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[Markets] Turkey: Alarming Crackdown On Journalists, Desperate Appeal To UN Turkey: Alarming Crackdown On Journalists, Desperate Appeal To UN

Authored by Uzay Bulut via The Gatestone Institute,

International human-rights and press-freedom organizations recently appealed to the United Nations to take action against the ongoing abuse of journalists by the government of Turkish President Recep Tayyip Erdogan.

In a letter to the UN Human Rights Council (UNHRC) on September 3, eighteen organizations -- led by the group ARTICLE 19, which promotes freedom of expression -- called on "all Member and Observer States committed to media freedom, democracy and the rule of law" to "speak out and address the Turkish government's repressive campaign against freedom of expression" in the forum of the Working Group on Arbitrary Detention during the UNHRC's 42nd regular session.

The letter reads, in part:

"The right to hold and express dissenting opinions and to access information has been systematically undermined by the Turkish government in an intensive crackdown on journalists and independent media, academics, civil society, oppositional voices and the judiciary. Since 2016, the human rights situation in Turkey has steeply declined, facilitated by the misuse of sweeping emergency powers and the concentration of executive power. At the time of writing, at least 138 journalists and media workers are imprisoned, with hundreds more currently on trial facing lengthy sentences on manifestly unfounded terrorism charges ... Access to thousands of websites and platforms has been blocked after a government decree authorising removals and blockages of websites without judicial oversight."

Providing "background," the letter goes on:

"In July 2016, a state of emergency was imposed in Turkey after a failed coup attempt, which was followed by mass arrests and mass dismissals of judges, prosecutors and civil servants perceived to be in opposition to the government. Many of those arrested are reported to have been subject to torture and ill-treatment in detention and have faced politicised trials falling well below fair trial standards. Since then, President Erdogan's government has sought to tighten its grip, shutting down media outlets and imprisoning journalists on an alarming scale...

"In 2018 alone, 59 journalists were sentenced to a collective total of 419 years and 8 months in prison for 'being a member of a terrorist organisation', 'managing a terrorist organisation' or 'aiding a terrorist organisation'. Trumped up terrorism charges are routinely used against journalists expressing critical or dissenting opinions, and result in lengthy prison terms...

"Independent media has been all but wiped out. Under State of Emergency Decrees at least 170 media outlets including publishing houses, newspapers and magazines, news agencies, TV stations and radios were closed. Only 21 of these have been able to reopen, some of them only on the basis that they agree to major changes in their management boards.Many independent outlets have been permanently silenced, through the liquidation and expropriation of all their assets...

"These arrests and trials are taking place in the context of the absolute collapse of the rule of law in the country, where there is no prospect of a fair trial for defendants."

Recent examples of the above repression include:

  • On September 12, Baris Ince, a journalist with the newspaper Birgun, was sentenced to 11 months and 20 days in prison for "insulting president Erdogan."

  • On September 11, Max Zirngast, an Austrian university student and journalist with the Jacobin magazine, was acquitted by a Turkish court of "being a member of an armed terrorist organisation." Zirngast was detained last year and spent three months in jail, until he was released, but subject to an international travel ban, pending trial.

  • Also on September 11, journalists Aysegül Dogan, program coordinator of IMC TV, which was shut down, and Yusuf Karatas, a columnist for the daily Evrensel, had their hearings, which lasted only five minutes. The two members of the media are charged with "establishing and leading an armed terrorist organization" as part of their journalistic activities and face up to 22 and a half years in prison. The next hearings are slated for December 25.

  • On September 11, as well, columnist Özlem Albayrak resigned from the pro-government daily, Yeni Safak, after the paper refused to publish her article criticizing the nearly 10-year prison sentence imposed on Canan Kaftancioglu, the Istanbul head of the main opposition Republican People's Party (CHP), for her social media posts. After her resignation, Albayrak said: "It appears that there is no tolerance left even for constructive and genuine criticism that is not hostile. And that is worrisome. But it would be delusional to think that this is restricted to Yeni Safak alone. In recent years, we have been expected to engage in hooliganism, not journalism."

  • On August 29, Ümit Uzun from the Demirören News Agency was detained by Istanbul police while reporting on a story. Uzun was handcuffed as he was interviewing the owner of a store into which a car had crashed, and was accused of "disrupting the scene of the accident." He was released after being interrogated.

  • On August 28, journalist Levent Uysal, the owner of the newspaper Yenigün, was attacked by armed assailants, who shot him in the leg, leading to his hospitalization. The Balikesir Journalists' Association called the assault "planned," "organized" and "a serious threat to the people's right to obtain information."

  • On August 22, Taylan Özgür Öztas, a reporter for Özgür Gelecek, was taken into custody in Istanbul after covering the protests against the government's recent dismissal of the mayors of Mardin, Diyarbakir and Van. Tunahan Turhan, a reporter for the Etkin News Agency, was detained during the same demonstrations. Both reporters were later brought to court and released under judicial control measures.

  • On August 20, Mezopotamya reporters Ahmet Kanbal and Mehmet Sah Oruç, JinNews reporter Rojda Aydin, and journalists Nurcan Yalçin and Halime Parlak, were arrested in Mardin while covering the same demonstrations against the government's removal of the mayors from office. The journalists were released on August 26, after giving their statements at the local police department.

The Working Group on Arbitrary Detention was held on September 13. Sadly, no one at the meeting addressed the persecution of journalists in Turkey -- not José Guevara Bermúdez, Chair-Rapporteur of the Working Group, nor Béla Szombati, who represented the European Union, nor any other participant.

The 42nd session of the UN Human Rights Council, which ARTICLE 19 has appealed to, is scheduled to continue until September 27, and the next session of the Working Group is scheduled to take place in November.

Amnesty International recently tagged Turkey the "world's largest prison for journalists." The UNHRC, if it wishes to change its image from that of a laughing stock, should put at the top of its agenda calling Ankara to task. Meanwhile, however, Erdogan's violations of freedom of speech need to be exposed daily and loudly condemned -- not only by members of the UN and the media, but by any and all allies of Turkey -- and freedom of expression -- in the West.

Tyler Durden Thu, 09/19/2019 - 02:00
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Published:9/19/2019 1:20:02 AM
[Markets] Attention: US GAO Informs Public About Hypersonic Weapons Attention: US GAO Informs Public About Hypersonic Weapons

The U.S. Government Accountability Office (GAO) published a new report about hypersonic weapons, including hypersonic glide vehicles (HGVs) and hypersonic cruise missiles (HCMs), and their development as the race for hypersonic technology heats up with Russia and China. 

Hypersonic weapons fly between Mach 5 (3,836 mph) and Mach 10 (7,672 mph) and have the ability to out outmaneuver the world's most advanced missile defense systems, such as the US MIM-104 Patriot and Russian S-400 missile system. 

As shown in the GAO diagram, the HGVs and HCMs fly at lower altitudes and unpredictable flight paths than a traditional ballistic missile that flies typically at an arch from launch to target. 

Hypersonic weapons have extreme maneuverability capabilities which make it difficult to defend against.

GAO said HGVs are hypersonic gliders that are initially propelled with a rocket to altitudes between 25 and 60 miles. 

High-speed engines power HCMs during the entire flight. Can fly at altitudes between 12 and 19 miles.

"For most HCMs, a rocket would accelerate the missile to Mach 3 or 4, and then the HCM's own ramjet or supersonic combustion ramjet (scramjet) engine would take over. A ramjet uses the speed of the vehicle to "ram" and compress air with fuel, which is burned to produce thrust. A scramjet is similar, with air moving at supersonic speed," the report said.

The GAO cited a recent update from the U.S. Air Force Scientific Advisory Board that said: "the core technologies needed for the development of a tactical range HGV have reached Technology Readiness Level (TRL) 5 out of 9. The board expected the remaining subsystems for such a weapon to reach TRL 6 or higher by 2020. According to GAO best practices, TRL 7 is the level of technology maturity that constitutes a low risk for starting system development. It indicates that technology has achieved form, fit, and function, and has been demonstrated in an operational environment." 

GAO lists several important features of hypersonic weapons, and how these weapons will make warfighting against major adversaries easier. 

  • Penetrate defenses: Hypersonic weapons would likely enable U.S. warfighters to penetrate existing adversary anti-aircraft and anti-missile systems because of their speed, maneuverability, and altitude (above typical anti-aircraft defenses and below interception points for ballistic reentry vehicles).
  •  Strike fleeting targets: The speed of hypersonic weapons would allow them to hit targets that are only vulnerable for a limited time, such as mobile, high-value military targets and adversary weapons systems.
  • Agile targeting: A traditional missile needs to be launched with a target in mind, but a hypersonic weapon could be maneuvered later in flight. This could provide U.S. decision-makers more time and make it extremely difficult for adversaries to prepare.
  • High travel speeds: Piloted hypersonic vehicles would allow for very short travel times and may have commercial applications. Such vehicles have essentially been limited to certain spacecraft reentering the atmosphere and experimental aircraft.

GAO also lists the challenges of developing a hypersonic weapon, and are likely some of the reasons why the U.S. is losing the weapons race against Russia and China. 

  • Heat-tolerant materials: At hypersonic speeds, the exterior temperature of a hypersonic vehicle or weapon can exceed 2,000°F, necessitating advanced materials that will protect interior electronics. Such materials also need to be mechanically strong and efficient.
  • Propulsion technology: Refinement of engine technology is needed for HCMs. This includes increasing the reliability and efficiency of scramjet engines. New types of engines that allow for propulsion from standstill to hypersonic speeds are also being developed, which would eliminate the need for rockets to provide the initial launch.
  • Weapon tracking: Defense against a hypersonic weapon would involve tracking and intercepting it, but current radar and satellite systems are inadequate for this task.
  • Limited testing resources: There are limited places to perform ground tests and flight tests of hypersonic weapons and vehicles in the United States. Currently, there are limited wind tunnel facilities in the country capable of running propulsion tests of hypersonic weapons and vehicles.
  •  Safety and control: Hypersonic velocities require additional improvements of aircraft control and guidance to help ensure the accuracy of hypersonic weapons and to

Within the Department of Defense (DOD), several top-secret programs by the Defense Advanced Research Projects Agency (DARPA), the Air Force, the Navy, and the Army have received billions of dollars in the last several years to develop hypersonic weapons. 

GAO warns that these technologies aren't mature and it could take time until deployment.

Meanwhile, Russia and China have been testing and deploying such weapons, signaling that the U.S. is rapidly losing its global air supremacy, and another reason why the world is marching closer to war.

Tyler Durden Thu, 09/19/2019 - 01:00
Published:9/19/2019 12:19:17 AM
[Markets] London Markets: The Bank of England decision is coming — here’s what to expect Here’s a look at what to expect when the Bank of England’s latest interest-rate decision is announced at 7 a.m. Eastern on Thursday.
Published:9/19/2019 12:19:17 AM
[Markets] Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative? Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?

Authored by Brandon Smith via Alt-Market.com,

After 9/11, the concept of the “false flag attack” gained prominence in American culture, and ever since, more and more people are starting to question the official narrative whenever new crisis events occur. It is possible that this is why there has not been another attack in the US on the scale of 9/11 since 2001; not because the government is doing a better job with security (there was ample security in operation on 9/11 that for some reason was not utilized), but because it's harder for government agencies to get away fabricated disasters or scapegoating the wrong people as the culprits.

That said, sometimes governments don't need to create a false flag from scratch. Sometimes disasters not of the government's making can be turned into false flags, as long as they can pin the blame on the target they most want to attack.

The elites only need to get away with one major false flag every couple of decades to push the populace into a war or a cultural crisis which can be exploited.

This was essentially the strategy outlined by the “Project For A New American Century”, a foreign policy think tank in the 1990's made up of Neo-Cons and ghouls from the Council On Foreign Relations which called for a “new Pearl Harbor” that would give the US a rationale to enter the Middle East militarily and change the entire political landscape. As Rahm Emanuel once said, “You never want a serious crisis go to waste...”

Of course, they got their Pearl Harbor, but contrary to popular opinion I think it's wrong to assume that the PNAC was designed to open the door to American hegemony. Rather, I think the intention was to cause the opposite – the eventual fall of American geopolitical influence. After all, what happened to the Soviet Union after they bungled into a land war in Afghanistan? Only a long and costly quagmire that ultimately contributed to their economic downfall. This is exactly what is happening to the US today. Are we to believe the elites are completely unaware of this outcome?

To put it another way, perhaps the real goal of efforts toward American hegemony is to sabotage the US image over time, as well as sink it into bankruptcy? But let's examine the underlying factors a little further...

US involvement in the Middle East thus far has led to nothing but disaster. While total financial costs are often debated, general estimates of the combined costs of US involvement in Iraq, Afghanistan, Syria and Pakistan are in the area of $5 trillion (a conservative estimate in my opinion). The civilian body count from the Iraq war alone stands at around 208,000 people according to Iraqbodycount.org. US, Israeli and Saudi Arabian covert agencies involved in Libya and Syria trained, funded and armed the same militants that would eventually give rise to ISIS under a program called Timber Sycamore. And, though we continually hear about Trump's intentions to pull US troops out of the region, tens of thousands of soldiers and private contractors remain in Iraq, Afghanistan and Syria to this day.

No person in their right mind could claim that US foreign policy in the Middle East has been successful. In fact, the US has lost considerable face and economic stability during these conflicts, which have been perpetuated by BOTH Republican and Democratic administrations. And now, the potential for a war in Iran is rising; a war that could devastate the US economy once and for all.

I would point out here that whatever a person might believe about the details surrounding 9/11, Iraq had absolutely nothing to do with it and the US invaded the nation on false pretenses.  Evidence was faked, the only WMD's the Iraqis had were those the US sold to them in the 1980's, and Saddam had no verifiable ties to Al-Qaeda.  The claims of Western intelligence agencies cannot be taken seriously after such a farce, and we must apply the same skepticism to any accusations they make against Iran.

John Bolton, a primary advocate of the PNAC, was the National Security Adviser to Donald Trump until only a few days ago. I hardly find it coincidental that Iran, one of the final targets on the PNAC hit list, is now being blamed for the latest attack on Saudi Arabian oil production right after Bolton exits the White House. It is often the case that elitists within an administration will jump ship right before their agendas are implemented so that they can redirect any blame for the consequences.

Needless to say, just because John Bolton has left the building doesn't mean his schemes are gone, or that the supposed “disagreement” between Trump and Bolton was even real. Bolton is but one of many puppeteers controlling the Trump Administration...

Wars are not always started through Pearl Harbor-like ambushes on the American people – sometimes they are started through alliances and engineered confrontations on the other side of the world designed to drag the American people kicking and screaming into conflict. The attack on Saudi Aramco's oil processing plants, the largest processing plants in the world, stands as another potential “linchpin”, as RAND Corporation would call it.  An event that sets a domino effect in motion that leads to a global crisis. In this case, it is probably a linchpin that is being exploited as a crisis of opportunity. Or to put it it another way, it is a linchpin because the establishment is MAKING IT into a linchpin.

Initial reports of the attack indicated that it was launched by Yemeni Houthi rebels using drones. The Houthis have publicly accepted responsibility for the attacks. The Houthi rebellion started out as a protest movement against the hard line Yemeni government, which has long been a proxy for Saudi interests in the region. The Houthis demanded free speech rights and greater representation in government. The government responded by trying to imprison the protesters and killing their leadership.

This is not to say that I agree with the Houthi ideology, but I can see the reasoning in their revolt. The Saudi and US drone strikes and bombings in Yemen against the Houthis have been relentless and go widely unreported by the mainstream media. US officials claim that the strikes are aimed at “fighting Al-Qaeda”, but Al-Qaeda is used as a convenient label for just about any group that stands against US interests or allies.

US strikes on the Houthis accelerated under the Obama Adminsitration after a supposed “failed missile attack” on the destroyer USS Mason. The Houthis denied any involvement in the attack, saying it did not originate from their area of control. US strikes in Yemen have continued under Trump.

Political opponents in Yemen and the Saudis have consistently accused the Houthis of being proxies for Iran, and while Iran has publicly supported the Houthi rebellion, the Houthis have ignored Iranian advice on numerous occasions, indicating they are not as controlled as some would like the Western public to believe. I would note that the same media outlets that are screaming today about Iran as the villainous mastermind behind the Houthi insurgency were arguing against that claim only a couple years ago.

The narrative of “state controlled” insurgents is a common one for governments to use when faced with a rebellion they cannot defeat outright. In the war of propaganda, the last thing any establishment controlled dictatorship wants is for the public to view the rebels fighting them as common people and “heroic underdogs”. So, they conjure a story in which the rebellion is actually an evil conspiracy forged by a foreign power. Many conservatives and liberty activists might be able to relate to this, as numerous leftist media outlets have recently accused us of being nothing more than an “astro turf” movement created by the Russians, or at the very least, unwitting dupes manipulated by the Russians.

One of the most important aspects of a rebellion against the establishment is the ability to raise public awareness of the establishment's crimes, but once they are successfully pigeon-holed as a proxy controlled by a foreign power, few in the public will listen to what they have to say no matter how factual it may be.

Saudi Arabia and the US have been exposed for funding and training militants (ISIS) in Syria to start a violent revolution against Bashar al-Assad, so it is a bit hypocritical of them to demonize Iran for any influence they may have with the Houthis. Last I checked, at least the Houthis aren't guilty of committing genocide, cannibalism, nor are they guilty of large scale attacks on civilian targets (though there are plenty of unsupported accusations of attacks on civilians by the Saudi government).  Frankly, if they were responsible for the attack on Saudi oil production as they claim, this represents a strike against a legitimate military target, not a terror attack.

But the real point here is that it does not matter if the Houthis are legitimate, or that they have real grievances against Saudi Arabia, or that they take full credit for the attack on Saudi Aramco – The establishment is going to rewrite the narrative to fit their agenda anyway.

Currently, Secretary of State Mike Pompeo has named Iran directly as being the culprit behind the strikes on Saudi Arabia (still no hard evidence available to verify this). Even though the Saudis stated right after the attack that 10 drones were used, and this corroborates what the Houthis have stated, the story is being quickly “adjusted”. Now, US officials claim that the attack was accomplished with 17 or more “cruise missiles” that originated from the direction of Iran. How the Saudis were able to confuse cruise missiles for drones remains a mystery.

The new official story is being tweaked everyday to counter any predictable skepticism.  For example, the new claim of "terrain hugging" cruise missiles helps to counter anyone who asks how the attack could have thwarted the billions in American Patriot missile systems on Saudi soil?  Patriots are not specifically designed to stop low flying missiles.

However, the Saudis have also purchased AN/TPQ-53 Quick Reaction Capability Radar systems from the US.  This is next gen radar technology that is able to track low flying missiles, aircraft and drones.  But still, the Saudi radar net was somehow defeated?  If this is the case and the accusations are true, then one would have to conclude that Iran has military hardware capable of slipping past some of the best defense technology the US has to offer.

The bottom line is, a Houthi drone attack just doesn't do it for the establishment.  Even if they could substantiate hard military ties between Iran and the insurgents in Yemen, they would not be able to justify war based on the relationship alone.  They have to connect Iran to the attack directly.

Clearly, the goal of this narrative is to create a rationale that allows the Trump Administration to commit to a war with Iran, probably starting with limited air strikes and escalating from there.  When Trump finally gives his statements on evidence that supposedly points to Iran, I suspect he will not say much in terms of what the US reaction will be.  The public (and the markets) will be left to assume that nothing substantial will happen and that it will all fade away.  We will simply wake up one morning to discover that initial strikes against Iranian targets have been launched and that war has begun.  The only other scenario that makes sense at this stage is that another strike against Saudi Arabia will take place within the next couple of weeks and that this will be used as the "final straw".

It was only a matter of time. With the heavy influence of globalists in Trump's cabinet, every major event in the region has been somehow tied to Iran, from attacks on random oil tankers to Palestinian and Lebanese opposition to Israel and so on.

Trump could not use a downed drone to start a war, that was not enough to convince the American public. Those people who applauded Trump as some kind of peacemaker for not initiating strikes on Iran for a single downed drone missed the bigger picture. War with Iran is baked into the cake; it is simply a matter of finding the right trigger.  Perhaps skyrocketing oil prices in the face of “Iranian sponsored terrorism” will be exactly what the globalists needed.

Is it coincidence that this event is being hyped by the establishment as an Iranian agenda right after John Bolton leaves the White House? Is it a coincidence that it is being hyped after Russia recently warned that oil might drop to $25 a barrel on falling global demand? Is it a coincidence that it is being hyped right after Iran announced it was utilizing advanced Uranium centrifuges? Is it a coincidence that Trump now has an excuse to not reopen negotiations on Iran sanctions?

And, as noted at the beginning of this article, if you believe as I do that the globalists are seeking to completely destabilize the US with Donald Trump at the helm in order to destroy the image of the conservative movement and sovereignty activists by association, then a war with Iran would surely do the trick.

As covered in my article 'Globalists Only Need One More Major Event To Finish Sabotaging The Economy', published in May, a conflict with Iran would be a perfect catalyst for a final plunge in US markets in the midst of trade war tensions and tight Fed liquidity. Also, a war in Iran would inevitably lead to a shutdown of the Strait of Hormuz through which around 30% of the global oil supply flows, increasing oil prices exponentially along with international anger at the US. It would further galvanize China and most of the world to decouple from the US economically and eventually dump US treasuries and the dollar as the world reserve currency.

At the same time, the globalists will have effectively exploited the Trump Administration, which they may not intend to remain in office after 2020 anyway, as a tool for launching a war they have long wanted but could not trick the American public into supporting.  Right now, it doesn't matter if the American public agrees or not.

This is the true strategic brilliance of using Trump as a puppet president. Under Trump, the globalists can take actions they have always wanted to pursue and then lay all blame at the feet of conservatives. With Trump, it's irrelevant if the White House loses face. He has been built up as a “populist” and anti-globalist, therefore any disaster he oversees will become the fault of populists and anti-globalists. This is why people should expect war in Iran in the near term. The temptation for the globalists to light the fuse with Trump as president must be overwhelming.

To understand why the elites would want the fall of the US, I suggest reading my article on the globalist end game HERE. While OPEC may benefit from higher oil prices in the face of dwindling global demand, and the Neo-Cons may benefit from seeing their PNAC plans for destabilizing the Middle East come to fruition, it is truly the globalists that have the most to gain by linking Iran to the Saudi Aramco attack and plunging the US into a war it cannot survive economically.

Simply put, they see crisis and chaos as the fastest stimulants of fear, and the most useful engines for global change. They are seeking to kill two birds with one stone – Break down the old world order to make way for their "new world order" while wrapping the catastrophic effects on the populace around the necks of their biggest ideological enemies.

*  *  *

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Tyler Durden Wed, 09/18/2019 - 23:55
Published:9/18/2019 11:19:41 PM
[Markets] The U.S. isn’t even in the top 10 for best countries for retirement What can we learn from other countries to help our retirees?
Published:9/18/2019 11:19:41 PM
[Markets] Asia Markets: Asian markets mixed as Fed cuts rates, BOJ stays unchanged Asian markets were mixed in early trading Thursday, as the Bank of Japan kept its ultra-easy monetary policy unchanged following the U.S. Federal Reserve’s interest-rate cut.
Published:9/18/2019 10:49:40 PM
[Markets] First Footage Of Notorious Criminal Charles Bronson In A Decade Surfaces Online First Footage Of Notorious Criminal Charles Bronson In A Decade Surfaces Online

A convicted drug dealer who is running several social media accounts from a UK prison using a contraband cellphone has published what appears to be the first footage of notorious UK criminal Charles Bronson, whose decades of violent crime have been the subject of movies and TV shows.

In the video, Bronson appears to coyly object to being filmed, covering his face with his arm and exchanging good-natured expletives with the cameraman, drug dealer Sam Walker, as the two prisoners seek to pass the time at their prison in the Midlands of the UK, according to the Daily Mail.

Some have questioned whether it is really Bronson, known as Britain's most dangerous prisoner, who was reported to be in HMP Woodhill in Milton Keynes for the past year. Bronson has a far more gruff voice than the man in the video.

But if it really is Bronson, this would be his first appearance in more than decade.

Walker has 45 convictions for 130 offenses. He notoriously fled to Africa after authorities tried to arrest him, then taunted police while he was on the run in Africa. He's back in prison serving a 33 month sentence.

Walker's twitter account has 19,000 followers, and his YouTube account, where he posted the video of Bronson, has 1,000 subscribers.

Tyler Durden Wed, 09/18/2019 - 23:35
Published:9/18/2019 10:49:40 PM
[Markets] "Killer Robots" Could Commit "Atrocities" Says Former Google Engineer "Killer Robots" Could Commit "Atrocities" Says Former Google Engineer

Authored by Mac Slavo via SHTFplan.com,

Laura Nolan, a former Google software engineer who left the company in protest of Project Maven, Google’s since-abandoned artificial intelligence development program for military drones, says killer robots could commit atrocities. If governments turn control of their weapons systems over to fully-autonomous machines, we may face devastating, unintentional calamities or acts of war.

Nolan told The Guardian this week that there should always be a human finger on the trigger or else the technology can do “calamitous things that they were not originally programmed for.”  But humans commit atrocities too. Democide, or people being killed by their own government/authorities is the leading cause of human death other than natural causes. Humanity has been notoriously violent and forceful with each other.

Even though most scientists want autonomous weapons completely banned, governments have no intention of doing so.  It would limit their ability to commit mass murder. Major military powers including Russiathe United Kingdom, and the United States have invested heavily in autonomous weapons, military drones, and battlefield robots.

“You could have a scenario where autonomous weapons that have been sent out to do a job confront unexpected radar signals in an area they are searching,” Nolan told The Guardian.

Nolan was illustrating a hypothetical problem area, suggesting that a machine might mistake hunters for enemy combatants and open fire.  But governments are the ones developing these machines and the humans who make up government have “made mistakes” and slaughtered innocent people during war too. 

“Very few people are talking about this but if we are not careful one or more of these weapons, these killer robots, could accidentally start a flash war, destroy a nuclear power station and cause mass atrocities,” Nolan added.

It isn’t the robot that’s morally corrupt here; it’s humanity and always has been. 

Until we evolve past the idea that people have the right to murder and enslave and steal as long as they are voted for by a majority, we will experience atrocities committed by those who were given power that wasn’t theirs to have in the first place.

Tyler Durden Wed, 09/18/2019 - 23:15
Published:9/18/2019 10:19:36 PM
[Markets] Putin's Multipolar Offer To Saudi Arabian Exceptionalism Putin's Multipolar Offer To Saudi Arabian Exceptionalism

Authored by Tim Kirby via The Strategic Culture Foundation,

Global Islamic Terrorism is universally recognized as today’s big threat and has been the justification for all sorts of changes, especially to life in the West after 9/11. The Islamic terrorists whom we are supposed to fear on a daily basis more or less believe in some form of Wahhabism, which grew up in and is spread from Saudi Arabia. Surprisingly the US and the Saudis have been and still are staunch allies.

This makes little sense on the surface but Saudi exceptionalism extends to Russia as well. Russia and former parts of its territory have been some of the biggest victims of Wahhabism and still fight it to this day and yet President Putin just vowed to protect them from air threats via Russia’s top of the line equipment. So this raises the question by what logic would Russia want work with the Saudis who prop up the ideas that murder their citizens? The short answer is Multipolarity.

During the Cold War we saw two great powers with massive spheres of influence dividing the planet between themselves. This Bipolar (in the literal sense) structure forced everyone on America’s side to be Capitalist / Western-style Democratic and everyone on the USSR’s side to be Communist. So for every Communist revolution that succeeded Moscow’s sphere of influence grew while Washington’s shrank.

Now in the 21st century this dynamic is much different as the sole Hyperpower is fighting against any upstarts who challenge its status, which means that every nation that succumbs to the Washington status quo is a victory for Monopolarity, while any nation that begins to act on its own or under the influence of anyone besides the US/NATO/The West is a victory for Multipolarity.

This is why today, unlike during the Cold War Russia has a policy of being open to working with anyone who is willing to work with them regardless of ideology. Of course during the Cold War the US and the Soviet Union would work with countries outside their political theory of preference to some degree, but now Russia is free from the burdens of Communist ideology and is thus free to associate with anyone and Moscow is willing to work with anyone because any nation that rises up to a high level of sovereignty creates another crack in the monolith of Monopolarity.

This is why Moscow has been cooperating with Turkey who at times has been very aggressive towards them, shooting down a Russian planeforcing their way into Syria and working against Assad’s and Russia’s interests in the region, and opening Turkish Universities across parts of the Former USSR challenging Russian cultural influence. These all sound bad, but Moscow has a bigger fish to fry and the upstart Turks, despite being in NATO are beginning to push for a more powerful sovereign pro-Turkish foreign policy, which is bad for Russia in doses, but on the whole is a huge stride towards a Multipolar World that Russia so desperately needs.

And this is the logic that applies to the Saudis. True the Saudi Wahhabism and loud inaction in terms of containing Wahhabism have lead to the deaths of many Russian-speaking people the world over, but the Multipolar mission takes precedence, thus Putin offered the Saudis to buy Russian S-400 systems because “Our (Russian) air defenses can protect you, like they do Turkey and Iran” and that “These kinds of systems are capable of defending any kind of infrastructure in Saudi Arabia from any kind of attack.”

Syria and Turkey are both major Multipolar victories so perhaps in Putin’s words there is a hint that Saudi Arabia could jump on the Other World Order’s boat by buying these defense systems. The S-400s in question could be used to defend against a local neighbor, but we could suppose that a massive surface-to-air set up would best be used to defend against NATO, who is the only serious missile launching threat.

To an extent it is very possible that this offer by President Putin to the parties indirectly responsible for a great deal of suffering in Russia could actually be an invitation to the Multipolar World.

Saudi Arabia has been very much the exceptional Arab nation in the Middle East when it comes to NATO’s actions, but nothing lasts forever. The Saudis have oil and little means to defend it, while at the same time maintaining an ideology that has been demonized by the Mainstream Media for almost 20 years, prepping the West with a casus belli when the time comes. The fear of Monopolar aggression could force the Saudis to buy into team Multipolarity.

