The Bay Area mother-of-three has her hands full 24-hours a day. The ages of her children run the gamut from newborn to teenager. While this Lutz mom prides herself in being an attentive, active, dedicated mother, she’s also a realist. She knows an emergency can happen in a matter of seconds, even to the best of parents.

When Steffany saw the recent tragedy in Pasco County where a toddler wandered into a pond and drowned, her heart was broken. As she talks about it, she shakes her head sadly, closes her eyes and sighs. “It was awful, so sad. You know, good parents have bad things happen,” Steffany told WFLA.

They always like to use the children to make us feel guilty.

The narrative will be that if you are against implantable microchips then you are against child safety and you are a bad person.  By now, you have seen how this works on issue after issue.  There won’t be any talk about the potential tyranny that government-issued identity microchips could unleash.  Instead, all of the talk will be about the “potential benefits” and about how this will make things so much safer “for the children”.

We truly do live in apocalyptic times, and many of us can see where all of this is leading.  Unfortunately, we can complain all that we want but the agenda just keeps moving forward.

Not too long ago, a Wisconsin-based company called Three Square Market began implanting microchips in their employees “on a voluntary basis”.  In the aftermath of that decision, USA Today published an article entitled “You will get chipped — eventually”.  Here are a few lines from that article…

You will get chipped. It’s just a matter of time.

In the aftermath of a Wisconsin firm embedding microchips in employees last week to ditch company badges and corporate logons, the Internet has entered into full-throated debate.

Can you see the psychological tricks that they are using on us?

They want you to believe that it is inevitable and that everyone around  you will eventually give in and get chipped.

As for me and my house, we will never be chipped under any circumstances.  Everything will be “voluntary” in the beginning, but it doesn’t take a genius to figure out how this story will end.

Published:11/13/2018 4:10:05 AM
[Markets] 5 cool ways people are closing the generation gap Here are some great ideas for tapping the talent of people over 50 to help kids on a path to adult success.
Published:11/13/2018 4:10:04 AM
[Markets] Napoleon Reborn: We Need A "European Empire" To Challenge US And China, French Minister Says

As increasingly unpopular French President Emmanuel Macron's calls for creating a "Real European Army" have been met with ridicule from President Trump, who has insisted that Macron should first try meeting France's NATO commitments...

...Another senior French official upped the aggressive rhetoric in an interview published on Monday, saying that Europe shouldn’t be afraid of using its power to become "a peaceful empire" to help it stand up to China and the US. French Finance Minister Bruno Le Maire made the comments in an interview with Germay's Handelsblatt, which noted that Germany remains largely opposed to such a Continent-wide military alliance.

French

To be sure, Le Maire insisted that "I am using this phrase because, in tomorrow’s world, it’s going to be all about power...technological power, economic, financial, monetary, cultural power - all will be decisive. Europe cannot be shy any longer about using its power."

Le Maire also hinted that there will be "decisions made" about a Continent-wide fighting force during an upcoming EU summit.

"We have talked about it for a long time. Now it’s time for decisions. And there will be decisions made on December 4, at the next meeting of the economy and finance ministers. I cannot imagine anything else."

Because the people of Europe have had enough of the "babble from Brussels."

"Everybody knows it takes guts to stand in the way of Donald Trump’s administration," Le Maire said. "The people of Europe have had enough of the babble from Brussels. They want to see action."

In one recent example of European weakness, cited by Le Maire as justification for his imperial ambitions, Europe failed to stop the US from reimposing sanctions on Iran, and has instead opted for a passive alternative: The creation of a Special Purpose Vehicle to circumvent SWIFT and allow European companies to trade with Iran. While the workaround will suffice - for now - the broader problem is that Europe can't allow the US to decide with whom it can and cannot trade.

Of course, it's difficult to talk about the creation of a French empire without thinking about Napoleon, the 18th century tyrant who seized power and fought a bloody continent-wide war to spread his "revolutionary principles" across Europe.

Given the timing of the interview, we wonder if Le Maire was aware that Sunday was the 100th anniversary of the Armistice that ended World War I, a horrific, bloody conflict that left some 16 million soldiers dead and ripped apart the continent. If nothing else, this anniversary certainly lent his remarks a hint of irony.

Published:11/13/2018 3:36:21 AM
[Markets] Dow futures up over 100 points after Monday's sharp pullback U.S. stock futures indicated a bounce for Wall Street equities on Tuesday, a day after a rout that sent the Dow Jones Industrial Average lower by 600 points. Dow futures rose 116 points, or 0.5%, to 25,498, while S&P 500 futures gained 14.2 points, or 0.5%, to 2,742. Nasdaq-100 futures gained 49.75 points, or 0.7%, to 6,884.50. On Monday, along with sharp losses for the Dow, the S&P and Nasdaq Composite fell 2% and 2.8%, respectively. The pullback came as crude prices tumbled, losses which continued on Tuesday. Published:11/13/2018 2:38:03 AM
[Markets] Turkey's "Sea Bandit" Threats Are Indirectly Aimed Against The US

Authored by Andrew Korybko via Oriental Review,

Turkish President Erdogan warned against so-called “sea bandits”.

He was speaking in regards to the controversial issue of energy exploration in disputed Aegean and Eastern Mediterranean territories along his country’s maritime borders with Greece and Cyprus, the latter of which is comprised of a northeastern third that declared itself the “Turkish Republic of Northern Cyprus” and is only recognized by Ankara.

The Turkish leader threatened that his country “will not allow bandits in the seas to roam free just like we made the terrorists in Syria pay”, which strongly implies its intentions to militarily defend it and its ally’s interests against the much weaker forces of Greece and Cyprus, despite the first-mentioned being a “fellow” member of NATO.

It’s more than likely bluster at this point, but his eyebrow-raising rhetoric draws attention to some very important trends.

The first is that maritime tensions along Turkey’s western and southern peripheries have been heating up, partially due to Israel’s prospective plans to build an “EastMed” gas pipeline connecting the self-proclaimed “Jewish State” with Italy via Cyprus and Greece. Not only could drilling take place off of the divided island, but its internationally recognized government could also receive a windfall of revenue by facilitating this pipeline’s transit across its maritime territory, funds that might be withheld from the northeastern region pending an official resolution of the conflict on Nicosia’s terms. President Erdogan understands just how closely connected the topics of Cyprus’ reunification and its energy geopolitics are, hence why he’s taking such a strong stand at this time in a bid to help his ally gain better negotiating leverage.

The second trend that President Erdogan’s polemics seem to address is the increasing sense that his country is being “contained” along its maritime and mainland borders, the first of which was just touched upon while the second deals with the Syrian Kurds and Armenia. It’s well known that Ankara regards the PYG-YPG as terrorists and has militarily intervened against them twice in Syria, while there’s a looming unease that the new pro-Western Color Revolutionary government of Nikol Pashinyan in Armenia might move uncomfortably closer to the US in the coming future. This fear was heightened after US National Security Advisor John Bolton praised the quality of American arms while visiting Armenia late last month, which made some worry that Washington is trying to militarily court Yerevan despite Armenia denying it.

Altogether, Turkey’s threats against so-called “sea bandits” lurking in the Aegean and Eastern Mediterranean can therefore be interpreted as a reaction against what its government tacitly regards as an ongoing “strategy of tension” all along its maritime and mainland borders. Turkey is beginning to feel like its notional American “ally” is “containing” it despite the incipient rapprochement that the two Great Powers are presently involved in, and it thinks that blustering against what it suspects are the US-backed plans of its Greek and Cypriot neighbors will scare them off and succeed in calling the US’ bluff. The situation is becoming ever more unpredictable and dangerous as Washington and Ankara jostle for influence in the Turkish borderlands, thereby raising the risk of a proxy war by either miscalculation or design.

Published:11/13/2018 2:38:03 AM
[Markets] Finnish PM: Russia Suspected Of Massive GPS Blackout In Finland During War Games 

On Sunday, Prime Minister Juha Sipila told Yleisradio Oy (Yle), Finland's national public broadcasting company, that large-scale GPS blackouts over northern Finland during Nato war exercises over the past few weeks were intentional and the culprit could be Russia.

Air Navigation Services Finland (ANS Finland) issued a warning last week for all air traffic due to massive GPS interruption in the northern region of the country. Norway also posted a similar notice about GPS disruption for air traffic during the NATO exercise. 

Here is the announcement on Eurocontrol's website:

Ivalo airport in Finland’s northernmost region issued a warning of unstable GPS signals last week. The warning was posted as Notice to Airman.

Lapland in Finland and Finnmark in Norway were some of the most affected regions.

“It is possible that Russia has been the disrupting party in this. Russia is known to possess such capabilities,” Sipila told Yle.

The war exercise was mainly conducted in Norway but field training exercises extended into the North Atlantic and the Baltic Sea, as well as in Finland, Sweden, and Iceland. About 29 NATO members and partner countries Finland and Sweden participated in the most significant phase of the exercise, the LIVEX, which was held between October 25 and November 07.

Finland's participation in Nato's Trident Juncture has been seen as a move that pushes Helsinki, the capital of Finland, towards Washington, a move that has infuriated Russia.

"Technology-wise it’s relatively easy to disturb a radio signal, and it’s possible that Russia was behind it,” Sipila said, adding that Russia has the capabilities to do it.

”It’s a message to all parties participating in the military exercise,” he warned.

Sipila said GPS jamming poses a severe risk to the commercial aviation industry, it increases the chance of civilian air traffic accidents, and that Finland has prepared to deal with these types of disturbances.

Then on Monday afternoon, Moscow dismissed Sipila's claims, according to Reuters. Dmitry Peskov told reporters on a call he had zero information that Russia could have been responsible and said his country was regularly accused of all kinds of crimes, most of which were baseless.

While there is no confirmation on who exactly launched the GPS blackout over Finland and Norway during the war exercises, one can certainly get the picture that governments are not telling the public that an electronic warfare battle could be underway (between Russia and NATO), or if that is not the case, then maybe a false flag. No matter who caused the incident, the war drums are beating.

Published:11/13/2018 2:09:28 AM
[Markets] Futures Movers: Oil prices under pressure, with record skid set to continue Oil trades lower Tuesday, unable to recover from a start-of-the-week pullback.
Published:11/13/2018 1:36:41 AM
[Markets] Russia's Next Weapon... A Church?

Authored by Michael Peck via The National Interest,

The Russian military plans to build a military church to bolster the spiritual values of its armed forces.

Meet Vladimir Putin's newest weapon: a church.

The Russian military plans to build a military church to bolster the spiritual values of its armed forces. Construction will soon begin of the Main Church of the Armed Forces, to be erected in Patriot Park outside Moscow, according to Colonel General Andrei Kartapolov, deputy defense minister and chief of the armed forces’ Main Military-Political Directorate, a new organization responsible for political education of the troops.

The “new church will be one more example of the people’s unity around the idea of patriotism, love, and devotion to our Motherland,” Kartapolov told Russian journalists.

To say the church, dubbed by some as the “Khaki Temple,” will have a martial air would be an understatement.

“The walls of the military church are really made in the color of the standard Russian missile system and armored vehicle,” according to the Russian newspaper The Independent [Google English translation here ] “...From the inside, the walls are decorated with paintings with battle scenes from military history and texts from the Holy Scriptures. The projected height is 95 meters [104 feet] and is designed for 6,000 people.”

“Kartapolov is convinced that the modern Russian serviceman cannot be shaped without shaping lofty spirituality in him,” Russian media said. “Speaking about ideology, the deputy head of the military department pointed out that this will be based on knowledge of the history of our Motherland and people and on historical and cultural traditions.”

“Even though the Russian constitution states that ‘no ideology may be established as state or obligatory,’ the Kremlin continues to search for a unifying set of beliefs,” notes the U.S. Army's Foreign Military Studies Office.

Religion has long played a role in Russian military life, first through the Russian Orthodox Church in Tsarist times, and then—in a secular way—through Communism in Soviet times. “In late imperial Russia, when they began to build garrisons, every regiment sought to build a regimental church, but not a synagogue or mosque,” Roger Reese, an historian at Texas A&M University who has written books on the Tsarist and Soviet armed forces, told the National Interest. “In Putin’s Russia, the Orthodox Church seeks every opportunity to represent itself as the national religion and tie itself to the state as it had under the tsars, so this act represents continuity broken temporarily by the Soviet years. Of course the Soviet regime did not build churches for the army, but it did build the ‘House of the Red Army,’ shaped like a star, in Moscow dedicated to the use of the Red Army and its soldiers.

In some respects it was analogous to a USO [United Service Organization that supports American soldiers] building. So Putin’s dedicating one particular building to the use of the Russian Army soldiers for purposes of morale—and morals—is in line with that.”

While the thought of a military church will be distasteful to some, Russia is hardly unique in linking the military and religion.

Many armies, the United States and Israel included, maintain chaplains who wear uniform and hold military rank. Chapels are common on military bases, and soldiers are given time for - and sometimes pressured to - attend religious services. While a Russian military church is likely to favor a specific denomination - Russian Orthodoxy - even that isn't unique: non-Christian members of the U.S. military have complained of religious discrimination , especially by Christian fundamentalists.

What's interesting is how little things change. Be it the Tsar's conscripts, or the Red Army's draftees or the volunteers who comprise much of modern Russia's military, some spiritual reinforcement is deemed necessary to get soldiers to fight.

Published:11/13/2018 1:07:38 AM
[Markets] The Wall Street Journal: Boeing withheld crucial safety information on new 737 models, experts say Boeing Co. withheld information about potential hazards associated with a new flight-control feature suspected of playing a role in last month’s fatal Lion Air jet crash, according to safety experts involved in the investigation, as well as midlevel FAA officials and airline pilots.
Published:11/12/2018 11:05:42 PM
[Markets] Asian Stocks Slide Following Tech-led Slump on Wall Street Investing.com - Asian stocks slid in morning trade on Tuesday following a tech-led slump on Wall Street as Apple (NASDAQ:AAPL) tanked by 5%. Published:11/12/2018 11:05:42 PM
[Markets] Midterm Elections: A Disaster Denied, And What Is Coming

Authored by Jeremiah Johnson (nom de plume of a retired Green Beret of the United States Army Special Forces ) via SHTFplan.com,

Before the 2016 Presidential Election, and both before and after the inauguration, I wrote specifically about how important the midterm election would be, and the results if the President should lose even one House of Congress.  That happened: the Republicans just lost the House of Representatives. Now that the Democrats control it, not one piece of legislation will pass that is on the President’s agenda. In the supreme act of denial, the Republican party claims the “Blue Wave” was not successful; the President even declared a “victory” with the midterms.

Nothing could be further from the truth, on either count.

The Democrats intend to mount a non-stopping offensive against the President. First, they are going to demand that Mueller go on the attack again. They are already demanding the President’s tax returns. On Thursday, 11-8-18, thousands of people marched in Times Square in New York City in protest of Jeff Sessions’ departure from the White House…although Sessions was the one who tendered a letter of resignation. The mob of protesters carried mass-produced “No one is above the law” placards and signs.

Not one of those Marxists carried those signs when former Secretary of State Hillary Clinton resigned after Benghazi, where a U.S. Consular Outpost of the United States was destroyed, and the U.S. Ambassador and four of his staff murdered.

“Happy Veterans’ Day” is coming up, with the cliché eternal: “Thank you for your service.”

Nobody really cares about it, except the vets. Those who have to work receive time and a half for their pay, and Hallmark makes about another $50 million or so on the cards and gifts…about $10 million of that for the Government to “re-ingest” with the taxes….another day on the endless cycle:

The cycle of spending of disposable income, an indispensable part of the economy and all of the governmental employees on paid federal holiday, solemnly dispensed of at the expense of (to paraphrase Metallica) the government’s “disposable heroes.”

Where were the protests in the streets after Benghazi? Everybody was hidden, because at the time we were under Obama. When Donald Trump was elected President, a “hiatus” was granted from the nonstop march toward socialism/communism that reached a zenith as never before. Now that hiatus is shrinking, as the Communists and Marxists begin new offensives under their playbook “Rules for Radicals,” offensives targeting every area of the society.

Their plan should be obvious: to keep the President “backpedaling” and the economy faltering, in order to set the stage for the 2020 election. All of this I have written about before, and it came to pass with the Midterm elections. If they keep the President on the defense and keep pushing the “social issues,” it will render his administration ineffective…not delivering the change back toward the right that the voters wanted to see in 2016.

The Wall Street Journal published a piece on November 9 entitled Democrats plan to pursue most aggressive gun-control legislation in decades.” They have been receiving plenty of help on this one, with the Synagogue shooting in Pittsburgh, and the recent murders by a former Marine last week. Here they come again! All of the legislators…with armed protectors paid for by you, mind you…clamoring for the guns. Here’s a piece of it for you:

Democrats say they will pass the most aggressive gun-control legislation in decades when they become the House majority in January, plans they renewed this week in the aftermath of a mass killing in a California bar. Their efforts will be spurred by an incoming class of pro-gun-control lawmakers who scored big in Tuesday’s midterm elections, although any measure would likely meet stiff resistance in the GOP-controlled Senate. Democrats ousted at least 15 House Republicans with “A” National Rifle Association ratings, while the candidates elected to replace them all scored an “F” NRA rating. “This new majority is not going to be afraid of our shadow,” said Mike Thompson, a California Democrat who is chairman of the House Gun Violence Prevention Task Force. “We know that we’ve been elected to do a job, and we’re going to do it.”

Now of course the argument to this rationale will be that the Senate is needed before a law passes. Yes, we all watched “Schoolhouse Rock” and learned about the three-party system of checks and balances. The problem?  Nothing was accomplished when the Republicans held both houses of Congress, and the Reds and Blues counter one another, and more:

The Democrats’ strategy is not to pass any laws: it is to stir up public controversy, win support of the “Zero” generation, and either force actions through the “tyranny of the majority,” or make it so horrible an arena that it detracts from or prevents any positive efforts and actions from the administration…setting the stage for the 2020 election.

Ocasio-Cortez just entered the House of Representatives at the “sage/sagacious” age of 29, and she is a self-described “democratic socialist” who favors single-payer healthcare, gun control, abolishing border controls, and declared that she would support the impeachment of the President. She was also part of Bernie Sanders’ campaign movement in 2016.

Lenin espoused some “gems” that should be considered. Here is one that falls in line with the “newly discovered wonderful possibility of socialism” the Zero-generation and twenty-somethings have fallen in love with hook, line, and sinker:

“The goal of socialism is communism.”

New York just placed a “democratic socialist” in Washington... a declared socialist, among all of the hidden Marxists camouflaged under the “progressive” or “democratic” monikers.

Gun control, coming at us once again, and once more, a quote from Lenin for you:

“Disarmament is the ideal of socialism. There will be no wars in socialist society; consequently, disarmament will be achieved. But whoever expects that socialism will be achieved without a social revolution and the dictatorship of the proletariat is not a socialist. Dictatorship is state power based directly on violence. And in the twentieth century – as in the age of civilization generally – violence means neither a fist nor a club, but troops. To put “disarmament” in the program is tantamount to making the general declaration: “We are opposed to the use of arms.” There is as little Marxism in this as there would be if we were to say: “We are opposed to violence!” – Lenin, “The Disarmament Slogan,” from October of 1916

The next two years should be interesting, to say the least. Keep in mind: the President is not throwing in the towel, however, he has one more year to turn the tide...before he has to campaign. There is still another way, though: I mentioned it in the last article that I wrote. Bush Jr. used this technique successfully when he was trailing Kerry in the polls. Margaret Thatcher used this technique when she was about to be shown the door, and turned it around, remaining in office.

The “technique” is a war, whether a “quickie” (such as the Falklands War…Malvinas, if you prefer), or a protracted one (Iraq “II” where victory was declared within months of started, and it was achieved…with the decades and a half of Military Industrial Complex contracts…and the transition of the United States into a Surveillance and Police State).

The technique is a war, and if you keep abreast of what is going on, you will see that Russia and China are gearing up for a war, the nations are “decoupling” themselves incrementally from the dying fiat-backed Petrodollar, and North Korea is once again raising itself as a nuclear threat (on its own, or encouraged by one or more nations). A war could either suspend elections, or propel the incumbent into a victory based on the populace’s perception of what they need. Remember this last quote from Lenin, and let it sink in good:

“A standing army and police are the chief instruments of state power.” – Lenin, State and Revolution, 1917

The ultimate truth: the elections are akin to the Stock Market, the Dow-Jones Industrial Average. It doesn’t matter how many shares are bought or sold, as long as there are fluctuations and flux. The winners are the brokers, who pocket their commissions on every trade…a sell or a buy. The same exists here. The blue donkeys versus the red elephants. The “tribalism” of men, and their needs of a social order…a cohesive social grouping that reflects what they believe in…is exploited to its maximum advantage. All the while, the paradigm shifts almost imperceptibly, until before you know it….twenty years have elapsed, and you are not looking at the same country anymore.

The “art” is to make the people think they will be getting what they want…dupe them into believing it is something good, when it’s not. It took the blood of heroes to form and defend this nation.  The downfall is precipitated by traitors from within…bleeding the nation white by circumventing existing laws and replacing them with the greatest injustice and threat to personal liberty of all. What is that greatest threat? A foreign enemy? A spontaneous collapse of everything?

No. The greatest threat is the acceptance of the people of the illusion of “social justice,” that really translates into something for nothing by taking from those who have earned, and giving it to those who live within the entitlement cesspool of their own sloth. Such a mentality pervades our society today. In order to save the United States, we have to return to our fundamental values and become an ass-kicking, straight-shooting people who fear God and care for their families, neighbors, and nation once more. If we do this, we may emerge from the coming night as a nation once more. Ready your NVGs, and steel your hearts for the challenge before it arrives…now…at the twilight’s last gleaming.

May Veterans’ Day bring remembrance to your mind, may your heart find peace, and may any who serve in your family be safe and sound.

Published:11/12/2018 11:05:42 PM
[Markets] Former Malaysian PM Warns Of "Economic Crisis" If Brent Trades Below $70

Najib Razak, the former prime minister of Malaysia, warned that the country is headed for an economic collision of massive proportions should ICE Brent Crude contracts trade below $70. As of Friday, Brent Crude contracts settled at 70.18, which he also warned that Moody's decision to downgrade the country's credit rating to negative could be imminent.

The former prime minister, who was previously arrested in July for involvement in the 1MDB scandal, explained in a Facebook post that the recent bear market in oil would see the country's deficit explode and the Malaysian ringgit continue to depreciate as the Federal Reserve signals further rate hikes.

“The pressure on the government’s fiscal position will double,” Razak warned.

This, Razak said, the country would have to issue a higher dividend to cushion the shortfall in revenue for Petronas, the country's national petroleum company.

In doing so, he said that could severely impact Malaysia’s credit rating for 2019.

“This is when oil prices are said to be high and stable. But what if oil prices drop?... What buffer do we have to cushion an oil crisis, if it happens again?," he questioned. 

On Thursday, Moody’s affirmed the A1 domestic issuer and foreign currency senior unsecured ratings of Petronas but altered its outlook from stable to negative.

"The rating agency also affirmed the A1 rating for Petronas Capital Ltd’s senior unsecured notes and the US$15 billion medium-term note (MTN) programme as well as sukuk issued through Petronas Global Sukuk Ltd, but changed its outlook to negative from stable.

Moody’s said the rating action was due to the government’s announcement that Petronas would be paying RM26 billion in dividends in 2018 and RM54 billion (inclusive of a one-off special dividend of RM30 billion) in 2019," Free Malaysia Today.

Moody’s also said the 2019 budget indicates Malaysia’s high debt levels are likely to continue for longer than expected, as deficits break above 3% of GDP for the next several years.

On November 02, prime minister Dr. Mahathir Mohamad said Petronas could afford to contribute the RM30 billion special dividend to the federal government in 2019 due to higher oil prices.

“Yet, the Pakatan Harapan government is depending a lot on oil in 2019, and if the price of oil plunges below US$70 as projected, the Malaysian economy could experience an economic crisis," said Razak.

Razak's warning of an immient economic crisis in Malaysia is coming at a time where a global slowdown is beginning to materialize for 2019.

The sharp drop in global equities in October was a remarkable warning shot that trade wars, monetary tightening, and a commodity bust in energy are some of the fundamental triggers of the next global crisis.

During a turning point in an economic cycle, the weakest balance sheets, if that is of companies and or countries, tend to break first.

All eyes of Malaysia for 2019, as it could be the canary in a coal mine for the next economic crisis.

Published:11/12/2018 10:35:14 PM
[Markets] The Wall Street Journal: Lawmakers call for ‘thoughtful regulation’ of tech companies While Silicon Valley companies face increased scrutiny over the role they play in elections and the propagation of false or biased news, politicians and industry insiders at a Wall Street Journal conference said there should be limited regulation of the industry.
Published:11/12/2018 10:07:37 PM
[Markets] Trouble Brewing In Hong Kong

Authored by Simon Black via SovereignMan.com,

Hong Kong has for decades been one of the most stable places in the world.

When the British took Hong Kong over in the late 1800s, it was nothing more than an irrelevant backwater made up of fishing villages and illiterate fishermen.

But after a few decades, it became one of the most prosperous places in the world.

And that wasn’t an accident. Hong Kong allowed unbridled capitalism to dominate and it worked extraordinarily well.

Sure, a handful of people got super wealthy. But, in general, there’s been bountiful prosperity across the board.

As a result of the prosperity and bent toward capitalism, Hong Kong has become one of the most important financial centers in the world. And for decades, it’s had a very well capitalized banking system.

And one of the key reasons for that is the Hong Kong dollar (HKD) has been pegged to the US dollar (USD) since the early 1980’s.

The peg is a double-edged sword for Hong Kong.

The key advantage is international stability. As long as the USD remains the global reserve currency, the fact that it’s interchangeable with HKD means economic stability.

The disadvantage is that the peg doesn’t give Hong Kong any independence. They have to follow US interest rate policy regardless of whether or not it’s good for them.

And that’s definitely caused problems, which are accelerating this year.

The US is just coming off a decade of ultra-low interest rates meant to boost domestic growth. But HK, which wasn’t in a dire, economic situation to begin with, has also had a decade of low rates.

One of the results of that is that Hong Kong has become one of the most expensive property markets in the world. It makes London look cheap.

And the property market in Hong Kong is highly leveraged. People typically get bank loans to buy property without putting much money down.

And a lot of those loans are like what we saw in the US in 2008 – no money down, low teaser rates, variable rate loans, etc… the type of lax lending that rocked the entire financial system.

I expect we’ll see a similar, financial crisis in Hong Kong down the road as a result of this lax lending against property.

And now that interest rates are rising in the US, they’re rising in Hong Kong…

So the local mortgages will reset at higher rates that people can’t afford. I expect we’ll see a wave of defaults that will slam the banks big time.

If that were the only problem in Hong Kong, I wouldn’t be terribly concerned because the banks there are so well capitalized.

However, the ongoing dispute between the US and China adds another risk.

The US-imposed sanctions against China are problematic and will force the Chinese to scramble for the dollars they need to engage in international commerce. Even though the dollar isn’t the local currency, China still needs dollars to buy oil, copper and pretty much everything else on the global stage.

And that takes a steady supply of dollars.

Right now, China gets a lot of USD from the US, because China runs a big surplus with the US. And those dollars fund China’s deficit with its other trading partners.

If that dollar supply gets cut off because of a trade dispute, China will need another supply.

And where is there a giant supply of dollar’s available for the Chinese?

Hong Kong is sitting on around half a trillion USD.

In a crisis, China could take those dollars and repeg the HKD to the renminbi.

I’m not saying that’s likely. But it’s more of a possibility now than it has been in the past. And things change.

Still, I felt compelled to raise this with you as a potential risk – albeit a somewhat minor one.

I’ve often discussed holding HKD as a risk-free way to hold USD. If the USD ever tanked, Hong Kong could remove the peg and allow the HKD to float freely.

But this new risk changes the situation…

Enough so that I’m taking my money out of HKD and reducing my exposure to Hong Kong banks.

I don’t think this will become a major catastrophe or that this HKD scenario is even that likely. But it is riskier than it was.

