Newsgeeker.com news site RSS Email Alerts

Markets


[Markets] Scientists Expose World-Killer: Where Ozone-Destroying Chemicals Are Coming From

Authored by Carly Cassella via Science Alert,

It's been exactly one year since US scientists reported a mysterious surge in ozone-destroying chemicals, known as chlorofluorocarbons (CFCs).

Banned in 1987 under the globally signed Montreal Protocol, there was only one explanation: somewhere out there, in an unknown location, someone must have gone rogue, setting back progress on the ozone hole by a decade or more.

After much speculation, the whereabouts and magnitude of these harmful emissions has been confirmed in scientific research. As earlier reporting in The New York Times had already suggested, they seem to be coming from the northeast coast of mainland China.

Since the Montreal Protocol was declared a success in 2013, this highly industrial region has continued to emit, whether accidentally or not, CFC-11: the second most abundant chlorofluorocarbon in the atmosphere. Between the periods of 2008-2012 and 2014-2017, in fact, CFC-11 emissions increased here by roughly 110 percent.

"This increase accounts for a substantial fraction (at least 40 to 60 per cent) of the global rise in CFC-11 emissions," an international team of researchers writes in a new report.

"We find no evidence for a significant increase in CFC-11 emissions from any other eastern Asian countries or other regions of the world where there are available data for the detection of regional emissions."

These violations are likely going unreported because even though CFC-11 is illegal, it is also one of the cheapest ways to produce new foam insulation in refrigerators and buildings.

After tracking down documents and international sources, journalists at The New York Times and independent investigators discovered that in some factories in China, illegal CFC use has been slipping through the cracks for years.

The examples given are based in Xingfu, a rural industrial town in China's Shandong province, and incidentally, that is the very same province that the scientists landed on too.

Gathering atmospheric observations from locations in South Korea and Japan, the researchers compared global monitoring data and atmospheric chemical movements to figure out whether these emissions came from eastern Asia - the area most suspected as the source of CFC-11.

Along with Shandong, the nearby province of Hebei was also implicated. Both regions are big industrial producers heavily involved in the nation's manufacturing, and while the chemical may not actually be produced here, it's certainly being emitted at alarming rates somewhere nearby.

"To bring about such an increase ... would require new emissions from the disposal and destruction of refrigerators more than 10 times higher than recently estimated for the whole of China between 2014 and 2017," the authors write, "or a larger and more rapid increase in emissions from the demolition of old buildings than was previously predicted for the entire world over a 20-year period (2020–2040)."

Whether these factories know what they're doing or not (and the NYT report certainly suggests they understand), their actions pose a serious threat not only to the ozone layer, but also to the climate crisis. CFC-11 has a powerful heat-trapping effect in the atmosphere, so if emissions continue as they are, experts say it would be equivalent to the amount of CO2 produced by 16 coal-fired power stations every year.

China currently produces about one-third of the world's polyurethane foam, and the emissions so far may only represent a fraction of what has already been manufactured. The rest of the CFC-11 may still be trapped inside a slowly-emitting foam bank, and the only way to know for sure is to find the ones responsible.

Unfortunately, the new research is unable to zoom in any closer on the culprit, so it is still unclear whether these emissions are widespread across both these Chinese regions, or scattered among just a few sources. For now, the hunt continues.

This study has been published in Nature.

Published:5/22/2019 8:12:09 PM
[Markets] Asia markets slide amid US-China trade jitters Stocks in Asia declined in morning trade. Treasury Secretary Steven Mnuchin told CNBC on Wednesday that a trip to Beijing to resume trade negotiations has not been scheduled yet, reducing hopes of a speedy resolution to the U.S.-China trade war. Meanwhile, restrictions on Chinese telecommunications giant Huawei have led China to rethink its entire economic relationship with the U.S., according to a report from The South China Morning Post. Published:5/22/2019 7:41:12 PM
[Markets] World Trade War I: US Asks South Korea To Join Anti-Huawei Campaign

The bilateral trade war between the US and China is gradually becoming a global trade war of global geopolitical and commercial dominance between the US and Chinese spheres of influence.

Shortly after the two largest mobile phone companies in the UK decided against launching Huawei-built 5G phones this morning, and roughly around the time a bevy of Japanese tech and telecom companies including ARM Holdings, Panasonic and SoftBank all imposed a boycott on supplying Huawei with mission critical components joining Australia, and New Zealand as major US allies to end commercial relations with Huawei following the US decision to crack down on the Chinese telecom giant (see "Huawei Feels U.S. Squeeze in U.K., Japan as Partners Curb Business") the White House is now pressuring another critical Chinese trading partner - South Korea - to cease ties with Huawei.

According to the Chosun Ilbo newspaper, the US recently asked South Korean government to support and join its anti-Huawei campaign.

Forcing Seoul to pick sides in a fight it would rather stay out of - especially since both sides still bear a distinct grudge from the Korean war - the US delivered a message several times to S. Korea’s Foreign Ministry that "using Huawei products may cause security problems" and as a result, the US requested S. Korea’s "active" support of US policy toward China as South Korea is seen as an American ally.

More from Chosun, google translated:

A diplomatic source in Seoul said, "We have been constantly communicating to the Ministry of Foreign Affairs that there is a risk of security problems if the US government uses Huawei products through various diplomatic channels. "We have asked for cooperation in the policy." The United States, which is in full control of Huawei due to trade pressure on China, has demanded that its allies such as South Korea join in.

U.S. State Department official told a S. Korean govt official that LG Uplus should not provide services in sensitive areas in the country and that S. Korea needs to ban Huawei in the end, though not immediately

For now, the pressure campaign has failed to generate success: while the Ministry of Foreign Affairs expressed its sympathy for the concerns of the United States, it has so far been hesitant to take a stand, saying, "it is difficult for the government to intervene in the decision-making of private enterprises" and expressed reservations about the request.

As Chosun adds, citing members of the telecom and IT industry, if the Korean government stops importing Huawei equipment at the request of the United States, it is estimated that the damage to the enterprise amounts to billions of dollars. If China takes retaliation against our company, the damage can snowball."

On the other hand, South Korea's own telecom giant, Samsung stands to benefit if Huawei, the world's second-biggest smartphone vendor (having recently supplanted Apple) is crippled. Of course, if Seoul concedes to US demands, and joins Japan, Australia, New Zealand and other Pacific Rim nations in launching their own trade war against Beijing, China's retaliation will be furious and will likely result in further collapse in trade among these nations. Which is a problem considering that just yesterday we pointed out the unprecedented plunge in South Korean exports for the first 20 days of the month.

As such, the longer the trade war between the US and China drags on, the more nations will join both either US or China in retaliating against the adversary, in the process plunging global trade even further. Which is also a problem, because as we showed last week, global trade has already plummeted to near depression levels last seen during the financial crisis.

Should trade get even worse, not even central banks will be able to "print" the trillions in trade and commerce that will be indefinitely mothballed.

Published:5/22/2019 7:41:12 PM
[Markets] The Wall Street Journal: Bill would offer $700 million in aid to U.S. telecoms hurt by Huawei ban Lawmakers introduced legislation Wednesday that would provide up to $700 million to help U.S. telecom carriers remove equipment purchased from Huawei Technologies Co. and other Chinese companies deemed a security risk.
Published:5/22/2019 7:41:12 PM
[Markets] Is it time to revive the rumors that Apple will buy Tesla? Here’s why one expert thinks so The bad news seems to keep on coming for Tesla Inc., and one expert says this is the year the electric-car company “comes undone” — and maybe gets bought by Apple Inc.
Published:5/22/2019 7:11:48 PM
[Markets] Asia markets set to slide amid US-China trade jitters Asia markets were set to trade cautiously on Thursday as investors worried over the ongoing trade tensions between the United States and China. Treasury Secretary Steven Mnuchin told CNBC on Wednesday that a trip to Beijing to resume trade negotiations has not been scheduled yet, reducing hopes of a speedy resolution to the U.S.-China trade war. Meanwhile, restrictions on Chinese telecom giant Huawei have led China to rethink its entire economic relationship with the U.S., according to a report from The South China Morning Post. Published:5/22/2019 7:11:48 PM
[Markets] Nevada Passes National Popular Vote Bill To Undermine Electoral College

The Nevada Senate on Tuesday approved a National Popular Vote bill, sending the legislation aimed at undermining the electoral college to Democratic Gov. Steve Sisolak. 

Assembly Bill 186 was passed by the Senate on a 12-8 vote along party lines, and will bring Nevada into the National Popular Vote Interstate Compact - an agreement which would see participating states casting their electoral votes for whoever wins the popular vote, according to the Washington Times

If signed as expected by Democratic Gov. Steve Sisolak, Nevada would become the 16th jurisdiction to join the compact, along with 14 states and the District of Columbia. The compact would take effect after states totaling 270 electoral votes, and with Nevada, the total would reach 195.

While the effort has been billed by organizers as bipartisan, Democrats have embraced the NPV in the aftermath of President Trump’s 2016 victory, which saw the Republican win the electoral vote but not the popular vote. -Washington Times

The move was widely applauded by leftist groups such as Public Citizen, Common Cause and Indivisible. 

"The movement to abolish the electoral college is winning," tweeted Public Citizen. Of note, the NPV does not actually "abolish the electoral college" - it renders it irrelevant by requiring electors cast their votes for whoever receives the most votes, regardless of who actually wins in their state. 

Supporters of the NPV compact say it will take the power away from a handful of swing states, while critics say it will concentrate power in coastal, populous, primarily liberal strongholds such as California and New York. 

"If we go to a national popular vote, why would they even bother coming here? Our constitution says we’re a republic, not a democracy," said Nevada Assemblyman Jim Wheeler (R) during an April debate. "I voted ‘no’ on the national popular vote because I don’t want Nevada to be a flyover state." 

So far in 2019, Colorado, Delaware and New Mexico have joined the compact, while other Democrat-controlled states are expected to follow. Last week the Maine Senate passed an NPV bill which has been sent to the House, while Oregon's similar legislation has been approved by the Senate. 

Published:5/22/2019 7:11:47 PM
[Markets] Japan, UK Join US Blockade Of China: ARM Tells Staff To Stop Working With Huawei

Japan and the UK have joined the US trade clampdown on China as technology companies scramble to comply with a May 15 Executive Order signed by President Trump, which governs foreign-made telecommunications equipment deemed a national security risk

Japanese-owned chip designer ARM Holdings has notified its staff to halt "all active contracts, support entitlements, and any pending engagements" with Huawei and its subsidiaries in order to comply with the recent US clampdown, according to the BBC. Based in the UK and owned by Japan's Softbank, ARM designs and licenses processors used in all types of electronic devices, including smart phones, tablets, laptops, televisions, automotive systems and more. 

"ARM is the foundation of Huawei’s smartphone chip designs, so this is an insurmountable obstacle for Huawei," said Geoff Blaber of CCS Insight, adding: "That said, with an abundance of companies in Huawei’s supply chain already having taken action to comply with the US order, Huawei’s ability to operate was already severely affected."

In a company-wide memo, ARM told employees that their designs contain "US origin technology," which would be affected by the Trump administration's May 15 Executive Order to "protect our country against critical national security threats." 

The US has argued that the Chinese government could force companies such as Huawei to install backdoors on their devices to allow for spying on US networks - an accusation Huawei has repeatedly denied. 

Softbank - which is also one of Japan's largest mobile carriers - has joined with Japan's largest carriers DoCoMo and KDDI in announcing that they will stop taking orders for Huawei handsets. 

KDDI and SoftBank said they made the decision as it remains unclear whether U.S. technology giant Google LLC will continue providing services, including its Android operating system, to the Chinese smartphone-maker following the declaration of a national emergency over technology threats by U.S. President Donald Trump last week. -Japan Times

Meanwhile, Japan's Panasonic has halted business with Huawei, and will no longer sell them certain components. "The affected products are limited, and there will be hardly any impact on earnings," said a spokesperson. 

Panasonic supplies parts for Huawei phones, and some of the Japanese companies' products use U.S.-made technology.

The Osaka-based company said it will study whether other products are affected by last week's U.S. Commerce Department decision, which applies to American-made technology, as well as to products manufactured overseas if the ratio of U.S.-derived content exceeds 25% by market value. -Nikkei

The UK's Vodafone and BT subsidiary EE, have also announced that they would pull Huawei's phones from their 5G networks, according to the Irish Times

BT subsidiary EE had planned to offer Huawei phones as part of its launch on Wednesday of the UK’s first 5G network, but decided to “pause” this because of uncertainty after the Chinese group was included on a blacklist that forbids US companies to supply it with technology. This could stop Google from providing future versions of its Android system to Huawei.

Vodafone also said it would suspend Huawei’s Mate X phone from its 5G line-up. Vodafone had planned to launch the handset in the summer on its 5G network, but a spokesman said on Wednesday that “Huawei’s 5G handset is yet to receive the necessary certifications”. -Irish Times

EE will continue to use Huawei technology, along with Ericsson, for their 5G network's radio equipment despite the ongoing political debate surrounding the Chinese company's supply chain. 

Last week the United States placed Huawei and 70 affiliates on its so-called "Entity List," which will make it much more difficult for the telecom giant to buy parts and components from U.S. companies. U.S. officials said the decision would also make it difficult for Huawei to sell some products because of its reliance on U.S. suppliers.

Published:5/22/2019 6:41:36 PM
[Markets] Mnuchin Says Plans For Harriet Tubman On The $20 Have Been "Delayed" To 2028

In a move that is drawing ire from the left side of the aisle, Treasury Secretary Steven Mnuchin announced Wednesday that a planned redesign of the $20 bill, set to include Harriet Tubman, will be delayed from its planned release date in 2020, according to CNBC.

The timing of the release had been set to coincide with the 100th anniversary of the 19th Amendment, which granted women the right to vote, but, due to counterfeiting issues, Mnuchin now says that no new imagery is going to be released until 2028. 

Mnuchin said during a House Financial Services Committee meeting: “The primary reason we have looked at redesigning the currency is for counterfeiting issues. Based upon this, the $20 bill will now not come out until 2028. The $10 bill and the $50 bill will come out with new features beforehand.”

The redesign was announced by Treasury Secretary Jack Lew in 2016, following a 10 month process of seeking input from the public. In 2016, Lew said: “The decision to put Harriet Tubman on the new $20 was driven by thousands of responses we received from Americans young and old. I have been particularly struck by the many comments and reactions from children for whom Harriet Tubman is not just a historical figure, but a role model for leadership and participation in our democracy.”

During President's Trump campaign for President, he referred to the idea of Tubman on the $20 as "pure political correctness" and instead suggested that she should be on the $2 bill. 

Naturally, this set the left into a frenzy:

In more important news, perhaps somebody should remind the left that if they get their ways in terms of MMT, monetary policy and fiscal policy, it's not going to matter who is printed on the $20 when it inevitably becomes worthless. 

Published:5/22/2019 6:10:16 PM
[Markets] Tesla’s Autopilot feature lags ‘far behind’ a human driver, Consumer Reports says A new feature on Tesla Inc.’s Autopilot allows questionable moves and is ultimately more trouble than it is worth, Consumer Reports says in a report Wednesday.
Published:5/22/2019 5:39:54 PM
[Markets] US Market Indexes Close Lower Wednesday S&P 500 down 0.28% with political concerns Published:5/22/2019 5:39:54 PM
[Markets] The Unseen Costs of "Medicare For All"

Authored by Bradley Thomas via The Mises Institute,

Most of the attention on Bernie Sanders’ proposed “Medicare for All” plan has focused on the financial costs of its implementation.

This is understandable, given that some estimates project costs toexceed $32 trillion over its first ten years, and that Medicare is already suffering massive losses – more than $130 billion since 2008 – along with facing unfunded liabilities in excess of $30 trillion.

But what about the non-financial costs like doctor shortages, foregone treatment due to lack of access to care and tens of thousands of deaths due to overly aggressive care?

Will Supply Meet Demand?

Basic economics, and common sense, tells us that when the marginal cost to the consumer for a good or service at the point of sale is reduced to zero, demand will increase significantly.

Under Sanders’ Medicare for All plan, there will be no payment made by patients when they receive treatment. Medical care consumers will no doubt make more frequent visits to doctors, specialists and emergencies rooms – often times for unnecessary treatments – because, after all, it won’t cost them anything.

Moreover, because people will be taxed to help finance the plan and pay the same amount of tax regardless of their usage, people will feel obligated to “get their money’s worth” and flood doctors’ offices with more frequent check-ups and testing.

The question then becomes: will there be sufficient supply to meet this spike in demand?

Most indicators say no.

According to the American Association of Medical Colleges, the U.S. can expect a doctor shortage of up to 120,000 physicians by 2030, thanks in no small part to our nation’s rapidly growing senior citizen population – and this is without factoring in accelerated demand by Medicare for All.

Doctors are already struggling to keep up with current demand. According to this 2018 survey by the Physicians Foundation, a stunning 80 percent of physicians claim to be “at capacity or overextended.”

The future doesn’t look bright, either. A 2016 Physicians Foundation survey found 48 percent of physicians planning to cut back hours, retire, or take other steps toward limiting patient access to their practices.

Burnt out and semi-retired doctors is not a reliable pool of providers upon which to throw a sizeable spike in demand for services that Medicare for All would usher in.

Pay Cuts Would Make the Shortages Worse

Medicare reimbursement rates fall well below the costs of providing care. In 2017, payment shortfalls to hospitals for Medicare services totaled a whopping $54 billion.

In treating Medicare patients, hospitals only receive about 87 cents in reimbursement for every dollar they spend in care.

If all patients become Medicare patients, how will medical providers stay in business?

Indeed, Medicare reimbursements have been estimated to be 40 percent lower than private insurance payments.

If you think the doctor shortage is bad now, what will happen when doctors are forced to take a 40 percent pay cut on all their former private insurance patients?

Lack of Access Will Bring Unhealthy Results

With greater demand straining a system with dwindling supply, a new cost to patients will emerge: time.

Wait times will inevitably increase substantially, bringing with it a human toll in the form of prolonged suffering of symptoms as well as the mental anguish over the uncertainty that comes with a lack of regular access to care.

And an inability to schedule check ups and other preventative services on a regular basis will cause patients to delay seeking care and treatment, resulting in greater suffering and preventable deaths.

Moreover, like underage college kids who binge drink on the unpredictable occasions they are able to score beer, when patients finally do see a doctor they will be more likely to seek overly aggressive care and excessive testing and treatment. After all, there’s no telling when they’ll get another appointment, and it’s free.

Excessive testing and treatment is already a significant problem in our current system which features a majority of medical services being paid for by a third party. According to this Health Care Finance News article, “Some experts estimate that at least $200 billion is wasted annually on excessive testing and treatment.” Compare this to the roughly $30 billion in charity care for the uninsured we hear so much about as supposedly being a major driver of rising healthcare costs.

Even more significant is the harm caused by overly aggressive and excessive treatment, which generated “mistakes and injuries believed to cause 30,000 deaths each year.”

Imagine the added financial and human toll of excessive care if we transitioned to a Medicare for All system.

Black Markets Will Cause Unequal Treatment

One of the purported benefits of a Medicare for All plan is that it would make access to quality care more equitable. When everyone is covered, the poor will have the same level of care as the rich, goes the argument.

But doctor shortages and long lines under Medicare for All will make access to care exceedingly rare, and in high demand. Such conditions would create a black market in which the rich would pay under the table for quicker service and to avoid the Medicare line.

The rich would have timely access to quality care, while the poor would be left to compete against each other for what little facetime they can get with a doctor. The goal of equity will be unfulfilled.

Myth of Administrative Cost Savings

Advocates of Medicare for All claim that big administrative savings will allow more generous payments to doctors, and thus help avoid shortages. No worries about long wait times and a lack of access to care, they assure us.

But such hopes are fool’s gold.

Most of the projected administrative cost savings are based on faulty interpretations of data. Medicare for All supporters point to data showing that Medicare administrative costs are lower than those of private insurance companies – as a percentage of total costs per beneficiary.

But Medicare patients tend to be older and sicker, and Medicare spends nearly two and a half times more per beneficiary compared to private insurance plans. Calculating administrative costs as a percentage of costs of care paints a highly misleading picture.

Indeed, according to this Heritage Foundation analysis, administrative costs per person are about 12 percent higher in Medicare compared to private insurance.

Switching millions of people from private insurance onto Medicare will drastically increase administrative costs, making it even less likely for Medicare to adequately reimburse doctors and hospitals.

Moreover, when scarce resources are allocated by government bureaucracy rather than the market price mechanism, rationing by administration tends to take over.

As shown in the chart below, thanks primarily to the federal government’s increasing intervention into the healthcare market, the number of healthcare administrators has exploded by more than 3,000 percent since 1970, compared to a growth of physicians of less than 200 percent.

Conclusion

The well-reported price tag for Bernie Sanders’ Medicare for All plan is eye-popping. But of greater concern is the unseen price that will be paid in the form of human suffering and even death as a result of doctor shortages, lack of access to care, and overly aggressive “binge” treatment and testing.

Questions about how to pay for this single-payer plan can be easily answered in the minds of many with the old mantra “tax the rich.”

But how to answer for the human toll of Medicare for All is a far more difficult chore for advocates. Opponents would be wise to make these unseen costs far more visible.

Published:5/22/2019 5:39:54 PM
[Markets] The Dow Fell 101 Points Because Apple Could Be Drawn Into the Trade War The Dow Jones Industrial Average tumbled 0.39% to close at 25,776.61. The S&P 500 slipped 0.28% to end at 2856.27, and the Nasdaq Composite fell 0.45% to close at 7750.84. Published:5/22/2019 5:10:51 PM
[Markets] The Wall Street Journal: U.S. may expand list of blacklisted Chinese companies The U.S. is considering expanding the list of Chinese companies on a blacklist for U.S. suppliers amid escalating tensions between the two economic powers, according to a person familiar with the matter.
Published:5/22/2019 5:10:51 PM
[Markets] You Might Be A White Supremacist If...

Here, courtesy of the New York City Department of Education, are 14 things to watch out for if you suspect you (or a friend) are a white supremacist...

 

  1. PERFECTIONISM — Giving undue focus to the shortcomings in someone or their work, or viewing them as personal flaws. "Making a mistake is confused with being a mistake, doing wrong with being wrong," according to a description of the book on the Web site for the "Challenging White Supremacy Workshop."

  2. SENSE OF URGENCY — Prioritizing short-term results without considering long-term implications. "For example, sacrificing interests of communities of color in order to win victories for white people," the write-up says.

  3. DEFENSIVENESS — When people, often in power, are dismissive of new ideas solely for fear that they might shake things up. "The defensiveness of people in power creates an oppressive culture," the description says.DEFENSIVENESS — When people, often in power, are dismissive of new ideas solely for fear that they might shake things up. "The defensiveness of people in power creates an oppressive culture," the description says.

  4. QUANTITY OVER QUALITY — Being results-oriented and diminishing an otherwise-sound process if it doesn't produce measurable results. It also goes hand-in-hand with "discomfort with emotion and feelings."

  5. WORSHIP OF THE WRITTEN WORD — This idea prioritizes documentation and writing skills, rather than the "ability to relate to others." It also leads to teaching that there is "only one right way" to do something.

  6. PATERNALISM — When those already in power think they're the only ones who can or should make decisions. "Those with power often don't think it is important or necessary to understand the viewpoint or experience of those for whom they are making decisions," the write-up explains.

  7. EITHER/OR THINKING — Seeing things in terms of good or bad, right or wrong, or black or white. This "results in trying to simplify complex things, for example believing that poverty is simply a result of lack of education."

  8. POWER HOARDING — Similar to defensiveness, those in power seek to preserve it, and see it as something that can't be shared. They may also feel threatened when someone suggests change, and "assume they have the best interests of the organization at heart."

  9. FEAR OF OPEN CONFLICT — This comes through when someone overemphasizes politeness, and equates broaching touchy topics with being rude. "The response is to blame the person for raising the issue rather than to look at the issue which is actually causing the problem," the description says.

  10. INDIVIDUALISM — This idea is found among people who have "little experience or comfort working as part of a team." It can lead to isolation, and emphasize competition over cooperation.

  11. PROGRESS IS BIGGER, MORE — Focusing only on the bottom line and tangible growth. "Progress is an organization which expands ... or develops the ability to serve more people," those with this mindset think.

  12. OBJECTIVITY — This can lead to the belief that there is an ultimate truth and that alternative viewpoints or emotions are bad. It's even inherent in "the belief that there is such a thing as being objective."

  13. RIGHT TO COMFORT - Those in power may believe that they "have a right to emotional and psychological comfort," while denying the same to those not in power. This also covers cries of reverse racism because that's "equating individual acts of unfairness against white people with systemic racism which daily targets people of color." 

So, if you're a "perfectionist" with a "sense of urgency" who "fears open conflict"? Then you could be a white supremacist!

*  *  *

h/t @DonDraperClone

Published:5/22/2019 5:10:50 PM
[Markets] How major US stock indexes fared Wednesday Stocks ended lower on Wall Street Wednesday, weighed down by mixed corporate earnings from big retailers and uncertainty over the trade dispute between the U.S. and China. Lowe's and Nordstrom slumped ... Published:5/22/2019 4:40:34 PM
[Markets] Coming to a VR device near you: interacting with your favorite superheroes Facebook’s Oculus could be what comic books need to crack virtual reality, writes Michael Brush.
Published:5/22/2019 4:40:34 PM
[Markets] No Wonder Obama Intel Chiefs Panicking - Trump To Declassify "Bucket 5" Russiagate Docs

As Congressional Democrats insist on conducting post-Mueller probes into President Trump and those around him, much of the recent infighting and backpedaling we've seen from former Obama intel chiefs is starting to make sense

Appearing with Fox News's Sean Hannity Tuesday night, The Hill's John Solomon revealed that according to his sources (and Hannity's as well), President Trump will begin declassifying 'Russiagate' documents in the next 6-7 days

Among those will be the so-called "Bucket Five" - documents which were originally presented to the Gang of Eight in 2016, which included everything the FBI and DOJ used against Trump campaign aide Carter Page - including the FISA surveillance application and its underlying exculpatory intelligence documents which the FISA court may have never seen. 

And as 'Sundance' of the Conservative Treehouse notes, the release would presumably include the transcripts from FBI wiretaps of George Papadopoulos, who was listed in the Carter Page FISA. Also noted by CT is that declassification would be on target to occur between Trump's upcoming state visit to Japan (5/25 - 5/28) and his state visit with the UK (6/3 - 6/5). 

Via the Conservative Treehouse

No-one really knows the extent of the current documents and/or information that may be subject to a Trump declassification request.  However, this is the original list as outlined in September 2018, and the agencies who would be involved in the declassification process:

  1. All versions of the Carter Page FISA applications (DOJ) (DoS) (FBI) (ODNI).
  2. All of the Bruce Ohr 302’s filled out by the FBI. (FBI) (ODNI)
  3. All of Bruce Ohr’s emails (FBI) (DOJ) (CIA) (ODNI), and supportive documents and material provided by Bruce Ohr to the FBI. (FBI)
  4. All relevant documents pertaining to the supportive material within the FISA application. (FBI) (DOJ-NSD ) (DoS) (CIA) (DNI) (NSA) (ODNI);
  5. All intelligence documents that were presented to the Gang of Eight in 2016 that pertain to the FISA application used against U.S. person Carter Page; including all exculpatory intelligence documents that may not have been presented to the FISA Court. (CIA) (FBI) (DOJ) (ODNI) (DoS) (NSA)
  6. All unredacted text messages and email content between Lisa Page and Peter Strzok on all devices. (FBI) (DOJ) (DOJ-NSD) (ODNI)
  7. The originating CIA “EC” or two-page electronic communication from former CIA Director John Brennan to FBI Director James Comey that started Operation Crossfire Hurricane in July 2016. (CIA) (FBI) (ODNI)

? President Trump can prove the July 31st, 2016, Crossfire Hurricane counterintelligence operation originated from a scheme within the intelligence apparatus by exposing the preceding CIA operation that created the originating “Electronic Communication” memo. Declassify that two-page “EC” document that Brennan gave to Comey.  [The trail is found within the Weissmann report and the use of Alexander Downer – SEE HERE]

? Release and declassify all of the Comey memos that document the investigative steps taken by the FBI as an outcome of the operation coordinated by CIA Director John Brennan in early 2016.  [The trail was memorialized by James Comey – SEE HERE]

? Reveal the November 2015 through April 2016 FISA-702 search query abuse by declassifying the April 2017 court opinion written by FISC Presiding Judge Rosemary Collyer. Show the FBI contractors behind the 85% fraudulent search queries. [Crowdstrike? Fusion-GPS? Nellie Ohr? Daniel Richman?]  This was a weaponized surveillance and domestic political spying operation. [The trail was laid down in specific detail by Judge Collyer – SEE HERE]

? Subpoena former DOJ-NSD (National Security Division) head John Carlin, or haul him in front of a grand jury, and get his testimony about why he hid the abuse from the FISA court in October 2016; why the DOJ-NSD rushed the Carter Page application to beat NSA Director Admiral Mike Rogers to the FISA court; and why Carlin quit immediately thereafter.

? Prove the Carter Page FISA application (October 2016) was fraudulent and based on deceptions to the FISA Court. Declassify the entire document, and release the transcripts of those who signed the application(s); and/or depose those who have not yet testified. The creation of the Steele Dossier was the cover-up operation. [SEE HERE]

? Release all of the Lisa Page and Peter Strzok text messages without redactions. Let sunlight pour in on the actual conversation(s) that were taking place when Crossfire Hurricane (July ’16) and the FISA Application (Oct ’16) were taking place.  The current redactions were made by the people who weaponized the intelligence system for political surveillance and spy operation.  This is why Page and Strzok texts are redacted!

? Release all of Bruce Ohr 302’s, FBI notes from interviews and debriefing sessions, and other relevant documents associated with the interviews of Bruce Ohr and his internal communications. Including exculpatory evidence that Bruce Ohr may have shared with FBI Agent Joseph Pientka. [And get a deposition from this Pientka fella] Bruce Ohr is the courier, carrying information from those outside to those on the inside.

? Release the August 2nd, 2017, two-page scope memo provided by DAG Rod Rosenstein to special counsel Robert Mueller to advance the fraudulent Trump investigation, and initiate the more purposeful obstruction of justice investigation. Also Release the October 20th, 2017, second scope memo recently discovered.  The Scope Memos are keys to unlocking the underlying spy/surveillance cover-up. [SEE HERE and SEE HERE]

Published:5/22/2019 4:40:34 PM
[Markets] NewsWatch: The new math of saving for retirement may boil down to this one, absurdly simple rule Why you should be saving at least 10% of your salary.
Published:5/22/2019 4:09:41 PM
[Markets] What Happened in the Stock Market Today A district court ruled that Qualcomm has been engaging in anticompetitive practices. Meanwhile, Target soared on strong sales gains. Published:5/22/2019 4:09:41 PM
[Markets] Henrich: This 'Ghost Chart' May Come Top Haunt Us All

Authored by Sven Henrich via NorthmanTrader.com,

Are markets engaged in a major topping process? Last week I’ve raised the question of potential topping patterns being in the process of being formed if $SPX can’t recapture 2900 and move on to make new highs (Sins of the Past).

Let’s dig into this question a bit more deeply. Let me be the first to tell you to evaluate what I’m about to show you with caution and a healthy dose of skepticism, but in context of record debt levels, record BBB and junk debt levels, trapped central bankers, slowing growth and an escalating trade war between the 2 largest economies on the planet with asset prices artificially inflated by record buybacks and political jawboning we’re staring at least at a similar backdrop as we did in 2007/2008, except now debt is even higher.

Oh, and credit card interest rates are at all time highs.

But don’t worry says Jay Powell, engaged in the required game of projecting confidence like his predecessors:

‘We got this’ appears to be the message. After all Bullard and Evans are already talking QE and/or rate cuts/zero rates. It’s all theoretical of course. Wink wink.

Come on. We’re at the end of a bloated debt cycle propagated by easy money and it’s simply not producing growth anymore. Trade wars, blade wars, whatever, fact is growth peaked last year and it was all artificial because of the also artificial tax cuts.

Let’s just keep things real here. The data shows ZERO uptick in organic growth anywhere.

And the bond market has been screaming warnings since last year when it tagged its multi-year trend line. Long time readers are familiar with this macro chart:

You can either believe unemployment remains at 50 year lows or you may not. 99.99% of history shows it won’t stay there.

Fact is often times the 10 year peaks before unemployment hits a cycle low. That’s what we saw in the last 2 cycles. And we just saw it again. And yes, they’ve done a good job ramping these markets back up following the December lows. But new highs are always a dangerous thing if they come on weakening participation. As I said last week: All things being equal 2019 stinks.

Given the broader backdrop it may be worthwhile to look at the bigger chart picture again to see if there is evidence that markets may be engaged in a major topping process. It’s always easy to get lost in the day to day noise and it’s always useful to go back and check for clues.

Don’t forget topping patterns are a protracted mess. Here’s 2000 for reference:

Look at that chop and these constant rallies even after the peak in March 2000. If you were in the thick of that action you had no inkling this was going to come:

But each vertical rally would’ve likely shaken everybody trying to short out or gotten people bullish again. Buy the dip dies hard. Yet selling these rallies would’ve been exactly the right thing to do.

And now we are here:

Massive moves up and down and up. Currently right below the January 2018 highs, after just a 5% correction. If this all seems familiar it should. Indeed the ghosts of the past may come back to haunt these markets in a big way, because this is a structure we’ve witnessed before.

Comparing the current structure of $SPX to the time period of 2006/2007 I present to you the ultimate ghost chart:

Oh I know, we’ve all seen analogs before on twitter that never meant anything, 1987, 1929, and even previous 2007/2008 analogs, but frankly I’ve never see one aligning in structure as close as this one.

Massive rally leading to a 10% correction, another rally to new highs, an even larger scarier correction followed by a near vertical move to slight new highs (on weakening participation), and then a smaller correction followed by an even smaller bounce which is exactly what we’ve just seen.

Now if this structure is on the money we are here:

How will we know when this analog becomes invalid?

Simply put, new highs. Then the analog may be dust and off the table. Get a China deal and we may make new highs in an instant. Given how sour sentiment is at the moment in regards to a deal it would likely spark a major relief rally.

But without a China deal it’s hard to see new highs with a protracted trade war putting the already fragile business cycle at further risk.

How will we know if this analog continues to apply? If we start dropping soon and proceed to drop below 2800 on $SPX. If the script follows we should see then another rally that then fails and ultimately proceeds take out the lows of December.

Seems unfathomable at this point, but then nobody, except the big short guys, was expecting a massive bear market coming at the “we are here” moment in 2007.

Yet currently Wall Street is predicting solid higher prices for the rest of the year.

To which I say – never forget:

For reference: $SPX closed near 800 in 2008.

I’m just saying: Neither the Fed or Wall Street will tell you to sell. Ever.

We are on our own.

As I said at the outset of this post: View analogs with a healthy dose of caution. Analogs work until they don’t, but there’s little denying that the principle structure we’re seeing in markets, coupled with the economic macro backdrop of slowing growth, extreme debt levels and a Fed in risk denial mode are putting us at structural/technical risk of a major topping process. And, without new highs, the ghost chart may come to haunt us all.

*  *  *

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

Published:5/22/2019 4:09:41 PM
[Markets] Technology Is Not Just Disruptive, It's Disastrously Deflationary

Authored by Charles Hugh Smith via OfTwoMinds blog,

Deflation eats credit-dependent, mass-consumption economies alive from the inside.

While AI (artificial intelligence) garners the headlines, the next wave of disruptive technologies extend far beyond AI: as the chart of technologies rapidly being adopted shows, this wave includes new materials and processes as well as the "usual suspects" of machine learning, natural language processing, data mining and so on.

While many voices seek to assure us these technologies won't displace human workers, the reality is cutting labor inputs is the core driver. What few pundits seem to understand (perhaps because they've never experienced a truly competitive market?) is that the rush to incorporate these technologies into existing enterprises is deflationary not just to prices but to profits.

Reducing labor inputs and improving productivity of capital and the remaining labor force is not going to generate profits if competitors can access the same tools and processes. The race isn't to maximize profits, it's to survive the inevitable deflationary spiral in prices as competitors are forced to pass along cost savings to customers to retain market share.

Pundits glorying in tech profits only consider monopolies or quasi-monopolies like Apple, Facebook and Google or monopolies / cartels enforced by government regulations and policies. Markets open to competition do not enable pricing power beyond a temporary advantage for one or two product cycles. (Please see Two Intertwined Dynamics Are Transforming the Economy: Technology and Financialization)

As the race to improve technologies speeds up, "good enough" open source software and cheap previous-generation hardware is good enough for most applications. (We can surmise that the Pareto Distribution is active: technology that is 20% of the cost of the newest product can do 80% of what the new product can do, and tech that costs a mere 4% of the latest tech can do 64% of what the latest product can do.)

Everyone counting on trillions in tech profits is overlooking the inconvenient reality of the S-Curve for cheap credit, cheap energy and cheap labor--the three drivers of global expansion. Once credit dries up or becomes more expensive, once cheap energy is only a memory (or future fantasy) and once employment sags under the pressure to reduce labor inputs, the ranks of those with the earnings or credit to buy, buy, buy will be thinned.

Stagnant wages can only be supplemented with borrowed money until the costs of servicing the debt (interest) eats the borrower's budget. At that point, lenders will have to face the unpalatable truth that any additional loan will end in default, a process that will also collapse the entire unsustainable mountain of debt the household is struggling to service.

As many others have pointed out, energy can be abundant but it only drives expansion if it's affordable to low-wage workers. If it's only affordable to the top 20%, every economy based on mass consumption implodes.

One of the factors in the U.S.-China trade dispute that few seem to notice is labor costs are spiraling higher in China, reducing its competitiveness at a critical juncture as global trade, demographics, energy costs and the risk of credit bubbles bursting all form a self-reinforcing confluence of negative dynamics.

China still needs the jobs while its customers (including but not limited to the U.S.) are seeking lower-cost alternatives to Made in China. Even Chinese companies are looking to establish lower-labor cost manufacturing hubs overseas.

Strip away the happy talk about technology creating jobs and we're left with real-world enterprises desperate to lower cost inputs in any way they can: and the go-to "solution" to reducing cost inputs is reducing labor inputs by reducing wages via global wage arbitrage (a.k.a. offshoring jobs) and/or replacing human labor with software and robotics.

Sure, there will be jobs for those installing and maintaining the software and robots, but remember: enterprises don't have profits, they only have costs, and the pressure to eliminate entire layers of managerial costs as well as production costs will only increase.

Who will be willing and able to pay a premium for any technology, product or service if cheaper alternatives are available? As debt service costs rise and wages continue to stagnate, the "solution" of borrowing more reaches an endgame of credit contraction and soaring defaults.