Tyler Durden Wed, 09/18/2019 - 22:35
Tags
Published:9/18/2019 9:49:57 PM
[Markets] Secret Service Wants Jet Skis For Mar-a-Lago & Hamptons As Trump Family "Very Active In Water" Secret Service Wants Jet Skis For Mar-a-Lago & Hamptons As Trump Family "Very Active In Water"

A Secret Service memo has requested the need for jet skis to protect President Trump's family and friends -- while at vacation properties at President Trump's exclusive south Florida Mar-a-Lago Club and other properties in the Hamptons. 

The memo said the agency needs two jet skis and a trailer to "enhance safety/security for protective assignments on the water."

The agency has requested two Kawaski jet skis that retail for more than $10,000 per unit. The request noted security challenges that special agents face while traveling to President Trump's golf courses and resorts. 

"President Trump and his family spend several weeks throughout the year in Mara Largo FL and Hamptons NY. The First Family is very active in water sports," the request states, which was first highlighted by WRC-TV reporter Scott McFarlane.

Previously, Secret Service agents have rented jet skis with their own money, the memo said.

"Several family members along with their guest participate in open water activities for which USSS Special Agent Rescue Swimmers are responsible," the request continues.

"SA's have rented watercraft with their own personal funds to allow them to be near our protectees in various water environments to fulfill the USSS Rescue Swimmer mission."

The Secret Service said the 4-stroke, 4-cylinder 1498cc jet skis will be stored at the agency's training center in Beltsville, Maryland. 

To protect President Trump's family and friends at golf courses and resorts, the Secret Service must adapt to their luxurious lifestyles. 

Special agents have found themselves increasingly putting around on E-Z-GO golf carts and jet skis over the last several years. 

According to Trump Golf Count, President Trump has visited golf courses about 217 times since his inauguration, with evidence of playing golf on at least 101 visits (the data runs through Sept. 15). 

The Secret Service has protected President Trump and his family at Mar a Lago at least 91 times and at his Bedminster course 75 times since his inauguration. 

As a reminder, President Trump made this promise to the American people in 2016: "I'm going to be working for you. I'm not going to have time to go play golf." 

So far, President Trump's golf outings have cost taxpayers nearly $109 million. Maybe it's time for the president to start picking up some of the tabs, like jet skis for the Secret Service. 

Tyler Durden Wed, 09/18/2019 - 22:15
Published:9/18/2019 9:19:18 PM
[Markets] Patrick Byrne sells his Overstock shares, but blames the SEC and ‘Deep State’ Patrick Byrne’s dramatic exit from Overstock.com Inc. had a surprise second act Wednesday, as the former chief executive sold his large stake in the company and blamed the Securities and Exchange Commission, which he referred to as “the Deep State’s pets.”
Published:9/18/2019 8:53:59 PM
[Markets] Battle For The Arctic: Russia Deploys S-400 Missile Defense Systems To Control New Frontier Battle For The Arctic: Russia Deploys S-400 Missile Defense Systems To Control New Frontier

Russia, China, and the US are all racing towards the Arctic region, trying to establish their military dominance in part of the world where $35 trillion worth of national resources could be hiding underneath the ocean floor. Now Russia is dashing its way into the Arctic, announcing on Monday that new missile defense systems have been deployed to the region.

The Russian Northern Fleet said the new S-400 Triumph system had been installed on the Novaya Zemlya archipelago in the Arctic.

"The air defense regiment of the Russian Northern Fleet deployed on Yuzhny island of the Novaya Zemlya archipelago has been completely reequipped with new S-400 systems," the statement reads.

The surface to air-missile regiment of the Northern Fleet's air defense forces has been equipped with S-400s, which is considered the most advanced missile defense systems in the world and can hit enemy targets at up to 248 miles.

On Wednesday morning, Directorate for the Russian Federation State Border Arrangement told the Krasnoyarsk news agency NGS24, that a large radar station will be built at Cape Chelyuskin, which is about 800 or so miles east of where the S-400s are stationed.

The project is officially called "Radiotechnical point Chelyuskin," and includes a project cost of approximately $19 million. Expected completion of the radar station will be within 33 months.

Novaya Zemlya and Cape Chelyuskin are located in the northernmost point of Russia. This area is where all shipping along the Northern Sea Route passes, is considered a strategic area in Russian Arctic development.

Russia has been aggressively expanding its military presence in the Arctic in the last several years. It has also been increasing exploration activities, such as oil and gas and mineral extraction.

Washington has widely criticized Moscow for its increased presence in the Arctic. Responding to criticism, Russian Foreign Minister Sergei Lavrov said that Moscow isn't intimidating anyone, noting that increased defenses capabilities in the Arctic are to protect its assets.

Russia and China are establishing the "Polar Solk Road" in the Arctic as warming temperatures give way to new shipping lanes and economic opportunities.

The Arctic is home to at least 20-25% of the world's untapped fossil-fuel resources, along with minerals, including gold, silver, diamond, copper, titanium, graphite, uranium, and other rare earth minerals.

Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the US have established the Arctic Council, an intergovernmental cooperation forum, that holds biennial ministerial meetings on the region. It's an attempt to stabilize the Arctic and avoid conflict as corporations and governments rush into the area to seize new economic opportunities.

With the latest news of Russia militarizing the Arctic, this will not sit well with the Trump administration who has been trying to buy Greenland. The Arctic and its resources will be a major topic of the 2020s and beyond, the first to secure its military in the region could become the next superpower of the world.

Tyler Durden Wed, 09/18/2019 - 21:35
Published:9/18/2019 8:53:59 PM
[Markets] Gun Store Runs Out Of "Beto Special" Named After Gun-Grabbing Communist Gun Store Runs Out Of "Beto Special" Named After Gun-Grabbing Communist

Authored by Mac Slavo via SHTFplan.com,

A gun store in Arizona has run out of both the AR-15 and the AK-47 rifles they put on a sale named the “Beto Special.”

This gun sale was in response to threats made by Communist Beto O’Rourke, who said: 

“Hell, yes, we’re going to take your AR-15, your AK-47.”

Much like totalitarians and communists before him, O’Rourke has threatened to use force and violence to disarm innocent people to accumulate guns in the hands of those in the government.  History has an uncanny way of repeating itself and humanity never seems to learn the hard lessons.

Barack Obama used to be a great gun salesman, but it appears that upping the commie ante has propelled O’Rourke past the former president. But free people who reject authority over their lives took action. Alpha Dog Firearms Owner Matt Boggs was outraged after O’Rourke’s threat. In an interview with The HolloNet, Boggs said: 

“I saw the comments that he made, and I was kinda like, ‘You know what: the Hell with this guy!” Boggs said O’Rourke’s threats of theft and violence against innocent people made him determined to sell more guns even if it meant losing money on them.

Alpha Dog Firearms was so overwhelmed with customers, that they ended up selling 200 rifles in two hours.   That prompted Boggs to post an afternoon update on Facebook that read:

UPDATE: SOLD OUT. More deals will be on the website soon. Y’all broke our internet today!!!

According to a report by CNS News, Boggs and Alpha Dog Firearms are no strangers to colorful promotions. On Sunday, Alpha Dog hosted an “Area 51 Invasion Training” event at a local shooting range. “Come out to the Alien Shoot,” Boggs says in a Facebook video live from the event.

Tyler Durden Wed, 09/18/2019 - 21:15
Published:9/18/2019 8:19:32 PM
[Markets] Shocking Yearbook Photo Shows Justin Trudeau Wearing 'Brownface' Shocking Yearbook Photo Shows Justin Trudeau Wearing 'Brownface'

What could very well be the defining political scandal of Prime Minister Justin Trudeau's political career has just been broken wide open by Time Magazine.

Echoing a scandal that befell Virginia Gov. Ralph Northam earlier this year, a photo depicting Trudeau in 'brownface' (he was reportedly dressed as an Arab for an 'Arabian Nights' theme party) was published by Time Magazine Wednesday evening.

The photo was taken in 2001 while Trudeau was teaching at an elite private school.

The Liberal Party has already confirmed that Trudeau is in the photo, and the PM has already issued an apology - "I am really sorry" - to those who might be offended by the image, WSJ reports. Zita Astravas, spokeswoman for Trudeau's Liberal Party, confirmed it to Time.

Before...

...And after?

This couldn't have come at a worse time for Trudeau: His Liberal Party is neck-and-neck in the polls with their Conservative rivals ahead of what's expected to be a close federal election next month.

According to Time, the photo appeared in the 2000-2001 yearbook of West Point Grey Academy. The 'Arabian Nights'-themed gala was attended by students and faculty, Time reported. A Canadian businessman who was 'part of the WPGA community' came across the photo over the summer and decided that it should be made public.

The photograph has not been previously reported. The picture was taken at an “Arabian Nights”-themed gala. It shows Trudeau, then the 29-year-old son of the late former Prime Minister Pierre Trudeau, wearing a turban and robes with his face, neck and hands completely darkened. The photograph appears in the 2000-2001 yearbook of West Point Grey Academy, a private day school where Trudeau was a teacher.

Earlier this month, TIME obtained a copy of the yearbook, The View, with the photograph of Trudeau in brownface from Vancouver businessman Michael Adamson, who was part of the West Point Grey Academy community. Adamson was not at the party, which was attended by school faculty, administrators and parents of students. He said that he first saw the photograph in July and felt it should be made public.

The photo was taken while Trudeau taught classes, including French, at the school, which he left after the Spring of 2001. West Point Grey Academy is currently among the most expensive private day schools in Vancouver, with tuition ranging from just under $22,000 to about $23,500.

Several critics spoke out to WSJ saying it's 'deeply saddening' to see Trudeau in brownface/blackface. One of Trudeau's opponents is a Sikh, and as such blasted Trudeau and claimed personal offense.

“Seeing the Prime Minister in brownface/blackface is deeply saddening,” said Mustafa Farooq, executive director of the National Council of Canadian Muslims in a written statement. It is seeking an apology. “The wearing of blackface/brownface is reprehensible, and hearkens back to a history of racism, slavery, and an Orientalist mythology that is unacceptable."

Meanwhile, the leader of Canada’s left-wing New Democratic Party, Jagmeet Singh, said the photo was insulting. Mr. Singh is a Sikh and wears a turban.

Of course, already one Twitter user and Trudeau critic has complained about being 'censored' by Twitter for trying to share the photo, which violates the site's terms of service.

Other Canadians mused about Trudeau's re-election prospects with this additional scandal weighing on his campaign. Trudeau is still fighting allegations of corruption after the SNC-Lavalin ethics probe.

This could very well be the moment that Trudeau loses his place in the polls and never regains the lead ahead of next months' vote.

Tyler Durden Wed, 09/18/2019 - 20:55
Tags
Published:9/18/2019 8:02:59 PM
[Markets] The Fed: Fed lowers interest rate by a quarter-point, and is open to the idea of more easing The Federal Reserve on Wednesday cut its benchmark interest-rate by a quarter point and seven officials indicated they believe there would be one more move this year.
Published:9/18/2019 7:19:32 PM
[Markets] Watch: Trump Accidentally Discusses Top Secret Technology Used In The Border Wall    Watch: Trump Accidentally Discusses Top Secret Technology Used In The Border Wall   

During a three-day trip to the West, President Trump moments ago visited the Mexico–U.S. border region near San Diego. While speaking to a group of reporters, he accidentally disclosed sensitive technology that is embedded in the border wall. 

Trump told reporters that the steel bollard-style wall that's made of hollow, vertical steel beams filled with concrete and rebar, is "wired - so that we will know if somebody is trying to breakthrough."

He then turns to the right and asks a top U.S. Customs and Border Protection (CBP) official to discuss the technology at length. The CBP official responds by saying, "Sir, there could be some merit in not discussing that."

The technology at play appears to be a smart fence that will alert CBP agents if a breach is underway, and will likely tell them exactly where. 

Neither Trump nor the official disclosed how the sensors work, but it's evident that this is the first time the technology has been mentioned to the press. 

Oh my god. Trump starts to discuss apparently sensitive technology deployed at the border. Asks the General in charge to describe the technology.

The General's response: "Sir, there could be some merit in not discussing that." pic.twitter.com/FlSmiNTbLM

— Scott Stedman (@ScottMStedman) September 18, 2019

At the same site last year, located in the border area of Otay Mesa, a San Diego neighborhood along the Mexican border, Trump saw eight prototype walls, of which none were picked, and all destroyed to make way for 14 miles of steel bollard-style walls.

Trump is riding a series of big wins on the wall and immigration. Arrests and incoming immigrants to the U.S. have plunged in recent months, showing that Trump's policies, in conjunction with the 20,000 Mexican troops on the border, are working. Last week, the Supreme Court allowed Trump to refuse asylum to people who travel through another country on the way to the Mexico–U.S. border without having sought protection in that third country.

In July, CBP confirmed that, 60 miles of replacement wall had been built since 2017, with 450 miles of the wall expected to be completed by 4Q20. There was no mention by Trump or the official of how much of the wall is "wired," or like what we said is "smart." 

Tyler Durden Wed, 09/18/2019 - 20:15
Published:9/18/2019 7:19:32 PM
[Markets] Trump Balks At California Governor's Request For Homeless Aid Trump Balks At California Governor's Request For Homeless Aid

The Trump administration has rejected a request by California Governor Gavin Newsom for more money to combat the state's growing homelessness crisis, according to Bloomberg

Newsom and 13 mayors of the state's largest cities wrote to Trump this week in search of more federal funds to expand state-wide programs such as housing vouchers. 

"We can all agree that homelessness is a national crisis decades in the making that demands action at every level of government – local, state, and federal. In California, state and local governments have ramped up action to lift families out of poverty by investing in behavioral health, affordable housing, and other homeless programs," wrote the mayors. "In contrast, your Administration has proposed significant cuts to public housing and programs like the Community Development Block Grant."

Request denied

"Federal taxpayers are clearly doing their part to help solve the crisis," wrote Housing and Urban Development Secretary Ben Carson in a Wednesday reply to Newsom, written at the request of President Trump. "California cannot spend its way out of this problem using federal funds."

Trump, meanwhile, directed his administration last week to explore ways to combat the homelessness crisis in California. Ideas include relocating vagrants from Los Angeles's notorious skid row to vacant federal properties

Nearly 500,000 California households already receive some kind of federal housing assistance, Carson said in his letter, dated Wednesday, and subsidies per tenant are 38% higher than the national average. He said that Los Angeles alone -- where many freeway overpasses and public parks have become encampments -- is home to 19% of the nation’s entire homeless population. -Bloomberg

Carson added that California needs to let police officers refer homeless people to social services workers, and must increase its psychiatric hospital services - which could come via additional federal funding, according to the report. Here's the kicker however; California must end so-called "sanctuary city" policies which he says encourage illegal immigrants to flock to the state in search of government services. 

As we noted last week, Trump told Fox News host Tucker Carlson in July that his administration "may intercede" in cities like New York, San Francisco and Los Angeles. 

"You can't have what's happening -- where police officers are getting sick just by walking the beat.  I mean, they're getting actually very sick, where people are getting sick, where the people living there living in hell, too," said Trump. "We cannot ruin our cities.  And you have people that work in those cities. They work in office buildings and to get into the building, they have to walk through a scene that nobody would have believed possible three years ago."

Tyler Durden Wed, 09/18/2019 - 19:35
Published:9/18/2019 6:55:44 PM
[Markets] Key Words: An Apple-Disney merger? Here’s how Bob Iger says it could have happened Apple Inc. and the Walt Disney Co. could have merged had Steve Jobs not died, Disney Chief Executive Bob Iger believes.
Published:9/18/2019 6:55:44 PM
[Markets] Ex-CEO Patrick Byrne sells all of his Overstock shares for $90 million Ex-CEO Patrick Byrne sells all of his Overstock shares for $90 million Published:9/18/2019 6:19:28 PM
[Markets] U.S. Housing Finance "Worse Off Today" Than In 2008 U.S. Housing Finance "Worse Off Today" Than In 2008

Via Birch Gold Group,

Remember when the housing bubble started to burst in late 2007?

By September 2008, both Fannie Mae and Freddie Mac had experienced heavy losses and were placed into conservatorship. The government then advanced them a whopping $190 billion of taxpayer money to keep them afloat.

At the time, this action was described as “one of the most sweeping government interventions in private financial markets in decades.”

Turns out, the drama wasn’t over. In fact, it was just getting started...

After changing the terms of the conservatorship, both organizations were seized by the U.S. Treasury in 2012 to avoid a financial catastrophe like the one that had occurred during the Great Recession a few years earlier.

Given the benefit of experience, you would think Fannie Mae and Freddie Mac’s financial problems would have been cleaned up and resolved. But in a recent hearing for the Senate Banking Committee, Trump Administration officials warned, “The U.S. housing finance system is…

“Worse off today than it was on the cusp of the 2008 financial crisis.”

If the situation is worse now than it was 11 years ago, that means the $190 billion bailout didn’t do much good.

In fact, officials from the Administration are also warning that lending standards have deteriorated since 2008 and the two entities lack sufficient capital. (These loose lending standards help to explain the rise of unconventional loans.)

In light of these facts, the Committee meeting examined the Administration’s call to end conservatorship of Fannie and Freddie. In the hearing, Senator John Kennedy lamented that the “whole thing is a car wreck. It’s a dumpster fire.”

Senator Mark Warner added, “We could end up with a system that actually doesn’t end too-big-to-fail and doesn’t increase affordable access to credit” and is “going to put us right back to where we were prior to 2008.”

Together, Freddie Mac and Fannie Mae control about $5 trillion in mortgage-backed securities. That means the impact from any “car wreck”, like Senator Kennedy alluded to, could potentially be catastrophic to the economy.

Fannie and Freddie Are Severely Over-Leveraged

On its own, this information from the Committee hearing is sobering enough, but the same meeting also shed light on another disturbing fact:

“I will tell you as a safety-and-soundness regulator, when I look at a $3 trillion institution that is leveraged 1,000 to 1, it keeps me up at night,” Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, told the committee.

Thanks to a directive from Congress, both Fannie Mae and Freddie Mac are allowed to keep a total of $6 billion ($3 billion each) as a capital buffer. But they own or guarantee almost $5 trillion in mortgage securities.

That’s why Calabria is losing sleep at night. Two entities that control half of the mortgage-backed securities in the U.S. are effectively one thousand times over-leveraged.

To put that in perspective, if just 0.12% of Fannie and Freddie’s mortgages go bad (about one-tenth of 1%), it would wipe them out completely. They’d have no capital left. And without a government bailout, they might cease to exist altogether.

Fannie and Freddie are critical to maintaining liquidity in the real estate market. Without these two entities repackaging and guaranteeing mortgages, the sale of homes would be decimated, causing a massive ripple effect across the entire real estate market.

It would not be an understatement to say that billions (if not trillions) in savings could be wiped out within months of Fannie and Freddie going belly up.

Maybe that should be keeping all of us up at night, too.

Don’t Let a Housing “Car Wreck” Ruin Your Retirement

These are interesting times indeed. The impending housing bubble, a rise in risky loans, and both Freddie Mac and Fannie Mae may be heading towards the end of the road. And all of them seem to be following a similar script to 2008.

Don’t let your retirement suffer, like many did after the Great Recession. Now is a good time to consider hedging your bets.

Diversify into assets known to be a source of protection during times of economic disruption, such as gold and silver. There may never be a better time to protect your savings than right now.

*  *  *

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it's no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it's critical to act now! That's why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

Tyler Durden Wed, 09/18/2019 - 19:15
Published:9/18/2019 6:19:28 PM
[Markets] Governments Not Prepared For Pandemic That Could Kill 80 Million People, Warns WHO Governments Not Prepared For Pandemic That Could Kill 80 Million People, Warns WHO

Authored by Paul Joseph Watson via Summit News,

Governments are not prepared for a devastating pandemic that could kill up to 80 million people, a new report warns.

The report was published by the Global Preparedness Monitoring Board, a joint entity formed by the World Bank and the World Health Organization.

“There is a very real threat of a rapidly moving, highly lethal pandemic of a respiratory pathogen killing 50 to 80 million people and wiping out nearly 5% of the world’s economy,” warns the paper, adding that “the world is not prepared” for this.

“A global pandemic on that scale would be catastrophic, creating widespread havoc, instability and insecurity,” the organization warns.

The GPMB says governments need to invest more in emergency preparedness and that misinformation on social media is also exacerbating the spread of diseases.

As we reported last month, the rise of “doomsday prepping” is largely driven by reports from mainstream institutions such as the GPMB and mainstream media reports, not “right wing conspiracy theories” as some have claimed.

*  *  *

My voice is being silenced by free speech-hating Silicon Valley behemoths who want me disappeared forever. It is CRUCIAL that you support me. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

Tyler Durden Wed, 09/18/2019 - 18:35
Published:9/18/2019 5:51:08 PM
[Markets] The Most Profitable Business In The World? The Most Profitable Business In The World?

Authored by Simon Black via SovereignMan.com,

More than 5,000 years ago on a hilltop located in modern-day Georgia (the country, not the state), a group of people from the prehistoric Kura-Araxes civilization gathered their primitive tools and began to dig.

It took years. But they eventually burrowed 20 meters deep into the earth and constructed a network of elaborate tunnels.

Thousands of years later, archaeologists and geologists figured out why: the Kura-Araxes were digging for gold.

And that site, known as Sakdrisi-Kachagiani, is the oldest gold mine in the world. It predates Ancient Egypt and even Mesopotamia.

And it shows that, even in prehistoric times, our early ancestors valued gold.

Nearly every great civilization from every corner of the planet since then has continued to mine for gold– from Greece and Rome to China’s Zhou dynasty in the first millennium BC, to the Inca and Aztec.

Mining was so important in ancient times, in fact, that wars frequently broke out over control of the best-producing mines.

In many respects, a gold mine is the ultimate asset. Even to this day we still use the term ‘gold mine’ to refer to a fantastic investment.

And obviously gold mines themselves can be phenomenal investments.

We’ve been talking about gold a lot lately and discussing different ways to own it. I’ve encouraged you to avoid buying into a gold ETF, and instead to buy the most prominent physical coins (like Canadian Maple Leaf gold coins).

But one very interesting (and completely different) way to invest in gold is to buy shares of mining companies.

Mining companies generate profit based on the difference between their mining costs and mining revenue.

So as the price of gold increases, mining company profits tend to increase as well, pushing their stock prices higher.

Among miners, the largest are known as the ‘majors’ or ‘senior producers’, including companies like Goldcorp, Kinross Gold, Barrick Gold, Newcrest Mining, Gold Fields, etc.

Majors are typically multi-billion dollar companies that have been around for decades, similar to how Exxon-Mobil and Royal Dutch Shell dominate the oil business.

Majors also frequently pay dividends to their shareholders, which means you could profit from an increase in the gold price while also generating regular cashflow.

And while this might sound great, there’s a slightly different business model in the mining industry that I think is even more compelling.

Business is difficult, and mining is no exception. Large mining companies have thousands of employees and often operate in difficult jurisdictions. Things go wrong all the time– strikes, major accidents, political instability, etc. And these can all affect the company’s performance.

But there’s another category of businesses in the mining industry called royalty or streaming companies.

Gold streaming/royalty companies are quasi-banks; they provide capital up-front to mining companies to help build and develop mines.

And in exchange they usually receive a royalty on every ounce of gold (or silver, etc.) that’s produced from that mine, whether in the form of a cash payment, or a portion of the production itself.

Now, read this next statement very carefully:

Gold streaming is the most profitable business model in the world.

That’s because, while the major mining companies have to hire tens of thousands of people to operate their mines, the streaming/royalty companies can operate with minimal overhead.

Barrick Gold, one of the largest gold miners in the world, generated $1.765 billion in Operating Cash Flow in 2018 according to its annual report.

(Operating Cash Flow is a great benchmark to measure the real-world profitability of a company’s core operating business, without factoring in accounting gimmicks or capital investments.)

Given that Barrick Gold has more than 20,000 employees, that works out to be around $82,000 in Operating Cash Flow per employee.

Franco Nevada is the world’s largest gold royalty and streaming company. And according to its annual report, Franco Nevada had $474 million in Operating Cash Flow in 2018.

Except that Franco Nevada only has 34 employees! That means Franco Nevada generated over $13 million in cash flow per employee last year.

Franco Nevada’s business model is more profitable than:

– Apple ($629,000 Operating Cash Flow per employee)

– Google ($463,000 Operating Cash Flow per employee)

– Netflix (NEGATIVE $377,000 Operating Cash Flow per employee)

– Exxon-Mobil ($507,000 Operating Cash Flow per employee)

– JP Morgan ($56,000 Operating Cash Flow per employee)

Now, I’m not recommending that you buy shares of Franco Nevada (or any other company) right now; Franco Nevada shares sell at nearly 50x operating cash flow– and that’s pretty expensive in my opinion.

But it’s definitely an industry worth watching and potentially accumulating when valuations become more attractive.

Now, there’s one more segment of the industry that you should know about: ‘junior’ mining companies.

Unlike the major producers which operate large mines, juniors are usually tiny companies that explore for new gold deposits.

These are very high risk ventures. It’s entirely possible that a junior mining company looking for gold burns through all of its investors’ capital but comes up with nothing.

Then again, from time to time, a ‘junior’ / exploration company with a great property and solid management will discover a substantial deposit.

And its stock price can shoot up 10x, 50x, even 100x.

Within mining, this is the place where fortunes can be made (and lost).

They’re high risk and very speculative. But given how phenomenal the potential returns are, qualified investors who can bear the risk might consider allocating a small portion of their capital to speculate in juniors.

The right investment could literally be a gold mine.

And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

Tyler Durden Wed, 09/18/2019 - 17:55
Published:9/18/2019 5:18:59 PM
[Markets] Dow Jones Futures: Stock Market Rally Steady, Apple In Buy Range After Fed Rate Cut; Microsoft Sets Big Buyback Dow Jones futures: The stock market rally held up after a Fed rate cut. Apple stock is a buy again. Microsoft stock rose late on a buyback. Will AT&T; sell DirecTV? Published:9/18/2019 5:18:59 PM
[Markets] Rex Nutting: In a time of Trump, the Fed doesn’t know what’s going to happen next Fed Chair Jerome Powell doesn’t know the answer, he knows he doesn’t know, and he knows you know he doesn’t know. So quit asking.
Published:9/18/2019 5:18:59 PM
[Markets] Dow Jones Index Reverses Losses, Closes Up 0.13% The Dow Jones Industrial Average Index rose 36.28 points for a 0.13% increase today. The S&P; 500 Index gained 0.07% while tech ETFs mirrored that increase. Published:9/18/2019 4:49:20 PM
[Markets] DOJ Sued For Records Of FBI Agent Who Helped Circulate Steele Dossier DOJ Sued For Records Of FBI Agent Who Helped Circulate Steele Dossier

A Freedom of Information Act (FOIA) lawsuit was filed against the US Justice Department on Wednesday by legal watchdog group Judicial Watchseeking records concerning FBI Special Agent Michael Gaeta - an agency Legal Attaché in Rome who helped circulate the infamous Steele Dossier. 

Christopher Steele

The JW lawsuit seeks:

  • All records of communications, including emails (using [his or her] own name or aliases), text messages, instant chats and encrypted messages, sent to and from former FBI Legal Attaché in Rome, Special Agent Michael Gaeta, mentioning the terms “Trump”, “Clinton”, “Republican”, “Democrat”, and/or “conservatives.”
  • All SF50s and SF52s of SA Michael Gaeta.
  • All expense reports and travel vouchers submitted for SA Michael Gaeta.

According to August 2018 testimony by the DOJ's former #4 official Bruce Ohr, dossier author Christopher Steele gave two memos from his salacious, Clinton-funded opposition research to Gaeta.

In the July 30 meeting, Chris Steele also mentioned something about the doping — you know, one of the doping scandals. And he also mentioned, I believe — and, again, this is based on my review of my notes — that he had provided Mr. Gaeta with two reports…”

The only thing I recall him mentioning is that he had provided two of his reports to Special Agent Gaeta.

According to the Epoch Times, Gaeta was authorized by former Assistant Secretary of State Victoria Nuland to meet with Steele at his London office in order to obtain dossier materials. 

The purpose of the London visit was clear. Steele was personally handing the first memo in his dossier to Gaeta for ultimate transmission back to the FBI and the State Department.

For this visit, the FBI sought permission from the office of Nuland, the assistant secretary of state for European and Eurasian affairs. Nuland, who had been the recipient of many of Steele’s reports, gave permission for the more formal meeting. On July 5, 2016, Gaeta traveled to London and met with Steele at the offices of Steele’s firm, Orbis.

The FBI's scramble to vet the dossier's claims are well known. According to an April, 2017 NYT reportthe FBI agreed to pay Steele $50,000 for "solid corroboration" of his claims. Steele was apparently unable to produce satisfactory evidence - and was not paid for his efforts:

Mr. Steele met his F.B.I. contact in Rome in early October, bringing a stack of new intelligence reports. One, dated Sept. 14, said that Mr. Putin was facing “fallout” over his apparent involvement in the D.N.C. hack and was receiving “conflicting advice” on what to do.

The agent said that if Mr. Steele could get solid corroboration of his reports, the F.B.I. would pay him $50,000 for his efforts, according to two people familiar with the offer. Ultimately, he was not paid. -NYT

Still, the FBI used the dossier to obtain the FISA warrant on former Trump campaign aide Carter Page - while the document itself was heavily shopped around to various media outlets. The late Sen. John McCain provided a copy to Former FBI Director James Comey, who already had a version, and briefed President Trump on the salacious document. Comey's briefing to Trump was then used by CNN and BuzzFeed to justify reporting on and publishing the dossier following the election. 

"The FBI is covering up its role in the Russiagate hoax," said Judicial Watch President Tom Fitton. "Judicial Watch has had to fight the FBI ‘tooth and nail’ for every scrap of information about the illicit targeting of President Trump."