It’s sensible to take some money off the table. The HKD trades in a tight band with the USD and it costs very little to switch in and out.

And you can put that money into 28-day T-bills, which are yielding over 2%.

If I had to choose between making 2%+ in T-bills and the potential threat of the HKD being repegged to renminbi, I’m taking T-bills.

This week I’m telling Sovereign Man: Confidential readers more about what’s happening with the Hong Kong dollar and what they can do about.

But for now, I think it makes sense to take some money out of HKD. It makes sense regardless of what may or may not happen in the future.

And like many things we discuss regarding a Plan B, there’s no downside.

Published:11/12/2018 10:07:36 PM
[Markets] What's Behind China's New Charm Offensive?

Authored by Tim Daiss via Oilprice.com,

Australia’s reliance on its giant trading partner China could get a little stickier going forward. Yesterday, Australia’s new Prime Minister Scott Morrison pledged to increase his country’s military and diplomatic engagement in the South Pacific amid concerns the nation’s influence is waning as China continues it headlong regional hegemony pursuits, particularly in the contested South China Sea.

Morrison said that his government will set up an AUD$2 billion (US$1.46 billion) infrastructure fund for the region, increase naval deployments and carry out more military exercises with island nations. In comments released by his office, Morrison said, “This is our patch. It’s where Australia can make the biggest difference in world affairs.” His comments also come amid growing backlash against what many in Australia see as Chinese interference in its political process, while others have warned for years that the country was too reliant on natural resource exports to China.

This growing anti-China sentiment for long-time U.S. ally Australia also comes as President Trump pushes against China in trade so hard that it has already started to slow down manufacturing expansion and economic growth, with further projects for the same. It also comes as Australia joins the US, Canada, New Zealand, Japan, UK, France, India and others to enforce freedom of navigation patrols in the South China Sea, much to the angst of Beijing who claims 90 percent of the sea in what it refers to as “historical rights,” a dubious claim that could be used by a myriad of other nations in the region.

Thawing a diplomatic chill

However, Beijing replied quickly to Morrison’s vow to increase naval deployments. China's top diplomat Wang Yi said that China and Australia should be cooperating in the South Pacific and not cast as political rivals.  Reuters said Wang made her remarks after a meeting in Beijing between her and Australian foreign minister Marise Payn, which was widely billed as a step toward re-setting bilateral ties after a lengthy diplomatic chill.

Wang said that she had agreed that the two countries could combine their respective strengths and embark on trilateral cooperation with Pacific island countries. “We are not rivals, and we can absolutely become cooperation partners,” Wang said, describing the meeting as important after the recent “ups and downs” in the relationship, adding that the discussions were “valuable, full and candid.”

“We’ve realistically acknowledged today that in a relationship as dynamic as ours ... there will be from time to time differences,” she said later at a separate news briefing. “But what is important about that is how we manage those, and we are focused on managing them respectfully, mindful of the tremendous opportunities the relationship presents to both our nations.”

Chinas new charm offensive

There are several take-aways from both Morrison's recent pledge and Beijing’s response.

First, Australia is in an almost no-win situation with China. Since it shares a close and over century old relationship with the U.S. as well as shared political values, a common history, language and concern over human rights, it’s unlikely it would do anything to damage that crucial relationship. On the other hand, Australia's iron ore, LNG and other natural resources to China has helped transform the Australian economy.

Another major take-away and one that will be happening more in the future, is a softer tone from China with its other neighbors in the region. Just two weeks ago, China cozied up long time bitter rival Japan in a surprise move that would have been unimaginable five or six years ago.

The UK-based Independent said the two sides showed a united front on “free and fair” trade as Japanese Prime Minister Shinzo Abe, along with over 1000 Japanese businessmen, met Chinese president Xi Jinping in Beijing for talks. The two Asian giants signed a slew of agreements, including a currency swap deal and plans to work together in other markets.

China's Premier Li Keqiang said they had signed 500 agreements worth $18 billion.

“This indicates our cooperation has great potential and a promising prospect,” he said. “As countries with great influence in the region and the world, we should safeguard free trade.”

As U.S. sanctions continue to hit China hard, expect Beijing to soften its approach with both friend and foe alike in the Asia-Pacific region. Another prime target for China will be improved bilateral and perhaps even military cooperation with long-time rival India. In essence, China, with few allies other than North Korea, has little choice but to try to offset the impact of US sanctions as well as Washington's harder stance in the South China Sea.

Beijing, for its part, was waiting to proceed with more trade talks after the mid-term elections in the U.S., hoping for Democrats to take back control of the House. However, though Democrats did indeed take control of the House of Representatives, Republicans picked up two Senate seats to solidify its grip. Nonetheless, most believe that despite a Democratic controlled House which starts at the beginning of the year, both Democrats and Republicans will still allow Trump free reign over his trade war with China. Trump's EU trade maneuverings could be checked, but China is still in Trumps cross hairs.

In the short to mid-term, the trade war will continue to hurt the so-called second wave of U.S. LNG projects that need financing and long-term off take agreements, including from China. However, it will also force Beijing into a more conciliatory tone with its other LNG suppliers, including a befuddled Australia, bringing this geopolitical drama full circle.

Published:11/12/2018 9:43:51 PM
[Markets] Asia Markets: Asian markets tumble, following tech losses on Wall Street Asian stock markets plunged in early trading Tuesday following Monday’s rout, led by tech stocks, on Wall Street.
Published:11/12/2018 9:43:51 PM
[Markets] Amazon reportedly picks New York City, Northern Virginia for new headquarters Amazon reportedly picks New York City, Northern Virginia for new headquarters Published:11/12/2018 9:04:18 PM
[Markets] US Farmers Are Stashing Soybeans In Toolsheds And Caves As They Wait Out Trade War

Amid China's worsening trade-war fueled economic slide, the Communist country's April decision to slap a 25% tariff on imports of US soybeans has remained one of its most rewarding retaliatory maneuvers. So far, at least, the food-price inflation that many feared would follow hasn't materialized - while the plunge in soybean purchases (imports to China fell 94% between the beginning of September and mid-October) has helped maximize the pressure on Trump-supporting farmers in North Dakota, Iowa and across the US farm belt.

Still, for China, targeting soybeans was essential if it wanted the agricultural tariffs to have any real impact, as the chart below clearly illustrates.

Soybeans

Analysts had worried that Chinese pork farmers would struggle to find another source of soybeans, causing prices to skyrocket. That hasn't happened, as other soybean producers (who process the oilseed into food for their hogs) like Brazil, Argentina and now Russia have helped pick up the slack. What's more, the transition has been relatively fluid. Meanwhile, in the US, soybean prices have fallen $2 per bushel over the past two months. For US farmers, the timing on China's tariffs couldn't have been worse, as Chinese demand started to level off just as US production reached record highs.

And even as the trade war shows no signs of letting up (though markets are perhaps naively optimistic about Trump's upcoming meeting with President Xi on the sidelines of the G-20 later this month), futures traders are hoping that demand will have rebounded (or that farmers will have the good sense to cut production) by this time next year, when a rebound has already been priced in. Many are hoping that prices will rise if the Trump-Xi trade talks yield even the slightest sign of progress. But seeing as they have few good options, American farmers are choosing to try and wait it out.

Soybeans

According to Bloomberg, American farmers are storing more soybeans than ever before. Storing soybeans isn't easy, as farmers in North Dakota are quickly learning: The slightest exposure to moisture can cause the crops to quickly rot, transforming the beans into a slick blackish mush with the consistency of mashed potatoes and the stench of roadkill.

Soybeans

Still, with farm profits down in four of the last five years, many farmers have no good options.

For some farmers, there is little choice but to keep their harvest. Millions of bushels have nowhere to go. Terminals in Portland, a key outlet in the Pacific Northwest to ship to China, are rarely offering bids. Supplies are backed up at terminals and elevators, even as cold, wet weather in North Dakota has left many acres unharvested. The country’s soybean inventories are expected to more than double to about 955 million bushels by the end of this crop year, according to the USDA.

Iowa grower Robb Ewoldt, who’s been farming since 1996, is storing most of his soy for the first time in about 15 years. His crop usually floats down the Mississippi River, about a half mile from his fields, on barges for export through the Gulf of Mexico to China and other countries. This year he’s stashing beans in his silos, making room for them by selling or storing his corn in commercial storage, to await higher prices.

"It’s probably more advantageous to store this year than any year in the past," he said.

Given that silo capacity is tight, some farmers are experimenting with new methods for storing their beans, like piling them on the ground or stuffing them into large bags. Others are stuffing their beans virtually anywhere they can find space, including tool sheds and caves.

Space for all the extra soy is tight. That’s leading to some rarely taken measures, such as piling beans on the ground - risking their exposure to bad weather. More farmers also are stuffing them into sausage-shaped bags that can stretch the length of a football field.

"I’ve heard farmers and commercial companies putting corn and soybeans into tool sheds and caves," Soren Schroder, chief executive officer of Bunge Ltd., the world’s largest soybean processor, said in an interview last month.

The tariffs have particularly hit exports from North Dakota, where the expansion of oilseed acreage was a direct result of the growth of Chinese demand. The state plants the fourth-highest number of soybeans in the U.S. and about 70 percent go to Asia, largely because of its geographic accessibility to western ports.

In North Dakota, which has been the hardest hit by the tariffs given the massive expansion of production capacity in recent years to feed the Asian market, some farmers are planning to store their entire crop. One cooperative in North Dakota expects to store more than 2 million bushels of soybeans this year.

North Dakota farmer Mike Clemens is so in need of space that he’s breaking out a dozen and a half bins built in the 1960s to store about 45,000 bushels of soybeans, which is half his farm’s production this year. He expects to fill up his five new silos with 300,000 bushels of corn.

Sarah Lovas, a grower in Hillsboro, North Dakota, has drawn several diagrams to map out storage for her entire crop. Her current plan is to fill up her 400,000 bushels of on-farm storage with 50,000 bushels of soybeans and the rest with corn. She’s renting grain bins for soybeans from a neighbor for the first time, to store about 68,000 bushels.

"I wish I had more bins," Lovas said.

One family owned farm that pioneered the bagging technique for storing corn says it has been inundated with pleas for help by other farms.

Gingerich Farms in Lovington, Illinois, has used 300-foot plastic white bags for the last seven to eight years to store corn and soybeans. This year, the family operation has gotten as many as 10 calls from neighboring producers asking about how to use the bags, compared with one or two inquiries last year, said Darrel Gingerich, vice president of the farm.

"Corn is kind of a given," he said. "They were calling us about bagging beans."

The Illinois Department of Agriculture has been overwhelmed by requests for more storage capacity, as the state, which is the largest US producer of soybeans.

Soy

As of early October, farmers had requested storage capacity for 11.4 million bushels of soybeans, triple the level from last year.

Illinois, the largest US soybean producer, may have the biggest storage shortfall, needing as much as 100 million bushels for storing crops, said Tim Brusnahan, an analyst with agriculture brokerage and consulting firm Brock Associates.

As of the start of this month, the Illinois Department of Agriculture had received requests for 11.6 million bushels of emergency storage capacity, such as bags, nearly triple the amount from a year earlier. Requests for temporary storage such as structures with waterproof covers increased 4 percent.

While Illinois’s crops are less dependent on China demand, today’s low prices make storing the soy a better choice, Gingerich said.

"The markets tell us to store it," Gingerich said. "It’s tight, very tight."

To try to alleviate the economic pain, the Trump administration has ordered billions of dollars of subsidies for soybean farmers. It has also earmarked $200 million to help cultivate (no pun intended) new overseas markets for US soybeans. But given the rush for foreign producers to gobble up market share previously belonging to US farmers, anxieties are mounting that the US soybean industry will never recover from the tariffs. And although soybean farmers in Iowa and North Dakota stood by the Republican Party during the midterms, if the pain persists, will they look to punish "the president's folly"?

Published:11/12/2018 9:04:18 PM
[Markets] Amazon Picks New York City, Northern Virginia For HQ2

As previously leaked by the NYT and WaPo, moments ago the WSJ reported that Amazon has picked New York City (specifically Long Island City) and Northern Virginia as the homes for Amazon.com second and third headquarters, ending a 14 month public contest that started with 238 candidates and ended with a surprise split of its so-called HQ2.

Why these two east coast venues? Because, according to a prior report by the NYT, Amazon already has more employees in those two areas than anywhere else outside of Seattle, its home base, and the Bay Area. The two cities are expected to add a combined 50,000 employees to the company's workforce which as of Sept 30 stood at just over 613,000 full and part-time employees.

The imminent announcement is expected as soon as Tuesday, according to the WSJ's sources. Other cities may also receive major sites, some of the people said.

Developing

 

Published:11/12/2018 8:34:24 PM
[Markets] For The First Time Ever, Bank Of Japan Total Assets Surpass Japan's GDP

For the first time in history, a central bank has managed to print enough money to buy enough assets to surpass the nation's annual GDP.

Under the watchful eye of Kuroda, and the overseeing (but independent) hand of Abe, The Bank of Japan's balance sheet grew to 553.6 trillion yen as on November 10th - that is larger than Japan’s annualized nominal seasonally-adjusted GDP of 552.8 trillion yen (as of the end of June).

Some context for just how crazy this is, here is The Fed vs US GDP...

And putting it all together...

What happens next?

Published:11/12/2018 8:06:19 PM
[Markets] The Wall Street Journal: Democrat Kyrsten Sinema wins Flake’s Arizona Senate seat Rep. Kyrsten Sinema won Arizona’s Senate contest, becoming the state’s first Democrat in 30 years to win Senate election.
Published:11/12/2018 7:37:37 PM
[Markets] Foreign Investors Reduce Chinese Bond Holdings For The First Time Since Feb 2017: Why This Matters

Three months ago, something unprecedented happened to China's economy: for the first time since 1998, China reported a current account deficit for the first half of the year.

While we expounded on the full implications previously, they could be summarized as follows: greater reliance on foreign funding, a more open capital account, a weaker CNY and deeper and less manipulated capital markets.

Of the four, the increasing reliance on outside capital was likely the most important as it implied that China's economic well-being would be increasingly left to the generosity of foreigners, much the same way foreigners have for decades funded America's generous way of life.

Only last month something troubling happened on China's road to foreign reliance: global investor enthusiasm for Chinese corporate bonds collapsed.  Whether due to China's weaker currency, or the collapsing premium of Chinese over U.S. interest rates, foreign holdings of yuan-denominated, domestically traded bonds in China rose by just 250 million yuan ($35.9 million), or 0.02%, to 1.44 trillion yuan in October, according to the WSJ citing data provider Wind. As shown in the chart below, the rate of growth has been decelerating since June, when it peaked at 8.9% month on month, the fastest in 21 months.

Even more troubling, after adjusting for valuation effects, ChinaBond calculated that foreign investors actually reduced their holdings of Chinese bonds. While this reduction was modest, JPMorgan noted that it nonetheless represents the first outflow since February 2017, highlighting the risk of continued currency depreciation exacerbating the capital outflow picture.

Meanwhile, as Bank of America notes, China's weakening economy has led Chinese bond prices to rally sharply in the past year, pushing yields down, even as rising interest rates send U.S. bonds in the other direction. That means Chinese sovereign debt now offers a much thinner premium over U.S. Treasurys. Yields on benchmark 10-year Chinese securities fell to 0.24 percentage point above Treasurys late last week, the narrowest gap since July 2010.

It's not just the collapsing yield differential that confirms the economic slowdown and is a threat to Chinese capital inflows: in addition to the near contracting Chinese PMI, as the chart below shows the Korean KOSPI, Macau-exposed WYNN,  Caterpillar and Chinese property giant China Evergrande, have all slumped this year.

So why does Chinese bond flows matters? As the WSJ explains, foreign institutions, such as central banks and pension funds, own just 1.7% of China’s overall $12 trillion bond market, the world’s third largest behind the U.S. and Japan. Still, they have already become influential players in the narrower field for central government debt, where they own 8.1% of what is a roughly $2 trillion market.

Still, a reversal in bond flows is the last thing China's economy, whose current account surplus is now virtually non-existent, can afford. According to Peter Ru, Shanghai-based chief investment officer of China fixed income at Neuberger Berman, foreign investors slowed their purchases of Chinese bonds mostly because of the yuan’s fast depreciation: "Given the uncertainties over the trade war, nobody can be sure how much more the yuan may weaken."

He is right: foreign investors have decided to sit on the sidelines as they await potential initiatives from Beijing, such as further monetary easing, said Jason Pang, Hong Kong-based China government bond portfolio manager at J.P. Morgan Asset Management. And yet, such easing would result in even further depreciation, making the choice whether to resume buying Chinese bonds a complex one: on one hand, one would need to hedge bond exposure (which is virtually impossible as anyone who has shorted the offshore Yuan knows the central bank's tendency to periodically "murder" speculators), and absent that there would have to be an expectation of currency stability, something which the central bank increasingly is unable to provide; as such not even a most generous stimulus can offset the risks of rapid currency devaluation, ensuring that foreign investors will stay on the sidelines for the foreseeable future.

There is one alternative: Pang said he sees Chinese government bonds as a “trade war hedge.” Their prices have rallied as Beijing has taken measures such as loosening lending conditions to offset the impact of worsening trade frictions, he said. "If you believe that the trade war will escalate, there’s all the more reason that you should own some Chinese government bonds," Pang added.

Of course, bond prices may simply be rallying because investors expect a sharp, disinflationary slowdown in the economy; and should China itself fall into a deflationary liquidity trap, then all bets are truly off and the last thing bond investors will want to do is allocate capital to a country which is about to have a debt crisis during deflation.

In any case, the PBOC now finds itself trapped, on one hand facing the end of China's current account days, and on the other facing the danger that Beijing's increasingly ad hoc response to the US trade war which includes continue yuan devaluation, will scar foreign bond investors, leaving Beijing with no source of outside capital. And since the only offset to these two developments would be a surge in domestic saving - and collapse in domestic Chinese consumption - the result for China should foreign investors indeed pull their money, would be nothing short of a recession or worse.

Published:11/12/2018 7:37:37 PM
[Markets] Dow Crumbles Amid Tech Weakness; Merger Monday Gets Early Start -- ICYMI Concern about a mounting trade war with China also weighed on stocks. The Dow Jones Industrial Average fell 602 points, the S&P 500 declined 2%, and the tech-heavy Nasdaq slid 2.8%. , were the Dow's leading laggards in addition to Apple. Published:11/12/2018 7:03:58 PM
[Markets] The Wall Street Journal: Google network traffic briefly rerouted through Russia, China, Nigeria Google services were temporarily unreachable for some users after some traffic intended to reach the web giant was rerouted through other networks.
Published:11/12/2018 7:03:58 PM
[Markets] How Deadly Was World War I?

Veterans Day in the United States was created to commemorate the veterans of World War I. This year Veterans Day also marks 100 years since the end of the war to end all wars.

As Statista's Sarah Feldman notes, World War I became known as the war to end all wars due to how deadly it was to those who went into combat. The advent of mustard gas and chlorine gas along with trench warfare, made the casualties rate much higher than previous conflicts.

Casualties are defined here as soldiers who were killed, wounded and captured or reported missing during combat.

Infographic: How Deadly Was World War I? | Statista

You will find more infographics at Statista

On the Allied side, Russia and France shouldered the most causalities with about three-quarters of their mobilized forces succumbing to causalities.

For the Central powers, about 90 percent of the mobilized army under the Austria-Hungarian empire became causalities, while the mobilized German army had 65 percent of their forces become casualties.

 

Published:11/12/2018 7:03:58 PM
[Markets] DEA And ICE Hiding Secret Cameras In Streetlights 

According to new government procurement data, the Drug Enforcement Administration (DEA) and Immigration and Customs Enforcement (ICE) have purchased an undisclosed number of secret surveillance cameras that are being hidden in streetlights across the country.

Quartz first reported this dystopian development of federal authorities stocking up on “covert systems" last week. The report showed how the DEA paid a Houston, Texas company called Cowboy Streetlight Concealments LLC. approximately $22,000 since June for “video recording and reproducing equipment.” ICE paid out about $28,000 to Cowboy Streetlight Concealments during the same period.

"It’s unclear where the DEA and ICE streetlight cameras have been installed, or where the next deployments will take place. ICE offices in Dallas, Houston, and San Antonio have provided funding for recent acquisitions from Cowboy Streetlight Concealments; the DEA’s most recent purchases were funded by the agency’s Office of Investigative Technology, which is located in Lorton, Virginia," said Quartz.

Below is the list Of contract actions for Cowboy Streetlight Concealments LLC. Vendor_Duns_Number: "085189089" on the Federal Procurement Database:

Christie Crawford, who co-owns Cowboy Streetlight Concealments with her husband, said she was not allowed to talk about the government contracts in detail.

“We do streetlight concealments and camera enclosures,” Crawford told Quartz. “Basically, there’s businesses out there that will build concealments for the government and that’s what we do. They specify what’s best for them, and we make it. And that’s about all I can probably say.”

However, she added: “I can tell you this—things are always being watched. It doesn’t matter if you’re driving down the street or visiting a friend, if government or law enforcement has a reason to set up surveillance, there’s great technology out there to do it.”

Quartz notes that the DEA issued a solicitation for “concealments made to house network PTZ [Pan-Tilt-Zoom] camera, cellular modem, cellular compression device,” last Monday. According to solicitation number D-19-ST-0037, the sole source award will go to Obsidian Integration LLC.

On November 07, the Jersey City Police Department awarded Obsidian Integration with “the purchase and delivery of a covert pole camera.” Quartz said the filing did not provide much detail about the design.

It is not just streetlights the federal government wants to mount covert surveillance cameras on, it seems cameras inside traffic barrels could be heading onto America's highways in the not too distant future.

And as Quartz reported in October, the DEA operates a complex network of digital speed-display road signs that covertly scan license plates. On top of all this, Amazon has been aggressively rolling out its  Rekognition facial-recognition software to law enforcement agencies and ICE, according to emails uncovered by the Project for Government Oversight.

Chad Marlow, a senior advocacy and policy counsel for the ACLU, told Quartz that cameras in street lights have been proposed before by local governments, typically under a program called “smart” LED street light system.

“It basically has the ability to turn every streetlight into a surveillance device, which is very Orwellian to say the least,” Marlow told Quartz. “In most jurisdictions, the local police or department of public works are authorized to make these decisions unilaterally and in secret. There’s no public debate or oversight.”

And so, as the US continues to be distracted, torn amid record political, social and economic polarization, big brother has no intention of letting the current crisis go to waste, and quietly continues on its path of transforming the US into a full-blown police and surveillance state.

Published:11/12/2018 6:37:46 PM
[Markets] The Wall Street Journal: U.S. set to produce half of world’s oil, gas output by 2025, IEA report finds Relentless American shale development is set to allow the U.S. to leapfrog the world’s other major oil and gas producers, with the potential for the country to account for roughly half of global crude and natural growth by 2025, the International Energy Agency said Tuesday
Published:11/12/2018 6:37:46 PM
[Markets] 1 million Americans live in RVs. Meet the ‘modern nomads.’ Many say that this lifestyle has improved their marriages and made them much happier. Published:11/12/2018 6:07:50 PM
[Markets] Australian shares fall after Dow tumbles overnight Stocks in Australia traded lower in the morning. Overnight on Wall Street, the major stock indexes saw a sell-off, with the Dow Jones Industrial Average plunging by more than 600 points. Stocks in Australia were lower in the morning on the back of the Dow Jones Industrial Average falling by more than 600 points overnight. Published:11/12/2018 6:07:49 PM
[Markets] Earnings Outlook: Cisco earnings: Tariffs could throw a wrench into strong sales momentum Cisco Systems Inc.’s strong year may hit speed bumps going into 2019 as higher prices and uncertainty in the U.S.-China trade war raise the possibility that businesses may cut back on enterprise spending to weather the effects of tariffs.
Published:11/12/2018 6:07:49 PM
[Markets] 3 Ways Bernie-Care Makes Canadian Healthcare Look Good

Authored by Ryan McMaken via The Mises Institute,

Canadian healthcare has become something of a byword for the "ideal" in healthcare among certain activists in the United States. Bernie Sanders, for example, has relentlessly pressed for a Canada-style healthcare system, and many left-of-center Americans advocate for the same.

Not surprisingly, though, few details of how the Canadian "single-payer" system works are ever discussed in the US. Advocates for single payer tend to assume that there is a simply one big national healthcare apparatus, and that everyone need only show up at a hospital or doctor's office to get everything free. This has never been the case with Canadian health care, but it's clear than many think it is.

One need only look at the Bernie Sanders plan to see how monolithic and extensive their idea of government healthcare, based on the single-payer idea:

Bernie’s plan would create a federally administered single-payer health care program. Universal single-payer health care means comprehensive coverage for all Americans. Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments.

This vision of federally-mandated health care goes much, much further than Canada's healthcare system. And if implemented, it would be a far larger financial burden to payers of federal taxes than is the case in Canada.

I say this not to advocate for the Canadian system, but to highlight than some government healthcare systems are worse than others. And looking at some of the details of the Canadian system helps to illustrate how the proposed Bernie plan is one of the worst that's been proposed.

There are three main ways that the Canadian plan isn't as bad as the Bernie plan: it's relatively decentralized, it has a limited scope of mandated coverage, and there is more room for a private sector than in many other countries with government healthcare systems.

Interestingly, if one peruses the Canadian left's commentary on the country's healthcare system, the commentary is likely to regard all of these good points as bad things about Canada's healthcare system. They tell us that federal mandates ought to be extended. That the federal government ought to assert more control, and that there is too large a role for the private sector. From a laissez-faire perspective, of course, all of these "shortcomings" of the system actually make it relatively less bad.

One: It's Decentralized

As many observers of the Canadian healthcare plan have noted, Canada doesn't have one government healthcare system. It has 13: one for each territory and province. Since the beginning, the Canada Health Act, including its subsequent revised versions, places much of the control over healthcare coverage at the provincial level. In other words, the "details of how each system operates, including what is covered and how, is determined provincially."

The federal mandate means that provinces must cover "medically necessary" hospital services and services performed by a doctor. This may sound pretty comprehensive, but what is "medically necessary" is usually defined at the provincial level. Moreover, what is defined as medically necessary can be — and has been — changed to lessen the number of procedures covered by the state. This, in effect, puts that procedure or product into the realm of the private sector.

And there are some big holes in coverage in government healthcare in Canada that may surprise advocates for "socialized medicine" in America. In Canada, patients must rely primarily on private insurance for prescription medications, dental care, physiotherapy, ambulance services, prescription eyeglasses and other procedures deemed to experimental to too costly to be covered by government facilities. Moreover, long-term care is "practically invisible at the federal level," and, "the majority of mental health services do not meet the eligibility requirement of 'medically necessary.' Unless received in a hospital, psychological services must be paid for out-of-pocket or covered by private third-party insurance."

All the territories and provinces have added coverage beyond the federal mandates, of course, but they remain free to undo these policies as well. After all, expanded coverage puts a burden on local budgets. And provincial governments have neither the ability to print money or — thanks to the realities of tax competition — raise taxes endlessly.

Two: A Limited Scope of the Federal Act Allows for Ways to Control Costs

Needless to say, the fact prescription drugs, mental health services, and long-term care are not covered by federal mandate would be considered scandalous by the authors of the Bernie Sanders plan. They demand that everything from an annual eye exam to a physical-therapy session be covered by US taxpayers right down to the last dime.

The Canadian left has criticized their own system for this limited scope, too, with occasional calls for new reforms to expand federally-mandated coverage. But, so far, this has not happened.

Part of the reason it hasn't happened is that provinces and the federal government are, in fact, limited by the realities of government budgets. While many Americans perceive government spending to be an utterly limitless and non-scarce resource, other countries such as Canada don't live in a world where new money can be endlessly created so long as the money remains the world's reserve currency. The Canadian dollar, of course, isn't the world's reserve currency and massive government deficits do present an actual problem for the Canadian state. Thus, medical procedures are sometimes declared not medically necessary, and prescription drugs — a potentially huge burden on government budgets — have never received received blanket coverage.