That leaves government-enforced monopolies as the only dependably profitable corporations, and the citizenry will soon tire of enriching tech oligarchs who bought political cover and regulatory moats. Deflation eats credit-dependent, mass-consumption economies alive from the inside.

Adapt or die boils down to strip out costs or die.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. 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. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

Published:5/22/2019 3:40:21 PM
[Markets] Stocks end lower as lingering trade woes overshadow Fed minutes U.S. stocks finish lower Wednesday as lingering trade woes overshadow the release of the minutes from the Federal Reserve’s policy meeting that was largely interpreted as accommodative. Published:5/22/2019 3:40:21 PM
[Markets] The Wall Street Journal: SEC accuses developer Robert Morgan of scamming investors The federal government accused one of the nation’s largest landlords with running a “Ponzi scheme-like” effort using cash from small investors and with misleading banks to obtain bigger loans by using fake loan documents.
Published:5/22/2019 3:40:20 PM
[Markets] Stocks & Bond Yields Tumble As Trade Turmoil Sparks Breakdown In Boom-Bust Barometer

Fed Minutes fail to fend off the selling pressure as the Trump administration cranks up the pressure on China...

 

Chinese stocks were lower overnight (but ChiNext remain green on the week?)..

 

European markets were mixed with Germany modestly higher against weakness in the periphery...

 

US markets tumbled on the day with Trannies tanking worst... Another weak close took The S&P red on the week and Dow very modestly higher...

 

Today was the 7th day in a row of the opening-ramp...

 

We noticed that the machines kept wanting to lift Nasdaq futures back to the scene of the crime last night when NYT headlines reported the HIKvision blacklist...but each one failed

 

"Most Shorted" stocks tumbled today (so get yourself ready for a squeeze tomorrow?)

 

Semis slumped back to Monday lows...

 

Tesla bonds and stocks tumbled further on the day (with default odds now near 50%)...


Treasury yields tumbled on the day, pushing 30Y (outperforming) back to unch on the week

 

10Y Yields dropped back below 2.40% again today...

 

The yield curve extended its flattening trend after FOMC Minutes...

 

The Dollar is pinging around like a penny stock this week, but bounced very modestly higher after the hawkish tone from the Minutes...

 

Cable just keeps falling as rumors of May's demise rise...

 

Cryptos were quiet again today with Bitcoin treading water just below $8k (after briefly breaking above it overnight)...

 

Copper and Crude were clubbed like baby seals (trade war and inventory build respectively) with PMs flat on the day...

 

WTI almost tested a $60 handle intraday...

 

Finally, as Bloomberg's Ye Xie notes, the so-called boom-bust barometer is flashing a warning sign to the stock market.

The indicator, which tracks the ratio between the CRB industrial material price index and weekly jobless claims, peaked in mid-April and has since sunk like a stone. A similar decline a year ago foreshadowed the market rout in late 2018.

The recent decline in the index, which was created by Ed Yardeni at Yardeni Research, is driven by lower commodity prices and higher jobless claims. While it's easy to dismiss the jump in jobless claims as noise, the drop in industrial material prices do reflect weaker global manufacturing as the trade war moves from simmer to boil.

And global money supply support is disappearing...

Published:5/22/2019 3:09:19 PM
[Markets] Dow industrials end down 100 points as trade-war fears continue Dow industrials end down 100 points as trade-war fears continue Published:5/22/2019 3:09:19 PM
[Markets] US STOCKS SNAPSHOT-Wall St dips after renewed U.S.-China trade fears Wall Street's major indexes dipped on Wednesday as inflamed trade tensions between the United States and China weighed on investor sentiment. The Dow Jones Industrial Average fell 100.85 points, or 0.39%, ... Published:5/22/2019 3:09:19 PM
[Markets] "We Were Unrealistically Optimistic" - BofA Slashes Bond Yield Forecasts As "Misery" Approaches

Unlike most of its competitors, Bank of America is not shy to admit when it has made a major forecast mistake due to being, as it puts it, "overly optimistic", and that's precisely what the bank's rates strategist did earlier today when in a note titled appropriately "marking to misery", BofA's Ralf Preuser said that "our old forecasts imply an unrealistically optimistic backdrop for remainder of 2019, we cut our forecasts across the board." The reason for the revision: "Trade, central banks, inflation & Brexit have surprised", in other words pretty much everything that the bank had expected just a few months ago... was wrong.

Here is Preusser's explanation of how everything that could go wrong went wrong:

When the facts change, we change our opinion

We started the year with a bullish bias in our yield forecasts vs consensus and our economists. Following the latest tariff developments, our yield forecasts imply a best case scenario for a resolution of the US-China trade dispute, which seems unrealistic. We cut our forecasts across the board.

Trade wars, central banks and inflation have all surprised

It would be simplistic to blame these forecast revisions purely on the latest chapter in the trade war saga. Central banks globally have shifted to a dramatically more dovish tone. And inflation has continued to disappoint - surprisingly so in the US, and sufficiently in the Euro Area (EA) to finally appear on the ECB's radar screen. Finally, Brexit and related uncertainty remains unresolved.

And speaking of central banks throwing in the towel...

Central banks' reaction functions around the globe have changed materially. The Fed has abandoned both the hiking cycle and balance sheet run-off. The ECB has kicked off a debate about tiering. The RBNZ has cut rates, the RBA is expected to ease in June. And most other central banks have followed suit, with dovish tones from the likes of the BoC and the Riksbank.

The reasons behind the decision to change tack are myriad. Initially, the tightening of financial conditions on the back of the 4Q18 financial market turbulence was a major factor. The sharp revisions to inflation expectations are a more recent concern. For some central banks more idiosyncratic issues are at play: disappointing growth and housing market woes in Australia, evolving views on the impact of Brexit induced uncertainty for the BoE, and the fears of currency appreciation on being out-doved by the Fed for many.

Almost as if central banks know something the rest of us don't.... Or perhaps those 99 lead balloons that Michael Every warned about earlier, are indeed about to start falling.

So now that all hell is about to break loose, what does that mean for yields... besides lower "across the board" of course? Here is MS' explanation:

US 10y yields to 2.60% at year-end

Our new forecasts continue to express a slightly more cautious balance of risks relative to our economists' modal forecast. Crucially, however, we remain above forwards even then. We continue to favor real and nominal curve steepeners, as well as 30y breakeven longs as soft duration shorts.

We cut our forecasts in US 10y to 2.60% from 3.00% for year-end. This reflects a slightly negative bias relative to our economists' modal forecast, but still leaves us expressing a small bearish bias versus the forwards. We see curves steeper, breakevens wider and the US underperforming on a cross market basis, as duration longs remain crowded and front-end pricing is approaching extremes outside of 2007

Bund yields at risk of new lows of -25 bp in Q3

The EA remains asymmetrically exposed to global event risks, as well as facing potentially serious headwinds from oil and FX. There is room for the market to reprice the ECB further and for term premia to turn more negative given increased periphery vulnerabilities.

In EUR rates, we revise our forecasts for Bunds to -10 bp from 30 bp for year end. This partly reflects the change in ECB view from our economists. Crucially, we see Bund yields at risk of reaching new lows of -25 bp in Q3 as we approach crunch time on accumulated event risks. The structural underweight in EUR rates vs the US as well as the asymmetry of macro risks creates the room for Bunds to outperform. This motivates our constructive stance relative to forwards over the forecast horizon. We favour real rate curve flatteners and see the belly outperform the wings vs forwards across flies.

Gilts: a low quality duration trade

We have revised our rate profile lower. As Brexit drags on and the list of global risks lengthens, we see the BoE struggling to raise Bank rate over the next 12 months. This limits the upside to rates in our view. Our new forecasts remain marginally bearish relative to the pessimism priced in to the forwards.

Given the increased chance of the UK facing persistent uncertainty, both domestically and globally, our economists have cut their growth forecasts for 2020 by 50bp to 1.1%. 2019 has been revised up marginally after the strong Q1 print. They have also pushed out their forecast for the next BoE rate hike to May 2020. We argued after the last BoE meeting that even if a Brexit resolution is found, the BoE would find it hard to hike rates meaningfully given the global backdrop, which have now been priced out entirely from the front end.

We have revised our rate profile lower off the back of our economists change in forecast and in line with our US and European colleagues. As Brexit drags on and the list of global risks lengthens, we see the BoE struggling to raise Bank rate over the next 12 months. This limits the upside to rates in our view. Our new forecasts remain marginally bearish relative to the pessimism priced in to the forwards.

And visually:

Going back to the US, BofA cautions that there is a likelihood of an even lower bone yield as the "key near-term risk to our rates forecast is a significant deterioration of US-China trade negotiations, though we currently believe a full blown trade war is unlikely." Alas, it now appears that a full-blown trade war - at least until the market crashes and forces Trump to the negotiating table - is now the base case.  Additionally, "there is also uncertainty and downside risk surrounding the global growth outlook and political landscape in the US. A resolution of trade tensions and a resilient US domestic economy, on the other hand, would challenge front-end pricing."

And now that BofA has thrown in the towel, expect the rest of Wall Street to do the same, admitting they too got absolutely everything wrong on the bond side. The only real question is when will stocks follow yields which are going much, much lower.

Published:5/22/2019 2:46:33 PM
[Markets] GLOBAL MARKETS-Investors seek safety on threat of wider U.S.-China spat Global equity markets slid on Wednesday as investors sought safety in bonds, the Japanese yen and Swiss franc amid renewed worries over the U.S.-China trade standoff after reports the United States has another Chinese tech firm in its sights. Relief over Washington's temporary relaxation of curbs against China's Huawei Technologies Co Ltd faded after reports that the White House is considering further sanctions on Chinese video surveillance firm Hikvision. The yen and Swiss franc gained against the dollar and the price of the 10-year U.S. Treasury note rose, but the decline in U.S. and European equity markets was relatively subdued after recent sell-offs. Published:5/22/2019 2:46:32 PM
[Markets] The Ratings Game: Target shoppers who use same-day delivery at urban stores buy five times more items Target has focused on giving customers a number of options for getting their items same-day, which it says has paid off.
Published:5/22/2019 2:46:32 PM
[Markets] The Tell: More active managers are beating the stock market again thanks to the trade war: Goldman Sachs Mutual funds are having one of their best years since the financial crisis, with 42% of large-cap active mutual funds outperforming their benchmarks so far in 2019, well above the 34% rate averaged during the last decade
Published:5/22/2019 2:09:35 PM
[Markets] "A Distressed Credit And Restructuring Story": Morgan Stanley Warns Tesla Is Facing Bankruptcy

On Wednesday, Morgan Stanley held an investor call for clients, led by analyst Adam Jonas, supposedly due to feedback after the company's note yesterday, which saw the investment bank lower its "bear case" target to on the company to just $10 per share. This came, ironically enough, just weeks after the company helped Tesla perform a $2.4 billion financing. 

To us, nothing smells more like another potential downgrade than letting "select" investors on a call that wasn't supposed to be for media or for the public. Yet we get the funny feeling that the media - and the public - are going to hear all about the call and discuss it widely for days, if not weeks, to come.

Adam Jonas opened the call by talking about how optimistic 2018 looked - the company was generating cash and Elon Musk was saying they don't need to raise cash. Demand was robust and all was right with the world, at the time. Then, 2019 happened... and somehow everything went to hell overnight. 

Jonas contrasted 2018 by giving his interpretation of where things are today for Tesla: "supply exceeds demand, they're burning cash, nobody cares about the Model Y, they raised capital near lows" and there's been "no strategic buy-in". 

"Tesla's is not seen as a growth story, it's seen as a distressed credit and restructuring story," Jonas said later in the call, suggesting that the next step for Tesla is an out of court debt restructuring and/or bankruptcy (preferably a Chapter 11).

Demand was the first domino, Jonas said, echoing what he put in his note on Tuesday. Additionally, at about 6 minutes in on the call, Jonas talked about the lackluster interest in the Model Y: "Excitement level is really low. There's not much we know about the product."

PlainSite, which documented numerous great quotes from the call, pointed out Jonas making comments about people running scenarios for what would happen in a reorganization scenario as part of their analysis of the business now. 

Jonas also chimed in on the effects of the trade war: "Could there be a worse time to depend on China to sell robot cars?" he asked. 

He also mentioned that the company's debt was only now a burden, since the growth story has dried up. Even Jonas is seemingly unable to ignore the fact that the bond market is pricing the company's 2025 bonds at 82 cents on the dollar: "No one really cares about debt; no one cares about the CDS as long as you're growing. When questions are calling into your growth these numbers start start to be noticed," he said, sounding exasperated.

Jonas then went on to talk about the company's 5 year CDS prices: "Nevertheless, the CDS on Tesla I believe the  five-year CDS this morning was 673 basis points. That compares to Ford Motor Company at around 200." While the implications are clear, the price implies a 46% probability of default in 5 years.

He claimed that after inquiring with Morgan Stanley's credit desk about the price of the company's CDS, they informed him that it is pricing in "a 10% chance of default". 

You can listen to a full leaked version of the call here

Naturally, Twitter had a field day as it was ongoing:

Recall Jonas had slashed his bear case on the company to just $10 yesterday, from $97, "driven primarily by our concerns around Chinese demand for Tesla products."

As a result, the bank's range of price targets for Tesla is easily one of the funniest charts encountered this year:

Jonas opened Tuesday's note by reminding readers that the company's 5 year CDS is at 674 vs. Ford at 200, saying that Tesla "has among the widest ranges of outcomes and uncertainty of any major auto firm". With MS's bear case at $10 and other clinically insane optimistic analysts on the name predicting $4,000 per share, that's one assertion Jonas is clearly right about. 

Jonas also called into question the year's "sharp deceleration in demand":

We have long held that Tesla’s share price performance is driven by: demand for its products, ability to generate cash flow, and access to capital markets. This year’s sharp deceleration in demand has led to a substantial curtailment of the company’s ability to self-fund through free cash flow generation, at the margin potentially impacting the firm’s access to capital. Tesla’s recent $2.7bn equity and convertible debt raise may provide an extra year of liquidity to run a business of this size and cash consumption. However, Tesla may now find itself in a cycle where a lower share price may itself contribute to a potential deterioration of employee morale as well as potentially increased counterparty risk with both customers and business partners (suppliers,governments)... potentially further impacting fundamentals.

He then reminded the Musk collective of the importance of demand, or lack thereof, saying it is "at the heart of the problem" and adding that the company may have over-saturated the market outside of China:

We believe Tesla may have over-saturated the retail market for BEV sedans outside of China. Tapping into new demand could require aggressively expanding into: 1) the Chinese domestic market, 2) lower-priced SUVs, 3) and logistics/mobility fleets. Tesla is a large and highly vertically integrated company, capacitized to build between 500k and 1 million units annually. In our opinion, Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals.

If that wasn't enough, Jonas also slammed the "departure of key executives, price discounting, and extraordinary cost-cutting efforts add to the narrative of a company facing real potential stress."

Published:5/22/2019 2:09:35 PM
[Markets] Market Shrugs Off Fed Hawkish Tone (For Now) - Goes Nowhere

It appears The Fed has mastered the art (for now) of creating a document with no algo-triggering headlines as despite a definite hawkish tone - transitory inflation and asset valuation warnings - stocks and bonds are unmoved and the dollar is very marginally higher.

Bond yields are unch...

Eurodollar futures show no immediate shift in rate expectations on the back of the Fed minutes, despite the "transitory" inflation language and the lack of any mention of rate cuts would seem to be a little more hawkish than the market's positioning.

Stocks are down very modestly...

But the dollar was the only asset that really moved (and even that was minimal)...

But, of course, it's early yet.

Published:5/22/2019 1:39:43 PM
[Markets] Market Snapshot: Stock market remains under pressure after release of Fed minutes U.S. stocks remain under pressure Wednesday as the Federal Reserve released the minutes from its policy meeting concluded earlier this month where it reiterated its commitment to being patient on interest rates.
Published:5/22/2019 1:39:43 PM
[Markets] The Fed Minutes Offered No Surprises, and the Dow Is Still Down The minutes from the latest meeting of the Federal Open Market Committee offered no market-moving news, leaving stocks lower, as they were earlier in the day. Published:5/22/2019 1:39:43 PM
[Markets] Fed minutes: Voters say patient stance can last 'for some time' The voting members of the Federal Open Market Committee seemed comfortable with their patient stance on interest rate, agreeing it could last for "some time," according to minutes of their April 30- May 1 meeting released Wednesday. Even if global economic and financial conditions improve, a wait-and-see approach was warranted, the officials said. Officials were split on the outlook for interest rates. A few officials said there might be a need for higher rates if the economy evolves as they thought. But others thought higher productivity might mean there was more economic slack than the low unemployment rate might suggest. Several others expressed worry about the risk of low inflation readings leading to lower expectations of future inflation, but did not call for a rate cut. Many said that the recent low inflation readings were transitory. In addition to interest-rate policy, there was a lengthy discussion, but no decision, about what types of Treasurys the central bank should hold once its balance sheet stops shrinking. Published:5/22/2019 1:10:54 PM
[Markets] Fed minutes: Voters say patient stance can last 'for some time' Fed minutes: Voters say patient stance can last 'for some time' Published:5/22/2019 1:10:54 PM
[Markets] Buy This, Not That: This is one of the safest sunscreens you can buy right now — and it only costs $9 What’s the best sunscreen for your money? Blue Lizard and Neutrogena sunscreen are among top-rated, new safe sunscreen report finds
Published:5/22/2019 1:10:54 PM
[Markets] FOMC Minutes Confirm Hawkish "Transitory" Inflation Outlook, Remains "Patient For Some Time"

Will the Minutes attempt to walk back Powell's 'hawkish' transitory/transient inflation comments, will they mention frothy prices in financial markets, or will an insurance rate-cut be discussed against trade-war threats?

The answer is mixed:

Hawkish

*MANY FED OFFICIALS SAW INFLATION DIP AS LIKELY 'TRANSITORY'

Dovish

*FED OFFICIALS SAW PATIENT APPROACH APPROPRIATE FOR 'SOME TIME'

Bloomberg lays out the key takeaways from FOMC minutes:

  • Fed doubles down on its wait-and-see strategy, as FOMC members felt their patient approach on interest-rate adjustments "would likely remain appropriate for some time'' even if global economic and financial conditions continued to improve.

  • Backing up Powell's comments at the press conference, minutes say "many participants'' viewed recent dip in inflation as ``likely to be transitory''; minutes contain multiple references to support for patience strategy.

  • A "few'' officials said that policy firming would be needed if economy evolved as they expected and inflation pressures built up, while "several'' saw a risk that inflation expectations could become anchored below 2%; minutes don't contain explicit reference to support for possible rate cut.

  • The FOMC held a discussion on the future maturity composition of the central bank's bond portfolio without making a decision. Staff presented two scenarios: a portfolio similar to maturity of outstanding Treasuries, and a portfolio with bond maturities of three years or less. The minutes show extensive debate on the pros and cons of each approach, particularly on how much capacity they would provide to provide economic stimulus through a maturity extension program.

  • There was little discussion about the U.S.-China trade war, a sign that the worsening of tensions since the meeting probably came as a surprise.

  • On the decision to lower interest on excess reserves rate by 5 basis points, the minutes say Fed staff noted that the effective fed funds rate rose to 5 bps above IOER after the federal income tax deadline on April 15; while a similar dynamic occurred in prior years, the magnitude of the change was larger this year.

*  *  *

Since the FOMC Meeting on May 1st, the yield curve has had a wild ride but overall has collapsed...hardly a signal that Fed policy is approved by the market.

Stocks and Gold have been the worst hit with bonds and the dollar rallying since Powell's transitory press conference...

But while the price action looks (and Powell sounds) hawkish, the market-implied Fed rate-change expectations have plunged dovishly since the FOMC meeting...

And, perhaps most notably, despite The Fed's actions on IOER, the short-term liquidity market remains broken...

*  *  *

Full Minutes below:

 

Published:5/22/2019 1:10:54 PM
[Markets] Why Robert F. Smith’s pledge to pay off Morehouse loans is a turning point for colleges and the billionaires that support them Donors, including Oprah, tend to support access through scholarships, but Smith is saying, ‘I’m giving you access to your lives,’ according to one fundraising expert
Published:5/22/2019 12:44:58 PM
[Markets] What To Look For In Today's "Potentially Relevant" FOMC Minutes

The FOMC’s April/May meeting saw the Fed firmly in neutral with recent Fedspeak suggesting that the Fed remains in "patient, or "wait and see mode," assessing how trade wars will impact growth and inflation. Traders will be particularly attentive to any guidance on the ‘transitory’ nature of inflation, uncertainties around trade, and ‘insurance’ rate cuts.

Courtesy of RanSquawk, here is a recap of what happened during the last FOMC meeting, and what to expect today:

Meeting Recap

At its April/May meeting, the FOMC unanimously decided to hold the FFR target between 2.25-2.50%, as expected, though cut the IOER by 5bps to 2.35%. The statement saw the Fed acknowledge a "solid" rate of growth (upgrading its view), while pointing out that both overall and core inflation has eased (downgrading its view to 'below 2%', while also dropping its reference to low rates being a function of low energy prices). The Fed noted that job gains have been solid, though growth of household spending and business fixed investment has slowed. Fed Chair Powell attempted to navigate a neutral line in his press conference, reiterating the messages of the statement, while emphasising the appropriateness of the Fed's policy stance, and the familiar message of neutral, seasoned with patience. The chair added that while business fixed investment and household spending had slowed, he sees it rebounding. Risks have moderated since the beginning of Q1, (data from China and Europe, disorderly Brexit pushed back, progress on trade talks with China, where the gains would be seen over time). Powell said the Fed was strongly committed to a symmetric inflation target; core inflation fall was unexpected, but likely transitory (this affirmation would prove to be the turning point during the presser, from a markets perspective). Powell said the policy stance is currently appropriate and does not see the case to shift rates in either direction (on a few occasions reiterating that the current policy stance was appropriate); he said the IOER was a technical adjustment that does not represent any shift in the Fed's policy stance; the FFR remains the central bank's primary policy tool; he also said that the Fed could look at the possibility of a repo facility at upcoming meetings. Fed Chair Powell was pressed on conditions that the Fed would need to see before considering cutting rates, though he seemed reticent to be drawn in, instead reiterating the Fed's policy targets. Asset prices were elevated, but not extremely so, though has some concern about corporate leverage; overall though, he does not see evidence of overheating. The FOMC had a discussion on the composition of the balance sheet; a decision will need to be taken at future meetings, and any changes will be telegraphed well in advance, Powell said.

Watch For: Trade Uncertainty

  • Fed Chair Powell, Fed Vice Chair Clarida and FOMC Vice Chair Williams all gave remarks this week ahead of the FOMC minutes release, but there was very little to take away, and the Trinity focusing more on the fundamentals of monetary policy itself, avoiding any detail on US trade policy. Analysts note that without the details of Chinese countermeasures, and details of any exemptions, it is difficult to outline exact economic implications. Until then, uncertainties are likely to persist through to the G20 meeting in June, and the Fed may choose to refrain from committing in either direction until the uncertainty has lifted, delivering upbeat remarks on the progress of the US economy instead.

Watch For: Insurance Rate Cuts

  • When journalists were attempting to cajole Powell into an answer on rate cuts, the Fed chair strongly emphasized the Fed's neutral position, arguing that he did not see the case to move rates either way. Analysts expect, therefore, that the minutes will show a broad consensus for that neutral stance and a high threshold for possible insurance rate cuts. Indeed, the Fedspeak in the run-up to the release of the minutes has tended to be neutral, signalling that there is support for this view. CS thinks a significant downgrade of the economic data would likely be needed in conjunction with rising financial stress before the Fed entertained lower rates. On the IOER, the minutes will likely reiterate that the move was technical in nature.

Watch Fore: Transitory Inflation

  • Powell downplayed the significance of cooling inflation, suggesting that it was a result of transitory factors, and the minutes will provide insight on how confident the FOMC is in this view. Credit Suisse has argued that Powell's categorisation of inflation as transitory might be an effort by policymakers to push back against speculation of an insurance rate cut. The 'transitory' argument has been pushed forward in remarks by other Fed policymakers since the May meeting too, again signalling that the majority of officials on the Committee tend to agree with Powell. Naturally, there are elements that do not agree - the Fed' Bullard (voter) recently made the case that if inflation remains at 1.6% he would be more aggressively in favor for lowering rates, signalling that there may be more voices calling for lower rates than higher.

Additionally, here is the take from Nomura's Charlie McElligott who warns that today's Minutes have "potential for actual relevance" for the following reasons:

  • Potential for further clarity on Powell’s recent characterization of inflation weakness as “transitory”
  • There too is potential for an update on Fed balance-sheet normalization—recall, QT is “still a thing” currently (keeping USD “bid” with b/s runoff, policy rates at 11y highs and increased Treasury issuance acting to restrict USD liquidity), but shifts to QE-Lite in Oct; thus we could hear more about the Fed’s vision for the composition of the balance-sheet and the concept of something where purchases look “reverse operation twist”-like by being concentrated into T-Bills in order to shorten WAM and steepen curve
  • Finally, we should be on the lookout for any further developments on a standing repo facility as a long-term solution to ease the current / recurring funding squeeze dynamic—as this mechanism would allow for USTs to be “fungible” into Reserves if required “on demand,” helping in periods of “tighter” funding rates
Published:5/22/2019 12:44:58 PM
[Markets] Harriet Tubman 20-dollar bill not coming next year, says Treasury's Mnuchin Harriet Tubman 20-dollar bill not coming next year, says Treasury's Mnuchin Published:5/22/2019 12:12:21 PM
[Markets] Schumer: Americans' Jaws Would Drop If They Knew What Happened In White House Meeting

Senate Democratic leader Chuck Schumer (NY) said that President Trump 'threw a temper tantrum' on Wednesday, storming out of a meeting with he and House Speaker Nancy Pelosi (CA) to instead hold a press conference in the Rose Garden, according to Bloomberg.

Schumer added that what happened in the White House meeting would make Americans' "jaw drop." 

Trump, meanwhile, took to the Rose Garden to blame the Democrats' "phony investigations," explaining that he walked into the meeting with Pelosi and Schumer and told them that the ongoing probes have hampered bipartisan infrastructure negotiations - and that Democrats could not legislate and investigate at the same time. 

When she and Senator Chuck Schumer arrived at the White House, Mr. Trump was loaded for bear. He walked into the Cabinet Room, did not shake anyone’s hand or sit in his seat, according to a Democrat informed about the meeting. He said he wanted to advance legislation on infrastructure, trade and other matters, but that “Speaker Pelosi said something terrible today and accused me of a cover-up,” according to the Democrat. -NYT

"I walked into the room and I told Sen. Schumer, Speaker Pelosi: I want to do infrastructure, I want to do it more than you want to do it... But you know what, you can't do it under these circumstances." 

The Wednesday barbs began after Pelosi emerged from a meeting with Congressional Democrats, annoncing that they believed Trump was involved in a "coverup" in regards to the administration's efforts to prevent former White House Counsel Don McGahn from testifying Tuesday before the House Judiciary Committee. 

The confrontation came on a day when pressure over a possible impeachment effort raised temperatures on both sides of the aisle. Ms. Pelosi arrived at the White House for a session with the president set to talk about infrastructure shortly after meeting with restive House Democrats to talk about impeachment. She emerged from that meeting with Democrats accusing Mr. Trump of a “cover-up.” -NYT

Published:5/22/2019 12:12:21 PM
[Markets] Key Words: Abrams breaks from Buttigieg: ‘Identity politics is... exactly how we won’ Former Georgia gubernatorial candidate Stacey Abrams splits with fellow Democrat Pete Buttigieg on whether identity politics — the tendency for people of a particular race or background to huddle together to promote their political interests — is a good thing for the party ahead of the 2020 election.
Published:5/22/2019 12:12:21 PM
[Markets] U.S. stocks move south ahead of Fed minutes U.S. stocks slip Wednesday morning as investors brace for minutes from the Federal Reserve’s most recent policy gathering. Published:5/22/2019 11:42:09 AM
[Markets] Trump Today: Trump Today: President breaks off infrastructure discussion after Pelosi’s ‘coverup’ remark President Donald Trump on Wednesday said he ended infrastructure spending talks with senior Democrats after House Speaker Nancy Pelosi said he’s engaging in a coverup.
Published:5/22/2019 11:42:09 AM
[Markets] 99 Lead Balloons... Are About To Come Crashing Down

Submitted by Michael Every of RaboBank

'Lead balloon.' That graphic description of public failure apparently dates from the US in 1924, and ironically was itself such a poorly-received idiom that it didn’t appear in the American press again until 1947. A few decades later, and the phrase was so well known that a derivative of it inspired one of the greatest rock bands of all time. Today, 99 lead balloons fill our sky.

To illustrate the point I don’t even have to look at headlines about the US-China trade war – though I could pick any number of them showing how serious this is getting, and how global the impact is likely to be. My favourite today contains a quote from a US semiconductor maker who states We’re too far into free trade that the world cannot have countries not trading.” Sorry mate, 1913 called and wants its ‘Great Illusion’ back; indeed, reports are that China’s surveillance camera-maker Hikvision is next in the US firing line. Standing with me not on the side of the (Norman) Angells is Eli Lake writing for Bloomberg, who argues The tech cold war has begun. To which I can only say: It’s about time. If this ban is just a bit of brinkmanship designed to pry a better trade deal out of Beijing, however, then it’s a blunder. The national security implications raised by Huawei’s technology transcend any trade dispute.” And while US tech is in the headlines, so is US farming, where federal subsidies are set to rise sharply to offset trade-war pain.

I could choose from a series of stories in Turkey, where the authorities are both trying to prop up the currency and cutting rates at the same time(?), as well as about to clash with the US and NATO allies again over their preferred choice of anti-aircraft defence system in a major way.

I could point to Italy, where Deputy PM Salvini is promising to change EU rules to allow a 15% flat tax, another Deputy PM Di Maio says tax cuts are coming in the 2020 budget, and former PM Getonlini argues a new election is needed.

I could point to Australia, where the RBA Governor has said he’s considering a rate cut in June and unemployment now needs to be BELOW 5.0% for him NOT to cut rates, making a mockery of all the “Jobs market is on fire wages up soon!” claims he’s been making, and I’ve been pooh-poohing, for so long. AUD still hasn’t quite sized that shift up yet, but if you think ‘one and done’ is enough to right this particular ship, you are in for a surprise.

But for a change, let’s go back to the UK and PM Theresa May. The May-bot, as she is sometimes referred to in the press, has just experienced yet another cataclysmic political circuit failure. The weeks she spent wasting precious time granted to the UK by the EU as a temporary Brexit extension, all the while infuriating her own party by sitting down with opposition Labour, and then not giving them what they wanted, came to naught – of course. May then tried a last-gasp Hail Mary to offer a watered-down compromise on a temporary customs union and a second referendum…but only if Parliament passes her Withdrawal Agreement (WA) in an early-June fourth-time-lucky vote. The PM succeeded…in uniting her fractured party and the House of Commons: everyone now wants her to go, and go now. Even MPs who backed her last time now say they will refuse to do so, and this morning there is so much vitriol from the Conservatives the WA may be dropped over the White Cliffs of Dover and May, who has tied the string to her wrist, will follow. Then comes a leadership election…and quite possibly PM Boris Johnson. It’s perhaps not a surprise that GBP is struggling to hold on to 1.27, and the intra-day low of 1.2441 seen back in January this year must surely be laying out the welcome mat and preparing for visitors.

But, sorry, I can’t stay away from China for long. Former British Governor Chris Patten has stated in an interview with Bloomberg that the proposed extradition law about to be steamrollered through Hong Kong’s Legislative Council would break China’s “One Country, Two Systems” and risk undermining the city’s rationale as an international trade hub – a cry the American Chamber of Commerce has publicly echoed. “If China starts to treat Hong Kong as though it was simply part of the mainland, as though it were Shenzhen or Shanghai, sooner or later the international community will be encouraged to think, well, in that case that Hong Kong ceases to be special,” says Patten, who states that the law would be the “worst thing” to happen to Hong Kong since 1997 – which will make him even more popular in Beijing.

For those not following this development, Patten says the proposed law removes the legal firewall between Hong Kong and China, with the former risking being subject to the Chinese “rule by law” system with “no real distinction between the courts, the security services and what the [Communist] party wants to happen.” Recall the US-China Economic and Security Review Commission annual review published in November 2018 already flagged the US should review its treatment of Hong Kong and China as separate customs areas for dual-use technology exports due to the “troubling” political trends there; against the current political backdrop might the US react to the extradition legislation’s passage by acting on that front? It’s an indication of places one conceives of as being true balloons suddenly looking ‘leaden’ due to this trade war.

Meanwhile, with the North Korea, Iran, and Venezuela situations all looking like they could burst at once, which really isn’t a coincidence at all, once again cheesy pop lyrics of the past hold worryingly prophetic wisdom.

Back at base, bugs in the software; Flash the message, "Something's out there"

Floating in the summer sky; 99 lead balloons go by

99 lead balloons floating in the summer sky; Panic bells it's red alert

There's something here from somewhere else

The war machine it springs to life; Opens up one eager eye

Focusing it on the sky; As 99 lead balloons go by

99 Decision Street, 99 ministers meet; To worry, worry, super scurry

Call out the troops now in a hurry

This is what we've waited for; This is it boys, this is war

The president is on the line; As 99 lead balloons go by

Published:5/22/2019 11:42:09 AM
[Markets] Trump says infrastructure talks with Democrats are off because of investigations Trump says infrastructure talks with Democrats are off because of investigations Published:5/22/2019 11:09:15 AM
[Markets] Blackstone Bidding On Luxury Hotels Owned By Anbang (Which Were Originally Bought From Blackstone)

US private equity giant Blackstone still remembers that the surest way to make money remains the simplest one: buy low, sell high... and then buy back even lower.

That's what it is trying to do with a portfolio of luxury hotels currently belonging to China's terminally troubled and recently nationalized conglomerate Anbang. According to the FT, as part of Beijing's unwind of Anbang Insurance, Chinese authorities have received offers of up to $5.8BN for the conglomerate’s US luxury hotels business from a group of bidders including Blackstone and Brookfield. In addition to these two, another fifteen potential buyers, which include South Korea’s Mirae Asset Management, SoftBank-owned Fortress, and GIC, Singapore’s sovereign wealth fund, have made it to the final bidding round for the Anbang hotel properties.

Yet while this would be just another plain vanilla commercial real estate auction in what is already a frothy market, if Blackstone ends up the winning bidder, it would cap what the FT dubbed "a remarkable series of deals" involving the US private equity firm, which bought Strategic Hotels in December 2015 for $6 Billion before selling it just three months later to Anbang for $6.5 billion. And now, just over three years later, it may buy it back for $1 billion less!

The sale of the Chicago-based Strategic Hotels, one of Anbang’s most valuable assets in the US, comes after the conglomerate was placed under the control of Chinese regulators last year when its founder Wu Xiaohui was jailed for 18 years on fraud and embezzlement charges, while the company was on the verge of collapse.

The 15 luxury hotels on the block include the Fairmont Scottsdale, several Ritz-Carlton properties including those in Half Moon Bay near Silicon Valley, several Four Seasons hotels, the JW Marriott Essex House on Central Park South in NYC, the Intercontinental in Chicago and the Westin in San Francisco.

Ritz-Carlton, Half Moon bay

Bank of America, which is advising Anbang on the sale which is scheduled for this summer, it will have its hands full: with offers for the portfolio coming in at a very wide range, at a $1 billion gap between the highest and lowest bids, there is clearly a wide range of opinion about the value of the properties and the complexity of the transaction. Curiously, some typical buyers of trophy assets, such as Middle Eastern sovereign wealth funds, did not participate.

The reasons for the sharp drop in value since the hotels were flipped in 2016 include uncertainty over the state of the US economy is depressing the bids, as is the fact that assets that require heavy capital expenditure are out of favor, according to FT sources. Even so, the earnings multiples on the current portfolio were higher than that of comparable hotel groups.

Which of course is good news for Blackstone, which will have already booked a generous profit on the very same portfolio it may soon hold once again.  It is by implication bad news for Anbang, or what's left of it, as it was taken over by what is now the Chinese Banking and Insurance Regulatory Commission;

As a result of Anbang's troubles, management of Strategic has been in disarray, further eroding its value.

In March of last year, David Hogin, the chief operating officer of Strategic, wrote to Anbang requesting approval for the 2018 budget, according to a letter seen by the Financial Times. “Given all the recent turmoil within our parent company, it is critically important that we communicate with [employees] that their salaries and benefits are proceeding in accordance with prior practice,” he wrote.

Separately, the Anbang-owned iconic Waldorf Astoria Hotel in New York, which is not part of Strategic, remains shuttered while part of it is converted to apartments, even as that the real estate market in Manhattan has softened dramatically. Anbang's overhang lingers over another Anbang property, the high-end condominiums at 100 East 53rd Street, just a few blocks from the Waldorf, where bankers that lent to the property recently classified the loan as non-performing.

The even better news for Blackstone, which will likely end up pulling this deal over, is that it will have many more distressed real estate assets to pick off from Anbang's liquidating carcass: before Wu’s arrest, Anbang controlled 58 companies directly or indirectly with $290 billion in assets; very soon all those assets will flip back to US private equity owners, much the same way that Japan's foray into US real estate in the 1980s - most infamously with the ill-fated purchase of Rock Plaza - ended up in disaster and marked the top of the Japanese asset bubble.

Published:5/22/2019 11:09:15 AM
[Markets] Outside the Box: Early retirement is a risk — so is working in an office your whole life The FIRE life may be a gamble, but there are no ‘safe’ choices.
Published:5/22/2019 11:09:15 AM
[Markets] Warning signs illustrate why it’s crucial for the stock market to hit new highs soon The stock market needs to carve out a fresh record — and soon — or else, concludes strategist Andrew Adams. Published:5/22/2019 10:40:10 AM
[Markets] Bannon Says Destroying Huawei More Important Than Striking Trade Deal

From a comfortable position thousands of miles away from the White House (he has reportedly been spending a lot of time in Europe lately), former White House Chief Strategist Steve Bannon has embraced a stance toward Beijing that's somewhere to the right of John Bolton. Bannon calls himself a China "superhawk", which helps make President Trump's tough stance look moderate by comparison, while pro-business negotiators like Steven Mnuchin look like sinophiles.

Bannon used two recent interviews with CNBC to explain his hostility toward Beijing. His argument boils down to this: for too long, Washington has allowed Beijing to get away with its anticompetitive subsidies and market protections, while the MSS steals whatever technology isn't deliberately handed over by American companies hoping to enter the world's largest growth market. Instead of fighting back, Washington has sat idly by as American money and corporations helped transform the Chinese economy, giving the Chinese the tools to stand up to the US. 

Bannon

But now that Beijing is making serious strides toward achieving its goal of supplanting the US as the world's top military and economic power, the White House can't afford to be silent any longer, which is why Bannon believes Trump "won't back down" during the trade war.