Tyler Durden Wed, 09/18/2019 - 17:35
Tags
Published:9/18/2019 4:49:19 PM
[Markets] U.S. Steel stock falls on third-quarter outlook U.S. Steel stock falls on third-quarter outlook Published:9/18/2019 4:18:12 PM
[Markets] The Big Stock Market Winners Today Were Just Plain Weird Utility stocks rise when yields fall. Banks stocks gain when they rise. They finished as the stock market's top two sectors after the Fed meeting, which really isn’t supposed to happen. Published:9/18/2019 4:18:12 PM
[Markets] NewsWatch: Wall Street vet dunks on Suze Orman’s ‘peeing $1 million down the drain’ take Earlier this year, Suze Orman, with a net worth well into eight figures, said nobody should be buying a daily cup of coffee. Ellevest’s Sallie Krawcheck explains why that’s “terrible advice.”
Published:9/18/2019 4:18:12 PM
[Markets] Meet Israel's New "Kingmaker" & Why War With Hamas Is Imminent Meet Israel's New "Kingmaker" & Why War With Hamas Is Imminent

Authored by Michael Snyder via The End of The American Dream,

Last November, Avigdor Lieberman resigned as Israel’s defense minister when Israeli Prime Minister Benjamin Netanyahu decided to reject Lieberman’s plan for a military operation in Gaza and agree to a ceasefire with Hamas instead.  At the time, Lieberman called the ceasefire a “surrender to terrorism”, and of course it didn’t last very long at all.  Hamas has continued to bombard Israel with rockets in the months since then, and this has once again brought Israel and Hamas to the brink of war.  But everything was on hold until Tuesday’s election, and it appears that the outcome of that election is going to make war with Hamas much, much more likely.

According to the exit polls, the Blue and White party led by Benny Gantz and Netanyahu’s Likud will win about the same number of parliamentary seats.  But neither of them will be able to come close to forming a majority without Lieberman’s Yisrael Beiteinu party, and that makes Lieberman Israel’s new “kingmaker”.  The following comes from the BBC

Exit polls following Israel’s second general election in five months suggest the result is too close to call.

The centrist Blue and White alliance of former military chief Benny Gantz is projected to win between 32 and 34 seats, and PM Benjamin Netanyahu’s right-wing Likud party 30 to 33 seats.

Yisrael Beiteinu party leader Avigdor Lieberman may end up being kingmaker.

This gives Lieberman an extraordinary amount of leverage, and he has already stated that he plans to use that leverage to force Likud and the Blue and White party into “a national-unity government”.  The following comes from the Jerusalem Post

Yisrael Beytenu chairman Avigdor Liberman promised on Tuesday night that his party would fulfil its campaign vow to ensure the establishment of a national-unity government without the ultra-Orthodox and religious-Zionist parties.

“We have only one option. A liberal, national, broad unity government made of Yisrael Beytenu, Likud, and Blue and White,” said Liberman speaking above raucous cheers of jubilation at the party’s election party late Tuesday night.

Don’t be misled by Lieberman’s use of terms such as “liberal”, because the truth is that he is the number one war hawk in all of Israeli politics.

In fact, he makes Netanyahu look like a dove in comparison.  When Netanyahu refused to go to war with Hamas last November, Lieberman promptly resigned as defense minister.  And since that time, he has been telling anyone that would listen what needs to be done in Gaza.

For example, he made the following statements in March

“Today, when the military enters Gaza, it will have significantly better capabilities than the Second Lebanon War. But in the end, when you embark on such a campaign, you want to ensure the safety of the soldiers,” he said. “Terror always has a bottom. In order to dry out terror, we must reach the critical mass. You have to kill thousands, arrest thousands more, and the rest will disperse.”

But, he said, “The reality in Gaza is that the group has terror infrastructures with military capabilities, and this is a very problematic situation. We have to destroy the military infrastructure in Gaza, and it will not be by a political move or only by airstrikes.”

And he has been very outspoken about the fact that Netanyahu “personally torpedoed” his plans “to deal with Gaza”…

Former Defense Minister MK Avigdor Liberman said Prime Minister Benjamin Netanyahu personally torpedoed plans to strike Gaza during a significant escalation in violence between Israel and Hamas in November.

“Netanyahu personally torpedoed the plans,” the Chairman of Yisrael Beytenu told Ben Caspit at the Maariv Security Conference on Wednesday. “We have enough tools to deal with Gaza and I had a full plan.”

In this election, it looks like Lieberman’s Yisrael Beiteinu party will roughly double the number of seats they hold in parliament, and I guarantee you that Lieberman will not join any coalition unless he is assured that Israel will invade Gaza.

In the days leading up to the election, I think that Netanyahu realized that he was losing votes to Lieberman, and that may be why he said that it looks like Israel has “no other choice” other than to invade Gaza.  In the end, that didn’t stop many Israelis from voting for Lieberman instead, and now Lieberman has more political power than ever.

If Netanyahu had moved to crush Hamas earlier, he might not be fighting for his political future now.  The Israeli people have grown very weary of rockets constantly being fired at them from the south, and an increasing number of Israelis want someone that will take decisive action.  So it is not exactly a surprise that someone like Lieberman has experienced a surge in popularity.

So what should we expect next?

After the formation of a government, we should expect Israel to launch a military operation inside Gaza at some point after the upcoming Jewish holidays.  Of course this would have the potential of sparking a much wider regional conflict, but the Israeli people are simply not going to put up with the endless rocket attacks coming from Gaza any longer.

And of course all of this is happening at the same time that a military conflict between the United States and Iran is potentially looming.  World War 3 could literally erupt at any time, and once it starts, the Middle East will never be the same again.

For Hamas, the Israeli election could not have gone any worse.

If either Likud or the Blue and White party had won a landslide victory, there would have been a slight possibility that war could have been avoided.

But now Lieberman is in the catbird seat, and that means that Gaza is about to get flattened.

Tyler Durden Wed, 09/18/2019 - 17:15
Published:9/18/2019 4:18:12 PM
[Markets] Ron Paul Warns: US Rates Are Going Negative & The Fed Can't Stop It Ron Paul Warns: US Rates Are Going Negative & The Fed Can't Stop It

Authored by Mac Slavo via SHTFplan.com,

Former Texas congressman, Dr. Ron Paul, says that the United States won’t be the exception when negative interest rates crush the economy. Dr. Paul is warning negative interest rates are coming, and the Federal Reserve cannot stop it.

“We will join the rest of them and go to total negative rates in hopes that that will be the solution,” Dr. Paul told CNBC’s “Futures Now” this week.

“We’ve never had as many currencies in negative interest rates. $17 trillion worth of bonds [are] in negative interest rates. It’s never existed before. And, that’s a bubble. So, we’re in the biggest bond bubble in history, and it’s going to burst.”

Dr. Paul, who is a former presidential candidate and vocal libertarian is well-known for his economic and stock market bubble warnings as well as his stance on small or non-existent government. He says that the Federal Reserve’s policies are powerless in this current bubble environment and that this week’s Fed meeting will not provide any kind of relief to Americans. He also says cutting interest rates again will not be the answer.

“You can’t predict exactly where the creation of credit goes,” said Dr. Paul.

“We have a ton of inflation with all that QE [quantitative easing]. And, every time you lower interest rates below market levels and create new credit, that’s a bubble.

Dr. Paul admits that it’s impossible to predict when the markets will collapse and the bubbles will all burst.

 “You don’t know this precise time. But you know it can happen,” he said.

“How do you sell a bond that pays a negative rate? Who’s going to jump up and down?”

And the U.S. is only going to be protected from an economic depression temporarily.  The stock market will only insulate for so long before it’ll take hits too. Dr. Paul says central banks, which drastically lower interest rates destroy the pricing mechanism in financial markets, can’t stop the ultimate collapse. 

“I don’t think anything even existed coming close to what we’re facing today,” Paul said.

Tyler Durden Wed, 09/18/2019 - 16:35
Published:9/18/2019 3:57:42 PM
[Markets] The Dow Finished Higher After the Fed Did What Was Expected and That Turned Out to Be Enough There had been some concern before the meeting that the Fed might not lower interest rates. But the Fed cut rates by a quarter point, and nothing else. Donald Trump is not happy. Published:9/18/2019 3:57:42 PM
[Markets] Obama weighs in on Big Data, privacy in Silicon Valley fireside chat The slippery slope of data has never been more crucial, former President Barack Obama warns in a far-ranging fireside chat at a tech conference in San Francisco on Wednesday.
Published:9/18/2019 3:57:41 PM
[Markets] Bank Stocks Bounce Hard On QE4 Hints But Bonds & Bullion Rebuff Powell Promise Bank Stocks Bounce Hard On QE4 Hints But Bonds & Bullion Rebuff Powell Promise

After two days of liquidity issues in the repo market, prompting the biggest Fed response in over a decade, Jay Powell proudly proclaimed that there was nothing to see here, move along...

The market wasn't buying it...

Until of course, Powell suddenly got the tap on the shoulder and promised "moar":

“It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought.”

In other words - QE is coming, just not yet... and stocks rebounded excitedly...

By the end of the day, stocks had pushed back up to the highs of the day... (but gold, bonds and the dollar shurgged off the QE4 hint)...

 

S&P and Nasdaq did their best to scramble back to unchanged on the week...

S&P 500 algos were all about 3,000 once again...

 

Banks were the big gainers on the day as rates surged...

Source: Bloomberg

Very mixed picture across the curve today with yields rising after The Fed but on the day, the long end was lower in yield (30Y -3bps) and short-end higher (+3bps)...

Source: Bloomberg

The 2Y Yield spiked back top unchanged on the week (ignoring the QE4 hints)...

Source: Bloomberg

30Y yields rose very modestly on The Fed but ended lower on the day (again ignoring Powell's QE4 hints)

Source: Bloomberg

The yield curve flattened notably - policy errorishly...

Source: Bloomberg

The dollar spiked - on the relatively hawkish Fed statement - ignoring his more dovish promises...

Source: Bloomberg

Cryptos were mixed again with Bitcoin flat but Altcoins gaining ground

Source: Bloomberg

In commodityland, everything was lower (stronger dollar) with WTI worst (surprise build and reduction in war rhetoric) and gold actually outperformed...but on the week copper is weakest

Source: Bloomberg

Gold was monkeyhammered lower - erasing the post-Saudi-bombing gains, before bouncing...

Source: Bloomberg

Silver rebounded more aggressively...

Source: Bloomberg

 

Finally, to circle back to where we started, The Fed has totally lost control over its rate transmission process - we will have to see if the IOER cut today and Powell's promise of 'moar' will make any difference...The effective fed funds rate printed outside of the central bank’s target band Tuesday for the first time since the financial crisis.

Source: Bloomberg

Additionally, we note that the market is now pricing in less than one more rate cut for the rest of the year...

Source: Bloomberg

Tyler Durden Wed, 09/18/2019 - 16:00
Published:9/18/2019 3:18:24 PM
[Markets] Key Words: Stocks could drop 20% after an October disappointment, strategist warns Joseph Zidle, Blackstone’s chief investment strategist, explains why stocks are poised for a beatdown.
Published:9/18/2019 3:18:24 PM
[Markets] U.S. stocks end mostly higher after reversing earlier losses U.S. stocks end mostly higher after reversing earlier losses Published:9/18/2019 3:18:24 PM
[Markets] Dow ends sightly higher as bank stocks take an unusual bounce higher after Fed cuts interest rates U.S. stock indexes on Wednesday finished mostly higher--even if only slightly so--after the Federal Reserve cut benchmark rates, as expected. The Dow Jones Industrial Average closed up 36 points, or 0.1%, to 27,147, but had been down by as many as 211.65 points at session lows. Meanwhile, the S&P 500 index added about a point, or less than 0.1%, to end at at 3,006.73. The Nasdaq Composite index edged 9 points, or 1%, lower to 8,177. The rate-setting Federal Open Market Committee cut rates by one quarter of a percentage point to a range of 1.75%-2%, in a 7-3 vote. Stocks initially took a leg lower but began to pare losses as Fed Chairman Jerome Powell explained the rate decision in a press conference at 2:30 p.m. Eastern, about a half-hour after the release of the central bank's policy statement. Voting against the action were St. Louis Fed President James Bullard, who preferred to lower the target range for the federal-funds rate to 1.50% to 1.75%. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren both preferred to maintain the target range at 2% to 2.25%."Bottom line, there is now a likelihood that as of today, this might be the last rate cut of the year as the 'mid course adjustment' process continues but could be done. So call this a hawkish cut," wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a research note after the Fed decision. The 10-year Treasury yield climbed after the Fed decision, with the rate rising to 1.79%, helping to deliver a lift to the banking sector, which tends to benefit from higher yields, even though the Fed cut rates. The Financial Select Sector SPDR ETF finished the session with a 0.4%, and shares of Goldman Sachs Group Inc. and those for JPMorgan Chase & Co. led gains for the blue-chip Dow. Published:9/18/2019 3:18:24 PM
[Markets] Dow turns higher in last half-hour of session Dow turns higher in last half-hour of session Published:9/18/2019 2:50:21 PM
[Markets] The Dow Has Turned Positive After the Fed Did What Was Expected and Not Much Else There had been some concern before the meeting that the Fed might not lower interest rates. But the Fed cut rates by a quarter point, and nothing else. Donald Trump is not happy. Published:9/18/2019 2:50:21 PM
[Markets] Duterte Admits To Assassination Attempt On 'Son Of A Bitch' Politician; Spokesman Says He Misspoke Duterte Admits To Assassination Attempt On 'Son Of A Bitch' Politician; Spokesman Says He Misspoke

Phillipines President Rodrigo Duterte - who said he once threw a man from a helicopter - admitted to ordering an assassination attempt on a politician last year according to the New York Times

While railing against drug-related corruption in a Tuesday speech from the presidential palace in Manila, Duterte mentioned two mayors who were killed by police after he accused them of involvement in the drug trade; "Rolando Espinosa, who was gunned down in his jail cell in 2016, and Reynaldo Parojinog, who died in a raid on his home in 2017," according to the report. 

He then turned to mayor and former general Vicente Loot - who survived an assassination attempt last May after Duterte accused him of protecting drug rings. In 2016, confessed drug lord Kerwin Espinosa testified that he gave weekly bribes to Loot, according to ABS-CBN news. 

"General Loot, you son of a bitch," said Duterte. "I ambushed you, you animal, and you still survived."

Presidential spokesman Salvador Panelo immediately began damage control - claiming on Wednesay that Duterte had meant to say "You were ambushed," not "I ambushed you," noting that Duterte's native language is Visayan, not Filipino. 

"It is silly and absurd to conclude that he is behind the ambush just because he misspeaks the Filipino language, which is not his native tongue or first language," said Panelo. 

Mr. Duterte ran for president promising a bloody campaign to kill drug dealers, and thousands of people — many but not all of them suspected dealers or addicts — have been gunned down by police officers or vigilantes since he took office in 2016.

Mr. Loot, Mr. Espinosa and Mr. Parojinog were on a list of more than 100 politicians that Mr. Duterte read on live television soon after taking office, accusing them of being involved in drug trafficking.

In December, Mr. Duterte denied being involved in the attack on Mr. Loot, which left three of his aides and a dock worker wounded. Mr. Loot, who was unhurt in the attack, has denied involvement in drug trafficking. -New York Times

In July, the UN voted to explore an investigation of killings which have occurred during Duterte's tenure - while two complaints have been filed at the International Criminal Court in The Hague accusing Duterte of murder. According to the report, "one was filed by two men who say they were part of a “hit squad” he commanded as mayor of Davao, a city in the south." 

On Wednesday, a lawyer for those men, Jude Sabio, said that Duterte's comments about Loot's failed assassination could be used against him in court. 

"As a lawyer and a former prosecutor, he knows that admission is the queen of evidence," said Sabio. 

Tyler Durden Wed, 09/18/2019 - 15:45
Published:9/18/2019 2:50:21 PM
[Markets] Powell Confirms QE4 Is Coming, Just Not Today Powell Confirms QE4 Is Coming, Just Not Today

For all those who were wondering why Powell would leave the market - which had made its expectation for some sort of POMO announcement today very clear - hanging so badly, sending risk assets and gold tumbling and the dollar surging, Powell finally felt some pity for the world's liquidity addicts when he hinted that QE is indeed coming, just not today. To wit:

“It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought.”

And just in case that was confusing, Powell also said that the Fed would revisit the question of returning to "organic growth" in the intermeeting period.

It wasn't clear how the Fed injecting liquidity equates to "organic growth" of the balance sheet, but we'll leave that for the pedants.

The moments Powell confirmed that QE4 is indeed on the way, around 2:50pm ET, stocks spiked, and the dollar slumped.

And so with expectations thus set, the thing that will be necessary for Powell to launch QE4 - i.e., the "Fed needs another Lehman" moment we predicted yesterday...

... is another repo market crisis, and/or a plunge in stocks, or maybe both just to tbe sure. And since the "QE4" outcome is precisely the one that Trump also wants, expect fireworks in repo as soon as tonight.

As for Powell's promise to cut rates more should the economy worsen, we expect that Trump already knows the rules of the game, and will announce some major escalation in the trade war with China in the coming days if not hours.

Tyler Durden Wed, 09/18/2019 - 15:04
Published:9/18/2019 2:18:58 PM
[Markets] Trump slams Fed after quarter-point rate cut and says he’s ordering more Iran sanctions President Donald Trump ripped the Federal Reserve after the central bank cut interest rates by a quarter point Wednesday, as he ordered more sanctions on Iran and named a new national security adviser. Published:9/18/2019 2:18:58 PM
[Markets] Outraged Trump Slams "Terrible Communicator" Powell: "He Failed Again" Outraged Trump Slams "Terrible Communicator" Powell: "He Failed Again"

It wasn't just the market that was disappointed by Powell's lack of a QE or POMO announcement: so was the president.

Moments after Powell cut rates by 25bps, very much in line with Trump's expectations, and sparked a favorable initial kneejerk reaction, the market slumped when it realized that contrary to expectations, Powell failed to announce a POMO/QE Lite.

Apparently Trump figured it out too, because several weeks after Trump asked for the first time for "some QE", Powell failed to deliver, and this in turn sparked the furious president to lash out at Powell when he tweeted "Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision!  A terrible communicator!"

At this rate we would venture to guess that Powell's job is only safe until the next 10% correction; at that point he may as well tender his resignation.

As for what happens next: all hail future Fed Chair Bullard - you will now be paid to take out your next mortgage!

Tyler Durden Wed, 09/18/2019 - 14:33
Published:9/18/2019 1:50:12 PM
[Markets] The Dow Is Dropping Because the Fed Did What Was Expected and Nothing Else There had been some concern before the meeting that the Fed might not lower interest rates. But the Fed cut rates by a quarter point, and nothing else. Donald Trump is not happy. Published:9/18/2019 1:50:12 PM
[Markets] Fed Chairman Powell answers press questions following rate cut: Watch live Fed Chairman Powell answers press questions following rate cut: Watch live Published:9/18/2019 1:50:12 PM
[Markets] The Margin: Warning: This Sandy Hook Promise PSA may be exceedingly difficult to watch The “back-to-school essentials” spot sees kids using scissors and skateboards to protect themselves from an active shooter.
Published:9/18/2019 1:50:12 PM
[Markets] Very Divided FOMC Cuts Rates As Expected, Fails To Address Liquidity Crisis, Sees No More 2019 Cuts Very Divided FOMC Cuts Rates As Expected, Fails To Address Liquidity Crisis, Sees No More 2019 Cuts

Summary: Tw critical things stand out:

  • The Fed is very divided: 7-3 vote to cut. 7 predict another cut this year. 10 say hold or raise

  • No mention of POMO or permanent repo ops: watch G/C explode overnight

*  *  *

As we detailed earlier, things have not gone exactly according to plan since The Fed cut rates for the first time in a decade:

But today is a big day for Jay Powell as he has to somehow explain why he is cutting rates in the face of:

Surging inflation

Source: Bloomberg

Dramatically positive macro surprises

Source: Bloomberg

Unemployment near record lows

Source: Bloomberg

Stocks near record highs

Source: Bloomberg

Bond yields near record lows

Source: Bloomberg

Dollar near record highs

Source: Bloomberg

Of course, there is the fact that policy uncertainty has never been higher...

Source: Bloomberg

And The Fed just suffered the biggest short-term liquidity crisis since 2007!

Source: Bloomberg

The market is completely priced for at least a 25bps cut today...

Source: Bloomberg

But, we note that markets have become more hawkish in recent weeks - shifting from expecting 2.7 rate-cuts to just 2 rate-cuts in 2019 (including today)...

Source: Bloomberg

Perhaps, Powell has seen this chart?

Data-Dependent, my arse.

How many dissents this time? (anticipated dissents - Esther George, Eric Rosengren and, possibly, Jim Bullard)

Source: Bloomberg

*  *  *

To check all the dovish boxes, Powell would need to: cut 25bps, suggest more to come (dovish tweaks to language), median dots adjusted lower, fewer dissents, restart QE. As BMO noted:

In terms of assumptions for the FOMC, a 25 bp cut is essentially a done deal. The statement should maintain language that the Committee “will act as appropriate to sustain the expansion” to keep the door open to future rate cuts. The dot plot will shift lower, though we’d caution against over-interpreting this forward guidance due to the divergence between modal member forecasts and monetary policy implemented with a risk-management focus. We’re skeptical that the longer-run dot will decline further from 2.5%, which should continue to provide support for long rates (5y5y is around 2% while 10y10y is closer to 2.5%).

Anyway, here's what he did...

  • *FED CUTS MAIN TARGET RATE 25 BPS TO 1.75%-2%

  • *FED LOWERS RATE ON OVERNIGHT REVERSE REPOS BY 30 BPS TO 1.7%

7-3 vote to cut. 7 predict another cut this year. 10 say hold or raise

3 Dissents

  • GEORGE, ROSENGREN DISSENT FOR NO CUT

  • BULLARD SEEKS 50 BPS

Bloomberg's Key Takeaways from the Fed decision:

  • No surprise on main action, as FOMC cuts benchmark rate 25 basis points for a second straight meeting -- to 1.75%-2% target range

  • The dot plot of rate forecasts is somewhat hawkish, showing a split over the need for more easing, not just in 2019 but in coming years: Seven officials see an end-2019 funds rate of 1.625%, with five at 1.875% and five at 2.125%; none see the rate going below 1.625% through 2022

  • Esther George and Eric Rosengren again dissent in favor of no cut, while James Bullard seeks a half-point cut; it's the first decision with three dissents since 2016, under Janet Yellen

  • The Fed also lowered the interest on excess reserves rate and the overnight repurchase rate by 30 basis points, with the central bank seeking to regain control of the benchmark as money-market strains persist

  • The FOMC reiterates that it will "act as appropriate to sustain the expansion''; the statement contains minimal changes, mainly to note household spending gains have been "strong" while business fixed investment and exports have "weakened"; the mention of exports is new and there's a more explicit nod to trade tensions weighing on growth

  • Fed officials' economic forecasts were largely unchanged from the prior round in June; there's a slight upgrade in GDP growth expectations, but policy makers still see the expansion slowing and nowhere near Trump's 3% goal

And the DOT-plot adjusted...

Fed projections show no further cuts in 2019, but seven of 17 policymakers saw one more cut as appropriate

Source: Bloomberg

Looking at the dot plot, it's clear there are three camps within the Fed:

  1. Pre-emptive accommodation is not needed; we've already done too much

  2. We've delivered the necessary amount of pre-emptive accommodation for now

  3. More pre-emptive accommodation is needed

The Fed is now expecting 2019 fed funds rate at 1.9 where we are now...

 

*  *  *

Full Statement below:

*  *  *

Good luck in the press conference.

Tyler Durden Wed, 09/18/2019 - 14:07
Published:9/18/2019 1:18:03 PM
[Markets] US STOCKS-Wall Street extends losses following Fed announcement U.S. stocks extended losses on Wednesday after the Federal Reserve cut interest rates by a quarter of a percentage point in a widely expected move, but gave mixed signals about what may happen next. With continued economic growth and strong hiring "the most likely outcomes," the Fed nevertheless cited "uncertainties" about the outlook and pledged to "act as appropriate" to sustain the expansion. Expectations of lower rates have supported Wall Street's rally this year, with the benchmark S&P 500 now about 1% below its record high close in July. Published:9/18/2019 1:18:03 PM
[Markets] The Margin: This 24-year-old has raised $100,000 for charity — by asking for beer money on national TV Anheuser-Busch and Venmo are matching donations to the University of Iowa children’s hospital.
Published:9/18/2019 1:18:03 PM
[Markets] Stock market losses deepen after Fed cuts interest rates by 1/4 point Stock market losses deepen after Fed cuts interest rates by 1/4 point Published:9/18/2019 1:18:03 PM
[Markets] Bond King Gundlach says this contradiction in stock and bond markets is ‘danger signal’ Bond-market guru Jeff Gundlach says he’s watching a few areas of the market to gauge whether the current bullish dynamic is starting to unravel in earnest. On Wednesday afternoon, during a CNBC interview, he said that he’s sees some early cracks that are worth investors’ attention. Published:9/18/2019 12:57:49 PM
[Markets] Key Words: Bond King Gundlach says this contradiction in stock and bond markets is ‘danger signal’ Bond-market guru Jeff Gundlach says he’s watching a few areas of the market to gauge whether the current bullish dynamic is starting to unravel in earnest. On Wednesday afternoon, during a CNBC interview, he said that he’s sees some early cracks that are worth investors’ attention.
Published:9/18/2019 12:57:49 PM
[Markets] Regulators Expand Already Massive Precious Metals Manipulation Probe To Other Markets Regulators Expand Already Massive Precious Metals Manipulation Probe To Other Markets

Just two days after the DOJ took the unprecedented step of designating the JPMorgan precious metals trading desk as a "criminal enterprise" using unusually aggressive language which reminded legal experts of indictments utilizing the RICO Act, and which hopefully ended years of precious metal manipulation by the group formerly headed by Blythe Masters, CNBC now reports that the probe is set to spread significantly as Federal prosecutors and regulators "are expanding their already aggressive investigations of fraudulent precious metals trades at J.P. Morgan Chase to other U.S. markets and financial firms."

The inquiry into market manipulation of all kinds comes amid a spike in criminal prosecutions and civil actions in the past year involving so-called “spoofing” in the precious metals markets, which we now find had been taking place with reckless abandon for years at JPMorgan and virtually all other major banks.

The prosecutors broadened their investigation thanks to information received from traders questioned for spoofing-related charges, and as in most RICO cases, the information obtained from those traders has led to criminal charges against other individuals.

In short: what we for many years said was blatant manipulation of precious metals was precisely that, and now the participants in said manipulating cabal are being treated as a mafia syndicate by the DOJ.

The widening inquiry is being led by the Justice Department and the U.S. Commodity Futures Trading Commission as they continue their pursuit of individuals and firms for manipulating U.S. markets.

The crackdown may result in one of the biggest conviction rings for the DOJ since the financial crisis, with CNBC adding that the scope of the investigations has grown to the point where the criminal fraud division of the Justice Department expects to add personnel to the existing team to assist with the investigations and prosecutions of cases.

According to CNBC source, prosecutors now have an easier time identifying suspected spoofing due to advancements in the way the Department collects and analyzes trade data internally. Of course, they could have merely come to this site any time between 2009 and 2018 and observed the countless cases of blatant intraday gold and silver manipulation/spoofing which we pointed out, week after week.

CNBC further adds that prosecutors are using information about suspected spoofing to collect additional evidence against a trader and, if warranted, question that trader about their own conduct and that of others. So far, the increased focus on spoofing has resulted in federal prosecutors bringing a total of 13 spoofing cases against 19 defendants in the past five years. Of those, eight have pleaded guilty, while seven are fighting the charges and awaiting trial.

Following the indictment of three J.P. Morgan precious metals traders on Monday, Assistant Attorney General Brian Benczkowski said that the Justice Department is not finished with its probes.

“Our investigation is ongoing, and we’re going to follow the facts wherever they lead whether it is across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.

At the same time, CFTC, the commodity regulator, has also been enhancing its own data analytic capabilities to detect spoofing and other suspicious activity in the markets, which makes sense considering that in 2013 the same CFTC found absolutely no evidence of manipulation in the silver market.

Oops.

"Our goal is to build a really comprehensive data analytical capability — a complete set of data with the expertise to analyze all of it in each specific market so that we have a comprehensive ability to identify suspicious activity in any form it takes in any market it occurs in,” said the Director of the CFTC’s Enforcement Division James McDonald in an interview with CNBC.

McDonald used that knowledge when he moved to revamp the CFTC’s cooperation program. That effort has worked in tandem with the agency’s investment and development in data analytics.

“You can identify the person who executed the trade, but is there a supervisor or someone higher up the chain who may also have culpability?” McDonald said, explaining how to leverage data analysis with personal interviews of traders.

“It can be hard to go up the chain without having someone to tell you what is happening on the inside,” McDonald said.

We can only hope that this time the CFTC actually takes its job seriously, although at this point it is no longer lowly commercial traders who are manipulating gold but central bankers and the BIS itself, something we first reported years ago. We doubt regulators will go after central bankers with the same zeal they have been pursuing the small fish.