This version of "universal" healthcare falls far short of what Bernie Sanders and his supporters imagine, but its also the reason that Canada is not on the brink of a sovereign debt crisis, or burdened by massive debt payments, as in the US and much of Western Europe.

Three: There Is at Least Some Room for a Private Sector

The limited nature of mandatory coverage allows for some breathing room for a private sector — in drugs, in mental health, and in whatever is not deemed medically necessary. In Canada, nearly one-third of healthcare transactions are financed by private sources, which is higher than most countries with "universal" health systems.

Unfortunately, there are draconian limits on what the private sector can offer if the procedure is indeed listed as necessary. This means the private sector can't simply set up shop offering parallel hospitals or even basic diagnostic services. Part of the rationale for this has been political, because it is believed that the mere availability of parallel private medical services is "unfair." Another rationale is economic: policymakers fear all doctors would flock to the private sector, thus driving up the price of doctors for the "public" hospitals. As Canadian historian Ronald Hamowy notes, there has thus been opposition to allowing even small clinics performing diagnostic services like MRI scans. This, it was argued, would allow rich people to "jump the queue."

It is not a surprise, of course, that the size and speed of "the queue" is an issue in a healthcare system where wait times for a wide variety of treatments can frequently total 20 weeks (or more). This is a direct result of the prohibition on parallel private services. Some people die waiting for their medically necessary services, which is why some governments, such as Australia, have attempted to increase access by allowing parallel private insurance. And its why some Canadians are now suggesting a two-tier system in healthcare.

The prohibitions on market care, after all, are what makes a healthcare system "single payer." It means there can only be a single payer (the government) for certain services — primarily so that government policymakers can have total control over pricing.

In this respect, though, the Canadian system is "single payer" only in cases of what is deemed "medically necessary." Everything else becomes a part of a multi-payer system, either public or private.

Things would hardly improve though, if Canadian coverage were to move in the direction of the Bernie Sanders plan. On the contrary, flexibility would be greatly diminished and consumers would have fewer choices. As the Sanders plan is far more extreme than the Canadian plan in terms of making itself a strictly single-payer system, nearly all medical services under the plan would be allowed only within the public sector, and private services in nearly every area of care would become either illegal or very rare.

Naturally, the Bernie plan doesn't say this is the outcome of their plan. But it's a likely outcome.

Published:11/12/2018 6:07:49 PM
[Markets] Hedges: Assange Has Done More To Expose American Crimes Than Any Other News Organization

Authored by Chris Hedges via TruthDig.com,

Julian Assange’s sanctuary in the Ecuadorian Embassy in London has been transformed into a little shop of horrors. He has been largely cut off from communicating with the outside world for the last seven months. His Ecuadorian citizenship, granted to him as an asylum seeker, is in the process of being revoked. His health is failing. He is being denied medical care. His efforts for legal redress have been crippled by the gag rules, including Ecuadorian orders that he cannot make public his conditions inside the embassy in fighting revocation of his Ecuadorian citizenship.

Source: Mr.Fish

Australian Prime Minister Scott Morrison has refused to intercede on behalf of Assange, an Australian citizen, even though the new government in Ecuador, led by Lenín Moreno - who calls Assange an “inherited problem” and an impediment to better relations with Washington - is making the WikiLeaks founder’s life in the embassy unbearable. Almost daily, the embassy is imposing harsher conditions for Assange, including making him pay his medical bills, imposing arcane rules about how he must care for his cat and demanding that he perform a variety of demeaning housekeeping chores.

The Ecuadorians, reluctant to expel Assange after granting him political asylum and granting him citizenship, intend to make his existence so unpleasant he will agree to leave the embassy to be arrested by the British and extradited to the United States. The former president of Ecuador, Rafael Correa, whose government granted the publisher political asylum, describes Assange’s current living conditions as “torture.”

His mother, Christine Assange, said in a recent video appeal,

“Despite Julian being a multi-award-winning journalist, much loved and respected for courageously exposing serious, high-level crimes and corruption in the public interest, he is right now alone, sick, in pain—silenced in solitary confinement, cut off from all contact and being tortured in the heart of London. The modern-day cage of political prisoners is no longer the Tower of London. It’s the Ecuadorian Embassy.”

“Here are the facts,” she went on. “Julian has been detained nearly eight years without charge. That’s right. Without charge. For the past six years, the U.K. government has refused his request for access to basic health needs, fresh air, exercise, sunshine for vitamin D and access to proper dental and medical care. As a result, his health has seriously deteriorated. His examining doctors warned his detention conditions are life-threatening. A slow and cruel assassination is taking place before our very eyes in the embassy in London.”

“In 2016, after an in-depth investigation, the United Nations ruled that Julian’s legal and human rights have been violated on multiple occasions,” she said. “He’d been illegally detained since 2010. And they ordered his immediate release, safe passage and compensation. The U.K. government refused to abide by the U.N.’s decision. The U.S. government has made Julian’s arrest a priority. They want to get around a U.S. journalist’s protection under the First Amendment by charging him with espionage. They will stop at nothing to do it.”

“As a result of the U.S. bearing down on Ecuador, his asylum is now under immediate threat,” she said. “The U.S. pressure on Ecuador’s new president resulted in Julian being placed in a strict and severe solitary confinement for the last seven months, deprived of any contact with his family and friends. Only his lawyers could see him. Two weeks ago, things became substantially worse. The former president of Ecuador, Rafael Correa, who rightfully gave Julian political asylum from U.S. threats against his life and liberty, publicly warned when U.S. Vice President Mike Pence recently visited Ecuador a deal was done to hand Julian over to the U.S. He stated that because of the political costs of expelling Julian from their embassy was too high, the plan was to break him down mentally. A new, impossible, inhumane protocol was implemented at the embassy to torture him to such a point that he would break and be forced to leave.”

Assange was once feted and courted by some of the largest media organizations in the world, including The New York Times and The Guardian, for the information he possessed. But once his trove of material documenting U.S. war crimes, much of it provided by Chelsea Manning, was published by these media outlets he was pushed aside and demonized. A leaked Pentagon document prepared by the Cyber Counterintelligence Assessments Branchdated March 8, 2008, exposed a black propaganda campaign to discredit WikiLeaks and Assange.

The document said the smear campaign should seek to destroy the “feeling of trust” that is WikiLeaks’ “center of gravity” and blacken Assange’s reputation. It largely has worked. Assange is especially vilified for publishing 70,000 hacked emails belonging to the Democratic National Committee (DNC) and senior Democratic officials. The Democrats and former FBI Director James Comey say the emails were copied from the accounts of John Podesta, Democratic candidate Hillary Clinton’s campaign chairman, by Russian government hackers. Comey has said the messages were probably delivered to WikiLeaks by an intermediary. Assange has said the emails were not provided by “state actors.”

The Democratic Party - seeking to blame its election defeat on Russian “interference” rather than the grotesque income inequality, the betrayal of the working class, the loss of civil liberties, the deindustrialization and the corporate coup d’état that the party helped orchestrate - attacks Assange as a traitor, although he is not a U.S. citizen. Nor is he a spy. He is not bound by any law I am aware of to keep U.S. government secrets. He has not committed a crime. Now, stories in newspapers that once published material from WikiLeaks focus on his allegedly slovenly behavior—not evident during my visits with him—and how he is, in the words of The Guardian, “an unwelcome guest” in the embassy. The vital issue of the rights of a publisher and a free press is ignored in favor of snarky character assassination.

Assange was granted asylum in the embassy in 2012 to avoid extradition to Sweden to answer questions about sexual offense charges that were eventually dropped. Assange feared that once he was in Swedish custody he would be extradited to the United States. The British government has said that, although he is no longer wanted for questioning in Sweden, Assange will be arrested and jailed for breaching his bail conditions if he leaves the embassy.

WikiLeaks and Assange have done more to expose the dark machinations and crimes of the American Empire than any other news organization. Assange, in addition to exposing atrocities and crimes committed by the United States military in our endless wars and revealing the inner workings of the Clinton campaign, made public the hacking tools used by the CIA and the National Security Agency, their surveillance programs and their interference in foreign elections, including in the French elections. He disclosed the conspiracyagainst British Labour Party leader Jeremy Corbyn by Labour members of Parliament. And WikiLeaks worked swiftly to save Edward Snowden, who exposed the wholesale surveillance of the American public by the government, from extradition to the United States by helping him flee from Hong Kong to Moscow. The Snowden leaks also revealed, ominously, that Assange was on a U.S. “manhunt target list.”

What is happening to Assange should terrify the press. And yet his plight is met with indifference and  sneering contempt. Once he is pushed out of the embassy, he will be put on trial in the United States for what he published. This will set a new and dangerous legal precedent that the Trump administration and future administrations will employ against other publishers, including those who are part of the mob trying to lynch Assange. The silence about the treatment of Assange is not only a betrayal of him but a betrayal of the freedom of the press itself. We will pay dearly for this complicity.

Even if the Russians provided the Podesta emails to Assange, he should have published them. I would have. They exposed practices of the Clinton political machine that she and the Democratic leadership sought to hide. In the two decades I worked overseas as a foreign correspondent I was routinely leaked stolen documents by organizations and governments. My only concern was whether the documents were forged or genuine. If they were genuine, I published them. Those who leaked material to me included the rebels of the Farabundo Marti National Liberation Front (FMLN); the Salvadoran army, which once gave me blood-smeared FMLN documents found after an ambush; the Sandinista government of Nicaragua; the Israeli intelligence service, the Mossad; the Federal Bureau of Investigation; the Central Intelligence Agency; the Kurdistan Workers’ Party (PKK) rebel group; the Palestine Liberation Organization (PLO); the French intelligence service, Direction Générale de la Sécurité Extérieure, or DGSE; and the Serbian government of Slobodan Milosovic, who was later tried as a war criminal.

We learned from the emails published by WikiLeaks that the Clinton Foundation received millions of dollars from Saudi Arabia and Qatar, two of the major funders of Islamic State.

As secretary of state, Hillary Clinton paid her donors back by approving $80 billion in weapons sales to Saudi Arabia, enabling the kingdom to carry out a devastating war in Yemen that has triggered a humanitarian crisis, including widespread food shortages and a cholera epidemic, and left close to 60,000 dead. We learned Clinton was paid $675,000 for speaking at Goldman Sachs, a sum so massive it can only be described as a bribe. We learned Clinton told the financial elites in her lucrative talks that she wanted “open trade and open borders” and believed Wall Street executives were best-positioned to manage the economy, a statement that directly contradicted her campaign promises. We learned the Clinton campaign worked to influence the Republican primaries to ensure that Donald Trump was the Republican nominee. We learned Clinton obtained advance information on primary-debate questions. We learned, because 1,700 of the 33,000 emails came from Hillary Clinton, she was the primary architect of the war in Libya. We learned she believed that the overthrow of Moammar Gadhafi would burnish her credentials as a presidential candidate. The war she sought has left Libya in chaos, seen the rise to power of radical jihadists in what is now a failed state, triggered a massive exodus of migrants to Europe, seen Libyan weapon stockpiles seized by rogue militias and Islamic radicals throughout the region, and resulted in 40,000 dead. Should this information have remained hidden from the American public? You can argue yes, but you can’t then call yourself a journalist.

“They are setting my son up to give them an excuse to hand him over to the U.S., where he would face a show trial,” Christine Assange warned.

“Over the past eight years, he has had no proper legal process. It has been unfair at every single turn with much perversion of justice. There is no reason to consider that this would change in the future. The U.S. WikiLeaks grand jury, producing the extradition warrant, was held in secret by four prosecutors but no defense and no judge. The U.K.-U.S. extradition treaty allows for the U.K. to extradite Julian to the U.S. without a proper basic case. Once in the U.S., the National Defense Authorization Act allows for indefinite detention without trial. Julian could very well be held in Guantanamo Bay and tortured, sentenced to 45 years in a maximum-security prison, or face the death penalty. My son is in critical danger because of a brutal, political persecution by the bullies in power whose crimes and corruption he had courageously exposed when he was editor in chief of WikiLeaks.”

Assange is on his own. Each day is more difficult for him. This is by design. It is up to us to protest. We are his last hope, and the last hope, I fear, for a free press.

“We need to make our protest against this brutality deafening,” his mother said.

“I call on all you journalists to stand up now because he’s your colleague and you are next. I call on all you politicians who say you entered politics to serve the people to stand up now. I call on all you activists who support human rights, refugees, the environment, and are against war, to stand up now because WikiLeaks has served the causes that you spoke for and Julian is now suffering for it alongside of you. I call on all citizens who value freedom, democracy and a fair legal process to put aside your political differences and unite, stand up now. Most of us don’t have the courage of our whistleblowers or journalists like Julian Assange who publish them, so that we may be informed and warned about the abuses of power.”

Published:11/12/2018 5:33:50 PM
[Markets] Stocks - Dow Sheds 600 Points as Apple Slump Triggers Tech Wreck Investing.com - The Dow tumbled Monday as tech stocks continued to bleed, led by a selloff in Apple on fresh signs of weak iPhone demand. Published:11/12/2018 5:33:50 PM
[Markets] CNBC’s Jim Cramer says stock market is in ‘a very serious correction’ — and there’s nowhere to hide Jim Cramer, CNBC’s “Mad Money” host and a prominent fixture among market commentators on Monday said the market is enduring “a very serious correction.” Published:11/12/2018 5:03:40 PM
[Markets] London Markets: FTSE 100 ends lower as British American Tobacco’s stock gets smoked U.K. stocks on Monday kick off the week on a downbeat note, as shares of British American Tobacco finish the day nearly 12% lower on reports of increased regulation by the FDA.
Published:11/12/2018 5:03:40 PM
[Markets] Auto Stocks Slide On Reports US Car-Import Probe Is Advancing

Minutes before the close of a brutal trading day that saw the Dow dump more than 600 points, Bloomberg published a report that simultaneously stoked the worst fears of German carmakers and US investors who are desperately searching for a positive trade-related headline to reignite the rally. The headline sent shares of Ford and GM lower into the close. 

The White House is circulating a draft report by the US Commerce Department about whether to impose Section 232 tariffs on automobile imports. The report, which is the latest sign that Trump's investigation into auto tariffs is moving forward, should offer an update on the status of the probe.

Trump ordered the investigation back in May under the same Trade Expansion Act provision that he used to justify the tariffs on steel and aluminum - though Commerce has until February to finish the probe.

Car

Trump is planning to meet with his trade advisors and Commerce staff on Tuesday to discuss the report and car-import tariffs more generally, though it's unclear whether Trump will act soon on the tariffs, according to Bloomberg (Trump will likely abstain from more trade-related antagonisms until at least after his meeting with Chinese President Xi Jinping at the G-20 summit later this year).

 

News of the activity on the trade front seems ill timed, considering that European Commission trade chief Cecilia Malmstrom is about to leave for Washington to meet with US Trade Representative Robert Lighthizer for "exploratory" talks about a future free-trade agreement. Formal talks are expected to follow in January.

Still, automakers have good reason to be nervous. Despite the pleas of GM and Ford, who have said tariffs could seriously impact profitability and lead to thousands of job cuts, Trump has threatened 25% tariffs on imported cars while expressing frustrations with the US's European and Japanese trading partners. Governments and companies from Europe and Asia warned that the tariffs would disrupt the global automotive industry and hurt US growth during hearings in July.

Furthermore, Trump has exhibited more signs of his growing impatience, particularly regarding what he sees as an unfair trade relationship with Japan. At a press conference last week, he told a Japanese reporter to "say hello to Shinzo", referring to Prime Minister Shinzo Abe, adding that "I’m sure he’s happy about tariffs on his cars."

"I tell him all the time that Japan does not treat the United States fairly on trade. They send in millions of cars at a very low tax. They don’t take our cars. And if they do, they have a massive tax on their cars," Trump added.

Furthermore, European Commission President Jean-Claude Juncker said Monday that Europe's avoidance of US car import tariffs might not last past the end of the year.

All of this is happening at a time when the downward spiral in US car sales continued in October after an already abysmal September.

Cars

And as if the situation in the US wasn't bad enough, Chinese car sales were also a disaster last month, meaning that global automakers, who rejoiced at China's promises for market liberalization, might need to find a new savior. But with the midterms now behind us, Trump is probably less concerned about the impact his trade policies might have on the market, given that the political pressure has been - at least temporarily - relieved.

Published:11/12/2018 5:03:40 PM
[Markets] Nomura: This Was "Death By Papercuts" Mixed With Hedge Fund Redemption Panic

One day after the midterm elections, when the Dow soared by over 500 points on abysmal volume, the formerly bearish narrative immediately turned to how wonderful gridlock is for stocks, with Wall Street suddenly certain that based on historical patterns - according to which the market has levitated into year-end every single time after midterms - this year would be no different.

So much for certainty: as of today, all the post-Midterm gains are gone...

... and the market has resumed its downtrend, down 6% since October, compared to a 10% drop for the Nasdaq as tech stocks got liquidated en masse as sentiment has once again sharply turned against anything that has to do with growth.

Alongside the seemingly random liquidation in the tech sector, investor fears are rising, manifested not only in slumping prices but also in the surge of the 30-day vol in the Nasdaq 100 which according to Bloomberg has tripled in five weeks, rising to the highest since 2011. As a result, day-to-day swings are now averaging 1.7%, half a percentage point more than in February, as prices for options protection in tech have exceed the rest of the market by the most in seven years, using the difference in implied vol between the Nasdaq and the S&P 500.

But while there were many immediate reasons for today's 600 points plunge in the Dow, including the surge in the dollar to fresh 2018 highs, the guidance cut and a warning from a key Apple supplier confirming that iPhone demand is tumbling, fears over rising rates, political turmoil in Italy and uncertainty over Brexit, slowing profit growth and rising negative earnings pre-announcements, the unspoken catalyst behind today's mass dump most likely has to do with the previously discussed November 15 mass redemption day faced by hedge funds, one which we said portends a November 15 bloodbath as underperforming hedge funds brace themselves for an avalanche of redemption requests. And all this happened as bond markets were on vacation, further accentuating the already illiquid equity moves.

Confirming this, Nomura's Charlie McElligott wrote after the close that what was already a sloppy situation within the U.S. Equities-space "got even messier, as the (negative) performance-driven de-risk / “de-gross” of the past month has escalated." Specifically, today saw a "somewhat idiosyncratic" set of circumstances "pile-on" into the already-stressed environment surrounding the imminent HF “redemptions notice” date, accentuated by the following "death by papercuts" factors in stocks:

  • The 5% implosion of Apple and its supply-chain following LITE’s guidance-slash on "meaningfully reduced shipments" from one of its largest customers (-30.3%), implicating Apple and reduced demand for iPhones. The news crushed the entire supplier space (AMS SW -22.4%; CRUS -13.8%; KN -10.2%; AMD -9.4%; SYNA -8.2%; IFX GR -7.1%; AVGO -6.4%; STM IM -6.4%; QRVO -6.3%) as the three-year “hiding place” in the Apple phenomenon breaks-down.
  • The ongoing destruction in "Growth"-heavy long portfolios (“Cash / Assets LONGS” are -3.8% on the day, “R&D / Sales LONGS” -2.9%), as well as large gains in “Value” market-neutral strategies, where despite actually somewhat lower “Value LONGS” on the day, the Growth companies which make up “Value SHORTS” in the market-neutral factor strategies are being crushed—e.g. “EBITDA / EV SHORTS” are -4.1% today, “Predicted E/P SHORTS” -2.4%
  • Another unwind of popular hedge fund positions has to do with the de-betaing of portfolios in a hurry: "beta longs" are -3.1% on the day, and -15.8% QTD, the result of unwinding “long high beta, short low beta” bets, which has rationally corresponded with the Equities L/S hedge fund performance swoon, as it captures that many funds were long-er the market than they realized

Factors showing the pressure on popular "growth" longs are captured by the upside for "Value" Market Neutrals (as shorts are squeezed) and the selloff in "beta" and "vol":

Equities HF L/S index ticking with real-time "beta" factor market neutral-i.e., funds' market exposure was even higher than realized:

Meanwhile, as we noted in our EOD wrap, the market has dropped enough to where dealer gamma imbalance is back as a downward market force, with further stock declines forcing further liquidations in a self-reinforcing loop.

Additionally, according to Nomura there is another important mechanical phenomenon, where an important “rally date” falls out of the 1m sample set (by today’s close) from the bank's systematic trend model, which means -$32.8B of S&P futures for sale on a close and sending the overall allocation in S&P from “100% Max Long” back down to just "65% Long."

In practical terms, this is the case for 1) Nasdaq, with this date falling-out dictating a deleveraging from “100% Max Long” down to “65% Long” and creating -$21.6B of selling in NQ1 and 2) Russell 2k, where the close below 1545 sees the “65% Long” decline to “30 Long” and create -$17.4B for sale in Russell minis.

Meanwhile, in addition to the stunning 8% drop in Goldman shares, largely the result of rising concerns over the bank's (and Lloyd Blankfein's) exposure to 1MDB, McElligott also highlights his long-time "funding stress" proxy whipping-boy General Electric is back under the gun (-6.3%) after the CEO flopped in his TV debut.

The final insult to injury within U.S. stocks was the S&P Energy sector sliding -2.2% as Crude couldn't hold positive and was smashed -2.5% lower despite the OPEC supply cut jawboning this weekend, with President Trump tweeting at the Saudis along with the US Dollar breakout further challenging oil.

It wasn't all gloom: the Nomura cross-asset strategist notes that, hilariously, the "Buyback" factor was one of the best performers today +0.9% / +1.7 SD’s (1Y relative), indicating that the corporate bid is one of the few supporting phenomena in the market. However, not even buybacks were strong enough to prop up the market from today's bloodbath.

Putting the above together, McElligott cautions that even with a brief selling pause provided post the passing of the November 15 hedge fund redemption date, this "death by papercuts" market is further sapping willingness to deploy risk despite a "cleaner" positioning footprint and the return of the "buyback bid."

These "papercuts" only add to the already damaged psyche of investors, who are clearly in the grips of the "glass half-empty" view that the Fed is on the “policy error” route and will "tighten us into a slowdown."

Published:11/12/2018 4:37:41 PM
[Markets] Goldman's 'bear market risk indicator' signals returns will be zero the next 12 months Goldman's bear market indicator is at a rare 73 percent, its highest level since the late 1960s and early 1970s. The indicator is "flashing red," wrote Goldman chief global equity strategist Peter Oppenheimer. Goldman Sachs's bear market prediction tool is at an "elevated" level that has historically signaled a zero average return over the next 12 months and a "substantial" risk of drawdown. Published:11/12/2018 4:37:41 PM
[Markets] The Wall Street Journal: Senators warn Trump that his criticism could undermine Fed, hurt economy Two U.S. senators called on President Donald Trump on Monday to stop publicly criticizing the Federal Reserve and warned his comments could jeopardize the central bank’s credibility and hurt the economy.
Published:11/12/2018 4:37:41 PM
[Markets] Everyone On Wall Street Is Getting Bigger Bonuses This Year

It wouldn’t be the tail end of 10 years of Federal Reserve-catalyzed market manipulation and price euphoria if Wall Street executives didn’t get their share and cut themselves even bigger bonuses this year, just as the centrally planned party is about to end. And that is exactly what is happening.

According to Bloomberg , traders, money managers, commercial bankers and underwriters are all slated to get bigger bonuses this year. The only group slated to face a bonus cut are merger and acquisition advisers according to a closely watched annual report from compensation consultants Johnson Associates Inc.

This is the second straight year that most of the industry is going to get what are described as "moderately" higher payouts. The report projects that stock traders and investors making long-term bets will do well while those advising on M&A are feeling the brunt of the recent market volatility which has impacted overall deal activity and may even see a slight decrease.

Alan Johnson, the firm's managing director told Bloomberg that "there was a lot of day-to-day stuff and that’s where these traders make money - in the volatility. It’s not like they were extremely volatile, but more so than in recent years."

Here is how the report estimates that bonuses will rise across Wall Street:

Stock and bond salespeople also had a busy year according to the report, and were also helped along by the occasional bursts of market volatility. On the other end of the market - and volatility - spectrum, private equity managers saw the benefits of inflows into their funds. Firm managers, i.e., the executives, controllers and attorneys at the tops of financial firms, are also set to get raises. Many of these raises are a result of the tax code overhaul which helped bolster profits across the nation.

Meanwhile, a silver lining for M&A bankers is that while they may be slated for a modest bonus cut, they still get the highest bonuses on an absolute basis.

As "booms" go on the street, however, this bonus increase will be short lived as 2019 is already stacking up to be not as optimistic looking, and Johnson warned that "We’re not seeing 2019 as rosy. The report predicts banks will probably face geopolitical turbulence and pressure to lower fees next year, while new technology eliminates jobs and makes it easier for firms to pay less."

That is, at least until the Fed's next round of "stimulus" comes through. 

Published:11/12/2018 4:15:19 PM
[Markets] NewsWatch: Stocks close sharply lower as Dow tumbles 600 points in wake of oil-market woes Stocks close sharply lower Monday, with the Dow Jones Industrial Average tumbling 600 points as crude oil prices extended their retreat.
Published:11/12/2018 4:15:19 PM
[Markets] What Happened in the Stock Market Today Stocks fell sharply, with General Electric tumbling after a CEO interview and Pacific Gas & Electric plunging on fire liability worries. Published:11/12/2018 4:15:19 PM
[Markets] Dow falls 600 points, Nasdaq 200 as stocks suffer major technology-induced loss Dow falls 600 points, Nasdaq 200 as stocks suffer major technology-induced loss Published:11/12/2018 3:43:09 PM
[Markets] Maxine Waters Tells Trump: Californians "Wish He Would Keep His Mouth Shut"

As Democrats prepare to let the subpoenas fly early next year, Rep. Maxine Waters (D-CA.), who is preparing to become the first black female chairwoman of the House Financial Services Committee in January, reiterated her vow to investigate President Trump's ties to Deutsche Bank - which she called "one of the biggest money laundering banks in the world" - during an interview with AM Joy, adding that "it's one of the big issues that we will be working on."

Waters

During the wide-ranging interview, Waters also blasted President Trump's threats to revoke federal funding from California, saying she wished he would "keep his mouth shut" when it comes to all issues pertaining to her home state (while offering no substantive response to Trump's criticisms of harmful forest-management policies that have exacerbated the fires).

Ultimately, Maxine said, Trump and his fellow Republicans attack her because they're afraid of having a "strong, black woman" in charge of the financial services committee.

"That’s the opposition talking about what would happen if this strong, black woman Maxine Waters is the chair of the Financial Services Committee," Waters said, becoming animated.

"They’ve never seen anybody like me before. There’s never been a woman in the history of this country that’s been the chairperson of the Financial Services Committee, and certainly never a black woman."

Circling back to Waters' response to Trump, the congresswoman, who was one of the targets of several attempted mail bombings last month, accused Trump of being "clueless" about issues of "poor management" and that he was talking about something he has "no knowledge of".

Though, as we've pointed out, climate scientists including the University of Washington's Cliff Mass have offered substantial evidence showing that climate change isn't a contributing factor in California's wildfires.

"The president of the United States attempts to talk about things that he has no knowledge of. He doesn’t even understand what goes into fighting a fire, and for him to come out talking about poor management is just another indication that the president is not willing to learn anything. He does not really care about others, and he’s on the attack all of the time. We wish he would keep his mouth shut. California does not need him to be talking about things that he does not know."

"We need him to bring people together, to be concerned about the safety of our families. So, again, it’s just another Trump who is again reaching in, talking about things that he doesn’t understand, and we need him to just stay away from us."

The 80-year-old Congresswoman has repeatedly called on Deutsche to provide documents detailing any ties between the Trump family and Russia. Though, when it comes to making irresponsible comments, Waters probably could teach the president a thing or two, given that she has repeatedly tried to incite her supporters to form mobs and confront Republicans, while telling her supporters back in September that they should "knock off" Trump.