Expanding on this theme during an interview with the South China Morning Post, a Hong Kong-based newspaper whose owner has ties to the Communist Party, Bannon explained that driving Huawei out of Europe and the US is "10 times more important" than striking a trade deal.

"It is a massive national security issue to the West," Bannon said, in a phone interview on Saturday with the South China Morning Post. "The executive order is 10 times more important than walking away from the trade deal. It [Huawei] is a major national security threat, not just to the US but to the rest of the world. We are going to shut it down."

Despite being largely shut out of the US and a handful of other international markets, Huawei has made inroads in Europe, where governments have tentatively cleared domestic telecoms firms to use Huawei products in the construction of their 5G networks. The Trump Administration has warned that using Huawei parts could invite spying by Beijing, though Huawei has denied it would ever cooperate with the government against its customers and has promised to sign "no spying" pledges. Of course, Chinese law stipulates that Chinese companies must help the state when asked.

The interview took place earlier this week, shortly after President Trump announced a brief waiver that will keep Huawei off the Commerce Department's "Entity List" for 90 days. Once the prohibition takes effect, however, the Chinese telecoms giant won't be able to buy components from American firms. It also took place before reports that leaked late Tuesday claimed the administration was weighing whether to add more Chinese companies to the "Entities List".

Going one step further, Bannon said his ultimate goal is to shut Chinese companies out of American capital markets, something that would horrify Wall Street and the investment bankers whom Bannon has accused of being moneymen for the Communist Party.

"The next move we make is to cut off all the IPOs, unwind all the pension funds and insurance companies in the US that provide capital to the Chinese Communist Party," he said.

"We’ll see a big move on Wall Street to restrict access to capital markets to Chinese companies until [they agree to] this fundamental reform."

Trump made a huge mistake last spring when he intervened to lift restrictions on ZTE.

"During the trade talks’ early stage, he [Trump] gave a waiver for ZTE, which I think was a mistake," Bannon said.

The crux of Bannon's argument is that by engaging Beijing in an all-out "economic war", Washington might succeed in forcing the Communist Party leadership to make certain structural reforms. Bannon doubts this will be resolved quickly: "I don’t think it’s going to be resolved quickly. This is the beginning of a very long and tough process."

But regardless of the outcome, Bannon believes the US - including its bankers and corporations - can no longer afford to coddle Beijing. "The pressure we will keep up will be relentless. We are not going to be quiet."

Published:5/22/2019 10:40:09 AM
[Markets] The Corporate Maginot Line Looms

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Since the post-financial crisis era began more than a decade ago, record low-interest rates and the Fed’s acquisition of $4 trillion of the highest quality fixed-income assets has led investors to scratch and claw for any asset, regardless of quality, offering returns above the rate of inflation. 

Financial media articles and Wall Street research discussing this dynamic are a dime-a-dozen. What we have not heard a peep about, however, are the inherent risks within the corporate bond market that have blossomed due to the way many corporate debt investors are managed and their somewhat unique strategies, objectives, and legal guidelines. 

This article offers insight and another justification for moving up in credit within the corporate bond market. For our prior recommendation to sell junk debt based on yields, spreads, and the economic cycle, we suggest reading our subscriber-only article Time To Recycle Your Junk. If you would like access to that article and many others, you can sign up for RIA Pro and enjoy all the site has to offer with a 30-day free trial period. 

Investor Restraints

By and large, equity investors do not have guidelines regulating whether or not they can buy companies based on the strength or weakness of their balance sheets and income statements. Corporate bond investors, on the other hand, are typically handcuffed with legal and/or self-imposed limits based on credit quality. For instance, most bond funds and ETFs are classified and regulated accordingly by the SEC as investment grade (rated BBB- or higher) or as high yield (rated BB+ or lower). Most other institutions, including endowments and pension funds, are limited by bylaws and other self-imposed mandates. The large majority of corporate bond investors solely traffic in investment grade, however, there is a contingency of high-yield investors such as certain mutual funds, ETFs (HYG/JNK), and other specialty funds.

Often overlooked, the bifurcation of investor limits and objectives makes an analysis of the corporate bond market different than that of the equity markets. The differences can be especially interesting if a large number of securities traverse the well-defined BBB-/BB+ “Maginot” line, a metaphor for expensive efforts offering a false line of security.

Corporate Bond Market Composition

The U.S. corporate bond market is approximately $6.4 trillion in size. Of that, over 80% is currently rated investment grade and 20% is junk-rated.This number does not include bank loans, derivatives, or other forms of debt on corporate balance sheets.

Since 2000, the corporate bond market has changed drastically in size and, importantly, in credit composition. Over this period, the corporate bond market has grown by 378%, greatly outstripping the 111% growth of GDP.  The bar chart below shows how the credit composition of the corporate bond market shifted markedly with the surge in debt outstanding. 

As circled, the amount of corporate bonds currently rated BBB represents over 40% of corporate bonds outstanding, doubling its share since 2000. Every other rating category constitutes less of a share than it did in 2000. Over that time period, the size of the BBB rated sector has grown from $294 billion to $2.61 trillion or 787%.

The Risk

To recap, there is a large proportion of investment grade investors piled into securities that are rated BBB and one small step away from being downgraded to junk status. Making this situation daunting, many investment grade investors are not allowed to hold junk-rated securities. If only 25% of the BBB-rated bonds were downgraded to junk, the size of the junk sector would increase by $650 billion or by over 50%. Here are some questions to ponder in the event downgrades on a considerable scale occur to BBB-rated corporate bonds:  

  • Are there enough buyers of junk debt to absorb the bonds sold by investment-grade investors?
  • If a recession causes BBB to BB downgrades, as is typical, will junk investors retain their current holdings, let alone buy the new debt that has entered their investment arena?
  • Will retail investors that are holding the popular junk ETFs (HYG and JNK) and not expecting large losses from a fixed income investment, continue to hold these ETFs?
  • Will forced selling from ETF’s, funds, and other investment grade holders result in a market that essentially temporarily shuts down similar to the sub-prime market in 2008?

We pose those questions to help you appreciate the potential for a liquidity issue, even a bond market crisis, if enough BBB paper is downgraded. If such an event were to occur, we have no doubt someone would eventually buy the newly rated junk paper. What concerns us is, at what price will buyers step up?  

Implied Risk

Given that downgrades are a real and present danger and there is real potential for a massive imbalance between the number of buyers and sellers of junk debt, we need to consider how close we may be to such an event. To provide perspective, we present a graph courtesy of Jeff Gundlach of DoubleLine.

The graph shows the implied ratings of all BBB companies based solely on the amount of leverage employed on their respective balance sheets. Bear in mind, the rating agencies use several metrics and not just leverage. The graph shows that 50% of BBB companies, based solely on leverage, are at levels typically associated with lower rated companies.

If 50% of BBB-rated bonds were to get downgraded, it would entail a shift of $1.30 trillion bonds to junk status. To put that into perspective, the entire junk market today is less than $1.25 trillion, and the subprime mortgage market that caused so many problems in 2008 peaked at $1.30 trillion. Keep in mind, the subprime mortgage crisis and the ensuing financial crisis was sparked by investor concerns about defaults and resulting losses.

As mentioned, if only a quarter or even less of this amount were downgraded we would still harbor grave concerns for corporate bond prices, as the supply could not easily be absorbed by traditional buyers of junk.   

Recommendation

Investors should stay ahead of what might be a large event in the corporate bond market. We recommend corporate bond investors focus on A-rated or solid BBB’s that are less likely to be downgraded. If investment grade investors are forced to sell, they will need to find replacement bonds which should help the performance of better rated corporate paper. What makes this recommendation particularly easy is the fact that the current yield spread between BBB and A-rated bonds are so tight. The opportunity cost of being wrong is minimal. At the same time, the benefits of avoiding major losses are large. 

With the current spread between BBB and A-rated corporate bonds near the tightest level since the Financial Crisis, the yield “give up” for moving up in credit to A or AA-rated bonds is a low price to pay given the risks. Simply, the market is begging you not to be a BBB hero.

Data Courtesy St. Louis Federal Reserve

Summary

The most important yet often overlooked aspect of investing is properly recognizing and quantifying the risk and reward of an investment. At times such as today, the imbalance between risk and reward is daunting, and the risks and/or opportunities beg for action to be taken.

We believe investors are being presented with a window to sidestep risk while giving up little to do so. If a great number of BBB-rated corporate bonds are downgraded, it is highly likely the prices of junk debt will plummet as supply will initially dwarf demand. It is in these types of events, as we saw in the sub-prime mortgage market ten years ago, that investors who wisely step aside can both protect themselves against losses and set themselves up to invest in generational value opportunities.

While the topic for another article, a large reason for the increase in corporate debt is companies’ willingness to increase leverage to buy back stock and pay larger dividends. Investors desperate for “safer but higher yielding” assets are more than willing to fund them. Just as the French were guilty of a false confidence in their Maginot Line to prevent a German invasion, current investors gain little at great expense by owning BBB-rated corporate bonds.

The punchline that will be sprung upon these investors is that the increase of debt, in many cases, was not widely used for productive measures which could have strengthened future earnings making the debt easier to pay off. Instead, the debt has weakened a great number of companies.

Published:5/22/2019 10:07:36 AM
[Markets] The Margin: Here’s the new trailer for the film that got a 6-minute standing ovation in Cannes Quentin Tarantino is used to adoration from Hollywood insiders, but what happened in Cannes was some next-level love.
Published:5/22/2019 10:07:36 AM
[Markets] Wall Street edges lower on fresh trade concerns; Qualcomm drags techs The reports come after Washington's decision to temporarily ease curbs on Huawei Technologies calmed investors nerves on Tuesday over a hit to technology sector earnings from the Trump administration's decision last week to add the Chinese telecoms equipment maker to a trade blacklist. Qualcomm Inc plunged 10.1%, contributing the most to a 0.43% drop in the S&P 500 technology sector. The S&P 500 was down 10.21 points, or 0.36%, at 2,854.15 and the Nasdaq Composite was down 25.62 points, or 0.33%, at 7,760.10. Published:5/22/2019 9:40:15 AM
[Markets] Why Stocks Stubbornly Refuse To Sell Off Despite The Escalating Trade War

While stocks are modestly lower overnight as "risk-off" returns, pushing yields and commodities lower and the VIX and gold higher, on one or more of the following catalysts - take your pick - listed by Nomura's Charlie McElligott:

  • More trade war noise / rhetoric—Xi’s “New Long March” commentary, but particularly Mnuchin “no plans to go to Beijing yet” headline—which makes tariff imposition likely
  • US consumer concerns around outlook cuts from Nordstrom and Lowe’s
  • QCOM blow-up -12.5% on anti-trust ruling from FTC (crowded / favorite HF name)
  • Brexit again devolving with May “toast”
  • The DoJ recommending to block the Sprint / T-Mobile deal

... the question remains why do markets continue to stubbornly selloff and reprice lower even as the probability of a drawn out, lengthy trade war with China, as neither Trump nor Xi will be willing to de-escalate absent a major market (or economic) shock lower, is now effectively 100%.

One possible explanation for this recurring refusal to drop suggested by McElligott (besides the now daily ramp in stocks at the open of trading) is a number of flow catalysts for "rolling squeezes" in Equities despite what the Nomura strategist calls "the deteriorating macro & trade — where despite the now very ‘neutral’ current options-implied Gamma & Delta profile of the market we see"...

  1. the recent bulking-up of Shorts and reduction of Nets (1Y + lows) from Leveraged Funds act as potential “upside risk” demand catalysts—especially with
  2. Nomura's CTA models across Global Equities “well within” reach of COVERING levels in Russell, Eurostoxx, Nikkei, DAX, FTSE, CAC, Hang Seng / Hang Seng CH and KOSPI (while also near re-leveraging in critical SPX and Nasdaq, as well as Bovespa)—and while
  3. the bank's Risk Parity model estimates exposure to US Equities futures at 26m lows—meaning there is plenty of room to add from systematic / vol-sensitive buyers—all at a time where
  4. VIX roll-down strategies are again in position to sell vol with the term structure back neatly in contango, while we are also seeing
  5. the gradual return of systematic vol sellers (i.e. put underwriters)—which not only means pressure on vol, but also then creates dealer Delta to “buy”

Digging into the technical and positional reasons for the continued levitation despite deteriorating sentiment, Nomura charts the latest market "Greeks" (see below) and highlights that "the SPX / SPY combined $Delta is now effectively “Neutral” at just -$13.4B (27th %ile since 2014) and with the SPX / SPY options Delta position vs Spot near “flip” level at 2866; for QQQ the $Delta position too is just -$4.4B (12th %ile since ’14)"

At the same time, "the profile for SPX/SPY- and QQQ-options Gamma has changed meaningfully over the past week+ as well, with 1) the total notional $Gamma sum dropping significantly to VERY low historic %iles while also 2) the current spot location sees the overall Dealer Gamma profile at effectively “Neutral” (vs its recent “Negative Gamma” location)",

  • SPX / SPY $Gamma just 20.8th %ile since 2014; QQQ just 17.5th %ile since 2014
  • SPX / SPY combined Gamma per 1% move vs Spot at “Neutral” position, with Spot essentially “at” the flip zone (@ 2871 including this week’s expiry; 2876 without this week’s expiry)

Finally, McElligott calculates that the two largest notional Gamma strikes in SPX/SPY consolidated options have spot “surrounded”, with the lower 2800 strike has $4.2B of Gamma, while the upper 2900 strike has $4.6B, serving as yet another source of "gamma gravity" around 2,850.

There is another reason for the lack of a selloff: the recent increase in shorts (at least according to Nomura, other sellside sources fail to find such a development) by leveraged funds has prompted fears of a short squeeze. Here are Nomura's observations:

  • Leveraged Funds actually ADDED to their US Equities futures shorts last week with -$9.6B of incremental notional selling WoW across SPX -$6.4B, NDX -$3.1B and RTY -$100mm
  • Our intraday implied price distribution for SPX saw “real” shifts towards higher strikes yday, particularly for this Friday’s expiry:

It's not just leveraged/hedge funds who have turned short: according to the Nomura QIS CTA model, there has been a "powerful blast of CTA deleveraging over the course of May, with Russell, Eurostoxx, Nikkei, DAX, FTSE, CAC, Hang Seng, Hang Seng Ch and KOSPI all flipping outright -100% Short—while SPX and NDX have reduced the size of their ‘long positions’ (although SPX and NDX are still the remaining ‘long’ holdouts along with ASX and Bovespa)"

The danger to McElligott, is this: the majority of the Equities futures we follow are well-within range of their “trigger” levels to COVER shorts or re-leverage longs (PARTICULARLY in global risk appetite indicators SPX and NDX).

Putting all this together, McElligott - who one should note has been predicting that a squeeze-driven melt up in stocks is likely - doubles down on his narrative, noting that the factors listed above "are at risk of providing new “mechanical” sources of covering / buying demand for stocks in coming weeks, despite the clear degradation of the US / China trade situation."

His conclusion, "expect the sideways chop to continue despite this macro deterioration", which of course is without a sharp drop in equities, the probability of a push to compromise in the trade war is nil. Meanwhile, the longer trade war continues - without the market noticing - the more the imbalances will build up, eventually leading to a far more painful collapse in risk, once markets can no longer ignore what is happening to the global economy.

 

 

 

Published:5/22/2019 9:40:15 AM
[Markets] Best New Ideas in Retirement: The new math of saving for retirement may boil down to this one, absurdly simple rule Why you should be saving at least 10% of your salary.
Published:5/22/2019 9:40:14 AM
[Markets] Dow slips at opening bell as Wall Street awaits Fed minutes Dow slips at opening bell as Wall Street awaits Fed minutes Published:5/22/2019 9:08:33 AM
[Markets] The Boycott Begins: Chinese Company Orders Employees To "Stop Using American Products, Eating At KFC"

In a harbinger of what's to come as the US-China trade war gets worse by the day, a Chinese company has told all of its employees to boycott American products and halt international travels to the U.S., reported The Epoch Times.

Jinggang Motor Vehicle Inspection Station notified all employees last Thursday, May 16 that the use of iPhones, driving in American automobiles, eating at American fast food restaurants, using American household products, and even traveling to the U.S. was forbidden by a new company policy; any employee who violated the new rules would be fired. Here are some excerpts from the notice:

"Employees are prohibited from purchasing or using iPhones; instead, they are recommended to use Chinese domestic brands of cell phones, such as Huawei.

"Employees are not allowed to purchase vehicles made by China-U.S. joint venture automakers. They are recommended to purchase 100 percent Chinese-made vehicles.

"Employees are forbidden to eat at McDonald's or Kentucky Fried Chicken. They are not allowed to purchase P&G [Proctor and Gamble, a U.S. maker of household products], Amway [U.S. maker of health and beauty products], or any other American brands. Employees must not go to the United States as a tourist."

The company's memo was emailed to employees several days after state-run newspaper Global Times published an editorial piece that called on the Chinese public to "fight a people's war" against the U.S.

As a result of a prolonged trade war with the U.S., the company said: "To help our country win this war, company authorities have decided that all employees must immediately stop purchasing and using American products."

The Times said the notice went viral on Chinese social media platforms: "Computers should be banned as well, because it is a U.S. invention," one Chinese internet user said. Another said: "Stop using the Windows operating system, everyone."

However, some Chinese internet users thought it was ridiculous to ban American products.

Earlier this week, people across China called for an immediate boycott of Apple products after the Trump administration targeted Huawei. Trump signed an executive order last week that prevented U.S. firms from buying Chinese telecommunication equipment. Then in a separate announcement, the administration banned Huawei from buying U.S. chips without government approval.

On Weibo, users reacted to the deepening trade war and pressure on Huawei by denouncing iPhones. "The functions in Huawei are comparable to Apple iPhones or even better. We have such a good smartphone alternative; why are we still using Apple?" wrote one user.

"I feel guilty watching the trade war. Once I have money I will change my smartphone," said another user.

"I think Huawei's branding is amazing, it chops an apple into eight pieces," said another post.

Some Weibo users called for a boycott of U.S. chips. "Trump doesn't allow companies to use Huawei, then let's not use Apple. We shouldn't buy any phone that uses Qualcomm as well," one angry user said.

The ban against Huawei comes days after the Trump administration increased tariffs to 25% on $200 billion of Chinese products. In a tit-for-tat effort, China slapped a 25% tariff on $60 billion worth of American products that go into effect June 1.

Another report showed a restaurant in China was charging a tariff to only American customers. An English translation of the sign read: "From now on, our store will charge 25% service fee (tariff) to American customers. If you don't understand, please consult the American Embassy!"

Earlier this week, we reported that CCTV 6, the movie channel of China's leading state television broadcaster, recently aired three anti-American movies.

The three movies are Korean war films: Heroic Sons and Daughters (1964), Battle on Shangganling Mountain (1954), and Surprise Attack (1960).

All last week, anti-American propaganda flourished across the country, with the slogan "Wanna talk? Let's talk. Wanna fight? Let's do it. Wanna bully us? Dream on!" going viral on Chinese social

Another report from Tuesday showed how a song titled "Trade War," has gone viral on one the largest Chinese social media platforms. The song begins with a chorus singing "Trade war! Trade war! Not afraid of the outrageous challenge! Not afraid of the outrageous challenge! A trade war is happening over the Pacific Ocean!"

As has been the case during previous trade feuds, nationalist sentiment is spreading throughout China, which with foreign markets closing off, may be the only Trump - no pun intended - card left for China's economy, where even a modest hiccup could lead to recession. Meanwhile, while it is debatable if anyone wins a trade war, the escalating collapse in existing supply chains will only get much worse before it gets better, and will likely lead to a global trade recession or even a depression, which as we showed last week...

... may have already started.

Published:5/22/2019 9:08:33 AM
[Markets] The Dow Is Dropping as Market Awaits Evidence That the Fed Is Still on Its Side 6:44 a.m. The Dow Jones Industrial Average looks set to open little changed as the market waits for the minutes from the last FOMC meeting. Dow futures have dipped 9 points, while S&P 500 futures have declined 0.1%, and Nasdaq Composite futures have 0.2%. The stock market hasn’t dropped all that much since the trade was escalated this month, and one reason is because investors are betting that the Federal Reserve will cut rates if necessary. Published:5/22/2019 9:08:33 AM
[Markets] Syrian Rebels Attack Russian Air Base In Major Offensive

Some 500 Nusra-front militants, accompanied by seven tanks and about 30 pickup trucks armed with mounted heavy machine guns launched three major offensives against government troops in Idlib province on Wednesday, the Russian Defense Ministry said.

Syria

The counterattack focused on the town of Kafr Nabudah, which was recently captured by the Syrian government.

Militants also launched a missile attack on Russia's Hmeymim air base on Wednesday, but nine of the missiles were shot down, and another 8 didn't reach their target, the ministry added.

Northwest Syria, which runs along Syria's border with Turkey, is home to the last remaining rebel strongholds, including a swath of land dominated by the Al Qaeda-linekd Nusra Front, which has adopted a new name, Tahrir al-Sham, Haaretz reports.

The increase in shelling in the region has led to the displacement of 180,000 people, while the increase in shelling marked the most intense period of fighting between Bashar al-Assad and the rebels

Syria

According to RT, more than 150 rebels were killed during the morning offensive. Three tanks were destroyed, while 24 trucks mounted with heavy guns were also destroyed in the fighting.

Published:5/22/2019 8:40:14 AM
[Markets] Qualcomm Stock Dives as the Dow Heads Lower STOCKSTOWATCHTODAY BLOG Downdraft: Stocks will likely be starting out the day with losses. Futures on the S&P 500 were off by 0.4% shortly before the market was due to open as lingering trade tensions and some disappointing earnings results from the retailers weighed on sentiment. Published:5/22/2019 8:40:14 AM
[Markets] London Markets: London markets climb as end of May era looms The flagging prospects of Theresa May’s deal may bring an end to the Brexit deadlock
Published:5/22/2019 8:40:13 AM
[Markets] Computer glitch plagues Deutsche Bank's suspicious-activity scan Computer glitch plagues Deutsche Bank's suspicious-activity scan Published:5/22/2019 8:10:31 AM
[Markets] Cable Collapse Continues As May's 'New Deal' Flops, Farage Soars

Cable has plunged almost 2 full handles from the post-May-'New Deal' hope of yesterday afternoon as it's increasingly clear her latest and last gambit is dead on arrival...

Bloomberg reports that Theresa May is facing pressure to abandon her Brexit deal and quit as British prime minister within days, according to people familiar with the matter. Several senior government officials said they were shocked that the premier’s new offer intended to win votes in Parliament for her European Union divorce agreement had been so badly received so quickly.

Which just goes to show how disconnected from reality they are. FX traders, however, were not surprised...

Dragging sterling to its weakest level of 2019...

Early year hopes of avoiding a hard Brexit are dashed by the combination of May's failure and the rising euroskeptic sentiment across Britain (and Europe).

As Mike Shedlock notes, Nigel Farage's Brexit Party is on a stunning roll. That's what happens when you take a firm position the public favors.

The final YouGov poll on the European Parliament elections for the UK is in.

Some will be shocked. I am not.

Beyond Embarrassment

Theresa May truly embarrassed herself today.

Her Meaningful Vote 4 Speech Flopped Splendidly.

She tried to reach out to everyone at the same, offending everyone. May has changed her tune so many times, who the hell even knows what she wants?

The best summation I can come up with is "Any deal is better than no deal".

Labour

Please be serious.

Jeremy Corbyn is just like Theresa May. He wants to "honor" Brexit, by not doing it.

Two Peas in a Pod

Corbyn is simultaneously for and against another referendum, just like Theresa May!

Despite how they pretend, they are in bed with each other.

Another Poll Needed

YouGov needs another poll: Who is more pathetic? Theresa May or Jeremy Corbyn?

From where I sit, it's a close call.

*  *  *

Finally, as Human Events reports, Farage has pledged to field a “full 650 candidates” when Britain has its next general election. The talk behind the scenes at Brexit Party gatherings, is of what a government might look like if Farage and his band of brothers (and sisters) held the balance of power after an election.

Long-term euroskeptic and former President of the Czech Republic, Vaclav Klaus, sums things up well:

"As I look at it from Prague, the British main political parties totally failed, and betrayed and abandoned the British citizens, their own voters. It had, however, one positive side effect: by behaving in this way, they probably and unwillingly created the Brexit Party...

...Dear Brexit friends, you should in the forthcoming elections give the whole rest of Europe a good example. Many Europeans need it, and many are waiting for it. Don’t disappoint them.

Read more here...

Published:5/22/2019 8:10:31 AM
[Markets] Stock Futures Slump On Trade, Antitrust News; Target Surges Target and Advance Auto were standouts, rising as stock futures slumped Wednesday and the stock market awaited Federal Reserve minutes. Published:5/22/2019 8:10:31 AM
[Markets] Best New Ideas in Retirement: The retirement community of the future may be more like a WeWork The sharing economy shakes up a new industry — senior housing.
Published:5/22/2019 8:10:31 AM
[Markets] Apple's EPS at risk of 29% hit if its products are banned in China, Goldman says Apple Inc.'s per-share earnings are at risk of shrinking by about 29%, or $3.35, if its products are banned in China in retaliation for measures taken by the U.S. government against Huawei, Goldman Sachs said Wednesday. "This represents 100% of estimated Apple earnings exposure to Mainland China and Hong Kong combined with some offset assumed for Sales & Marketing cost savings," analysts led by Rod Hall wrote in a note to clients. Based on the company's own disclosures, Apple's sales into Mainland China made up about 96% of total Greater China sales in 2013 and 2014; the company stopped making disclosures after 2015, but Gartner data suggests about 39 million iPhone shipments in Greater China in 2019, 83% of which went to Mainland China, 13% to Hong Kong and less than 5% to Taiwan. There is also risk for the company in its supply chain, most of which is based in mainland China, including the final assembly of the iPhone at Foxconn facilities. "We are not assuming restrictions on iPhone production in Mainland China at this point. Should China restrict iPhone production in any way we do not believe the company would be able to shift much iPhone volume outside of China on short notice, though actions that would push Apple production outside of China could have negative implications for the China tech ecosystem as well as for local employment," said the note. Goldman rates the stock as neutral and cut its price target to $178 from $184. Shares were down 1.4% premarket, but have gained 18% in 2019, while the Dow Jones Industrial Average , which counts Apple as a member, has gained 11% and the S&P 500 has gained 14%. Published:5/22/2019 7:39:36 AM
[Markets] China ban could reduce Apple earnings per share by 29%: Goldman Sachs China ban could reduce Apple earnings per share by 29%: Goldman Sachs Published:5/22/2019 7:39:36 AM
[Markets] Nenner: If Deutsche Breaks $6.40 "The World Is In Trouble"

Via Greg Hunter’s USAWatchdog.com,

Renowned geopolitical and financial cycle expert Charles Nenner says if there was ever a global canary in the coal mine warning for the financial system, it is Germany’s Deutsche Bank (DB). Late last year, Nenner predicted if DB stock went below $8 a share, “You should be worried.” Recently, DB stock hit all-time lows and now sits around the $7.40 per share level.

Nenner warns, “I see it can hold up to late July, and then it can go to $6.50 (per share)..."

"If it breaks below $6.40, it can go out of business. So, it’s a very serious situation... I think all the markets can have a bounce in a couple of days to the end of July. That’s why DB might hold up, but if it gets below $6.40, the world is in trouble.

This is not a hyped prediction considering the IMF called DB the “most systemically dangerous bank” in the world in 2016. If DB does break $6.40, do we get a daisy chain of default around the world? Nenner says:

It is a very dangerous situation. I don’t think DB is the only one. They just got caught. I think if you look at the balance sheets very closely of other banks, especially Europe and Italian banks, you will see a lot of troubling signs also. I don’t think it’s only Deutsche Bank. It’s much more...

If it breaks $6.40, the downside price target is zero. If everybody watches my analysis and it does go below $6.40, everybody is going to run for the exits.”

If DB goes under with its massive book of derivatives, other banks would be in the same trouble as DB. Nenner says,

“Yes, if they have to close their derivatives, who knows which bank is going to lose how much? It’s going to be a big problem.”

On interest rates, Nenner says,

“At the end of the summer, or let’s say at the end of July, we are going to have a long term rise in interest rates for a couple of years.”

On gold, Nenner says,

A lot of people don’t know that a lot of bull markets in gold are in a deflationary period. We are looking for a long term bull market for a couple of years to come, maybe until 2024. We are fine tuning it, but we are going to go short in the middle of the summer the bonds and go long the gold. I don’t think the weakness in stocks is going to go to the usual September, October and November time period. I think, after July, it will start to be difficult.”

Nenner thinks the stock market will bottom out in the year 2022, and the path from here is mostly down according to his cycles.

In closing, Nenner says,

Gold prices and silver prices will go up. It’s early, and it’s better to get in early instead of when it’s exploding, and everybody knows you have to now be in gold. It’s always the clever money that is basing their money into gold stocks. The price is going much higher. Remember, my upside price target is $2,500. Right now, it is $1,270, and $2,500 is a substantial move in gold.

Join Greg Hunter as he goes One-on-One with financial and geopolitical cycle expert Charles Nenner.

To Donate to USAWatchdog.com Click Here

Published:5/22/2019 7:39:36 AM
[Markets] Affimed shares slide as biotech to end cancer program, focus on innate immunity Affimed shares slide as biotech to end cancer program, focus on innate immunity Published:5/22/2019 7:09:36 AM
[Markets] Dressbarn put out to pasture as Ann Taylor parent Ascena tries to grow Ascena Retail, whose portfolio also includes Ann Taylor, announced plans to close all 650 Dressbarn stores.
Published:5/22/2019 7:09:36 AM
[Markets] "Far Less Competent Than A Human": Consumer Reports Slams Tesla's Autopilot

At a time when the safety of Tesla's Autopilot driver-assistance technology is under growing scrutiny, following a former NHTSA head calling for a recall and several fatal  accidents associated with Autopilot, the influential Consumer Reports has weighed in with their take on the company's Navigate feature, a lane changing assistance feature included with the latest Autopilot update. What Consumer Reports found was that Tesla's automated software was "far less competent than a human driver".

Tesla's recent Autopilot update was supposed to allow certain cars to automatically change lanes in an attempt to make driving "more seamless". But Consumer Reports refuted the narrative, instead saying that the feature simply "doesn’t work very well and can create potential safety risks for drivers."

The feature was added last month as part of a promised upgrade to a package of driver assist features. To use it, the driver essentially gives the car permission to make its own lane changes and can cancel an automated lane change at any time by using the turn-signal stalk, braking, or holding the steering wheel in place.



The independent test found that the Navigate feature "lagged far behind a human driver’s skill set."

The report found that the feature cut off cars without leaving space and even passed other cars in ways that violate state laws. As a result, the driver often had to intervene and prevent the system for making poor decisions.

Jake Fisher, Consumer Reports’ senior director of auto testing slammed the technology: 

“The system’s role should be to help the driver, but the way this technology is deployed, it’s the other way around. It’s incredibly nearsighted. It doesn’t appear to react to brake lights or turn signals, it can’t anticipate what other drivers will do, and as a result, you constantly have to be one step ahead of it."

CR said that multiple testers reported that the Tesla "often changed lanes in ways that a safe human driver would not—cutting too closely in front of other cars, and passing on the right." The article also expressed concern about Tesla's claims that three rearward-facing cameras could detect fast approaching objects.

Fisher continued: "The system has trouble responding to vehicles that approach quickly from behind. Because of this, the system will often cut off a vehicle that is going a much faster speed since it doesn’t seem to sense the oncoming car until it’s relatively close."

Fisher also said that merging is an issue for the software: “It is reluctant to merge in heavy traffic, but when it does, it often immediately applies the brakes to create space behind the follow car—this can be a rude surprise to the vehicle you cut off.”

"In essence, the system does the easy stuff, but the human needs to intervene when things get more complicated," Fisher continued.

From a legal standpoint, the testers also had concerns. Several testers experienced Navigate initiate a pass on the right on a two-lane divided highway, a move that could result in a ticket for an "improper pass" in some states. It also failed to return to the right-hand travel lane after making a pass several times, testers said. 

Dorothy Glancy, a law professor at Santa Clara University School of Law in California who focuses on transportation and automation stressed the fact that automated driving software must be programmed to follow local laws. 

She said: “One of the issues we lawyers are looking at is the obligation of autonomous vehicles to obey all traffic laws where the vehicle is being used. That can get tricky when there are variations from area to area, even within a state—for example, municipal speed limits.”

Shiv Patel, an automotive analyst at market research firm ABI Research said he believes that Tesla's hardware is operating near full capacity: “I would say that Navigate on Autopilot would be pushing the upper limits of what could be achieved with the current computer hardware in the vehicle.” 

The review then goes on to state the obvious: despite Tesla promising will have full self driving next year, their experience with Navigate suggests it will take longer.

Aside from the massive safety risks associated with Autopilot that we have been sounding the alarm on for years, could it also be that two more Elon Musk promises - self driving next year and millions of robotaxis on the road - may (gasp) wind up not materializing? While we won't be surprised, Tesla cultists investors who still believe in Musk very well may be. 

Published:5/22/2019 7:09:36 AM
[Markets] Exclusive: Facebook sticks to global ban on promoting marijuana on platform Exclusive: Facebook sticks to global ban on promoting marijuana on platform Published:5/22/2019 6:38:13 AM
[Markets] Qualcomm Shares Crash After Losing Landmark Anti-Trust Case

Just weeks after Qualcomm secured a clear victory in its long-running legal battle with Apple, sending the chipmaker's shares rocketing higher, a federal judge in San Jose ruled against the company in a high-profile anti-trust lawsuit that could seriously disrupt Qualcomm's business model.

The decision sent Qualcomm shares plunging as much as 11% in premarket trade, erasing half of its gains from the Apple settlement.

Qualcomm

The decision sided with the FTC, which initially sued Qualcomm back in January 2017. Released late Tuesday, the decision, handed down by US District Judge Lucy Koh, found Qualcomm violated anti-trust laws by charging unreasonably high royalties for its patents. Koh challenged the company's practice of collecting chip royalties based on a smartphone's price, according to WSJ.

The judge ruled that Qualcomm's licensing practices had "strangled competition" in "key parts" of the chip market.

President Trump's decision to add Huawei to a US 'blacklist' hammered chip stocks earlier in the week. More bad news was the last thing Qualcomm investors needed.

Published:5/22/2019 6:38:13 AM
[Markets] Need to Know: Rare bullish S&P 500 move that has occurred only 16 times in the past 70 years is flashing green Our chart of the day, from Chris Ciovacco, founder and chief executive officer of Ciovacco Capital Management, cites a rare technical moves that points to two more years of gains for the S&P 500.
Published:5/22/2019 6:38:12 AM
[Markets] Lowe's stock tumbles after profit missed expectations, full-year guidance slashed Shares of Lowe's Companies tumbled 10% in premarket trade Wednesday, after the home improvement retailer missed fiscal first-quarter profit expectations and slashed its full-year outlook. Net income for the quarter to May 3 rose to $1.05 billion, or $1.31 a share, from $988 million, or $1.19 a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share came to $1.22, below the FactSet consensus of $1.33. Net sales rose to $17.74 billion from $17.36 billion, above the FactSet consensus of $17.64 billion, and same-store sales growth of 3.5% beat expectations of a 3.0% increase. Gross margin fell to 31.46% of sales from 33.11%. For fiscal 2019, the company cut its adjusted EPS guidance range to $5.45 to $5.65 from $6.00 to $6.10, but affirmed its net sales and same-store sales outlooks. Chief Executive Marvin Ellison said that while the same-store sales performance showed that the consumer is healthy, "the unanticipated impact of the convergence of cost pressure, significant transition in our merchandising organization, and ineffective legacy pricing tools and processes led to gross margin contraction in the quarter which impacted earnings." The stock has rallied 20.3% year to date through Tuesday, while the SPDR S&P Retail ETF has gained 5.1% and the Dow Jones Industrial Average has advanced 10.9%. Published:5/22/2019 6:06:39 AM
[Markets] Thiel-Backed Crypto Startup Pays Out Staggering 6,567% Return

A crypto startup backed by legendary VCs Peter Thiel, Alan Howard and Louis Bacon is buying back shares from its seed investors in a round of 'share buybacks' that will massively inflate its valuation - at least on paper.

Block.one, a crypto startup that raised $4 billion during one of the most successful ICOs in history, has decided to pay back (some might say pay off) its earliest investors by buying back their shares - initially purchased for about $22.50 - for $1,500. That's a staggering 6,567% return, spread across two years. By comparison, bitcoin climbed 1,900% between the beginning of 2017 and its peak in December.

While it once promised to build a new 'secure' version of the Internet, Block.one hasn't done much with its massive mountain of capital. Aside from a few venture investments, the company has invested the bulk of its capital in Treasury bonds and a portfolio of cryptocurrencies.

Thiel

Peter Thiel

Block's founders insist that the money is being put to good use. The company is building out its new 'secure' version of the Internet, as well as a social media product that the company plans to release in June. The company has also made $174 million in venture investments, a fraction of the $1 billion in investments it has pledged to make.

Still, critics have accused CEO Brendan Blumer of creating a vehicle to 'hoover up' investors' money'.

"They designed a very clever mechanism to hoover up as much capital as possible," said Richard Burton, San Francisco-based founder of Balance.io, a blockchain company that designs applications for open source financial products. "Bitcoin was started on a shoestring and Ethereum raised just a few million dollars, which goes to show you don’t need anything like the money Block.one raised to launch and scale a successful network. It should be beholden on them to explain why they needed that much and what they are doing with it."

So as Blumer tries to defend his reputation, he has apparently hit on the strategy of a stock 'buyback' that will value the company at $2.3 billion, up from a $40 million valuation from its 2017 seed round.

Block has tried to portray the buyback as a bid for legitimacy, but there are some who aren't convinced.

"A private buyback of this sort signals to me that the company believes that there are few growth opportunities in sight, or badly wants to consolidate ownership and avoid outside scrutiny," said Nic Carter, a partner who focuses on blockchain at investment firm Castle Island Ventures in Boston. It has not invested in Block.One or EOS tokens.

We wonder: Will 'share buybacks' or 'token buybacks' become a sign that high-flying ICOs that raised hundreds of millions, or billions, off the strength of a white paper and a convincing pitch have given up on their ambitions? Unfortunately for those who bought in during the token sales, not everybody can receive a payout at a massive premium. If anyone walks away with a profit, it will be the biggest valley players who bought in on the best terms.