Tyler Durden Wed, 09/18/2019 - 13:54
Tags
Published:9/18/2019 12:57:49 PM
[Markets] Jamie Dimon doubts U.S. and China will strike trade deal prior to 2020 election Jamie Dimon doubts U.S. and China will strike trade deal prior to 2020 election Published:9/18/2019 12:18:12 PM
[Markets] US STOCKS-Wall Street retreats ahead of Fed decision as FedEx weighs U.S. stocks came under pressure on Wednesday as investors waited for the Federal Reserve's decision on interest rates and clues about its future monetary policy, while a profit warning by FedEx weighed on sentiment. The package delivery company's shares tumbled 13.6% and were on course for their sharpest one-day percentage drop since the financial crisis after FedEx blamed U.S.-China trade tensions and a split with Amazon.com Inc for its dismal full-year profit forecast. Published:9/18/2019 12:18:12 PM
[Markets] Green Sheet: Greta Thunberg-inspired climate strike for Friday expected to be biggest yet — and New York kids can cut class Dispatches from the business of climate change.
Published:9/18/2019 12:18:12 PM
[Markets] Aramco Attacks An "Act Of War" By Iran: Pompeo After Arriving In Jeddah Aramco Attacks An "Act Of War" By Iran: Pompeo After Arriving In Jeddah

What's the end game here? Secretary of State Mike Pompeo has just arrived in Jeddah for talks with Saudi leaders over a response to the weekend attacks on two of the kingdom's major oil facilities. 

After a prior press conference by the Saudi Defense Ministry where it for the first time assigned public blame on Iran for the attacks which initially knocked out half of the kingdom's daily oil output, saying the air attacks "unquestionably" had Iranian state sponsorship, Pompeo has announced the Aramco attacks constitute an "act of war" by Iran

And President Trump himself said Wednesday from the White House that it looks like Iran did it but that he still hopes to avoid war.

He announced via a statement on Twitter that, "I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!" — in what appears an alternative to launching a military response. 

"I'm not looking to get into new conflict, but sometimes you have to," Trump told reporters Wednesday.

Pompeo's new "act of war" declaration indeed takes the potential for escalation right back to boiling point.

Pompeo is in Jedda where he's expected to meet with Saudi Crown Prince Mohammed bin Salman to evaluate a possible response, where the are expected to "coordinate efforts to counter Iranian aggression in the region," according to a State Department statement.

Meanwhile, if the 'military option' is being considered, it appears we could be in the beginning phases of an international coalition response. UK Prime Minister Boris Johnson announced he and Trump held a phone call to discuss the need for a "united diplomatic response from international partners" after the Aramco attacks. 

Wednesday's Saudi Def. Ministry press briefing showcasing missile and drone debris alleged "evidence" the Iranians were behind attack. 

The fact that Johnson's statement included the word "diplomatic" - along with Trump's emphasis on extending stronger sanctions - is a good sign however, that the White House is not prepping for war. 

Tyler Durden Wed, 09/18/2019 - 13:10
Tags
Published:9/18/2019 12:18:12 PM
[Markets] The Ratings Game: FedEx stock plunges as outlook prompts four analyst downgrades FedEx stock tanks as several analysts downgrade it following a quarterly miss and a steep outlook cut for the logistics company.
Published:9/18/2019 11:50:38 AM
[Markets] The New Ghost Ships The New Ghost Ships

Authored by Danielle DiMartino Booth via QuillIntelligence.com,

  • California Mega-Port volumes are negative thus far this year, the longest stretch since the Industrial and Great Recessions; echoing the weakness, Cass Freight Shipment Volumes are down 4.5% versus last year

  • While the Bloomberg consensus calls for a modest export expansion in the third and fourth quarters of this year, freight volumes suggest otherwise; in August, ISM and IHS Markit export indices fell to levels not seen since 2009, corroborating the freight data

  • U.S. trade contracting by year-end is increasingly likely; the GM strike will exacerbate the pressure on transportation as the fallout pushes down the supply chain

We’d venture that the first thing that comes to mind when you hear “ghost ship” is the “Flying Dutchman,” the phantasmal ship that can never make port, doomed to sail the seas forever. But not all ghost ships are products of fiction. Real-life derelicts sprinkle history’s annals. One famous example was the Mary Celeste, an American merchant brigantine, discovered off the Azores Islands in the Atlantic on December 5, 1872, adrift and crewless. The Canadian brigantine Dei Gratia happened upon the abandoned and disheveled, but seaworthy ship, still under partial sail, and with her lifeboat missing. The Mary Celeste had departed New York City for Genoa, Italy on November 7. With her last log entry dated ten days before her discovery, she was still amply provisioned, her cargo of denatured alcohol intact, and the captain’s and crew’s personal belongings undisturbed. None of those who had been on board were ever seen or heard from again.

Today’s massive freighters are amply crewed and anything but ghostly, unless you count the missing cargo in their holds. Over this past weekend, one of QI’s Twitter followers generously shared a picture of such a rarely seen image – a container ship not loaded to capacity pulling into the Port of Los Angeles. It’s the middle of September, time to stock up for the holidays. And we’re seeing a drop-off in import volumes hitting U.S. shores?

This got us thinking about the monthly California Mega-Port container data from Los Angeles, Long Beach and Oakland that we have shared with you in the past. We don’t yet have September volumes on hand. We have to wait until the middle of October for that data to be released. August, however, speaks to a theme of contracting trade unfolding.

Thankfully, the California Mega-Ports release granular figures on both loaded and empty containers. Common sense says to focus on the former because loaded containers ferry goods and empty containers do not (duh). Examining the sum of those heading outbound and those coming inbound – exports plus imports – yields a proxy for total trade.

The red line above depicts this series, which has declined on a year-over-year basis every quarter this year, including the third quarter-to-date’s 0.3% dropRecent parallel losing streaks were last seen in the 2015-16 Industrial Recession and the Great Recession. (The 2001 Recession included just one year-over-year contraction.)

Cass Freight Shipment Volumes – the blue line – gauge broader trade flows and echo the weakness in port trafficWhat differentiates Cass is that it covers other modes of transportation beyond water via air, rail and truckAt -4.5% vs. last year, thus far in the third quarter, Cass is sending a relatively weaker signal.

For completeness, we included total U.S. trade (green line above), the ‘X’ and ‘M’ in net exports, but summed these Econ 101 metrics instead of taking the difference. Goods either come in or go out of the country. Freight flows don’t distinguish between the two, they include both. Through this year’s second quarter, total U.S. trade has decelerated to a 0.8% rate compared to 2018’s second quarter rate, the slowest expansion in three years.

Further validating the multiplying number of trends, export indices from both the Institute for Supply Management (ISM) and IHS Markit downshifted sharply in August to levels last seen in 2009. With this reality hiding in plain sight, you would think consensus expectations for exports would be equally bearish. Rather, the Bloomberg consensus of economists is calling for modest export expansion of 1.3% and 1.9%, quarter-over-quarter annualized, in 2019’s third and fourth quarters, respectively. Yes…we’re shaking our heads with you.

We concur with Cass which sees, “a growing risk that GDP will go negative by year’s end.” And we were there before GM’s unionized army of workers went on strike. We’ve already heard rumbles of layoffs spreading along the North American supply chain in response to planned production cuts that promised to deepen. A cynic might have chuckled at the headlines designed to shock of GM losing $50-100 million a day in profits for every day the strike lasts. With inventories continuing to rise, which we’ll cover in depth in next week’s Quill, GM will initially benefit from the forced idling of its production lines.

In the meantime, freight volumes will be depressed further as the strike takes hold and pushes down through to GM’s suppliers. That means there will be more negative prints to come from Cass, which reckons it takes two to three quarters for depressed freight to be reflected in broader economic data. It’s no optical illusion – the risk of an outright contraction in U.S. trade is squarely in our sights. We suggest that you be on the lookout for a growing number of ghost ships crossing the Pacific.

Tyler Durden Wed, 09/18/2019 - 12:40
Published:9/18/2019 11:50:38 AM
[Markets] The Dow Is Down 68 Points as Investors Wait for the Federal Reserve FEATURE Waiting for the Fed. The three major U.S. stock market indexes were down modestly as investors looked forward to the Federal Reserve’s 2 p.m. announcement on whether it will cut interest rates again, and if so, by how much. Published:9/18/2019 11:50:38 AM
[Markets] SodaStream to shut down for Sept. 20 climate strike SodaStream to shut down for Sept. 20 climate strike Published:9/18/2019 11:38:46 AM
[Markets] This Week's Oil Futures Spike Is About To Hit Consumers At The Gas Pump This Week's Oil Futures Spike Is About To Hit Consumers At The Gas Pump

The attack on a Saudi Arabia oil facility, now being blamed on Iran, that caused crude oil futures to spike more than 10% to start the week is likely going to start hitting consumers at the pump over the next couple of days, according to Bloomberg.

Despite retail gasoline futures jumping as much as 20 cents on the New York Mercantile Exchange early in the week, the average US retail gasoline gallon rose just 1 cent since Sunday. But the impact of futures rising will become more pronounced over the next day or two, according to Patrick DeHaan, senior petroleum analyst at GasBuddy.

The shift in prices at the pump will come after gasoline distributors adjust their prices to match gains in futures and regional spot markets, he says.

An increase of about 15 cents to 30 cents per gallon in the United States is going to be likely over the next several days while Saudi Arabia works to get production back up to speed.

Source: Bloomberg

Despite the huge move higher at the beginning of the week, where crude futures ran through the $63 mark, they have since pared gains and are trading at around $59 late in the day on Tuesday - still about 10% higher than prior to the weekend.


Source: Bloomberg

President Trump also said on Tuesday that it wasn’t going to be necessary to release oil from the Nation's Strategic Reserves:

“I don’t think we need to. Oil has not gone up very much,” Trump told reporters Tuesday aboard Air Force One as he traveled to California for a series of fundraisers. “There’s a lot of oil in the world.”

As Trump is likely well aware, any type of prolonged increase in gas prices could keep low and middle income voters from the polls during election time, according to Kevin Book, managing director of ClearView Energy Partners in Washington.

Book continued: “No voter has ever been happy about a price increase. They might not vote for the other party, but they might not get off the couch if they are pissed off.”

The potential for rising gas prices comes at a time during the year when winter grade gasoline, which is cheaper to make, usually sends prices lower. AAA had predicted $2 dollar gasoline in the US South this fall, where it is generally cheapest in the nation. 

DeHaan concluded: “Right now you are seeing the stations rushing to get those tanks full. And those who are not able to fill up will be confronted with having to pay extra later.”

Tyler Durden Wed, 09/18/2019 - 12:25
Published:9/18/2019 11:38:45 AM
[Markets] Market Extra: Repo market ruction throws off some measures of probability of Fed rate cut Even as investors say the chance of a Fed interest rate cut on Wednesday’s meeting is close to a 100%, the CME’s FedWatch tool says otherwise.
Published:9/18/2019 11:38:45 AM
[Markets] Outsized selloff in Dow transports is virtually all the fault of FedEx's stock Outsized selloff in Dow transports is virtually all the fault of FedEx's stock Published:9/18/2019 11:19:14 AM
[Markets] More Money Pumping Won't Make Us Richer More Money Pumping Won't Make Us Richer

Authored by Frank Shostak via The Mises Institute,

Whenever a central bank introduces easy monetary policy, as a rule this leads to an economic boom - or economic prosperity. At least this is what most commentators hold. If this is however the case then it means that an easy monetary policy can grow an economy.

But loose monetary policies do not generate economic growth. These policies set in motion the diversion of real savings from wealth generators to the holders of the newly pumped money. Real savings, rather than supporting individuals that specialize in the enhancement and expansion of the infrastructure are consumed by various individuals that are employed in non-wealth generating activities.

Moreover, not all consumption is a good thing. The consumption of real savings by individuals engaged in the enhancements and the expansion of the infrastructure is productive consumption. Conversely, the consumption of real savings by individuals that are employed in non-wealth generating activities is non-productive consumption.

It is non-productive consumption that sets the foundation for the weakening of the existing infrastructure thereby weakening future economic growth. In contrast, productive consumption sets the foundation for a better infrastructure, which permits stronger future economic growth. Needless to say, productive consumption leads to the increase in individuals living standards while non-productive consumption results in the lowering of living standards.

Why then is loose monetary policy seen as a major contributor towards economic growth?

Given that economic growth is assessed by means of the gross domestic product (GDP) framework — which is nothing more than a monetary turnover — obviously then when the central bank embarks on monetary pumping (i.e., loose monetary policy) it strengthens the monetary turnover in the economy and thus GDP.

After deflating the monetary turnover by a dubious price deflator one obtains the so-called real GDP. By means of real GDP, economists and various other experts are supposedly in a position to ascertain the state of economic growth, or so it is held. (Note that the increase in the monetary turnover because of the increase in the money supply is regarded as reflecting economic growth). In such a framework, it is not surprising that central bank policies are an important factor in setting in motion an economic boom.

From this, economists and various other experts conclude that the central bank by being able to grow the economy can also make sure that the economy follows the correct growth path. (The growth path as outlined by policy makers of the central bank).

Whenever the economy deviates from the path outlined by central bank policy makers and the government, this will allow them the opportunity to intervene by either raising or slowing the pace of monetary pumping.

The economy in this way of thinking is depicted as a helpless creature that must be guided by the all-knowing bureaucrats all the time. The passivity of the creature called the economy is also reflected by the fact that the output generated must be distributed by the all-knowing bureaucrats. In fact, one gets the impression that bureaucrats supervise the entire production process and individuals are just submissive entities that have hardly anything to say here.

If loose monetary policies of the central bank are able to generate through the GDP statistic so-called economic growth, then this must mean that a tighter monetary stance sets an economic bust.

"Economic bust" is here associated with the liquidation of various non wealth-generating activities. That is, the economic bust results in the curtailment of non-productive consumption.

Note that an important vehicle in setting the boom-bust cycle is the existence of the fractional reserve banking, which through the expansion of money out of thin air sets an economic boom while through the contraction of money out of thin air sets an economic bust.

Observe that in fractional reserve banking an expansion of money out of thin air emerges because of the ownerless lending. Consequently, when banks curtail the ownerless lending this leads to the contraction of money out of thin air.

Can Government Policies Grow the Economy?

While loose monetary policy, which results in an exchange of nothing for something, cannot cause economic growth, can the same be said about an increase in government outlays? Will this not result in a strengthening in economic growth?

Given that in the GDP framework one of the components is government outlays, obviously then once there is an increase in these outlays, all other things being equal, we will have an increase in the GDP and thus in so-called economic growth.

But if the government is not a wealth generating entity, how can an increase in government outlays grow the economy? Various individuals who are employed by the government expect compensation for their work. Note that the government can pay these individuals by taxing others who are still generating real wealth. By doing this, the government weakens the wealth-generating process and undermines prospects for economic growth. (We ignore here borrowings from foreigners).

Now, fiscal stimulus could “work” if the flow of real savings is large enough to fund government activities while still permitting a positive growth rate in the activities of the private sector. (Note that the overall increase in real economic activity is in this case erroneously attributed to the government's loose fiscal policy).

If, however, the flow of real savings is declining, then regardless of any increase in government outlays, overall real economic activity cannot be expanded. In this case the more the government spends (i.e., the more it takes from wealth generators) the more it weakens prospects for a recovery.

Thus when government by means of taxes diverts bread to its own activities the baker will have less bread at his disposal. Consequently, the baker will not be able to secure the services of the oven maker. As a result, it will not be possible to boost the production of bread, all other things being equal.

As the pace of government spending increases a situation could emerge that the baker will not have enough bread to even maintain the workability of the existing oven. (The baker will not have enough bread to pay for the services of a technician to maintain the existing oven). Consequently, his production of bread will actually decline.

Similarly, as a result of the increase in government outlays other wealth generators will have less real savings at their disposal. This in turn will hamper the production of their goods and services and in turn will retard and not promote overall real economic growth.

As one can see, the increase in government outlays will lead to the weakening in the process of wealth generation in general.

Many commentators are of the view that lowering of taxes could be an important catalyst for the strengthening of economic growth. This could be so if the government also curtails its outlays. It must be realized that as long as government outlays continue to grow no effective cut in taxes is possible. Remember that the expansion in government outlays implies an increase in the diversion of real savings from wealth generators to government. Hence, an effective cut in taxes can only emerge once the government curtails its outlays.

For instance, government announces that it will cut the income tax by 5% at the same time it outlays are planned to increase by 10%. What matters here is that the government will require to increase the diversion of real savings by 10% in order to support the increase in its activities.

It does not matter how the government is going to collect the required real savings – it can be by means of various forms of indirect taxes or by means of borrowings or by means of money pumping. The essence in all this is that once the government requires more real savings it will get it from the private wealth generating sector. Hence in this case rather than having a tax cut what we have here is an effective increase in the tax burden because of the increase in government outlays.

Conclusion

Neither loose monetary policy, nor big-spending fiscal policy can grow an economy. All that these policies can do is to redistribute a given pool of real savings from wealth generators towards non-wealth generating activities. Hence, we can conclude that both loose monetary and fiscal policies cannot set in motion an economic boom but rather an economic impoverishment.

Tyler Durden Wed, 09/18/2019 - 12:10
Published:9/18/2019 11:19:14 AM
[Markets] Dow Jones Cools Ahead Of Fed Rate Cut Decision; Why CDW Stock Is A Higher-Risk Breakout The Dow Jones Industrial Average and other main indexes showed mild selling ahead of another pivotal Federal Reserve decision on rates. CDW broke out. Published:9/18/2019 11:19:14 AM
[Markets] Wall Street vet dunks on Suze Orman’s ‘peeing $1 million down the drain’ take Earlier this year, Suze Orman, with a net worth well into eight figures, said nobody should be buying a daily cup of coffee. Ellevest’s Sallie Krawcheck explains why that’s “terrible advice.”
Published:9/18/2019 11:19:14 AM
[Markets] McDermott's stock plunges 49% prior to trading halt for volatility McDermott's stock plunges 49% prior to trading halt for volatility Published:9/18/2019 10:52:06 AM
[Markets] Stunning Consensus Emerges: Fed May Announce Launch Of QE In Just A Few Hours Stunning Consensus Emerges: Fed May Announce Launch Of QE In Just A Few Hours

It was back on August 6, in an article titled "Forget China, The Fed Has A Much Bigger Problem On Its Hands", where we explained why in response to the coming dollar funding shortage and liquidity crunch (we warned about this month's repo crash over a month ago), we first said that Fed will likely resume QE as soon as the fourth quarter. Needless to say, with the Fed having only just cut rates for the first time in over a decade just a week earlier, others looked at us funny, even though just two days later we got the clearest sign yet that the Fed was indeed contemplating QE when we described a very odd email we received from a Fed researcher in "When You Get An Email Like This From The Fed, It May Be Time To Panic."

In any event, virtually no 'serious' Wall Street analyst predicted that QE would be on traders lips in the immediate future, and certainly nobody predicted the coming "dollar funding storm", which we warned readers about just last Friday.

Fast forward to today when one analyst after another is scrambling to "predict" that today, with its repo operations woefully inadequate to calm the storm that has gripped the funding markets and the dollar shortage, the Fed may go so far as to expend its balance sheet by announcing the launch of permanent open market operations, i.e., the monetization of bonds.

Just please don't call it QE.

Let's start with Nomura's rates analyst Lewis Alexander, who overnight - just like every other STIR strategist - comments on the record fireworks in the repo market and writes that after a period a relative stability from early May through mid-August, reserves in the banking system have been declining in recent weeks, something we said would happen as we entered the fourth quarter as the Treasury scrambled to rebuild its cash balance.

As Nomura further notes for those who missed our justification for the recent sharp drop in reserves, "with the asset side of the Fed’s balance sheet fixed, the recent declines in reserves have been driven by increases in the Fed’s non-reserve liabilities, primarily the Treasury General Account (TGA), currency outstanding and deposits held by foreign official institutions." Additionally, the Japanese bank estimates that yesterday the Trasury's cash balance at the Fed went up by $60-100bn, due to the regular pattern of corporate tax payments, and concludes what is by now apparent to everyone "the decline in reserves driven by these increases in the Fed’s other liabilities had an outsized impact on funding markets."

Why does this matter? Because it all comes as the Fed is determining how far they should let reserves fall, among other key things, such as how far should the Fed let rates drop.

Some more details: Reserves reached $2.8tn in late 2014 when the Fed stopped expanding its balance sheet and they were $2.2tn when, in late 2017, the Fed decided to begin to let its assets gradually run off. By June of this year, when the Fed decided to end runoff, reserves had fallen to $1.5tn. While the debt limit was binding this year – from March through early August – the TGA was trending lower, and this tended to offset the impact of growth of the Fed’s other liabilities on the level of reserves. However, when the debt limit was raised in early August it was clear - and we noted so at the time - that the Treasury was going to increase its cash holdings relatively quickly, and as we noted over a month ago, they were expected to reach $350bn by end-September which was going to put significant downward pressure on reserves.

Meanwhile, pressures that have emerged in funding markets in recent days, and the Fed’s decision to conduct a short-term repo transaction today, suggest that the Fed may be reassessing the level of reserves that is consistent with good control of the nexus of short-term interest rates.

With all that said, and given recent events, Nomura now expects Chair Powell and the FOMC to say something about their plans for the balance sheet at the conclusion of this week’s FOMC meeting, where the bank sees four options:

  1. The FOMC and/or Chair Powell could simply state that the FOMC will conduct short-term repo transactions as needed to maintain short-term interest rates within a range that is consistent with the target range for the funds rate. This could be part of the FOMC statement or it could be part of Powell’s opening remarks at the post-meeting press conference.
  2. The FOMC could say they they will start to expand the Fed’s balance sheet as soon as practicable, in line with the growth of the Fed’s non-reserve liabilities. If the FOMC makes this decision it is likely to be included in the FOMC statement.
  3. The FOMC may again lower IOR relative to the top of the federal funds target range, in an effort to keep the fed funds rate well within the FOMC’s target range.
  4. The FOMC could announce they they are launching a new standing repo facility.

While Nomura generally rules out option four and sees option 1 as most likely, it is the bank's discussion of option two that is most relevant. This is what Alexander said on the topic:

The second option – announcing that they will start to expand the balance sheet in coming weeks – also seems likely. Operationally it would not be hard to implement. The New York Fed is already purchasing assets to offset the runoff of its existing Treasury and MBS securities. It would be relatively simple to expand the size of those purchases to take account of increases in other liabilities. The Treasury’s plans for their cash balance will likely continue to put downward pressure on reserves in coming weeks and we expect the level of reserves to reach $1.3tn by the end-September, or sooner. Moreover, the pressures that affected funding markets in the last few days may be an indication that reserves have fallen “enough.”

And so, at least one bank thinks it is "likely" the Fed may announce permanent open market operations, i.e., regularly scheduled bond purchases to inject market liquidity. Nomura is not the only one.

In his latest installment analyzing the impact of tumbling reserves, BofA's Mark Cabana, who was probably the most ahead of the Wall Street curve on this topic, also presents his personal views as to what caused the recent spike in repo, which he attributes to a substantial decline in reserves, and which serves to confirm that the amount of cash in the baking system is too limited, concluding that "the limited amount of reserves is the key driver of the funding pressures."

Cabana also points out that whereas before the crisis zero excess reserves were perfectly sufficient in a world where banks regularly used the Fed's discount window, that is no longer the state of play, largely due to regulatory and liquidity requirements, and as a result with funding pressures rising as reserves have declined to ~$1.35tn suggests that the market is on the upward sloping part of the reserve demand curve, below the minimum amount of reserves needed for an "abundant reserve regime."

The repo operations in the past two days - the first in a decade - bring us closer to the flat portion of the reserve demand curve, buy it is temporary: as shown in the chart below, there is a roughly $400BN reserve shortage to normalize the FF-IOER spread. 

With repo rates still high, it is also clear that the repo operation has not quelled repo pressures and the Fed will need to keep providing cash to the market to maintain an abundant quantity of reserves in the system.

Which brings us to Cabana's punchline: "Fed may announce outright purchases Wednesday."

Echoing Nomura, the BofA strategist predicts that at today's FOMC meeting, "we see risks the Fed indicates they intend to stabilize the level of reserves in the system. This is not our base case for now but we see substantial risks of such an action. Such a statement would imply that permanent balance sheet growth and outright purchases are necessary." Cabana believes that such a communication would likely be included in the Fed's "implementation note" and also likely be discussed by Chair Powell in his press conference.

How much "bond purchases" would the Fed announces? The answer is not far off the $400BN we extrapolated based on the chart above:

"The Fed will likely need to purchase $250bn in assets in the secondary market to return to an "abundant" reserve level plus a buffer, and will need to continue outright purchases of ~$150bn/yr to maintain this reserve level. Reserves declined ~$100bn at the start of the week and the banking system appears to have reached the upward sloping part of the demand curve with this drain.

There's more, literally.

As Cabana then adds, the Fed will also likely want to maintain a buffer above this "abundant" level. here, using variations in Fed liabilities since the start of 2019, BofA estimate this buffer to be around $150bn based on prior NY Fed analysis; in other words, "to offset Monday's reserve drain and add a buffer, the Fed's balance sheet needs to grow $250 bn."

Then, to maintain reserves at "abundant" levels, the Fed will need to continue outright purchases to meet growth in demand for their liabilities. This demand comes from:

  • Currency in circulation - which grows with GDP. Fed surveys show the median growth expectation at 4.9% per year.
  • Bank HQLA - reserves fulfill HQLA needs of banks and should growth with bank balance sheets.
  • Treasury cash balance - which is based on expected five day outflows and should grow with the deficit.
  • To meet this demand for their liabilities, we estimate the Fed will need to purchase ~$150bn in USTs per year.

In sum, and confirming what we said above, the Fed's purchases could be $400bn in the next year, according to BofA, which would be front-loaded with a $250bn purchase now, and annual run-rate of $150bn.

Oh, and for those wondering what the Fed will purchase, here is the answer:

We expect purchases will occur across the curve, to reflect the distribution of USTs outstanding (which is how they currently purchase) and most likely only in USTs. The Fed could front-load these purchases at the front end of the curve to exert a larger impact on repo, but may not want to deliberately steepen the curve and tighten financial conditions while lowering interest rates. Purchasing across the curve would also be consistent with how the Fed offset currency growth via "coupon passes" prior to the crisis. We acknowledge there is lots of uncertainty on this question.

Needless the say the market reaction would be instant, with "richening of yields across the curve, especially in the long end" if the Fed announces outright UST purchases as now appears to be consensus.

Finally, completing the trifecta of strategists expecting the Fed to launch QE open market purchases, is Morgan Stanley strategist Matt Hornbach, who said that "the Federal Reserve is likely to announce permanent open market operations in its communications Wednesday. "

Speaking in an interview on Bloomberg TV, the rates strategist said that this step would allow the Fed to address the funding market’s strains without stoking fears of a systemic problem or fueling talk of a recession. Echoing what Cabana said above, Hornbach agrees that "the buffer of reserves that the Fed was hoping to have in the system clearly isn’t there any more."

Ok... but won't a restart of QE trigger PTSD flashbacks to 2009 and the financial crisis, and telegraph to the world that the US is in a recession? Well, this is where semantic comes into play, because when is QE not QE? Or when is debt monetization not debt monetization? Or when is state financing not state financing? When it is something else. And here is where the magic of narratives come in.

As Hornbach writes, "POMOs will help the Fed avoid the implication that it’s restarting QE, which could raise suspicions of a bigger economic threat."

Wait, wait, wait... Isn't POMO, i.e. permanent open market operations precisely the way one implements QE? After all, even Cabana above admits the Fed will need to expand its balance sheet by up to $400BN in the very short term to normalize financial conditions? Apparently, to Morgan Stanley, the answer is no.

"When you start losing control of the target rate, you need to increase reserves in the system, but that’s not necessarily QE as we know it in a traditional sense. They’re going to do this via permanent open market operations."

Oh, so it's not QE... it's just what the central bank does when it implements QE. Thanks, Matt, I think we got it.

Watch his entire interview, and much more below.

Besides the staggering implications for capital markets from a return to QE, what all of the above means is that Wall Street now expects the Fed to not only cut rates, but to launch QE... pardon, start permanent open market operations (also known as QE). This also means that the bar is suddenly much lower for the Fed to disappoint consensus Wall Street, and trader, expectations because if Powell merely commits to a 25bps cut with no follow through, and says nothing about a standing repo facility and/or POMOs, the market will be extremely displeased, and the result will be not only a violent drop in risk assets, but a blow out in funding levels to new all time highs.

The combination of those two taking place at the same time could just be the catalyst that culminates in the next market crash, unless of course the Fed yields to Wall Street demands for even more liquidity, and stocks soar to new record highs on the back of rate cuts and QE at a time when the US economy is firing on all cylinders.

One final fringe benefit: president Trump will be very happy and Powell will keep his job for at least a few more months.

Tyler Durden Wed, 09/18/2019 - 11:34
Published:9/18/2019 10:52:05 AM
[Markets] US STOCKS-Wall St dips as FedEx issues profit warning; all eyes on Fed U.S. stocks came under pressure on Wednesday after a profit warning by FedEx, while investors waited for a decision on interest rates and clues on the future of U.S. monetary policy from the Federal Reserve. Shares of the package delivery company tumbled 14% and were on course for their sharpest one-day percentage drop since the financial crisis after FedEx blamed U.S.-China trade tensions and a split with Amazon.com Inc for its dismal full-year profit forecast. Published:9/18/2019 10:52:05 AM
[Markets] Beat the System: Big investors are nervous —– but that’s not necessarily bad news for you And there are some simple investments they’re too scared to buy.
Published:9/18/2019 10:52:05 AM
[Markets] Dow transports' outsized selloff is almost all FedEx's fault The 13.9% plunge in FedEx Corp.'s stock is the main reason the Dow Jones Transportation Average is tumbling 170 points, or 1.6%; that is much worse than the performance of its sister index the Dow Jones Industrial Average , which lost 56 points, or 0.2%. FedEx stock's price drop of $24.07, following disappointing quarterly results and a lowered full-year outlook, accounted for about 147 points of the Dow transports' price decline. Add the $2.52, or 2.1% decline in United Parcel Service Inc. shares in sympathy, and the FedEx-related selloff was shaving 162 points off the Dow transports. Published:9/18/2019 10:18:40 AM
[Markets] Ilhan Omar Deletes Old Tweet Revealing Her Father Has Same Name As Brother Ilhan Omar Deletes Old Tweet Revealing Her Father Has Same Name As Brother

Authored by Rusty Weiss via The Mental Recession

Representative Ilhan Omar created a whirlwind of controversy when she deleted a tweet from 2013 that wished a Happy Father’s Day to a man named “Nur Said.”