Watch the full AM Joy segment below. Waters' interview starts at the 30-second mark:

Published:11/12/2018 3:43:09 PM
[Markets] Stocks close sharply lower as Dow tumbles 600 points in wake of oil-market woes Stocks close sharply lower Monday, with the Dow Jones Industrial Average tumbling 600 points as crude oil prices extended their retreat. Published:11/12/2018 3:43:09 PM
[Markets] Dow sinks 625 points at low as the stock market contends with a fresh threat: a rising dollar The Dow Jones Industrial Average midday Monday was trading near session lows, amid a firming U.S. dollar. Last week, investor sentiment was buffeted by a rapid decline in crude-oil prices , which fell into bear-market territory, defined as a drop from a recent peak of at least 20%. And while that decline has stabilized somewhat, with the Organization of the Petroleum Exporting Countries considering cuts to production to address rising crude-oil inventories, a new problem appears to be knocking stocks around. Some market participants were attributing a rise in the dollar to a roughly 1 1/2-year high as one of the key factors producing fresh headwinds for the broader market. A popular gauge of the buck, the ICE U.S. Dollar Index was trading up 0.5% at 97.43, representing its highest level since June of 2017, according to FactSet data. A stronger dollar can hurt sales of multinational companies, making goods relatively more expensive to customers purchasing abroad. Meanwhile, the bond market was closed in observance of Veterans Day. Most recently, the Dow was down 625 points, or 2.4%, at 25,352. Meanwhile, the S&P 500 index was off 2% at 2,726, while the Nasdaq Composite Index retreated by 2.8% at 7,202. To be sure, a decline in shares of Apple Inc. after a series of negative reports on its holiday shipping also was weighing on technology and internet-related stocks and the broader market. A sharp decline in shares of Goldman Sachs Group Inc. also was delivering a hefty blow to the Dow and the broader market. Published:11/12/2018 3:02:59 PM
[Markets] With 5 minutes left in the stock-trading day, the Dow is down 600 points With 5 minutes left in the stock-trading day, the Dow is down 600 points Published:11/12/2018 3:02:59 PM
[Markets] In One Chart: The White House probably won’t be tweeting this Trump-vs.-Obama chart The Trump administration has long pointed to the bull market as a clear validation of the president’s #MAGA policies. Trump himself celebrates each passing Dow milestone with tweets of self-appreciation like this one earlier this year. But what happens when things start to go wrong, like they have been lately?
Published:11/12/2018 3:02:59 PM
[Markets] Dollar Jumps, Stocks Dump As Crude Carnage Continues

RIP Stan Lee...

China had an extremely exuberant session overnight with CHINEXT (China's small cap/tech index) exploding almost 3.5% higher...

But don't get too excited about CHINEXT...

 

Ugly day in Europe with DAX leading the way lower even as Italy and Brexit anxiety is back in the headlines...

European banks were ugly as Carige was bailed out...

 

US equity futures extended Friday's late-bounce gains in the overnight session but started to fade quickly ahead of the cash open and extended those losses as AAPL, GS, and trade headlines sparked notable selling...

 

With no bond market for the algos to pivot off, stocks dropped, stabilized after the European close, then dumped into the last few minutes - Nasdaq was worst on the day

Weakness in stock indices started off driven by Tech but was dragged lower into the close by Oil...

 

The Dow broke back below its 100DMA and the rest of the majors all broke back below their 200DMA (after the machines ramped to close them on Friday)...

 

Stocks were dropped on lower than average volumes (around 20% below avg - though higher than during last week's rally), and liquidity remains terrible...

 

And as we warned yesterday, with gamma imbalanced, selling is begetting selling...

VIX is back above 20 as it has erased its post-Midterms uncertainty drop... (and VIX term structure is inverted once again)

 

Stocks have erased post-Midterms gains...

 

AAPL was hit hard on demand headlines from a supplier (LITE), testing down to its 200DMA (AAPL knocked 60 points off the Dow)

 

Goldman was battered... biggest 2-day drop since April 2010. (GS knocked over 100 points alone off the Dow)

 

GE was a bloodbath...despite the CEO's best efforts...dropping to a $7 handle for the first time since its crash lows in March 2009...

 

FANG was FUBAR...

 

California Utilities were burned...

 

Energy stocks rolled over - starting to catch down to the ugliness in the oil complex...

 

The cash bond market was closed for Veterans Day but Treasury futures imply a 3bps compression in 10Y yields on the day...

 

The Dollar was up for the 3rd day in a row to the highest since May 2017 (this 3-day jump is the biggest since April_

 

Offshore Yuan weakened for the 5th day in the 6, almost erasing last week's short-squeeze surge... (hints at another squeeze coming soon from fwd points action)

 

Cable was ugly as Brexit headlines dominated the flow once again...

 

Cryptos mixed with Bitcoin unch, Bitcoin Cash down and Ripple up...

 

Dollar gains sent commodities lower across the board...

 

Oil rebounded modestly on the day on Saudi production cut headlines but as Trump tweeted against OPEC cuts and WTI crashed back into the red to a $58 handle for the first time since Feb... (11th day in a row - another record losing streak)

 

Gold in Yuan has erased 50% of its recent re-valuation (Yuan strengthening)...

 

Finally we remind some who question why would anyone sell the "no brainer" stocks like Apple and Goldman? Simple - they are forced to as redemption deadlines loom.

Published:11/12/2018 3:02:59 PM
[Markets] North Korea Expands "Secret" Missile Bases As Peace Talks Stall

As it grows increasingly frustrated with the US's refusals to begin lifting economic sanctions in recognition of all the "progress" made during the Trump era, North Korea threatened a week ago to restart its nuclear program if the US doesn't acquiesce to its demands for a "gradual" lifting of economic sanctions accompanied by a similarly gradual program of surrendering the North's nuclear weapons.

However, these threats rang hollow and failed to elicit a response from the Trump Administration. And now we know why: because Trump while is worried about letting what he sees as one of his biggest foreign policy achievements slip through his grasp, the US intelligence apparatus has long known that North Korea never really stopped enriching uranium and building missiles.

Trump

Much fanfare followed North Korea leader Kim Jong Un's declaration, following a summit with his South Korean counterpart earlier this year, that the North would allow international observers to document the dismantling of a nuclear reactor, as well as several missile sites where the country tested the ICBMs that provoked so much anxiety back in 2017. But a report published by the New York Times on Monday definitively dispelled this myth by exposing a "secret" North Korean missile launch site near the South Korean border that would be capable of launching a nuclear warhead at the US.

Little more than 50 miles north of the DMZ, Sakkanmol is one of the closest bases to South Korea, sitting about 80 miles away from the densely populated capital of Seoul. American troops are also in close range. The images, reportedly culled from the report highlighted the different structures at Sakkanmol, including a suspected ballistic missile operating base and an "unidentified military facility."

North

They also highlighted support buildings and greenhouses.

North Korea

And while Sakkanmol is the focus of the report, it isn't the only missile base mentioned. One map seen by the Times revealed three belts of missile bases capable of firing everything short-range tactical missiles that could fire on Seoul, to the feared ICBMs that could reach American shores. In seemingly offhanded fashion, the report mentions that the North has between 40 and 60 nuclear warheads that could be loaded on a missile and blasted at the US.

According to intelligence analysts quoted by the NYT, the North's motives are fairly obvious. By keeping the missile bases open, the kingdom is hedging its bets. If talks with Trump don't work out, it still has a fallback to ensure its survival. And even if the North and South declare an end to the Korean War, the missile sites mean that the threat from the North will persist.

The North Korea experts who have examined the images believe that the North’s motivations are fairly easy to interpret. "It looks like they’re trying to maximize their capabilities," Joseph S. Bermudez Jr., a co-author of the report and a veteran analyst of satellite images of North Korea, said in an interview. "Any missile at these bases can take a nuclear warhead."

"The level of effort that North Korea has invested in building these bases and dispersing them is impressive," he added. "It’s very logical from a survival point of view."

Weapons experts, as well as Mr. Pompeo, say that North Korea, despite engaging in denuclearization talks, continues to produce the fissile material that fuels nuclear arms. The North is believed to have about 40 to 60 nuclear warheads.

What's worse, while the North has been slowly building up its nuclear program without the threat of angering the US, its government has been undermining the sanctions regime by building a stronger relationship with Beijing and Moscow, which are doing more to help prop up the regime. All of this supports the notion that the North is merely stalling, that it has no intention of ever meaningfully unwinding its nuclear program, and essentially wants to have its cake and eat it too: Retain its nuclear arms, while being welcomed back into the world of international trade and commerce.

And, if its nuclear program continues without any meaningful resistance, it just might succeed. Now, we wait to see if this news prompts the Trump administration to alter its plans for another summit between Trump and Kim.

Published:11/12/2018 2:35:34 PM
[Markets] Market Extra: Oil futures just did something never done before, as Trump calls for lower crude prices A jolt lower for oil since peaking in October has helped crude futures to carve out a bearish record
Published:11/12/2018 2:35:34 PM
[Markets] As Of October 2018, The US Is Now Energy Independent

While the main event this weekend was the latest OPEC+ meeting which saw member states of the oil cartel and their allies scramble to promise that oil production will be cut if oil prices continue to drop due to excess supply now that Iran's oil exports may rebound thanks to waivers granted to its main trading partners by the Trump administration, a just as important event to take place was the news of record oil production levels in North America.

Helped by higher prices, total oil production has hit a record level in the US, reaching a combined 15.9 million b/d (crude oil and NGLs) in the past month and almost 2mn b/d above last year.

This number is broken down into 11.35mn b/d of crude oil and 4.57 mn b/d of natural gas liquids (NGLs). As a reference, the US will likely consume about 20.7mn b/d of oil and other liquid fuels in 2018. The surge in US and also Canadian output has pushed total North American crude production volumes above 20 mn b/d.

The larger-than-expected surge in North American oil volumes has come primarily from the Permian, Canada's oil sands, and more recently, the Gulf of Mexico.

In contrast to the fast growth experienced by its Northern neighbors, Mexican oil output continues to fall as the effects of the latest energy sector reform have yet to be translated into output.

Notably, this surge in North American oil production is only set to accelerate, and according to Bank of America forecasts US crude oil volumes alone will exceed 12MM b/d in 2019. It is this sky high production in the US, coupled with incremental barrels coming from Saudi Arabia and Russia, that together with the Iran wildcard is starting to impact oil market balances. As such, crude oil inventories are starting to increase once again and has led to the recent bear market in oil prices.

Of course, as anyone with a passing interest in the energy sector knows, the faster than expected growth in the US, coupled with more barrels coming from Saudi Arabia and Russia following a challenging meeting last July, is starting to impact oil market balances. For starters, crude oil inventories in the US are starting to increase once again on the back of surging North American output and refinery turnarounds. Meanwhile, there is a risk that total OECD oil inventories may follow suit on the back of the surge in OPEC+ volumes.

This reversal in US and global inventory trends has seen a sharp impact on the market, with near-term indicators of real-time market balances such as front-to-third month spreads in Brent and WTI have fallning back into contango as BofA shows in the chart below (Chart 9). Meanwhile, longer measures such as front-to-thirteen month contracts are following suit (Chart 10), a shift that could set OPEC+ into motion to potentially reduce output volumes heading into their upcoming December meeting, unless of course Trump tweets out a few more warning threatening to intervene if OPEC dares to cut production. That said, OPEC has worked long and hard to rebalance the market in the past two years, and it will hardly be threatened by some jawboning by the US president.

But the biggest surprise from the recent data, and the biggest threat for OPEC is something different, the same thing that according to Bank of America could make the next OPEC price war a lot more costly to the cartel just as the US has continued to isolate itself from global oil price swings.

The reason: as of October, the US is now energy independent for the first time, which is a seismic change considering that just 10 years ago, America was spending 3% of GDP buying foreign energy in 2008, but its energy trade balance is now positive.

And, as BofA calculates, "whether measured in in BTU/oil barrels equivalent or in US dollars, we estimate that the reversal in energy balances from a deficit into a surplus happened in October 2018."

That said, an perhaps something for the administration to consider, is that on the flip side, the marked improvement in US energy trade balances has been met with a major deterioration in the non-energy trade balance, as a strong US economy and has led to increased demand for foreign goods.

Still, with great energy independence comes great international interdependence. 

Consider that in just 10 years, America flipped from being a huge energy importer to becoming the largest exporter of petroleum products in the world (Chart 13). On average, US petroleum product exports averaged 5.1 mn b/d in the past quarter mostly on a combination of gasoline, diesel and residual fuel. In addition, the US is on track to become the largest NGL exporter too (Chart 14). Currently, America runs the world's largest NGL exports, followed by Saudi and Qatar, thanks to surging ethane, propane and butane export volumes.

The good news, is that as of this moment, the US oil independence has led to soaring US energy trade. According to Bank of America, America has been exporting increasingly larger volumes of crude oil to many countries, with levels recently topping out at around 2.4 mn b/d in the past few weeks (Chart 15). In fact, US crude barrels have recently reached places as far as South Africa, Indonesia and Oman, highlighting the increasing appetite for US light sweet barrels.

It's not just crude: LNG exports are also finally picking up steam as trains come on line (Chart 16). Total export levels now average 2.95 bcf/d or 0.45 mn b/d of oil equivalent and are poised to keep growing over the next 18 months.

The flipside: whereas the booming US energy sector is now contributing billions to the US trade surplus - even as the overall US trade deficit soars - any additional alienation of OPEC could result in another 2014-type fallout, in which the OPEC cartel effectively dissolves itself and it becomes every oil exporter for themselves as they once again scramble to recapture market share lost to US shale. As a result of such an outcome, oil prices could crater as low as $20 once again, crippling shale producers, but also resulting in another emerging markets/petrodollar crisis.

What could catalyze this outcome? More tweets such as this one:

Meanwhile, going back to OPEC and its next steps, the surge in US production means that with oil prices falling by 20% from the highs in recent weeks, the next OPEC+ decision will also have to factor in: (1) the massive 2+MM b/d YoY surge in US output and (2) the negative demand impact of the ongoing trade tensions.

Published:11/12/2018 2:06:45 PM
[Markets] U.S. oil prices end below $60 a barrel, marking a record 11 straight down days U.S. oil prices end below $60 a barrel, marking a record 11 straight down days Published:11/12/2018 2:06:45 PM
[Markets] Oil futures just did something never done before, as Trump calls for lower crude prices A jolt lower for oil since peaking in October has helped crude futures to carve out a bearish record Published:11/12/2018 2:06:45 PM
[Markets] Outside the Box: Companies should honor military service beyond Veterans Day Hiring and supporting veterans is good business, writes Sanjiv Das.
Published:11/12/2018 1:33:40 PM
[Markets] Trump says in Monday tweet that oil’s price ‘should be much lower based on supply’ ‘Hopefully, Saudi Arabia and OPEC will not be cutting oil production. President Donald Trump apparently doesn’t think crude-oil prices are where they belong. Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Published:11/12/2018 1:33:39 PM
[Markets] Johnstone: US Mass Shootings - Gun Issue, Mental Health Issue, Or War Issue?

Authored by Caitlin Johnstone via Medium.com,

A man, pictured below, killed twelve people with a gun at a California bar last week, then turned the gun on himself bringing the total number of dead to thirteen.

Like a disproportionately high number of mass shooters in the US, he served in the military. He reportedly suffered from PTSD as a result of his experiences in Afghanistan with the US Marines. America’s war in Afghanistan is the longest war in US history.

We all already know the script by heart now. A loud demand for gun control legislation will come from Democrats and progressives, while conservatives will insist that America’s mass shooting epidemic is a mental health issue, not a gun issue. This debate will rage on impotently for a few days to a few weeks, and exactly zero changes will be made in US gun policy or in mental health care. Happens every single time.

That’s really the only debate Americans are allowed to have about these shootings, and it’s already seeing arguments cranked out by both sidesmarching everyone into their respective partisan stables. The spectrum of acceptable debate has been narrowed down to two opposing viewpoints which cancel each other out, neither of which will ever come anywhere remotely close to inconveniencing anyone who has real power.

You should always be skeptical when you see a popular line of debate like this. Noam Chomsky said, “The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum?—?even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.”

The propagandists who manipulate your society are constantly trying to narrow that spectrum of debate to the point where it’s just empty bickering which poses no real threat to real power. They want you arguing about whether or not Democrats are better than Republicans, not whether the two-party system is rigged for the elite class that owns it.They want you arguing about Trump’s rude tweets and the hurt feelings of Jim Acosta, not this administration’s persistent advancement of longstanding, world-threatening neoconservative military agendas. They want you arguing about whose speech should be censored on the internet, not whether there should be internet censorship at all. They want you arguing about who is and is not a “terrorist”, a label that is useful only to the government agencies who leverage that word to justify increasing government intrusiveness. They want you fighting to control the position of an on/off switch that isn’t connected to anything.

The plutocrats who use mass media propaganda and alliances with opaque government agencies to manipulate public thought to their advantage do not actually care if civilians are shooting each other, as long as it doesn’t damage their investments. They do not care how many bullets you are allowed to put in your gun, nor do they care if the mentally ill receive adequate treatment. They care very much, however, about their ability to manufacture consent for the endless military campaigns they wage for profit and geopolitical dominance.

It is already well documented that individuals who’ve served in the US military are at least twice as likely to commit mass shootings as the rest of the adult population, and this should surprise no one. Being exposed to meaningless acts of slaughter can break your mind, which is why there is a suicide epidemic among US veterans. Couple that factor with PTSD and the way servicemen are psychologically conditioned and desensitized to the killing of human beings, and you’ve got a recipe for mass murder when those men come home.

Of course, not all mass shootings are committed by veterans; two-thirds are committed by people who’ve never served in the military. And I maintain that those shootings are directly related to US warmongering as well.

The three most overlooked and under-appreciated aspects of the human experience are (1) consciousness itself, (2) the extent to which compulsive thinking habits dominate our lives, and (3) the extent to which we are influenced by domestic propaganda. American society is saturated in war propaganda, and has been for a long time, to the extent that hardly anyone even notices it anymore. It’s like that old joke about the two fish who are asked “How’s the water?” by a passing duck and then turn to each other to ask “What’s water?”; things like ubiquitous flag worship, intelligence and defense agencies influencing Hollywood movie scripts, the way the mass media consistently rallies in support of every new military campaign while ignoring the endless ongoing nature of old ones; these things are all so pervasively normalized that they don’t stand out against the background much.

But they are very abnormal, and they have real consequences. If we lived in a healthy, peaceful world where wars suddenly started happening, every single person would recoil with horror and do everything in their power to stop it. But because it’s something we’re born into and indoctrinated into accepting as normal, it just gets taken on as a natural part of life, and because Americans happen to live where the western empire concentrates most of its military might, they are the most pervasively propagandized people on earth.

So now it just slides right into their minds unchecked when CNN stages a fake interview featuring a little Syrian girl reciting scripted war propaganda, when US media squeals with delight every time Trump bombs Syria, when war criminals like George W Bush are humanized and embraced by his ostensible opposition, the way dangerous new cold war escalations are being continually advanced against Russia while the mass media tells US liberals that Trump is too soft on Putin, to name just a few very recent examples.

If war propaganda didn’t significantly impact the public psyche, nobody would use it. The correlation between mass murder in the US and domestic war propaganda has not been scientifically researched, because the suggestion that domestic war propaganda exists in the US has not gained mainstream acceptance. Anyone who paid attention to western media’s unforgivable facilitation of the invasion of Iraq knows that corporate news media is such a reliable a partner to the US military that it may as well be a part of the military itself, but the first order of propagandizing an ostensibly free country is to hide the fact that that country is being propagandized. If it entered into mainstream awareness that the powerful people who control the mass media are using it to manipulate the way Americans think, perceive, behave, and vote, trust in those outlets would fall away and the ability to propagandize the masses would be lost. Americans not realizing that they are propagandized is itself a product of propaganda.

Lack of scientific inquiry notwithstanding, what else could explain the uniquely American mass shooting epidemic? Surely access to firearms is a factor, but other countries like Switzerland have similarly liberal gun laws without anything like the level of violence seen in the US. Surely mental health is a factor as well, but neither mental health problems nor lack of healthcare is a problem unique to the US. There is nothing like the mass shooting epidemic in the United States anywhere else in the world, nor indeed anywhere else in recorded history. Name me one thing unique to America that could possibly explain its unique mass shooting problem besides the fact that the American psyche is necessarily pummeled with war propaganda day in and day out in order to manufacture consent for US war agendas, and sometimes the mind gets bent so far it breaks.

Again, I am not saying that guns or mental health aren’t factors in this phenomenon, and I am not saying that these aren’t debates that Americans should be having with each other. But the fact that domestic propaganda can undeniably be found throughout the US media and the fact that mainstream psychology is completely ignoring its effects means that there are definitely leviathans moving beneath the surface of social consciousness which have yet to have any light shone on them.

*  *  *

Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for my website, which will get you an email notification for everything I publish. My articles are entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics on Twitter, checking out mypodcast, throwing some money into my hat on Patreon or Paypal,buying my new book Rogue Nation: Psychonautical Adventures With Caitlin Johnstone, or my previous book Woke: A Field Guide for Utopia Preppers.

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Published:11/12/2018 1:33:39 PM
[Markets] Goldman Sachs stock falls further, toward worst one-day drop in 7 years Shares of Goldman Sachs Group Inc. extended their selloff Monday, to fall 7.3% in afternoon trade to put it on track for the lowest close since Nov. 16, 2016. The stock was also headed for the biggest one-day decline since it fell 7.4% on Nov. 9, 2011. The selloff comes after the shares shed 3.9% on Friday, after Bloomberg reported that former Goldman Chief Executive Lloyd Blankfein was the unidentified high-ranking executive referenced in U.S. court documents who attended a 2009 meeting with former Malaysian Prime Minister Najib Razak involved in the 1MDB scandal. The stock's two-day plunge of 10.9% would be the worst since it plummeted 11.4% over the two-sessions ending April 19, 2010. The stock has now shed 10.1% over the past three sessions while the SPDR Financial Select Sector ETF has lost 4.6% and the Dow Jones Industrial Average has gained 0.7%. Published:11/12/2018 1:02:16 PM
[Markets] Trump Today: Trump Today: Staying home on Veterans Day, president says stock market is rattled by prospect of Democratic ‘harassment’ President Donald Trump on Monday opted to spend the day at the White House on Veterans Day, as he said the stock market is being hurt by the prospect of Democratic lawmakers “harassing” him.
Published:11/12/2018 1:02:16 PM
[Markets] What Keeps Credit Investors Up At Night: Here Is The Latest BofA Survey

Two months after the latest Bank of America credit investor survey found that fixed income asset managers were most concerned about the Trump tariff and trade war trifecta of i) trade war, ii) China and iii) geopolitical risk, the latest, November credit investor survey released over the weekend saw a big change at the top of biggest concerns, with "rising interest rates" jumped to first place and mentioned by 66% of respondents, up from 35% in the prior, September, survey.

And while investors remain very concerned about the trade/China-heavy categories "Trade war", "China" and "Geopolitical risk", which have shifted to 2nd-4th spot, clearly overall risks have increased driven primarily by the recent substantial increase in interest rates. Other concerns include deflation/recession, inflation, asset bubbles, fiscal policy and event/LBO risk.

While it has become trendy to blame the October volatility on last month's jump in the 10Y yield, Bloomberg notes that concerns about rates seem as much driven by headlines as by real-world changes, while Bank of America notes that it is struggling to detect anything in terms of what drives this increase in concerns about rates. Here, it notes that the recession probability from its survey was little changed at 15.9% (fig.2), and there was actually a small decline in the proportion of investors concerned about inflation.

To BofA, this may be acknowledging that "rates are now going up because they can, on rising dollar hedging costs." Or perhaps Millennial "credit investors" are now so clueless they have no idea what rising rates means for inflation expectations or recession odds.

And while the bank cautions that one of its biggest concerns is that the European sovereign crisis gets much worse due to Italy's fiscal challenges, investors once again demonstrate cognitive dissonance - or perhaps simple financial cluelessness - and agree that while Italy probably gets worse (Figure 3), they are getting less concerned (Figure 1).

Go figure.

Meanwhile, as Bloomberg also observes the investing herd may simply be reflecting the media: the volume of stories mentioning higher yields surged in October, mostly to explain the stock selloff. As a result, credit investors - who are supposed to be far more intelligent than their stock-focused peers - have transposed this fear onto their own domain.

That said, two things did change between September and November: one was the rise in the 10-year TIPS yield above 1% for the first time in years. At the same time, however, 10Y breakevens dropped sharply from 2.15% around mid-September to as low as 2.03% earlier this month, following the plunge in oil prices. If anything, this would imply lower rates in the future, not higher.

In terms of positioning within the asset classes, High Grade investors sharply reduced exposure to the Energy sector (Figure 25), as oil prices declined, whereas their HY counterparts actually added meaningfully (Figure 26).

Asked about views on risk-adjusted excess return performance across the ratings spectrum, HG investors favor BBBs (48%) despite rising concerns about an avalanche of fallen angels, while HY investors support Bs (40%). However, cross credit investors, that can be active in both HG and HY, support a barbell strategy around BBBs, using A-rated and higher and BB-rated paper.

Another notable observation in the latest survey is that credit investors turned notably more bearish on fundamentals (Figure 23), a shift that was especially pronounced for HY investors (Figure 24).

As credit investors also expect declining supply volumes (if offset by soaring leveraged loan issuance), this more negative outlook for fundamentals is perhaps related to the recent decline in oil prices and evidence of input price pressures - or maybe the correction in equities. In terms of flows, HG investors continue to see only small inflows and expect that to continue, while HY investors are experiencing small outflows.

Finally, in addition to the standard concerns US credit investors wrote in the following:

  • Increasingly tighter financial conditions: monetary policy becoming too restrictive and unabated balance sheet unwind;
  • Crowding out due to increasing UST issuance, Eurozone existential issues;
  • Not necessarily a currency war, but continued upward pressure on the dollar;
  • Italy's impact on the EU;
  • Overly hawkish Fed;
  • Trade war;
  • Refinancing risk.
Published:11/12/2018 1:02:16 PM
[Markets] Oil Price Tumbles As Trump Says OPEC Shouldn't Cut Production

Having surged higher at last night's futures open on the heels of headlines about Saudi's about-face on production, President Trump has reversed those gains as he tweeted: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!,”

Sending WTI back to unchanged...

“If we believe that Saudi Arabia will cut supply we’ll see what happens in December, but this will tighten up the market and should rally things up a bit,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto.

“I wouldn’t be too surprised to see crude head back closer to recent highs, maybe not to the October levels, but certainly off the recent lows.”

For now, that's not happening.

Published:11/12/2018 12:33:37 PM
[Markets] Capitol Report: Tesla had a record third quarter, so why do doubts persist? Why isn’t everyone satisfied with what Tesla reported in its third-quarter results?
Published:11/12/2018 12:33:37 PM
[Markets] "Sleepwalking Into Another Great Conflict" - World War I & The 'Butterfly Effect'

Via Global Macro Monitor,

To honor Veterans’s Day,  we are reposting our June 2017 butterfly piece, which illustrates how sleepwalking can lead the world into a war that nobody wants.

French President, Emmanuel Macron, warned today about sleepwalking into another great conflict.

“I know there are old demons which are coming back to the surface. They are ready to wreak chaos and death. History sometimes threatens to take its sinister course once again."

 – President Macron

History’s Biggest “Butterfly Effect” Occurred On This Day

The butterfly effect is the concept that small causes can have large effects. Initially, it was used with weather prediction but later the term became a metaphor used in and out of science.

In chaos theory, the butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state. The name, coined by Edward Lorenz for the effect which had been known long before, is derived from the metaphorical example of the details of a tornado (exact time of formation, exact path taken) being influenced by minor perturbations such as the flapping of the wings of a distant butterfly several weeks earlier. Lorenz discovered the effect when he observed that runs of his weather model with initial condition data that was rounded in a seemingly inconsequential manner would fail to reproduce the results of runs with the unrounded initial condition data. A very small change in initial conditions had created a significantly different outcome.  — Wikipedia

On June 28, 1914, the driver for Archduke Franz Ferdinand,  nephew of Emperor Franz Josef and heir to the Austro-Hungarian Empire,  made a wrong turn onto Franzjosefstrasse in Sarajevo.