Published:5/22/2019 6:06:39 AM
[Markets] Target's stock jumps 8% premarket after retailer's results top expectations Target's stock jumps 8% premarket after retailer's results top expectations Published:5/22/2019 6:06:39 AM
[Markets] Nordstrom stock slides as sales miss extends retail rout Nordstrom Inc. stock falls more than 9% in the extended session Tuesday after the retailer reports first-quarter sales below Wall Street expectations, admits to missteps with its customers, and trims its outlook for the year.
Published:5/22/2019 6:06:39 AM
[Markets] Qualcomm down 10% premarket as chip maker found to violate antitrust law Qualcomm down 10% premarket as chip maker found to violate antitrust law Published:5/22/2019 5:36:50 AM
[Markets] Airlines gear up for record number of passengers this summer — and crowds More people are poised to take advantage of low fares.
Published:5/22/2019 5:36:50 AM
[Markets] Washington Weighs Blacklisting Of Up To 5 Chinese Surveillance Firms

Before markets could finish shrugging off their losses from overnight, another wave of troubling trade news has arrived to sour the trading mood.

Not only is Washington weighing whether to impose restrictions on Hangzhou Hikvision Digital Technology - a CCTV company that's the largest supplier of video surveillance equipment for Beijing's indomitable security apparatus - as was reported last night, but four other Chinese firms might also find their way onto the "Entities List," Washington's blacklist. Like Huawei(which has been put on a temporary hold), the restrictions being considered would cut off the flow of critical American components to as many as five companies.

The only other firm named by Bloomberg was Zhejiang Dahua Technology, another supplier for the Chinese security state, along with "several unidentified others." All the firms are said to be security-focused.

Shares of both companies led Chinese markets lower on Wednesday, wiping billions of dollars of wealth for the tycoons behind both companies.

Any action taken against these two companies would constitute the first actions to cripple China's security apparatus, which has drawn international condemnation over the imprisonment of 1 million ethnic Uyghurs in the far-West Xinjiang province. Both companies have been accused of facilitating Beijing's repressive activities, according to human rights groups, and Hikvision, the industry leader in Chinese security, has begun selling its cameras abroad. These cameras are capable of using facial recognition technology on a vast scale.

China

Reports about Washington's plans, rattled Chinese stocks in afternoon trading, with the small-cap ChiNext gauge recording the biggest drop (1.1%), while the Shanghai Composite also skidded (0.7%). The Japanese yen strengthened against most G-10 rivals.

For an idea of how Beijing would react to more bans, remember: Blacklisting one company prompted President Xi to herald the beginning of a "new Long March". A trade war "fight song" has gone viral across China. Another escalation from the US would only help cement the widely held notion that Trump is deliberately trying to 'contain' China, unleashing another wave of fervent trade-war nationalism.

It's still unclear whether more companies will join Huawei on the "Entities List", which blocks the sale of American technology to a given firm without special permission. Washington has rooted its attacks on Huawei as a matter of 'national security', as Washington fears most of these firms would assist Beijing in global espionage.

In response to the reports, Global Times editor Hu Xijin warned that China would adapt to more hostility to the US.

We imagine we'll be hearing more from Beijing soon.

Published:5/22/2019 5:15:01 AM
[Markets] Caroline Baum: The Fed should put up or shut up on its inflation undershoot To think that central bankers have no idea how to create inflation is nothing short of stunning, says Caroline Baum.
Published:5/22/2019 5:15:00 AM
[Markets] Tesla Stock Could Plummet to $10, According to a Dire Morgan Stanley Scenario Tesla stock is down 38% year to date, far worse than the 10% gain of the Dow Jones Industrial Average and a 1% gain in the Russell 3000 Auto & Auto Parts Index. Published:5/22/2019 4:39:36 AM
[Markets] Charts suggest there could be a bull market in gold after eight lean years Trend-line resistance has been overcome, and trend-line support has been affirmed, says Sven Henrich.
Published:5/22/2019 4:39:36 AM
[Markets] Buchanan: Has The Day Of The Nationalists Come For Europe?

Authored by Patrick Buchanan via Buchanan.org,

Next week, Europeans may be able to gauge how high the tide of populism and nationalism has risen within their countries and on their continent.

For all the returns will be in from three days of elections in the 28 nations represented in the European Parliament.

Expectation: Nationalists and populists will turn in their strongest performance since the EU was established, and their parliamentary group — Europe of Nations and Freedom — could sweep a fourth of the seats in Strasbourg.

Nigel Farage’s new Brexit Party is predicted to run first in the British elections, winning two to three times the votes of the ruling Tory Party of Prime Minister Theresa May.

In France, Marine Le Pen’s National Rally is running even with the party of President Emmanuel Macron, who pleads for “more Europe.”

Matteo Salvini, interior minister and leader of the League, predicts his party will finish first in Italy and first in Europe.

At Salvini’s invitation, a dozen nationalist parties gathered in Milan this weekend. A week from now, they could be the third-largest bloc in the European Parliament. If so, their gains will come at the expense of the center-left and center-right parties that have dominated European politics since World War II.

Speaking before tens of thousands in front of Duomo Cathedral in Milan, Salvini threw back in the faces of his enemies the taunt that these new parties are rooted in the old ugly politics of the 1930s.

“In this piazza, there are no extremists. There are no racists. There are no fascists. … In Italy and in Europe, the difference is between … those who speak of the future instead of making trials of the past.”

Tomorrow versus yesterday, says Salvini.

While the European establishment draws parallels between the populist parties of the present and what happened in the 1930s, it fails to recognize its own indispensable role in generating the mass defections to the populist right that now imperil its political hegemony.

The populist-nationalist parties are energized and united by both what they detest and what the EU has produced.

And what is that?

They resent the inequities of the new economy, where the wages of the working and middle class, the core of the nation, have fallen far behind the managerial class and the corporate and financial elites.

People who work with their hands, tools and machines have seen their wages arrested and jobs disappear, as salaries have surged for those who move numbers on computers.

The disparities have grown too great, as has the distance between national capitals and national heartlands.

Then there is immigration. Native-born Europeans do not welcome the new ethnic groups that have come uninvited in considerable numbers in recent decades, failed to assimilate and created enclaves that replicate the Third World places whence they came.

If one could identify a cry common to populists, it might be: “We want our country back!”

Whatever may be said of populists and nationalists, they are people of the heart. They love their countries. They cherish the cultures in which they grew up. They want to retain their own unique national identities.

What is wrong with that?

Patriotism is central to nationalist and populist movements. Globalism is alien to them. They believe in De Gaulle’s Europe of nation-states “from the Atlantic to the Urals,” not in the abstract Europe of Jean Monnet, and surely not in the Brussels bureaucracy of today.

The nation, the patria, is the largest entity to which one can give loyalty and love. Who would march into no man’s land for the EU?

Europe’s nationalists are not all the same. The ruling Polish Law and Justice Party disagrees on Putin’s Russia with the ruling Fidesz Party of Prime Minister Viktor Orban in Hungary.

While the EU Parliament does not possess great power, these elections are not without great meaning.

Consider Farage. Should his Brexit Party run first in Britain, how can the Tory Party not carry through on the 2016 vote to withdraw from the EU, without betraying its most loyal constituency on its most critical issue?

Nationalism in Europe is spreading, even deepening rifts between the premier powers in the NATO alliance.

Germany will not be reaching the promised 2 percent of GDP for defense President Donald Trump has demanded. And Berlin is going ahead with a second natural gas pipeline under the Baltic Sea to Germany from Russia, Nord Stream 2.

Turkey is taking possession of a Russian-built S-400 air defense system this summer, despite a U.S. warning that our sale of 100 F-35s will not go through if the Turks go forward with the Russian system.

Have the nationalists of Europe caught the wave of the future?

Or will the future see the revival of the idea of One Europe, a political and economic union that inspired the dreamers of yesteryear?

From here it looks like Matteo, not Macron.

Published:5/22/2019 4:11:11 AM
[Markets] Livability: A retirement dream come true: Living in Santa Fe, New Mexico This couple made a nearly spontaneous cross-country move to start fresh in this enchanting city.
Published:5/22/2019 4:11:11 AM
[Markets] Monsanto Spied On Both Sides Of Pesticide Debate In At Least 7 European Nations

New details have emerged about the recently revealed dossier(s) Monsanto, now owned by Bayer, compiled to sway public opinion on herbicides. The dossier(s) included people from 7 European states and potentially beyond, according to a new report by RT

Monsanto files reportedly listed prominent public figures who were opinionated on either side of the herbicide debate. The list included “stakeholders in France, Germany, Italy, Netherlands, Poland, Spain and the United Kingdom, as well as regarding stakeholders related to EU institutions.” 

Bayer says it has hired a law firm for the purpose of trying to determine whether similar lists exist in other states. 

Recall, about one week ago we reported that Bayer, which is being investigated by French prosecutors for compiling files of influential people such as journalists in France, likely did the same across Europe, suggesting a potentially wider problem.

French prosecutors said several weeks ago that they had opened an inquiry after newspaper Le Monde filed a complaint alleging that Monsanto - acquired by Bayer for $63 billion last year - had kept a file of 200 names, including journalists and lawmakers in hopes of influencing positions on pesticides. The list was said to be prepared by PR firm FleishmanHillard on behalf of Monsanto. 

“[We have] decided with the agency to end the collaboration in the areas of communication and public affairs for the time being,”  Bayer said, referring to PR firm FleishmanHillard.

Bayer acknowledged the existence of the files and said it does not believe any laws were broken.

It’s safe to say that other countries in Europe were affected by lists ... I assume that all EU member states could potentially be affected,” Matthias Berninger, Bayer’s head of public affairs and sustainability, told journalists about a week ago.

“When you collect non-publicly available data about individuals a Rubicon is clearly crossed,” regardless of whether data privacy laws were actually violated, he added.

Bayer said in its initial statement that it had "...no indication that the preparation of the lists under discussion violated any legal provisions."

The issue of the lists pales in comparison to the legal liability Bayer potentially faces after losing its third trial in a row over claims that its Roundup weed killer causes cancer. A jury recently awarded a total of $2 billion in punitive damages to a husband and wife over their Roundup-related cancer claims. 

Published:5/22/2019 3:39:00 AM
[Markets] Love & Money: Couples are savings thousands of dollars on their wedding day by buying used goods One couple met on an app that buys and sells used furniture — then used it to save $3,000 for their wedding.
Published:5/22/2019 3:38:59 AM
[Markets] Dow Futures Slip, Global Stocks Slide, Amid Report US Targeting More China Firms Global stocks drift lower as investors fade the impact of eased restrictions on Huawei to focus on slowing economic growth and rising geo-political risks. The New York Times reports the White House is reading to expand the number of Chinese firms on the so-called Entities List, a move that could escalate trade tensions between Washington and Beijing. Oil edges higher lower after a bigger-than-expected API build of 2.4 million barrels and a stronger U.S dollar, which is holding at near four-week highs against a basket of six global currencies. Published:5/22/2019 2:38:47 AM
[Markets] France Threatens Journalists With Jail Time For Exposing Government Lies About Yemen

Via Middle East Eye,

France has threatened three French journalists with potential jail time for using secret documents to reveal the country's involvement in the Yemen civil war. 

In a series of reports published in April, investigative journalists from Disclose and Radio France revealed the number of French arms sold to Saudi Arabia and the United Arab Emirates. 

The documents, authored by France's Directorate of Military Intelligence (DSGI), showed that senior French officials had lied about the role of French weapons in the Yemen War. 

Following the publication of the reports in April, Disclose's co-founders Geoffrey Livolsi and Mathias Destal and Radio France journalist Benoît Collombat were asked to attend a hearing at the DSGI headquarters in Paris. 

The three journalists refused to reveal their sources after being questioned by the DSGI on the origin of the document, their work and posts on Facebook and Twitter.

The journalists used the hearing to defend press freedom and how it was in the public interest to publish details from the leaked DSGI document. 

Press Freedom has been protected for more than 130 years under the Press Law of 1881, which gives journalists the right to keep sources confidential. 

But the law, however, does not cover national security and the journalists could be sentenced under a 2009 French law that considers as an offence the handling of a classified document without clearance or proper authorisation.

If convicted, the journalists could face five years in prison and a $83,000 fine. The case could be closed by the DSGI or be handed to a judge who could take the case to trial. 

France is ranked 32nd out of 180 countries in RSF’s 2019 World Press Freedom Index.

Paul Coppin, the head of Reporters Without Border's (RSF) legal unit, criticised the DSGI for attempting to prosecute the French journalists. 

In a statement published on the RSF website, Coppin described the case as a "matter of legitimate public interest".

"We are concerned that the sole aim of this hearing is to use the threat of prosecution to put pressure on these journalists to reveal their source," said Paul Coppin.

"As it is legally unable to force them to disclose the identity of their source, the prosecutor's office is using the possibility of a charge of compromising national defence secrecy, a charge punishable by five years in prison and a fine of 75,000 euros [$83,750].

"The mere fact of threatening such a prosecution for publishing information in the public interest would in itself constitute a serious violation of the public's right to be informed."

Yemen's civil war has killed or injured more than 17,900 civilians and triggered a famine that has taken the lives of an estimated 85,000 children.

Campaigners have argued that arms supplied by other Western countries, including the United States and Britain, have been used by the Saudi-led coalition to commit human rights abuses as they fight against Iran-backed Houthi rebels.

Published:5/22/2019 2:38:47 AM
[Markets] Futures Movers: Oil prices fall on signs of surprise U.S. inventory rise Oil prices fell Wednesday after data from the American Petroleum Institute showed a surprise jump in inventory supplies, ahead of supply numbers from the Energy Information Administration due later.
Published:5/22/2019 2:08:03 AM
[Markets] Asia stocks edge up as US-China trade tensions linger Markets in Asia traded cautiously in the afternoon. The U.S. temporarily backed off on restrictions on Chinese telecommunications giant Huawei, but trade tensions continued to linger. Markets in Asia were subdued on Wednesday afternoon as trade tensions continued to linger between the U.S. and China. Published:5/21/2019 11:36:14 PM
[Markets] Asia Markets: Asian markets cautious amid lingering trade tensions Asian stock markets were little changed in cautious early trading Wednesday, as lingering trade tensions weighed on traders.
Published:5/21/2019 10:35:08 PM
[Markets] The Wall Street Journal: Raheem Sterling wants racist soccer fans to face tougher penalties Manchester City forward Raheem Sterling called for tougher penalties in response to fans who yell racist abuse at players during soccer matches.
Published:5/21/2019 10:04:54 PM
[Markets] The Wall Street Journal: Sempra Energy strikes deal to sell liquefied natural gas to Saudi Arabia Saudi Arabia has agreed to purchase U.S. liquefied natural gas from Sempra Energy, a new strategic direction for the kingdom as it seeks to establish a footprint in the growing global market for the fuel.
Published:5/21/2019 9:34:49 PM
[Markets] Asia stocks subdued as US-China trade tensions linger Markets in Asia traded cautiously in the morning. The U.S. temporarily backed off on restrictions on Chinese telecommunications giant Huawei, but trade tensions continued to linger. Markets in Asia traded cautiously on Wednesday morning as trade tensions continued to linger between the U.S. and China. Published:5/21/2019 9:05:32 PM
[Markets] TaxWatch: More Americans believe it’s OK to cheat on your taxes, according to IRS poll The poll was published during an increasingly heated battle between President Trump and Congressional Democrats over his own tax returns.
Published:5/21/2019 8:34:29 PM
[Markets] Is Gold About To Go Full Bull?

Authored by Sven Henrich via NorthmanTrader.com,

Is Gold about to go full bull?

Let’s check some charts.

Before we do, some basic price facts: Gold peaked in 2011 just above $1900. Since then it’s been an exercise in dread for gold bugs (Disclosure: I have no position, not trading Gold myself). Gold bottomed in early 2016 and now it’s back in the same price range it’s basically been in since 2013.  So basically the price of Gold has gone nowhere over the past 6 years which could be interpreted as a consolidation range.

While the price chop may seem arbitrary we can however discern some structural conclusions on a larger time frame chart:

2 key trend lines:

  • A supporting trend line from the 2008 lows connecting the 2015/2016 lows and the 2018 lows. Price remains above this trend line.

  • A trend line that formed resistance off of the 2011 and 2012 highs and represented resistance in 2016 and initially in 2017. Price has broken above that trend line in 2017 and has remained ever since.

Bottomline: Trend line resistance has been overcome and trend line support has been affirmed. Combined these events are supportive of a potentially larger bullish outlook.

However price has really not make much progress. In the chart above one may identify a potential bull flag, that has risk back to the support trend line.

Taking a closer look we can see an additional pattern, and I present a structure identified by my better half Mella, a potential inverse pattern on Gold:

To be clear: This is not a confirmed pattern, it’s a potential pattern, but it comes with the aforementioned bull flag as well. To see confirmation Gold needs to move solidly above 1350-1380, a perhaps tall order in its current configuration, but that pattern, if triggered may be quite powerful as it implies a $1520 target.

When is the pattern and support structure invalid? A sustained drop below 1250 would spell trouble. 1250 represents confluence support of the long term support trend line and the .236 fib level shown in the earlier chart.

Another way to think about the setup? Risk/reward. If the pattern plays out, risk can be defined as 1230/1250 and upside reward to 1520, or about 3% downside and 19% upside from current price levels.

*  *  *

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

Published:5/21/2019 8:34:29 PM
[Markets] The Wall Street Journal: China’s Xi offers a potent trade reminder with visit to rare earths hub President Xi Jinping pinpointed a source of leverage his government has over high-technology industries critical to the U.S. economy, touring a region of China that calls itself a rare-earths kingdom with his top trade negotiator.
Published:5/21/2019 8:05:34 PM
[Markets] Two Scenarios For Trump-Russia Investigators... And Neither Is Comforting

Authored by Sharyl Attkisson , op-ed via The Hill,

As the investigations into the Trump-Russia investigation proceed, it’s not too difficult to figure out a few of the theoretical starting points.

The first and most obvious theory is the one largely promulgated in the media for the better part of two years. It goes something like this: The sharp, super-sleuth investigative skills of top officials within the Justice Department and our intel community enabled them to identify Donald Trump and his campaign as treacherous conduits to Russian President Vladimir Putin himself.

That theory was summarily dismissed by special counsel Robert Mueller’s conclusion that there wasn’t so much as even coordination between Russia and Trump, or any American.

So that leaves several other possibilities … and none of them is good:

They knew

One possibility to be considered is that top Obama administration officials knew all along there never was any real collusion or crime at play, but they manufactured the false Russia premise in order to justify their political spying.

Under this hypothetical scenario, they wanted to get inside information on the Trump campaign and, perhaps, gather dirt against the competition for blackmail or political purposes.

This effort included surveillance using paid spies and wiretaps on multiple Trump associates, as reported in the press.

The Obama officials had lots of help from foreign players such as the United Kingdom and Russia’s nemesis, Ukraine. Ukrainian-linked Democrats assisted with an early effort to gin up negative press coverage about key players, such as Trump associate Paul Manafort, who had been hired by the pro-Russian Ukrainian government prior to the anti-Russian Ukrainian government taking over in 2014. There were other Ukraine entanglements, such as the lucrative position earning millions of dollars that then-Vice President Joe Biden’s son got in 2015 to serve on the board of a Ukrainian energy company under the anti-Russia Ukraine regime.

Anyhow, under this scenario, after Trump defied all predictions and won the election, those who had conspired against him went into panic mode. They rightly worried that Trump, his national security adviser Lt. Gen. Michael Flynn, and others outside the “establishment” would be able to see what Justice Department and intel officials had been up to in secret.

They were worried that not only would their furtive activities in 2016 be exposed but that their behavior during the past decade-plus, when there were many other documented surveillance and intel abuses. These abuses include improper surveillance of American citizens, political figures, journalists and other targets.

One can only imagine all the things they did that never became public. Whose communications did they pretend to capture accidentally? Whose bank records, photos, emails, text messages, internet history and keystrokes were monitored? What unverified or false evidence did intel officials present to the secretive Foreign Intelligence Surveillance Court to get wiretaps on political enemies? Who improperly “unmasked” whom?

Hypothetically, these government officials — desperate to keep their deeds in the dark — rushed to amplify the Trump-Russia collusion narrative. Putting Trump under investigation, even if under false pretenses, would accomplish the goal of keeping him from poking around into their business and practices. Any attempts he’d make to find out what was going on inside his own Justice Department or intel agencies would automatically be declared “Obstruction!”

However, they were sloppy.

First, they were sloppy in the improper actions they undertook over a decade or more. They never imagined outsiders would ever really get a look at the evidence of their alleged wrongdoing. Then, they became sloppier in their panic-stricken attempts to cover up after Trump got elected.

As you can see, this scenario presumes a level of corruption.

For those who aren’t prepared to accept the possibility that some within our Justice Department and intel community would frame Trump and his associates to keep their own alleged crimes secret, there is at least one other possibility. But it may not be much more palatable.

They didn’t know

If Mueller is correct and there was no collusion or even coordination between Russia and Trump, or any American, and if the Obama administration officials who insisted that was the case are not corrupt, then they collectively suffered from one of the most historically monumental cases of poor judgment in U.S. intelligence history.

Under this scenario, the seasoned experts entrusted to protect our national security committed the kind of bush-league mistakes that few novice investigators would make. They jumped to conclusions with no evidence. They let their own biases lead them down trails in the wrong direction. They misinterpreted evidence, misread people’s actions and barked up the wrong trees. They misconstrued exceedingly common business and political contacts with Russians as deep, dark, dastardly plots. They wasted energy and resources chasing specters, ghosts and conspiracies where none existed.

Under this scenario, the misguided obsession over nonexistent treachery and enemies of the state caused the officials to underestimate or ignore the real threats that were right under their noses.

We do know this much: Only after Trump was elected did these officials ring major alarm bells about the Russians. It’s as if they are utterly unaware that the election interference they suspected and detected happened while they were in charge.

Or maybe they just hope to convince us to look the other way.

Instead of looking the other way, we might be well advised to open the books and examine how these officials were running their shops well before 2016. What does either scenario imply about how these operators behaved behind closed doors? How did they use their power and the powerful tools at their disposal? How well did they guard the nation’s interests and our deepest secrets?

Whether they were corrupt or inept, whether they knew or whether they didn’t know, the questions seem important to answer.

Published:5/21/2019 8:05:34 PM
[Markets] Asia stocks higher following overnight Wall Street gains Shares in Asia traded higher in morning trade. The U.S. temporarily backed off on restrictions on Chinese telecommunications giant Huawei, but trade tensions continued to linger. Shares in Asia were higher in Wednesday morning trade following a positive finish overnight on Wall Street, though trade tensions continued to linger between the U.S. and China. Published:5/21/2019 7:37:28 PM
[Markets] US Warns Assad Of "Quick Response" After New Chemical Attack Allegation

Here we go again with a claim that seems to surface every Spring: the US says it is looking into allegations the Syrian government has used chemical weapons as it continues an offensive against jihadists in northwest Syria.

Just as in prior incidents, it appears the sole originator of the claim is al-Qaeda in Syria, currently battling it out with pro-Assad forces near Idlib. And like with prior chemical attack allegations, it comes at a moment the jihadists are fast losing ground in the area. 

According to Reuters, citing US State Department remarks

US State Department says it sees signs Syrian government may be renewing use of chemical weapons, including alleged chlorine attack on May 19

File photo from fighting in Douma last year, site of a prior chemical attack allegation, via the AFP.

The State Department spokesman said in a written statement the US is closely monitoring Assad military operations in northwest Syria after an alleged chlorine attack on Sunday. "We are still gathering information on this incident, but we repeat our warning that if the Assad regime uses chemical weapons, the United States and our allies will respond quickly and appropriately," the statement reads

The May 19 claimed incident has received little to no media coverage since it allegedly happened Sunday, with nothing in the way of any kind of photographs or footage yet to surface, unlike prior highly publicized chemical attack claims. It allegedly occurred near Idlib or possibly in northeast Latakia province, a government stronghold southwest of Idlib, and it appears the initial claim was made by none other that Hay’at Tahrir Al-Sham before being picked up by Syrian opposition media groups and among some western Middle East think tanks analysts.  

According to prior United States government statements Hay’at Tahrir Al-Sham (HTS) is synonymous with al-Qaeda in Syria (as it rebranded from Nusrah Front). Thus it once again it appears the United States is blindly parroting the claims al-Qaeda terrorists

The few details that currently exist surrounding the claimed chemical attack were reported Sunday by Middle East-based source Al Masdar News:

The Syrian Arab Army (SAA) launched a new attack to capture the key town of Kabani in the northeastern countryside of the Latakia Governorate.

Led by the 4th Armored Division, the Syrian Arab Army began their assault by launching a flurry of missiles and artillery shells towards the positions of Hay’at Tahrir Al-Sham and the Turkestan Islamic Party (TIP).

During this barrage of missiles, the militants accused the Syrian Arab Army of using chlorine gas against them.

Two years ago in April 2017 it was also HTS that initially claimed a chemical attack by pro-Assad forces in Khan Shaykhun, Idlib province - which eventually resulted in President Trump ordering airstrikes on Syria for the first time. 

During that incident, as well as ones following such as the more recent events in Douma outside of Damascus, both Syria and Russia have pointed the finger at al-Qaeda operatives and their backers for staging such "provocations" in order to draw in US intervention. 

Brett McGurk — then White House appointed anti-ISIS envoy — previously described Hay’at Tahrir Al-Sham, the group making the latest chemical attack claims, in unusually frank comments:

Interestingly, the State Department in its Tuesday statement made extensive reference to repeat Russian and Syrian "false flag" allegations. According to the State Dept.:

Russia and the Assad regime have made these false allegations as a pretext in advance of the Assad regime’s own barbaric chemical weapons attacks. The facts, however, are clear: the Assad regime itself has conducted almost all verified chemical weapons attacks.

The statement further said Russian media criticisms of the White Helmets are part of "a continuing disinformation campaign" to create a "false narrative". 

However, ironically these new allegations have surfaced just after a leaked report produced by the international watchdog, the Organization for the Prohibition of Chemical Weapons (OPCW), paints a very different picture contracting the US version of events on Douma last April 2018. 

The Douma incident led to massive US and allied airstrikes on Damascus, which Trump had said was a "limited" and punitive campaign in order to prevent chemical weapons usage. 

Published:5/21/2019 7:37:28 PM
[Markets] The Wall Street Journal: CEO Jamie Dimon’s pay package narrowly approved by JPMorgan shareholders JPMorgan Chase & Co. investors voted to approve Chief Executive James Dimon’s pay at the bank’s annual meeting over the objections of a shareholder-advisory firm.
Published:5/21/2019 7:37:28 PM
[Markets] Asia stocks set to rise following overnight gains on Wall Street The U.S. temporarily backed off on restrictions on Chinese telecommunications giant Huawei, but trade tensions continued to linger. Shares in Asia were poised to rise at the open on Wednesday following a positive finish overnight on Wall Street, though trade tensions continue to linger between the U.S. and China. The Nikkei futures contract in Chicago was at 21,390, as compared to the benchmark index's last close at 21,272.45. Published:5/21/2019 7:06:56 PM
[Markets] Antifa Organizer Ordered To Pay Legal Fees Over 'Unreasonable, Frivolous' Lawsuit

A San Francisco judge on Wednesday ordered a Berkeley Antifa organizer to pay Judicial Watch $22,000 in legal fees and $4,000 in litigation costs, while her co-plaintiffs were ordered to pay $1,000 each to the conservative legal watchdog. 

Judge Vince Chhabria, an Obama appointee, called Yvette Felarca's lawsuit against Berkeley Unified - in which Judicial Watch was named as a party - "frivolous" and "unreasonable." 

Felarca is a prominent figure in By Any Means Necessary (BAMN), a group founded by the Marxist Revolutionary Workers League that protests conservative speaking engagements. In 2016, Felarca and two of her allies were arrested and charged with several crimes, including felony assault, for inciting a riot in Sacramento. Earlier this year, Felarca was ordered to stand trial for assault.

U.S. District Judge Vince Chhabria, Northern District of California, who had previously ruled that Felarca’s lawsuit was entirely frivolous,” wrote in his ruling awarding legal fees to Judicial Watch that Felarca and her co-plaintiffs’ First Amendment claims were “premised on the obviously baseless assumption” that the First Amendment condemns the speech of some while condoning the ideological missions of others. -Judicial Watch

Chhabria also said that "The plaintiffs also mischaracterized the documents under review" and had "failed to grapple with the role Ms. Felarca played in making herself a topic of public discourse through her physical conduct at public rallies and her voluntary appearance on Fox News."

Fox News's Tucker Carlson took Felarca to town in 2017 over her definition of a "fascist" - challenging her to explain what she thinks should be done to people she disagrees with. 

In 2017, Judicial Watch filed a California Public Records Act (CPRA) request seeking public records information about Felarca’s Antifa activism and its effect within the Berkeley Unified School District. In her lawsuit aimed at keeping the Berkeley school district from furnishing the records, Felarca alleged that Judicial Watch was misusing the law for political means and the district should refuse to provide the information.

In January 2018, a separate judge ordered Felarca to pay more than $11,000 in attorney and court fees for her frivolous attempt to get a restraining order against Troy Worden, the former head of the University of California (UC) Berkeley College Republicans. -Judicial Watch

Embarrassingly, Judge Chhabria also pointed out that "a significant portion of the documents the plaintiffs initially sued to protect from disclosure had been publicly disclosed months earlier in another suit brought by Ms. Felarca against BUSD, where she was represented by the same counsel. (See generally Felarca v. Berkeley Unified School District, No. 3:16-cv-06184-RS). The plaintiffs, therefore, had no reasonable argument to protect those documents from disclosure.

In other words, Chhabria has a really crappy lawyer

Published:5/21/2019 7:06:56 PM
[Markets] Afghan War: Hope For Exit, No Hope For Peace

Authored by Lawrence Franklin via The Gatestone Institute,

In his State of the Union address on February 5, U.S. President Donald Trump said that his administration was "holding constructive talks with a number of Afghan groups, including the Taliban... [in order] to be able to reduce our troop presence and focus on counter-terrorism."

Trump continued, "We do not know whether we will achieve an agreement — but we do know that after two decades of war, the hour has come to at least try for peace."

On April 26, following a meeting in Moscow on the status of the Afghan "peace process," representatives of the U.S., China, and Russia released the following joint statement:

  1. The three sides respect the sovereignty, independence, and territorial integrity of Afghanistan as well as its right to choose its development path. The three sides prioritize the interests of the Afghan people in promoting a peace process.

  2. The three sides support an inclusive Afghan-led, Afghan-owned peace process and are ready to provide necessary assistance. The three sides encourage the Afghan Taliban to participate in peace talks with a broad, representative Afghan delegation that includes the government as soon as possible. Toward this end, and as agreed in Moscow in February 2019, we support a second round of intra-Afghan dialogue in Doha (Qatar).

  3. The three sides support the Afghan government efforts to combat international terrorism and extremist organizations in Afghanistan. They take note of the Afghan Taliban's commitment to: fight ISIS and cut ties with Al-Qaeda, ETIM, and other international terrorist groups; ensure the areas they control will not be used to threaten any other country; and call on them to prevent terrorist recruiting, training, and fundraising, and expel any known terrorists.

  4. The three sides recognize the Afghan people's strong desire for a comprehensive ceasefire. As a first step, we call on all parties to agree on immediate and concrete steps to reduce violence.

  5. The three sides stress the importance of fighting illegal drug production and trafficking, and call on the Afghan government and the Taliban to take all the necessary steps to eliminate the drug threat in Afghanistan.

  6. The three sides call for an orderly and responsible withdrawal of foreign troops from Afghanistan as part of the overall peace process.

  7. The three sides call for regional countries to support this trilateral consensus and are ready to build a more extensive regional and international consensus on Afghanistan.

  8. The three sides agreed on a phased expansion of their consultations before the next trilateral meeting in Beijing. The date and composition of the meeting will be agreed upon through diplomatic channels.

This statement was released a mere week after a summit between the Taliban and officials from the government of Afghan President Ashraf Ghani was postponed indefinitely, after the Taliban objected to the number of delegates that Kabul wanted to send to the meeting.

That spat was only one example of why negotiations with the Taliban have not been going smoothly. Another is concern on the part of high-ranking Afghan diplomats and intelligence officials that their American counterparts may be betraying them. Afghan National Security Adviser Hamdullah Mohib, for example, publicly accused Zalmay Khalilzad -- the U.S. State Department's Special Representative for Afghanistan Reconciliation -- of having ambitions to become president of Afghanistan.

Sadly, no amount of blood, money or time spent in Afghanistan has been, or possibly will be, able to fashion it into a peaceful, united and democratic country. Pictured: U.S. Army soldiers carry a critically wounded American soldier on a stretcher to an awaiting helicopter, on June 24, 2010 near Kandahar, Afghanistan. (Photo by Justin Sullivan/Getty Images)

Nevertheless, in response to the U.S.-China-Russia trilateral statement on the peace process, Khalilzad wrote a highly optimistic post on social media:

"Our [the U.S.'s] agreement w/ China & Russia yesterday along w/ previous one w/ Europeans means we have emerging intl consensus on US approach to end the war AND assurances [that] terrorism never again emanates from #Afghanistan. More to do but important milestone. #Momentum"

Trump should be lauded for working toward a withdrawal from Afghanistan, where 14,000 U.S. troops still remain. But he should not expect to leave behind a peaceful situation in the failed state, which is made up of a complex web of tribal divisions and hostilities.

The ethnic Pashtuns, who comprise most of the Taliban's recruits, account for about 40% of Afghanistan's population. Taliban Pashtuns are largely from the Durrani Pashtun clan from southern Afghanistan in the Kandahar Province region, along the Pakistani border. The Durrani are historic enemies of the Ghilzai Pashtun clan, which inhabits the region east and south of Kabul.

President Ghani is closely allied with the Ghilzai Pashtun from eastern Afghanistan, and may have somewhat isolated himself by viewing his presidential responsibilities primarily through a Ghilzai lens.

The rivalry between Pashtun clans further complicates efforts to arrive at a negotiated settlement between the Taliban and the Ghani administration. There is a lack of trust even within the largely Pashtun Taliban.

Yet another factor militating against national unity is that Pashtun clans appear not to view Afghanistan's non-Pashtun ethnic minorities as equal partners in a future Afghanistan. Pashtuns assume that Afghanistan is synonymous with "Land of the Afghans (or Pashtuns)."

Perhaps the most debilitating factor of all is that millions of Pashtuns also live in Pakistan, courtesy of the Durand Line. This dysfunctional demographic reality is a consequence of the late 19th century decision by imperial Britain to establish the border between Afghanistan and British India (which included today's Pakistan) and Afghanistan. To the Pashtuns, however, the Durand Line is only a line on a paper map, to be ignored.

The point is that whatever the final terms of a negotiated U.S. withdrawal, Afghanistan's strife will probably continue unabated.

The Taliban will still be able to count on a sizable supply of manpower -- from Pakistan-based Pashtun males attending madrassas (schools for Islamic study). The Taliban may also rely upon continued support from Pakistan, unless Islamabad alters its strategic assessment that a pro-Pakistani regime in Afghanistan is a necessary wedge against India, its regional rival.

In addition, the Taliban and its Pakistani supporters are undoubtedly assured of an uninterrupted flow of financial support from Islamist sources in the Gulf States, as the strict Sunni nature of the Taliban brand of Islam is well-aligned with some of the Gulf State Islam.

Afghanistan's remaining population consists of Tajiks (25%), Hazaras (19%), Uzbeks (6%) and various tribal peoples. Respectively, these Persian, Mongol and Turkic peoples, based upon their past armed resistance to Pashtun attempts to control the whole of Afghanistan, will most likely fight to maintain their autonomy. This historical reality alone should be sufficient cause for U.S. policy-makers to abandon the seemingly impossible task of building a unified, democratic, pro-Western Afghanistan.

Yet another reason not to harbor fantasies of a unified Afghanistan is the utter lack of what Mideast scholar Dr. Mordechai Kedar calls a "shared national consciousness."

Even a superpower with good intentions such as the United States cannot accomplish the impossible. Sadly, no amount of blood, money or time spent in Afghanistan has been, or possibly will be, able to fashion it into a peaceful, united and democratic country.

*  *  *

Dr. Lawrence A. Franklin was the Iran Desk Officer for Secretary of Defense Rumsfeld. He also served on active duty with the U.S. Army and as a Colonel in the Air Force Reserve.

Published:5/21/2019 6:46:47 PM
[Markets] The Wall Street Journal: Boeing dismissed scenario that may have caused Ethiopia Airlines crash Four weeks after faulty sensor data led a 737 Max jet to crash in Indonesia last year, a high-ranking Boeing Co. executive raised and dismissed the possibility of a bird collision triggering a similar sequence of events that could cause a second accident.
Published:5/21/2019 6:46:47 PM
[Markets] Texas Pipeline Protesters May Face Up To 10 Years In Prison

Ever since last September, Angeline Cheek was preparing for disaster.

The native American organizer from the Fort Peck reservation in Montana has fears that the proposed Keystone XL pipeline could break and spill, destroy her tribe’s water, and desecrate sacred Native American sites. But environmental catastrophe is not the most immediate threat.

The government has characterized pipeline opponents like her as “extremists” and violent criminals and warned of potential “terrorism”, according to recently released records. The documents, revealed last year, suggested that police were set to launch an aggressive responses to possible Keystone protests.

And now, that threat to what some have dubbed as "eco-terrorism" has become reality, at least in one US state. According to Bloomberg, oil pipeline protesters who interrupt operations or damage equipment could face up to 10 years in prison under legislation approved by Texas lawmakers.

Under the bill that was approved by both chambers of the Texas legislature, protesters found guilty of halting service or delaying construction of an oil or natural gas pipeline could be charged with a third-degree felony punishable by two to 10 years of incarceration. That’s on a par with the sentences handed down to drive-by shooters who fail to hit their mark according to Bloomberg.

The measure, which was originally authored by Republican Representative Chris Paddie, cleared the Texas House on May 7 and the Senate on Monday.

The delighted Texas Oil & Gas Association applauded the bill's passage and said the bill provides property owners and pipeline companies “greater protections against intentional damage, delays, and stoppages caused by illegal activity.”

The bill still needs Governor Greg Abbott’s signature to become law, although that is only a formality.

Predictably, environmental groups, meanwhile, called the measure an assault on free speech. “The bill was never about safety and security,” Cyrus Reed, interim director for the Sierra Club’s Lone Star Chapter, said in an email. “It was about silencing protesters trying to protect their water and land.”

That... and also preventing rampant vandalism. Other projects, including Energy Transfer LP’s Dakota Access crude pipeline and EQM Midstream Partners LP’s Mountain Valley gas conduit, have also drawn on-the-ground protests. Even in Texas, which is considered friendlier to the oil and gas industry, activists have staged opposition to the Trans-Pecos pipeline, which runs through the Big Bend region in the western part of the state.

Texas may be the first, but it will hardly be the last: as noted above, states have long been taking action to prepare for pipeline protests as environmental groups increasingly target infrastructure as part of their opposition to fossil fuels, becoming true "eco-terrorists" in the process; there should thus be little surprise that officials are cracking down.

As Bloomberg notes, while South Dakota has yet to pass a similar crackdown on eco protesters, earlier this year the state advanced legislation to allow the state to seek money from pipeline companies to help cover expenses related to protests. That bill aims to ready South Dakota for the contentious Keystone XL crude oil pipeline, which is held up in court but recently scored a new presidential permit from the Trump administration.