“Happy Father’s Day to my aabo Nur Said, I am forever grateful to Allah for giving me the best father a …” the post reads, linking to a since-deleted Instagram post.

As reported at The Political Insider, Omar (D-MN) was reportedly engaged in civil marriage with a man many have speculated to be her brother, Ahmed Nur Said Elmi, from 2009 up until 2017.

In Somalia, a person’s name normally consists of a first name, followed by the father’s name and then the grandfather’s name.

The left-leaning Minneapolis Star-Tribune in June reported on documents that raised questions as to whether Omar married her own brother as a means to “skirt immigration laws.”

This tweet raises questions as to whether or not Ilhan’s real name is even Omar, and certainly lends some credence to the speculation. And Omar is most definitely concerned about its contents. She has since deleted it.

Judicial Watch President Tom Fitton asked, “Did Ilhan Omar delete MORE evidence she married her brother?

Fortunately, the post has been archived and will forever be retained.

PJ Media reporter David Steinberg, in a post from October of 2018, indicated he had spoken to classmates of Ahmed Nur Said Elmi, and had discovered “Elmi’s father was identified as the same man Ilhan Omar has always publicly referred to as her own father: Nur Said Elmi Mohamed.”

Imam Tawhidi, who goes by the ‘Imam of Peace’ on social media, explained in a Twitter thread the nuances behind surname usage in “most Muslim countries.”

“Most Americans don’t know that in most Muslim countries, the surname is actually the father’s name,” Tawhidi wrote, prior to calling for Omar’s resignation.

The liberal media went apoplectic back in July when President Trump suggested he had heard stories about the potential immigration fraud perpetrated by Omar. Rather than actually investigate since then, they condemned him for bringing up such a wild conspiracy. 

“There’s a lot of talk about the fact that she was married to her brother,” Trump told reporters. “I know nothing about it. … I’m sure that somebody would be looking at that.”

But they didn’t, and now the story only moves along because somebody found an old tweet in Omar’s archives before she did. Will the media continue to whitewash this scandal as she seemingly is trying to do?

“The people who I love know who I am and what I care about,” Omar said following reports of an affair with a paid political consultant.

When will the mainstream media start asking questions about who she is and what she has done?

Tyler Durden Wed, 09/18/2019 - 11:05
Published:9/18/2019 10:18:40 AM
[Markets] Best New Ideas in Money: How wiping out $1.5 trillion in student debt would boost the economy Many voters have come around to the idea that the loans are an unsustainable burden
Published:9/18/2019 10:18:40 AM
[Markets] U.S. stocks move slightly lower ahead of Fed interest-rate decision U.S. stocks move slightly lower ahead of Fed interest-rate decision Published:9/18/2019 9:47:09 AM
[Markets] US STOCKS-Wall St edges lower as FedEx profit warning drags; Fed in focus U.S. stocks came under pressure on Wednesday after FedEx issued a profit warning, while investors waited for the Federal Reserve's decision on interest rates in what has been a rocky week for global markets. Investors will also focus on the Fed's policy statement, which is due at 2:00 p.m. ET (1800 GMT), followed by Chair Jerome Powell's address a half hour later. The central bank is expected to lower interest rates by a quarter percentage point for the second time in three months, but a deep divide among policymakers has seen traders abandon all bets on a third reduction this year. Published:9/18/2019 9:47:09 AM
[Markets] Oil Algos Confused Despite Bigger Than Expected Crude Build Oil Algos Confused Despite Bigger Than Expected Crude Build

WTI has extended losses overnight following API's surprise crude build and President Trump appearing to ease off the war rhetoric and Aramco's words have eased market fears.

“Saudi Aramco has so far shown great crisis-management skills and great resilience, keeping operations ongoing in the attacks’ aftermath and quickly mobilizing recovery and repair crews,” said Samuel Ciszuk, founding partner of consultants ELS Analysis in Stockholm.

However, inventories remain a key barometer.

API

  • Crude +592k (-2.5mm exp)

  • Cushing -846k

  • Gasoline +1.6mm (-500k exp)

  • Distillates +2.00mm (+500k exp)

DOE

  • Crude +1.06mm (-2.5mm exp)

  • Cushing -647k

  • Gasoline +781k (-500k exp)

  • Distillates =437k (+500k exp)

A surprise crude build last night from API was confirmed by DOE data which indicated a bigger build of 1.06mm barrels (along with builds in gasoline and distillates stocks)...

Source: Bloomberg

Crude production remains near record highs despite the ongoing decline in rig counts

Source: Bloomberg

WTI hovered just above $58.00 ahead of the DOE data - well down from the pre-API levels - but algos were confused on the DOE data's bigger build...

Finally, we note that Bloomberg Intelligence's Senior Energy Analyst Vince Piazza points out that:

The attack on the Saudi installations will push oil-market fundamentals to the back seat, allowing the elevated geopolitical risk to support crude prices. While retaliation is likely, a military intervention that drags allies into a broader conflict is less certain. Still, with key infrastructure now a target of terrorism, we believe a stronger risk premium on global benchmarks is warranted, even with the threat of a slowing global economy.

Uncertainty in the oil market is the highest we've seen since the Sept. 11 attacks in 2001.

Tyler Durden Wed, 09/18/2019 - 10:35
Published:9/18/2019 9:47:09 AM
[Markets] Mark Hulbert: Here’s how retirees should plan for an imminent recession A recession doesn’t automatically lead to losses in your portfolio.
Published:9/18/2019 9:47:09 AM
[Markets] German Finance Minister Says Gov't Must Reject Facebook's Libra Coin German Finance Minister Says Gov't Must Reject Facebook's Libra Coin

Authored by Joeri Cant via CoinTelegraph.com,

German Finance Minister Olaf Scholz stated that policymakers cannot accept parallel currencies such as Facebook's proposed Libra stablecoin.

image courtesy of CoinTelegraph

Prevent stablecoins from becoming alternative currencies

As reported by Reuters, on Sept. 17, German Vice Chancellor and Finance Minister Olaf Scholz said during a panel discussion in Berlin that Facebook’s planned crypto coin Libra will be clearly rejected. He said:

“We cannot accept a parallel currency. [...] You have to reject that clearly.” 

According to a document seen by Reuters, German regulators are working closely with their European and international allies to make sure stablecoins will not become alternatives to traditional currencies. The document reportedly read:

“The Federal Government will work at European and international level to ensure that stablecoins will not become an alternative to official currencies”

The German government has spoken out against Facebook’s Libra project before. On Sept. 13, German parliamentarian Thomas Heilmann stated that the government will block projects like Libra, claiming that the authorities are not planning to allow any market-relevant private stablecoins, following in France’s footsteps.

Libra is no threat to the global financial system

Meanwhile, David Marcus, head of Calibra, was attempting to defuse Libra’s perceived threat to the global financial system yesterday.

Marcus pointed out during a meeting between Libra founders and 26 global central banks in Basel that Libra’s cryptocurrency project does not intend to form a new currency but rather build a “better payment network and system running on top of existing currencies” to deliver meaningful value to users over the globe. He emphasized that there is no new money creation, which will “strictly remain the province of sovereign Nations.”

Tyler Durden Wed, 09/18/2019 - 10:03
Tags
Published:9/18/2019 9:16:54 AM
[Markets] Gold on track for first loss in 3 sessions as traders await Fed policy decision Gold futures head lower on Wednesday, on track to post their first loss in three sessions, ahead of a Federal Reserve decision that could set near-term tone for bullion trading for the next several weeks.
Published:9/18/2019 9:16:54 AM
[Markets] Stock Market Slips Ahead Of Fed Decision; Adobe, FedEx, Roku Sell Off The major stock indexes were squarely lower ahead of the Fed's interest rate policy decision today. Roku sold off after Facebook launched a new product. Published:9/18/2019 9:16:54 AM
[Markets] Stocks open slightly lower ahead of Fed decision U.S. stocks edged slightly lower at the opening bell Wednesday, as investors awaited the conclusion of a Federal Reserve policy meeting that's expected to deliver another quarter-point rate cut. The Dow Jones Industrial Average was down 88 points, or 0.3%, to 27,023, while the S&P 500 lost 9 points, or 0.3%, to trade at 2,997. The Nasdaq Composite declined 19 points, or 0.2%, to 8,167. While the Fed is expected to cut rates when it concludes its meeting, investors will be watching for signs the Fed is ready to deliver further easing in coming months. Shares of FedEx Corp. dropped 12% following a disappointing fiscal first-quarter earnings report and full-year outlook. Published:9/18/2019 8:49:54 AM
[Markets] Trump taps State Dept.’s O’Brien to replace Bolton as national-security adviser Trump taps State Dept.’s O’Brien to replace Bolton as national-security adviser Published:9/18/2019 8:49:54 AM
[Markets] Trump Nominates Chief Hostage Negotiator To Be Next National Security Advisor Trump Nominates Chief Hostage Negotiator To Be Next National Security Advisor

President Trump has named his pick to succeed John Bolton as the next National Security Advisor amid burgeoning tensions with Iran over a weekend attack in Saudi Arabia.

In a Wednesday morning tweet, Trump said he planned to nominate Robert C. O'Brien, who currently serves as the special presidential envoy for hostage affairs at the State Department, the administration's top hostage negotiator, to become the next NSA.

According to the State Department's website, O'Brien has served in multiple administrations, and even once worked closely with John Bolton after being named the US representative to the 60th session of the UN General Assembly by George W Bush.

Robert C. O'Brien

* * *

Read his full biography below:

Ambassador Robert C. O’Brien serves as the Special Presidential Envoy for Hostage Affairs at the U.S. Department of State. Working for Secretary Pompeo, O’Brien leads the U.S. Government’s diplomatic efforts on overseas hostage-related matters. He works closely with the families of American hostages and advises the senior leadership of the U.S. Government on hostage issues. O’Brien also coordinates with the interagency Hostage Recovery Fusion Cell on the development and implementation of U.S. hostage recovery policy and strategy.

O’Brien previously served as Co-Chairman of the U.S. Department of State Public-Private Partnership for Justice Reform in Afghanistan under both Secretaries Rice and Clinton. The PPJRA promoted the rule of law by training Afghan judges, prosecutors and defense lawyers and provided scholarships for young Afghan lawyers to study in the U.S. From 2008 through 2011, O’Brien was a presidentially-appointed member of the U.S. Cultural Property Advisory Committee, which advises the federal government on issues relating to the trafficking of antiquities and other cultural items. In 2005, Mr. O’Brien was nominated by President George W. Bush and confirmed by the U.S. Senate to serve as a U.S. Representative to the 60th session of the United Nations General Assembly where he worked with Ambassador John Bolton. Earlier in his career, O’Brien served as a Senior Legal Officer for the UN Security Council commission that decided claims against Iraq arising out of the first Gulf War. O’Brien was a Major in the U.S. Army Reserve.

O’Brien is the co-founding partner of Larson O’Brien LLP in Los Angeles, a nationally recognized litigation firm. His law practice focuses on complex litigation and international arbitration. In addition to his client work, O’Brien has served as an arbitrator in over 20 international proceedings and he has been appointed by the federal courts to serve as a special master in numerous complex cases.

O’Brien is a graduate of the Boalt Hall School of Law at U.C. Berkeley. He received his B.A. degree in political science, cum laude, from UCLA. He is a member of the Pacific Council on International Policy.

* * *

Like Mitt Romney, whose campaign he worked on as an advisor, O'Brien is a mormon. And after he is confirmed, will be the highest ranking mormon in the Trump Administration.

O'Brien has been involved in many high-profile incidents during the Trump years, including, most recently, the negotiations with Sweden over the fate of rapper A$AP Rocky.

Back in 2017, O'Brien was reportedly considered to be Secretary of the Navy, but was instead nominated to his current position, and given the rank of ambassador one year later.

Tyler Durden Wed, 09/18/2019 - 09:44
Tags
Published:9/18/2019 8:49:54 AM
[Markets] U.S. stocks edge lower ahead of Fed interest-rate decision U.S. stock-index futures Wednesday morning were slightly lower ahead of a Federal Reserve decision that could help guide investor sentiment, amid liquidity issues this week in money markets and uncertainties in Middle East politics Published:9/18/2019 8:18:20 AM
[Markets] Mish Blasts NYT Kavanaugh Smear: "Editorial Mistake My Ass" Mish Blasts NYT Kavanaugh Smear: "Editorial Mistake My Ass"

Authored by Mike Shedlock via MishTalk,

As details emerge in the New York Times Kavanaugh scandal, it's very clear the NYT repeatedly made serious errors

Blatant Sleaze

On September 14, the New York Times resurrected unsubstantiated and graphic rumors about Supreme Court Justice Brett Kavanaugh in a purposeful smear article Brett Kavanaugh Fit In With the Privileged Kids. She Did Not.

The article was by disgraced NYT authors Robin Pogrebin and Kate Kelly to promote their upcoming book “The Education of Brett Kavanaugh: An Investigation.”

I do not normally report on sleaze but to understand what the NYT did, I have to.

Here is one controversial paragraph.

"We also uncovered a previously unreported story about Mr. Kavanaugh in his freshman year that echoes Ms. Ramirez’s allegation. A classmate, Max Stier, saw Mr. Kavanaugh with his pants down at a different drunken dorm party, where friends pushed his penis into the hand of a female student."

Coverup Whitewash

The NYT later added this correction.

"The book reports that the female student declined to be interviewed and friends say that she does not recall the incident. That information has been added to the article."

That's one hell of a correction don't you think?

Editing Error

Making matters worse for itself, The NYT came out and blamed it all on an "editing error".

Reporters Robin Pogrebin and Kate Kelly said in an interview on MSNBC that they wrote in the draft of their Sunday Review piece that a woman who Kavanaugh was said to have exposed himself to while a student at Yale had told others she had no recollection of the alleged incident.

Their editors, they say, removed the reference. “It was just sort of. . . in the haste of the editing process,” said Pogrebin.

The editor responsible for editing the Kavanaugh piece, Times Deputy Editorial Page Editor James Dao addressed select questions about the piece on a Times “Bulletin Board” posted on Monday and updated Tuesday. But he did not address why the information about the woman’s recollection was removed from the story.

Dao declined a POLITICO request for comment.

Half Bullshit

We certainly never intended to mislead in any way,” Pogrebin said in discussing the editor’s note on MSNBC.

“We wanted to give as full a story as possible.”

I know bullshit when I see it. The whole story is bullshit. On second thought, make that half bullshit (I will explain in a moment).

Since when do you post unsubstantiated sleaze of this nature when the people allegedly involved do not remember the incident?

Someone shoved a penis in my face and I don't remember.

Really?

Here's the believable part: “We wanted to give as full a story as possible.”

Robin Pogrebin and Kate Kelly want to sell books and sleaze sells.

Of course they wanted as "full a story as possible" and the more bullshit the better.

Bullshit Replicated

Entire Book Unravels

Zerohedge fills in the remaining pieces in his take As Kavanaugh Smear Unravels, Original Accuser's 'Witness' Now Doubts Story

As the left-wing smear against Supreme Court Justice Brett Kavanaugh continues to unravel amid a journalistic malpractice scandal at the New York Times, original Kavanaugh accuser Christine Blasey Ford's "lifelong friend" and alleged witness now doubts her story.

Keyser - who said she was pressured by Ford's ex-FBI buddy to lie and say that she didn't remember the party instead of saying that it never happened - originally said through her attorney that she "does not refute Dr. Ford's account," however "the simple and unchangeable truth is that she is unable to corroborate it because she has no recollection of the incident in question."

"I was told behind the scenes that certain things could spread about me if I didn't comply," Keyser told the Times journos - who felt it wasn't notable enough for their smear article.

Now, Keyser says she doesn't believe Ford's story at all

"We spoke multiple times to Keyser, who also said that she didn’t recall that get-together or others like it," wrote Pogrebin and Kelly in their new book, The Education of Brett Kavanaugh: An Investigation (yet another item that didn't make it into their inflammatory Times article). "In fact, she challenged Ford’s accuracy."

Editors Should Be Fired

At a minimum, the editors responsible should be fired. They are corrupt, incompetent, or both.

Anyone at the NYT defending the editors should also be fired.

NYT Pours On the Bullshit

NYT opinion columnist Jamelle Bouie says Mad About Kavanaugh and Gorsuch? The Best Way to Get Even Is to Pack the Court.

So what should Democrats do? They should play hardball back. Congress, according to the Judiciary Act of 1789, decides the number of judges. It’s been 150 years since it changed the size of the Supreme Court. I think it’s time to revisit the issue. Should Democrats win that trifecta, they should expand and yes, pack, the Supreme Court. Add two additional seats to account for the extraordinary circumstances surrounding the Gorsuch and Kavanaugh nominations.

To post that article in the wake of blatant errors adds fat to the fire.

It's also asinine.

The fact of the matter is Republicans control the Senate and Trump gets to make the nominees.

Even assuming that changes, all it would do is encourage Republicans to counter the next time they are in charge.

Nonpolitical Court

The court is supposed to be nonpolitical.

In that regard, Trump made two excellent choices. He could easily have appointed two far-right choices but didn't.

Excellent Choices

Some of my own readers incorrectly accused me of TDS (Trump Derangement Syndrome).

The notion is absurd. I am a free market, anti-war Libertarian.

When Trump strays from either, I criticize.

Here, Trump is correct.

Trump Tweets

Instead of admitting how stupid they were, Democrat presidential nominees want a Kavanaugh impeachment.

The people in charge of this fiasco at the NYT should be fired.

Tyler Durden Wed, 09/18/2019 - 09:00
Tags
Published:9/18/2019 8:18:20 AM
[Markets] MoviePass is shutting down — here’s how the remaining movie-ticket subscription plans compare Cinema buffs still have options, from Cinemark’s $8.99 plan to AMC’s $23.95 subscription.
Published:9/18/2019 8:18:20 AM
[Markets] FedEx's stock tumbles as Wall Street analysts cut ratings, targets after disappointing Q1 report Shares of FedEx Corp. tumbled 11% in premarket trading Wednesday, as a number of Wall Street analysts backed away from their bullish views in the wake of a disappointing fiscal first-quarter report and full-year outlook. Of the 27 analysts surveyed by FactSet, no less than four analysts downgraded FedEx and 10 analysts have cut their price targets. While the average rating remains overweight, the average price target was lowered to $171.23 from $180.52 as of the end of August. Analyst David Ross at Stifel Nicolaus downgraded the package delivery company to hold, after being at buy since March 2018, and cut his price target to $171 from $185. Ross said the expects the stock to continue to underperform over the next few quarters as the global economy is unlikely to rebound in 2020. KeyBanc Capital's Todd Fowler cut his rating to sector weight, after being at overweight for at least the past two years, citing a softer international outlook, a downbeat outlook on FedEx Ground margins and concerns over the need of increased near-term business investment. FedEx's stock has gained 7.4% year to date through Tuesday, while shares of rival United Parcel Service Inc. have climbed 25.5%, the Dow Jones Transportation Average has rallied 16.7% and the Dow Jones Industrial Average has advanced 16.2%. Published:9/18/2019 7:49:35 AM
[Markets] N.Y. Fed injects liquidity into U.S. banking system for second straight day N.Y. Fed injects liquidity into U.S. banking system for second straight day Published:9/18/2019 7:49:35 AM
[Markets] Liquidity Shortage Getting Worse: Fed's Repo Oversubscribed As Funding Demand Soars 50% Overnight Liquidity Shortage Getting Worse: Fed's Repo Oversubscribed As Funding Demand Soars 50% Overnight

20 minutes after today's repo operation began, it concluded and there was some bad news in it: as we feared, yesterday's take up of the Fed's repo operation which peaked at $53.2 billion has expanded substantially, and according to the Fed, today there was a whopping $80.05BN in bids submitted, and increase of $27 billion, or 50% more than yesterday.

It also meant that since the operation - which is capped at $75BN - was oversubscribed by over $5BN, that there were participants who did not get the last-minute liquidity they needed, and that the Fed will see demands to either expand the size of its operations, or implement a fixed operation and/or transition to permanent open market operations, i.e. QE

By comparison this is what yesterday's repo operation looked like:

What is immediately notable is that except for agency paper, there was a greater use of both Treasury ($40.9BN to $51.6BN) and Mortgage-backed ($11.7BN to $27.8BN) collateral. The only silver lining: the step out rate on agency paper dropped from 3.00% to 2.1% however with virtually nobody using that, it is a largely meaningless easing in terms.

Finally, the worst news is that immediately after the operation, overnight repo remained elevated, with Reuters reporting the rate was 2.25%-2.60% after the latest repo operation, confirming that the liquidity shortage continues with the high end of repo still far above fed funds.

* * *

Yesterday's Fed repo operation - the first direct liquidity injection in a decade - was an unmitigated disaster, with the NY Fed forced to cancel it in the middle due to "technical difficulties" which nobody still know what they were, only to resume it moments later. All we can say is that today the Fed better not fuck this up again, especially with New York Fed President John Williams, senior vice president of market operations Lorie Logan and first vice president Michael Strine all expected to be in Washington for the Fed's two-day central bank meeting.

In any case, moments ago the NY Fed announced that, as expected, today's repo operation started at 8:14am as expected, with the repo rate trading quite elevated around 2.80% and the SOFR trading bizarrely above 5%

  • Overnight U.S. Funding Rate at 2.8%, Elevated for a Third Day
  • *SECURED OVERNIGHT FINANCING RATE JUMPS TO 5.25%

With such mindboggling volatility, SOFR will certainly make a "great" LIBOR replacement.

Check back here at 830am ET for the results; it will be interesting if the total uptake today is over yesterday's $53BN - that will suggest that the problem is getting worse, not better...

Tyler Durden Wed, 09/18/2019 - 08:45
Published:9/18/2019 7:49:35 AM
[Markets] U.K. consumer-level inflation rate lower than forecast U.K. consumer-level inflation rate lower than forecast Published:9/18/2019 7:16:19 AM
[Markets] Futures Movers: Oil adds to loss with Saudi output seen coming back online, rising U.S. supplies Oil futures are heading lower for a second day on Wednesday as crude-oil markets react to Saudi Arabia’s report that it will fully restore some 5.7 million-barrels-a-day of crude output by month end after last weekend’s attacks.
Published:9/18/2019 7:16:19 AM
[Markets] Caution: Mean Reversion Ahead Caution: Mean Reversion Ahead

Authored by by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

If you watch CNBC long enough, you are bound to hear an investment professional urging viewers to buy stocks simply because of low yields in the bond markets. While the advice may seem logical given historically low yields in the U.S. and negative yields abroad, most of these professionals fail to provide viewers with a mathematically grounded analysis of their expected returns for the equity markets.

Mean reversion is an extremely important financial concept and it is the “reversion” part that is so powerful.  The simple logic behind mean reversion is that market returns over long periods will fluctuate around their historical average. If you accept that a security or market tends to revolve around its mean or a trend line over time, then periods of above normal returns must be met with periods of below normal returns.

If the professionals on CNBC understood the power of mean reversion, they would likely be more enthusiastic about locking in a 2% bond yield for the next decade.

Expected Bond Returns

Expected return analysis is easy to calculate for bonds if one assumes a bond stays outstanding till its maturity (in other words it has no early redemption features such as a call option) and that the issuer can pay off the bond at maturity.

Let’s walk thought a simple example. Investor A and B each buy a two-year bond today priced at par with a 3% coupon and a yield to maturity of 3%. Investor A intends to hold the bond to maturity and is therefore guaranteed a 3% return. Investor B holds the bond for one year and decides to sell it because the bond’s yield fell and thus the bond’s price rose. In this case, investor B sold the bond to investor C at a price of 101. In doing so he earned a one year total return of 4%, consisting of a 3% coupon and 1% price return. Investor B’s outperformance versus the yield to maturity must be offset with investor C’s underperformance versus the yield to maturity of an equal amount. This is because investor C paid a 1% premium for the bond which must be deducted from his or her total return. In total, the aggregate performance of B and C must equal the original yield to maturity that investor A earned.

This example shows that periodic returns can exceed or fall short of the yield to maturity expected based on the price paid by each investor, but in sum all of the periodic returns will match the original yield to maturity to the penny. Replace the term yield to maturity with expected returns and you have a better understanding of mean reversion.   

Equity Expected Returns

Stocks, unlike bonds, do not feature a set of contractual cash flows, defined maturity, or a perfect method of calculating expected returns. However, the same logic that dictates varying periodic returns versus forecasted returns described above for bonds influences the return profile for equities as well.

The price of a stock is, in theory, based on a series of expected cash flows. These cash flows do not accrue directly to the shareholder, with the sole exception of dividends. Regardless, valuations for equities are based on determining the appropriate premium or discount that investors are willing to pay for a company’s theoretical future cash flows, which ultimately hinge on net earnings growth.

The earnings trend growth rate for U.S. equities has been remarkably consistent over time and well correlated to GDP growth. Because the basis for pricing stocks, earnings, is a relatively fixed constant, we can use trend analysis to understand when market returns have been over and under the long-term expected return rate.

The graph below does this for the S&P 500. The orange line is the real price (inflation adjusted) of the S&P 500, the dotted line is the polynomial trend line for the index, and the green and red bars show the difference between the index and the trend.

Data Courtesy Shiller/Bloomberg

The green and red bars point to a definitive pattern of over and under performance. Periods of outperformance in green are met with periods of underperformance in red in a highly cyclical pattern. Further, the red and green periods tend to mirror each other in terms of duration and performance. We use black arrows to compare how the duration of such periods and the amount of over/under performance are similar.  

If the current period of outperformance is once again offset with a period of underperformance, as we have seen over the last 80 years, than we should expect a ten year period of underperformance. If this mean reversion were to begin shortly, then expect the inflation adjusted S&P 500 to fall 600-700 points below the trend over the next ten years, meaning the real price of the S&P index could be anywhere from 1500-2300 depending on when the reversion occurs. 

We now do similar mean reversion analysis based on valuations. The graph below compares monthly periods of Cyclically Adjusted Price to Earnings (CAPE) versus the following ten-year real returns. The yellow bar represents where valuations have been over the last year.

Data Courtesy Shiller/Bloomberg

Currently CAPE is near 30, or close to double the average of the last 100 years. If returns over the next ten years revert back to historic norms, than based on the green dotted regression trend line, we should expect annual returns of -2% for each of the next ten years. In other words, the analysis suggests the S&P 500 could be around 2300 in 2029. We caution however, valuations can slip well below historical means, thus producing further losses.

John Hussman, of Hussman Funds, takes a similar but more analytically rigorous approach. Instead of using a scatter plot as we did above, he plots his profit margin adjusted CAPE alongside the following twelve-year returns. In the chart below, note how closely forward twelve-year returns track his adjusted CAPE. The red circle highlights Hussman’s expected twelve-year annualized return.

If we expect this strong correlation to continue, his analysis suggests that annual returns of about negative 2% should be expected for the next twelve years. Again, if you discount the index by 2% a year for twelve years, you produce an estimate similar to the prior two estimates formed by our own analysis.  

None of these methods are perfect, but the story they tell is eerily similar. If mean reversion occurs in price and valuations, our expectations should be for losses over the coming ten years.

Summary

As the saying goes, you can’t predict the future, but you can prepare for it. As investors, we can form expectations based on a number of factors and adjust our risk and investment thesis as we learn more.

Mean reversion promises a period of below average returns. Whether such an adjustment happens over a few months as occurred in 1987 or takes years, is debatable. It is also uncertain when that adjustment process will occur. What is not debatable is that those aware of this inevitability can be on the lookout for signs mean reversion is upon us and take appropriate action. The analysis above offers some substantial clues, as does the recent equity market return profile. In the 20 months from May 2016 to January 2018, the S&P 500 delivered annualized total returns of 21.9%. In the 20 months since January 2018, it has delivered annualized total returns of 5.5% with significantly higher volatility. That certainly does not inspire confidence in the outlook for equity market returns.

We remind you that a bond yielding 2% for the next ten years will produce a 40%+ outperformance versus a stock losing 2% for the next ten years. Low yields may be off-putting, but our expectations for returns should be greatly tempered given the outperformance of both bonds and stocks over the years past. Said differently, expect some lean years ahead.

Tyler Durden Wed, 09/18/2019 - 08:11
Published:9/18/2019 7:16:19 AM
[Markets] Blain: "Something Is Happening, And We Don’t Know What It Is" Blain: "Something Is Happening, And We Don’t Know What It Is"

Blain's Morning Porridge, submitted by Bill Blain

Why so Calm?

Even as the Fed meeting pondered raising rates by a smidge, it had to intervene to pump money into the short-term US financial system for the first time since the 2008 crisis.  That’s a clear sign of financial dislocation – but markets seem utterly unconcerned.  (The wires all quote issues such as tax payments and an imbalance between new funding and low redemptions to explain the sudden lack of cash, but none of my money market chums are convinced. They fear something else, a big No-See-Em is underway.) 

The last crisis started in money markets.  Add that to the ongoing WTF-happened questions about the Saudi bombings, and there seems to be a curious sense of false calm in markets.  No vol, no concern, and gold hardly moving.  I can’t help but think of ducks; serenely floating upstream while their legs are furiously paddling below the surface.  Something is happening, and we don’t know what it is.

Since I don’t know either, today is the day to take a pop at the Green Puritan movement: 

There is a great comment from Bill Gates in the FT - Fossil fuel divestment has “zero” climate impact, says Bill Gates.  Worth a read, and maybe get yourself thinking about what damage ESG/Green group-think nonsense is doing? Its distorting the global economy and voiding perfectly sane investment strategies. As regular readers will know, I absolutely believe Climate Change is The Big Threat – but I’m more and more convinced that much of the ESG / Green Investment bandwagon is utter bollchocks! 