Just hours earlier, Franz Ferdinand narrowly escaped assassination as a bomb bounced off  his car as he and his wife,  Sophie,  traveled from the local train station to the city’s civic city.   Rather than making the wrong turn onto Franz Josef  Street, the car was supposed to travel on the river expressway allowing for a higher speed ensuring the Archduke’s safety.

Yet, somehow, the driver made a fatal mistake and tuned onto Franz Josef Street.

The 19-year-old anarchist and Serbian nationalist, Gavrilo Princip, who was part of a small group who had traveled to Sarajevo to kill the Archduke,  and a cohort of the earlier bomb thrower, was on his way home thinking the plot had failed.   He stopped for a sandwich on Franz Josef Street.

Seeing the driver of the Archduke’s car trying to back up onto the river expressway, Princi seized the opportunity and fired into the car, shooting Franz Ferdinand and Sophie at point-blank range,  killing both.

That small wrong turn,  a minor perturbation to the initial conditions, or deviation from the original plan,  set off the chain events that led to World War I.

Stumbling Into The Great War

Fearing Russian support of Serbia, Franz Josef would not retaliate by invading Serbia unless he was assured he had the backing of Germany.   It is uncertain as to whether the Kaiser gave Franz Josef Germany’s unequivocal support.   Russia, fearing Germany would intervene, mobilized its troops forcing Germany’s hand.

The great European powers thus stumbled into a war they didn’t want through complicated entanglements and alliances, and miscalculation.  Russia backing Serbia;  France aligned with Russia,  Germany backing the Austro-Hungarian Empire;  and Britian, who really didn’t have a dog in the fight except her economic interests, aligned with France and Russia.

Later the U.S. would enter the war due to Germany’s unrestricted submarine warfare threatening American merchant ships and the Kaiser floating the idea of an alliance with Mexico in the famous Zimmerman Telegram, which was intercepted by the British.

Of course, some will argue that Great War in Europe was inevitable

The great Prussian statesman Otto von Bismarck, the man most responsible for the unification of Germany in 1871, was quoted as saying at the end of his life that “One day the great European War will come out of some damned foolish thing in the Balkans.” It went as he predicted.  – History.com

Nevertheless,  maybe the course of history would have been different if not for that wrong turn on June 28, 1914, which created the humongous butterfly effect, which we still experience the consequences this very day.

The botched Treaty of Versailles  sowed the seeds the for World II.  The War contributed to the Russian revolution and Cold War.  The redrawing of borders in the Middle East after the War created the conditions for the instability and breakdown to tribalism the region experiences today.

A map marked with crude chinagraph-pencil in the second decade of the 20th Century shows the ambition – and folly – of the 100-year old British-French plan that helped create the modern-day Middle East.

Straight lines make uncomplicated borders. Most probably that was the reason why most of the lines that Mark Sykes, representing the British government, and Francois Georges-Picot, from the French government, agreed upon in 1916 were straight ones.  — BBC News

If Franz Ferdinand had not been murdered on this day in history,  that conflict between the Serbs and the Austro-Hungarian Empire may have been contained to just the Balkans.   Maybe.

The butterfly effect.  Think how many small events, decisions, mistakes, one small turn, or “minor perturbations” in plans have had enormous consequences in your own personal life.

Published:11/12/2018 12:02:16 PM
[Markets] Michelle Obama had IVF treatment — what is it and what does it cost? About 10% of women between 15 and 44 years old have difficulty getting or staying pregnant.
Published:11/12/2018 12:02:16 PM
[Markets] Tech stocks lead broad sell-off in US stocks; oil rebounds A steep drop in technology companies sent U.S. stocks sharply lower Monday, knocking off more than 400 points from the Dow Jones Industrial Average. Banks and consumer-focused companies and media and communications ... Published:11/12/2018 11:32:04 AM
[Markets] Tempted By Whataburger, Troops Deployed To Southern Border Scrape By On MREs, No Electricity

A new report by the New York Times suggests that the 5,600 US troops "rushed to the brown, dry scrub along the southwest border" to deal with the approaching Central American migrant caravans are "going through the motions of an elaborate mission that appeared to be set into action by a commander in chief determined to get his supporters to the polls.

The Times notes that the soldiers are subsisting on basic provisions in tents without electricity.

There is no mess hall, just the brown, prepackaged M.R.E.’s. Military police officers patrol the perimeter at night, armed with handguns. The tents sleep 20 soldiers and have no electricity or air-conditioning. Phone charging is relegated to a few generators that power the spotlights around the living area. -NYT

The worst part, according to the Times? US troops at Base Camp Donna are being tempted by a local Whataburger just 8 miles away while being forced to settle for military rations known as M.R.E.s (or "Meal, Ready-to-Eat"). 

from the cot outside his platoon’s tent at the Army’s latest forward operating base, Sergeant Micek could almost see the bright orange and white roof of Whataburger, a fast-food utopia eight miles away but off limits under current Army rules. The desert tan flatbed trucks at the base are for hauling concertina wire, not food runs. Such is life on the latest front where American soldiers are deployed. -NYT

While the Times is eager to compare living conditions at Camp Donna to those in Afghanistan, we somehow missed their coverage panning the same MREs and living conditions during Obama's protracted opium-guarding mission - ostensibly not a direct threat to the US. In fact, The Times suggested in 2010 that US MREs in Afghanistan were "fun" and sought after. Then again, there wasn't a Whataburger 8 miles away.

Morale at the border, meanwhile, is apparently low despite The Times admitting that "The soldiers, by and large, shy away from talking about the political winds that sent them to the border." And since no soldiers actually indicated their opposition to the mission, one can only assume The Times is presenting its opinion as fact.

Instead of football with their families on this Veterans Day weekend, soldiers with the 19th Engineer Battalion, fresh from Fort Knox, Ky., were painstakingly webbing concertina wire on the banks of the Rio Grande, just beneath the McAllen-Hidalgo-Reynosa International Bridge.

Nearby, troops from Joint Base Lewis-McChord in Washington State were making sure a sick call tent was properly set up next to their aid station. And a few miles away, Staff Sgt. Juan Mendoza was directing traffic as his engineer support company from Fort Bragg, N.C., unloaded military vehicles.

Come Thanksgiving, they most likely will still be here. -NYT

"When you give a soldier a real mission, you have less of a morale problem, even if it’s Christmas or Thanksgiving," said Representative Anthony G. Brown, Democrat of Maryland and a former Army helicopter pilot who served in the Iraq war. "But when you send a soldier on a dubious mission, with no military value, over Thanksgiving, it doesn’t help morale at all."

The Pentagon, meanwhile, apparently views the deployment as an "expensive waste of time and resources, and a morale killer to boot." While there has been no announcement on cost, estimates as high as $200 million have been floated if the deployment expands to 15,000 troops, as President Trump has suggested it may. 

The Times would also like us to know that "There has been no money set aside to combat the men, women and children who are bound for the American border, many of them fleeing violence or corruption, nearly all seeking better lives." 

In short; Trump has sent troops to combat men, women and children who simply want better lives (and are unwilling to accept asylum from Mexico or seek entry into the United States through the proper legal process). 

In late October, the Department of Homeland Security sent a memo to the Pentagon with a series of formal requests for support in handling immigrants at the southern border, including the caravan on its way from Central America, according to two senior administration officials.

Among the requests, issued at the White House’s behest, were that troops deployed to the border be armed, prepared for direct contact with the migrants and ready to operate under rules for the use of force to be set by the Defense Department.

When Defense Department officials replied the same day, on Mr. Mattis’s orders, they rejected those requests and referred the Department of Homeland Security to the White House, the officials said. The Defense Department viewed the requests as inappropriate and legally treacherous, potentially setting up soldiers for violent encounters with migrants. -NYT

"A wasteful deployment of overstretched Soldiers and Marines would be made much worse if they use force disproportional to the threat they face," tweeted Martin Dempsey, Chairman of the Joint Chiefs of Staff between 2011 and 2015. 

Dempsey, of course, participated in the death of thousands of civilians in Iraq as the commander of the 1st Armored Division, 2nd Armored Cavalry Regiment and a brigade of the 82nd Airborne Division between 2003 - 2005. One imagines that the use of force was also disproportional to that of the now-dead Iraqi civilians in that very necessary regime change based on dubious US intel.

 

Published:11/12/2018 11:32:03 AM
[Markets] Can you save half your income so you can retire early? There are those among us who are working hard to save 40 to 50 percent of their income so that they don’t have to work hard until they’re 70 or older. Published:11/12/2018 11:02:21 AM
[Markets] Goldman Crashes To 2-Year Lows As Malaysia Seeks "Full Refund" On 1MDB Deals

While US Financial stocks are generally a lot lower post-Midterms (Maxine Waters?), there is one TBTF bank that is drastically undeperforming...

Goldman Sachs is down over 10% in the last two days as 1MDB deal drama comes back to bite them.

As Bloomberg reports, Malaysian Finance Minister Lim Guan Eng said the nation is seeking a full refund of all the fees it paid to Goldman Sachs for arranging billions of dollars of deals for troubled state fund 1MDB.

Goldman has “admitted culpability” after former banker Tim Leissner entered a guilty plea for his role in the scandal, Lim said in a Monday interview with radio station BFM. Lim is banking on the firm’s “indirect” admission of wrongdoing and U.S. law against kleptocracy, to help Malaysia recoup fees that include nearly $600 million that it paid Goldman for three bond deals. Goldman Sachs hasn’t publicly admitted any wrongdoing and has said it’s cooperating with authorities.

“I would be happy if we can get around 30 percent net after all the expenses incurred” from the entire 1MDB scandal, he said, referring to the overall amount of funds thought to be lost through the troubled state fund.

Prime Minister Mahathir Mohamad has set a goal of bringing back $4.5 billion.

For now shareholders are concerned... Sendin the stock to its lowest since mid-November 2016...

Seems like Mr. Blankfein jumped ship right in time.

Published:11/12/2018 11:02:20 AM
[Markets] Dow Slides as Apple and Goldman Sachs Drop Sharply, Nasdaq Craters Here Are 3 Hot Things to Know About Stocks Right Now The Dow Jones Industrial Average declined sharply on Monday after finishing last week with a gain of 2.8%. Apple Inc. fell 4.5% on Monday after a key supplier issued a profit warning, increasing investor concerns that iPhone demand may be waning. Published:11/12/2018 11:02:20 AM
[Markets] Deep Dive: These S&P 500 companies increased quarterly sales the most while expanding margins Investors need to look beyond earnings ‘beats’ and ‘misses.’
Published:11/12/2018 11:02:19 AM
[Markets] Decline of 5% makes Goldman Sachs the Dow's bigger loser Monday Decline of 5% makes Goldman Sachs the Dow's bigger loser Monday Published:11/12/2018 10:32:14 AM
[Markets] Dow sinks 400 points in early trade as the stock market contends with a fresh threat: a rising dollar The Dow Jones Industrial Average early Monday was trading near session lows, amid a firming U.S. dollar. Last week, investor sentiment was buffeted by a rapid decline in crude-oil prices , which fell into bear-market territory, defined as a drop from a recent peak of at least 20%. And while that threat has stabilized somewhat, with the Organization of the Petroleum Exporting Countries considering cuts to production to address rising crude-oil inventories, a new problem appears to knocking stocks around. Some market participants were attributing a rise in the dollar to a roughly 1 1/2-year high as one of the key factors producing fresh headwinds for the broader market. A popular gauge of the buck, the ICE U.S. Dollar Index was trading at 97.48, representing its highest level since June of 2017, according to FactSet data. A stronger dollar can hurt sales of multinational companies, making goods relatively more expensive to customers purchasing abroad. Meanwhile, the bond market was closed in observance of Veterans Day. Most recently, the Dow was down 400 points, or 1.6%, at 25,584, the S&P 500 index was off 1.5% at 2,738, while the Nasdaq Composite Index retreated by 2.7% at 7,204. To be sure, a decline in shares of Apple Inc. after a series of negative reports on its holiday shipping also was weighing on technology and internet-related stocks and the broader market. A sharp decline in shares of Goldman Sachs Group Inc. also was delivering a hefty blow to the Dow and the broader market. Published:11/12/2018 10:32:14 AM
[Markets] Gaza Mortars Slam Into Israeli Bus As 100 Missiles Unleashed; Major War Is Coming

There's been a huge uptick in rocket fire out of Gaza on Monday following a dramatic Israeli special forces raid 3km into Gaza territory on Sunday to assassinate a top Hamas commander. And now an Israeli bus has been hit by fire out of Gaza.

A mortar struck an Israeli bus Monday, Israeli media confirmed. 

The escalation in violence began when earlier in the day Monday thousands of mourners in the Gaza Strip buried seven militants killed during the Israeli commando raid and accompanying aircraft cover fire that resulted in strikes on the strip, which further led to sporadic rocket fire from Hamas. One Israeli soldier was reported killed during the high risk operation which reportedly involved the commandos entering Gaza by civilian car in order to take out a gathering of Hamas military leaders. 

During the Gaza funeral the crowd chanted "revenge" amidst masked gunmen in camouflage. 

A huge barrage of rocket and mortar fire was unleashed Monday after the burial of Hamas commanders killed by an Israeli special forces raid:

Apparently that "revenge" came in the form of a mortar shell fired from Gaza which scored a direct hit on a bus in southern Israel, severely wounding a 19-year-old Israeli. According to multiple regional reports this was followed by a barrage of over 100 rockets fired from Gaza toward Israel within only an hour's time. Israeli sources have reported multiple injuries and extensive damage from the rockets, many of which may have been intercepted by the Iron Dome missile defense system.

Breaking video footage shows the Iron Dome intercepting a hail or rockets and mortar fire raining down on sourthern Israeli communities including in Be'er Sheva, Ashkelon and Sderot, where injuries have been reported. 

The fresh wave of fighting will now only intensify as Israel is mounting a major response to the attack on the passenger bus.

Two Palestinians have been reported killed during Israeli retaliatory attacks, however, that death toll is likely to rise as the fighting intensifies.

Israeli media is currently reporting that its citizens in the southern part of the country are being asked to remain in bomb shelters through the night amid expectations that a major war is coming

developing...

Published:11/12/2018 10:32:14 AM
[Markets] California Utilities Implode, Lose A Third Of Their Value In 2 Days On Massive Fire Damages

With the two giant wildfires in northern and southern California projected to result in $25 billion in damages, the shares of California's two largest utility owners have crashed the most in  nearly two decades - since the power crisis at the start of the century.

Trading in PG&E was briefly halted after shares crashed for a second day, triggering a volatility break. The stock has lost 44% of its value in the two trading days since the Camp Fire broke out north of San Francisco last week.

Meanwhile, Edison International is down 30% since a fire broke out near Los Angeles. According to Bloomberg, for both companies, the two-day declines are among the steepest since power shortages triggered rolling blackouts across the state in 2000 to 2001.

The sellside was quick to slam the companies: Evercore ISI cut PG&E’s PT to $49 from $55, based on a $3.5 billion "exposure placeholder" for the Camp fire; says every $1b of higher exposure to Camp fire liability would hit Evercore’s PT by a little over $1/share. According to the report, PG&E fell 16.5% on Friday, and stock is trading just above book value as at the end of third quarter of $37.60/share; which means that shares are discounting over $20BN of exposure to fire liabilities, and "it could trade lower, but we think there is value here."

Separately, Goldman Sachs analyst Michael Lapides expects incremental investor concern for PG&E and Edison as the fires continue to grow. He adds that the California’s wildfire legislation that passed in late August (SB901) doesn’t contain provisions regarding wildfire recovery for potential 2018 fires.

Finally, Morgan Stanley’s Stephen Byrd writes that PCG/EIX shares now reflect $17b/$5b for 2017-2018 fires, including a permanent 25%/20% discount to peers, adding that the "implied damage likely exceeds shareholder liability and underscores need for further reforms."

The so-called Camp Fire in Northern California and the Woolsey Fire in suburban Los Angeles have destroyed more than 6,700 structures and could cost the state, insurers and homeowners $25 billion or more in damages.

Published:11/12/2018 10:01:35 AM
[Markets] Pain Therapeutics stock rises on plan to appeal opioid approval decision Pain Therapeutics stock rises on plan to appeal opioid approval decision Published:11/12/2018 10:01:35 AM
[Markets] Paul Brandus: What to expect from Washington’s new Big Three Can Washington’s big three actually get anything done over the next two years, asks Paul Brandus.
Published:11/12/2018 10:01:35 AM
[Markets] Nasdaq down 125 points in Monday-morning trades Nasdaq down 125 points in Monday-morning trades Published:11/12/2018 9:33:01 AM
[Markets] Dan Loeb Turns Bearish, "We Have Grown Our Short Book And Expect To Be Net Sellers"

Last Friday, in a note that was among Goldman's most bearish reports published in recent years, the bank warned that while there are several mitigating factors, "stocks may be about to enter a sustained bear market" and warning that the recent sharp rebound in the market is to be expected during the "volatile period" that follows the last year of the average bull market before a protracted and painful slide into a bear market.

Then, later on Friday, none other than Dan Loeb published his latest letter to investors in which he revealed that unlike recent years, Third Point had a surprisingly disappointing year, returning -0.1% in Q3 and only 0.6% YTD.

Third Point's disappointing performance was hardly surprising in light of the bloodbath experienced by hedge funds in the quarter and especially October, the worst month for the industry since 2011. However, what was unexpected was the sharp change in tone from Dan Loeb, whose traditionally bullish outlook for the past two years now appears to be over, and has been replaced with a general sense of derisking and foreboding near-term gloom:

"We have delevered our portfolio, reduced our tech exposure meaningfully, and grown our short book. We expect to be net sellers over the next few months if markets rally..."

To contextualize his new thinking, Loeb uses the analogy of the new NBC TV show The Good Place to elaborate how he, like many others, were caught wrong-footed by the market:

In the hit NBC television show The Good Place, (spoiler alert!) the audience is led to believe that a group of people who led righteous lives arrive in a utopian village where they are given the homes of their dreams to live in, are matched with their soul mates, and can eat endless amounts of frozen yogurt and never get fat. Eventually, the characters learn that their “soul mates” were chosen in error and that the angel played by Ted Danson was actually an evil demon who concocted the scenario as a way to torture them. Turns out, the “Good Place” was actually the “Bad Place.”

Looking back, it has become clear that we and many investors thought earlier this year that we had arrived at the “Good Place” in terms of market conditions. In January, fueled by tax cuts and synchronized global expansion, PMIs rose, economic growth estimates were revised upwards along with corporate earnings, and stocks surged across the board, especially growth stocks. Then, in February, volatility spiked to record levels and stocks dropped precipitously after a series of technical dominoes fell into place. After October’s market rout, it seems that the environment this year ought to have been dubbed the “Bad Place Market.”

Loeb then highlights the growing dispersion within the S&P as a reason for active management underperformance:

While the S&P is up slightly for the year, this statistic belies the extremity of the moves at the sector and global levels. Year-to-date, retail is up 30%, tech hardware is up 20%, and healthcare equipment is up 20%. By contrast, autos is down 18%, materials is down 8%, and capital goods is down 7%. At the lows, 63% of global stocks had entered into a bear market, which is almost equivalent to the 70% level reached at the 2011 and 2016 index lows. Rotation among sectors and industries has been violent, with the share of sectors recording extreme moves at the highest level since Trump’s election.

Looking at the catalysts behind the market volatility, Loeb understandably blames the sharp tick up in rates, which crippled the growth narrative and led to a brutal deleveraging of the quants during the peak of the buyback blackout period coupled with a troubling rise in negative earnings pre-announcements, all events duly documented here over the past month:

We believe the initial sell-off was caused by a backup in interest rates that saw 10-year yields rise from 2.8% at the end of August to 3.2% by the beginning of October. While equities and yield tend to move together over long periods of time, fast rate moves can cause equity declines in the short-term. Rates were driven higher by Fed Chair Powell’s commentary that spooked the market into quickly projecting the worst-case scenario, i.e. that a tightening overshoot would drive an otherwise buoyant economy into recession. These fears manifested themselves initially in the de-levering of growth stocks, causing volatility to rise and the market to breach levels to the downside, driving systematic and quantitative strategies to accelerate selling in a window of time where corporates were not participating in buyback programs due to the blackout period. At the same time, a string of weak earnings pre-announcements made investors question what had been a firewall for the S&P until that point. Strong earnings had allowed the S&P to withstand headwinds from weakening growth abroad and escalating tariffs, which had already driven most ex-US markets lower this year.

Still, Loeb refuses to throw in the towel just yet, and while he expects volatility to "remain high versus recent history and, while we have officially graduated from the post-financial crisis “buy the dip” paradigm" Loeb thinks "the strength of the US economy combined with the lack of significant inflationary pressure or structural imbalances still favors higher equities from these levels." Specifically, at ~16x one year forward P/E for the S&P500, valuations are not overly demanding, especially when considered relative to real rates of 1.0%, which imply an above-average equity risk premium."

Thus, it is important to stay balanced and not get overly negative. The market has just been through its sharpest P/E multiple de-rating since the 2011 sovereign debt crisis. While the current 10% consensus EPS growth forecast for 2019 is probably too high, the current multiple of 16x is already discounting cuts to the 2019 consensus. On the upside, delivery on 2019 consensus EPS and a return to the pre-sell-off multiple, which would still be below the peak 18x multiple in January, would imply ~8% upside. The biggest risk at these levels is immediate weaker economic growth, which in extremis could cause a recession, thereby driving down markets more substantially as both earnings and multiples would fall.

Looking ahead, Loeb writes that "while the prism through which we seek out our longs has not changed, we are increasing our focus on stress testing cash flow, asset productivity, and the interplay of rising rates to balance sheet strength and financial flexibility."

From our vantage point, the debate around what is value (e.g. the index, the factor, sectors) versus growth loses sight of our aim to identify compounders of value. To that end, we increasingly will be doubling down on finding quality-driven ideas, namely those with strong relative growth prospects, solid financial returns, and appealing relative valuation vis-à-vis their cash flows, peers, or the market.

Finally, it's not just a reappraisal of market fundamentals that will shape Third Point's investing process but a new focus on "further evolving our “quantamental” process to aid in portfolio selection, construction, and hedging." Specifically, Loeb sees opportunities "to shape our portfolio borne out of a more thoughtful understanding of the derivative markets, passive and quant flow impact, cross asset signaling, and how investor behavior sometimes creates extremes in positioning."

We have seen again over the last month what the new era in quant and ETFdriven markets looks like and we are determined to evolve in order to thrive as fundamental stock pickers in this environment.

Loeb's full letter is below (pdf link):

Published:11/12/2018 9:33:01 AM
[Markets] Nasdaq's 1.6% intraday tumble takes tech-heavy stock-market gauge to roughly 2-week low The Nasdaq Composite Index early Monday was the worst performer among the three main U.S. benchmarks, with its drop putting the index on track to close at its lowest level in about two weeks. The Nasdaq was down 1.7% at 7,280. A close there would mark the technology and internet-related index's lowest level since Oct. 30 when it finished at 7,161.65, according to FactSet data. A sharp decline in shares of Apple Inc. was weighing on the broader market, including the market-capitalization S&P 500 and the price-weighted Dow Jones Industrial Average . Published:11/12/2018 9:33:01 AM
[Markets] The Wall Street Journal: New York raids luxury condo building in crackdown on Airbnb rentals in one of largest actions to date A team of New York City law-enforcement officers swarmed a Manhattan condominium last month, issuing 27 notices of violations for illegal hotel use in one of the largest crackdowns on short-term rentals such as those listed on Airbnb.
Published:11/12/2018 9:33:01 AM
[Markets] Dow down 100-plus points early Monday; oil rebounds on talk of OPEC output curb Dow down 100-plus points early Monday; oil rebounds on talk of OPEC output curb Published:11/12/2018 9:02:18 AM
[Markets] Apple's stock exacts more than 50-point toll from Dow industrials, in early morning action The Dow Jones Industrial Average was trading solidly lower early Monday, with shares of Apple Inc. producing the greatest headwind for the price-weighted benchmark in early action. Shares of Apple were down more than $8, or about 4%, which equates to a 54-point loss for the Dow. Apple's stock was tumbling after Lumentum Holdings Inc. slashed its earnings and revenue outlook, saying it received a request from "one of its largest industrial and consumer customers for laser diodes for 3D sensing" to "materially reduce shipments" during the fiscal second quarter, which ends in December. That customer is believed to be Apple. The Dow was down 170 points, or 0.6%, at 25,821. A $1 move in any one of the Dow's components translates to a a roughly 6.8-point swing. Meanwhile, the S&P 500 index fell 0.7% at 2,761 and the Nasdaq Composite Index was trading 1.3% lower at 7,313. Apple is the biggest company by market value and one of the most influential companies within the Dow by virtue of its price. That fact makes Apple a key catalyst for market moves among the three main stock benchmarks. Published:11/12/2018 9:02:18 AM
[Markets] In the wake of #MeToo, relationships with co-workers have become even riskier Barclays tells U.K. employees to disclose office romances.
Published:11/12/2018 9:02:18 AM
[Markets] GE Collapses To A $7 Handle After CEO Fails To Inspire

Having blown through $9 last week, GE is crashing back below $8 for the first time since March 2009's freefall after new CEO Lawrence Culp failed to inspire optimism in a CNBC interview...

General Electric’s most important goal is cutting its debt levels, Chief Executive Officer Larry Culp said in his first public comments since the company spooked investors with its third-quarter earnings report last month.

“We have no higher priority right now than bringing those leverage levels down," Culp said in an interview Monday with CNBC.

“I think we’ve got plenty of opportunities through asset sales to do that.’’

And investors are not impressed...

As we noted previously, GE is now unchanged since 1995...

And default risk is spiking...

 

Published:11/12/2018 9:02:18 AM
[Markets] The Wall Street Journal: Top Facebook VR exec may have been fired for his Trump support Facebook Inc. executive and virtual-reality wunderkind Palmer Luckey was a rising star of Silicon Valley when, at the height of the 2016 presidential contest, he donated $10,000 to an anti-Hillary Clinton group.
Published:11/12/2018 8:39:29 AM
[Markets] Understanding The Global Recession Of 2019

Authored by Charles Hugh Smith via OfTwoMinds blog,

Isn't it obvious that repeating the policies of 2009 won't be enough to save the system from a long-delayed reset?

2019 is shaping up to be the year in which all the policies that worked in the past will no longer work. As we all know, the Global Financial Meltdown / recession of 2008-09 was halted by the coordinated policies of the major central banks, which lowered interest rates to near-zero, bought trillions of dollars of bonds and iffy assets such as mortgage-backed securities, and issued unlimited lines of credit to insolvent banks, i.e. unlimited liquidity.

Central governments which could do so went on a borrowing / spending binge to boost demand in their economies, and pursued other policies designed to bring demand forward, i.e. incentivize households to buy today what they'd planned to buy in the future.

This vast flood of low-cost credit and liquidity encouraged corporations to borrow money and use it to buy back their stocks, boosting per-share earnings and sending stocks higher for a decade.

The success of these policies has created a dangerous confidence that they'll work in the next global recession, currently scheduled for 2019. But policies follow the S-Curve of expansion, maturity and decline just like the rest of human endeavor: the next time around, these policies will be doing more of what's failed.

The global economy has changed. Demand has been brought forward for a decade, effectively draining the pool of future demand. Unprecedented asset purchases, low rates of interest and unlimited liquidity have inflated gargantuan credit / asset bubbles around the world, the so-called everything bubble as most asset classes are now correlated to central bank policies rather than to the fundamentals of the real-world economy.

Keenly aware that they've thinned their policy options and financial buffers to near-zero, central banks are struggling to normalize their policies by raising rates, reducing their balance sheets by selling assets and tightening lending conditions / liquidity.

Unfortunately for central banks, global economies are now junkies addicted to zero interest rates and central bank stimulus / support of bond markets, stock markets and real estate markets. The idea of normalization is to slowly inch the financial system and economy back to levels that were normal in previous eras, levels that allowed some room for central banks to respond to recessions and global financial crises by lowering rates and extending credit to insolvent lenders.