Published:5/21/2019 6:15:44 PM
[Markets] Capitol Report: Fannie, Freddie shareholder payout is part of the reform discussion, regulator says in surprise move The head of the Federal Housing Finance Agency says there may be a payout for common shareholders of Fannie Mae and Freddie Mac.
Published:5/21/2019 5:52:45 PM
[Markets] Donald Trump, Socialist?

via Thomas L. Knapp (Twitter: @thomaslknapp)

“Tonight, we renew our resolve that America will never be a socialist country,” US president Donald Trump announced in his State of the Union address in February.  His base, as he had hoped, cheered him on in setting himself up as foil to Bernie Sanders and Alexandria Ocasio-Cortez.

In the three months since, though, Trump has doubled down on his own socialist policy proposals. On trade and immigration, he’s 21st-century America’s most strident - or most empowered, anyway - advocate of an indispensable tenet of state socialism: Central planning of the economy by the government.

Trump wants the government to control what you buy and who you buy it from. Thus, his “trade wars” with Canada, Mexico, the European Union, and China, powered by tariffs intended to advantage “Made in America” goods (and their politically connected makers) over others.

Now he’s announced a plan for “merit-based” government control of immigration under which bureaucrats in Washington decide how many, and which, immigrants the American economy “needs,” instead of leaving such decisions to markets and individuals.

In the past I’ve bemoaned the fact that “socialism” has come to mean such different things to so many different people. From its 19th century definition of  “worker ownership of the means of production,” it’s been continually re-defined to characterize everything from Marxist-Leninist totalitarianism to a more all-embracing “democratic socialist” welfare state powered by heavy taxation on “the rich.”

That’s a pretty broad net. But except among anarchist socialists, state control of the economy is the axis on which all versions of socialism turn, and Trump is clearly all-in on the idea.

He even lends a socialist cast to the  excuses he makes for his economic policies. He continually positions himself as protecting workers from the “dog-eat-dog” competition of capitalism (while avoiding using that word negatively). By adding an emphasis on political borders to those excuses, he changes the discussion from “labor versus capital” to “American labor versus foreign capital.”

That approach is nothing new. See Stalin’s “socialism in one country,” for example, or the marriage between central economic planning and nationalism characterizing the fascism of Mussolini and Hitler.

America’s Republican president campaigns against socialism while attempting to implement it. Meanwhile, America’s progressives  campaign for socialism while attempting to thwart actual worker ownership of the means of production (e.g. the “gig economy”). Talk about cognitive dissonance!

Notice what’s missing from the discussion on both major “sides”: Freedom.

Freedom to move within and across political borders.

Freedom to trade within and across political borders.

Freedom to plan our own lives and live them instead of turning that power, and that responsibility, over to the state.

Neither major political party even convincingly pretends to care about those fundamental human rights anymore.

The entire public discussion revolves around what the politicians should “allow” or “forbid” the rest of us to do next, based on an unquestioning assumption of their moral authority to make such decisions for us.

Unless we break that cycle, we’re on our way into the next Dark Age.

* * *

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

 

Published:5/21/2019 5:52:44 PM
[Markets] China's Economic "Super-Weapon" Would Devastate Its Rare-Earth Exporters

Submitted by Michael Every of Rabobank

Earth

With nationalism to the fore, for a change, talk of a “people’s war”, and with China telling the US it has “unwavering resolve” to fight “bullying” --a change from “imperialism”, which China itself is now accused of in some quarters-- President Xi Jinping went to visit a rare earths facility yesterday. That was no accident. Nothing in Chinese politics is an accident. It was a signal that China can turn off the taps on rare earths exports to the US if pushed much further. Yet such a step would devastate its rare earth exporters; it would show the world they cannot rely on China as a supplier; and it would be the final(?) nail in the coffin of a ‘macro 101’ model of how the world works. (As if that is needed a day after US President Trump publicly stated he’s “very happy” with the trade war and that the Chinese economy won’t be number one on his watch.)

After all, rare earths aren’t actually rare. Lots of countries, including the US, Japan, Brazil, India, and South Africa, have them in abundance. China only controls 80% of global supply because it subsidised its state-owned firms until they achieved economy-of-scale dominance in the same way as it is seen trying to do in other industrial sectors, which has generated the current China backlash. In short, mercantilism–meets-Mr.Magoo-free-markets means Beijing got the whip hand over the industrial global supply chain for a vital input in order to save a few dollars. One sees why it’s time to say goodbye to macro 101. Indeed, if there aren’t governments planning to massively boost rare earths output in Australia, California, India, Japan, Vietnam, and Brazil, etc., then I will eat my hat. China will soon find that its latest economic ‘super-weapon’ is another dud.

Wind

You want to see a real super-weapon? Look at the US decision to cut Huawei off from Western technology yesterday. How is Huawei supposed to function without the high-end silicon chips China can’t make, and which neither US nor European firms will now supply? It has 12-months of stock…and then what? (And in terms of the global economic impact, please note South Korea’s May 1-20 chip exports plunged -33% y/y before any of this happened!) Equally, how is Huawei supposed to sell 5G phones when it cannot update Google’s Android software? Of course, some say China will develop its own high-end silicon chips and proprietary operating system (OS). It might do that…but that’s a very hard thing to achieve when cut off from the West – and it’s much harder to do than digging up rare earths. If China could just do it, why hasn’t it until now? Because they believe in macro 101? Really?! Indeed, the announcement today that Huawei will roll out its own OS imminently looks like ‘wind’ to me… unless it is called “Ban-droid”. Will it come bundled with the Little Red App of Xi Jinping thought? As someone said on Game of Thrones when it was still good, “Power is power.” And this, is power, folks. Not visiting a rare earths factory for the cameras.

However, the White House has just announced the Huawei hamstringing will be delayed by 90 days, with existing equipment to be serviced for that period, not new products, presumably to allow room for that crucial G-20 head-to-head between Trump and Xi, and also to allow US firms to gird their loins for the disruption that this ban is going to cause. Can we agree that the stakes for that G-20 are going higher and higher, especially for China? As such, this is still very much a long USD, short CNY, if indirectly, and EM FX environment as we get to see the full power of this fully operational battle station. The Fed’s Powell meanwhile says “the outcome of the trade negotiations is not known, is highly uncertain, and it would be premature” for the Fed to make a judgement (and hence rate call) on the back of it. Not known, yes; uncertain, arguably no. The balance of risks must be clear, even to the Fed(?)

Fire!

It would be tempting to shift to talk about Iran or North Korea under that sub-heading (Trump has just said again that any Iranian action will be with “great force”), but I turn to the RBA. Just days after the election, the (comprehensively recidivist) Australian Prudential Regulation Authority –which presided over an epic housing bubble driven by lax lending standards-- is about to loosen its loan guidance again. Instead of most lenders having to assume a 7.25% mortgage rate ahead when assessing a borrower’s repayment ability --as opposed to 10x income interest-only loans on fantasy income-- the new rule will be to assume rates 2.5% above the current mortgage rate. Does this mean the Aussie bubble is baaaack? Nope. But it means the RBA are going to cut aggressively, because when borrowers had to assume a 7.25% rate regardless of where the actual interest rate was, there was no advantage for the housing market in cutting. Now there will be: if the RBA slashes rates 125bp, for example, all of that can get passed on. So, RBA, fire!

Indeed, the RBA’s minutes today showed the conservative bank noting “…members considered the scenario where there was no further improvement in the labour market in the period ahead, recognising that in those circumstances a decrease in the cash rate would likely be appropriate….” In short, they have now moved from expecting the labour market to get better to admitting that even if it stays the same, rather than unemployment rising, a cut is warranted! That door to easing is easing open. We next hear from Governor Lowe later in the day, and one wonders if he will also signal this more clearly?

Published:5/21/2019 5:16:31 PM
[Markets] US Market Indexes Close Higher Tuesday Tech sector regains ground after US reprieve Published:5/21/2019 5:16:31 PM
[Markets] Personal Finance Daily: Grumpy Cat’s owner confronts the fact that pet life insurance is not designed for influencers and the tax-smart way to loan money to family members Tuesday's top personal finance stories
Published:5/21/2019 4:58:50 PM
[Markets] Go Greyhound: California Border Agents Dropping Illegal Migrants At Bus Station

Due to a surge in migrants filling California detention facilities to capacity, US Border Patrol agents in El Centro began dumping detained border crossers three hours north at the San Bernardino Greyhound Station last Wednesday, after the agency ran out of room to house them. 

"It was a decision that was made because they couldn’t take any more families and obviously we cannot keep them in custody for much longer because we are at capacity," said acting assistant chief patrol agent Miguel Garcia, according to Reuters

Apprehensions of migrant families in California’s El Centro sector rose 383 percent in the seven months through April from a year earlier as record numbers of mainly Central Americans crossed the border, Border Patrol data shows.

In San Bernardino, long a transit hub for east-west travel and freight, immigrants were dropped off at the bus terminal by Customs and Border Patrol Agents to wait for family, friends or volunteers to pick them up. -Reuters

"We asked them where they were going to drop us off and they said at a bus station and there you might find some people who can help you, and that’s it," said Angel Gonzalez, 34, who left Guatemala on April 25 with his 11-year-old son and traveled through Mexico before illegally crossing into the United States. The father and son stated at a CBP facility for six nights before their release in San Bernardino on Sunday, where they embarked on a ride to "join relatives in Arkansas," according to the report. 

Map of Greyhound bus routes

Releasing detained migrants at Southwest bus stations is nothing new, as migrants are expected to return for their pending immigration court hearings to determine whether they can remain in the country legally. In December, ICE dropped off around 200 migrants at an El Paso Greyhound station without warning.

The influx of families has swamped U.S. Border Patrol stations built to house single adults, and U.S. Immigration and Customs Enforcement has run out of space to hold them. -Reuters

Of note, El Centro is in Imperial County - right next to San Diego County, where the Trump administration began flying hundreds of detained immigrants from overcrowded facilities in Texas. Plans to send migrants to Florida and other states however were scrapped, with President Trump tweeting last week "There are no plans to send migrants to northern or Coastal Border facilities, including Florida." In the case of San Diego, however, CBP officials confirmed that the migrant relocations had begun

On Tuesday, Trump tweeted: "I am very disappointed that Mexico is doing virtually nothing to stop illegal immigrants from coming to our Southern Border," adding "Mexico’s attitude is that people from other countries, including Mexico, should have the right to flow into the U.S. & that U.S. taxpayers should be responsible for the tremendous costs associated w/this illegal migration..."

According to Democrats, however, there's no crisis at the border

Published:5/21/2019 4:58:50 PM
[Markets] NewsWatch: Here are the Best New Ideas in Retirement The most innovative thinking on retirement, from how we save for it to how we spend it to what it all means.
Published:5/21/2019 4:14:50 PM
[Markets] "This Is Unfathomable" - Nike, Adidas Pen Letter To Trump Calling Proposed Tariffs "Catastrophic"

Footwear companies Nike and Adidas are publicly airing their grievances and having their say about President Trump's pending decision to slap tariffs on footwear made in China. The companies are calling the policy “catastrophic for our consumers, our companies and the American economy as a whole,” according to Bloomberg and a letter released publicly by the shoe industry’s trade association, the Footwear Distributors & Retailers of America, on Monday.  

The two giants have been joined by 171 additional footwear companies in asking the President to hold off on raising tariffs further. The letter was also addressed to Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and National Economic Council director Larry Kudlow. The industry estimates that the tariffs, if implemented, would add $7 billion in new costs per year that would need to be passed onto the consumer. 

They wrote:

"On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end."

President Trump has recently threatened tariffs as high as 25% on Chinese goods. The U.S. Trade Representative’s office released a list of products that could see higher import duties, including footwear, last week. Trump is set to talk to Xi Jinping next month to discuss the issue further. 

Michael Jeppesen, president of global operations for Wolverine World Wide Inc., which also signed the letter, said of the tariffs:

 “We don’t make enough to absorb that. The only way it can is to be passed onto the consumer.”

Duties have always been higher for footwear makers due to longstanding tariffs that already sometimes exceed 30% for those in the industry. Nike makes 26% of its apparel and footwear in China while Sketchers produces about 65% of their products there. In Sketchers' case, not all of the products manufactured in China are imported to the United States. Under Armor gets about 18% of its products from China, down from 46% in 2013, and has goals of getting that number down to 7% by 2023. 

The U.S. imported $11.4 billion in footwear from China last year, according to the U.S. Census Bureau.

This isn't the first time the industry has sounded off against proposed tariffs, either. In March of last year, more than 100 brands wrote to Trump to urge him to reconsider tariffs. 

“Given the price sensitivity of our products, any additional increases in our costs would strike right at the heart of our ability to keep product competitively priced for our consumers,” the March letter read. 

Here’s the full letter released on Monday:

Dear Mr. President:

As leading American footwear companies, brands and retailers, with hundreds of thousands of employees across the U.S., we write to ask that you immediately remove footwear from the most recent Section 301 list published by the United States Trade Representative on May 13, 2019. The proposed additional tariff of 25 percent on footwear would be catastrophic for our consumers, our companies, and the American economy as a whole.

There should be no misunderstanding that U.S. consumers pay for tariffs on products that are imported. As an industry that faces a $3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer. It is an unavoidable fact that as prices go up at the border due to transportation costs, labor rate increases, or additional duties, the consumer pays more for the product.

This significant tax increase, in the form of tariffs, would impact every type of shoe and every single segment of our society. In fact, our industry’s trade association, the Footwear Distributors & Retailers of America (FDRA), ran the numbers and the results are staggering. FDRA estimates your proposed actions will add $7 billion in additional costs for our customers, every single year. This dramatic increase would be on top of the billions Americans already pay as a result of the current tariff burden on footwear imports that was started in 1930.

High footwear tariff rates fall disproportionately on working class individuals and families. While U.S. tariffs on all consumer goods average just 1.9 percent, they average 11.3 percent for footwear and reach rates as high as 67.5 percent. Adding a 25 percent tax increase on top of these tariffs would mean some working American families could pay a nearly 100 percent duty on their shoes. This is unfathomable.

There have been suggestions that industries should quickly shift sourcing to countries other than China in the wake of these additional tariff threats. While our industry has been moving away from China for some time now, footwear is a very capital-intensive industry, with years of planning required to make sourcing decisions, and companies cannot simply move factories to adjust to these changes. Any action taken to increase duties on Chinese footwear will have an immediate and long-lasting effect on American individuals and families. It will also threaten the very economic viability of many companies in our industry.

On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end.

Published:5/21/2019 4:14:50 PM
[Markets] What Happened in the Stock Market Today Kohl's missed profit forecasts and lowered guidance, while Home Depot beat earnings expectations. Published:5/21/2019 4:14:50 PM
[Markets] Nordstrom stock falls 9% after retailer posts sales miss Nordstrom stock falls 9% after retailer posts sales miss Published:5/21/2019 3:45:48 PM
[Markets] Dow logs 200-point gain as demand for tech, energy stocks overshadow trade angst Stocks close solidly higher Tuesday, following a temporary reprieve on restrictions on U.S. exports to China telecom giant Huawei Technologies, reflecting a slight reduction of tensions in one front of the Sino-American tariff war. Published:5/21/2019 3:45:48 PM
[Markets] WTI Slides Below $63 After Surprise Crude & Gasoline Builds

WTI traded lower today (finding support around $63) as anxiety over the ongoing US-China trade deal weighed on global growth (demand) sentiment (after yesterday's gains on OPEC/Saudi supply comments).

“Given the fact that the macro environment isn’t looking spectacular, oil is doing relatively well," said Bart Melek, head of commodity strategy at Toronto’s TD Securities. “It’s very much marching to its own drumbeat here, with the supply side being supportive in the face of less risk appetite."

Product draws have been shrinking and crude builds increasing recently, dragging investors' eyes back to the 'gluttiness' of energy markets...

API

  • Crude +2.4mm (-1.3mm exp)

  • Cushing +871k

  • Gasoline +350k (-662k exp)

  • Distillates -237k (-158k exp)

API reported a surprise inventory build in crude and gasoline...

 

WTI traded back down to Sunday night futures opening levels today, hovering around $63 ahead of the API print and kneejerking lower after the data hit...

 

Published:5/21/2019 3:45:48 PM
[Markets] Stocks Bounce As Huawei Hope Trumps Home Sales Horror

It appears President Trump saw the news last night, did not like stocks being red and reversed his Huawei ban (at least temporarily), everything is awesome again...

 

Trump's apparent (temporary) fold on Huawei sparked buying euphoria at China's open, but things faded in the afternoon session...

Although rare-earth stocks soared...

 

German stocks led the bounce today but European stocks remain red on the week...

 

US equities ripped higher today, led by Small Caps and Nasdaq, but Nasdaq remains red on the week (unable to erase yesterday's losses)... S&P and Nasdaq weak into the close

NOTE - 6th day in a row of panic-buy-the-f**king-cash-open (and a weak close again)

Volume was very weak (SPY around 40% below average)...

 

And amid the low volume ramp, another big short-squeeze helped send Small Caps surging on the day (and week)...

 

And it appears Buybacks were once again unleashed...

 

A look at S&P futures shows the ramp today looks very technical in nature, slowly drifting higher to cover the pre-open drop from yesterday but unable to accelerate beyond that...

 

Notably Semis stocks only retraced around Fib 61.8% of the drop from yesterday's Huawei headlines...

 

Homebuilders rallied aggressively on the day...

As existing home sales slumped once again, ignoring the lower mortgage rates...

 

TSLA bounced (despite the bear-case analyst forecast of $10 target)...

 

But BYND was down!!!

 

Treasury yields were higher on the day with the short-end underperforming notably (2Y +3.5bps, 30Y unch)..

 

The yield curve is flattening dramatically...

 

The Dollar ended the day higher, almost erasing all of yesterday's losses (despite a big spike lower as cable spiked higher on Brexit headlines)...

 

Cable spiked on May's speech and the possibility of a 2nd referendum, then dumped as Corbyn rejected it...

 

The Hong Kong Dollar remains unable to escape the lower end of its USD peg band...

 

Cryptos were relatively quiet on the day with early losses being erased, notably cryptos mini-flash-smashed around 0830ET...

 

With Bitcoin testing up against $8000 numerous times intraday...

 

Crude and copper dropped on the day as Gold slipped further but silver held gains...

 

Commodities agree with bonds on growth/inflation expectations...

 

Gold in Yuan continued to slide (after tagging 900 yuan last week)...

 

Finally, a reminder that global money supply growth support is fading fast...

Published:5/21/2019 3:15:14 PM
[Markets] US STOCKS SNAPSHOT-Tech shares boost Wall St after Huawei reprieve Shares of technology companies helped lift Wall Street on Tuesday after the United States temporarily eased curbs on China's Huawei Technologies Co Ltd, alleviating investor concerns about pressure on ... Published:5/21/2019 3:15:14 PM
[Markets] Dow industrials finish up nearly 200 points as tech fuels rally Dow industrials finish up nearly 200 points as tech fuels rally Published:5/21/2019 3:15:14 PM
[Markets] St Louis Fed Promotes Still More Free Money For Banks (And Hiding It All)

Authored by Mike Shedlock via MishTalk,

St Louis Fed researchers concocted a scheme to pay banks still more free money, but this time hiding all of it.

At the current rate of 2.35%, the Fed hands out about $33.58 billion in free money to the banks.

Interest Rate on Excess Reserves

The two charts show the moving target.

Excess reserves peaked at $2.7 trillion in August of 2014 but the interest rate on excess reserves then was only 0.25%.

0.25% of $2.7 trillion is "only" $6.75 billion in free money at an annualized rate. At the current rate, banks take in over $33 billion in free money.

The peak annualized rate was probably in August of 2017 with the interest on excess reserves at 1.95% on $2.2 trillion. That's free money to the tune of $42.9 billion at an annualized rate.

St. Louis Fed Proposal

Please consider Why the Fed Should Create a Standing Repo Facility by David Andolfatto, Senior Vice President and Economist, Federal Reserve Bank of St. Louis; and Jane Ihrig, Associate Director and Economist, Federal Reserve Board of Governors.

Market participants are projecting ample reserves in the $1 trillion range—a level much higher than their precrisis average of approximately $20 billion.

Why should banks prefer reserves to higher-yielding Treasuries? One explanation is that Treasuries are not really cash equivalent if funds are needed immediately. In particular, for resolution planning purposes, banks may worry about the market value they would receive in the sale of or agreement to repurchase their securities in an individual stress scenario.

The Fed could easily incentivize banks to reduce their demand for reserves by operating a standing overnight repurchase (repo) facility that would permit banks to convert Treasuries to reserves on demand at an administered rate. This administered rate could be set a bit above market rates—perhaps several basis points above the top of the federal funds target range—so that the facility is not used every day, but only periodically when a bank needs liquidity or when market repo rates are elevated.

With this facility in place, banks should feel comfortable holding Treasuries to help accommodate stress scenarios instead of reserves.

Treasury Sales On Demand - Guaranteed Bid

Lovely. The Fed proposes a facility that would allow banks to hold higher yielding treasuries instead of holding excess reserves, by guaranteeing a bid for the treasuries.

Sweet Spot

Given the inverted nature of the yield curve in many spots there isn't all that much to gain, but there is some.

The current sweet spot in this scheme is the 6-moth T-bill. It yields about 10 basis points or so more than the 2.35% the Fed currently pays on excess reserves.

Annualized Value

The annualized value of the proposed scheme is only $1.4 billion. Still, that's nothing to sneeze at.

Hidden Beauty

Please don't forget about the hidden benefits.

Like what?

See if you can figure it out before reading further.

Poof!

There are no longer any excess reserves.

Banks get to buy treasuries with a guaranteed bid. So they do. En masse. In a flash, the top chart will look like it did in 2005, with everything seemingly back to normal.

Judging from the top chart, one has to wonder how much this has been front-run already, above and beyond stated tapering, now on hold.

Published:5/21/2019 2:44:29 PM
[Markets] Stocks are posting solid afternoon gains, with Dow up 200 and Nasdaq ahead 100 Stocks are posting solid afternoon gains, with Dow up 200 and Nasdaq ahead 100 Published:5/21/2019 2:15:45 PM
[Markets] United Continental Stock Is Rising, but It Still Looks Like a Bargain Shares of United Continental are rising for a second day following an upgrade by Morgan Stanley. On Tuesday, United management reiterated guidance and that was enough to keep the positive momentum going. Published:5/21/2019 2:15:45 PM
[Markets] Illinoisans Will Be Among Nation's Hardest-Hit In Next Recession

Authored by Ted Dabrowski and John Klingner via WirePoints.org,

Illinoisans have another reason to worry about their future – their state government is unprepared for the next recession. That means when the national economy finally slows, Illinoisans will get hit far harder than residents nationally.

A new report by Moody’s Investors Service finds Illinois and New Jersey are the two weakest-prepared states in the country for whatever financial damage the next recession will cause.

The warning of sorts is yet another reminder that Illinois needs deep structural reforms, including an amendment to the pension protection clause, to restore financial stability and flexibility to the state. And it’s a further condemnation that Illinois’ business as usual – more taxes, more borrowing and pension can-kicking – have brought Illinois to the brink of a junk credit rating.

Moody’s measured four key factors in arriving at its conclusions: revenue volatility, reserves, financial flexibility and pension risk.

Here’s what they said:

“Our new criteria shows 22 states strongly prepared for the next recession, with 26 states moderately prepared, and two – Illinois (rated Baa3/stable outlook) and New Jersey (A3/stable) – weaker in recession preparedness.”

‘While current economic conditions are strong, states are aware that a downturn will come eventually and are building reserves to prepare,’ said Emily Raimes, Vice President and Senior Credit Officer at Moody’s. ‘While most states have healthy reserves and inherently strong fiscal flexibility, Illinois and New Jersey both have low levels of reserves relative to the potential revenue decline in our recession scenario. In addition, they both show weakness in their pension risk scores.'”

Readers of Wirepoints won’t be surprised with Moody’s conclusion. We’ve highlighted Illinois’ growing structural deficits, mass of unpaid bills and true retirement costs in the recent past:

Illinois scored badly on three of Moody’s four measures.

Moody’s says Illinois has some of the worst financial reserves of any state in the nation. Only four states have less available cash on hand to pay for emergencies than Illinois does.

The agency also found that Illinois has very little financial flexibility to deal with a recession. Nearly 40 percent of Illinois’ annual budget is consumed by “fixed costs” like pensions, debt service and Medicaid. Illinois is the nation’s outlier. That means core spending on other priorities like education, social services and public safety would be cut under a harmful recession.

The agency also found Illinois is the extreme outlier when it comes to the damage a recession would wreak on its pension funds. Illinois stands alone as the worst off in the nation according to Moody’s pension “stress test.”  No only would a recession force economically-struggling Illinoisans to pay billions more into pensions when they can least afford it, but it could also bring many funds to the brink of total insolvency, risking benefits for government workers.

The only measure Illinois scored average on was “revenue volatility.” Illinois’ flat income tax keeps revenues fairly stable in comparison to states “relying on the highest earners through high and progressive personal income tax rates.” Any move to a progressive tax scheme in Illinois will increase the state’s revenue volatility.

*  *  *

Illinois is in dire financial straits, as the above graphics show. The state is an outlier in most fiscal categories nationwide, and in many cases, Illinois is the extreme outlier.

The current “panacea” offered by Gov. J.B. Pritzker, a progressive tax scheme, does nothing to address the underlying structural causes of Illinois’ mess. Tax proponents may get the tax hike they want, but look it for it to accelerate Illinois’ downward spiral. Instead of fixing Illinois, it will  only perpetuate the status quo and do further damage to the state’s competitiveness.

Moody’s warns a recession could have an “adverse impact” on Illinois’ credit. And seeing as Illinois is just one notch from junk, there’s only once place the state can go. That’s something nobody wants.

Published:5/21/2019 2:15:43 PM
[Markets] Key Words: Kareem Abdul-Jabbar calls for boycott of ‘stains on our democracy’ like Alabama The NBA Hall-of-Famer added his voice to those across the country opposing recent bills to ban abortions.
Published:5/21/2019 2:15:42 PM
[Markets] Second White House 'Farm Bailout' Could Cost As Much As $20 Billion

Introduced earlier this month in a disjointed stream of tweets from President Trump, the White House is finally ready to release more details about its second bailout for American farmers.

This year's package could cost as much as $20 billion, nearly double the $12 billion from last year.

And at first glance, it appears that farmers will be better compensated by the new plan - a sign that the administration doesn't see an immediate resolution for the trade crisis - though it still is cold comfort for farmers in the American heartland who have been hammered not only by China's tariffs, but by record flooding in the Midwest and five years of falling agricultural commodity prices.

Farmers

Rates currently under discussion include $2 per bushel for soybeans, 63 cents per bushel for wheat and 4 cents per bushel for corn growers to compensate them for their losses (whether the White House truly intends to distribute as aid to struggling countries remains to be seen). Though the final details of the plan are subject to change. 

Bloomberg's sources said farmers will also receive payments for other commodities, just like they did last year.

In a departure from last year, the administration is reportedly considering basing payments on the acreage planted for the coming season, rather than farmer's current production levels. This has spurred questions from some economists.

While the payments last year were based on farmers’ current production, the basis will be modified, the people familiar with the plan said. The administration is considering basing payments on the acreage farmers plant this year and their historic yield of crops per acre, the people said.

Former Agriculture Department officials and economists have warned that a decision to base payments on current acres planted risks skewing farm production decisions and adding to the rising stockpiles of crops, particularly soybeans. That risks depressing commodity prices even after the current trade dispute is resolved.

The combination of a disparity in payments favoring soybeans over corn and rainy weather in the Midwest could encourage farmers to change plans and decide to plant soybeans rather than corn. Soybeans have a shorter growing season, so they can be planted later.

American farm income dropped by 16% last year, and increasingly desperate farms are increasingly turning to suicide to escape their financial troubles. As of Sunday, farmers have planted only 49% of the corn they had said they intended to plant this year, according to Department of Agriculture data. That compares with 80% from the same period last year.

Department of Ag Secretary Sonny Perdue said last week that the aid package could be as large as $20 billion (which would be $5 billion more than President Trump had said). Most of the money will be directly distributed to farmers based on the system for compensation, though some agricultural goods will be purchased directly by the federal government under the plan.

Unless a trade deal is reached between now and then (extremely doubtful), the White House is expected to release the plan, which will offer Trump some important political cover during the 2020 race, by Thursday.

Published:5/21/2019 1:44:29 PM
[Markets] The Margin: Alabama Public Television refuses to air two gay cartoon animals getting married While the rest of the country aired the Season 22 premier of “Arthur,” which included the same-sex wedding of two cartoon animals, Alabama Public Television instead decided to go with a less-controversial rerun. This is the South, after all.
Published:5/21/2019 1:44:29 PM
[Markets] Push for legislation allowing banks to serve the cannabis business is gaining momentum The push for legislation that would allow banks do business with cannabis companies without the risk of federal enforcement action is gaining momentum and credit unions are playing a key role. Published:5/21/2019 1:14:26 PM
[Markets] Establishment Narrative-Managers Struggling With New Syria Plot Holes

Authored by Caitlin Johnstone via Medium.com,

It has been about a week since the Working Group on Syria, Propaganda and Media (WGSPM) published a leaked internal document from the Organisation for the Prohibition of Chemical Weapons (OPCW) investigation into an alleged chemical attack in Douma, Syria last year. The document, whose authenticity the OPCW has confirmed, contends that the official story which was used to justify an air strike by the US, UK and France about poison gas being dropped on civilians from Syrian government helicopters is scientifically implausible, saying “In summary, observations at the scene of the two locations, together with subsequent analysis, suggest that there is a higher probability that both cylinders were manually placed at those two locations rather than being delivered from aircraft.”

The document, titled “Engineering Assessment of Two Cylinders Observed at the Douma Incident”, was signed by a man named Ian Henderson, whose name is seen listed in expert leadership positions on OPCW documents from as far back as 1998 and as recently as 2018. The OPCW hid this information from the public, for reasons it has yet to attempt to justify.

The fact that a longtime OPCW-trained investigator wildly dissented with the OPCW’s official conclusions within the OPCW’s own investigation should obviously have been made public knowledge, and this revelation should obviously have made headline news throughout the western media. Instead, it’s been completely ignored. Only a few alternative media outlets and the usual Russian publications have covered it.

“According to ProQuest database, [Peter] Hitchens’ piece is the only mention in any UK corporate newspaper so far,” tweeted media analysis site Media Lens yesterday.

So there’s a total media blackout on this story from the usual plutocratic news outlets, which is a huge story in and of itself. Just as significantly, the less well-known propagandists who are typically the first to attack any argument which casts doubt on the “Assad is a child-gassing monster who must be stopped at all cost” imperial narrative have been incredibly feeble in their attempts to dispute this new revelation.

Bellingcat is a pro-NATO narrative management firm which has defended ridiculous Syria regime change propaganda like the Bana Alabed psyop, and is consistently elevated with fawning puff pieces and collaborative reportsfrom major mass media outlets like the Guardian and the New York Times. As of this writing it has published absolutely nothing on the Engineering Assessment. Nothing for, nothing against. Nothing. The outlet’s incredibly shady founder, Eliot Higgins, has responded to this new revelation by pinningtweet citing a completely baseless theory that the WGSPM “got played by a disgruntled OPCW employee.”

“This reporting by @Brian_Whit on the leaked Douma report that the conspiracy theorists and chemical weapon denialists are so excited about is consistent with what I’m hearing. Looks like they all got played by a disgruntled OPCW employee,” Higgins tweeted with a link to a Medium article by UK reporter and virulent Syria regime change cheerleader Brian Whitaker, adding, “This is why the Syrian Propaganda Group needs to work on verifying things it decides to republish, even if it fits with their attempts to deny chemical weapon use in Syria, otherwise they just get played by people with their own agenda.”

The silliness of this argument was pointed out by journalist Aaron Maté, who responded, “What ‘reporting’? He’s citing rumors that he acknowledges are ‘not confirmed.’ Regardless, the document comes from OPCW, as Whitaker’s update notes. The question now is whose findings are accurate?—?and there’s nothing in this article that challenges the leaked findings.”

Maté highlighted portions of the text that Higgins shared from Whitaker’s article, which I will put in bold here:

“One story circulating in the chemical weapons community (though not confirmed) is that Henderson had wanted to join the FFM and got rebuffed but was then given permission to do some investigating on the sidelines of the FFM. The suggestion (again, not confirmed) is that this was a way of extending his contract at the OPCW. If true, it might explain how he appeared to be working with the FFM while not (according to the OPCW press office) actually being part of it.”

Even if all of the completely unconfirmed things Whitaker is speculating are true, it wouldn’t actually negate the importance of the Engineering Assessment; this is merely an attempt to divert attention from the message to the messenger. And, again, this was a post that Higgins pinned to the top of his Twitter profile. It was his very best argument.

It is not terribly surprising that Higgins has struggled to address this new revelation, partly because there’s not much ground upon which for him to do so, and partly because in the midst of an online debate in the wake of the alleged Douma attacks he already conceded that one of the gas cylinders may have been manually placed where it was photographed.

“Again, you’re assuming it was photographed in its original resting place and not moved. Keep up,” Higgins tweeted following the April 2018 incident in response to someone questioning the strange placement and circumstances of one of the cylinders. It was lying on an unbroken bed in relatively good condition and people were rightly perplexed as to why it hadn’t shattered the bed base upon impact.

Idrees Ahmad, a particularly loathsome anti-Assad regime change propagandist who has smoothly transitioned into an anti-Maduro regime change propagandist as well when the US empire focused its crosshairs on Venezuela, has had similar difficulty in addressing the leaked document. Ahmad flipped out and posted dozens of tweets in response to Susan Sarandon sharing my article about the OPCW’s admission that the Henderson report is legitimate. His arguments range in brilliance from falsely claimingthat I am an “Australian fascist”, to repeatedly arguing that Henderson’s conclusions differ from the official OPCW report (duh), to repeatedlyregurgitating Higgins’ aforementioned baseless argument about Henderson being a “disgruntled OPCW employee”.

So they’ve really got nothing. There is no actual argument to be made that the OPCW had any business keeping the public in the dark about a dissenting assessment about the Douma incident signed by a longtime OPCW investigator. Or if there is I haven’t seen it, and I’ve been looking in all the usual places one might expect such an argument to appear.

There are still plenty of unanswered questions about the Douma incident. The leaked document doesn’t by itself prove that the Engineering Assessment is correct and the official OPCW findings are incorrect, it just proves that there were other analyses which differed sharply with the official conclusions we’ve been permitted to see, and that we weren’t permitted to see those analyses. In a post-Iraq invasion world, this by itself is entirely unacceptable. And, rather than pushing for answers and accountability, the so-called journalists of the largest media outlets in the west are completely ignoring it.

*  *  *

Everyone has my unconditional permission to republish or use any part of this work (or anything else I’ve written) in any way they like free of charge. My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics on Twitter, throwing some money into my hat on Patreon or Paypalpurchasing some of my sweet merchandise, buying my new book Rogue Nation: Psychonautical Adventures With Caitlin Johnstone, or my previous book Woke: A Field Guide for Utopia Preppers. 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. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here.

Bitcoin donations:1Ac7PCQXoQoLA9Sh8fhAgiU3PHA2EX5Zm2

Published:5/21/2019 1:14:26 PM
[Markets] The Ratings Game: Tesla stock ‘bear case’ is $10, Morgan Stanley says Tesla Inc. shares slide further on Tuesday after analysts at Morgan Stanley peg their worst-case scenario for the stock at $10 and say the Silicon Valley car maker might have grown “too big.”
Published:5/21/2019 1:14:26 PM
[Markets] Senior Official In Russian Parliament Says That Cryptos Can Ruin Governments

Authored by Helen Partz via CoinTelegraph.com,

A senior official in Russia's parliament, the State Duma, has argued that cryptocurrencies have the potential to ruin governments, Russian financial media agency Rambler reported on May 20.

Nikolai Arefiev, a member of the Communist Party of the Russian Federation and vice-chairman of the Duma’s committee on economic policy, innovative development and entrepreneurship, claimed that cryptocurrencies were created in order to hide large offshore assets from the government.

image courtesy of CoinTelegraph

If cryptos such as bitcoin (BTC) had emerged by 1994, Russia would have been “fully destroyed” so far because it would have lost all its capital offshore, Arefiev stated, speaking at a recent press conference of local media agency, National News Service.

The 70-year-old official has further suggested that it is useless for a government to attempt to be involved in cryptocurrencies’ operations, emphasizing that those jurisdictions that decided to ban cryptocurrencies have chosen the easiest way to protect their capital.

Also today, Arefiev warned the public against speculative capital, claiming that it accounts for more than 90% of the global economy. According to the official, bitcoin is a part of those speculative schemes, which create “money from money” and do not actually produce any products.

The cryptocurrency industry is still not regulated in Russia.

Recently, Russia’s largest bank, Sberbank, requested that a client provide information on their income from operations with cryptocurrency. Last week, Russian prime minister and former president Dmitry Medvedev claimed that crypto regulation is not a priority for the Russian government since cryptocurrencies “have lost their popularity.”

Published:5/21/2019 12:51:15 PM
[Markets] Stocks rebound after US eases off China sales restrictions Stocks marched broadly higher on Wall Street in afternoon trading Tuesday, placing the market on track to snap a two-day losing streak. The rally followed the U.S. government's decision to temporarily ... Published:5/21/2019 12:51:15 PM
[Markets] Victoria’s Secret market share sinks as online brands grow Data from Coresight Research shows that Victoria’s Secret has lost market share over recent years as smaller, online brands have gained.
Published:5/21/2019 12:51:15 PM
[Markets] Capitol Report: Trump’s tweets suggest he’s more of a ‘tariff man’ than ever The art of the deal? Try “tariff man.” President Donald Trump’s mentions of tariffs have soared to record-high levels and “tariff man” — versus Trump the dealmaker — “could be here for an extended stay,” says TD Securities.
Published:5/21/2019 12:14:47 PM
[Markets] FT Editors Warn Washington's "Coercive Steps" Against Huawei Are "Seriously Misguided"

The FT's editorial board rarely agrees with the Trump administration, and when it comes to Washington's decision to blacklist Huawei, the paper's editors believe Trump is making a massive miscalculation.

FT reporters warned yesterday that Google's decision to cut Huawei off from most Android-related offerings represented a "hammer blow" to the telecoms giant's rapidly expanding smartphone business.

Smartphone

Analysts quoted by the South China Morning Post on Tuesday warned that "as far as overseas markets go, this move just turned Huawei's upcoming phones into paperweights."

Beijing, for its part, has sworn to cultivate whole supply chains and app-based ecosystems out of nothing to insulate Huawei from Washington's blacklisting. In this, the FT editors apparently believe the Chinese might succeed. 