We are not going to solve Climate Change by going back to the Stone Age.  It will require technological solutions.  Yet, a whole green investment industry of advisors, influencers, and whatever the financial equivalent of an Instragram is, have taken over the agenda.  They’ve become the market equivalent of whinny millennials, brutally offended by everything, but failing to realise how much they offend us and hold back solutions.  They are fleas looking to feast.  Every time I read some b*llsh*t about a wonderful and insightful Green Bond conference I reach for the barf bag.  The organisers are fleas biting into bigger fleas.

The Gates article hits it squarely.  Divesting from the oil majors will not change the world.  Changing the world will change the world – Doh!  And the best way to do that is to get everyone on the same side – understanding the problems and the costs of solving it.

Let me give you an example:  we all accept renewable energies are critical to replace fossil fuels pumping Co2 into the atmosphere.  It makes perfect sense to replace dirty coal fired power stations with sustainable solar, hydro and wind power (and I hope tidal soon). 

But building a new Wind Generator, or an array of solar cells, or the turbines for a hydro scheme, requires high-grade steel.  Steel is a wonderful material – you can recycle and reuse it. But you also need Carbon, from coking coal, to make it.  A typical off-shore wind generator requires 250 tonnes of Met Coal to make. It’s a 1.8 bln tonne per annum market, and it’s in increasingly short supply.  It’s known in the business as metallurgical coal – because that’s what its used for.  Met Coal is a high value, clean commodity – but can you fund it? 

Nope. 

That’s because most fund managers have got ESG and Green guidelines that start and end with Coal is evil.  They don’t want to propose it to investment committees as they might reject it for “reputational risk” reasons.  As a result its bundled alongside dirty coal and cannibalism as too difficult to fund – meaning any smart investor should be taking notes on the basis Met Coal investments are cheap and rewarding.  Making them attractive is a more difficult matter – but it has to happen.

And yes – I am working on such difficult deals. If your investment committee hasn’t already been taken over by the ESG pod-people or Green Puritans activists, and you want to make proper returns from real assets that are good for the planet – then give me a call…

Repeat the same exercise on anything that might be a wee bit polluting, environmentally challenging, squishes a few crested newts while saving the rest, and you rule out loads of perfectly good investments that are likely to be as environmentally sound as anything the Green lobby sticks a Green Finance label on. 

If the default scenario is don’t do it – then we are missing opportunities.  The right way to save the planet is to mitigate, solve, fund and finance things in such a way the environment is protected, the climate improved and things to solve the crisis get made.  I believe Greta Thunberg is absolutely on the right track. It’s not her I’m mocking… it’s the lack of bravery by investment managers to do right thing in the face of misguided and ill-informed environmental populism led by Green Puritans!

If you want a decent omelette – you need to crack a few eggs.    

Softbank going Flaccid?

Back on Planet reality…  I’m struggling to find the time to do more in-depth digging on Softbank, but I’m more and more convinced we’re looking at a massive negative feedback loop.  I won’t say its headed into a death-spiral.. (for that might get me a wrist-slapping), so I’ll let you draw your own conclusions.

What we do know is Softbank’s strategy of investing in disruptive tech to bring them to IPO is  creaking.  The plan looked brilliant – hype up disruptive tech opportunities and rewards, ignore the lack of profitability, talk up their own expertise to spot and fund opportunities, then pile millions into start-ups and reap billions from the ones it could quickly bring to market.  It worked as long as hype preceded reality.  Reality caught up as it became clear disruptive technologies are only unicorns if they work, are uniquely monopolistic and catch money.  The ride-hailing market is awash with competitors.  Streaming is something everyone wants a piece of.

The critical point is Softbank valued WeWork at nearly $50 bln a few weeks ago.  Or think about it this way.  Softbank pumped $100 bln into Tech Start Ups, creating its own market in its own holdings.  What are they really worth?

Uber was a wake up moment.  The embarrassment of the We-Work failed IPO demonstrates how far off kilter they now are.  As a strategy, Tech Disruptive Hype has had its time.  Sure, there are more Unicorns that will likely become multi-billion businesses to be snapped up, but how many has SoftBank got on its books?  How much less hyped will prices be?  How much less when you strip out Softbank and other Tech funds making their own prices on their own investments?

Softbank’s investors sound unhappy.  Backers of Vision Fund 2 are pulling out.  It’s clear the Saudi SWF Public Investment Fund and Abu Dhabi’s Mubadala are not best pleased. They invested $60bln into the $100bln fund.  How much have they made?  And will firms like Apple really want to put money into Vision 2 as the model creaks from the We-Work catastrophe?  

Next couple of weeks are going to be very interesting.  I’ll stick to my earlier thesis WeWork would be the IPO to break the Tech craze, but now I think it could bring down Softbank as well..

Tyler Durden Wed, 09/18/2019 - 07:26
Published:9/18/2019 6:46:03 AM
[Markets] IPO Report: 5 things to know about J. Crew spinoff Madewell and its upcoming IPO Madewell, the denim specialist in the J.Crew portfolio, has filed to go public, an expected part of the parent company’s reorganization.
Published:9/18/2019 6:46:02 AM
[Markets] Need to Know: Schwab’s Sonders warns of inflation and interest-rate complacency Need to Know: Schwab’s Sonders warns of inflation and interest-rate complacency Published:9/18/2019 6:46:02 AM
[Markets] Market Extra: How a cash shortage forced the Fed to stem a surge in rates in a vital area on Wall Street funding The rise in short-term borrowing costs such as repurchasing rates have drawn questions over the lack of liquidity in Wall Street’s plumbing.
Published:9/18/2019 5:45:14 AM
[Markets] New York Becomes 2nd State To Ban Flavored E-Cigarettes As 'Vaping Illness' Claims 7th Life New York Becomes 2nd State To Ban Flavored E-Cigarettes As 'Vaping Illness' Claims 7th Life

New York State has joined Michigan and become the second state to ban sales of most flavored e-cigarettes, CNN reports.

Just as the mysterious 'vaping illness' - which has been tied to black-market sales of marijuana vaping products - claimed its seventh life, New York Gov. Andrew Cuomo delivered an executive action to ban sales of flavored vape products that was upheld by state health officials in a late Tuesday vote.

The ban will initially stand for 90 days, but it can be renewed or extended.

Andrew Cuomo

The only two flavors that people will be able to buy are tobacco and menthol.

State Health Commissioner Dr. Howard Zucker said during the emergency meeting that officials would take a closer look at menthol to determine whether that should be banned as well.

Banning flavored products is aimed at reducing the number of teenagers and children who vape.

Zucker presented data to the state's Public Health and Health Planning Council showing that New York state high school students' use of tobacco products increased 160% from 2014 to 2018.

Meanwhile, across New York State, there have been 74 confirmed cases of people with fast-developing pneumonia, who developed symptoms after using black-market vaping products.

Of course, the vote at the planning council was hotly debated, with vape shop owners arguing that flavored products accounted for most of their sales, and that the ban would be devastating for their businesses. Others testified that the flavored products helped them quit smoking.

The state is also planning to slap a 20% tax on vaping products, Zucker said.

Cuomo's ban follows the Trump administration's new enforcement policy, which will require vaping companies to take all of their flavored products off the market.

Tyler Durden Wed, 09/18/2019 - 06:30
Published:9/18/2019 5:45:14 AM
[Markets] Saudi Arabia Says It Has "Material Evidence" Tying Iran To Aramco Attack Saudi Arabia Says It Has "Material Evidence" Tying Iran To Aramco Attack

Saudi Arabia revealed yesterday that, contrary to its initial estimates, Aramco should be able to restore oil production to 100% capacity by the end of the month. And on Wednesday morning, the kingdom's Defense Ministry said it was planning a press conference to present "material evidence" purportedly linking Tehran to the unprecedented attack on the Kingdom's oil infrastructure.

The country's defense ministry will hold a news conference later in the day laying out new evidence. This follows reports from the US claiming that the roughly 20 missiles and drones used in the attack had been traced back to a 'launch site' in southern Iran.

Tehran has denied involvement in the Sept. 14 attacks, while the Houthi rebels in nearby Yemen have claimed credit. But Washington and Riyadh have adamantly blamed Iran, whom they have blamed for several 'attacks' in the region since the start of the year. 

Of course, this attack would represent a serious escalation from the tanker bombings and the downing of an American drone. Some have speculated that Tehran has nothing to gain from attacks like this, which only serves to provoke the West and Saudi Arabia. The Houthis have carried out several attacks within Saudi Arabia, including the bombing of an airport earlier this year, but experts say the precision of the attack on Aramco's Abqaiq plant was far more sophisticated than anything the armed movement has ever pulled off. Experts said cruise missiles were likely used to target critical components of the oil complex.

Secretary of State Mike Pompeo and several senior US officials are heading to Saudi Arabia on Wednesday, as are several UN experts responsible for monitoring sanctions on Iran and Yemen, and another team of investigators that will report to the Security Council, according to Reuters.

The Defense Ministry's news conference will begin Wednesday at 10:30 am ET.

The Saudi Defense Ministry said it will hold a news conference on Wednesday at 1430 GMT to present "material evidence and Iranian weapons proving the Iranian regime’s involvement in the terrorist attack." Riyadh has already said preliminary results showed the attack did not come from Yemen.

The Iranian leadership infamously threatened that if they couldn't export crude oil, "no one would" shortly after Washington ended waivers for countries reliant on Iranian oil. The Iranian leadership has ruled out meeting with President Trump, arguing that this would only validate the administration's strategy of maximum pressure.

Other countries, including Japan, have said they haven't seen any intelligence linking the attacks to Iran. But that hasn't deterred one senior US official from asking the UN Security Council to respond.

Several senior officials in the Trump Administration assured Reuters that the Saudi investigation would yield "compelling forensic evidence" showing the location of the attack's origins.

Trump said Monday that there was "no rush" to retaliate, and that the US was working closely with Gulf states and its European allies. But the US and Saudi Arabia are pushing Iran to stop providing financial assistance to groups like the Houthis, who retain control of most of the territory in Yemen, despite years of fighting with supporters of the ousted government, which has Saudi Arabia's backing.

Tyler Durden Wed, 09/18/2019 - 06:03
Published:9/18/2019 5:16:03 AM
[Markets] This state is home to nearly half of all people living on the streets in the U.S. The Trump administration proposed multiple solutions to the homelessness crisis, including deregulation and policing.
Published:9/18/2019 5:16:03 AM
[Markets] London Markets: British pound under pressure on softer-than-forecast inflation data The British pound came under pressure Wednesday as inflation data grew softer than forecast in August.
Published:9/18/2019 4:47:18 AM
[Markets] Dow Futures Drift Lower, Global Markets Cautious Ahead of Fed Rate Decision Global stocks traded cautiously Wednesday, with investors focused on both the U.S. Federal Reserve's September rate decision later today in Washington and the impact of last weekend's attacks on two key Saudi oil facilities on world crude markets. Published:9/18/2019 4:16:14 AM
[Markets] EU's Growing Trade Deficit With China Bodes Poorly For The Future EU's Growing Trade Deficit With China Bodes Poorly For The Future

Via Bruce Wilds' Advancing Time blog,

While we read a great deal about the huge trade deficit America runs with China it is important to understand we are not the only one. Other countries also have this problem.

Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.

Europe Runs A Solid Trade Deficit With China (click to enlarge)

Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.

The Items These Countries Trade (click to enlarge)

This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.

Simply put, the EU and the companies that call it home lag in both innovation and technology. The most innovative companies based on the number of patents they received in 2017 were IBM, Samsung Electronics, Canon, Intel, LG, Qualcomm, Google, and Microsoft, in that order. Note how European companies are absent from this list. Adding to their lack of industrial leadership is the matter of over-regulation that stifles EU companies from moving forward. When it comes to low-cost production they are also beaten by China and other Asian countries. This has caused Brussels to join Washington in complaining that China wants free trade but does not play fair.

The auto industry is just one example of the EU losing its ability to compete. A recent article titled, "European Carmakers Face Perfect Storm" delves into how European carmakers are facing what could turn out to be a major crisis. It is being created by EU regulators which are driving automakers to cut emissions at great cost. The EU has been enforcing emission caps on cars but beginning next year they will be reduced further to 95 grams of CO per km. This means a slew of electric vehicles will be rolled out but there are no guarantees that people will want to buy those cars. These cars will be much more expensive to build, estimates are each one will cost over $10,000 more to produce, so just because many people claim they are a greener alternative does not guarantee a market for them.

Click Here To View C919 Article

In future years the EU is expected to continue slipping further behind in many areas. Politico reports that Washington is preparing to announce tariffs on billions of goods from the European Union.  This follows a decision by the WTO which has just ruled in favor of the US in a case against Airbus. This ends a multi-year transatlantic dispute between the world's two largest aircraft manufacturers over whether Airbus had benefited from illegal state subsidies. Unfortunately, for both America and the EU the Chinese state-owned aviation manufacturer Commercial Aircraft Corp of China (COMAC), has been busy developing the C919, which is seen as China's answer to the Boeing 737 and Airbus 320.

The C-919 hits right at the core market of both companies. COMAC is yet to release the price tag of the jet, but a report by China National Radio predicted that it would likely to be sold for around $43 million. This is much cheaper than a Boeing 737 or an Airbus 320 which each cost around $80 million $100 million respectively. It does not take a rocket scientist to calculate how rapidly China can ramp up production.

This is just the sort of thing that dooms the EU into an unwinnable position. The EU will be hard hit if America is successful in trimming its existing deficit with the region while its deficit with China widens.

Tyler Durden Wed, 09/18/2019 - 05:00
Published:9/18/2019 4:16:14 AM
[Markets] Outside the Box: Stock market’s eerie parallels to September 2007 should raise recession fears Fed watchers may have just witnessed Powell’s ‘Bernanke moment,’ writes Sven Henrich.
Published:9/18/2019 4:16:14 AM
[Markets] Brexit: The Endgame? Brexit: The Endgame?

With parliament suspended and the UK's EU withdrawal process in enforced stasis, the next major stop on the Brexit road map is the EU summit in Brussels on 17 and 18 October. As we have become accustomed, no one knows what will happen now.

This flowchart though, based on analysis by The Independent's John Rentoul, runs through the most likely scenarios, starting first with the question of whether the meeting bears fruit in the form of a new Brexit deal.

As Statista's Martin Armstrong explains, the quickest, but let's face it, most unlikely outcome, would be a new deal which gets approved by parliament, leading to the UK leaving the EU on the current Article 50 deadline of 31 October.

Going further down the Brexit rabbit hole, we could also see Boris Johnson refusing to request an extension and resigning, the Queen appointing Jeremy Corbyn to sort the mess out, only for a vote of no confidence motion to pass, placing the Father of the House, Ken Clarke, in temporary charge, leading to an Article 50 extension, a general election, and a possible second referendum in 2020.

Take a deep breath...

Infographic: Brexit: Endgame? | Statista

You will find more infographics at Statista

Tyler Durden Wed, 09/18/2019 - 04:15
Tags
Published:9/18/2019 3:46:17 AM
[Markets] U.K. CPI slows more than forecast in August U.K. CPI slows more than forecast in August Published:9/18/2019 3:46:17 AM
[Markets] Erdogan Wants To Create 'Refugee City' After Threatening To Flood Europe With 1M Syrians Erdogan Wants To Create 'Refugee City' After Threatening To Flood Europe With 1M Syrians

Via AlmasdarNews.com,

Turkish President Recep Tayyip Erdogan announced after the first meeting at the Ankara peace talks that his country will not allow terrorists to appear in the area created on the border with Syria; instead, he has proposed to turn it into a refugee city.

“For the refugees there (on the Syrian border), it is necessary to create a city for them to participate in agriculture. I explained to my colleagues that it is necessary to build infrastructure for them,” Erdogan said.

Syrian refugees in Turkey. Image source: The New York Times

"It is necessary to prevent the formation of a terrorist corridor,” the Turkish president said after talks with Russian President Vladimir Putin and Iranian President Hassan Rouhani in Ankara on Monday.

The Turkish capital Ankara on Monday hosted the tripartite summit of the guarantors of the Astana process (Russia, Turkey and Iran) on the Syrian settlement.

During the meeting on Monday, the three presidents agreed to establish a constitutional committee to resolve future political disputes.

Furthermore, the three presidents discussed the future of the Idlib Governorate, but no official agreement was made to resolve their differences.

* * *

Syrian refugees in a Turkish camp. Image source: AP

Erdogan's "refugee city" idea comes after earlier this month he issued a 'with us or against us' ultimatum to the world, promising that if he couldn't have his Syria 'safe zone' (read: land grab to ethnically cleanse Syrian Kurds), he would flood Europe with one million refugees in response: 

You either support us to have a safe zone in Syria, or we will have to open the gates. Either you support us or no one should feel sorry. We would like to host 1 million refugees in the safe zone,” he said at the time

It remains unclear, however, whether the so-called refugee city would be on Turkish soil or "newly acquired" Syrian territory occupied by the Turkish Army. Mostly likely in Erdogan's mind it would be the former. 

Tyler Durden Wed, 09/18/2019 - 03:30
Published:9/18/2019 2:44:55 AM
[Markets] EU car sales drop in August New car sales in the European Union fell in August with the bloc’s five major markets recording decreases, according to data published on Wednesday.
Published:9/18/2019 1:49:39 AM
[Markets] Russia Will Be The First To Deploy Hypersonic Missiles On Submarines Russia Will Be The First To Deploy Hypersonic Missiles On Submarines

As far as hypersonic development, the Russian Navy is far outpacing the US Navy. Russia is expected to be the first country to deploy hypersonic cruise missiles on submarines, reported Forbes

Earlier this year Russian sources told Forbes that submarine-launched hypersonic missile tests would be conducted in 2020.

The missile in focus is called 3M22 Zircon, a scramjet-powered maneuvering anti-ship hypersonic cruise missile that will be launched from the latest nuclear-powered cruise missile submarine called the K-561 Kazan. 

Zircon is a winged hypersonic cruise missile that can travel at Mach 8 to Mach 9 (6,090 to 6,851 mph). The missile's range is estimated at 620 miles, can already be launched from aircraft, ships, ground-based launch systems, and soon to be submarines. 

Forbes said the Russian Navy is going through an unprecedented transformation, ever since it started launching cruise missiles from submarines into Syria. Before that, Russia developed its cruise missiles, fired from submarines, for anti-ship operations. 

"For much of the Cold War, the missiles carried by Russian submarines were focused on hitting ships at sea, particularly the US Navy's formidable aircraft carriers. It was not until the conflict in Syria that Russia began using submarine launched cruise missiles in a similar way to the US Navy's Tomahawk missile; as a long-range surgical strike weapon." 

The Tomahawk Land Attack Missile is primarily launched from submarines and ships by the US Navy and Royal Navy. It flies at Mach 0.75 (575 mph) with a range 1,550 miles. 

Russia's new missile is so advanced that upon it being deployed by submarines, it would create a significant power shift away from the US Navy. The shift in power would add a new layer of deterrence for Russia that would have the US Navy very concerned, that is because the US Navy doesn't have any countermeasures against hypersonic weapons. 

A submarine-launched missile test of the Zircon could pave the way for deployment in the near term. 

Forbes said by 2030 Russia could have at least eight submarines armed with Zircon missiles, and 17 by 2040. 

And in a bizarre report earlier this month, President Vladimir Putin revealed he was ready to sell the US some of Russia's hypersonic missiles, if President Trump was willing to return to serious strategic arms talks after the US-backed out of the Intermediate-Range Nuclear Forces Treaty (INF). 

Last year Russia's defense ministry touted a range of experimental weapons it said could counter and evade any US anti-aircraft defense measures, including a nuclear-powered missile that could traverse the globe endlessly. 

For a glimpse of a land-based launch of a Russian hypersonic missile, Russia-24 published a video from the Ministry of Defence of the Russian Federation that shows a successful launch of a new hypersonic interceptor missile.

So the question we ask: Is Russia winning the hypersonic development race?

Tyler Durden Wed, 09/18/2019 - 02:45
Tags
Published:9/18/2019 1:49:39 AM
[Markets] Will The Bank Of England Join The Loose-Money Bandwagon? Will The Bank Of England Join The Loose-Money Bandwagon?

Authored by Ben Lord via BondVigilantes.com,

As the year of the 325th anniversary of the Bank of England’s foundation, and as the month of one of the Bank’s more important rate-setting decisions since 2008, September provides a congruous occasion on which to reflect on the history of the BoE and consider what the future holds for it. Founded in 1694 as a private bank to the government, it was in 1998 that the BoE was granted independence from the government in setting monetary policy.

Now the UK faces perhaps its greatest political uncertainty in a generation, it is worth asking the question: to what extent will this independence continue?

We have already seen the effect of populist leaders on central banks that are ostensibly independent. The obvious case is that of the US, but there are other examples to be found of central banks facing political pressure to keep monetary policy easy, from Turkish President Erdogan’s sacking of the then central bank governor, to the ECB’s reaction to persistently low growth in Europe. Even if Trump doesn’t control the Fed directly, he certainly controls the market, which in turn has forced the hand of the central bank and led to the Fed cutting rates with the economy in expansion. And with ever more monetary sweets to choose from in the jar, which politician could resist raiding the cupboard and giving their economy a sugar high of rate cuts, QE and lending?

Pressure on the Fed is likely only to increase as the 2020 elections approach: if President Trump is able to engineer further cuts, and then get the markets soaring with a trade deal and promises of tax cuts just in time for elections, we might begin to agree he is – in his words – “a very stable genius”.

For now the UK seems to have escaped the global disinflation which started in Japan and is now being seen in Europe. That fits the BoE’s line, which is that they plan to hike rates, irrespective of the outcome of Brexit. Mark Carney has even warned investors that they are underestimating how much interest rates could rise. Does the market believe him? It’s certainly not our base case: the strategy of hawkish language to prep the market for rate hikes evidently didn’t work for Jerome Powell. If the UK does leave the European Union on 31st October without a deal, UK growth is likely to suffer – if the BoE’s goal is financial stability, it would be hard to justify a rate hold, let alone hike. So far the BoE’s forecasts are based on the assumption of an orderly Brexit, but they have made no public change to this in light of the ever-growing likelihood of a hard exit.

Some investors argue that a lower sterling (inevitable in the event of a ‘no deal’ Brexit, and also likely if the BoE engages in quantitative easing) would lead to considerable imported inflation due to increased export demand. This would justify a hawkish policy response. Here, however, a direct parallel may be drawn with that which we have witnessed in the US this year. The data in the US (strong wages, low unemployment, a solid consumer) may well justify a continued hiking cycle, but with a nervous market which has been placated by the promise of monetary easing, would a rate hike really help economic stability? The Fed evidently asked themselves this question and didn’t think so. Unlike in the US, rate cuts are not priced in by the UK market so far: currently, the implied probability of no change at the next MPC meeting is close to 100%, while in the US the implied probability of another cut in September’s FOMC meeting is close to 100%. But in the event of a ‘no deal’ Brexit in a month’s time, market expectations going forward may well be very different.

There are other uncertainties which will follow Brexit. Many now expect a general election to take place shortly after 31st October. Would a Corbyn-led government follow a similar nationalization of governmental institutions as of infrastructure? It would certainly increase fiscal spend, leading to considerable debt issuance and downward pressure on gilt prices from increased supply. And given that higher interest rates promote the interests of asset-owners/lenders over borrowers, it is likely that such a government would seek to lower the cost of borrowing in any way possible.

And which rate should be thought of as “neutral” anyway? The 2% CPI target which the BoE follows has been changed in the past. In a post-Brexit world of potentially dampened growth prospects, it may be that this already fairly arbitrary number faces pressure. With low inflation and growth around the world, we would argue that it is fiscal policy which should concern itself with growth, and monetary with inflation.

For now the Bank of England continues to plough its lone furrow of hawkishness. But as the clock ticks down to 31st October and a hard Brexit seems ever more likely, it may be hard for the new BoE governor to avoid joining the loose money bandwagon.

Tyler Durden Wed, 09/18/2019 - 02:00
Published:9/18/2019 1:18:43 AM
[Markets] Democratic Donor And 'Dangerous Sexual Predator' Ed Buck Arrested After Third Man Overdoses In LA Apartment Democratic Donor And 'Dangerous Sexual Predator' Ed Buck Arrested After Third Man Overdoses In LA Apartment

Democratic political activist and noted donor Ed Buck was arrested Tuesday night at his West Hollywood apartment where two men died of meth overdoses and a third, 37-year-old man, overdosed last week. The arrest came hours after President Trump was in the area for a fundraising blitz

Ed Buck and current House Intelligence Committee Chairman Rep. Adam Schiff (D-CA)

Buck has been charged with one felony count each of battery causing serious injury, administering methamphetamine and maintaining a drug house

Prosecutors have accused Buck of injecting the latest victim with two large doses of methamphetamine at his apartment on September 11, causing the man to overdose according to the indictment. After Buck refused to help the man and thwarted his attempts to get help, the man was able to flee the apartment and call 911 from a nearby gas station from which he was taken to a local hospital for treatment. 

Notably, the Daily Mail documented a young black man with a bandage on his arm visiting Buck's apartment on September 11. 

Hundreds of photographs of men in compromising positions were found in Buck's apartment according to court records. 

Screenshots of Damar Love (friend of Gemmel Moore)and Ed Buck allegedly at Buck's home., summer of 2017 via Weho Times

and have characterized him as a "violent, dangerous sexual predator," who uses drugs, money and shelter to lure black men struggling with addiction and homelessness into his home where he "manipulates them into participating in his sexual fetishes," according to KTLA. Accordingly, his bail has been requested at $4 million by prosecutors, who argued that he is a threat to the community. 

In a photo obtained by DailyMail.com, Buck smokes meth with a painfully thin, drug-addicted homeless young black man in his apartment - a partner he had found on the street and offered $300 to carry out his bizarre 'fetish' requests. Buck ordered the man to wear dirty white long johns and black leather 'f***ing boots'

The 65-year-old gay rights activist was notably given a pass after the first two men died in his apartment in what were ruled accidents. 

The first man, 26-year-old Gemmel Moore, died on July 27, 2017. Prosecutors cited insufficient evidence in declining to press charges against Buck in connection with Moore’s death, which was ruled an accidental methamphetamine overdose.

A second man, 55-year-old Timothy Dean, died of methamphetamine and alcohol toxicity on Jan. 7. Dean’s autopsy report said he died at least 15 minutes before anyone called 911. That death was also ruled accidental. -KTLA

"The full scope of his consistent malicious behavior is unknown," said prosecutors, adding "It is only a matter of time before another one of these vulnerable young men dies of an overdose."

Read more on Buck's alleged behavior here.

Buck has been a prominent figure in Democratic circles, associating with and donating to the likes of Democrats Ted Lieu, the Clintons, Adam Schiff and former California Governor Jerry Brown.

Los Angeles Mayor Eric Garcetti, Deputy Mayor Szabo and Ed Buck

If convicted, Buck faces a maximum possible sentence of five years and eight months in state prison according to KTLA.  

Tyler Durden Wed, 09/18/2019 - 01:23
Tags
Published:9/18/2019 12:51:25 AM
[Markets] Explainer: Five ways the Fed's expected rate cut could affect consumers The Fed is expected to cut its benchmark rate by one quarter of a percentage point to a range of 1.75% to 2%, the second rate reduction this year. Broader impacts of the Fed's decision to stop raising rates and start cutting them this year are already being felt across the economy. Investors anticipated that the Fed would cut further, lowering yields on bonds, and reducing mortgage rates. Published:9/17/2019 11:47:52 PM
[Markets] The Magnitskiy Myth Exploded The Magnitskiy Myth Exploded

Authored by Craig Murray,

The conscientious judges of the European Court of Human Rights published a judgement a fortnight ago which utterly exploded the version of events promulgated by Western governments and media in the case of the late Mr Magnitskiy.

Yet I can find no truthful report of the judgement in the mainstream media at all.

The myth is that Magnitskiy was an honest rights campaigner and accountant who discovered corruption by Russian officials and threatened to expose it, and was consequently imprisoned on false charges and then tortured and killed. A campaign over his death was led by his former business partner, hedge fund manager Bill Browder, who wanted massive compensation for Russian assets allegedly swindled from their venture. The campaign led to the passing of the Magnitskiy Act in the United States, providing powers for sanctioning individuals responsible for human rights abuses, and also led to matching sanctions being developed by the EU.

However the European Court of Human Rights has found, in judging a case brought against Russia by the Magnitskiy family, that the very essence of this story is untrue.

They find that there was credible evidence that Magnitskiy was indeed engaged in tax fraud, in conspiracy with Browder, and he was rightfully charged. The ECHR also found there was credible evidence that Magnitskiy was indeed a flight risk so he was rightfully detained. And most crucially of all, they find that there was credible evidence of tax fraud by Magnitskiy and action by the authorities “years” before he started to make counter-accusations of corruption against officials investigating his case.

This judgement utterly explodes the accepted narrative, and does it very succinctly:

The applicants argued that Mr Magnitskiy’s arrest had not been based on a reasonable suspicion of a
crime and that the authorities had lacked impartiality as they had actually wanted to force him to
retract his allegations of corruption by State officials. The Government argued that there had been
ample evidence of tax evasion and that Mr Magnitskiy had been a flight risk.

The Court reiterated the general principles on arbitrary detention, which could arise if the
authorities had complied with the letter of the law but had acted with bad faith or deception. It
found no such elements in this case: the enquiry into alleged tax evasion which had led to
Mr Magnitskiy’s arrest had begun long before he had complained of fraud by officials.
The decision
to arrest him had only been made after investigators had learned that he had previously applied for
a UK visa, had booked tickets to Kyiv, and had not been residing at his registered address.

Furthermore, the evidence against him, including witness testimony, had been enough to satisfy an
objective observer that he might have committed the offence in question
. The list of reasons given
by the domestic court to justify his subsequent detention had been specific and sufficiently detailed.

The Court thus rejected the applicants’ complaint about Mr Magnitskiy’s arrest and subsequent
detention as being manifestly ill-founded.

“Manifestly ill founded”.