But reducing the drip of financial heroin hasn't ended global economies' addiction to extraordinary easy financial conditions. Rather, it's illuminated the dangers of their continued addiction.

As soon as authorities attempt to limit their support / stimulus, markets wobble into instability. The entire economic structure of "wealth" is now dependent on asset bubbles never popping, for any serious decline in asset valuations will bankrupt pension funds, insurers, local governments, zombie companies and overleveraged households--every entity which is only solvent as long as asset bubbles expand or maintain current valuations.

So how do central banks normalize their unprecedented policies without popping the asset bubbles they've created? The short answer is: they can't.Rising interest rates are a boon to savers and Kryptonite to borrowers--especially over-leveraged borrowers who must roll over short-term debt and borrow more just to maintain the illusion of solvency.

As if this wasn't enough to guarantee recession in 2019, there's the unintended consequences of capital flows. Capital famously flows to where it's treated best, meaning wherever it earns the highest yields at the lowest risk, and where the rule of law protects capital from predation or expropriation.

When all central banks pursued roughly the same policies, capital had options. Now that the Fed has broken away from the pack, capital has only one option: the U.S. The Federal Reserve should have begun normalizing rates etc. back in 2013, and if they'd been wise enough to do so then even baby steps over the past 5 years would have led to a fairly normalized financial environment.

But Ben Bernanke and Janet Yellen blew it, so it's been left to the current Fed leadership to do the heavy lifting over a much shorter timeline. Predictably, pulling away the punch bowl has spoiled the asset-bubble party, and now all the asset bubbles are increasingly at risk of deflating.

But the yields and relative risk available in US-dollar denominated assets is starting to look a lot more attractive and lower risk than assets denominated in yen, yuan and euros. Capital flows tend to be self-reinforcing: as capital flows out of at-risk economies, it dampens investment, speculation and spending as the economy is drained of capital.

Owners of assets notice this decay and so they decide to sell and move their capital to safer ground. Selling begets selling, and pretty soon nobody's left to catch the falling knife, ie. buy assets that are rapidly losing value.

This is what surprised Alan Greenspan (by his own account) in 2008: bubbly markets quickly become bidless, that is, buyers vanish and sellers who want to unload their assets for cash find nobody's willing to part with cash for a plummeting asset.

The central bank "solution" to bidless markets is to become the buyer of last resort: when no sane investor will buy bonds, stocks or real estate, then the central bank starts buying everything in sight.

We are already seeing this in action as Chinese governmental agencies have started quietly buying empty flats in ghost buildings to prop up the housing market. The idea here is to restore confidence with a relatively modest burst of quiet buying. But when markets turn and confidence is lost, sentiment can't be restored so easily: sensing their last chance is at hand, sellers dump assets at a quickening pace, overwhelming the modest central bank buying.

This leaves the central bank with a stark and sobering choice: either let the asset bubble collapse and accept the immense destruction of "wealth," or buy the whole darn market. This is the unintended consequence of employing unprecedented policies for a decade: like using antibiotics every day for years, eventually resistance develops and the "fix" no longer works.

Now that central banks have inflated assets into the stratosphere, there's $300 trillion in global financial assets sloshing around seeking higher yields and capital gains. How much of this $300 trillion can central banks buy before they destabilize currencies? How much can they buy before they run out of political goodwill?

Isn't it obvious that repeating the policies of 2009 won't be enough to save the system from a long-delayed reset?

*  *  *

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.  Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Published:11/12/2018 8:39:29 AM
[Markets] US STOCKS SNAPSHOT-Wall Street opens lower as Apple drags U.S. stocks opened lower on Monday, as a slide in Apple Inc after weak forecasts from two of its suppliers and losses in tobacco companies offset early gains from a rebound in oil prices. The Nasdaq Composite dropped 42.86 points, or 0.58 percent, to 7,364.05 at the opening bell. Published:11/12/2018 8:39:28 AM
[Markets] California wildfires death toll stands at 31 California wildfires death toll stands at 31 Published:11/12/2018 8:02:26 AM
[Markets] Alibaba, Athenahealth, SAP, Qualtrics and SoftBank - 5 Things You Must Know U.S. stock futures were slipping on Monday, Nov. 12, as investors continued to reset interest rate expectations from the Federal Reserve and prepared for quarterly reports this week from a number of U.S. retail giants such as Walmart Inc. American depositary receipts of Alibaba fell 0.6% in premarket trading. Published:11/12/2018 8:02:26 AM
[Markets] Italian Banks On Verge Of New Crisis After €400 Million Hole Emerges At Banca Carige

Remember the Italian "doom loop"?

Two months ago we reported that during the first Italian bond market freakout this May over the ascent of the populist due of Salvini-Di Maio to the Italian throne, Italian bank holdings of domestic government bonds rose by a record €28.4bn, more than what was seen during the peak of the European sovereign debt crisis of 2012. Visually, this is what the single biggest month of Italian bank purchases of BTPs in history looked like.

This vicious circle of Country X banks (in this case Italy) buying Country X bonds during times of stress - with the ECB's trusty backstop - had for years been Europe's dreaded sovereign bank doom loop. And, as Italy clearly demonstrated, repeated and aggressive attempts by European regulators and policymakers to finally break the "doom loop", most recently with the introduction of the 2014 BRRD directive, which sought to remove the need for and possibility of bank bailouts, and instead ushered in bail ins, had been an abject failure.

On Monday traders got a harsh reminder of this when Italian banks came under renewed market focus, and selling, due to their inflated holdings of the country's government bonds whose value has tumbled since May - just as they doubled down on their BTP purchases.

This time, the epicenter of the bank rout was Banca Carige, Italy’s last remaining large problem bank; weakened by years of mismanagement and shareholder infighting, it has fallen behind in the restructuring process that has seen rivals shed bad debts in the past two years. And according to Reuters, healthy Italian banks will be needed to help fill a €400 million hole on Banca Carige's balance sheet "in order to avert a possible crisis that would further destabilize the sector."

The reason for this funding deficiency: Carige has failed twice this year to issue subordinated debt due to the high yields demanded by investors, even as the ECB has given it until Nov. 30 to detail how it will fill its capital gap before the end of the year. And with institutional funding markets closed to all but the strongest lenders, Italian banks would take up the bulk of a €400 million euro subordinated bond Carige plans to issue to quickly replenish its second-tier capital, Reuters reported.

If this sounds like taking the doom loop and squaring it, where semi-healthy Italian banks - already loaded to the gills with BTPs - have to fund the bailout of semi-insolvent banks which have succumbed to the doom loop, it's because that's precisely what is going on. Additionally, the bank’s leading shareholders are also expected to pitch in in this latest mini bailout.

The restructuring process will then see Carige launch a new share issue in coming months to repay the bond, one of the sources said. The banks that bought the bond will convert the debt into equity by taking on unsold shares, with a view to eventually liquidating their holdings, the source added.

The process will be carried out through a section of Italy’s depositors’ guarantee fund dubbed ‘Voluntary Scheme’, to which all the main banks contribute on a "voluntary" basis to avoid falling foul of European state aid rules. Members of the ‘Voluntary Scheme’ were due to meet at 1100 GMT on Monday to approve the intervention, a Reuters source said.

But while the emergency funds may paper over Carige's liquidity shortfall, its solvency remains very much in doubt: based in the port city of Genoa, Carige is heavily exposed to the economy of the northwestern Liguria region, which has been gripped by a deep recession. A global slump in the shipping industry have dealt harsh blows to the local economy, which is now also grappling with the fallout from the deadly collapse of a Genoa bridge that severed the port’s main artery to Europe.

Carige last raised funds in December 2017, when it resorted to asset sales to push through its third cash call since 2014. It has raised a total of €2.2 euros in capital in the past four years. It has not been enough.

But wait, there's more.

Further complicating matters, Carige has been through a series of management changes because its top shareholder, local businessman Vittorio Malacalza, has pushed out three chief executives in as many years. Malacalza in September won a boardroom battle and appointed former UBS banker Fabio Innocenzi as chief executive. Carige has also hired UBS as adviser - in what some may say reeks of a conflict of interest - to assess a possible merger, which bankers have said in the past was made difficult by the bank’s capital and restructuring needs and its bickering shareholders.

Carige’s shares and bonds were suspended from trading on Monday pending the bank’s announcement.

The bank's stock price closed on Friday at a new all time low.

Meanwhile, Italian 10Y bond yields spiked as high as 3.45%, matching the highest levels of November if still some 35 bps shy of the recent highs hit in mid-October.

And, in the most troubling market move of the day, the euro has tumbled to fresh 16 month lows as traders increasingly expect Europe's political turmoil(s) - whether Brexit, Italy's budget standoff or renewed focus on Italy's insolvent banks - to have wide ranging and adverse consequences.

Published:11/12/2018 8:02:25 AM
[Markets] CryptoWatch: Cryptos steady; Ethereum co-founder Lubin says blockchain can add wealth Cryptocurrrency prices are trading marginally higher to begin the week.
Published:11/12/2018 8:02:25 AM
[Markets] Lumentum slashes earnings, revenue outlook after major customer cuts shipments Lumentum slashes earnings, revenue outlook after major customer cuts shipments Published:11/12/2018 7:34:20 AM
[Markets] Metals Stocks: Gold edges lower as dollar strengthens to 1 ½-year high Gold prices on Monday trade slightly lower as a popular gauge of the dollar strengthens to its highest level in more than 17 months, weighing on demand for the precious metal.
Published:11/12/2018 7:34:20 AM
[Markets] Trump Says "An Honest Vote Is No Longer Possible" In Florida

As @ForexLive pointed out, President Trump has nothing on his schedule during Monday's Veterans' Day holiday. So this morning's steady stream of divisive tweets is expected to continue.

Pivoting away from demands that Europe pay up for US military protection, Trump is refocusing on the election recount in Florida, where narrow victories by Republican gubernatorial candidate Ron DeStantis and senatorial candidate (and current governor) Rick Scott are being called into question (though the possibility of vote tampering has also emerged as crates of mystery ballots have surfaced in Broward).

Following Scott's decision to file a lawsuit demanding that law enforcement seize vote-counting machines and ballots when they're not in use, Trump, who had previously threatened to open a federal investigation into the sluggish vote-counting process in Broward and Palm Beach counties, is now demanding that the recount be abandoned because of the arrival of a large number of ballots "out of nowhere," adding that many are "missing or forged."

Because of this, "an honest vote count is no longer possible", Trump said. "Ballots massively infected. Must go with Election Night!."

We're still waiting for a judge to rule on Scott's latest batch of lawsuits, which added to the legal drama after his opponent, incumbent Democrat Bill Nelson, filed a lawsuit demanding that ballots bearing mismatched signatures still be counted.  In Broward County, more than 20,000 ballots were cast where voters voted on down-ballot races, but neglected to vote in the governor's race, a scenario that experts have called "implausible."

Published:11/12/2018 7:34:20 AM
[Markets] Apple's stock slips after J.P. Morgan trims price target again Shares of Apple Inc. fell 0.7% in premarket trade Monday, after J.P. Morgan cut its earnings estimates on the technology giant, citing new forecasts for modest declines in iPhone shipments for this year and next. Analyst Samik Chatterjee cut his stock price target, for the second time this month, to $266 from $270, but kept his rating at overweight. He said the lower earnings outlook is because of a weaker macro-economic environment in emerging markets, such as China, which is driving softer consumer confidence in certain countries, and a stronger U.S. dollar, which is making iPhones more expensive in foreign currencies. He cut his annual iPhone volume expectations for calendar 2018 to 214 million from 216 million and for 2019 to 208 million from 218 million, while his earnings-per-share estimates drop by 10 cents in fiscal 2019 and fiscal 2020. On Nov. 2, Chatterjee had trimmed his stock price target to $270 from $272 to reflect U.S. dollar strength concerns. Apple's stock has lost 1.5% over the past three months, while the SPDR Technology Select Sector ETF has dropped 4.4% and the Dow Jones Industrial Average has gained 2.7%. Published:11/12/2018 7:01:36 AM
[Markets] Apple's stock slips after J.P. Morgan trims price target again Apple's stock slips after J.P. Morgan trims price target again Published:11/12/2018 7:01:36 AM
[Markets] The Moneyist: Two sisters want to disinherit their half-sister after their father dies without a will A Cinderella story of an inheritance and warring family.
Published:11/12/2018 7:01:36 AM
[Markets] Facebook Fired Oculus Founder For His Political Beliefs And Pro-Trump Donations

Every so often, Silicon Valley's virtue-signaling, shadowbanning, anti-conservative media titans appear in Congress or devise a quick PR campaign to show to the world just how truly impartial they are with zero liberal bias. And every single time it backfires as their true ideological face quickly emerges from behind a fake, hypocritical mask.

Take the case of former Facebook executive, Oculus co-founder and virtual-reality wunderkind Palmer Luckey, who was a rising star of Silicon Valley when, at the height of the 2016 presidential contest, he donated a modest $10,000 to an anti-Hillary Clinton group. His donation sparked a backlash from his colleagues, which then led to him being put on leave, and six months later he was fired. 

What is odd about Luckey's termination, is that when testifying before Congress about data privacy earlier this year, Mark Zuckerberg denied, or rather lied that the departure had anything to do with politics. In fact, neither Facebook nor Mr. Luckey ever said why he left the social-media giant.

Until now: according to a report from the WSJ, Luckey told people the reason for his termination from that bastion of apolitical impartiality Facebook, was his support for Donald Trump and the furor that his political beliefs sparked within his employer, and Silicon Valley, some of those people say.

It's not just his opinion either: internal Facebook emails suggest the matter was discussed at the highest levels of the company. In the fall of 2016, as unhappiness over the paltry donation simmered, executives at Facebook - which according to Open Secrets has spent over $60 million on lobbying in the past decade - including Zuckerberg pressured Mr. Luckey to publicly voice support for libertarian candidate Gary Johnson, despite Mr. Luckey’s yearslong support of Trump.

At that point Luckey, 26, allegedly hired an employment lawyer who argued to Facebook that it had violated California law in pressuring the executive to voice support for Johnson and for punishing an employee for political activity.

Not long after, Luckey and his lawyer negotiated a payout of at least $100 million, representing an acceleration of stock awards and bonuses he would have received through July 2019, plus cash, according to the people familiar with the matter. The stock awards and bonuses were a result of selling his virtual-reality company, Oculus VR, to Facebook in 2014 for more than $2 billion, a deal that netted him a total of about $600 million.

In other words, it was Trump's "fault" that a $10,000 donation resulted in a $100,000,000 payout just a few months later.

Meanwhile, in keeping with its fake facade of objectivity and impartiality, a Facebook spokeswoman told the WSJ that "we can say unequivocally that Palmer’s departure was not due to his political views. We’re grateful for Palmer’s contributions to Oculus, and we’re glad he continues to actively support the VR industry."

Of course, if he were to say anything else, it would be in violation of the Luckey's separation agreement. Same goes for the Oculus founder, who described the episode as being in the past. "I believe the team that remains at Oculus is still the best in the VR industry, and I am rooting for them to succeed."

It's doubtful that the inverse is also true: Luckey started Oculus in 2012, while still a teenager, with a $2.4 million crowdfunding campaign. He dropped out of the journalism program at California State University, Long Beach, to work on the company, along with co-founder Brendan Iribe. When they sold to Facebook, Luckey became the face of the virtual-reality industry, appearing on a Time magazine cover saying the technology was “about to change the world.”

But the real reason why the young entrepreneur - a Long Beach native who was home-schooled by his mother - never fit in was because he was often out of step with the largely liberal culture of Facebook. A fan of big cars and military gear, he drove a giant tan Humvee with machine-gun mounts and orange toy guns. According to WSJ sources, he once was forced to move it from the Facebook parking lot after someone called the police in to investigate.

However, what likely turned his co-workers against him, is that Luckey has been a longtime supporter of Donald Trump and wrote a letter to the then-reality-television star in 2011 urging him to run for president. Mr. Luckey has told friends that reading Mr. Trump’s book “The Art of the Deal” at age 13 sparked his entrepreneurial imagination.

And while even that may have been forgiven; the real dealbreaker was when Luckey slammed the patron saint of virtue signalers everywhere: Luckey’s fallout with Facebook began in September 2016, when the Daily Beast revealed his $10,000 donation to NimbleAmerica, a pro-Trump group that paid for advertising mocking Hillary Clinton ahead of the 2016 election. At least one billboard paid for by the group featured a picture of Mrs. Clinton and the phrase “Too Big to Jail.”

In one post on a Reddit chain dedicated to supporting Mr. Trump, the author, called “NimbleRichMan,” said he was donating to the group so it could spread unflattering memes about Mrs. Clinton. In the same post, the author professed to support Mr. Trump’s campaign, saying:

“Hillary Clinton is corrupt, a warmonger, a freedom-stripper. Not the good kind you see dancing in bikinis on Independence day, the bad kind that strips freedom from citizens and grants it to donors.”

The Daily Beast wrote that Mr. Luckey had said he used the pseudonym NimbleRichMan, and it was all downhill from there.

Luckey’s donation and the perception that he might be associated with a group that at times traded in misogynistic and white-supremacist messages, as some news stories reported, ignited a firestorm. Facebook employees expressed anger about Luckey on internal message boards and at a weekly town hall meeting in late September 2016, questioning why he was still employed, according to people familiar with the complaints. Because Silicon Valley's liberals are all about tolerance, as long as the opinion they have to tolerate is identical to their own.

Things then turned bizarre quickly.

In an apology posted on Facebook that month, Mr. Luckey denied writing the NimbleRichMan posts and said he “contributed $10,000 to NimbleAmerica because I thought the organization had fresh ideas on how to communicate with young voters through the use of several billboards.”

The post said Mr. Luckey is a libertarian and planned to vote for Mr. Johnson in the election.

Maybe not: “I need to tell you that Mark [Zuckerberg] himself drafted this and details are critical,” Facebook Deputy General Counsel Paul Grewal wrote to a lawyer for Mr. Luckey in a September 2016 email, attaching an early draft of the statement, according to the emails reviewed by the Journal. The draft said Mr. Luckey wouldn’t be supporting Mr. Trump in the election.

Soon after the apology was posted, a writer at the Daily Beast posted on Twitter emails he had received from Mr. Luckey in which he said he made at least one post attributed to NimbleRichMan—a contradiction of his public statement. Mr. Luckey has since told people he wasn’t the author, but took responsibility because the post reflected his views.

Facebook executives were furious about the conflicting statements, with some believing that Luckey had lied to them, according to people familiar with the matter.

At this point the company had every intention of firing Luckey, but it lacked a valid reason: The company launched a human-resources investigation, which in 2016 found that Luckey hadn’t violated internal policies, say people familiar with the investigation. His performance reviews were consistently positive, including his last in June 2016.

That was not enough to allow the young conservative to keep his job however, and amid the uproar, Facebook placed Luckey on paid leave. Then, just to rub salt in his coworker's liberal wounds, after Trump won the election in November, Luckey donated $100,000 to his inaugural committee. By December 2016, he had returned to work to prepare for and testify at a trial, although he was only on campus for a couple of days.

Meanwhile, Facebook finally got the break it needed in letting Luckey go: a videogame publisher, ZeniMax Media Inc., had sued Facebook shortly after it purchased Oculus, contending that a ZeniMax employee took proprietary code when he joined Oculus. After a trial, a judge ordered Facebook to pay $250 million, plus interest. Facebook has appealed.

After the verdict, Mr. Luckey got a call from a Facebook executive asking him to resign, according to people familiar with the call. He declined, seeking instead to get reinstated. Facebook said no.

Ultimately, Mr. Luckey was fired. His last day was March 30, 2017.

After his departure, Luckey - financially set for life - became even more political. One month after he left Facebook, he hosted a fundraiser for Republican Sen. Ted Cruz of Texas. He has since founded Anduril, an Orange County-based tech company focused on using artificial intelligence to protect troops, performing search-and-rescue missions and bringing “Silicon Valley thinking and funding to defense."

Recently, Mr. Luckey came as close as he has ever come to publicly divulging the circumstances of his Facebook departure. At Vanity Fair’s New Establishment Summit in Los Angeles last month, he told CNBC that"“it wasn’t my choice to leave."

Luckey’s termination ouster from Facebook was a harbinger of battles that have broken out over the past year over the overwhelmingly liberal culture of Silicon Valley, which has given the tech industry public-relations headaches for filtering out and banning conservatives, and brought unwanted attention from Washington.

Executives from Facebook, Twitter and Google have had to answer questions from lawmakers about potential bias in their treatment of conservative viewpoints. Tech executives concede that Silicon Valley is predominantly liberal—Zuckerberg said in Senate testimony that it is “an extremely left-leaning place”—yet they have steadfastly maintained that politics doesn't, which we now know once again is clearly a lie; then again one look at the charts below would have led to the same conclusion.

 

Published:11/12/2018 7:01:36 AM
[Markets] Futures Slide Amid Euro, Cable Rout; Dollar Soars To 2018 High

Stocks reversed earlier gains, turning lower in Europe as U.S. futures pared as many as 20 points of upside in overnight trading before turning lower on Monday, following a mixed session across most of Asia as investors weighed the outlook for equities after a roller coaster few weeks. Volumes were subdued with many banks closed for Veteran's Day in the US. Futures on the Nasdaq were flat after large-cap tech shares on Friday dragged the gauge down 1.7%.

Europe saw a sharp selloff in both the EUR and GBP this morning, with the EURUSD breaching 1.1300 to the downside, the lowest print since July 2017 as Brexit deal momentum once again faded, while the Italian budget negotiation failed to make progress ahead of another looming deadline.

Euro

For the euro, Italy was the main focus, with Rome facing a Tuesday deadline to submit a revised budget to the EU, though it has so far refused to cut the draft budget deficit, setting the stage for a collision with Brussels.  Bernd Berg, strategist at Woodman Asset Management, predicted the euro would tumble below $1.10 from the current $1.126 “as renewed eurozone and Brexit angst and a diverging economic outlook with a strong U.S. economy versus a weakening eurozone economy will trigger further euro selling pressure.”

The drop in Europe's Stoxx 600 Index was led by household goods and real estate shares. Major European indices were mixed, with Germany’s DAX (-0.8%) lagging, weighed on by Infineon (-5.3%) following a projected revenue decline and SAP (-3.2%) after the company stated they are taking over Qualtrics International. UK’s FTSE 100 (+0.2%) outperformed thanks to the weaker pound and as several big names are in the green (BHP +2.8%, Shire +2.3%, Anglo American +2.0%) outweighing the significant losses for British American Tobacco (-9.1%) and Imperial Brands (-4.1%) following reports of FDA commissioner pursuing a ban on menthol cigarettes. Similarly, sectors are mixed with IT names lagging and energy names outperforming, with FTSE giant BP (+1.8%) benefiting from the rebound in oil.

Italian bonds fell ahead of supply and the government’s deadline to resubmit its 2019 budget on Tuesday where there appeared to be no progress, while Bunds follow gilts higher on a lack of progress in the Brexit talks; The 10y spread to Germany widened 4bps to 303bps while Bund gains were spurred by gilts, which outperform by 3bps as the latest Brexit impasse lowers the chances of a BOE rate hike before November 2019, even as the next 25bps BOE hike remains fully priced in for November 2019.

Markets were also spooked by reports that Banca Carige would need around 400 million euros ($451 million) to plug a hole in its capital base and Italy’s deposit protection fund could fill only part of it. CRG.IM was halted, limited down as a result.

That raises the specter of a banking crisis in the euro zone’s third-biggest economy, keeping Italy’s bond yield spread over Germany - the risk premium attached to Italian assets - around the psychologically key 300 basis-point mark. Italian bank shares fell 0.6 percent

Earlier in the session, the MSCI Asia equities index also dropped, though shares in Japan and Hong Kong finished in a tight range, while Chinese stocks - for once - bucked the trend closing 1.2% higher. While Shanghai was lifted over one percent by regulators’ promise to simplify share buybacks, MSCI’s world equity index was down 0.3% and Asian markets broadly weakened following Friday’s weak Wall Street close.

China closed in the green even as investors fretted about signs of slowing growth in China where e-commerce giant Alibaba was the latest to raise alarm bells, with the slowest ever annual sales growth during its Singles Day shopping event.

Australia's ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. As noted earlier, the Shanghai Comp. (+1.2%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales.

With Asia mixed and European risk assets sliding, the Bloomberg dollar index printed fresh YTD highs: “King dollar has staged a return,” Credit Agricole's FX strategist Valentin Marinov said, adding that investors had piled back into the dollar after last week’s Fed meeting confirmed a rate-tightening path. "Euro and pound are both hurt by political risk and that is aggravating  underperformance versus the dollar,” Marinov added.

Speculators’ net long dollar positions rose last week to the highest since January 2016, according to the latest Commodity Futures Trading Commission data.

The pound slumped, dropping below $1.29 for the first time in more than a week following a report that four more U.K. government ministers are on the brink of resigning over Prime Minister Theresa May’s Brexit plans, and that May was forced to abandon plans for an emergency cabinet meeting to approve a Brexit agreement, the Independent news website reported, stoking fears that the government might not be able to secure a deal that satisfied both the European Union and members of the ruling party.

The opposition Labour Party said that if May’s Brexit deal was voted down in parliament, it would push for a national election and possibly also another referendum. The latest futures data showed net short sterling positions registered their biggest weekly rise in 1-1/2 months. Deutsche Bank analysts, however, predicted more pain, telling clients: “not enough risk is priced into sterling given the parliamentary problems ahead”.

The other big move was in commodities, where Saudi Arabia’s energy minister took some pressure off last week’s oil price drop, saying on Sunday that Riyadh could reduce supply to world markets by 500,000 barrels per day in December, a global reduction of about 0.5 percent. That jolted Brent crude futures up more than 2% to a high of $71.88 per barrel. However, the supply cut may prove to be a temporary solution to falling prices as global growth slows, with two of the world’s biggest economies - Germany and Japan - expected to report a contraction in output in coming days. “Supply-side surprises appear to be the main culprit, but concern that global demand is slowing may also be creeping into markets and weighing on risk appetite,” the ANZ analysts said.

Looking ahead, Treasuries aren’t trading due to Veterans’ Day holiday. UGI Corp. and AXA Equitable are among scheduled earnings

Market Snapshot

  • S&P 500 futures little changed at 2,778.50
  • STOXX Europe 600 down 0.2% to 364.86
  • MXAP down 0.4% to 151.66
  • MXAPJ down 0.5% to 481.78
  • Nikkei up 0.09% to 22,269.88
  • Topix down 0.06% to 1,671.95
  • Hang Seng Index up 0.1% to 25,633.18
  • Shanghai Composite up 1.2% to 2,630.52
  • Sensex down 0.8% to 34,867.39
  • Australia S&P/ASX 200 up 0.3% to 5,941.30
  • Kospi down 0.3% to 2,080.44
  • German 10Y yield fell 2.0 bps to 0.387%
  • Euro down 0.7% to $1.1256
  • Brent Futures up 1.2% to $71.05/bbl
  • Italian 10Y yield rose 0.8 bps to 3.033%
  • Spanish 10Y yield fell 1.2 bps to 1.586%
  • Brent Futures up 1.3% to $71.06/bbl
  • Gold spot down 0.2% to $1,207.13
  • U.S. Dollar Index up 0.6% to 97.47

Top Overnight News from Bloomberg

  • As well as increasing domestic pressure on May to ditch her Brexit plan or face defeat in Parliament, EU ministers in Brussels on Monday didn’t fix a specific date for an extraordinary summit. There’s still a need for more clarity from the U.K. before the bloc’s leaders convene to sign off a deal, an EU official said
  • Saudi Arabia expressed the need for oil producers to cut 1 million barrels a day from October levels and announced fewer shipments from next month, as OPEC and its allies began laying the groundwork to reduce oil supply in 2019, reversing an almost year-long expansion
  • China signaled tougher management of the yuan, dropping a phrase underlining the importance of market forces from a key policy report for the first time in five years
  • The most destructive series of wildfires in California history have killed at least 31 people and forced tens of thousands more to evacuate, officials said, as firefighters struggled to gain control in swirling winds
  • President Donald Trump left World War I commemorations in France after a weekend that exposed tensions with U.S. allies in Europe over his decision to pull out of the 1987 Intermediate- range Nuclear Forces Treaty with Russia. By the time he flew home on Sunday he appeared isolated and, by some, scorned

Asian equity markets eventually traded mixed but with gains limited as some cautiousness lingered from the uninspiring performance on Wall St last Friday, where ongoing global growth concerns and continued declines in commodities weighed on sentiment. ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. Elsewhere, Shanghai Comp. (+0.8%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales. Finally, 10yr JGBs were relatively flat with price action contained as pressure from the improvement in regional sentiment was counterbalanced by the BoJ presence in the market.