And the worst possible outcome of the Huawei crackdown - for the US, at least - would be for Huawei to survive by building a fully independent supply chain. That could help 'decouple' the American and Chinese tech industries, which are deeply intertwined due to the components trade.

They amount to an effort to decouple the US and Chinese tech sectors, leading to a bifurcation of the global industry. This reflects a view reaching beyond the Trump White House and deep into the US security establishment that President Xi Jinping’s China is a malign actor, and that its technology is on course to outstrip America’s. Indeed, the US steps appear part of an attempt to constrain China’s rise.

Echoes of the Soviet era abound, but Soviet industry was never entwined with America’s in the way China’s is. The latest US moves seem designed to cripple or crush one of the first Chinese tech companies to become globally competitive — and one that relies on American suppliers in both mobile phones and network equipment.

Other countries might also chafe at Washington once again imposing its will on global markets, which could galvanize support for an alternative to the US-dollar-based global financial system. And if China is forced to divorce its tech industry from the American tech industry, it could accelerate the 'splintering' of the Internet.

What's more, the European countries that have decided to tolerate the 'security risks' associated with allowing Huawei equipment to be used in their 5G networks will resent Washington's tenacity.

Assuming the US administration sticks to its measures, despite heavy lobbying by US businesses, they will damage American and other western corporate interests. Allied capitals will resent the White House’s efforts to impose its writ. However great the vulnerabilities in Huawei and the broader Chinese tech sector that they have revealed, the US steps may also ultimately fail.

They are likely to spur a Beijing-led effort to address China’s weaknesses and develop a fully independent supply chain. A historical analogy might be China’s nuclear weapons programme: the departure of Soviet advisers in the late 1950s forced it to build its own A-bomb. The result could hasten a splintering of the internet and associated technologies to which China and Russia, which recently passed a law ensuring it can cut itself off the world wide web, have already contributed.

Instead of pushing China down this path, Washington would be better served by encouraging "cooperation in a rules-based system" (because Beijing has no problem adhering to 'rules', right?).

If China wishes to change its image as a malign force, it must rein in such attacks. Yet Washington’s coercive steps are misguided. The US and the west should not seek to block China’s rise but encourage it to co-operate in a rules-based system, by setting good examples themselves. Washington’s allies should be free to determine what steps they judge necessary to combat security threats from Huawei or others. The US has the right to take security steps too - but not to allow these to slide into destabilising protectionism.

One could also deduce from the FT's argument that, if Washington does press ahead, it must destroy Huawei, or risk serious repercussions.

Published:5/21/2019 12:14:47 PM
[Markets] Xi Warns 'Prepare For New Long March' As Beijing Braces For Drawn-Out Trade Fight

In what the SCMP described as the "most dramatic sign to date that Beijing has given up hope of reaching a trade deal with the United States in the near term," President Xi called for the Chinese people to begin a new "Long March" and "start all over again."

Xi

Though he didn't specifically mention the trade spat, the message here is unequivocal: The Chinese people must prepare for economic hardship from the burgeoning trade spat. Xi delivered the speech from Jiangxi, the city where the defeated Red Army started the original "Long March" in 1934. And as if the implications for the trade war weren't already clear enough, Xi delivered his speech while accompanied by Vice Premier Liu He.

"We are here at the starting point of the Long March to remember the time when the Red Army began its journey," Xi told cheering crowds on Monday, in footage posted on state broadcaster CCTV’s website on Tuesday. "We are now embarking on a new Long March, and we must start all over again!"

For readers who aren't familiar with this singular triumph in the military history of Communist China, here's a quick explanation:

The Long March was a military retreat between 1934 to 1936 undertaken by the Red Army, the forerunner of the People’s Liberation Army, to evade Kuomintang troops during the Chinese civil war. The thousands of marchers covered some of the country’s harshest terrain and the feat is often evoked as a symbol of Chinese unity by the ruling Communist Party.

Xinhua echoed some of Xi's sentiments in an editorial, where he blamed Washington's "bullying" for the collapse of trade talks. Beijing has previously warned that there's no point in holding more talks if the US isn't "sincere" about wanting to achieve a fair outcome.

A long article by the official Xinhua News Agency on Monday claimed that "bullying by the US side" was the cause of the failed trade talks.

"The People’s Republic [of China] has been standing tall in the East for the last 70 years, it has never lowered its head and it has never feared anyone," Xinhua said. "History will prove again that bullying and threats by the US will not work."

Xinhua followed this up on Tuesday with a report of Xi’s tour, saying that "every generation has its own long march." It did not mention the trade war.

Washington's decision to blacklist Huawei has only strengthened the perception among the Chinese that the US is doing everything in its power to thwart China's rise. Yet, other than its tit-for-tat tariff hikes, Beijing has yet to announce any additional tariffs or other countermeasures, though dumping Treasuries has been discussed as a strategy for retaliation, while a rare-earth metals ban has also been the subject of speculation.

The historical 'Long March' took years. It appears China is digging in for a prolonged fight. Just wait until risk assets realize this.

Published:5/21/2019 11:45:38 AM
[Markets] The Technical Indicator: Charting a range-bound backdrop, S&P 500 weathers May trade-fueled volatility Technically speaking, the major U.S. benchmarks continue to whipsaw amid trade-fueled volatility though the bigger-picture damage has thus far been largely contained, writes Michael Ashbaugh.
Published:5/21/2019 11:45:38 AM
[Markets] 'American Taliban' Getting Out Of Prison Early; Slain CIA Officer's Father, Senators, Demand Answers

John Walker Lindh, the so-called 'American Taliban', is being let out of federal prison over three years ahead of schedule, and people want to know why. 

Lindh converted to Sunni Islam at age 16 after dropping out of school and becoming obsessed with hip-hop and the movie Malcom X (he pretended to be a black rapper online and criticized others for "acting black"). Shortly after his father left his mother for another man, the culturally appropriating Lindh began to attend San Francisco Bay Area mosques. After a 10-month trip to Yemen in 1998 to study the Qur'an, Lindh returned home for eight months, only to return to the Middle East - eventually winding up in Afghanistan to take up arms against Northern Alliance fighters in May, 2001. 

He was captured on November 25, 2001 and held at an a makeshift prison in Afghanistan, where he would participate in an extremely violent prisoner uprising (the battle of Qala-i-Jangi) that led to the death of CIA officer Johnny "Mike" Spann and hundreds of foreign fighters. Lindh was one of 86 prisoners who survived after hiding in a basement with a group of detainees who shot at Red Cross workers sent in to collect the dead, killing one

And now, he's getting out of prison early - and people want to know why

Republican Sen. Richard C. Shelby of Alabama and Democratic Sen. Maggie Hassan of New Hampshire have lots of questions for the Trump administration about the expected release on May 23 from federal prison of John Walker Lindh.

The bipartisan senators have asked Hugh Hurwitz, the acting director of the Federal Bureau of Prisons, to answer several questions about preparations for the release of convicted terrorists. -Roll Call

"We write to express concern over the anticipated release of convicted American Taliban fighter John Walker Lindh and request information about what steps the U.S. government is taking to ensure public safety," reads a joint letter from Shelby and Hassan. "Mr. Lindh was captured in Afghanistan in 2001, and the following year, he pled guilty to serving as a soldier of the Taliban. Mr. Lindh was sentenced to twenty years in prison but is scheduled to be released early from federal custody on May 23, 2019."

The letter also expresses concern over "as many as 108 other terrorist offenders" who are also scheduled to be released over the next few years after their sentences are up, and "whether they pose an ongoing public threat, and what your agencies are doing to mitigate this threat while the offenders are in federal custody.

Also furious is the father of CIA agent Mike Spann. His father, Johnny Spann, told a Virginia federal court that Lindh reportedly "ignored" conditions placed on him in a 2002 plea agreement, according to CNN

Spann has protested the early release of Lindh and taken the issue up with lawmakers, including Sen. Richard Shelby, an Alabama Republican, who said last month that he raised the issue with President Donald Trump, who agreed that Lindh should serve his full sentence.

According to a National Counterterrorism Center document reported by Foreign Policy magazine in 2017, Lindh "continued to advocate for global jihad and to write and translate violent extremist texts" from behind bars. -CNN

If only he'd culturally appropriated Rastafarianism - things could have turned out much better for Lindh. 

Published:5/21/2019 11:16:38 AM
[Markets] Deep Dive: Fans of Tesla’s stock might find the car maker’s bonds a profitable investment The longer-term notes have a high yield, and the convertibles are a lower-risk way to play the common shares.
Published:5/21/2019 11:16:37 AM
[Markets] Stock Market News: Home Depot Overcomes Mother Nature; Is Tesla $10-Bound? Tuesday morning brought some relief to the stock market. Published:5/21/2019 11:16:37 AM
[Markets] GLOBAL MARKETS-Global stocks rally as U.S. eases Huawei restrictions Global equity markets rose on Tuesday, led by chipmakers and companies exposed to Asia, after the United States temporarily eased trade restrictions imposed on China's Huawei Technologies, while the dollar rose on a flight to quality. Major European stock markets rose and Chinese indices gained more than 1 percent after the Commerce Department late on Monday allowed Huawei to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to its smartphones. Published:5/21/2019 10:44:07 AM
[Markets] Tesla Slashes Car Prices For The Third Time In 3 Months

Tesla is cutting prices yet again, a clear sign that "demand hell" has set in for the embattled automaker, and that the weather in Shortsville may continue to be 85 degrees and sunny heading into the summer where Morgan Stanley now sees the "bear case" scenario for the stock as low as $10 per share. 

Perhaps Tesla has finally figured out that there is simply not enough demand for its cars at the current price point, or worse, that its business model isn’t sustainable, resulting in what has been a 2019 full of business model changes, price cuts and employee layoffs.

On Tuesday morning, electrek reported that Tesla had again lowered the base price on its Model S and Model X vehicles. The company's demand issues were highlighted on Tuesday morning in a Morgan Stanley note that saw former Tesla uber-bull Adam Jonas lower his worst case price target for the the company to a paltry $10. 

Tesla brought back a ‘Standard Range’ option for both vehicles as a part of the cuts. Tesla has reportedly updated its online configurator to reduce the price of the Model S and Model X by $3,000 and $2,000, respectively. This represents the third price cut in three months for these models. 

 

Bizarrely, the company's attempt to fine tune the equilibrium price only took place after a modest price hike which was immediately reversed: Reuters reported that according to a Tesla spokesman "Last week, we raised U.S. Model 3 prices by 1%". Shortly after, the company cut prices.

In any case, the company still has not consistently offered a $35,000 base model for the Model 3 on its website and the vehicle can reportedly only be ordered by going into a store or calling the company. Recall, the promise of a $35,000 Model 3 with a full EV credit is how Musk drummed up "420,000" Model 3 reservations more than 3 years ago. 

Tuesday morning's MS note saw Jonas ponder if a collapse in the company's stock price could become a self-fulfilling prophecy among counterparties and employees. He also called into question the year's "sharp deceleration in demand":

We have long held that Tesla’s share price performance is driven by: demand for its products, ability to generate cash flow, and access to capital markets. This year’s sharp deceleration in demand has led to a substantial curtailment of the company’s ability to self-fund through free cash flow generation, at the margin potentially impacting the firm’s access to capital. Tesla’s recent $2.7bn equity and convertible debt raise may provide an extra year of liquidity to run a business of this size and cash consumption. However, Tesla may now find itself in a cycle where a lower share price may itself contribute to a potential deterioration of employee morale as well as potentially increased counterparty risk with both customers and business partners (suppliers,governments)... potentially further impacting fundamentals.

He then reminded the Musk collective of the importance of demand, or lack thereof, saying it is "at the heart of the problem" and adding that the company may have over-saturated the market outside of China:

We believe Tesla may have over-saturated the retail market for BEV sedans outside of China. Tapping into new demand could require aggressively expanding into: 1) the Chinese domestic market, 2) lower-priced SUVs, 3) and logistics/mobility fleets. Tesla is a large and highly vertically integrated company, capacitized to build between 500k and 1 million units annually. In our opinion, Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals.

The timing of Tuesday morning's Morgan Stanley note seems to be prescient. After all, price cuts are generally only offered when a company that is trying to spur more sales and move inventory. Even the pro-Tesla propaganda at electrek couldn't help but admit that "...it’s also becoming difficult to navigate Tesla’s price structure because it changes so often."

Published:5/21/2019 10:44:06 AM
[Markets] Pound Jumps On Reports May To Let MPs Vote On 'Second Referendum'

Brexit-related volatility is back for the pound as reports that Theresa May might offer MPs a vote on a second referendum has renewed hopes that Brexit might be abandoned altogether.

May reportedly ran the plan by her cabinet, but according to some reports, she backed down after Brexiteers in her cabinet refused to back the plan.

Earlier today, the pound reacted to news that May would be holding a press conference to outline a new Brexit proposal.

  • MAY POISED TO OFFER MPS VOTE ON HOLDING 2ND BREXIT REFERENDUM
  • VOTE ON 2ND REFERENDUM CONDITIONAL ON BILL PASSING 1ST STAGE
  • PARLIAMENT WOULD VOTE ON PUTTING BREXIT DEAL TO REFERENDUM

It's unlikely that a second referendum would be approved, as the indicative votes held back in March showed it wouldn't have the support of a majority of MPs, but the fact that a "People's Vote" on May's deal is back in the conversation is enough to ignite hopes that Brexit will simply be abandoned.

GBP

May will be speaking shortly.

Published:5/21/2019 10:13:29 AM
[Markets] Pelosi clashes with fellow Democrats on impeachment question Pelosi clashes with fellow Democrats on impeachment question Published:5/21/2019 9:46:20 AM
[Markets] Stocks rebound after US eases off China sales restrictions NEW YORK (AP) — U.S. stocks rallied in morning trading on Wall Street Tuesday after the U.S. government temporarily eased off its proposed restrictions on technology sales to Chinese companies. Published:5/21/2019 9:46:20 AM
[Markets] Trader: Occam's Razor On Trade War "Leaves No Choice But To Be Bearish Stocks"

How the U.S.-China trade war plays out is key to the future of U.S. stocks, and while hope is rife on every 'inspirational' "constructive" headline, Bloomberg macro strategist Mark Cudmore clarifies the way forward by applying Occam's razor to the situation, leaving him no choice but to be bearish.

And while headline indices may be rallying overnight on Huawei reprieve hopes, the trend in China-sensitive stocks is not your friend...

Via Bloomberg,

As Cudmore explains, there are obviously a host of other macro inputs. Most that are likely are largely priced and therefore relatively marginal. Unforeseen events, or black swans, significantly skew toward being negative surprises since uncertainty and volatility reduce the risk-reward of having cash tied up in investments.

The trade war is not the only driver of U.S. stocks, but it's a very large one where the status quo isn't yet priced and the uncertainty remains high. This arguably makes it the key driver for the rest of 2019 that we can strategize for right now.

There are essentially three scenarios:

1) The trade war escalates further and more barriers are implemented; clearly bad news for stocks

2) The trade war ameliorates and already-implemented measures are lifted; good news for stocks

3) There's no change to the current situation; equities have a long way to fall as they have not priced in the hit to earnings and the economy from the recently implemented tariffs being a permanent part of the landscape.

I have no extra insight on which way the trade war will play out. Occam's razor dictates that the outcome that requires the least speculation is most likely to be correct. That means the one where there's no major shift from the present U.S.-China trading relationship that exists today. That suggests S&P 500 downside, as outlined below...

The recent escalation in the U.S.-China trade war is a game-changer which could put overvalued American stocks through months of pain -- for at least the rest of the year.

  • A few months ago, an increase in bilateral tariffs was seen as 2019’s negative tail-risk. In hindsight, that looks optimistic and U.S. stocks have yet to price in the resulting slowdown in growth and earnings

  • There’s an assumption it’s just part of negotiations and will soon be resolved. The evidence provides little support for such complacency

  • The tone in state-sponsored Chinese media has shifted markedly more belligerent this month. Anti-U.S. sentiment is growing rapidly, as shown by a trade war song going viral in Beijing

  • And the trade tensions are no longer just about tariffs and their drag on growth: The targeting of tech giant Huawei is directly disrupting supply chains. The impact here is perhaps even more damaging for a U.S. equity bull market that has been so dependent on the tech sector

  • Many U.S.-based investors seem to be slow in registering where the world’s consumer power now lies. Asia has more than 50% of the world’s population, with almost 20% in China alone. This is a tech-savvy, consumption-focused middle-class population with a rising disposable income

  • Focusing on just the hit to U.S growth misses a large chunk of the negative earnings impact to come for all those Amercian multinationals

  • After being very bullish U.S. equities for 2019, I turned bearish on April 30 via this column. I highlighted stretched valuations but expected only a multi-week correction before fresh highs later in the year

  • That was before the trade war escalated. The landscape has changed enormously and those valuations now look far more out of whack

  • The Bloomberg U.S. economic surprise index has been below zero for almost five months -- during a time when most were optimistic toward the trade negotiations. The months ahead will see the outlook deteriorate further

  • The S&P 500’s blended 12-month forward-looking price-earnings ratio stands at 16.3 versus the 10-year average of 15. Worryingly, that’s before analysts slash estimates further, meaning an even longer way to fall to hit that long-term average

  • The price-to-book ratio is 3.3, versus the 10-year average of 2.6. The price-to-free-cash-flow ratio is 22 versus the 10-year average of 16.5

  • And these frighteningly expensive valuations are for just the S&P 500, let alone some of the more-tenuously priced unicorns and tech stocks

  • It’s not that the world economy is set to collapse. It’s not even that positioning is overly stretched or liquidity conditions are particularly tight. It’s just the value proposition in U.S. equities has suddenly vanished and will only look more negative by the week

  • When you add in the fact the credit cycle is turning, it gets a little more scary. Then you consider that any Fed power to support financial assets has been significantly diminished with rate cuts already well-priced into markets

  • At best, the Fed delivers the monetary easing that’s priced, but that’s no guarantee. And how will investors react to the signal of a rate-cutting cycle? The last time they experienced one was in 2008, so it may spark some worrying flashbacks

Cudmore concludes rather ominously:

"I’ve been a structural bull on U.S. equities for many years. I’ve had periods of being tactically bearish that have lasted for several months. The most recent one began April 30. But, for the first time since long before I joined Bloomberg News in 2014, I’m wondering if it’s time to become a structural bear on U.S. stocks.

All I know for sure is that the game has changed significantly and investors have not yet realized. That makes me very nervous..."

But there is a silver lining (of sorts) as Bloomberg's Richard Breslow reminds investors, it's not the economy, it's not the trade-deal, and it's not earnings... It's the central banks, stupid!!

Here’s what’s on the other side of the ledger from a stock market that is easy to hate but continuously holds the levels it has to: dovish central bankers who are receiving very little pushback, trillions of dollars worth of negative-yielding debt, and credit swaps that look like they have taken a pause from tightening. Add to that emerging markets that are looking decidedly squishy and a dollar that has remained stubbornly bid.

It’s certainly reasonable to argue that equities may have put in a top for now. Maybe for longer than now. But it is too early to call the market broken until it breaks. Easy for me to say, I know, because there is a lot to be pessimistic about. Maybe we’ll finally see an episode where political risk does overwhelm the rate-setters. It just hasn’t happened yet with lasting effect. While the indexes sometimes look ugly and the news sounds even worse, the fact remains that the strong hands are still the ones most constructive for the long haul.

Equities have dealt with non-believers for years during the whole way up. The bulls put it down to skill and the bears describe a less flattering view of things. Every time the market holds a level and the dip is bought, Willie Nelson’s lyrics come to mind: “The winners tell jokes and the losers say deal. Lady Luck rides a stallion tonight. And she smiles at the winners and she laughs at the losers. And the losers say now that just ain’t right.”

All sounds a little bit 'Dirty Harry' to us: "Do you feel lucky, punk?"

Published:5/21/2019 9:46:20 AM
[Markets] U.S. stocks open higher; tech rebounds after curb on Huawei sanctions U.S. stocks open higher; tech rebounds after curb on Huawei sanctions Published:5/21/2019 9:13:32 AM
[Markets] Stocks stage tentative rebound as investors eye trade headlines Stocks head cautiously higher Tuesday morning following a temporary reprieve on restrictions on U.S. exports to China telecom giant Huawei Technologies, reflecting a slight reduction in one front of the Sino-American tariff war. Published:5/21/2019 9:13:32 AM
[Markets] Capitol Report: Pelosi clashes with Democrats in debate on impeachment | Republicans press Trump to make a deal on spending Politico reports House Democratic leaders sparred internally on Monday over whether to begin an impeachment inquiry against President Donald Trump, with Speaker Nancy Pelosi and her allies rejecting the call to move forward for now.
Published:5/21/2019 9:13:32 AM
[Markets] Existing Home Sales Tumble YoY For 14th Month - Worst Run Since Housing Crisis

Existing home sales were the odd one out in March (falling as new- and pending-home-sales spiked) but expectations were for a catch-up rebound in April, but did not, dramatically missing the expectation of a 2.7% rise by dropping (again) by 0.4% MoM...

This 0.4% decline comes after existing home sales fell 4.9% MoM in March with a tumbling mortgage rate seemingly not affecting the secondary market...

Single-family units fell 1.1% MoM but Condos/Co-ops jumped 5.6% in April (erasing March's 5.3% drop).

Supply increased from 3.8 to 4.2 months (the highest since Oct 2018) as median prices jumped to their highest since July 2018.

Only The West saw an increase in sales (up 1.8% MoM) in April, with the Northeast worst, down 4.5% MoM.

Worse still, existing home sales are still down 4.4% year-over-year...

This is the 14th month in a row of annual declines - the longest stretch since the housing crisis over a decade ago...but that's probably nothing!!

Published:5/21/2019 9:13:31 AM
[Markets] "Brutal Reminders" Loom: 7 Measures Suggest A Decade Of Low Returns For Stocks

Authored by Lance Roberts via RealInvestmentAdvice.com,

“Price is what you pay, value is what you get.” – Warren Buffett

Just recently, I discussed the importance of valuations as it relates to investors who are close to retirement age. To wit:

“Unless you have contracted ‘vampirism,’ then you do NOT have 90, 100, or more, years to invest to gain ‘average historical returns.’ Given that most investors do not start seriously saving for retirement until the age of 35, or older, they have about 30-35 years to reach their goals. If that period happens to include a 12-15 year period in which returns are flat, as history tells us is probable, then the odds of achieving their goals are severely diminished.

What drives those 12-15 year periods of flat to little return? Valuations.”

Despite commentary to the contrary, the evidence is quite unarguable. As shown in the chart below, the cyclical nature of valuations and asset prices is clear.

In the short-term, a period of one year or less, political, fundamental, and economic data has very little impact on the market. This is especially the case in a late-stage bull market advance, such as we are currently experiencing, where the momentum chase has exceeded the grasp of the risk being undertaken by unwitting investors.

What investors most often overlook, due to this “short-termism” or the “fear of missing out,” is the risk being undertaken which will lead to less optimistic outcomes over the investment time frame of 10 to 20-years.

Just remember, a 20-year period of one-percent returns is indistinguishable from ZERO with respect to meeting savings goals. However, our focus today is looking at future returns over the next decade from current valuation levels which, again, are expected to be low to negative.

As I discussed previously in “You Carry An Umbrella In Case It Rains:”

“While daily, weekly, and monthly indications are useful, taking a look at ‘quarterly’ data can give us clues as to the ‘real risk’ investors are taking on at any given time. Is this the beginning of a major bull market cycle? Or, are we nearing the end of one? How you answer that question, given the relatively short time frame of the majority of investors (hint – you don’t have 100-years to reach your goals), can have an important impact on your outcome.

The problem for investors is that since fundamentals take an exceedingly long time to play out, as prices become detached ‘reality,’ it becomes believed that somehow ‘this time is different.’

Unfortunately, it never is.

The chart of the S&P 500 is derived from Dr. Robert Shiller’s inflation adjusted price data and is plotted on a QUARTERLY basis. From that quarterly data I have calculated:

  • The 12-period (3-year) Relative Strength Index (RSI),
  • Bollinger Bands (2 and 3 standard deviations of the 3-year average),
  • CAPE Ratio, and;
  • The percentage deviation above and below the 3-year moving average.
  • The vertical RED lines denote points where all measures have aligned”

Even after the sideways action over the last 18-months, the extended technical measures remain. Importantly, this doesn’t mean the market will mean revert tomorrow, it does imply that forward returns for current levels will be substantially lower than they have been over the last several years.

Yes, I know.

“P/E’s don’t matter anymore because of Central Bank interventions, low interest rates, accounting gimmicks, share buybacks, etc.”

It was the same in 2000 and 2007 when the “bull market psychology” makes such antiquated ideas like “value”seem irrelevant.

The important point to understand is that over the long-term investing period “value” and “returns” are both inextricably linked and diametrically opposed. As shown above, given current valuation levels, forward returns are expected to be lower than the long-term average.

Before we look at different valuation measures, let’s review what “low forward returns” does and does not mean.

  • It does NOT mean the stock market will have annual rates of return of sub-3% each year over the next 10-years.
  • It DOES mean the stock market will have stellar gains in some years, a big crash somewhere in between, or several smaller ones, and the average return over the decade will be low. 

“This is shown in the table and chart below which compares a 7% annual return (as often promised) to a series of positive returns with a loss, or two, along the way. (Note: the annual average return without the crashes is 7% annually also.)”

“From current valuation levels, two-percent forward rates of return are a real possibility. As shown, all it takes is a correction, or crash, along the way to make it a reality.”

This isn’t a prediction, it is just statistical probability and simple math.

With the premise in mind, let’s take a look at a variety of valuation measures as compared to forward 10-year returns.

The Charts

Tobin’s Q-ratio measures the market value of a company’s assets divided by its replacement costs. The higher the ratio, the higher the replacement costs resulting in lower returns going forward.

Just as a comparison, I have added Shiller’s CAPE-10. Not surprisingly, the two measures not only have an extremely high correlation, but the return outcome remains the same.

One of the arguments has been that higher valuations are acceptable because interest rates have been so low. As we can see below, when we take the smoothed P/E ratio (CAPE-10 above) and compare it to the 10-year average of interest rates (inverted scale) going back to 1900, the valuation to interest rate argument fails.

As noted above, historical valuation measures have been dismissed for a variety of reasons from Central Bank interventions to the rise of automation. However, while earnings can be manipulated through a variety of measures like share buybacks, accounting gimmickry, and wage suppression, “sales,” or “revenue,” which occurs at the top-line of the income statement is much harder to “fudge.” Not surprisingly, the higher the level of price-to-sales, the lower the forward returns have been. You may also want to notice the current price-to-sales is hovering near the highest level in history.

Corporate return on equity (ROE) sends the same message.

Even Warren Buffett’s favorite indicator, market cap to GDP, clearly suggests that investments made today will have a rather lackluster return over the next decade.

Even when we invert the P/E ratio, and look at earnings/price, or more commonly known as the “earnings yield,” the message remains the same.

We can reverse the analysis, as noted last week, and look at the “cause” of excess valuations which is investor“greed.”

“As investors chase assets, prices rise. Of course, as prices continue to rise, investors continue to crowd into assets finding reasons to justify overpaying for assets. However, there is a point where individuals have reached their investing limit which leaves little buying power left to support prices. Eventually, prices MUST mean revert to attract buyers again.”

The chart below shows household ownership of equities as a percent of household ownership of cash and bonds. (The scale is inverted and compared to the 5-year return of the S&P 500.)

Just like valuation measures, ownership of equities is also at historically high levels and suggests that future returns for equities over the next 5, 10, and 20-years will approach ZERO.

No matter, how many valuation measures you wish to use, there is no measure which currently suggests valuations are “cheap” enough to provide investors with sufficiently high enough returns over the next decade to meet their investment goals.

Let me be clear, I am not suggesting the next “financial crisis” is just around the next corner. I am simply suggesting that based on a variety of measures, forward returns will be relatively low as compared to what has been witnessed over the last decade. Such results are historically NOT a factor of “just one” issue but rather a culmination of issues which are simultaneously ignited by a single, unforeseen, catalyst.

As Doug Kass noted on Monday, there is a growing list of issues which will coalesce given the right catalyst.

  • Slowing economic growth
  • Trade/Tariffs
  • Credit spreads have begun to widen
  • Geopolitical uncertainties (Russia, China, North Korea, Iran)
  • Fiscal policy uncertainty
  • Earnings growth at risk
  • A very crowded momentum trade (ETF)

Most importantly, as stated above, none of these factors or measures mean the markets will just produce single-digit rates of return each year for the next decade. The reality is there will be some great years to be invested over that period, unfortunately, like in the past, the bulk of those years will be spent making up the losses from the coming recession and market correction. 

That is the nature of investing in the markets. There will be fantastic bull market runs as we have witnessed over the last decade, but in order for you to experience the up, you will have to deal with the eventual down. It is just part of the full-market cycle which encompass every economic and business cycle.

How you choose to handle the second-half of the full-market cycle is entirely up to you. However, “this time is not different,” and in the end, many investors will once again be reminded of this simple fact.

Unfortunately, those reminders tend to come in the most brutal of manners.  

Published:5/21/2019 8:43:56 AM
[Markets] US STOCKS SNAPSHOT-U.S. stocks open higher on Huawei reprieve U.S. stocks opened higher on Tuesday, with the Dow rising more than 100 points, as technology stocks rebounded after Washington temporarily eased trade restrictions imposed last week on China's Huawei. ... Published:5/21/2019 8:43:56 AM
[Markets] Oil prices rise on flare-up in Middle East tensions Oil prices rise on flare-up in Middle East tensions Published:5/21/2019 8:14:38 AM
[Markets] Stock futures hint at rebound as investors watch trade headlines U.S. stock futures point higher for Tuesday, indicating investors could be willing to shake off trade-related losses that kicked off the trading week. Published:5/21/2019 8:14:38 AM
[Markets] Blain: "It Feels Like A Shooting Match Is Imminent"

Blain’s Morning Porridge, submitted by Bill Blain of Shard Capital

“He knew everything about literature, except how to enjoy it…”

Waves of negative news headlines battering markets. Might have to wear a hat..

Huawei – Trade War Threat Level Rises

The Huawei embargo raises the trade war threat from undeclared to imminent shooting match. While it’s not quite “bullets fired at Archduke’s car”, it’s getting close. It feels like there is something of a tedious inevitability developing – a bellicose Trump realizes his political future depends on winning, and the Chinese refuse to lose face. Is it already too late to rein back? 

Huawei being effectively barred from Occidental markets has triggered all kinds of market fears: a “digital iron-curtain”, the threat of an economic cold tech war, broken global supply chains, and knock-on effects we can only begin to imagine. It’s the End of Globalisation – scream the media. The Chinese hint at reprisals. The “temporary exemptions” granted last night by the US are just that – temporary: they won’t undo the sudden need of millennials to dump their Huawei phones. The damage has been done.  Who will the Chinese punish in return?

Markets are now rife with speculation about “ripple” effects damaging tech dependent initiatives from autonomous cars, streaming, digitisation, and booking apps, triggering all kinds of real-world economic pain in sectors like tourism and luxury goods. While the market is fretting about how America will shod itself as tariffs are slammed on shoes made in China, it might be time to reassess market sectors where we expected long-term and ongoing China expansion, rising domestic consumption and demand to drive growth – I’m thinking areas from aviation, autos, machinery and plant, and energy. And, what are the implications for the UK – where the Chinese are building our nuclear power stations?

This doesn’t end well.

Powell wonders about Corporate Debt

In a fascinating Wall Street Journal article reporting Jerome Powell’s comments on the dangers of rising corporate debt to the US economy, he says he doesn’t rank the danger alongside what sub-prime mortgages did in 2007. Fair enough – but I think he may be underestimating the chain of consequences that could occur.

No matter how hard the trade war recession is, or how much the Fed raises rates, most corporates will not default. Sure, there will be pain, downgrades and re-trenchment. However, the "unintended consequences” of QE, low rates, hasty regulation and the transfer of risk from banks to the investment sector could magnify the scale of pain – and cause ructions in the corporate credit markets to trigger much wider financial pain, the next major crash.

  • Consider how much Junk and Near Junk Tech debt is out there – WeWork, Tesla, Uber and the rest. If the Tech bubble bursts, their bonds won’t be trading in the 80s, but in single digits.
  • Look at how much paper is BBB and the cusp of Junk. A small wobble could trigger massive enforced sales from holders unable to hold sub-prime, triggering further fixed income.
  • Read some of the nonsense written about how liquid Fixed Income ETFs are. If the crunch comes – I don’t see how they can retain value.
  • Don’t assume the investment sector will respond well if/when risk explodes. See yesterday’s porridge for more on this – the skills to manage and work out risk simply aren’t there…
  • 10-years of monetising equity through debt fuelled buy-backs has made corporates weaker, not stronger, and created falsely valued stock markets. That realisation will trigger not ripples, but a Tsunami across all markets on a corporate debt shock.

Moving on.

Deutsche Bank

As the stock hits a new low, do I really need to ask? How much longer? Apparently a group of core investors have had enough are pushing for the exit of Chairman Achleitner. Meanwhile, the FT suggests Goldman should buy the bank  - how amusing.

Jaguar Land Rover. Oh dear..

What does it say about Brexit Britain when our national car company is in serious need of reinvention? Jaguar Land Rover may have posted a small profit for this first few months of this year, but their $3.6 bln loss for the year after write-downs looks disastrous. There is little to suggest the company can turn itself around as Diesel cars remain almost unsellable, and Jaguars fail to excite buyers. Its failed to crack China, and car experts I’ve spoken with doubt the Indian owners have any real vision for the group. Its only decent selling the cars, the I-Pace and E-Pace are actually made by a separate firm and simply badged as Jags!

I have a simple solution for them: Cut prices and customer costs. I went into to look at a new Range Rover last year. A model essentially exactly the same as my current one, came with a £25k price hike from 3 years previously. More to the point, when I asked for financing options, they wanted to charge me a ridiculous usurious level – which I was quickly able to beat by calling another firm, but by then I was so peeved I decided just to keep my current car instead.

I probably don’t ever need to buy another new car – our current fleet of a 4-year old Rangey and a Roller Skate (Fiat 500) is pretty perfect for our purposes. She-Who-Is-Now-Mrs-Blain suggests there is room on the drive for something sporty, but I’m thinking an old Defender might be in order…

Published:5/21/2019 8:14:38 AM
[Markets] Bond Report: Treasury yields up slightly as stocks set for rebound despite trade uncertainty Treasury prices fall slightly Tuesday, pushing yields up, as a short respite from market jitters weighs on demand for government paper, even as investors keep an eye on trade uncertainty
Published:5/21/2019 8:14:38 AM
[Markets] Gold trades at nearly 3-week low as dollar, stocks perk up Gold prices head lower Tuesday as global stocks stage a rebound and the dollar strengthens, factors that help to dull bullion’s appeal. Published:5/21/2019 7:44:46 AM
[Markets] Boeing Shares Spike On Report 'Bird Strikes' Involved In Ethiopian Airlines Crash

Boeing shares are spiking, lifting the Dow, after the Wall Street Journal reported that US aviation authorities now believe a 'bird strike' may have triggered the sequence of events that led to the crash of Ethiopian Airlines flight 302.

Four weeks after faulty sensor data led a 737 MAX jet to crash in Indonesia last year, a high-ranking Boeing Co. executive raised and dismissed the possibility of a bird collision triggering a similar sequence of events that could cause a second accident.

Fears about the potential for a 'bird strike' to damage sensors on the jet appear to have been validated, though Ethiopian authorities aren't convinced.

US aviation authorities regard a collision with one or more birds as the most likely reason for trouble with the sensor, according to industry and government officials familiar with the details of the crash investigation.

Ethiopian authorities disagree but haven’t provided any specifics to support their conclusion.

Boeing shares spiked 3% in premarket trading on the news, though WSJ's report doesn't exactly absolve Boeing. The company must now answer why, if senior executives feared 'bird strikes' could be a problem, it persisted in allowing MCAS, its anti-stall software that's believed to have contributed to two deadly crashes, to rely on only one sensor.

Boeing

Algos clearly interpreted the news as positive...after all, every American who has seen the movie 'Sully' probably remembers how much damage a flock of birds can do.

Published:5/21/2019 7:44:46 AM
[Markets] J.C. Penney shares sink after wider-than-expected loss J.C. Penney shares sink after wider-than-expected loss Published:5/21/2019 7:13:34 AM
[Markets] Now It's Comey Vs. Lynch: Someone's Lying Again

Former Attorney General Loretta Lynch accused former FBI Director James Comey of lying about whether she told him to refer to the Hillary Clinton email investigation as a "matter" instead of an investigation in a September 2015 meeting. 

While testifying last year at a closed-door House Oversight Committee hearing last June, Comey said Lynch had pressured him to minimize the significance of the Clinton email probe - an encounter which he says left him questioning her impartiality, and - along with Lynch's clandestine tarmac meeting on a hot summer's day in 2016 - contributed to his decision to hold a July 2016 press conference announcing the FBI's conclusions. 

"The attorney general had directed me not to call it an investigation, but instead to call it a matter, which confused me and concerned me," said Comey. "That was one of the bricks in the load that led me to conclude, ‘I have to step away from the department if we’re to close this case credibly.'"

Lynch, meanwhile, told congressional the House Oversight and Judiciary committees on December 19: "I did not. I have never instructed a witness as to what to say specifically. Never have, never will.

"I didn't direct anyone to use specific phraseology. When the Director asked me how to best to handle that, I said: What I have been saying is we have received a referral and we are working on the matter, working on the issue, or we have all the resources we need to handle the matter, handle the issue. So that was the suggestion that I made to him," Lynch added - telling lawmakers that she was "quite surprised" to hear how Comey would later describe the conversation "because that was not how it was conveyed to him, certainly not how it was intended."

A transcript of Lynch's interview was released Monday evening by House Judiciary ranking member Doug Collins (R-GA) which reveals the conflicting testimonies. 

Lynch was also presented with an excerpt of Comey's book, A Higher Loyalty, in which he says she "seemed to be directing me to align with the Clinton campaign strategy" during the September meeting and that "the FBI didn't do 'matters.'"

"It occurred to me in the moment that this issue of semantics was strikingly similar to the fight the Clinton campaign had waged against The New York Times in July. Ever since then, the Clinton team had been employing a variety of euphemisms to avoid using the word ‘investigation,’" Comey wrote in his book. 

"I wasn't aware of the Clinton campaign strategy on anything," Lynch responded, adding that she was "not trying to align anyone on any issue." 

As the Washington Examiner points out, "In a report released last year, Justice Department Inspector General Michael Horowitz found Comey was "insubordinate" and "affirmatively concealed" his intentions from Justice Department leadership during the investigation into into Clinton's private email server."

Horowitz also found that Lynch's behavior was concerning, particularly when it comes to the tarmac meeting with Bill Clinton. 