The mainstream media ran reams of reporting about the Magnitskiy case at the time of the passing of the Magnitskiy Act. I am offering a bottle of Lagavulin to anybody who can find me an honest and fair MSM report of this judgement reflecting that the whole story was built on lies.

Magnitskiy did not uncover corruption then get arrested on false charges of tax evasion. He was arrested on credible charges of tax evasion, and subsequently started alleging corruption. That does not mean his accusations were unfounded. It does however cast his arrest in a very different light.

Where the Court did find in favour of Magnitskiy’s family is that he had been deprived of sufficient medical attention and subject to brutality while in jail. I have no doubt this is true. Conditions in Russian jails are a disgrace, as is the entire Russian criminal justice system. There are few fair trials and conviction rates remain well over 90% – the judges assume that if you are being prosecuted, the state wants you locked up, and they comply. This is one of many areas where the Putin era will be seen in retrospect as lacking in meaningful and needed domestic reform. Sadly what happened to Magnitskiy on remand was not special mistreatment. It is what happens in Russian prisons. The Court also found subsequent Magnitskiy’s conviction for tax evasion was unsafe, but only on the (excellent) grounds that it was wrong to convict him posthumously.

The first use of the Magnitsky Act was to sanction those subject to Browder’s vendetta in his attempts to regain control of vast fortunes in Russian assets. But you may be surprised to hear I do not object to the legislation, which in principle is a good thing – although the chances of Western governments bringing sanctions to bear on the worst human rights abusers are of course minimal. Do not expect it to be used against Saudi Arabia, Bahrain or Israel any time soon.

*  *  *

Unlike his adversaries including the Integrity Initiative, the 77th Brigade, Bellingcat, the Atlantic Council and hundreds of other warmongering propaganda operations, Craig's blog has no source of state, corporate or institutional finance whatsoever. It runs entirely on voluntary subscriptions from its readers – many of whom do not necessarily agree with the every article, but welcome the alternative voice, insider information and debate. Subscriptions to keep Craig's blog going are gratefully received.

Tyler Durden Tue, 09/17/2019 - 23:45
Tags
Published:9/17/2019 11:21:03 PM
[Markets] Walmart unveils new rewards credit card, but there are reasons to tread carefully Here’s how the card, which was launched with Capital One, compares to Amazon’s card.
Published:9/17/2019 11:21:03 PM
[Markets] Photos Emerge Of New Supersonic Spy Drone At Chinese Military Parade Rehearsal Photos Emerge Of New Supersonic Spy Drone At Chinese Military Parade Rehearsal

New images have surfaced on social media earlier this week revealing China's supersonic spy drone rolling through the streets of Beijing during a rehearsal ahead of a parade to celebrate the 70th anniversary of the founding of the People's Republic of China.

The rehearsal was conducted on Sunday and lasted through Monday morning. Observers across the city were able to take pictures of advanced weaponry and share them on social media platforms, domestically and internationally.

The photos sparked a firestorm of conversation on social media platforms, partly due to an unassembled supersonic DR-8 reconnaissance drone was spotted on the back of a military truck. The drone has never been seen before in public.

The South China Morning Post said the DR-8 would play a vital role if a shooting war breaks out with the US in the South China Sea or Western Pacific.

Rick Joe, a Chinese military analyst and author at The Diplomat, tweeted that the DR-8 has similar characteristics to a Lockheed D-21 supersonic drone that retired in the early 1970s. 

The DR-8 reconnaissance drone will allow China to coordinate strikes on US vessels with DF-21D anti-ship ballistic missiles, and the DF-26 ballistic missiles.

Zhou Chenming, a Beijing-based military commentator, was cited by the Post as saying the DR-8 has a maximum speed of Mach 3.35 (2,570 mph).

Shanghai-based military commentator Shi Lao told the Post that the People's Liberation Army (PLA) has been testing the drone extensively, says it can easily reach Guam where a major US military installation resides.

"In fact, this UAV [the DR-8] entered into service a while ago," Shi said.

Another military observer on social media said the drone was "the biggest surprise so far."

Also spotted in the rehearsal was China's hypersonic DF-17 missile, which can penetrate American missile defense networks through evasive maneuvering while traveling between Mach 5 (3,836 mph) and Mach 10 (7,672 mph).

Zhijun Cai, deputy director of the military parade leading group office, told local media that the weapons in the parade are all active and deployed with the PLA.

A previously undisclosed main battle tank of the PLA that entered service last year was also spotted.

"There will be some exciting new weaponry on show at the parade this year," Zhou said.

Hundreds of thousands of people are expected to attend the celebrations in Tiananmen Square on October 1, which will showcase how China, the rising power of the world, is ready for a fight with the US.

Tyler Durden Tue, 09/17/2019 - 23:25
Published:9/17/2019 10:45:25 PM
[Markets] Asia Markets: Asian markets flat ahead of Fed interest-rate decision Asian markets were flat in early trading Wednesday, as investors awaited the U.S. Federal Reserve’s expected interest-rate cut later in the day.
Published:9/17/2019 10:14:31 PM
[Markets] New Zealanders Face 5 Years In Jail For Not Handing-In Banned Firearms New Zealanders Face 5 Years In Jail For Not Handing-In Banned Firearms

Authored by Paul Joseph Watson via Summit News,

Following a ban on virtually all semi-automatic firearms, New Zealanders face 5 years in jail if they refuse to hand them in.

A France 24 report on the government’s new buyback scheme showed a line of gun owners wilfully giving up their guns in response to the Christchurch massacre earlier this year.

This despite the fact that the shooter himself said in his own manifesto that provoking mass gunfiscation was one of his intended goals. Mission accomplished.

Since the buyback scheme began, 19,000 firearms have been handed in. Most of the guns seen being handed in looked like ordinary rifles, not AR-15s.

Inspector Terry Van Dillen said he “accepted” that some people would be emotional giving up their guns due to them having been handed down by families for generations.

I’m sure any potential future mass shooters are gleefully handing in their firearms to police as I write this.

New Zealand’s gang members even publicly announced they would refuse to hand in any of the “banned” firearms.

Disarming responsible people and making them easier targets for actual criminals.

Genius idea.

*  *  *

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Tyler Durden Tue, 09/17/2019 - 23:05
Published:9/17/2019 10:14:31 PM
[Markets] Only 38% Of Americans Believe Humans Mainly Responsible For Climate Change Only 38% Of Americans Believe Humans Mainly Responsible For Climate Change

By now, most people have accepted that climate change is real, and that it is happening. What we can't all agree on though, is what the main cause is. As Statista's Martin Armstrong notes, close to an absolute majority of the world's scientists are adamant that we as humans are the main factor behind the speed and extent to which our climate is changing.

When though, like YouGov, you ask the people what they think, the picture becomes a bit cloudier.

Infographic: Are Humans Mainly Responsible for Climate Change? | Statista

You will find more infographics at Statista

As this infographic shows, of the countries surveyed, India has the largest share of people that think human activity is mainly responsible for climate change (71 percent).

At the other end of the scale however, only 35 percent of respondents in Norway and Saudi Arabia believe we should take the lion's share of the responsibility. In Norway, the most widely held belief is that while human activity is partly responsible, there are other factors which should be taken into account (48 percent).

When it comes to outright climate change deniers, the survey suggests that the USA harbors the largest share. There, 6 percent say the climate is not changing, and 9 percent say it is changing but not at all due to humans.

Tyler Durden Tue, 09/17/2019 - 22:45
Published:9/17/2019 9:46:20 PM
[Markets] Mutual Fund Chaos After Investments In Opioid Companies Plunge Mutual Fund Chaos After Investments In Opioid Companies Plunge

Earlier on Monday morning, we detailed how the embattled US drugmaker Purdue Pharma filed for Chapter 11 bankruptcy protection, a long-anticipated move aimed at shielding the company and its owners, the Sackler family, from financial ruin as they shoulder the brunt of the blame for igniting the opioid crisis with their aggressive marketing tactics of OxyContin.

Now we're starting to hear additional reports, specifically in recent filings, that the bust of Purdue and other big pharmaceuticals, thanks to nearly 2,000 litigants, has resulted in at least five mutual-fund companies reporting their returns have been affected after they made risky bets in pharmaceutical companies with opioid-related businesses.

Nick Mazing, the research director at investment research platform Sentieo Inc., told The Wall Street Journal that the number of times companies had mentioned opioids in their annual shareholder reports is up 300% in last eight years.

Walmart Inc., which operates pharmacies across the country, was forced to start disclosing opioid-related litigation as a risk in early 2018, and insurance company The Travelers Companies, Inc. began to disclose opioid-related litigation earlier this year.

Mazing said 55 companies mentioned opioids in their annual shareholder reports filed with the Securities and Exchange Commission as a significant risk factor. This is up from 41 last year and 37 in 2017.

At a time when some 130 Americans are dying every day from opioid-related overdoses, drugmakers like Purdue Pharma, Mallinckrodt, and Endo International are being sued by thousands of municipalities across the country and even individual states.

Mutal funds are worried that their investments in these drugmakers could be severely impacted, as those companies are now paying hundreds of millions of dollars, if not billions, to settle with litigants. In some cases, like Purdue, these companies are filing for bankruptcy.

Miller Value Partners LLC said its Miller Opportunity Trust fund had lousy performance in the last six months, mainly because it had too much exposure to Endo and Teva, two companies that have been cited as significant contributors in the opioid crisis.

"We considered the prospective opioid liabilities but judged them manageable," Miller Value said in its semiannual report for the period ending June 30. "We didn't anticipate just how myopically focused the market would become on this point, which was our main error."

Ohio National Fund said it cut Teva from a foreign-stock portfolio because the shares have been in a bear market for more than one year after a settlement of an opioid-related lawsuit.

Penn Series Funds Inc., an affiliate of Penn Mutual Life Insurance Co., said the 91% crash in Teva's stock in the last 50 months has absolutely "decimated" the company's midcap value fund.

American Funds Insurance Series, which is affiliated with Capital Research & Management Co., and Franklin Templeton Investments were others who saw depressed returns thanks to their exposure to opioid-related pharmaceutical companies.

Tyler Durden Tue, 09/17/2019 - 22:05
Published:9/17/2019 9:14:49 PM
[Markets] S&P Says Global Auto Sales To Fall 2-3% This Year S&P Says Global Auto Sales To Fall 2-3% This Year

The global automotive industry has been nothing short of a full fledged wreck over the last 12 to 18 months, with major markets like China, Europe and the U.S. all slipping as overextended consumers struggle to find the means necessary to purchase vehicles - even with interest rates worldwide near all time lows. 

And according to S&P, it's going to get far worse before it gets better. 

S&P predicts that global light vehicle sales will fall by 2%-3% in 2019 and, to add insult to injury, there will be "no growth" throughout 2020 and 2021. 

In a new research note out Tuesday, S&P says that sales in China will decline by 7%-9% this year and that U.S. sales will see a 3% decline. It also predicts a 2% drop for European sales for 2019. 

The note's base case assumptions for 2020 and 2021 are 0% to 1% growth in global light vehicle sales. S&P also expects weakness in "all market regions except China, which may see a modest rebound, not before 2021".

S&P believes that manufacturers will grapple with margin erosion in the mass market segment and will struggle to pass through increased costs of connectivity, electrification and autonomous driving. 

Days ago, we just noted that the world's biggest auto market, China, plunged deeper into recession, with the country's China Passenger Car Association releasing preliminary data for August that in no way indicates that the trend could be slowing. 

The CPCA reported last week that sales of sedans, SUVs, minivans and multipurpose vehicles in August fell 9.9% to 1.59 million units. 

It has been the industry's largest downturn in three decades. China has tried to roll out several stimulus measures to help the industry, including loosening car purchase restrictions, but they have done little to encourage consumption thus far. 

Top Chinese SUV maker Great Wall Motor Co. saw its first half profit lower by an astounding 59% and SAIC Motor Corp., China's biggest automaker, also cut its sales forecast recently and predicted its first annual sales decline in at least 14 years. Geely Automobile Holdings Ltd. saw sales fall 19% in August. 

 

U.S. auto sales have followed suit and are expected to continue to fall (formerly 2.2%, now 3%) in the back half of 2019. General Motors has found itself dealing with its first UAW strike in 12 years and now, the warning bells are also starting to be audible from Mexico. We noted  this week that Mexico's total export volume for August was crushed 12.7%.

It marks a sharp drop for one of the biggest exporters of vehicles in the world, according to new data from FreightWaves. Companies like Ford, Honda, Fiat-Chrysler, Toyota, BMW, GM, Kia, Mazda, Nissan, Volkswagen, and Audi all have manufacturing plants in Mexico. 

Tyler Durden Tue, 09/17/2019 - 21:25
Published:9/17/2019 8:44:17 PM
[Markets] Organizers Of "Storm Area 51" Event In Legal Battle Over Potential "Humanitarian Disaster" Organizers Of "Storm Area 51" Event In Legal Battle Over Potential "Humanitarian Disaster"

Authored by John Vibes via The Mind Unleashed blog,

In late June, a college student named Matty Roberts created a Facebook event called “Storm Area 51: They Can’t Stop Us All,” after watching a Netflix documentary about the secret military base.

For some unknown reason, the event went viral and quickly gathered millions of followers, who spent half of the summer making jokes and sharing memes about invading Area 51. Roberts never actually had any intentions of risking his life or freedom to enter the top-secret facility and was forced to clarify that the whole thing was just a joke after multiple warnings from various government agencies.

Still, having the captive audience of millions of people on an event page is an opportunity that would be foolish to pass up, so Roberts decided to plan a festival, called Alienstock, in a nearby town instead.

The event was scheduled to take place on September 20th—just a few days from now.

Roberts partnered with a number of other people and organizations to help make the event a success, including a nearby hotel, the Little A’Le’Inn.

Unfortunately, it seems that some of the organizers have had differing opinions on the details of the event and have now split and gone their separate ways.

Initially, the festival was scheduled to take place in Rachel, the town closest to Area 51, but there were some clear indications that the local community was less than happy about the idea. Most notably, a warning posted on Rachel’s town website said that the scene “could get ugly” if incoming curiosity seekers were to trespass on the property of local residents.

After these issues began to arise, the team had a difference of perspective about how to go about handling it. Roberts wanted to move the event to a safer location in Las Vegas, which has proper facilities for the 8,000 people expected to attend, while the owners of the Little A’Le’Inn wanted to keep the event at their location, insisting that they would be able to handle a large crowd.

statement on the Alienstock website reads:

“Due to the lack of infrastructure, planning, and risk management, along with concerns raised for the safety of the expected 10,000+ attendees, we decided to transition Alienstock away from the Rachel festival towards a safer alternative. We are officially disconnecting from the Little A’LE’INN, Rachel NV, and AlienStock’s affiliation with them.

We will no longer offer our logo, social media, website or Matty Roberts likeness or scheduled appearance. In short, the relationship has ended permanently. AlienStock will be moving to a safe, clean secure area in Downtown Las Vegas as an alternative. We are not interested in, nor will we tolerate any involvement in a FYREFEST 2.0. We foresee a possible humanitarian disaster in the works, and we can’t participate in any capacity at this point.”

Soon after, the notice on the homepage of Rachel’s website clarified that Alienstock had been moved to Las Vegas because it was not properly organized. The notice suggested that curiosity seekers should avoid Rachel entirely, however, other organizers are insisting that an event will still take place at the original location in Rachel. They also claim that local residents are happy to have the visitors.

In a statement sent to the Mind Unleashed, the team representing the Little A’Le’Inn said:

Amidst false accusations and rumors, the residents of Rachel Nevada are excited to announce that Alienstock is, in fact, still happening at the Little A’Le’Inn on September 19 – 22nd. With thousands slated to attend and artists traveling in from all over the country, this is sure to be a once-in-this-universe experience.”

“Alienstock has been thoroughly planned, approved, and locally supported. All permits, permissions, and down-payments have been made and correctly filed,” the statement continued.

Earlier this week, two men were arrested near Area 51 while attempting to capture footage of the facility. The men were reportedly two Dutch YouTubers, who flew all the way from the Netherlands for the “Storm Area 51” gathering.

*  *  *

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Tyler Durden Tue, 09/17/2019 - 21:05
Published:9/17/2019 8:14:47 PM
[Markets] "The Greatest Economy (N)Ever": Gundlach's Full Webcast Slides "The Greatest Economy (N)Ever": Gundlach's Full Webcast Slides

Speaking during a webcast for his $54 billion DoubleLine Total Return Bond Fund, Jeff Gundlach repeated what we said earlier, namely that the spike in overnight repurchase agreements may prompt the Federal Reserve to expand its balance sheet, and in fact used the very phrase we did in our description of today's repo operation: QE Lite.

"Is it an imminent disaster? No. The Fed is going to use this warning sign to go back to some balance sheet expansion," Gundlach said, calling it a way of “baby stepping” to more quantitative easing while making it clear that today's freeze up can only be viewed as a negative. Of course, if and when said baby step fails - and already banks are predicting that overnight repo will open at 4% tomorrow - the small step will become one giant leap for asset-holding kind as the Fed is "forced" to launch QE, just as ICAP's clients said they expect it to do.

On Tuesday morning, for the first time in a decade, the Fed injected billions of dollars in cash into the markets Tuesday to stem the explosion in rates on one-day repos, which briefly peaked as high as 10%. The Fed is likely to start expanding its balance sheet to “try to free up the plumbing of the banking system,” Gundlach said.

That said, and even as the market is 100% certain the Fed will cut rates by 25 bps tomorrow, Gundlach warned that "it’s not a great idea to be betting on lower interest rates", adding that investors have probably seen the low of the year in benchmark 10-year yields, which on September 3 plunged to near record low of 1.42%. When asked if he would buy 10-year Treasuries now, his response was clear: "Absolutely not", instead recommending to stay in shorter-duration, higher-quality assets.

Gundlach also said to hold off on buying more gold, and to wait for a price retracement, even as he sees 75% odds of a recession before the 2020 election.

In any event, Gundlach is certain of one thing: after the last communication debacle, where his "mid cycle adjustment" designation sent stocks tumbling, Powell - who Gundlach said reminded him of a "junior trader" and advised him to stop changing his message every six weeks - will probably say as little as possible at Wednesday’s meeting.

What else did Gundlach say in the presentation that was sarcastically titled "The Greatest Economy Ever"?

Among many other things - see his full presentation below - the DoubleLine CEO commented on the ongoing trade war with China, and put the chances of a U.S.-China trade deal before the 2020 U.S. presidential election at almost zero, saying that China has no incentive to do so before the election.

On rates, Gundlach said the bond market reflects two more Federal Reserve cuts in 2019 and one in 2020. As noted above, and as the market is well aware by now, he said there’s a high probability that the Fed cuts Wednesday.

Having long bashed the US dollar, Gundlach once again took aim at the greenback, saying that the next big move for the currency is down, and warned that when the next recession occurs the U.S. dollar and stocks will be in trouble, recommending investors to diversify into other currencies and markets.

And since his view on the economy is that it is anything buy the "Greatest ever", pointing out the sharp slump in 2019 global GDP projections...

... Gundlach put the odds of a recession before the 2020 election at 75%, predicting that once the recession hits, there will be an explosion in the national debt.

Additionally, as noted above, the fund manager has turned far less positive on gold in the short-term, although he did say that for a permanent portfolio position, gold should be held, even if "now is the time to be looking for a better buying opportunity in gold."

Gundlach was far more pessimistic of corporate debt, which he once again said was the most vulnerable asset class, highlighting BBB-rated corporate bonds, i.e. soon to be fallen angels, as the most at risk (see Ford's recent downgrade to junk), while adding that short-term sovereign debt is likely the least vulnerable.

Gundlach also saved some space for his two favorite correlation trades: the copper/gold ratio vs the 10Y TSYs...

... and German/US GDP vs 10Y TSY yields.

There was also the obligatory market doom slide:

Finally, he also touched on politics, where he took aim at his nemesis, Joe Biden, saying that if the primaries were held today, Elizabeth Warren would win the Democratic presidential nomination, and making it quite clear that "It’s not going to be Joe Biden."

His full webcast presentation is below

Tyler Durden Tue, 09/17/2019 - 20:25
Published:9/17/2019 7:44:32 PM
[Markets] New GoDaddy CEO is sticking with plan despite stock hiccup Shares of the Internet-domain registrar and web-hosting company have tumbled 10% since Scott Wagner retired in August due to health reasons. That ended Tuesday, with shares up 0.7% in regular trading, after GoDaddy announced in San Francisco a new software product that helps small businesses build websites with a suite of marketing tools.
Published:9/17/2019 7:16:28 PM
[Markets] Auto Bust Triggers Sharp Slowdown In Global Manufacturing Auto Bust Triggers Sharp Slowdown In Global Manufacturing

The gloom of the world is centered around auto manufacturing, which is dragging on the global economy, fuelling fears that a worldwide trade recession has already begun.

The first domino to fall has been auto manufacturing, already hitting a near-record low in August, reported the Financial Times.

New data from IHS Markit global car industry purchasing managers' index shows some of the sharpest declines across all sectors, not seen since 2009.

IHS indices for industrial goods, machinery, equipment, metals, and mining fell below the 50 mark, indicating that executives saw their businesses contracting.

The Financial Times blames much of the global slowdown on the escalation of the US-China trade war and its disruption of complex supply chains that have led to depressed exports and lower overall trade volumes.

Global export volumes fell by 1.4% in June YoY, according to the CPB Netherlands Bureau for Economic Policy Analysis.

"The world trade slowdown has much to do with the manufacturing downturn," said Adam Slater, lead economist at Oxford Economics.

"World trade has contracted, which is quite unusual outside a recession period, and it might worsen."

*chart world trade volume

Jennifer McKeown, head of global economics at Capital Economics, said, "machinery, metal, and auto vehicles have driven more than half of the slowdown in global manufacturing since it peaked at the end of 2017. That suggests that is closely related to the weakness in investment globally, which would have affected the demand for machinery."

The epicenter of the downturn is likely Europe, and to be more precise, it started in Germany, a major exporter on the continent. Slowing demand for German cars, EU emission tests, stagnating regional economy, and concerns of a US-Europe trade war have all affected car manufacturers on the continent.

The auto manufacturing downturn is spreading quickly. Also seen in China, India, Japan, and now the US.

The US has finally contracted a cold, and it's one that isn't going away anytime soon. June manufacturing output fell on an annual basis in July, while the main sentiment index slid into the contraction in August.

In the US, "domestic activity has seemingly converged with the rest of the world in a full-scale downturn," said Iaroslav Shelepko, an economist at Barclays.

The global manufacturing downturn is likely to persist through 1H20.

Global central banks are cutting rates aggressively to stave off a downturn. But loose monetary policy around the world could take upwards of a year to positively affect global manufacturing data.

The next shoe to drop will be global consumer sentiment - and for countries heavily reliant on consumers, such as the US, this could mean a further slowdown that is more broad-based could be seen in 2020.

Tyler Durden Tue, 09/17/2019 - 20:05
Published:9/17/2019 7:16:28 PM
[Markets] Johns Hopkins Professor On Child-Transgender Trend: "Many Will Regret This" Johns Hopkins Professor On Child-Transgender Trend: "Many Will Regret This"

Authored by Maria Lencki via The College Fix,

Argues that doctors are doing treatment without evidence...

A psychiatrist from Johns Hopkins University has slammed the medical and psychiatric industries for what he says is reckless and irresponsible treatment of patients who claim to be transgender.

Paul McHugh, a renowned psychiatrist from Johns Hopkins University, told The College Fix he believes transgender people are being experimented on because the doctors treating transgender patients with hormones “don’t have evidence that (the treatment) will be the right one.” He also criticized the manner of treatment given to many children who claim to be transgender.

“Many people are doing what amounts to an experiment on these young people without telling them it’s an experiment,” he told The Fix via phone.

“You need evidence for that and this is a very serious treatment. It is comparable to doing frontal lobotomies.”

Vast majority of gender minorities report mental health issues

A recent study published in the American Journal of Preventive Medicine found that 80 percent of gender minority students report having mental health problems, nearly double the rate of “cisgender” students. McHugh believes that in many cases the patient’s gender dysphoria is precipitated by mental illness.

“I think their mental problems, often depression, discouragement are the things that need treatment,” not gender dysphoria, he argued.

“I’m not positive about this. It’s a hypothesis, but it is a very plausible hypothesis, and it would explain why many of the people who go on to have treatment of their body discover they are just as depressed, discouraged and live just as problematic lives as they did before because they did not address the primary problem,” he added.

Possible ‘contagion effect’

“I believe that these gender confusions are mostly being driven by psychological and psychosocial problems these people have. That explains the rapid onset gender dysphoria Lisa Littman has spelled out,” McHugh said.

The Lisa Littman to whom the professor referred is a researcher at Brown University, who last year published a bombshell report suggesting that some transgender-identified children might suffer from “rapid onset gender dysphoria,” a phenomenon in which “one, multiple, or even all of the friends [in a group] have become gender dysphoric and transgender-identified during the same timeframe.”

There was significant backlash following Littman’s publication of the study, after which Brown censored the report. The study was eventually validated with its results unchanged.

Long-term effects of child transgender treatment

Asked about the possible long-term consequences of the growing practice of helping children develop transgender identities, including with hormones, McHugh expressed pessimism.

“They’re going to be in the hands of doctors for the rest of their lives, many of them are going to be sterilized not able to have their own children, and many will regret this,” McHugh said.

“Can you imagine having a life where you need to seek doctors all the time, for everything, just to live? Getting your hormones checked, getting everything checked. That is something doctors should like to spare people of,” he added.

McHugh thinks that eventually our society will look back on this craze as something of an historical shame. “I believe it will be something like how we think of eugenics now. We will come to regret it when we discover how many of the young people that were injured regret it themselves,” he told The Fix.

The doctor stressed that medical professionals should stick to a higher standard of evidence when considering treatment for individuals who claim a transgender identity.

“You can think whatever you want without proof. Be my guest. You can think anything you want, if you like it that way. But don’t ask me as a doctor to prescribe hormones or operate on you when I try to do things which are for your benefit,” he said.

“My aim isn’t to stop people. It’s when they draw medical people in. That’s when I insist on evidence and what makes more sense.”

Tyler Durden Tue, 09/17/2019 - 19:45
Published:9/17/2019 6:46:16 PM
[Markets] U.S. And Russia Battle It Out Over This Huge Iraqi Gas Field U.S. And Russia Battle It Out Over This Huge Iraqi Gas Field

Authored by Simon Watkins via OilPrice.com,

With the U.S, Russia, and China all jostling for position in Iraq’s oil and gas industry both north and south, Iraq’s oil ministry last week reiterated its desire to have one or more foreign partners in the Mansuriya gas field. Situated in Diyala province, close to the Iran border, Mansuriya is estimated to hold around 4.6 trillion cubic feet of natural gas, with plateau production projected at about 325 million standard cubic feet per day.

For the U.S., encouraging Iraq to optimise its gas flows so that it reduces its dependency for power from Iran is the key consideration.

For Russia, Rosneft essentially bought control of the semi-autonomous region of Kurdistan in northern Iraq in November 2017, so power in southern Iraq figuratively will complete the set.

Securing oil and gas contracts across all of Iraq will allow Russia to establish an unassailable political sway across the entire Shia crescent of power in the Middle East, stretching from Syria through Lebanon (by dint of Iran), Jordan, Iraq (also helped by Iran), Iran itself, and Yemen (via Iran). From this base, it can effectively challenge the U.S.’s vital oil, gas, and political ally in the region – Saudi Arabia. China, in the meantime, is operating to its own agenda in South Pars Phase 11 and its West Karoun holdings.

Iraq, like Turkey, is still – nominally at least – not committing to either the Russia or the U.S., preferring to play each off against the other for whatever they can get, and the same applies in microcosm to the field of Mansuriya. Turkey itself was a key player in this gas field through its national oil company Turkiye Petrolleri Anonim Ortakligi (TPAO) until the middle of last year – holding a 37.5 per cent stake – along with the Oil Exploration Company (25 per cent), Kuwait Energy (22.5 per cent), and South Korea’s KOGAS (15 per cent).

TPAO had signed the original development deal for Mansuriya back in 2011, promising Iraq’s oil ministry that it could be trusted to reach plateau production within 10 years at most, a senior figure in the ministry told OilPrice.com last week. This was not an unreasonable schedule, for which TPAO would be remunerated US$7.00-7.50 per barrel of oil equivalent, a relatively generous amount compared to many of the previous awards from the ministry. TPAO agreed that the first phase would mean production of at least 100 million cubic feet a day within 12 months from the signing date.

Unsurprisingly, given the rise of Islamic State at the time, TPAO suspended all operations on Mansuriya in 2014, but more surprisingly was that it refused to resume development work in September 2017 when asked to do so by then-oil minister, Jabar al-Luaibi. There were many subsequent requests from the ministry to TPAO to resume work before the ministry rescinded the contract last July.

As it stands, Iraq’s oil ministry has made it clear that it needs Mansuriya to be properly up and running and gradually increasing production towards the 325 million standard cubic feet per day figure so that it can be used as a feedstock for the country’s calamitous power sector. Peak summer power demand every year exceeds domestic generation capacity, frequently leading to up to 20 hours per day of blackouts in many areas. Without Mansuriya and similar gas fields coming online, this will get worse, as Iraq’s population is growing at a rate of over one million per year, with electricity demand set to double by 2030, according to the International Energy Agency.

This supply-demand imbalance has resulted in Iraq’s being dependent on neighbouring Iran for a considerable amount of gas and electricity imports – around one third of its total energy supplies, in fact. Specifically, Iraq pipes in up to 28 million cubic metres of Iranian gas a day for power generation and also directly imports up to 1,300 megawatts of Iranian electricity. Even the U.S. has been forced to grant waivers for Iraq to continue to do this, given the absence of other options currently.