Top Asia News

  • SoftBank to Raise $21 Billion in Wireless IPO to Invest More
  • Pilot Grounded Before Delhi-London Flight for Failing Booze Test
  • China’s LVMH Wannabe to Slow M&A After $4 Billion Spree

Major European indices have turned lower, with Germany’s DAX (-0.8%) lagging, weighed on by Infineon (-5.3%) following a projected revenue decline and SAP (-3.2%) after the company stated they are taking over Qualtrics International. UK’s FTSE 100 (+0.2%) is outperforming amid currency effects and as several big names are in the green (BHP +2.8%, Shire +2.3%, Anglo American +2.0%) outweighing the significant losses for British American Tobacco (-9.1%) and Imperial Brands (-4.1%) following reports of FDA commissioner pursuing a ban on menthol cigarettes. Similarly, sectors are mixed with IT names lagging and energy names outperforming, with FTSE giant BP (+1.8%) benefiting from the rebound in oil. In terms of individual equities, Telecom Italia (+4.6%) are leading the Stoxx 600 after reports in Italian press that the Italian government are pushing a fibre deal with the Co. Elsewhere, Rio Tinto (+3.4%) rose to the top of the UK benchmark following the completion of a share-buyback programme.

Top European News

  • Merkel Bid to Make Germany Inc. World Champion Hits EU Snags
  • Italy’s Industry Output Drop Makes It Harder to Convince EU
  • Hedge Fund Wins as European Luxury Goods Hit a Wall in China
  • Cerberus Plans to Buy Spain’s Altamira, Solvia: Expansion

In FX, the Dollar is firmly back in the ascendency, albeit partly due to underperformance in major counterparts due to specific bearish factors. However, the DXY has extended recovery gains beyond 97.000 and through its previous ytd peak to top out just shy of 97.600 at 97.583, with bulls now eyeing relatively strong Fib resistance around 97.871 ahead of 98.000.

  • GBP - More Brexit-related weakness in Sterling has tipped Cable through another big figure, and just under 1.2850 at one stage, while Eur/Gbp has rebounded further from recent sub-0.8700 lows towards 0.8775 on latest threats of revolt within the UK Government and time running out fast to reach a withdrawal deal with the EU. From a technical perspective, nearest support in Cable comes in around 1.2810, which coincides with a Fib and decent option expiry interest.
  • EUR - The single currency is also under considerable pressure, and after triggering stops at 1.1300 vs the Greenback, losses accumulated quickly to 1.1250 where hefty bids stalled further downside for a while. The catalyst, ongoing Italian-EU budget angst ahead of Tuesday’s deadline for the Government to resubmit a fiscal plan, and another meeting between key Roman officials later today. Note also, 1.1 bn option expiries roll off at the 1.1250 strike, with the same size capping any rebounds to 1.1300.
  • CHF/AUD - Both around 0.4-0.45% weaker vs a generally bid Usd, with the France testing 1.1000 and Aud back below 0.7200 amidst renewed weakness in the Yuan.
  • NZD - The Kiwi is holding up moderately better than its antipodean peer, as Nzd/Usd maintains 0.6700+ status (just) and the Aud/Nzd cross retests support/bids around 1.0700.
  • CAD/JPY - Relative outperformers, or at least keeping pace with the Usd as the Loonie pivots 1.3200 and derives underlying support from a rebound in oil prices, while the latter pares losses from circa 114.20 to just above 114.00 due to its greater safe-haven allure.
  • EM - Broad declines in regional currencies vs the resurgent Dollar, but with Usd/Try slipping back from 5.5000+ levels in wake of Turkish current account data revealing another y/y improvement.

In commodities, WTI (+0.4%) and Brent (+1.0%) bounced back with a vengeance as markets had the first opportunity to digest developments from the JMMC meeting during the weekend. The complex was on track for the longest losing streak since 1984, before Saudi Energy Minister Al-Falih said the kingdom plans to reduce oil supply by 500K BPD in December due to a seasonal demand decline. Meanwhile, the JMMC decided not to take decisions on market adjustments on Sunday, with UAE’s Energy Minister noting that 2019 will require a change in OPEC strategy, adding that the new strategy is definitely not going to involve hiking output. Furthermore, in early European trade, the Kuwaiti Oil Minister stated that oil exporters discussed some kind of supply cut for next year but no volume was mentioned. Note: weekly API and DoE inventory data have been pushed back by a day due to US Veterans’ day. Elsewhere, gold (-0.1%) fell to levels last seen in mid-October as the yellow metal tracked USD moves with the DXY reaching new YTD highs in early European trade. Meanwhile, copper is taking a breather from the recent sell-off and nickel extended losses to hit 11-month lows, pressured by concerns of slowing Chinese demand for steel. At the weekend JMMC meeting, the committee decided not to take decisions on market adjustment, while Saudi Arabia Energy Minister Al-Falih said it is too premature for OPEC to discuss production cuts but stated that Saudi will reduce oil supply by 500k bpd in December amid seasonal decline in demand.

US Event Calendar

  • Nothing major scheduled due to Veterans' Day holiday

DB's Jim Reid concludes the overnight wrap

Welcome to a new week and one where Brexit seems likely to grab a disproportional amount of the headlines. As I was scouring the weekend papers for news on this bewildering subject I stumbled across an article that innocently said that the British and the Irish are the top two countries in the EU for the percentage of the population that drink alcohol least once a week. It felt quite apt given the current situation. Also in the same Eurostat survey it suggested that the Dutch are the least likely to eat fruit and veg every day which given how tall they are perhaps dispels the myth that you need them! The Italians are one of the worst for amounts of exercise (Scandis generally the best) but they have the skinniest population. If anyone in Italy can give me the secret of that equation I’d be delighted to hear it. It must be the Mediterranean diet!

Talking of Brexit and Italy, two of the main highlights for this week are likely to be the increasingly cul-de-sac Brexit scenarios being wrestled and the deadline for Italy to respond to the EU’s budget deficit demands tomorrow. Data-wise we have CPI reports in the US and Europe as well as Q3 GDP in the latter. Also worth watching is Oil which is in the midst of what is currently a record (daily data to 1983) 10-day successive slump in price. After an OPEC get together yesterday Saudi Arabia signalled that it will reduce oil exports by as much as half a million barrels a day in December as producers increasingly worry about oversupply in 2019. It’ll be interesting if they can persuade others to join them ahead of next month’s semi-annual full gathering. Oil prices (Brent +1.68% and WTI +1.21%) are up this morning on the back of this news. Can it finally close higher today and buck the two week trend?

Brexit feels like its entering a crucial stretch and Friday was a bad day for the UK government with the weekend headlines not offering much additional joy. Pro-remain Tory MP Jo Johnson resigned and suggested he wouldn’t support the deal in its current form. The arithmetic around any deal passing through Parliament was already challenging enough without losing pro-remain Conservatives. The weekend media suggests there could be others refusing to vote in favour along those lines with the Sunday Times suggesting four such proremain Government resignations are possible. Basically the deal as it stands is being criticised by both remain and leave Conservatives and also by the DUP.

Meanwhile the Labour Party opposition is highly unlikely to vote for it. So a deal being reached with the EU still seems the easy part of the equation. Sterling is down -0.5% in Asia this morning after falling -0.67% on Friday with virtually all of it after the resignation. As a reminder the DB house view is that not enough risk is priced into sterling given the Parliamentary problems ahead.

Cabinet ministers have apparently been seeing the proposed text of the deal with the EU over the last few days (seemingly without the Irish section not yet availble) and if PM May can win their approval we could see a formal cabinet meeting early this  week to formalise the deal before May makes a statement to the House of Commons. The situation is extremely fluid however especially with the increased backlash internally within the government and with the Irish border issue still outstanding. So these dates could easily (and seem likely to us to) be pushed back. How we get out of this cul-de-sac is very unclear.

Moving onto Italy, the government is due to present its new 2019 budget to the EU by tomorrow after being ask to resubmit. That said, Italy has reiterated that it won’t change its 2.4% deficit target for 2019 so it’s not clear what will change.

As for US CPI on Wednesday the consensus is for yet another +0.2% mom core reading - the 37th month in a row with such a forecast. The annual rate should however hold at +2.2% yoy – a level that the Fed should feel comfortable with and not change path. In Europe we’ll get the final October CPI revisions in Germany (Tuesday), France, Spain and UK (Wednesday), and the broader Euro Area (Friday). A first look at Q3 GDP in Europe and Germany (Wednesday) will also be worth a close watch. The rest of the week ahead is at the end.

This morning in Asia, markets have started the week with a mixed note with the Nikkei and Hang Seng both trading flat, Shanghai Comp (+0.8%) is up while the Kospi (-0.3%) is down. Elsewhere, futures on S&P 500 (+0.4%) are pointing towards a positive start. It is worth noting that today is Veterans Day in the US. The US equity market will remain open but there is a recommended full market close for the Treasury market.

Global equities were mixed last week, with US indexes mostly advancing after the US elections but emerging markets underperforming. The DOW led gains and had its best week since March, rallying +2.84% (-0.77% on Friday though), while the S&P 500 and NASDAQ gained +2.11% and +1.06% (-0.94% and -1.67% Friday) respectively. The NYFANG index fell -1.35% (-1.77% Friday) as tech continues to underperform. In Europe, the STOXX 600 advanced +0.46% (-0.37% Friday), though sectors exposed to China lagged with autos and basic resources down -4.38% and -2.21% (-1.89% and -3.41% Friday) respectively. EM equities fell -2.50% overall (-1.85% Friday) while indices in China underperformed with the Hang Seng and Shanghai Composite retreating -3.34% and -2.90% (-2.39% and -1.39% Friday) respectively. In fixed income, 10-year Treasuries touched a new 8-year high of 3.237% before retracing slightly, ending the week -2.7bps lower (-5.2bps Friday) at 3.182% while Bunds remained in their recent range and fell -2.1bps on the week (-5.0bps Friday).

The US granting of Iran sanctions waivers to eight countries was a big development last week. They will be able to continue importing limited quantities of oil from Iran without running afoul of US laws, boosting the global supply of oil. WTI crude oil prices slid -5.21% (-1.35% Friday), for their tenth consecutive daily loss, the longest such streak on record with daily data going back to 1983. Brent fell -4.30% in unison (-1.34% Friday) though the spread between the two contracts remains near recent wides around $9.85 per barrel.

With it being Veterans Day in the US (US stock market open but bond market is closed), it's a quiet start to the week. In Europe, we get France's October Bank of France industry sentiment index. There is no data of note in the US. Away from this, the Fed's Daly is due to speak on the economic outlook while the ECB's Lautenschlaeger, de Guindos and Nouy are also scheduled to speak. EU general-affairs ministers will discuss the latest on Brexit negotiations followed by a press briefing from the EU's Chief Brexit Negotiator Michel Barnier. The EC President Juncker will give opening remarks at an economic conference on “Where is Europe headed?”

Published:11/12/2018 6:31:53 AM
[Markets] Altria, British American Tobacco stocks fall again on report of menthols ban Altria, British American Tobacco stocks fall again on report of menthols ban Published:11/12/2018 6:31:53 AM
[Markets] An expensive new medication is finally available for her rare disease — but she’s been fighting for two years to get it More and more rare-disease medications have been approved in recent years, but a tangle of complications can keep promising but expensive therapies out of reach for patients.
Published:11/12/2018 6:31:53 AM
[Markets] Dow Drops 44 Points in Quiet Veterans Day Trading STOCKSTOWATCHTODAY BLOG 6:24 a.m. We’re staring at a mixed market in what looks to be a quiet Veterans Day. Yes, the markets are open today, even though banks are not. S&P 500 futures have declined 0. Published:11/12/2018 6:00:50 AM
[Markets] Pound, Euro Tumble As Brexit-Deal Optimism Fades

With only weeks left before the hoped-for end of November deadline for the EU to approve a draft Brexit treaty, it appears Brexit talks are unraveling once again, after Theresa's May's hard-won concession to allow the entire UK to remain in the EU customs union should trade negotiations fall apart during the post-Brexit day transition period, members of her own conservative party are showing her exactly what they think of what was supposed to be a game-changing breakthrough.

Three days after Joe Johnson (brother of notorious former Foreign Secretary Boris Johnson) resigned as minister of transport after lambasting May for leading the UK toward an "incoherent Brexit that would leave us trapped in a subordinate relationship with the EU." Johnson warned that the UK was on the brink of "the greatest crisis since World War II," and that "so great is the gulf now between what was promised in the referendum campaign and what is on offer" that another "people's vote" should be held to allow the public to weigh in. Johnson also encouraged ministers to "mutiny" against the prime minister, who he said was on the verge of "total surrender to Brussels." After Johnson's shocking call for what would be, in effect, a second Brexit referendum, something that even pro-remainers in the Labour Party have been reluctant to discuss given its implications for, well, democracy, four more pro-remain ministers are on the brink of resigning.

All of this has revived talk that the UK might be headed for a "no-deal" Brexit when Brexit Day arrives on March 29. In the EU, ministers have failed to agree on a Brexit meeting later this month, shifting expectations for the next summit to December.

May

Given that progress on the deal remains effectively stalled, May has abandoned plans for another emergency cabinet meeting on Monday, where they were supposed to have reviewed the details of a finished draft agreement. Since the outline deal likely won't be ready by Tuesday, the likelihood that an EU summit will be called to review the final agreement by the end of the month has significantly diminished.

The pound has slipped back below $1.29 on the news, erasing all of its November gains, while the euro has tumbled to a 16-month low. UK bond yields have also fallen.

  • GBP/USD drops 1% to $1.2841, the lowest since Nov. 1, before paring decline; the currency weakened against all of its G-10 peers.
  • EUR/USD drops as much as 0.9% to 1.1240, lower a fourth day; sovereign name that supported the common currency in late October due to holding a double no-touch structure was absent Monday as option seems to have expired, a Europe-based trader says; stops were filled below 1.1300, with focus now on 1.1187, the 61.8% Fibonacci retracement of gains since early 2017.
  • As pressure mounted on May to abandon her proposal or face defeat in Parliament, U.K. 10-year bond yields fell 6bps to 1.43%, lowest this month, as chances of a Bank of England rate hike before Nov. 2019 receded.

UK

Euro

The pronounced drop in the euro caught the eye of traders given that Brexit fears have mostly been contained to the pound in recent months. However, one analyst offered an explanation peppered with toungue-in-cheek humor: Daisuke Karakama, chief market economist at Mizuho Bank Ltd. in Tokyo, said that speculation around the many possible outcomes for Brexit has become so complicated, that it has become difficult to predict where GBP/USD will end up. So, more traders are taking out their Brexit-related frustrations on the euro.

Meanwhile, chief EU trade negotiator Michel Barnier said later on Monday that no EU summit would be called.

According to the FT, the latest round of frustrations are rooted in the EU's push to get Britain to accept stringent environmental targets and European oversight of state aid rules as part of the "backstop" plan. Apparently, too many members of May's conservative party fear that, if trade negotiations falter during the transition, that the UK will be left trapped within the customs union, in an essentially diminished relationship as the EU continues to dominate rulemaking without any input from the EU.

Once again, senior UK government aides are whispering that they're increasingly "pessimistic" about the chances of the deal getting done given Brussel's stringent demands. "They are pushing and pushing on everything," the aide told the FT. This cabinet meeting has now been pushed back three times - on Thursday, Saturday and Monday.

As has been the case for the past two weeks, the controversy surrounding the backstop is that, as it stands, the provision would allow the UK to remain in the customs union after the end of the Brexit transition period in December 2020, at least until a new trade agreement can be forged. But Brexiteers in May's party refuse to accept any outcome that could leave the UK within the customs union permanently, and negotiations over a mechanism to ensure that this doesn't happen have largely led nowhere.

Meanwhile, March 29 and the possibility of a "no-deal" Brexit are looming ever-larger, which if nothing else is making Steve Eisman's (of "The Big Short" fame) decision to unveil his short against UK banks last week look surprisingly timely.

Other analysts, for their part, say that a credible backstop proposal is practically the only thing that can save the pound in the near-term, as fading chances for a Brexit deal are also dampening expectations for a late-2019 rate hike by the Bank of England.

"The pound is likely to continue to trade with increased volatility this week," Lee Hardman, analyst at MUFG, says in a note to clients. "Given that the remainder of the draft EU deal is apparently '95% done,' if a credible proposal to the backstop is announced this week, it could yet send the pound higher again."

"PM May will continue to have to fight every step of the way to get her proposal through first her party, then parliament, before it even makes its way across the channel," said Nick Twidale, chief operating officer for Rakuten Securities Australia Pty in Sydney. "Anything that seems to be slowing the process will lead to further downside for the pound."

Given these assessments, it appears that the pound could retrace even more of its gains from the past few weeks, which saw it ride groundswell of what has now been revealed to be unjustified optimism higher.

Published:11/12/2018 5:33:22 AM
[Markets] What plunging oil prices may be telling us about the stock market and global economy What the heck happened to oil prices? But more significantly, what does it mean for the broader stock market and the global economy? Published:11/12/2018 5:33:22 AM
[Markets] US Confident It Can Compete In Europe's Gas Market

Authored by Tsvetana Paraskova via Oilprice.com,

As American LNG costs continue to fall, and as Europe looks to untangle itself from Gazprom, U.S. liquefied natural gas (LNG) exports are quickly becoming a welcome alternative to Russian gas supplies. The United States is all too happy to help Europe increase its energy security by diversifying its natural gas supplies - in which Gazprom holds more than a third of the market.

These were the key messages from U.S. officials and LNG developers at this week’s gas conference in Berlin.

Germany is the end-point of the controversial Gazprom-led Nord Stream 2 pipeline project, which will follow the existing Nord Stream natural gas pipeline between Russia and Germany via the Baltic Sea. The U.S. opposes the project, as do EU institutions and some EU members such as Poland and Lithuania. Germany, however, supports Nord Stream 2 and sees the project as a private commercial venture that will help it to meet rising natural gas demand.

At the conference this week, Woodward Clark Price, Minister-Counselor for Economic Affairs at the U.S. embassy in Berlin, said that U.S. LNG is becoming increasingly competitive, due to continuously falling costs.

“US LNG will become even more cost-competitive and attractive. We are confident US LNG can compete [in Europe] -- even on price,” S&P Global Platts quoted Price as saying at the event.

Lower pipeline gas price compared to LNG has long been Russia and Gazprom’s key selling point. 

The U.S. is ready to help Europe to diversify its energy supply, Price noted.

“We want to enhance a more secure energy situation in Europe so that no one country or corporation can disproportionately influence Europe,” Price said, in an obvious reference to Russia and Gazprom.

U.S. LNG benefits from low-cost shale gas at home, flexible capital markets, and reduced liquefaction costs said Tom Earl, chief commercial officer at LNG developer Venture Global, which expects to make a final investment decision on its Calcasieu Pass LNG project in Cameron Parish, Louisiana, in early 2019.

Paul Corcoran, CFO at the Nord Stream 2 gas pipeline operating company, said that pipeline gas is cheaper than LNG and due to this, 75 percent of Europe’s LNG import capacity stays unutilized.

“Russian gas is still very well placed against US LNG,” Corcoran said at the Berlin conference.

At the same time in which Nord Stream 2 and U.S. LNG executives discussed the competitiveness of gas supplies to Europe, some 300 miles east of Berlin in Poland’s capital, Warsaw, U.S. Secretary of Energy Rick Perry was witnessing the signing of a 24-year LNG deal under which U.S. Cheniere will deliver growing volumes of LNG to Poland’s PGNiG.

“American energy is empowering Europe and diversifying markets,” Secretary Perry said.

Poland, one of the most vocal opponents of Nord Stream 2 and Russia’s dominance on the European gas market, will start importing regular supplies from the United States as early as next year.

“The share of LNG in our import portfolio is constantly increasing. The world’s liquefied natural gas market is rapidly growing and allows us to select the best offers in this area,” Piotr Wozniak, President of the Management Board of PGNiG, said in a statement. At the news conference after the signing of the deal, he said, as quoted by Platts:

“We will sign different contracts for LNG with US companies, they all have one thing in common, they are 20%-30% cheaper than the currently purchased gas from Russia.”

During Secretary Perry’s visit to Warsaw, Poland’s energy ministry and the U.S. Department of Energy also signed a joint declaration vowing to support the development of gas infrastructure alternative to Russian supplies, and to “promote market diversity through decreasing reliance upon dominant suppliers in Central and Eastern Europe and working together to counter politically driven projects, which are aimed to use energy as a means of political and economic coercion, such as Nord Stream 2 and the second line of TurkStream; and to ensure continuity of robust supply and transit of natural gas in Ukraine and other Central Eastern European nations.”

In the readout of Secretary Perry’s visit to Warsaw, the Department of Energy said, commenting on Cheniere’s long-term LNG supply deal:

“This contract is one of several that builds on the desire of Poland to diversify their sources of energy, and the effort of the Trump Administration to expand U.S. LNG abroad as an alternative to Russian gas.”

Published:11/12/2018 4:31:37 AM
[Markets] 200 scientific studies reveal how work meetings don’t have to be boring or bad A team of psychological scientists provides recommendations for getting the most out of meetings.
Published:11/12/2018 4:31:37 AM
[Markets] 'King dollar' benefits from European risks, growth fears The dollar surged to nearly 17-month highs on Monday against a basket of major currencies as investors sought out the highly liquid and high-yielding currency against a backdrop of global growth worry and rising political risk in Italy and Britain. While Shanghai was lifted one percent by regulators' promise to simplify share buybacks (.SSEC), MSCI's world equity index was down 0.3 percent <.MIWD00000PUS> and Asian markets broadly weakened following Friday's weak Wall Street close. Many also reckon that U.S. President Donald Trump could turn up the heat over trade, further damaging China's economy. Published:11/12/2018 4:02:14 AM
[Markets] Volvo Caught In Trade-War Crossfire - Rips Up Production Plans 

The protectionist crusade of the Trump administration has attacked the global world order the West was instrumental in creating. This disruption has caused tremendous harm to complex international supply chains, the repair of which will be expensive and will be profoundly disruptive to future business planning and investment plans.

Less than five months after opening its first US plant, the Volvo Group is now canceling production plans for much of its lineup to avoid tariffs the US and China have enacted on auto imports.

The Swedish brand halted S60 sedan exports to China and will stop US imports of XC60 sport utility vehicles from China and reduce shipments of S90 sedans built there.

Anders Gustafsson, the president of the carmaker’s US unit, told Bloomberg that the company intends to pivot from plans to export half of the S60s built at its factory in Charleston, South Carolina, to now only focus on the domestic market - a significant move that could lead to lower production numbers. The company still expects to export S60s to Europe from Charleston and will continue to import the XC60 from Europe to the US.

“We’ll go at this change not with a smile, but we know what we need to do,” Gustafsson said in a speech to the Automotive Press Association in Detroit Thursday.

“We have a global manufacturing structure that helps us maneuver in these tough waters.”

President Trump imposed tariffs of 27.5% on Chinese auto imports in July. China then retaliated with 40% duties on American autos, which drastically escalated the trade war.

Gustafsson said Volvo has not passed along costs related to the tariffs of the XC60 it imports from China to its customers, and that has since led to severe margin compression.

“We are absorbing the tariffs, and that really is what you saw in our financial results,” he said in an interview before the speech.

“But we can, under no circumstances, absorb tariffs in the long run. It’s huge.”

Gustafsson traveled to Charleston last week to visit the S60 production line. Capacity could ramp up to about 50,000 S60s next year.

In 2022, Charleson will add production of the XC90 and employment could expand to 3,900 from 1,200.

However, as the trade war will most likely deepen into a full-blown economic battle between the US and China in 2019, it is expected those production numbers could greatly suffer.

"We might need to make the XC90 in another country too if tariffs keep up," Gustafsson added.

President Trump's trade war has disrupted the carmaker, which its $1.1 billion Charleston plant is now in the crosshairs.

Tearing up production plans to avoid tariffs could be a costly repair for Volvo. 

“This is not easy, it’s a big, big, big thing,” he said in the interview. “It’s extremely painful. I don’t want to sit here and smile and say everything is great. Absolutely not. But that’s life.”

Add Volvo to the list of companies greatly suffering under the President Trump's trade war.

Disruption and reworking international supply chains involve lots of time and money, something that the global economy cannot afford so long into a mature expansion. That is why an economic slowdown could materialize for developed economies in 2019 - most likely will be blamed on the trade war and perhaps monetary tightening by the Federal Reserve. Storm clouds are here. 

 

Published:11/12/2018 3:30:59 AM
[Markets] New Powerful Defense Alliance Changes European Security Landscape

Authored by Alex Gorka via The Strategic Culture Foundation,

Ten European states have created a new defense coalition. It was launched on June 25 and held its first historic meeting in Paris on Nov.7 to start thrashing out details of how the force will operate and welcome Finland as the tenth participant. All founding nations are EU members, including Great Britain, which is to leave the bloc in March, 2019.

Led by France, the European Initiative Intervention (EII) comprises the UK, Germany, Belgium, Denmark, Estonia, the Netherlands, Spain, Portugal and Finland to cooperate in the planning, analysis of new military and humanitarian crises, and possible joint activities in response to contingencies. It is planned to have a common budget.

In a nutshell, the EII members will maintain readiness to carry out missions together independently from the United States, the EU or NATO. A streamlined decision-making process will permit a quick reaction time while the smaller number of members will give more flexibility in comparison with the North Atlantic Alliance, where the process is based on consensus among 29 nations, or the EU, which has failed to deploy the four multinational military battle groups created as far back as 2007.

French President Macron said he wanted a “real European army” because “We have to protect ourselves with respect to China, Russia and even the United States of America.” “When I see President Trump announcing that he’s quitting a major disarmament treaty which was formed after the 1980s Euromissile crisis that hit Europe, who is the main victim? Europe and its security,” he told Europe 1 in his first radio interview since becoming president. Emmanuel Macron believes that “Europe can ensure its own protection against Russia and even, under an unpredictable President Donald Trump.”

That’s how the US is viewed in Europe now. Not a defender but rather a threat.

“The goal: that our armed forces learn get to know each other and act together,” French Defense Minister Florence Parly tweeted on the occasion of launching the EII. 

“Thanks to exchanges between staff and joint exercises, we will create a European strategic culture. We will be ready to anticipate crises and respond quickly and effectively,” he commented on the final goal.

According to Stratfor, “the EI2's membership reveals that France is willing to go beyond the European Union in its quest for partners (as the United Kingdom will leave the bloc in 2019) and also outside of NATO (as Finland is not a member of the Atlantic alliance).”

The EU defense integration moves ahead at frustratingly slow pace. The 2017 “Permanent Structured Cooperation” (PESCO) defense agreement brought together 25 of the 28 armed forces. The UK, Denmark and Malta have decided to opt out of the voluntary system. Focused mainly on industrial cooperation, PESCO is not a great thing in real terms. It only offers a relatively small special fund to finance operations. It does not provide the EU with real joint fighting forces but rather offers a gradual integration at slow pace. The agreement has no provision on defense expenditure hike. The EU budget does not allocate money for creation of “European Army.” Besides, there are deep divisions between EU members states with different groups formed inside the Union. What sounds good on paper, may have little relation to real life. New smaller alliances are gradually being formed inside NATO and the EU – the blocs facing the threat of partition.