This isn't the first time Comey's claims have been in direct conflict with his former colleagues'. In April of 2018, Comey's former Deputy, Andrew McCabe, said that Comey was fully aware that he (McCabe) was making self-serving leaks to the Wall Street Journal. McCabe was fired for lying about it under oath, several times. 

"It’s not okay. The McCabe case illustrates what an organization committed to the truth looks like," Comey told ABC's 'The View,' adding "I ordered that investigation" which resulted in McCabe's ouster. 

McCabe hit back, saying in a statement through his lawyer that "Mr. McCabe advised Director Comey repeatedly that he was working with the Wall Street Journal on the stories in question..."

More recently, Comey and former CIA Director John Brennan are at odds over who insisted that the discredited Steele Dossier be included in the intelligence community assessment (ICA) on Russian interference

According to Fox Newsan email chain exists which indicates that Comey told bureau subordinates that Brennan insisted on its inclusion, while a former CIA official "put the blame squarely on Comey," according to the network.

"Former Director Brennan, along with former [Director of National Intelligence] James Clapper, are the ones who opposed James Comey’s recommendation that the Steele Dossier be included in the intelligence report," said the official. 

"They opposed this because the dossier was in no way used to develop the ICA," the official continued. "The intelligence analysts didn't include it when they were doing their work because it wasn't corroborated intelligence, therefore it wasn't used and it wasn't included. Brennan and Clapper prevented it from being added into the official assessment. James Comey then decided on his own to brief Trump about the document."

So - once again we're playing a game of "which former Obama administration official is lying?" 

Published:5/21/2019 7:13:34 AM
[Markets] Outside the Box: I thought my meatless burger was the real thing — and that’s why the meat industry is headed for trouble Investors in Tyson Foods and Smithfield Foods parent WH Group should be worried about the conversations these meatless burgers are starting.
Published:5/21/2019 7:13:34 AM
[Markets] Tesla Slides After Morgan Stanley Slashes "Bear Case" Price Target To Just $10

After Tesla shares plunged below $200 for the first time in years yesterday with Wedbush calling the company a "code red situation", another sell side analyst has taken the machete to his numbers this morning and is embracing the cold reality as long time bull Morgan Stanley slashed its bear case on the company to just $10 this morning from $97. This has caused shares to again slip under the Mendoza line in the pre-market session. The company printed a fresh 52 week low yesterday of $195.25. 

Morgan Stanley's Adam Jonas opened his note by reminding readers that the company's 5 year CDS is at 674 vs. Ford at 200, saying that Tesla "has among the widest ranges of outcomes and uncertainty of any major auto firm". With MS's bear case at $10 and other clinically insane optimistic analysts on the name predicting $4,000 per share, that's one assertion Jonas is clearly right about. 

Jonas slashed his price target for the company's bear case from $97 to just $10, "driven primarily by our concerns
around Chinese demand for Tesla products." But what about Tesla mobility?

First, Jonas asks if a collapse in the stock price could become a self-fulfilling prophecy among counterparties and employees. He also calls into question the year's "sharp deceleration in demand":

We have long held that Tesla’s share price performance is driven by: demand for its products, ability to generate cash flow, and access to capital markets. This year’s sharp deceleration in demand has led to a substantial curtailment of the company’s ability to self-fund through free cash flow generation, at the margin potentially impacting the firm’s access to capital. Tesla’s recent $2.7bn equity and convertible debt raise may provide an extra year of liquidity to run a business of this size and cash consumption. However, Tesla may now find itself in a cycle where a lower share price may itself contribute to a potential deterioration of employee morale as well as potentially increased counterparty risk with both customers and business partners (suppliers,governments)... potentially further impacting fundamentals.

He then reminds the Musk collective of the importance of demand, or lack thereof, saying it is "at the heart of the problem" and adding that the company may have over-saturated the market outside of China:

We believe Tesla may have over-saturated the retail market for BEV sedans outside of China. Tapping into new demand could require aggressively expanding into: 1) the Chinese domestic market, 2) lower-priced SUVs, 3) and logistics/mobility fleets. Tesla is a large and highly vertically integrated company, capacitized to build between 500k and 1 million units annually. In our opinion, Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals.

If that wasn't enough, Jonas also slams the "departure of key executives, price discounting, and extraordinary cost-cutting efforts add to the narrative of a company facing real potential stress."

The note also says MS doesn't anticipate meaningful Model 3 deliveries in China until 2020:

Finally, Jonas can't help but comment on the clear message that the bond market is sending out, which we pointed out yesterday. He says that Tesla's 2025 bonds have "sold off materially", now trading 82.769, sending a less than optimistic message about the debt market's outlook on the company. 

We noted yesterday these bonds were at a record high yield - riskier than Mexico, Russia, and Indonesia and almost as risky as Lebanon...

Finally, Jonas expects competition to continue to be robust, pressuring Tesla. Jonas says: “We give Tesla credit for tapping into the world’s largest EV market for a number of years” in China. “We strongly suspect a host of national champions to emerge” in the country.

The note concludes: "Our revised bear case assumes Tesla misses our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention. We currently forecast Tesla to sell an average of 165k units annually in China from 2020 (56k units) through 2024 (254k units). At an average price of around $55k/unit we forecast Tesla has an average forward year exposure of around $9bn (165k units x $55k/unit). Our new bear case assumes Tesla loses $4.5bn of revenue at a decremental margin of 30%,20% tax and 15x PE multiple... resulting in lost value of $16.4bn which on a per share basis (188mm shares) is $87, bridging the gap between our old bear case of $97 and our new bear case of $10."

Adam Jonas is a longtime bull on the company, similar to Wedbush's Dan Ives, who has now come to the realization that the story could play out far differently than he had expected during his earlier, more optimistic days.

We expect that reality will continue to slap sell side analysts in the face and that the fall in shares will be, as Jonas says, a "self fulfilling prophecy" of reality checks among those who once were the most optimistic about Elon Musk and his "disruptive" company.

Published:5/21/2019 6:46:11 AM
[Markets] United Continental's stock set to gain after affirming full-year profit guidance Shares of United Continental Holdings Inc. were indicated up about 0.8% in premaket trade Tuesday, after the air carrier affirmed its full-year profit outlook. The company disclosed in an 8-K filing with the Securities and Exchange Commission, that it still expects 2019 adjusted earnings per share between $10.00 to $12.00, surrounding the FactSet consensus of $11.10. The company said it still expects second-quarter adjusted pre-tax margin of between 11% to 13%. The stock has lost 2.4% year to date, while the NYSE Arca Airline Index has gained 8.0% and the Dow Jones Industrial Average has advanced 10.1%. Published:5/21/2019 6:46:11 AM
[Markets] Merck to acquire Peloton Therapeutics for upfront payment of $1.05 billion cash Merck to acquire Peloton Therapeutics for upfront payment of $1.05 billion cash Published:5/21/2019 6:46:10 AM
[Markets] Europe Markets: European markets stage rebound after Monday malaise Though they didn’t erase Monday’s losses, investors piled back in amid slightly better news for Huawei
Published:5/21/2019 6:15:38 AM
[Markets] Chinese Airline Asks Boeing For Compensation Over 737 MAX Grounding

As if more tariff threats weren't enough, China Eastern Airlines has become the first major carrier to petition Boeing for compensation for the grounding of its 737 MAX 8 jetliners, which began two months ago.

Chinese media reported Tuesday that the company has lodged an official claim with Boeing over the grounding of the airline's 14 Boeing 737 MAX 8s (the total number when 737 MAXs owned by subsidiary Shanghai Airlines are included). In what might be a bigger blow for Boeing, the airline has asked to delay deliveries of new planes.

China

Among the three major Chinese airlines, CTGN said China Eastern owns the smallest fleet of the new 737s. And though the operational impact has been 'limited', the airline still feels it should be compensated.

The airline's decision was first reported by the People's Daily and other Chinese media. The reports did not list an amount of compensation being sought.

"The grounding of 737 MAX aircraft since March 11, 2019 has caused relatively big losses to China Eastern. With the passing of time, related losses will further expand," according to the People's Daily. "At the same time, delayed deliveries of planes ordered by China Eastern also caused economic losses."

Meanwhile, the FAA is hosting a meeting of global regulators in Dallas on Thursday to review Boeing's software update for the 737 MAX and new training proposals, which could factor into a decision to end the grounding. 

A spokesman for Boeing declined to comment to Reuters. A representative from China Eastern confirmed to Reuters that reports about it's plans to seek compensation from Boeing are accurate.

While this might not seem like such a big deal at first, if more Chinese airlines decide to halt or delay their Boeing orders until they've been compensated for the grounding, such a trend could be more damaging to Boeing's shares than trade-war-related fears.

Published:5/21/2019 6:15:38 AM
[Markets] Beijing Warns Of "Unwavering Resolve" In Huawei Fight, Accuses Washington Of "Bullying & Blackmail"

As the anti-American sloganeering reaches an unprecedented level of froth (there's now an unofficial trade war 'fight song') across China, the Commerce Department has softened its anti-Huawei stance, calling for a 90-day reprieve  to allow American broadband companies more time to work out a 'Plan B'.

The delay will cover continued operation of existing networks and equipment, as well as support to existing handsets and other limited actions, according to Bloomberg.

American

But that's not even the biggest trade headline of the morning, as analysts wonder how Beijing will retaliate for the war on Huawei. Anyone who thinks Beijing won't respond is being naive, China's ambassador to the EU warned Tuesday. China will provide a "necessary response" to Washington's "wrong behavior."

"This is wrong behavior, so there will be a necessary response," Zhang Ming, China’s envoy to the EU, said in an interview in Brussels on Monday. "Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by."

Zhang said the White House's crackdown on Huawei is "politically motivated" and an "abuse of export-control measures."

"The U.S. government is trying to bring down Huawei through administrative means," he said.

He also warned that Beijing would present "unwavering resolve"

"The United States has been repeatedly creating troubles to the consultation, undermining the positive momentum formed in the process of hard and tough negotiations and seeking illegitimate gains through bullying and blackmail," Zhang said.

"China has unwavering resolve to defend its legitimate right and interests," Zhang said. "If the U.S. wants to fight, we will accompany to the end and we will also fight earnestly. In other words, the ball is in the U.S. court."

"We have been holding on for 5,000 years," Zhang said. "Why not another 5,000 years?"

On Friday, the Commerce Department added Huawei and dozens of its affiliates to a blacklist that will stop US companies from selling Huawei equipment. This could be seriously disruptive for Huawei's business.

Meanwhile, Global Times editor Hu Xijin warned yesterday that China would devote itself to saving Huawei, and that Washington's aggression has "woke up Chinese society."

A steady drumbeat of aggressive editorials continued Tuesday with Xinhua warning that the US, which started the trade war, will bear the "heavy brunt" of its actions.

As CNBC warned in a headline Tuesday morning, the trade war might "get worse before it gets better" as Beijing stokes nationalistic fervor against the 'imperialist' Americans.

"It’s going to get worse before it gets better," said Curtis Chin, an Asia fellow at the Milken Institute, a think tank.

Trade talks are still on hold, and investors have pinned their hopes for a deal on a Trump-Xi meeting at the upcoming G-20 summit. Meanwhile, every day, the US takes one more step toward imposing tariffs of as much as 25% on all remaining imported Chinese goods.

And Beijing takes another step toward other means of retaliation like, for example, a rare-earth metals ban.

Published:5/21/2019 5:43:46 AM
[Markets] London Markets: London markets edge higher as pound hits four-month low Investors helped the FTSE 100 recoup its losses from Monday
Published:5/21/2019 5:43:46 AM
[Markets] Home Depot shares edge higher after better-than-expected profit, revenue Home Depot shares edge higher after better-than-expected profit, revenue Published:5/21/2019 5:43:46 AM
[Markets] Dow Futures Gain, Global Tech Rebounds, as US Eases Restrictions on Huawei Global stocks rebound following a move by the Commerce Department to ease restrictions on China's Huawei Technologies. Tech stocks gain on temporary reprieve for world's biggest equipment maker, but China's hit at reprisals, as well as the ongoing supply chain disruption, caps equity market gains. Oil edges higher amid ongoing concern over the escalating U.S. rhetoric towards Iran, with prices also supported by OPEC's signalling of extended production cuts. Published:5/21/2019 5:43:46 AM
[Markets] Pound Slides As MPs Oppose May's Withdrawal Agreement Ahead Of 4th Vote

As its recent trading trajectory would suggest, investors are bracing for another summer of uncertainty in the UK. Adding to the instability, investors are bracing for news of Theresa May's sudden ouster (she has already purportedly promised to step down by mid-summer), which is looking increasingly likely.

The British pound weakened on Tuesday as mounting opposition to May's Brexit deal, and the push to oust her from No. 10, are weighing on the currency. At its lows, sterling was off 0.3% at $1.2688, its lowest since Jan. 15.

GBPUSD

If May goes, the jostling to replace her could lead to a general election later this year, or early next. Though a new leader might push the EU to finally acquiesce and reopen negotiations, judging by the success of the last round of negotiations, a swift, positive outcome seems remote. It also remains unclear how a Brexit resolution would be reached before the new deal deadline (Halloween). 

However, that hasn't dissuaded May's critics. After aggressively confronting May, Tory backbenchers wrested a promise from the PM that she would step down in the not-too-distant future. Now, May is facing pressure from her cabinet, which has complicated May's efforts to win her senior ministers' backing for her withdrawal agreement, which is expected to be called for a fourth vote early next month. 

May

At the same time, Jacob Rees-Mogg, the leader of the Brexiteer faction, said on his podcast - the "Moggcast" - that he wouldn't back May's withdrawal agreement, like he did during the most recent vote. Mogg explained that he backed the deal last time to try and ensure that the UK would 'leave on time'. Yet, here we are...

"Mrs May’s deal is a very bad deal, let’s make no bones about that, so as we’ve already delayed it’s hard to see any point in having a bill which fails to avoid the European elections, fails to get us out on time, fails to get the process going that might have worked with a new leader coming in because Mrs May said if it came in she would go," Mogg said.

After No. 10 failed to secure a deal with Labour, what little chance May's deal had evaporated. May's last remaining option is to try and use her resignation as a carrot to pass the agreement and finally take the UK out of the EU (She has promised to resign if the deal is passed). But that approach hasn't had much success so far.

Should she resign, here's the FT's list of the most likely candidate to replace May:

  • Jeremy Hunt, foreign secretary
  • Sajid Javid, home secretary
  • Boris Johnson, former foreign secretary
  • Michael Gove, environment secretary
  • Dominic Raab, former Brexit secretary
  • Amber Rudd, work and pensions secretary
  • Matt Hancock, health secretary

But among these, most expect Johnson to emerge as the frontrunner in the battle to replace May. And, as the Spectator writes in a recent column, the only thing that can stop Johnson is himself.

 

 

 

 

 

 

 

Published:5/21/2019 5:13:42 AM
[Markets] U.S. stock futures hint at rebound as investors watch trade headlines U.S. stock futures point higher for Tuesday, indicating investors could be willing to shake off trade-related losses that kicked off the trading week. Published:5/21/2019 5:13:41 AM
[Markets] Incompetent people from wealthy backgrounds are more likely to act like they’re smart — and people believe them A new study finds that overconfident people from upper-class backgrounds succeed, even if they’re not that clever.
Published:5/21/2019 5:13:41 AM
[Markets] Ukraine's Comedian-Turned-President Vows "First Task" Is To "End War In Donbass"

There's fresh hope that unrest in Donbass raging since 2014 could find resolution as Ukraine's new president, comedian and presidential impersonator turned overnight real political leader Volodymyr Zelenskiy, was just sworn in on Monday, and immediately he is dissolving parliament and urging peaceful settlement in the country's east. 

The 41-year old Zelenskiy said in translated comments via The Moscow Times: “Our first task is to end the conflict in the Donbass.” With a clear mandate from Ukrainian voters who overwhelmingly want to see an easing of tensions with Russia, and the exit of oligarchs from power to halt mass political corruption, he announced during the inauguration ceremony from Kiev he wants to achieve a ceasefire in eastern Ukraine, even if it means losing his post

Via Reuters: High Fives, Selfies and a Snap Election as Zelenskiy Takes Power in Ukraine.

In his much anticipated inauguration speech, Zelenskiy switched from Ukrainian to Russian to say: “I believe that the first step to begin this dialogue will be the return of all Ukrainian prisoners [held by Russia].”

He further emphasized he would pursue peace at a cost to his reputation — “and, if need be, even this job” — according to The Moscow Times. Zelenkiy's upset victory over Petro Poroshenko by a double-digit margin has led some to dub him the "Donald Trump of Ukrainian politics" given his outside the system status and willingness to break from the establishment on the question of dialogue with Russia. He promised Ukrainians that he would seek to do this without losing our territory, never.”

The five-year long conflict in the east involving Russian-backed separatists who've severed ties from Kiev in a move for de facto independence has killed an estimated 13,000 people and has at times threatened to escalate to the level of western intervention.

The billionaire chocolate magnate Poroshenko, who came to power as a result of the West-backed so-called Euromaidan revolution gave one parting shot during his concession speech: in the Kremlin, he said, “they believe that with a new inexperienced Ukrainian president, Ukraine could be quickly returned to Russia’s orbit of influence,” according to a translation by the LA Times

But it doesn't appear the more than 70% of Ukrainians who voted for Zelenskiy see this as a loss of sovereignty, given the former comedian had long been on record as rejecting Kiev's hardline anti-Russian language initiatives. 

Reception in Moscow, however, was cool and perhaps cautiously optimistic, per an AP/Reuters report

Kremlin spokesman Dmitry Peskov, asked if Vladimir Putin will congratulate Zelenskiy on his inauguration, said the Russian president had no such plans

He said that Putin would congratulate his newly-elected counterpart if Zelenskiy makes progress in settling the conflict with pro-Russian separatists in eastern Ukraine and mending relations with Russia. 

Last week, US Secretary of State Mike Pompeo met with his Russian counterpart Foreign Minister Sergey Lavrov, as well as President Putin in Sochi to discuss a broad number of security related issues. During comments in front of reporters Pompeo said Russia should now "work with Ukraine’s new president-elect to bring peace to eastern Ukraine," according to a summary of Pompeo's words by Reuters.

Image via Reuters: An armed pro-Russian separatist from the so-called Battalion Vostok (East).

The unlikely "Ukrainian Donald Trump" rode a wave of popular support among a majority of Ukrainians exhausted with politics-as-usual marked by wave after wave of corruption scandals. 

Poroshenko was seen as the deeply corrupted establishment's man in Kiev, thus much of Zelenskiy's support can be seen as more of an anti-Poroshenko vote, perhaps somewhat akin to Hillary Clinton's shock defeat by Trump in 2016. 

Published:5/21/2019 2:14:23 AM
[Markets] Spain Sees Surge In Migrant Crime "Because Of Political Cowardice"

Authored by Soeren Kern via The Gatestone Institute,

  • "We have tasers, but they are stored in a closet because of political cowardice." — Spokesperson, Municipal Police of Bilbao.

  • In Madrid, an elderly couple returning home from vacation discovered that their apartment had been "occupied" by African migrants. When a camera crew from the Madrid television channel Telecinco went to investigate, the migrants destroyed the camera.... Spain's notoriously lethargic justice system now rules on who is the apartment's rightful owner.

  • The Madrid city council, run by Mayor Manuela Carmena, in a case study of political correctness run amok, ordered police to keep out of the neighborhood of Lavapiés. The result is that illegal immigrants, far from facing the threat of deportation, are now secure in the knowledge that their violent actions have empowered them effectively to take control of an entire neighborhood of a major European capital.

The Madrid city council, run by Mayor Manuela Carmena, in a case study of political correctness run amok, ordered police to keep out of the neighborhood of Lavapiés, one of the most "multicultural" districts of the Spanish capital, to "avoid situations of tension." Pictured: Police officers in Lavapiés on November 12, 2015. (Image source: Luis Sánchez de Pedro Aires/Wikimedia Commons)

Six African migrants gang-raped a 12-year-old girl in a small town near Madrid, but Spanish authorities kept information about the crime hidden from the public for more than a year, apparently to avoid fueling anti-immigration sentiments.

On March 15, 2018, the 12-year-old girl was playing in a park in Azuqueca de Henares with several other girls when, at around one o'clock in the afternoon, six migrants — five Moroccans and one Nigerian — approached the playground. They carried two of the girls off to a nearby abandoned building, but then let one of them go after discovering that she was a Muslim. The migrants, aged between 15 and 20, grabbed the 12-year-old by her arms and legs and took turns raping her, first anally and then vaginally, for nearly an hour.

The public was not informed about the crime until March 20, 2019, when the newspaper El Mundo published the results of an investigation. According to the report, Spanish prosecutors and judges secretly decided that three of the minors will be held in a young offender institution for three years and then be "reinserted" into Spanish society rather than be deported. One of the adults is being held in preventive detention; the other adults were released.

The gang rape has cast a spotlight on spiraling migrant criminality in Spain, where "progressive" immigration policies — promoted by all the mainstream political parties and opposed only by the populist party Vox — are fueling an influx of illegal migration from Africa, Asia and the Middle East. The gang rape has also cast a spotlight on a lenient justice system that routinely releases migrant criminals back onto the streets.

Reliable statistics on migrant-related crimes are unavailable: the data compiled by the Spanish Interior Ministry on specific categories of crimes (homicide, rape, robbery, etc.) do not break down the offenders by nationality.

In addition, different Interior Ministry databases produce different results on the actual number of crimes. One database, for instance, shows that there were 332 homicides in Spain in 2017, while another shows that there were 308. One database shows that there were 865 rapes in 2017, while another shows that there were 1,382 — a difference of 60%.

The official Spanish statistics agency (Instituto Nacional de Estadística, INE) shows that immigrants comprise roughly 10% of the overall Spanish population, but 32% of the Spanish prison population. The INE does not break the statistics down by the nationality of the inmates, although Interior Ministry data show that the majority of immigrants arrested in 2017 were from just two countries: Romania (18,032) and Morocco (17,464).

Despite the lack of official statistics, anecdotal evidence found in the crime reports of local newspapers shows that migrant criminality — ranging from petty theft to sexual assault to murder — is a growing problem nationwide.

In Barcelona, for example, 15 members of a North African itinerant crime gang known as "Allah's Wolfpack" sexually assaulted a woman at a metro station. The migrants, some of whom are unaccompanied minors and all of whom are in Spain illegally, had long rap sheets and were well known to the police.

The attack, which occurred in the Barcelona suburb of Santa Coloma on November 11, 2018, took place when a couple attempted to exit the Can Peixauet subway station. The youths, from Morocco and Algeria, hurled insults and verbal abuse at the couple as they walked off a train, then followed the pair into an elevator, where they assaulted the woman and stabbed her male companion.

Police later found the youths in a nearby abandoned building, where they had been squatting for months, and where they had previously been arrested in connection with a series of robberies in the area. Police also said the youths were infected with scabies, which required police to activate a special decontamination protocol for the officers involved, the police vehicles and the jail cells. Eight of the 15 youths have since been released from police custody and are back on the street.

Migrant gang rapes have become increasingly common in Spain:

  • Alicante, April 16. Three Algerians gang-raped a 19-year-old woman. One of the men was arrested at the Alicante airport while trying to flee the country.
  • Tarragona, March 28. Eleven underage migrants were arrested for gang-raping a girl at the Roman amphitheater. Of the 11, only one was remanded in custody.
  • Alicante, March 26. Four underage Moroccans gang-raped an underage girl. They filmed the rape and then demanded that the girl pay 50 euros to avoid having the video posted online.
  • Alicante, March 22. Ten Algerians were arrested for gang-raping three girls aged between 14 and 17. Police said that the gang members sustained themselves by robbing homes and businesses and later selling the stolen items on the black market.
  • Sabadell, February 2. Eight Moroccans gang-raped an 18-year-old woman in an abandoned warehouse. The woman was celebrating her birthday when she became separated from her friends. The Moroccans, aged between 21 and 53, were homeless and squatting in the warehouse. Of the eight, only two were remanded in custody.
  • Algeciras, January 6. Three Dominicans were arrested for gang-raping a 14-year-old girl.
  • Benidorm, January 5. Four Ecuadorians were arrested for drugging and gang-raping a 19-year-old woman on New Year's Eve.

The victims of migrant-related sex crimes often are young children and teenagers as well as elderly women:

  • Barcelona, May 18. A 36-year-old Dominican drug dealer was arrested for raping a 13-year-old girl in the Raval district.
  • Valencia, May 16. A Bolivian man was arrested for repeatedly raping his 14-year-old daughter.
  • Granada, April 17. A 45-year-old Moroccan man was arrested after masturbating in front of children during a Holy Week procession.
  • Salt (Girona), April 4. A 42-year-old Malian man was arrested for sexually abusing his 14-year-old daughter.
  • Hospitalet de Llobregat, March 11. A 25-year-old Indian man was arrested for raping an underage girl he had groomed on social media.
  • Sagunto (Valencia), February 23. A 24-year-old Ecuadorian man charged with repeatedly raping a 16-year-old girl justified the crime by telling the judge, " I am the reincarnation of Jesus Christ and I have documents to prove it."
  • Valencia, February 22. A Honduran man was sentenced to four years in prison for being in a sexual relationship with a 14-year-old girl. The age of consent in Spain is 16.
  • Sils (Girona), February 20. Three men, including one from Venezuela, attempted to kidnap a 12-year-old child as she was leaving school.
  • Berga (Barcelona), February 18. A 33-year-old Senegalese migrant was arrested for sexually assaulting a 72-year-old woman.
  • Barcelona, February 7. A 40-year-old imam at a mosque was charged with anally raping a 13-year-old boy during a Koran lesson.
  • Blanes (Girona), February 6. A 24-year-old Senegalese migrant was arrested for sexually assaulting an 11-year-old girl.
  • Beniel (Murcia), February 5. A 34-year-old Moroccan man was arrestedafter he grabbed the breasts of two girls at an outdoor festival.
  • Sant Josep (Ibiza), February 2. A 48-year-old Moroccan was arrested for sexually assaulting an 87-year-old woman in her home. The man broke into her home and after verifying that she was alone, he threw her to the ground and sexually assaulted her. The woman suffered severe trauma to her face. Police said the same man had sexually assaulted a 19-year-old woman in nearby Sant Antoni in April 2018.
  • Leganés, January 28. A Pakistani man was arrested for sexually assaultingtwo teenage girls in his home. The man lured the girls by placing false advertisements in which he said he was looking for child care and housecleaning services.
  • Archena (Murcia), January 27. A 38-year-old Guatemalan man was arrested for sexually abusing his 11-year-old stepdaughter.
  • León, January 19. A Senegalese migrant was arrested for soliciting the prostitution of a 16-year-old girl. He offered her money and asked how much she charged per night.
  • Santomera (Murcia), January 15. An Algerian man was arrested for making sexual propositions to a group of children and inviting them to his home.
  • Valencia, January 12. A Colombian man was arrested for drugging a 16-year-old girl and attempting to rape her.

Other migrant-related sex crimes in Spain include:

  • Valencia, May 17. An 18-year-old Moroccan was arrested for raping an 18-year-old Belgian tourist.
  • Madrid, May 10. A 27-year-old Guinean man was arrested for sexually assaulting three woman at a night club in Carabanchel.
  • Martorell, May 9. A 40-year-old Moroccan man was arrested for attempting to rape three women who were jogging along the banks of the Llobregat River. A local judge sent the man to a mental health clinic.
  • Barcelona, April 19. A 32-year-old French citizen of Moroccan origin rapeda 37-year-old Portuguese woman in the gardens of the Maritime Museum, located just off La Rambla, one of the top tourist attractions in Barcelona. The rapist bit off his victim's ear, broke her arm and left her badly bruised. Police delivered the severed ear to a local hospital, where doctors performed reconstructive surgery. A week before the attack, local residents had alertedpolice to the man's aggressive behavior. He was arrested three times and released. Some believe that with stricter law enforcement, the attack could have been prevented.
  • Murcia, April 15. Two Moroccans, aged 21 and 26, were arrested for kidnapping and sexually assaulting an 18-year-old transsexual.
  • El Vendrell (Tarragona), April 8. A 23-year-old Dominican man was arrested for raping a 32-year-old woman in the entrance to her apartment building.
  • Crevillent (Alicante), March 5. A 32-year-old Moroccan man was arrestedfor stalking and sexually assaulting several women on city streets.
  • Bermeo, March 4. A sub-Saharan African attempted to rape a woman in the town center.
  • La Palma del Condado (Huelva), February 27. A Romanian man was arrested for sexually assaulting two women in a public park.
  • Lloret de Mar (Girona), February 23. A 23-year-old Moroccan man raped a woman in an ATM booth.
  • Lorca, February 26. A 31-year-old Moroccan man attempted to rape a woman he ambushed from behind.
  • Madrid, February 26. A 31-year-old Romanian man was arrested for sexually assaulting at least five women near the Tres Cantos railway station.
  • Valencia, February 24. A 48-year-old Pakistani man attempted to rape a woman in a parking garage.
  • Santa Cruz de Tenerife, February 22. A Moroccan man was arrested for sexually assaulting a woman in front of a refugee shelter. When the woman's boyfriend intervened, he was attacked with blows to the head.
  • Pamplona, February 19. Three Romanians, aged 17 and 18, were arrestedfor sexually assaulting a woman in the restroom of a bar.
  • Palencia, February 14. A 36-year-old Peruvian man was arrested for sexually assaulting his partner's daughter.
  • Marbella, February 13. A 35-year-old Chinese man was arrested for sexually assaulting a woman on two separate occasions. Both times, the man tied with woman with a rope and gagged her. He beat her, sexually assaulted her and then used her cell phone to transfer money from her bank account.
  • Beniaján (Murcia), February 12. A Moroccan man raped a 37-year-old woman he had met a few days earlier. In May, three men had also been arrested for gang raping a woman in the same town.
  • Villaviciosa de Odón (Madrid), February 9. A 21-year-old Cameroonian man raped a 21-year-old British student. The man, who arrived in Spain as a political refugee, had received free housing and social assistance for a year while his asylum application was processed.
  • Marbella, February 8. A Senegalese man attempted to rape a waitress at a restaurant. The man entered the establishment at around 11AM and began flirting with the woman, who told him that she was married. The man left. Shortly thereafter, she stepped outside to make some purchases at a nearby supermarket when the man ambushed her and tried to rape her.
  • Cádiz, February 7. A 19-year-old Guinean migrant was arrested after he repeatedly flashed his genitals at passersby. Police said he was in the country illegally.
  • Palma de Mallorca, February 4. A 42-year-old Moroccan man was arrested after he repeatedly grabbed the breasts of female passersby at the central train station.
  • Capdepera (Majorca), January 22. A 25-year-old Moroccan man was arrested for sexually assaulting a 39-year-old woman who was riding her bicycle.
  • Culleredo, January 21. A Peruvian man sexually assaulted a woman on a regional bus.
  • Guadalajara, January 20. A 25-year-old Algerian man was arrested for attempting to rape a 40-year-old woman.
  • Formentera, January 20. A woman was sexually assaulted by two men who seemed South American or Moroccan in appearance.
  • Mataró, January 14. A Moroccan man sexually assaulted a woman in a parking garage.
  • Safor (Valencia), January 11. A Pakistani man was arrested for sexually assaulting his stepdaughter. While traveling on a bus to Italy, he was detained at a police checkpoint.
  • Valencia, January 9. A Lebanese man was arrested for drugging and raping a 20-year-old woman on New Year's Eve.
  • Villajoyosa (Alicante), January 8. A 29-year-old woman was sexually assaulted at Hospital de la Marina Baixa by two men who appeared to be Moroccan. The hospital has been the scene of several sexual assaults: workers must walk along a dark road when going from the hospital to the parking garage.
  • Mislata (Valencia), January 5. A 28-year-old Colombian drugged and rapeda 16-year-old girl.
  • Burriana (Castellon), January 2. Two Romanian men were arrested for kidnapping and raping a 17-year-old girl on New Year's Eve.
  • Valencia, January 1. An 18-year-old Guinean sexually assaulted a female street cleaner.

Migrant-related honor crimes and domestic violence:

  • Madrid, May 6. A Moroccan man stabbed to death his fiancé, a 47-year-old Spanish woman named Juana U.M. Police said the man, who has a long criminal record, with at least 30 prior convictions, is believed to have fled to Morocco to evade Spanish justice.
  • Granada, May 17. A 36-year-old Moroccan man stabbed and seriously injured his 32-year-old ex-wife.
  • Sueca (Valencia), April 1. A 40-year-old Moroccan man was arrested for kidnapping and physically assaulting his wife and daughters.
  • Tudela, February 21. An Algerian man was arrested after he threatened to kill his wife.
  • Burriana, February 20. A Moroccan man physically assaulted his 18-year-old daughter because she had a conversation with a male classmate.
  • Totana (Murcia), February 3. A 41-year-old Ecuadoran was arrested for beating and raping his 31-year-old girlfriend after she refused to have sex with him.
  • Reus, February 1. A 19-year-old Dominican man decapitated his wife and then committed suicide by jumping from a fifth-floor window.
  • Salamanca, January 28. A 31-year-old Colombian man was arrested for physically assaulting his wife in the middle of the street.
  • Mula (Murcia), January 27. A Bolivian woman was arrested for physically assaulting her 15-year-old daughter. Police said that the girl had been whipped with a leather belt every day for two years at the hands of her mother and older brother.
  • El Palmar (Murcia), January 25. A 50-year-old Moroccan man was arrestedfor physically assaulting and threatening to kill his wife after she said she wanted a divorce.
  • Bonavista (Tarragona), January 20. A 44-year-old Argentinian man was arrested for pushing his wife from a third-floor balcony.
  • Vigo, January 14. A 41-year-old Moroccan man was arrested after threatening to kill his wife. The couple got into an argument after he accused her of spending too much time talking with the neighbors.
  • Murcia, January 8. A 29-year-old Moroccan man was arrested for assaulting his wife and forcing her to hide in a closet.
  • Vilagarcía (Pontevedra), January 7. A 60-year-old Romanian man physically assaulted his wife at a public park.
  • Salamanca, January 7. A Moroccan man stabbed his pregnant wife.
  • Laredo, January 3. A 29-year-old Ecuadorian stabbed to death his ex-girlfriend.
  • Madrid, January 2. A 41-year-old Ecuadorian serious injured his wife after beating her with a metal broomstick.

Underage unaccompanied migrants — known in Spain as Menas (menores extranjeros no acompañados) — are also engaged in criminal activity:

  • Barcelona, May 12. A group of 40 Menas squatted in an entire five-story apartment building in front of a police station. The Menas insulted and threatened police who approached the building.
  • Zaragoza, April 27. A 15-year-old Mena was arrested after punching a woman in the face and breaking her nose while trying to rob her cellphone. He then assaulted and injured three police officers who tried to arrest him.
  • Zaragoza, March 14. Three Menas were arrested for physically assaultingtheir tutor.
  • Melilla, March 12. Fifteen Menas physically assaulted a police officer.
  • Valencia, March 11. Three Algerian Menas who were on the run from French authorities were arrested after they boarded a train without a ticket. The Menas had stabbed and tortured two other Algerians in the French city of Lyon. One of their victims died in the March 5 attack, which was filmed and shared by the Menas on social media.
  • Palma de Mallorca, February 25. An Algerian Mena sexually assaulted his 24-year-old teacher at a migrant shelter. The boy, completely naked, pushed the woman into a bathroom.
  • Palma de Mallorca, February 14. Two Algerian Menas were arrested for sexual assault, harassment, domestic violence and making threats against neighbors and the staff at an asylum shelter.
  • Arenys de Mar (Barcelona), February 10. Three Menas physically assaulted and robbed town counsellor Susanna Mir of PDeCat, a Catalan independence party. All three of the attackers were repeat offenders, known to police.
  • Barcelona, February 7. A Moroccan Mena was arrested for raping six women between the ages of 40 and 78.
  • Zaragoza, January 10. Three Menas were arrested for assaulting police officers and attempting to rob a 58-year-old woman.

Some migrant criminals are serial offenders:

  • Tarragona, May 8. A 36-year-old Moroccan man was arrested after breaking into seven cars in one night. Although he has a long criminal record, with at least 17 different prior convictions, he was released.
  • Salou (Tarragona), May 7. A 67-year-old Algerian man was arrested for stealing a purse containing two high-end cellphones. Police said the man has a long criminal record, with at least 170 prior convictions.
  • Gijón, April 18. A 24-year-old Algerian was arrested after breaking into more than 20 cars in one week.
  • Usurbil (Gipuzkoa), April 3. A 47-year-old Algerian gang leader was arrested for the fourth time in five years for stealing cars and robbing homes across the Basque Country. The gang is responsible for around 100 car thefts and 200 burglaries since 2013, according to police.
  • Madrid, March 29. Eight members of a Moroccan gang were arrested for stealing 57 cars and vans and reselling them in Africa.
  • Gijón, March 22. A Moroccan was arrested for robbing a woman of her purse. The man, who dragged the woman along the ground for several meters before seizing her purse, has a long criminal record, according to local police.
  • Beniaján (Murcia), March 14. A 24-year-old Moroccan was arrested for breaking into more than 50 cars and stealing computer equipment, cellphones, and watches, among other items.
  • Leganes, February 9. A Polish man was arrested for trying to rape a woman as she was leaving her office. Police said the man has a long criminal record, with at least 18 different prior convictions.
  • El Ejido (Almería), January 6. An 18-year-old Moroccan, illegally in Spain, was arrested for sexual assault. Police said he was responsible for at least six armed robberies.

Elderly and handicapped persons are also increasingly victims of migrant-related assaults and robberies:

  • Vitoria-Gasteiz, May 14. A 75-year-old woman died of injuries sustained when she was assaulted and robbed by two Moroccans at the entrance to her apartment building.
  • L'Hospitalet de Llobregat (Barcelona), April 26. A 52-year-old Algerian man was arrested for brutally assaulting a 91-year-old woman. The woman was walking with her son in the early afternoon when the Algerian man pulled a metal bar from a shopping cart and began striking her. She was hospitalized and received more than 100 stitches to her head and neck. Police said the Algerian man was homeless and had mental health problems.
  • Gandia, April 26. A 22-year-old Pakistani man was arrested for assaulting and robbing a handicapped man. After confessing to the crime, a judge handed him an eight-month suspended sentence, apparently because he was a first-time offender. A few hours later, also in Gandia, the same man was accused of sexually assaulting and robbing a woman.
  • Jerez de la Frontera, April 24. A 34-year-old Moroccan man was arrested for assaulting and robbing an elderly couple, aged 81 and 83, at the entrance to their home.
  • Cieza (Murcia), April 3. An undocumented immigrant was arrested for robbing several elderly women.
  • Cantabria and Vizcaya, March 12. Two Algerians, aged 45 and 51, were arrested for robbing the homes of 35 elderly women. The Algerians, posing as plumbers, gained access to the homes by pretending to carry out repairs.
  • Lérida, February 16. A 48-year-old Algerian was arrested for robbing six elderly women. On November 9, he was arrested for robbing two women, aged 70 and 84. Police said the man had robbed at least 17 others the same way: he would stalk his victims, all elderly, as they returned home from the grocery store. He would then gain access to their buildings by offering to help them hold the door or carry bags for them.

Other migrant-related homicides, aggravated assaults and violent robberies include:

  • Cobeña (Madrid), May 3. Two Dominican gang members were arrested for murdering a 20- year-old student during a fight at a local festival. Police said the gang, dedicated to stealing wallets and cellphones during festivals, routinely rob between 80 and 100 people each night.
  • San Sebastian, April 28. Basque police arrested seven people, including three Romanians and two Moroccans, after a 17-year-old boy was killed during a brawl at a well-known discotheque.
  • Vigo, April 24. A Moroccan man stabbed a female passerby after she refused to hand over her purse.
  • Madrid, April 11. A large gang of Moroccan youths physically assaulted a 15-year-old boy after he "looked" at two girls from the group. The boy suffered serious injuries to his eyes, cheekbone and jaw and teeth. The boy's mother said that the gang has up to 50 members, aged between 14 and 20, who have been terrorizing the Congosto neighborhood in southern Madrid for more than a year. "Gang members wait outside schools," the boy's mother said. "They carry chains and clubs to beat students. They shove the elderly and steal their shopping bags. We need a solution because things cannot continue as they are." Another parent added: "They attack and steal as a hobby. Early in the afternoon, or late at night. In one area of ??the neighborhood, or in another. That is the worst. There is no way to guarantee that your children are safe anywhere. The gang has been taking control of Congosto because of police passivity. It is unbearable."
  • Rojales (Alicante), April 2. A 49-year-old Hungarian man murdered his 39-year-old Hungarian wife at their home.
  • Almería, March 27. A Moroccan man, illegal in Spain, was sentenced to one year in prison for physically assaulting a prostitute after she refused to give him free sex.
  • Sant Carles de la Ràpita (Tarragona), March 18. A 25-year-old Moroccan man was arrested for kidnapping his wife and demanding a ransom of 5,000 euros.
  • Las Palmas de Gran Canaria, March 12. Two Moroccans, aged 19 and 41, were arrested for committing a series of assaults and robberies.
  • Alcorcón, March 9. A 20-year-old Moroccan and a 20-year-old Dominican were arrested for stabbing a 21-year-old Dominican in the neck.
  • Tarragona, March 7. Two Moroccans kicked a pregnant woman in the stomach after she refused to hand over her backpack.
  • Cieza (Murcia), March 7. Two Moroccans with outstanding deportation orders were arrested after breaking into an automobile.
  • Tarifa, March 5. Three Moroccans assaulted and robbed an elderly couple.
  • A Coruña, March 3. A Moroccan and a man with Portuguese citizenship were arrested for robbing a pharmacy and a dental clinic.
  • Valencia, March 1. A 20-year-old Guinean man was arrested for robbing a woman of 20 euros. The man attacked the woman from behind, grabbed her neck and rendered her unconscious.
  • Elche, February 18. Three teenagers, one from Algeria, one from Ecuador and another with Spanish citizenship, were arrested for violently robbing a woman of her purse.
  • Jaén, February 15. A 19-year-old Moroccan arrested for physically assaulting his wife escaped from police custody.
  • Lepe (Huelva), February 4. A 28-year-old Moroccan, who was in Spain illegally and had a pending deportation order, physically assaulted a woman and seized her purse. When police tried to arrest him, he became violent and assaulted the police. He is also believed to be responsible for numerous property thefts.
  • Palma de Mallorca, February 3. Four Algerians, one Moroccan and another man with Spanish citizenship were arrested after physically attacking and robbing a man who had just won 1,200 euros at a bingo parlor.
  • Ceuta, January 22. A Moroccan man was arrested for violently robbing a woman.
  • Barcelona, January 13. A Polish man was arrested for pushing an Asian prostitute from a balcony. The woman was hospitalized with serious head injuries.
  • Galapagar (Madrid), January 12. Three Moroccans were arrested for breaking into a home, threatening two children at knifepoint and forcing their mother to withdraw money from an ATM. They then stole a tablet, which had a GPS tracking system that enabled police to arrest them.
  • San Javier, January 24. An 18-year-old Moroccan man was arrested for assaulting and robbing a woman at the entrance to her building.
  • Granada, January 15. Five Moroccans were arrested for assaulting and robbing a couple of a cellphone and money.

Violence is also on the rise at migrant shelters:

  • Madrid, April 17. An 18-year-old Moroccan stabbed a 17-year-old Moroccan at a shelter for unaccompanied minors in Hortaleza. Violence at the facility is reportedly spiraling. "There is an escalation of violence and there is no one to stop it," said one worker. "Many come to Madrid thinking that it will be the solution to their lives and when they see that this is not the case they are disappointed," said another. On March 26, more than 20 underage migrants attacked security guards at the same shelter.
  • Palma de Mallorca, February 14. Two unaccompanied underage migrants were arrested for "sexual abuse, harassment, domestic violence and serious threats to the staff" at an asylum shelter.
  • Melilla, January 2. A 21-year-old Algerian man was arrested for sexually assaulting a 21-year-old Moroccan man at a migrant shelter.

Migrants have been increasingly attacking law enforcement officers:

  • Las Cabezas de San Juan (Seville), May 12. Two Moroccans shot at police officers who were attempting to serve them with a warrant.
  • Palma de Mallorca, May 10. Four migrants hawking counterfeit goods physically assaulted police by throwing them to the ground and repeatedly kicking them in the head.
  • Gijón, April 16. A 28-year-old Moroccan man stripped naked and then head-butted a police officer who ordered him to get dressed.
  • Murcia, March 7. A 34-year-old Algerian man tried to run over a policeman who stopped his car during a routine traffic patrol.
  • Barcelona, March 6. A 35-year-old Moroccan man shouting "Allahu Akhbar" was arrested after he tried to stab several police officers.
  • Salamanca, March 1. A 24-year-old Moroccan man was arrested for assaulting three police officers.
  • Bilbao, August 25. A 25-year-old Senegalese migrant, accused of stealing a mobile phone during an outdoor festival, kicked a police officer in the chest and broke another officer's leg. Nine officers were needed to restrain the man, who called on other Senegalese migrants for backup. The Basque Union of Police and Emergency Workers (SVPE) denounced the "lack of equipment" that requires the Municipal Police of Bilbao to work in precarious conditions. "We have tasers, but they are stored in a closet because of political cowardice," a police spokesperson said. City police also do not have access to helmets or riot shields.

Several migrant-related criminal cases are working their way through Spain's judicial system, which in some instances has shown leniency:

  • Sanlúcar la Mayor (Seville), April 24. A Romanian migrant who had head-butted a police officer and broken his nose, and then bitten another officer in the arm, was released without bail. The Romanian, who has a long criminal history, attacked the officers after they tried to break up a fight. Local prosecutors and a judge decided that the assaults were insufficient to justify provisional detention. Local media reported that the decision was met with anger by police, who said they could not understand how someone who acted with such violence can be free, and who said his release would reinforce the feeling of impunity among criminals.
  • Murcia, April 22. A 32-year-old Moroccan man who admitted to raping a woman, was handed a five-year suspended sentence, on the condition that he not rape again within the next five years. The Provincial Court of Murcia justified the lenient sentence after establishing that the defendant acted the way he did because of his addiction to cannabis, which "diminished his intellective and volitional faculties."
  • Palma de Mallorca, April 11. Three Pakistanis were each sentenced to three-and-a-half years in prison for selling drugs in Magaluf, Majorca.
  • Ciudad Real, April 9. A 47-year-old Romanian man was sentenced to 81 years in prison for raping his two daughters, aged 14 and 15, six times while their mother was away.
  • Murcia, March 17. A Moroccan man was sentenced to nine months in prison for repeatedly exposing himself to an 11-year-old girl in Águilas. The man remains free pending an appeal.
  • Alicante, March 6. A 32-year-old Brazilian man was handed a 16-month suspended sentence for ejaculating on an underage girl on a city bus. He was also prohibited from using public transportation for eight months.
  • Valencia, February 20. Prosecutors called for a 41-year-old Brazilian man to be sentenced to eight years in prison for raping a 16-year-old in the showers of a gymnasium.
  • Palencia, February 1. A 39-year-old Costa Rican man was sentenced to eight years in prison for sexually assaulting a 13-year-old girl who was babysitting his two children.
  • Zaragoza, January 16. A Guinean migrant was spared a prison sentence after he admitted to sexually abusing two underage girls.
  • Palma de Mallorca, January 8. A Senegalese migrant was sentenced to four years in prison for attempting to rape a 29-year-old British tourist in the bathroom of a bar in Magaluf, Majorca. He was also ordered to be deported after serving two-thirds of his sentence.
  • Seville, January 8. Three Romanians were sentenced to 14 years in prison for gang-raping a 27-year-old Paraguayan woman in a field next to the Olympic Stadium.

In Jerez de la Frontera, meanwhile, a 70-year-old woman named Juana, who offered shelter in her home to an immigrant named Mohammed, has been left homeless. When the woman returned home after a hospital stay, she found that Mohammed, whom the woman originally met at a soup kitchen, had changed the locks and refused to allow her to return. Due to idiosyncrasies in Spanish real estate law, which often favors tenants at the expense of landlords, the woman will face an uphill battle to regain control of her apartment.

In Madrid, an elderly couple returning home from vacation discovered that their apartment had been "occupied" by African migrants. When a camera crew from the Madrid television channel Telecinco went to investigate, the migrants destroyed the camera. The couple is presently living with family members while Spain's notoriously lethargic justice system now rules on who is the apartment's rightful owner.

Also in Madrid, hundreds of undocumented migrants from sub-Saharan Africa went on a rampage in Lavapiés, one of the most "multicultural" districts of the Spanish capital. The riots were the direct result of many years of extreme deference by Spanish officialdom toward illegal immigrants, and a sweeping failure to enforce the law — all, apparently, out of a fear of being accused of racism.

The riots were triggered by false rumors that the local police had killed a 35-year-old Senegalese street hawker named Mmame Mbaye. Spanish cities today are filled with illegal migrants from Africa who sell counterfeit merchandise on city streets. They are known as manteros (blanket men) for displaying their goods on blankets (mantas), and whenever the police approach, for scooping up the blankets and fleeing.

Mbaye died, according to initial reports, after allegedly being chased by police from Puerta del Sol, in the city center, to Lavapiés, where he collapsed. On April 22, 2019, however, a court in Madrid confirmed that Mbaye did not die as the result of a police chase. Instead, he had heart disease and died of cardiac arrest while walking with a friend in Lavapiés. "The events do not reveal even the slightest indication that the deceased was personally subjected to any type of harassment or previous police persecution that could have triggered the lethal effects of the cardiac pathology from which he suffered," the court ruled. "There is no objective data or any witness to affirm the existence of such harassment or persecution, which has no support other than the mere assertions of the appellant [an NGO called SOS Racism Madrid]."

Mbaye's death nevertheless sparked violent protests that lasted for several days and caused massive destruction of public and private property.

The Madrid city council, run by Mayor Manuela Carmena, in a case study of political correctness run amok, ordered police to keep out of the neighborhood of Lavapiés to "avoid situations of tension." The result is that illegal immigrants, far from facing the threat of deportation, are now secure in the knowledge that their violent actions have empowered them effectively to take control of an entire neighborhood of a major European capital.

Published:5/21/2019 1:13:20 AM
[Markets] Project Syndicate: Is America tired of losing yet? In the two years since President Donald Trump abandoned the Trans-Pacific Partnership, Japan and the other TPP signatories have forged ahead with new trade deals, making American exporters wonder whatever happened to the art of the deal?
Published:5/21/2019 1:13:18 AM
[Markets] Asian stocks mixed after Wall Street fall on Huawei anxiety BEIJING (AP) — Asian stocks were mixed Tuesday after anxiety over U.S. restrictions on sales to Chinese tech giant Huawei pulled Wall Street lower. Published:5/21/2019 12:12:00 AM
[Markets] North Korean Sex Slaves Forced To Endure Rape, Exploitation And Forced Marriage In China

Tens of thousands of North Korean women and girls are actively trafficked into the Chinese sex trade by criminal organizations, and are often forced to endure "systematic rape, sex trafficking, sexual slavery, sexual abuse, prostitution, cybersex trafficking, forced marriage and forced pregnancy," according to a new report

Following an extensive investigation, the Korea Future Initiative found that victims are "commonly aged between 12-29 and overwhelmingly female." Many of them are sold more than once, and are "forced into at least one form of sexual slavery within a year of leaving their homeland." 

Sex trafficking and exploitation is a $105,000,000 per year business for the Chinese underworld, according to the report. 

"Victims are prostituted for as little as ¥30 Chinese Yuan ($4 United States Dollars), sold as wives for just ¥1000 Chinese Yuan ($146 United States Dollars), and trafficked into cybersex dens for exploitation by a global online audience."

"Pushed from their homeland by a patriarchal regime that survives through the imposition of tyranny, poverty, and oppression, North Korean women and girls are passed through the hands of traffickers, brokers, and criminal organisations" according to the London-based Korea watchdog group. 

According to the report's author, Yoon Hee-soon, prostitution has overtaken forced marriage as the "primary pathway" into the sex trade for North Korean women and girls. 

"Enslaved in brothels that litter satellite-towns and townships close to large urban areas in northeast China, victims are mostly aged between 15-25 and are habitually subjected to penetrative vaginal and anal rape, forced masturbation, and groping," said Hee-soon.

Girls as young as nine are forced to perform graphic cybersex acts and are sexually assaulted in front of webcams which are streamed to a global audience. 

"Prospects for North Korean women and girls trapped in China’s multi-million-dollar sex trade are bleak," said the report's author, adding "Many victims have perished in China, while small rescue organisations and Christian missionaries struggle to perform rescue work. Urgent and immediate action, which will run contrary to the prevailing politics of inter-Korean dialogue, is needed to save the lives of countless female North Korean refugees in China."

Published:5/21/2019 12:11:59 AM
[Markets] Escobar: "Clash Of Civilizations" Or Crisis Of Civilization?

Authored by Pepe Escobar via The Saker blog,

Talk about a graphic display of soft power: Beijing this week hosted the Conference on Dialogue of Asian Civilizations

Organized under the direct supervision of President Xi Jinping it took place amid an “Asian Culture Carnival.”  Sure, there were dubious, kitschy and syrupy overtones, but what really mattered was what Xi himself had to say to China and all of Asia.

In his keynote speech, the Chinese leader essentially stressed that one civilization forcing itself upon another is “foolish” and “disastrous.” In Xi’s concept of a dialogue of civilizations, he referred to the New Silk Roads, or Belt and Road Initiative (BRI), as programs that “have expanded the channels for communication exchanges.”

Xi’s composure and rationality present a stark, contrasting message to US President Donald Trump’s “Make America Great Again” campaign.

West vs East and South

Compare and contrast Xi’s comments with what happened at a security forum in Washington just over two weeks earlier. 

Then, a bureaucrat by the name of Kiron Skinner, the State Department’s policy planning director, characterized US-China rivalry as a “clash of civilizations,” and “a fight with a really different civilization and ideology the US hasn’t had before.”

And it got worse. This civilization was “not Caucasian” – a not so subtle 21st century resurrection of the “Yellow Peril.” (Let us recall: The “not Caucasian” Japan of World War II was the original “Yellow Peril.”) 

Divide and rule, spiced with racism, accounts for the toxic mix that has been embedded in the hegemonic US  narrative for decades now. The mix harks back to Samuel Huntington’s The Clash of Civilizations and the Remaking of World Order, published in 1996.

Huntington’s pseudo-theory, coming from someone who did not know much about the multi-polar complexity of Asia, not to mention African and South American cultures, was mercilessly debunked across vast swathes of the global South.  In fact, Huntington did not even come up with the original, flawed concept. That was the work of Anglo-American historian and commentator Bernard Lewis, who passes for a Middle East guru in the US.

Divide, rule, conquer

As Alastair Crooke, the founder of the Conflicts Forum, has outlined, Lewis consistently preached divide and rule, tinged with racism, in Islamic states. He was a fervent proponent of regime change in Iran and his recipe for dealing with Arabs was “to hit them between the eyes with a big stick” because, in his world view, the only thing they respect is power.

Crooke reminds us that since the 1960s, Lewis has been a master at spotting vulnerabilities in “religious, class and ethnic differences as the means to bring an end to Middle Eastern states.” Lewis is a hero across a certain spectrum – a spectrum that includes former US Vice President Dick Cheney and US Secretary of State Mike Pompeo.

Now, we live in the era of “Lewis redux.” Given that the Islamic world is  largely subdued, in torpor or in turmoil, the clash of civilizations basically applies, on a downsized scale, to containing or destroying Shi’ite Iran.

Meanwhile the real clash – as the State Department insists – is with China.

Huntington, the sub-Lewis, did not include Russia among “The West.” The revisionist State Department does. Otherwise how could “Nixon in reverse”be justified? (“Nixon in reverse,” let us remember, is the Kissingerian recommendation to President Donald Trump: Apply divide and rule between Russia and China – but this time seducing Russia.)

A revisionist Pentagon also came up with the “Indo-Pacific” concept. The only justification for the amalgam is that these two zones should conduct a foreign policy subjected to American hegemony.

The logic is always divide and rule and clash of civilizations – divisions provoking chaos all across Eurasia. 

But this strategy is being applied against the background of a crucial historical juncture: The era when BRI is being configured as the road map for progressive Eurasian integration.

Quo vadis, humanity?

It’s not hard to detect the faintest of smiles on the faces of Chinese strategists as they survey “The Big Picture” from the vantage point of 5,000 years of civilization. The Christian West as the unique road map to deliver humanity from evil – in fact, the foundation of Pax Americana – is regarded as an amusing fiction at best.

That fiction is now looking downright dangerous, wallowing in exceptionalism and demonization of “The Other” in myriad forms. The Other – from the Islamic Republic of Iran to atheist China, not to mention “autocratic” Russia – automatically qualifies as a manifestation of “evil.”

China, by contrast, is polytheist, pluralist, multi-polar – embracing Confucianism, Buddhism, Taoism. That is mirrored by the current drive towards a multi-polar world-system. What matters is unity in multiplicity – as Xi stressed in his keynote speech. In it, we find China and Persia, two ancient civilizations – not by accident linked by the Ancient Silk Road – thinking alike.

Then there’s the appalling state of the planet, which dwarfs the current appalling spectacle of political madness. UCLA geographer and global best-selling author Jared Diamond is not being terribly precise, but he estimatesthere’s a 49% chance “that the world as we know it will collapse by about 2050.”

As encapsulated by author Nafeez Ahmad:

 “Over the last 500 years or so, humanity has erected an ‘endless growth’ civilization premised on a particular patchwork of ideological worldviews, ethical values, political and economic structures, and personal behaviors. This is a paradigm that elevates the vision of human beings as disconnected, atomistic, competing material units, which seek to maximize their own material consumption as the principal mechanism for self-gratification.”

What we’re living now is not a clash of civilizations; it’s a crisis of civilization.

If the paradigm under which most of humanity barely survives is not changed – and there’s precious little evidence it will – there won’t be any civilizations left to clash.

Published:5/20/2019 11:14:46 PM
[Markets] Study Identifies Hundreds Of Coordinated 'Anti-Trump' Instagram Trolls

When it comes to electoral interference on Facebook platforms, Congress has tended to focus on ads linked back to the nefarious and mysterious Internet Research Agency, which purportedly carried out a campaign to 'sow discord' with memes meant to inflame racial tensions (and stoke both anti-Clinton and anti-Trump sentiment).

Well, a new study has been released this week by an independent research agency called Ghost Data, which claims to have ferreted out a next of interconnected profiles numbering roughly 350 that spout a circular ring of anti-Trump memes and vitriol, and appear to be acting with some degree of coordination. Of thousands of politically active Instagram accounts examined by the researchers, posting patterns and other indicators suggest that these accounts are mostly 'bots' - perhaps employed by forces allied with Beijing - programmed to smear the president.

"Our study focused on a dataset comprising ~350 Instagram accounts whose content is scorning, mocking or generally negative about Donald Trump. We further identified a subset of 19 suspicious accounts that appear to lead such dataset in this posting activity," the researchers said.

Imaging software showed that one of the accounts, purportedly set up by a young American woman, was actually using the profile photo of a Russian woman taken from a Russian social media site. Another account used an image of a Ukrainian woman.

These anti-Trump 'bots' are hardly alone: GhostData estimated that another 95 million bots are active on the platform posing as real users.

But even more amusing than the transparent fakeness of the accounts is the quality of the memes, which are reminiscent of the low-quality ads attributed to the Internet Research Agency.

Here are a few of our favorites included in the report:

Hamburglar

Trump

Trump

Trump

Moving on from the images, one of the charts included in the GhostData report broke down the "vulgar words" used by anti-Trump trolls identified by the study.  Some of the violent imagery might even qualify as hate speech, the researchers pointed out.

Bad

Of the Trumpland figures targeted by the trolls, it's probably no surprise that Trump was the most frequently mentioned by far, with 89% of the mentions. After Trump, the second most frequently mentioned was Ivanka, with 3.2% of mentions.

Trump

In summary: Facebook might care about rooting out 'Russian trolls', but it clearly hasn't prioritized rooting out 'anti-Trump' trolls.

Published:5/20/2019 10:43:51 PM
[Markets] Asia Markets: Asian markets mixed as investors weigh Huawei implications Asian stock markets were mixed in early trading Tuesday, amid reports that the Trump administration will extend a temporary reprieve for an export ban to China’s Huawei Technologies Co.
Published:5/20/2019 10:15:22 PM
[Markets] Saudis Claim Intercept Of Iran-backed Houthi Missiles Headed For Mecca

Authored by Ahmed Abdulkareem via Mint Press News

Saudi Arabia has claimed that its air defenses shot down two ballistic missiles over the city of Taif, just 65 kilometers east of Mecca, in the early hours of Monday morning. Saudi officials claim that another missile was intercepted over the Haddah in western Saudi Arabia.

The Saudi newspaper Okaz reported the missiles were intercepted as residents were breaking their day-long Ramadan fast. The paper claimed that the attempted attack was evidence that Yemen's Houthis had no regard for the safety and security of Muslim pilgrims visiting Mecca during the nights of Ramadan. The Houthis have unequivocally denied any involvement in the attacks.

The Ka‘ba in Mecca, via British Museum blog

Mohammed AbdulSalam, a spokesman for the Houthi political wing Ansar Allah, said in a statement, “We avoid targeting civilians as well as holy places, and this [accusation] is Saudi bankruptcy,” adding “Saudi Arabia fabricated the Houthi threat [to Meccia] in order to mobilize official and popular support.”

The Yemeni army, which is allied with the Houthis, said in a statement in the wake of Saudi accusation: “This isn’t the first time the Saudi regime has accused us of targeting Mecca. The objective of these accusations is to gain support and approval for their monstrous aggression.” An army spokesperson noted that the Houthis have never denied previous military maneuvers, saying “We do not hesitate to announce our military operations.”

The Houthis did claim responsibility for last week’s attack on two Saudi oil pumping stations in the provinces of Dawadmi and Afif near the Saudi capital, Riyadh.

High-ranking officials in the Yemeni army, as well as the Houthi Political Council, told MintPress that the pumping station attack was not part of a regional effort to stir up tension between Iran and the United States, and was planned before those tensions came about.

The attack was carried out with domestically manufactured Houthi drones and reportedly caused a four-meter rupture in one of the station’s main oil pipes, in turn resulting in a 1000-square-meter leak in the area surrounding the facility.

Qatari television network Al Jazeera released satellite imagery showing the extent of damage to Saudi energy giant Aramco’s Pump Station 8 following the drone attack.

An aerial view of Saudi Aramco Pump Station 8 after (left) and before (right) Houthi drone strikes. Source: Al Jazeera

The Houthis have said that the attack on Saudi pumping stations was the start of an operation that will target 300 vital military and economic targets, including military headquarters and facilities inside Saudi Arabia and the United Arab Emirates, as well as Saudi-led Coalition military targets inside Yemen.

Long-distance drone strikes have served as a breakthrough for Yemen’s civilians and Houthi-allied military forces alike. They have served as an equalizer against one of the most well-funded and -equipped military forces in the region.

Yemen’s Houthi-allied military says the drone weapons are a necessary tool in the war and can serve as a means to finally reach peace — further pointing out that Yemen poses no threat to any country outside of the Saudi-led Coalition and has no aggressive intentions against its neighbors or U.S. interests in the region.

“We have no choice, we are being killed every day and our suffering has slid into oblivion in the rest of the world,” Amar Faress, a father who lost his entire family when Saudi airstrikes targeted his home in 2015, said of the Houthi strikes on Saudi Arabia. “Maybe the world will care about us if their interests are compromised.”

Meanwhile, a spate of Saudi Coalition airstrikes across Yemen this weekend into Monday took a predictably heavy civilian toll. Local witnesses told MintPress that at least four civilians were killed and 11 others injured when Saudi aircraft targeted a vehicle as it was traveling along a road in the Mustaba district of Hajjah province on Monday afternoon.

Over the weekend, three civilians were killed and a young girl sustained injuries when militiamen loyal to the Saudi-led Coalition shelled a home in the Qa’atabah district of the southwestern Yemeni province of Dhale.

Yemen’s humanitarian crisis remains the worst in the world and shows no sign of ending. UNICEF chief Henrietta Fore said that around 360,000 children now suffer from severe acute malnutrition, and half of Yemen’s children under five (2.5 million people) have stunted growth — an irreversible condition. More than 2 million of Yemen’s children are out of school.

Fore added that famine still threatens millions, and a new cholera outbreak continues to spread, claiming almost as many victims in the first four months of the year as in the entirety of 2018. Cholera has affected 300,000 people in Yemen this year alone, compared with 370,000 during the whole of 2018.

UN Emergency Relief Coordinator Mark Lowcock said during a speech to UN Security Council members, “Ten million were still in need of emergency food assistance, while the specter of famine still looms.”

Published:5/20/2019 10:15:22 PM
[Markets] How The US Regime Uses Sanctions To Soften A Country Up For Invasion

Authored by Eric Zuesse via The Strategic Culture Foundation,

On May 13th, Reuters headlined “Iran insists on ramping up oil sales to stay in nuclear pact” and reported that “EU officials … estimate Iran needs to sell 1.5 million bpd to keep its economy afloat. A drop below 1 million bpd could bring hardship and economic crisis.”

Prior to US President Donald Trump’s cancellation of the nuclear deal with Iran and re-imposition of economic sanctions against Iran and against any companies that trade with Iran, Iran had been selling around 2 million bpd (barrels per day).

Furthermore:

Once Europe’s biggest supplier, Iran has seen its exports gradually cut off from European buyers.

China – Iran’s largest oil customer with imports of 475,000 bpd in the first quarter of this year – has also stopped buying from Iran after Washington chose not to renew sanctions waivers.

Therefore, companies both in Europe and in China are terminating trade with Iran. The likelihood is consequently that Iran will be forced back into its nuclear program, and that things will be like what they had been before Obama had struck his deal with Iran. Here’s what that was like:

On 22 April 2010, the Congressional Research Service reported to Congress that:

Iran’s economy is highly dependent on the production and export of crude oil to finance government spending, and consequently is vulnerable to fluctuations in international oil prices. Although Iran has vast petroleum reserves, the country lacks adequate refining capacity and imports gasoline to meet domestic energy needs. Iran is seeking foreign investment to develop its petroleum sector. While some deals have been finalized, reputational and financial risks may have limited other foreign companies’ willingness to finalize deals.

Trump seems likely to exceed the hostility toward Iran that had been in effect during Obama’s and Bush’s Presidencies. If Trump is trying to force Iran to retaliate, then the goal is to use such retaliation from Iran as an excuse for the US military to move in — to invade.

The Reuters article says “One year after Washington quit the deal, Iran announced on Wednesday steps to relax some restrictions on its nuclear program.”

So: that is already restarting.

OilPrice.com bannered on 22 April 2019, “Iran Threatens To Block Key Oil Chokepoint If It Can No Longer Export Crude” and reported that, “Iran will block the world’s most important chokepoint for global oil trade, the Strait of Hormuz, if Tehran is barred from using it to export its oil, Navy Rear Admiral Alireza Tangsiri, Commander of the Islamic Revolution Guards Corps (IRGC), said.”

A year ago, on 13 May 2018, Dr. Arshad M. Khan had headlined at Modern Diplomacy, “The Eclipsing Iran Deal: Truth And Consequences” and stated that,

Iran commands the Strait of Hormuz and a blocked Persian Gulf could see a quadrupling or more in the price of oil, bringing the current economic and stock market boom to a crashing end. Missile attacks from Iran and its ally Hezbollah would cause havoc in Israel’s cities; asymmetric warfare in Syria and Iraq would cost American lives.

On 5 July 2018, Britain’s Guardian headlined “Iran threatens to block Strait of Hormuz over US oil sanctions”, and reported that,

Tehran threatened to block the Gulf passageway in retaliation for Washington’s looming sanctions against Iranian oil exports – a threat the US military said would be immediately countered. … Mohammad Ali Jafari, the Guards commander, was quoted by the semi-official Tasnim news agency as saying: “We will make the enemy understand that either everyone can use the Strait of Hormuz or no one.”

Iran’s fear here is that those “looming sanctions against Iranian oil exports” will be accompanied by a US military blockade in order to enforce the economic sanctions militarily, and not merely by sanctioning both Iran and any company that trades with Iran. That would then be a physical blockade in addition to the economic blockade. In a sense, it would be like what the US and Saudi Arabia and UAE are doing to the residents in the Houthi area of Yemen.

The Trump regime is clearly hoping for an excuse to invade Iran, and if Iran blocks the Strait of Hormuz, then Trump and his friend Netanyahu will have their wish, their excuse to invade that country.

Iran is being abandoned now, not only by America’s allies such as in Europe, but even in countries that had formerly been friendly toward Iran, such as China. Trump and Netanyahu are having their way. Iran is apparently trapped by the two fascist regimes in US and Israel.

The US regime is also trying this strategy against Venezuela, of economically strangling the country with sanctions as a way to soften it up for an invasion. The excuse for an invasion there will probably be ‘humanitarian’, in order to stop the shortages of food, medicine and other necessities, which shortages are being caused by America’s economic sanctions against Venezuela and against any company that trades with Venezuela.

If Russia abandons any of its allies, such as Iran and/or Venezuela, then the US regime will have discredited Russia in the eyes of any remaining allied or even just friendly country, and this too could be part of Trump’s strategy.

These examples show how economic sanctions against a country are the first stage of war by the US regime, an unofficial declaration of war against that ‘enemy’ country, and the preparatory stage for a coup, or, if the coup fails to work, then for an invasion.

Published:5/20/2019 9:41:10 PM
[Markets] Huawei CEO says U.S. ‘underestimates’ the company’s strength The founder and chief executive of Huawei Technologies Co. says the U.S. government is underestimating the Chinese tech giant, and within a few years no one will be able to catch up with its 5G technology.
Published:5/20/2019 9:41:10 PM
[Markets] DHS Warns That Chinese-Made Drones May Steal Data

The US Department of Homeland Security (DHS) issued a Monday warning that Chinese-made drones may be sending sensitive flight data to their manufacturers in China, according to CNN, citing the alert. 

The drones are a "potential risk to an organization's information," the alert from DHS's Cybersecurity and Infrastructure Security Agency states. The products "contain components that can compromise your data and share your information on a server accessed beyond the company itself."

The report does not name any specific manufacturers, but nearly 80% of the drones used in the US and Canada come from DJI, which is headquartered in Shenzhen, China, according to one industry analysis. US local law enforcement organizations and infrastructure operators have grown to rely on drones in recent years. -CNN

"The United States government has strong concerns about any technology product that takes American data into the territory of an authoritarian state that permits its intelligence services to have unfettered access to that data or otherwise abuses that access," reads the alert. 

"Those concerns apply with equal force to certain Chinese-made (unmanned aircraft systems)-connected devices capable of collecting and transferring potentially revealing data about their operations and the individuals and entities operating them, as China imposes unusually stringent obligations on its citizens to support national intelligence activities." 

The warning over drones comes after President Trump signed an executive order last week effectively banning US firms from using telecom equipment made by Chinese firm Huawei, which has raised similar national security concerns over alleged spying. 

Nothing new

In 2017, the US Army issued a ban on DJI drones, alleging they shared critical law enforcement and infrastructure data with the Chinese government. Another report that year an internal intelligence assessment by the Immigrations and Customs Enforcement agency (ICE) in Los Angeles concluded that DJI was "selectively targeting government and privately owned entities within (the US. critical infrastructure and law enforcement sectors) to expand its ability to collect and exploit sensitive US data."

Users are warned to "be cautious when purchasing" drones from China, and to take precautionary steps like turning off the device's internet connection and removing secure digital cards.

"Organizations that conduct operations impacting national security or the Nation's critical functions must remain especially vigilant as they may be at greater risk of espionage and theft of proprietary information," the alert states. -CNN

DJI's most popular drone is the "phantom." Introduced in 2013, it is the top-selling commercial drone on the market. 79% of US and Canadian drones are made by DJI, while they make 74% of commercial drones sold worldwide. The company reported $2.7 billion in revenue in 2017. 

According to the report "industry experts say the drone's easy-to-use software combined with sophisticated cameras and advanced technology allowed DJI to take over sales in the US for hobbyists, as well as professional organizations." 

"A lot of companies found out that using a drone to inspect a roof or to inspect industrial facilities is a really good way -- you save a lot of people climbing ladders," said Drone Industry Insight CEO Kay Wackwitz, whose company focuses on the commercial drone market. 

Published:5/20/2019 9:11:46 PM
[Markets] Tesla Buffalo Plant Exporting Most Solar Cells To A "Large Asian Buyer" As Solar Roof Demand Plummets

The "great majority" of solar cells being produced at Tesla’s factory in West New York aren't being used in the company's "Solar Roof", as was pitched to win hundreds of millions in subsidies. Rather, they're being exported and sold overseas to "a large Asian buyer", according to a new report from Reuters

This unexpected shift in strategy, comes after New York state granted Tesla $350 million to build its factory, along with $274.7 million for equipment and $125.3 million “for additional specified scope costs,” according to Tesla disclosures. The subsidy requires that Tesla employ 1,460 people in Buffalo and spends $5 billion in the state over a decade. The factory employs only about 800 workers now. 

While the plan was to mass produce cells for the "Solar Roof", Tesla has only "sporadically" purchased solar cells produced by its partner in the factory, Panasonic.

Furthermore, a Panasonic letter to U.S. Customs said that the rest of the cells are going "largely to foreign buyers". The letter to customs was dated last October and was sent with a "request to produce the cells in a foreign trade zone within the Buffalo plant that would allow Panasonic to import certain parts tariff-free because the finished cells would be sold overseas, not domestically."

It's a far cry from how the partnership was originally pitched:

When the two firms announced the partnership in 2016, the companies said they would collaborate on cell and module production and Tesla would make a long-term commitment to buy the cells from Panasonic. Cells are components that convert the sun’s light into electricity; they are combined to make solar panels.

Tesla planned to use them in its Solar Roof, a system meant to look like normal roof tiles. Tesla Chief Executive Elon Musk billed the product as a cornerstone of the strategy behind the acquisition - selling a low-carbon lifestyle to eco-conscious consumers who could use the power from their Solar Roof to charge their Tesla electric vehicle.

But the company has installed them on just a handful of rooftops nationwide so far after production line troubles and a gutting of Tesla’s solar sales team.

“We believe Tesla will use Panasonic cells when it mass-markets the Solar Roof,” the company had previously said. It shares floor space in the Buffalo plant with Panasonic. The relationship between the two companies has soured in recent months. 

California data shows that only 21 solar roof systems were connected by the state's three investor-owned utilities as of February 28. Only a "few others" are connected elsewhere in the U.S., according to a former Tesla employee. Tesla, not surprisingly, decided not to comment, despite the fact that Musk once called the acquisition of Solar City a "no brainer". 

Panasonic spokesman Alberto Canal confirmed that Panasonic was seeking to use Buffalo to fulfill demand for U.S.-made solar cells from foreign buyers, but he didn't comment about the company's sales to Tesla. We wonder why. 

Reuters had previously reported that Panasonic was selling traditional solar panels produced at the plant to other buyers due to "lower demand" from Tesla. In Q1, Tesla reported a 36% slide in overall solar sales. Since the purchase of SolarCity, installations have dropped more than 76%.

Source: @TeslaCharts

And despite the volatility, clueless New York lawmakers responsible for giving Tesla the subsidies still couldn't be more pleased.

Pamm Lent, spokeswoman for Empire State Development, said: “We have two of the leading clean energy companies in the world in Buffalo at the RiverBend facility. Tesla produces their innovative solar roof tiles ?largely for development and testing with the goal of full scale launch in the future. Panasonic is now the largest producer and employer at Riverbend with a customer base independent of Tesla.”

Little does she know, Tesla doesn't even seem to be part of the equation at the factory. One employee told Reuters: "Everybody wants Tesla to succeed, but we are operating completely independently from them right now.”

Published:5/20/2019 8:41:46 PM
[Markets] Tax Guy: The tax-smart way to loan money to family members The right ways and wrong ways to share your cash with your kin.
Published:5/20/2019 8:13:30 PM
[Markets] Ron Paul Warns Violence Against Women Act Does Violates Constitution

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

A common trick of big-government loving politicians is to give legislation names so appealing that it seems no reasonable person could oppose it. The truth is, the more unobjectionable the title, the more objectionable the content. Two well-known examples are the “PATRIOT Act” and the “Access to Affordable and Quality Care Act.”

Another great example is the Violence Against Women Act. Passed in 1994, the Violence Against Women Act provides federal grants to, and imposes federal mandates on, state and local governments with the goal of increasing arrests, prosecutions, and convictions of those who commit domestic violence.

Like most federal laws, the Violence Against Women Act is unconstitutional. The Constitution limits federal jurisdiction to three crimes: counterfeiting, treason, and piracy. All other crimes — including domestic violence — are strictly state and local matters.

The law also forbids anyone subject to a restraining order obtained by a spouse or a domestic partner from owning a gun. This is a blatant violation of the Second Amendment’s prohibition on federal laws denying anyone the right to own a gun. Whether someone subject to a restraining order, or convicted of a violent crime, should lose their rights to own firearms is a question to be decided by state and local officials.

At least the current law requires individuals receive due process before the government can deprive them of their Second Amendment rights. The House of Representatives recently passed legislation reauthorizing and making changes to the Violence Against Women Act. The most disturbing part of this “upgrade” gives government the power to take away an individual’s Second Amendment rights based solely on an allegation that the individual committed an act of domestic violence. The accused then loses Second Amendment rights without even having an opportunity to tell their side of the story to a judge.