This and US President Trump overturning the treaties and putting into question the invocation of Article 5 prompted the formation of the new European defense alliance that is supposed to have real teeth and operate outside the EII’s control. The French-led initiative uniting EU and non-EU countries is especially attractive for Great Britain, which seeks a potential vehicle for post-Brexit defense cooperation outside the EU framework.

An independent military bloc will weaken NATO and reduce the Europe’s dependence on the United States. From this point of view, it will benefit Europe because its interests often do not coincide with that of the US. For instance, America cares little about the immigration, which is a far-flung problem for Washington, but keeping new migrants waves away is a matter of make it or break it for EU. In their turn, Europeans have nothing to do in Iraq and Afghanistan and have sent forces there only to demonstrate the transatlantic solidarity.

As one can see, Finland has found the EII preferable to NATO. But having joined the officially inaugurated new military alliance, it won’t be a neutral state anymore. It has become a member of the military organization, which openly says that Russia, its neighbor, is a threat to counter. This is a very significant change in the country’s foreign policy. Actually, the launching of the EII has attracted little media attention and undeservedly so, but the Finland’s EII membership has not gone unnoticed in Russia. Last year, Finland along with Sweden joined the UK-led Joint Expeditionary Force (JEF). It has allowed to use NATO forces use its territory during exercises, such as Trident Juncture-2018 – the largest NATO training event since the cold War.

The UK has always opposed the plans to create a European defense alliance, fearing it would be detrimental for NATO. Now it has done an about-face. It can continue to maintain special ties with US being a part of the new European defense alliance.

The formation of the EII shows how deep are the rifts dividing NATO and the EU into groups pursuing their own interests. These large organizations appear to have seen better days. They have become too large to be really united and strong. Like the empire of Alexander the Great, such large organizations have short lives. NATO and EU expansions were mistakes. It may never be said officially but the ten European nations have delivered a heavy blow against the US-led NATO. If the project does not gradually die away with all the ideas and initiatives swept under the rug being entangled in red tape, President Emmanuel Macron will go down in history as the architect of new large and powerful defense alliance to change the European security landscape.

The tensions and divisions between Europe and Russia are not forever and the EII and Russia don’t have to be adversaries, looking at each other through crosshairs. After all, they face common security threats. Sooner or later, cooperation in the field of security will be back on the agenda.

New waves of asylum seekers from Libya are a potential danger for Europe. Russia has influence in that country- it can help to prevent it. Joining together to restore Syria is another potential area of cooperation. The deployment of intermediate range weapons in Europe could be prevented with the INF Treaty not in force anymore if certain agreements were reached at Russia-Europe level even without US participation. The military activities can be discussed to ease the tensions. While the United States is preoccupied with the promotion of “America First” concept, the EII and Russia can talk. They could use the OSCE framework for it.

In August, President Macron called for strategic partnership with Russia. According to him, “I think that on matters like cybersecurity, defense, strategic relationships, we could envisage the outlines of a new relationship between Russia and the EU which is coherent with the direction Europe is headed in.” No improvement in the Russia-EU, Russia-NATO relationships is looming but it could be different regarding the ties between the EII and Russia. The options are a dialog and confrontation. Which of them will prevail? You never know. President Macron has said he prefers the first. 

Published:11/12/2018 3:01:02 AM
[Markets] Stocks Drift Lower, Oil Gains on Saudi Output Cuts; Dollar Spikes on Fed Signals Global stocks hold modest gains to start the week, but a notable spike in the U.S. dollar has investors on edge as the Fed assumes its place as the world's sole central bank hawk. Oil spikes higher after Saudi Oil minister says Kingdom will reduce December output by 500,000 barrels in order to rebalance markets following weekend meeting in Abu Dhabi. China growth questions linger as Alibaba's Singles Day notches record $30.8 billion in sales, but records the slowest pace of growth in the event's 10-year history. Published:11/12/2018 3:01:02 AM
[Markets] 69-Year-Old Dutch Man Asks Court To Change His Age To 49

Emile Ratelband, a 69-year-old entrepreneur in personal development from the Netherlands, has asked the courts to change his birth certificate, so that it will show he was born on March 11, 1969, rather than on March 11, 1949.

Ratelband says he feels twenty years younger than he is - doctors even told him he has the body of a younger man.

He equates the petition to the court as no different than someone asking to change their name or gender - and is not bothered that this comparison might offend transgender people.

“Because nowadays, in Europe and in the United States, we are free people,” he said in an interview with The Washington Post. “We can make our own decisions if we want to change our name, or if we want to change our gender. So I want to change my age. My feeling about my body and about my mind is that I’m about 40 or 45.”

Ratelband said the judges “laughed like little girls" when they heard his request earlier this week. But after he delivered a powerful speech about modern society freeing itself from the false gods of money and government and religion, they became more receptive to his angle.

The judges still expressed skepticism but said changing the sex on a birth certificate was once impossible, as transgender people now have the right to do so.

Ratelband’s motivation to make himself young again is distinctly American, he said and came from his education under Tony Robbins, a motivational speaker in the 1980s.

“This is American thinking,” he said. “Why can’t I change my age if I want to? You have to stretch yourself. If you think you can jump one meter, now I want to jump 20. If you earn 100 grand a month, now I want to earn 120 grand."

Ratelband also gave an interview to Algemeen Dagblad (AD) indicating his logic behind his public attempt to change his age. 

The AD asked: Why do you have to be 49 years on paper?

"I am going to live differently. If I am 69 years old, I will be notified of my limitations. Am I 49, then I buy a new house, I drive another car. I take more hay on my fork. If I put on Tinder that I am 69, I will not get a response. Am I 49, with that head of mine, then I'm rammed. Maybe they say: you have weak muscles for 49 years. And then I say: but not that one, you know. Come on!," Ratelband responded.

The AD then asked: Are you already living as if you are much younger than 69?

"But I am faced with it every month. I get now every month. I called the Sociale Verzekeringsbank and said: I do not want that 1200 euros. Can not. I get the confirmation every month that I am an old man. I do not want that. So I sent a letter to the municipality. He does not want to cooperate. So we go to court," Ratelband said.

There is quarter-life crisis, midlife crisis, and now it seems Ratelband has fallen victim to the later-life crisis.

Research from John Hopkins shows one in three people over the age of 60 will go through some type of psychological disorder, but Ratelband who wants to be a young stud again surfing Tinder seems to be an anomaly.

There is a silver lining to this madness, as changing the ages of seniors could be a new accounting trick for governments that could alleviate failing pension systems around the world.

 

Published:11/12/2018 2:00:24 AM
[Markets] UN Member States: Migration Is A Human Right

Authored by Judith Bergman via The Gatestone Institute,

The United Nations, in a non-binding agreement that almost all UN member states will sign at a ceremony in Morocco in early December, is making migration a human right.

The finalized text of the agreement, the Global Compact for Safe, Orderly and Regular Migration, although officially non-binding, "puts migration firmly on the global agenda. It will be a point of reference for years to come and induce real change on the ground..." according to Jürg Lauber, the representative of Switzerland to the UN -- who led the work on the agreement together with the representative of Mexico.

One immediate irony, of course, is that few countries have entry requirements as restrictive as Switzerland's. If one wishes to stay more than three months, not only is a "residence permit" required, but, "In an effort to limit immigration from non-EU/EFTA countries, Swiss authorities impose strict annual limitations on the number of residence and work permits granted to foreigners."

These hard-to-come-by-residencies have, unsurprisingly, become a source of income as "[r]ich foreigners 'buy' Swiss residency."

The UN agreement, on the other hand, notes:

"Refugees and migrants are entitled to the same universal human rights and fundamental freedoms, which must be respected, protected and fulfilled at all times."

(Preamble, section 4)

It cannot be stressed enough that this agreement is not about refugees fleeing persecution, or their rights to protection under international law. Instead, the agreement propagates the radical idea that migration -- for any reason -- is something that needs to be promoted, enabled and protected. Almost all UN member states, except for the United States, Austria, Australia, Croatia, Hungary and possibly also the Czech Republic and Poland, are expected to sign it.

The UN has denied that migration is being made into a human right.

"The question of whether this is an invidious way to start promoting a 'human right to migrate' is not correct. It's not in the text; there's no sinister project to advance that," Louise Arbour, the UN special representative for international migration, recently said.

The UN has no interest in admitting that the agreement promotes migration as a human right; until recently there has been little debate about it. More debate might risk jeopardizing the entire project. The wording of the agreement, as documented below, leaves little doubt, however, that with the signing of the agreement, migration will indeed become a human right.

The agreement is divided into 23 objectives toward which the signatories apparently wish to work. Objective number three, for instance, envisions the promotion and enabling of migration through a number of means. Signatory states commit to:

"Launch and publicize a centralized and publicly accessible national website to make information available on regular migration options, such as on country-specific immigration laws and policies, visa requirements, application formalities, fees and conversion criteria, employment permit requirements, professional qualification requirements, credential assessment and equivalences, training and study opportunities, and living costs and conditions, in order to inform the decisions of migrants."

States, in other words, are not only supposed to open their borders for the migrants of the world, but should also help them pick and choose their future country by providing them with comprehensive information about each country they may wish to settle in.

The service level envisioned to facilitate more migration is also high. Countries are called upon to:

"Establish open and accessible information points along relevant migration routes that can refer migrants to child-sensitive and gender-responsive support and counselling, offer opportunities to communicate with consular representatives of the country of origin, and make available relevant information, including on human rights and fundamental freedoms, appropriate protection and assistance, options and pathways for regular migration, and possibilities for return, in a language the person concerned understands."

Once migrants have arrived at their chosen destination, the signatory countries commit to:

"Provide newly arrived migrants with targeted, gender-responsive, child-sensitive, accessible and comprehensive information and legal guidance on their rights and obligations, including on compliance with national and local laws, obtaining of work and resident permits, status adjustments, registration with authorities, access to justice to file complaints about rights violations, as well as on access to basic services."

Migrants are, evidently, citizens of a new world, in which all countries must spring to the assistance of anyone who has chosen to travel and reside there for whatever reason. Borders may exist in theory, but the UN -- comprising nearly all governments of the world -- is working hard at making them disappear in practice.

Migrants, according to the agreement, must also be "empowered to realize full inclusion and social cohesion" in their new countries (objective 16). This means, among other things, that countries must:

"Promote mutual respect for the cultures, traditions and customs of communities of destination and of migrants by exchanging and implementing best practices on integration policies, programmes and activities, including on ways to promote acceptance of diversity and facilitate social cohesion and inclusion."

All cultures are equal and must be equally respected. Presumably, this means that, for example, the tradition of female genital mutilation (FGM), which almost all Somali women experience in Somalia, must be acknowledged in London and Paris as deserving of "mutual respect" in the same way that it would back in Mogadishu.

The agreement goes on to enumerate the work that states must initiate to accommodate migrants.

"National... policy goals regarding the inclusion of migrants in societies, including on labour market integration, family reunification, education, non-discrimination and health" should be developed. In addition, the host country should facilitate "access to decent work and employment for which they are most qualified, in accordance with local and national labour market demands and skills supply."

In other words, newly arrived migrants in, say, Europe, should have the same, or at least very similar, rights to education, the labor market and health care, as Europeans, who have worked hard and paid taxes for half a century to gain access to those very same things. Europeans, of course, will have to pay for all of this out of their tax money.

The authors of the agreement evidently do not expect it to go down all that well with their populations. An agreement to facilitate mass migration into primarily Western countries from the rest of the world (there is no migration to speak of in the opposite direction) may prove a bit much for people in the West. The agreement therefore clearly signals that any disagreement with the agenda will not be accepted and that the signatory states will work to dispel "misleading narratives that generate negative perceptions of migrants."

To make this objective a reality, the signatory states first commit to:

"Promote independent, objective and quality reporting of media outlets, including internet-based information, including by sensitizing and educating media professionals on migration-related issues and terminology, investing in ethical reporting standards and advertising, and stopping allocation of public funding or material support to media outlets that systematically promote intolerance, xenophobia, racism and other forms of discrimination towards migrants, in full respect for the freedom of the media." (Objective 17)

This is Orwell on steroids. Almost all UN member states will sign an agreement that says media outlets that disagree with government policies will not be eligible for public funding? On top of this, the agreement claims, bizarrely, that it is being written "in full respect for the freedom of the media", as if that is going to make anyone actually believe it.

Second, the signatory states commit to:

"... eliminate all forms of discrimination, condemn and counter expressions, acts and manifestations of racism, racial discrimination, violence, xenophobia and related intolerance against all migrants in conformity with international human rights law." (Objective 17)

The agreement, conveniently, offers no definitions of what constitutes "racism" or "xenophobia" in this context. What, for example, is "related intolerance"? Is criticism of UN migration policies, for instance, "intolerance"?

Originally, all UN member states, minus the United States, had approved the finalized text of the agreement and appeared ready to sign it in December. Recently, however, more states have announced that they are withdrawing from the agreement.

In July, Hungary withdrew from the agreement. Hungarian Foreign Minister Peter Szijjarto described it as "entirely against Hungary's security interests," and added:

"This pact poses a threat to the world from the aspect that it could inspire millions [of migrants]. Its main premise is that migration is a good and inevitable phenomenon. We consider migration a bad process, which has extremely serious security implications."

In July, Australia also indicated that it would withdraw from the agreement, at least in its present form. According to Minister for Home Affairs Peter Dutton:

"We're not going to sign a deal that sacrifices anything in terms of our border protection policies... We're not going to surrender our sovereignty – I'm not going to allow unelected bodies dictate to us, to the Australian people."

In November, both the Czech Republic, and Poland announced that they were very likely to withdraw from the agreement and Croatian President Kolinda Grabar-Kitarovic wrote in a statement that she would not be signing the agreement. "Our sovereign principles on securing our borders and controlling migration flows are absolutely the priority for us", said Polish Prime Minister Mateusz Morawiecki.

Also just this month, Austria announced that it also would not be signing the agreement. "We view some points of the migration pact very critically, such as the mixing up of seeking protection with labour migration," Austrian Chancellor Sebastian Kurz said.

The European Union immediately criticized Austria's decision. "We regret the decision that the Austrian government has taken. We continue to believe that migration is a global challenge where only global solutions and global responsibility sharing will bring results" said an unnamed spokeswoman from the European Commission.

This is, by the way, the same EU that is supposedly going to be "cracking down" on migration. If you are "cracking down" on migration, why are you signing agreements that will facilitate and exponentiate it as a human right?

Published:11/12/2018 1:02:20 AM
[Markets] Asia stocks lower amid growth worries; oil rebounds Asian shares drifted lower on Monday as signs of softening demand in China rekindled anxiety about the outlook for world growth, but Saudi Arabia's plans to cut production helped to halt a slide in oil prices. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.07 percent, trimming earlier losses on a bounce in Chinese shares, but struggling to break into positive territory.Australian shares added 0.13 percent, while Japan's Nikkei stock index gained 0.11 percent. Published:11/11/2018 10:59:46 PM
[Markets] Global Markets: Asia stocks lower amid growth worries; oil rebounds Asian shares drifted lower on Monday as signs of softening demand in China rekindled anxiety about the outlook for world growth, but Saudi Arabia's plans to cut production helped to halt a slide in oil prices. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.07 percent, trimming earlier losses on a bounce in Chinese shares, but struggling to break into positive territory.Australian shares added 0.13 percent, while Japan's Nikkei stock index gained 0.11 percent. Published:11/11/2018 10:34:51 PM
[Markets] Johnstone: The Best Way To Honor War Veterans Is To Stop Creating Them

Authored by Caitlin Johnstone via Medium.com,

The US will be celebrating Veterans Day, and many a striped flag shall be waved. The social currency of esteem will be used to elevate those who have served in the US military, thereby ensuring future generations of recruits to be thrown into the gears of the globe-spanning war machine.

Veterans Day is not a holiday to honor the men and women who have dutifully protected their country. The youngest Americans who arguably defended their nation from a real threat to its shores are in their nineties, and soon there won’t be any of them left. Every single person who has served in the US military since the end of the second World War has protected nothing other than the agendas of global hegemony, resource control and war profiteering. They have not been fighting and dying for freedom and democracy, they have been fighting and dying for imperialism, Raytheon profit margins, and crude oil.

I just said something you’re not supposed to say. People have dedicated many years of their lives to the service of the US military; they’ve given their limbs to it, they’ve suffered horrific brain damage for it, they’ve given their very lives to it. Families have been ripped apart by the violence that has been inflicted upon members of the US Armed Forces; you’re not supposed to let them hear you say that their loved one was destroyed because some sociopathic nerds somewhere in Washington decided that it would give America an advantage over potential economic rivals to control a particular stretch of Middle Eastern dirt. But it is true, and if we don’t start acknowledging that truth lives are going to keep getting thrown into the gears of the machine for the power and profit of a few depraved oligarchs. So I’m going to keep saying it.

Last week I saw the hashtag #SaluteToService trending on Twitter. Apparently the NFL had a deal going where every time someone tweeted that hashtag they’d throw a few bucks at some veteran’s charity. Which sounds sweet, until you consider three things:

1. The NFL’s ten wealthiest team owners are worth a combined $61 billion.

2. The NFL has taken millions of dollars from the Pentagon for displays of patriotism on the field, including for the policy of bringing all players out for the national anthem every game starting in 2009 (which led to Colin Kaepernick’s demonstrations and the obscene backlash against him).

3. VETERANS SHOULD NOT HAVE TO RELY ON FUCKING CHARITY.

Seriously, how is “charity for veterans” a thing, and how are people not extremely weirded out by it? How is it that you can go out and get your limbs blown off for slave wages after watching your friends die and innocent civilians perish, come home, and have to rely on charity to get by? How is it that you can risk life and limb killing and suffering irreparable psychological trauma for some plutocrat’s agendas, plunge into poverty when you come home, and then see the same plutocrat labeled a “philanthropist” because he threw a few tax-deductible dollars at a charity that gave you a decent prosthetic leg?

Taking care of veterans should be factored into the budget of every act of military aggression. If a government can’t make sure its veterans are housed, healthy and happy in a dignified way for the rest of their lives, it has no business marching human beings into harm’s way. The fact that you see veterans on the street of any large US city and people who fought in wars having to beg “charities” for a quality mechanical wheelchair shows you just how much of a pathetic joke this Veterans Day song and dance has always been.

They’ll send you to mainline violence and trauma into your mind and body for the power and profit of the oligarchic rulers of the US-centralized empire, but it’s okay because everyone gets a long weekend where they’re told to thank you for your service. Bullshit.

Veterans Day, like so very, very much in American culture, is a propaganda construct designed to lubricate the funneling of human lives into the chamber of a gigantic gun. It glorifies evil, stupid, meaningless acts of mass murder to ensure that there will always be recruits who are willing to continue perpetrating it, and to ensure that the US public doesn’t wake up to the fact that its government’s insanely bloated military budget is being used to unleash unspeakable horrors upon the earth.

The only way to honor veterans, really, truly honor them, is to help end war and make sure no more lives are put into a position where they are on the giving or receiving end of evil, stupid, meaningless violence. The way to do that is to publicly, loudly and repeatedly make it clear that you do not consent to the global terrorism being perpetrated in your name. These bastards work so hard conducting propaganda to manufacture your consent for endless warmongering because they need that consent. So don’t give it to them.

Your rulers have never feared the Koreans, the Vietnamese, the Iraqis, the terrorists, the Iranians, the Chinese or the Russians. They fear you. They fear the American public suddenly waking up to the evil things that are being done in your name and using your vast numbers to shrug off the existing power structures without firing a shot, as easily as removing a heavy coat on a warm day. If enough of you loudly withdraw your consent for their insatiable warmongering, that fear will be enough to keep them in check.

This Veterans Day, don’t honor those who have served by giving reverence and legitimacy to a war machine which is exclusively used for inflicting great evil. Honor them by disassembling that machine.

*  *  *

Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for my website, which will get you an email notification for everything I publish. My articles are entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics on Twitter, checking out mypodcast, throwing some money into my hat on Patreon or Paypal,buying my new book Rogue Nation: Psychonautical Adventures With Caitlin Johnstone, or my previous book Woke: A Field Guide for Utopia Preppers.

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Published:11/11/2018 10:34:51 PM
[Markets] Khashoggi’s Last Words Revealed As Turkish Media Plans To Publish Audio Death Tape

A day after President Tayyip Erdogan dropped the latest bombshell related to the Saudi murder of Jamal Khashoggi, saying Turkey had handed over an audio recording of the journalist's brutal slaying inside the Istanbul consulate to the U.S., Saudi Arabia, Germany, France and Britain, the contents of Khashoggi's last words have emerged. 

Editor for the the Turkish newspaper Daily Sabah, Nazif Karaman, shared some details from the audio tape with Al Jazeera. Karaman said Khashoggi's last words were:

“I’m suffocating… Take this bag off my head, I’m claustrophobic” – according what he confirmed is the authentic audio recording from inside the Istanbul consulate.

Meanwhile at the conclusion of the centennial anniversary of WWI ceremony in Paris President Erdogan's office confirmed he and President Trump discussed the Jamal Khashoggi killing on the sidelines of the weekend events. 

The two leaders spoke in Paris, via the Turkish presidency.

The prominent Turkish journalist for the popular pro-government Daily Sabah described further that the tape confirms that Khashoggi suffocated to death while a plastic bag was over his head in a killing that lasted for about seven minutes.

During the Al-Jazeera interview Karaman also said the group of 15 hitmen responsible for carrying out the murder, and who were reported to have arrived in Istanbul the day before the October 2 killing, spent 15 minutes dismembering Khashoggi's body.

And notably, Karaman said his newspaper plans to publish segments of the audio death tape. According to the Al-Jazeera report:

Karaman said that Daily Sabah would soon publish images of the tools that were brought into the country and used by the Saudi group.

He added the Turkish newspaper would also publish some of the recordings that document the last moments of Khashoggi's life.

If this happens it will likely renew the flood of anti-MbS press coverage that occurred in the weeks after the murder was revealed.

It will also raise serious questions for Washington and European officials who have apparently heard the recording but did not divulge or confirm that they had direct knowledge of such absolute certain proof that this was an official Saudi hit ordered at the highest levels. 

In a televised speech, Erdogan on Saturday confirmed Turkey handed over recordings to Saudi Arabia, the United States, Germany, France and Britain. According to Reuters Erdogan stated confidently:

We gave the tapes. We gave them to Saudi Arabia, to the United States, Germans, French and British, all of them. They have listened to all the conversations in them. They know.

But as we asked before, the pressing question that remains is how long have American authorities known of the contents of the Khashoggi murder tape? When did officials listen to it and why have they kept silent about it even as news of the death and investigation drove headlines? 

It appears the White House may have only come into possession of the recording as early as only a matter of days ago, not long before Erdogan and Trump met face to face in Paris and discussed the issue. 

According to the the Daily Mail's account of the Trump-Erdogan talks

The men were pictured at a dinner in Paris seated next to one another in photos released by the Turkish government, revealing a lengthy conversation took place on Saturday evening...

"I can confirm they sat next to one another and they discussed the ongoing tragic situation with Khashoggi," White House Press Secretary Sarah Sanders told DailyMail.com.

It will be interesting to see if President Trump himself addresses the audio recording in statements this week - something he may be forced to do if the audio is indeed leaked or published by Turkish press, as the Daily Sabah is now vowing to do. 

Published:11/11/2018 10:02:01 PM
[Markets] Margolis: We Are Heading For Another Tragedy Like World War I

Authored by Eric Margolis via EricMargolis.com,

We are now upon the 100th anniversary of World War I, the war that was supposed to end all wars. While honoring the 16 million who died in this conflict, we should also condemn the memory of the politicians, officials and incompetent generals who created this horrendous blood bath.

I’ve walked most of the Western Front of the Great War, visited its battlefields and haunted forts, and seen the seas of crosses marking its innumerable cemeteries.

As a former soldier and war correspondent, I’ve always considered WWI as he stupidest, most tragic and catastrophic of all modern wars.

The continuation of this conflict, World War II, killed more people and brought more destruction on civilians in firebombed cities but, at least for me, World War I holds a special horror and poignancy. This war was not only an endless nightmare for the soldiers in their pestilential trenches, it also violently ended the previous 100 years of glorious European civilization, one of mankind’s most noble achievements.

I’ve explored the killing fields of Verdun many times and feel a visceral connection to this ghastly place where up to 1,000,000 soldiers died. I have even spent the night there, listening to the sirens that wailed without relent, and watching searchlights that pierced the night, looking for the ghosts of the French and German soldiers who died here.

Verdun’s soil was so poisoned by explosives and lethal gas that to this day it produces only withered, stunted scrub and sick trees. Beneath the surface lie the shattered remains of men and a deadly harvest of unexploded shells that still kill scores of intruders each year. The spooky Ossuaire Chapel contains the bone fragments of 130,000 men, blown to bits by the millions of high explosive shells that deluged Verdun.

The town of the same name is utterly bleak, melancholy and cursed. Young French and German officers are brought here to see firsthand the horrors of war and the crime of stupid generalship.

Amid all the usual patriotic cant from politicians, imperialists and churchmen about the glories of this slaughter, remember that World War I was a contrived conflict that was totally avoidable. Contrary to the war propaganda that still clouds and corrupts our historical view, World War I was not started by Imperial Germany.

Professor Christopher Clark in his brilliant book, `The Sleepwalkers’ shows how officials and politicians in Britain and France conspired to transform Serbia’s murder of Austro-Hungary’s Crown Prince into a continent-wide conflict. France burned for revenge for its defeat in the 1870 Franco-Prussian War and loss of Alsace-Lorraine. Britain feared German commercial and naval competition. At the time, the British Empire controlled one quarter of the world’s surface. Italy longed to conquer Austria-Hungary’s South Tyrol. Turkey feared Russia’s desire for the Straits. Austria-Hungary feared Russian expansion.

Prof Clark clearly shows how the French and British maneuvered poorly-led Germany into the war. The Germans were petrified of being crushed between two hostile powers, France and Russia. The longer the Germans waited, the more the military odds turned against them. Tragically, Germany was then Europe’s leader in social justice.

Britain kept stirring the pot, determined to defeat commercial and colonial rival, Germany. The rush to war became a gigantic clockwork that no one could stop. All sides believed a war would be short and decisive. Crowds of fools chanted ‘On to Berlin’ or ‘On to Paris.’

Few at the time understood the impending horrors of modern war or the geopolitical demons one would release. The 1904 Russo-Japanese War offered a sharp foretaste of the 1914 conflict, but Europe’s grandees paid scant attention.

Even fewer grasped how the collapse of the antiquated Ottoman and Austro-Hungarian Empires would send Europe and the Mideast into dangerous turmoil that persists to our day. Or how a little-known revolutionary named Lenin would shatter Imperial Russia and turn it into the world’s most murderous state.

This demented war in Europe tuned into an even greater historic tragedy in 1917 when US President Woodrow Wilson, driven by a lust for power and prestige, entered the totally stalemated war on the Western Front. One million US troops and starvation caused by a crushing British naval blockade turned the tide of battle and led to Germany’s surrender.

Vengeful France and Britain imposed intolerable punishment on Germany, forcing it to accept full guilt for the war, an untruth that persists to this day. The result was Adolf Hitler and his National Socialists. If an honorable peace had been concluded in 1917, neither Hitler nor Stalin might have seized power and millions of lives would have been saved. This is the true tragedy of the Great War.

Let us recall the words of the wise Benjamin Franklin: `No good war, no bad peace.’

Published:11/11/2018 9:38:21 PM
[Markets] The Wall Street Journal: Vista strikes $1.94 billion deal to take software firm Apptio private Tech-focused private-equity firm Vista Equity Partners struck a deal to take software company Apptio Inc. private for $1.94 billion, according to people familiar with the matter.
Published:11/11/2018 9:38:21 PM
[Markets] The Wall Street Journal: Death toll from Camp Fire at 29, matches deadliest in California history Firefighters are battling two deadly California wildfires that have claimed at least 31 lives, left more than 200 people missing and a quarter million under evacuation, while unhealthy smoke levels have prompted warnings to stay indoors.
Published:11/11/2018 9:10:19 PM
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