Playing the game of pitting one side against the other for optimal gain, the Secretary General of the Iran-Iraq Joint Chamber, Seyed Hamid Hosseini, stated recently that Iran’s gas and electricity exports to Iraq are expected to reach US$5 billion by the end of the current Iranian calendar year, ending on 21 March 2020. This comment was made at the same time as a U.S. consortium led by Honeywell signed a memorandum of understanding for a deal that would reduce the country’s current level of gas flaring by nearly 20%. Part of this deal included processing associated gas at the Siba gas field, the original deal for which was also done in 2011 and also with TPAO.

In the running at the time for both fields was Russia. So interested is it in securing gas sites in north and south Iraq, which it will eventually be able to move via its vast pipeline capabilities and networks, that even before the latest announcement on Mansuriya’s availability was made public, Gazprom Neft (the oil arm of Russia’s gas giant, Gazprom) communicated to Iraq’s current oil minister, Thamir Ghadhban, that it was ‘very interested’ in taking a role in the Mansuriya field.

“Gazprom Neft often acts as the point man for Gazprom in initial conversations, as it is a slick, well-run, Western-style company, whereas Gazprom is a bit more old-style Soviet,” said the Iraq source. “It [Gazprom Neft] also made it clear that it would be interested in other sites, such as Siba,” he added. “It should be remembered that Gazprom was in the prime position to develop the other key gas fields of North Pars, Kish, and Farzad A and B before the U.S. withdrew from the JCPOA [Joint Comprehensive Plan of Action] last year,” he concluded.

Tyler Durden Tue, 09/17/2019 - 19:05
Published:9/17/2019 6:15:54 PM
[Markets] Is The Trump Administration Losing The Narrative Battle Over Iran? Is The Trump Administration Losing The Narrative Battle Over Iran?

Authored by Caitlin Johnstone via Medium.com,

I’m expected to write something about the Trump administration’s warmongering against Iran over an attack on a Saudi oil refinery, because that’s typically what I do in this ongoing improvisational exercise of mine: I write about the behavior of the US war machine and the propaganda that is used to bolster it. It’s what my readers have come to expect. But honestly I find the whole thing extremely tedious and I’ve been putting off writing about it for two days.

This is because from a propaganda analysis point of view, there’s really not much to write about. The Trump administration has been making bumbling, ham-fisted attempts at manufacturing public support for increasing aggressions against Iran since it initiated withdrawal from the JCPOA a year and a half ago, yet according to a Gallup poll last month Americans still overwhelmingly support diplomatic solutions with Tehran over any kind of military aggression at all. In contrast, most Americans supported a full-scale ground invasion of Iraq according to Gallup polls taken in the lead-up to that 2003 atrocity. With the far less committed Libya intervention, it was 47 percent supportive of US military action versus 37 percent opposed.

That’s the kind of support it takes to get a US war off the ground these days. And it’s going to take a lot more than a busted Saudi oil refinery to get there, even in the completely unproven event that it was indeed Iran which launched the attack.

The reason I’m able to spend so much time writing about war propaganda as part of my job is because war propaganda is happening constantly, and the reason war propaganda is happening constantly is because it’s absolutely necessary for the perpetuation of the US-centralized empire’s slow-motion third world war against unabsorbed governments. In other words, the propaganda apparatus of the empire works constantly to manufacture consent for military aggressions because it absolutely requires that consent.

When I say that the imperial war machine requires public consent before it can initiate overt warfare, I’m not saying that the US government is physically or legally incapable of launching a war that the public disapproves of, I’m saying that it is absolutely essential for the drivers of empire to preserve the illusion of freedom and democracy in America. People need to feel like their government is basically acting in everyone’s best interest, and that it is answerable to the will of the electorate, otherwise the illusion of freedom and democracy is shattered and people lose all trust in their government and media. If people no longer trust the political/media class, they can’t be propagandized. Without the ability to propagandize the masses, the empire collapses.

So out of sheer self-interest, establishment power structures necessarily avoid overt warfare until they have successfully manufactured consent for it. If they didn’t do this and chose instead to take off the nice guy mask, say “Screw you we’re doing what we want,” and start butchering Iranians at many times the cost of Iraq in both money and in American lives lost, people would immediately lose trust in their institutions and the narrative matrix which holds the whole thing together would crack open like an egg. From there revolution would become an inevitability as people are no longer being successfully propagandized by the establishment narrative managers into believing that the system is working fine for everyone.

Think about it: why else would the mass media be churning out propaganda about disobedient governments like Iran, Venezuela, Syria, Russia and China if they didn’t need to? They need the citizenry they’re charged with manipulating to consent to important geostrategic imperialist maneuvers, or they’ll break the hypnotic trance of relentless narrative control. And make no mistake, maintaining narrative control is the single highest priority of establishment power structures, because it’s absolutely foundational to those structures.

This is why the warmongers have been favoring economic warfare over conventional warfare; it’s much easier to manufacture support for civilian-slaughtering starvation sanctions. It’s slower, it’s sloppier, and it’s surely a lot less fun for the psychopaths in charge, but because the public will consent to economic sanctions far more readily than ground invasions or air strikes, it’s been the favored method in bringing disobedient governments to their knees. That’s how important manufacturing consent is.

So a bunch of drama around a Saudi oil refinery isn’t going to do the trick. The US government is not going to leap into an all-out war which would inevitably be many times worse than Iraq based on that, because they can’t manufacture consent for it right now. All they’re trying to do is escalate things a bit further with the goal of eventually getting to a point where Iran either caves to Washington’s demands or launches a deadly attack, at which point the US can play victim and the mass media can spend days tearfully running photos of the slain US troops. If that happens they might gain their consent from the public. If not, we may see them get a little more creative with their “crisis initiation”.

Until then this is a whole lot of noise and very little signal, which is why I find this current circus uninteresting to write about. It seems like every week now the Trump administration is trotting out some new narrative with the help of the mass media explaining why the Iranian government is evil and must be toppled, and nobody buys it because it’s on the other side of the damn planet and it’s always about something silly like oil or broken drones. Their unappealing pestering about this is starting to remind me of a really awkward loser who’s constantly asking out the prettiest girl in the office over and over again; you just want to pull him aside and say dude, stop. She’s just not into you.

I think I’m going to stop paying as much attention to these high-noise, low-signal Trump foreign policy dances and wait until I actually see a hard, tangible thing to run commentary on instead, particularly with Iran. With the narrative battle still so far from success it’s entirely likely that such an event will not occur until at least 2021, possibly under a President Warren whose warmongering will be cheered on as a historic victory for women everywhere.

Until then, just remember: they’re trying to manufacture your consent because they need it. So don’t give it to them. Make sure others don’t, either.

*  *  *

Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for my website, which will get you an email notification for everything I publish. My 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, checking out my podcast on either YoutubesoundcloudApple podcasts or Spotify, 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. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. Everyone, racist platforms excluded, has my permissionto republish or use any part of this work (or anything else I’ve written) in any way they like free of charge.

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Tyler Durden Tue, 09/17/2019 - 18:25
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Published:9/17/2019 5:44:15 PM
[Markets] Furious WeWork Employees Blame CEO's "Outsized Personality" For IPO's Collapse Furious WeWork Employees Blame CEO's "Outsized Personality" For IPO's Collapse

Now that WeWork has finally acquiesced to growing chorus of investment firms and bankers calling for the company to shelve its deeply troubled IPO, which it did this morning (the offering is slated to take place in October "at earliest"), CEO Adam Neumann would like his employees, and the general investing public to know something: He found the experience of watching four-fifths of his company's valuation evaporate during a string of media reports "humbling."

According to the Financial Times, Neumann expressed this sentiment during a webcast on Tuesday for company employees, and added that he needs more time to deepen his understanding of how a public company is supposed to be run. The 40-year-old founder, who has been lampooned as a "caricature" worthy of the TV show "Silicon Valley", said that while he knows how to run a private company, he hadn't received enough "feedback" to understand what needed to change.

Unsurprisingly, some employees who have clashed with Neumann in the past are finding it hard to forgive the CEO. One employee who worked closely with Neumann in the past said his "outsized personality" played a "huge role" in derailing the offering.

But there was little mia culpa in Neumann's feeble attempt at contrition was leaked to the press just as the company's bonds were taking another beating on Tuesday. WeWork, which has burned through billions of dollars in private financing over the past 10 years and never turned a profit, had lined up a $6 billion credit facility from a group of syndicate banks. But the loan was contingent on the successful completion of an IPO, which would have netted WeWork another $3 billion.

Without another influx of capital, WeWork could swiftly find itself on the cusp of a liquidity crisis, as it continues to burn $2 for every $1 in revenue. During the first half of 2019, the company reported operating cash outlays of $2.6 billion, nearly matching its cash burn for the entirety of 2018.

But WeWork's biggest backer, the Japanese telecoms firm/VC megafund Soft Bank, demanded that WeWork delay the listing after potential investors expressed extreme trepidation about buying into the offering, particularly during such a fragile market that has already seen its fair share of embarrassing IPO flops by "unicorns" like Uber and Lyft.

Adam Neumann

Circling back to the webcast, Neumann was joined by his co-founder, Miguel McKelvey, who is also the company's "chief culture officer", as well as Artie Minson, WeWork's CFO.

Many analysts who have been tracking WeWork doubt that a few months' delay will make much of a difference. One analyst insisted that he's never seen such a distinct lack of enthusiasm for such a wildly hyped-up startup.

John McClain, a portfolio manager at Diamond Hill Capital Management, said he could not remember another unicorn - a privately held start-up valued at more than $1bn - having "zero support from either debt or equity investors."

"Their borrowing model is seriously in question at this point," he added. "There is not a level that we could become interested in owning this company based on the business, the governance, and the financial statements."

Thanks to the WeWork business model's "susceptibility to recession," it's extremely likely that whenever it raises money next, whether in the private or public markets, that WeWork's valuation wouldn't exceed $10 billion.

Barry Oxford, an analyst at brokerage DA Davidson, said the value of the company was likely to fall below $10 billion given its "susceptibility to a recession, current cash burn rate, corporate structure, and corporate governance."

Neumann tried to assuage investors' concerns about the firm's governance, which delegated a tremendous level of control to Neumann and his wife, Paltrow-cousin Rebekah Neumann, by reducing the voting power of his special Class B and C shares, along with a few other relatively minor concessions. That, apparently, wasn't enough.

For all we know, the tweet below could prove eerily prescient (it doesn't sound like much of a departure from where we are right now).

And who knows what scandals or other issues (like, say, malfunctioning equipment) could rock the company in the interim?

Maybe a buyout is the best Neumann can hope for?

Tyler Durden Tue, 09/17/2019 - 18:05
Published:9/17/2019 5:16:47 PM
[Markets] Vegetarian diets can’t save Earth, but eating less meat might Scientists at the Johns Hopkins University Bloomberg School of Public Health find that diets in which meat, fish or dairy products are consumed only once a day would negatively impact emissions and water supplies less than a full vegetarian diet including milk and eggs.
Published:9/17/2019 5:16:47 PM
[Markets] Market Extra: Wall Street raises questions about Fed’s late action on funding squeeze Investors say the Fed was slow to react to growing stresses in funding markets and the spike in repo rates this week.
Published:9/17/2019 4:47:39 PM
[Markets] Dow Jones Futures: Stock Market Nears Record Highs Amid Fed Rate-Cut Mystery; Adobe, FedEx, Chewy Are Earnings Movers Dow Jones futures: The stock market rally neared highs even as Fed rate-cut odds fell to 50-50. Adobe, FedEx and Chewy fell on weak earnings or outlooks. Published:9/17/2019 4:47:39 PM
[Markets] "The 'Bots Are Coming For The Priests" "The 'Bots Are Coming For The Priests"

Via Global Macro Monitor,

Good, God!

  • A mechanical ‘priest’ has recently begun conducting Buddhist prayers in Japan. It is not the first attempt to deliver religious teachings and advice through the use of a programmed machine.

  • And Catholic Christians may soon find spiritual advice from a tiny 40-cm robot SanTO, developed by Gabriele Trovato, a roboticist and assistant professor at Japan’s Waseda University, after Trovato finishes perfecting his device in Peru.

  • In Germany, there is a BlessU-2 robot that looks like a hybrid between an ATM terminal and US comic Jeff Dunham’s puppet of Ahmed the Dead Terrorist. The robot is reportedly designed to engage in philosophical debates about the future of religion and the potential of artificial intelligence.  – Sputnik International

Just think of the coming spike in moral dilemmata.

Here’s one, for example.

  1. Does confessing sins of adultery with a sex robot to a robotic priest absolve you of sin?

  2. Is the affair with the robot adultery?

Tyler Durden Tue, 09/17/2019 - 17:45
Published:9/17/2019 4:47:39 PM
[Markets] U.S. industrial production up 0.6% in August, largest gain in a year U.S. industrial output rose 0.6% in August, the largest gain in a year, the Federal Reserve said Tuesday. Published:9/17/2019 4:13:22 PM
[Markets] NewsWatch: America just had another death linked to vaping-related lung illness Meanwhile, the CDC said Monday it had activated its Emergency Operations Center.
Published:9/17/2019 4:13:22 PM
[Markets] Markets That Live By The Fed, Die By The Fed Markets That Live By The Fed, Die By The Fed

Authored by Charles Hugh Smith via OfTwoMinds blog,

The "everything bubble" is not permanent.

All eyes are again on the Federal Reserve, as everyone understands that the Fed is the market-- the stock market, the bond market, the art market, the housing market, etc. All markets have been driven higher by one force: central bank money creation and distribution to the financial sector of financiers and corporations, the richest of the rich.

What few seem to grasp (because they're paid not to?) is the Fed is powerless over what actually matters in a healthy economy:

1. The Fed is powerless to create productive, profitable ventures for capital to invest in. Productivity has gone nowhere in the Fed's reign while speculative profits leveraged by the Fed's free money for financiers have soared.

2. The Fed is powerless to raise wages. Despite ginned-up claims that wages are finally rising 3% a year after a decade of stagnation, wages are still losing purchasing power once real-world inflation is factored in.

3. The Fed cannot force creditworthy households and enterprises to borrow more money, nor can they stop banks from lending to the only people who want to borrow more money, those who are credit risks, i.e. borrowers who will default at the first spot of bother.

4. The Fed is powerless to stop the New Gilded Age consequences of their policies via The Cantillon Effect: it's not just how the money is created, but how it's distributed. Those who get the Fed's nearly free money can use it to buy productive assets and pursue speculations such as stock buy-backs, while everyone else who didn't get a single dollar of the Fed's trillions experiences a loss of purchasing power as the Fed's new money expands the money supply without actually expanding the real economy.

The only power the Fed has is to incentivize profiteering via stock buy-backs and speculations of the super-wealthy--the power, in other words, to create a New Gilded Age of obscene wealth inequality.

The Fed's New Gilded Age is generating political blowback, and eventually the masses will awaken to the fact that the Fed is the enemy of the people because it is the sole enabler of the unproductive, parasitic, predatory corporate/insider class that's skimmed something like 87% of all the "wealth" "created" by the Fed's policies.

The Fed has created an economy in which capital has been stripped of low-risk yield. All capital must become gambling chips in the casino to earn a return, but gambling is intrinsically risky, and the asymmetry between the risk--rising--and the return--increasingly paltry--is setting the markets up for a fall the Fed is powerless to stop, and a political blowback to the Fed's New Gilded Age that is it equally powerless to stop.

Markets that live by the Fed also die by the Fed. The Fed's abject, pathetic powerlessness over what actually matters will be revealed in the years ahead, and everyone will look back on the decades in which the Fed was viewed as god-like as a form of mass delusion.

The "everything bubble" is not permanent. Gambling is risky, and the Fed has rigged the world's largest casino to benefit its banking / financier / corporate cronies. But bubbles burst for reasons outside the control of the Fed, a reality that's about to become undeniable.

*  *  *

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Tyler Durden Tue, 09/17/2019 - 17:05
Published:9/17/2019 4:13:22 PM
[Markets] FedEx stock falls after company lowers outlook on 'trade tensions' FedEx stock falls after company lowers outlook on 'trade tensions' Published:9/17/2019 3:42:40 PM
[Markets] Capitol Report: Senate panel grills Justice Department and FTC chiefs over their antitrust probes into Big Tech Officials from the Justice Department and Federal Trade Commission may provide more information on Tuesday afternoon about their antitrust probes that are targeting Amazon.com Inc., Apple Inc., Facebook Inc. and Alphabet Inc.’s Google.
Published:9/17/2019 3:42:40 PM
[Markets] WTI Extends Losses After Surprise Crude Inventory Build WTI Extends Losses After Surprise Crude Inventory Build

Oil prices traded down today on the back of confidence Saudi comments about the pace of recovery from the attack on its largest refinery.

“During the two past days, we managed to contain the damage by recovering more than half of the production that we had lost during that terrorist attack,” Energy Minister Prince Abdulaziz bin Salman said at a briefing in Jeddah. “Thus the company will be able to meet all its commitments to customers this month by drawing on its crude oil reserves.”

While all eyes will remain on Saudi production/supply, we suspect some marginal moves on the heels of inventory data (especially in light of potential storm disruptions).

The market will be monitoring for more declines at Cushing, Okla., and overall U.S. crude inventory decreases after the startup of new Permian pipelines, says John Kilduff, partner at Again Capital

API

  • Crude +592k (-2.5mm exp)

  • Cushing -846k

  • Gasoline +1.6mm (-500k exp)

  • Distillates +2.00mm (+500k exp)

After four straight weeks of draws, US Crude inventories showed a surprise 592k barrel build last week (and builds for gasoline and distillates), pressuring WTI prices even lower on the day...

 

WTI hovered around $59 ahead of the API print and extended losses after the surprise build...

Tyler Durden Tue, 09/17/2019 - 16:38
Published:9/17/2019 3:42:40 PM
[Markets] Project Syndicate: How low interest rates can discourage competition, leading to slower growth Low interest rates have traditionally been viewed as positive for economic growth. But recent research suggests, on the contrary, that extremely low interest rates may lead to slower growth by increasing market concentration.
Published:9/17/2019 3:12:37 PM
[Markets] Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen" Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen"

While it is being ignored by most (because the S&P didn't crash), the chaos in the Fed-controlled short-term liquidity markets should panic everyone as for the first time in a decade, NYFRB was forced to inject liquidity for o/n repo...

Source: Bloomberg

Repo rates kept rising despite the Fed's operation...

Source: Bloomberg

In context, this is quite a move...

Source: Bloomberg

As one veteran short-term rates trader explained...

Bottom line: here’s what the market thinks of the Fed’s temporary solution…

It’s a joke.

MORE COWBELL?

More cowbell indeed.

As Bloomberg reports, today’s surge in Treasury repo rates poses a threat to the market more broadly because traders won’t take new positions without confidence in their ability to obtain funding at consistent rates, said John Fath, managing partner at BTG Pactual Asset Management and a primary dealer trader from 1993 to 2008.

Today was a bit of a watershed event, though we’ve been seeing this brewing. When they set funds rate target at 2 to 2.25, ideally you would like to funding to be around 2.15. For weeks it’s been above that.
“Today was more dramatic. Funding opened at 4.5, quickly moved to a high of 10, then dropped back to 2.50, nothing close to 2.15. So you’ve lost control of where you want financing.

Overnight financing is the key to driving the economy, leverage. If you don’t have control over it, what’s the point of setting a funds rate? If they ease tomorrow and funding is at 4%, does it matter if they eased?

If the plumbing doesn’t work, then it’s going to dramatically affect secondary trading of Treasuries. Which is the last thing they need when there’s massive issuance going on.

This is without a doubt one of the worst things that can happen. In many respects it overshadows the Fed moving tomorrow, because if the plumbing doesn’t work everything starts to break down. Everything is predicated upon your getting a reasonable funding rate. Otherwise why would you buy this paper to begin with. If you’re funding your overnight position at 6 why would you buy a 10-year at 2?

Today’s funding market was more emblematic of what goes on in emerging markets rather than the largest developed debt market in the world. The bid-offer spread in repo should be a couple of basis points. At 7am it was 100bp. It was moving in increments of 50bp up and down. Dealers weren’t quoting pricing in terms of size. That alone is suggestive of a market that’s broken in the short term. The Fed would’ve been proactive by intervening at that point. By intervening at 10, it’s too late. Most people need funding by 8:30. They didn’t even get to the targeted amount, because it was just too late. The damage was done. If you’re a foreign investor seeing rates all over the map it doesn’t reinforce your viewpoint that things are working well.

“A number of people have called asking what it’s going to look like tomorrow. These shouldn’t be issues for the marketplace. Why would you initiate putting on new positions, trading in secondary market, if you were concerned about how consistent funding’s going to be going forward. It’s just a settlement date -- what’s year-end going to be like? These are questions people have asked me, in panicked way.

It’s a bigger deal than a rate cut by far. It’s meaningless if you put in a rate cut and overnight financing reflects nothing of that rate cut. Which is what’s happening right now. I’m surprised they let this get out of hand.”

How many more fleshwounds is this market going to withstand in the vain hope that Powell will keep delivering?

And before we move on to the rest of the markets, let's put today's repo chaos in context. As Monday Morning Macro notes, Here are a few “large” moves that markets have seen over the past few weeks. Notice anything that stands out?


Suffice to say, we’re not supposed to be talking about $ funding markets – the linchpin of the largest & most important (there, I said it) market in the world, US Treasuries – in the same breath as the wreckage wrought in Argentina only a month earlier. We’re definitely not supposed to be saying “the collapse in the Argentine Peso was barely 1/3 of what we just saw in the market that the Fed controls…”

Yet here we are.

*  *  *

Chinese stocks tumbled overnight...

Source: Bloomberg

European markets were mixed today with France and Germany best, Italy worst...

Source: Bloomberg

Nasdaq, Dow, and S&P limped along sideways today (until the late-day rampathon) as Small Caps and Trannies dipped and ripped...

NOTE - the ramp was all about getting the S&P and Nasdaq and Small Caps back to even on the week

Energy stocks erased a big chunk of yesterday's gains as oil prices slipped back lower...

Bank stocks rolled over after 8 straight days higher...

Source: Bloomberg

Defensives dominated today;s action but cyclicals rebounded from a weak open...

Source: Bloomberg

"Most Shorted" stocks tumbled at the open - no squeeze today - but bounced after Europe closed...

Source: Bloomberg

Factors were volatile again today with value weaker and momentum soaring early but fading late...

Source: Bloomberg

Bank stocks stalled at the usual spot...

Source: Bloomberg

 

Treasury yields extended their decline today with 30Y now down over 10bps since Friday's close

Source: Bloomberg

Meanwhile, WeWork bonds crashed...

Source: Bloomberg

Which makes WeWork a higher risk than Tesla...

Source: Bloomberg

Before we leave rates-land, we note that there is a 13.5% chance of a 50bps cut tomorrow and 86.5% odds of a 25bps cut...

Source: Bloomberg

And that rate-cut will come with full employment, surging inflation, record high stock prices, and near record low interest rates.

The Dollar Index puked pretty hard today, erasing all of yesterday's gains...

Source: Bloomberg

Lots of chatter today about President Trump's falling approval rating. However, seems to be holding up the dollar for now...

Source: Bloomberg

The Dollar dive was dominated by a surge in EUR and GBP...

Source: Bloomberg

Yuan tumbled back below the fix after dismal macro data...

Source: Bloomberg

Altcoins dominated crypto markets today with Ripple soaring most along with Ethereum...

Source: Bloomberg

As Bitcoin trod water, holding above $10,000 once again...

Source: Bloomberg

Silver outperformed, gold was flat (despite the dollar's drop), as crude tumbled on Saudi headlines and copper drifted lower...

Source: Bloomberg

Silver extended yesterday's gains, pushing above $18 once again...

Oil prices tumbled early on after Reuters headlines claimed that Saudi production would be back online within 2-3 weeks but then oil rebounded on Washington reports that missiles were fired from Iran to hit the refinery. However, the new Saudi energy minister spoke to press late on and sent the price back down again...

  • *SAUDI OIL MINISTER: WE HAVE CONTAINED THE DAMAGE

  • *ABQAIQ IS PROCESSING 2 MLN B/D OF OIL: ARAMCO CEO

  • *ARAMCO AIMS TO RESTORE ABQAIQ TO PRE-ATTACK LEVEL BY END-SEPT

Source: Bloomberg

Prepare yourself for higher pump prices...

Source: Bloomberg

And finally,

Tyler Durden Tue, 09/17/2019 - 16:00
Published:9/17/2019 3:12:37 PM
[Markets] Stocks end modestly higher ahead of Fed decision U.S. stocks finished with modest gains Tuesday, a day ahead of the outcome of a Federal Reserve policy meeting that's expected to deliver a rate cut. The Dow Jones Industrial Average rose around 31 points, or 0.1%, to end near 27,108, according to preliminary figures, while the S&P 500 gained around 8 points, or 0.3%, to close near 3,006. The Nasdaq Composite finished near 8,186, a gain of around 32 points, or 0.4%. Stocks bounced back from modest losses seen a day earlier when oil prices spiked in response to a weekend attack on oil-production facilities in Saudi Arabia. Oil fell sharply on Tuesday, however, extending a decline after the country's energy minister said supply would be restored by the end of the month. Published:9/17/2019 3:12:37 PM
[Markets] U.S. stocks end modestly higher ahead of Fed's decision on interest rates U.S. stocks end modestly higher ahead of Fed's decision on interest rates Published:9/17/2019 3:12:37 PM
[Markets] Lewandowski House Testimony Descends Into Congressional Slugfest Lewandowski House Testimony Descends Into Congressional Slugfest

A House Judiciary Committee meeting rapidly descended into chaos, as chairman Jerrold Nadler (D-NY) and other Democrats traded barbs with former Trump campaign manager Corey Lewandowski. 

"Sadly, the country spent over three years and 40 million taxpayer dollars on these investigations. It is now clear the investigation was populated by many Trump haters who had their own agenda — to try and take down a duly elected president of the United States," Lewandowski said in his opening statement - later adding "We, as a Nation, would be better served if elected officials like you concentrated your efforts to combat the true crises facing our country, as opposed to going down rabbit holes like this hearing."

"As for actual 'collusion,' or 'conspiracy,' there was none. What there has been, however, is harassment of the president from the day he won the election," he continued. 

To which President Trump tweeted in response: "Such a beautiful Opening Statement by Corey Lewandowski! Thank you Corey!"

Nadler and Lewandowski then got into it after the former Trump aide refused to answer a question until he was provided with a copy of the Mueller report in order to answer whether he met with President Trump in the Oval Office in 2017, and was asked to persuade then-Attorney General Jeff Sessions to reverse his recusal in the Mueller investigation and set new limits on the probe. 

Nadler continued to needle away, suggesting that there was a "cover-up" underway, and that "no one is above the law, not even the President of the United States."  

 

At one point Lewandowski sassed Rep. Sheila Jackson Lee's (D-TX), calling her long-winded question a "rant." 

Meanwhile, Rep. Doug Collins (R-GA) slammed the committee for trying to "repackage" the Mueller report, and said that Democrats "can't believe that Trump won and tey still can't get over it today."

Tyler Durden Tue, 09/17/2019 - 15:40
Tags
Published:9/17/2019 2:49:13 PM
[Markets] Cut and run: How U.S. stocks react in Fed easing cycles The Federal Reserve is expected to lower interest rates when it issues its policy statement on Wednesday at the close of a two-day meeting. It would be the central bank's second reduction this year, on the heels of a 25 basis point cut at the July policy meeting, the first rate cut since 2008. As recently as last week, markets were pricing in a greater than 90% probability that the Fed will shave another quarter point from its overnight lending rate, which is currently set in a range of 2.00% to 2.25%. Published:9/17/2019 2:49:13 PM
[Markets] RPT-GRAPHIC-Cut and run: How U.S. stocks react in Fed easing cycles Not all U.S. rate-cutting cycles are created equal, at least when it comes to how the stock market reacts. The Federal Reserve is expected to lower interest rates when it issues its policy statement on Wednesday at the close of a two-day meeting. It would be the central bank's second reduction this year, on the heels of a 25 basis point cut at the July policy meeting, the first rate cut since 2008. Published:9/17/2019 2:16:48 PM
[Markets] Investors Are The Most Apocalyptic Since August 2009, Completely Ignoring Last Week's Quant Crash Investors Are The Most Apocalyptic Since August 2009, Completely Ignoring Last Week's Quant Crash

Less than 10 days ago, Morgan Stanley laid out what was the biggest challenge facing the market: the fact that nobody was prepared, or certainly positioned, for the economy to turn better. Well, just one day later, the biggest quant crash since 2007 followed, as consensus factor positions violently reversed following a smattering of good news (and IG rate locks) that sent yields higher, and cascaded into the biggest short squeeze of value positions, coupled with a furious crash in momentum stocks.

In short Morgan Stanley was right, and for a few days, the world recoiled in horror as the biggest consensus trade in the world suffered the market equivalent of a train wreck.

And yet, after billions in P&L quickly changed hands from Quant Fund A to Quant Fund B, has anything really changed?

If one looks at the latest - August - Bank of America Fund Manager Survey, which was conducted September 6-12, so after last week's quantitanic events, polling 235 panelists with $683bn AUM participated in total, the answer is a resounding no because despite the market's violent reversal away from recession trades, the overarching consensus on Wall Street is that a recession is imminent. 

Indeed, as shown in the chart below, recession concerns continue to temper investor risk appetite as 38% of investors polled expect a recession over the next year versus 59% who see a recession as unlikely, the highest net recession risk since August, 2009.

Alongside this, investors have thrown in the towel on any tightening for the foreseeable future, and in September, just 21% of surveyed investors said they expect short-term rates to rise over the next 12-months, a strong reversal from Sept'18 when 87% FMS investors expected higher short-term rates; that said, there was a modest rebound from last month when short-term rate expectations were at their lowest since Nov'08.

Furthermore, as BofA CIO Michael Hartnett notes, there has been "no inflection" in FMS macro sentiment, despite a very small pick-up in global growth expectations to -28% (from -48%) insufficient to boost profits outlook (still in EPS recession, consensus YoY global EPS growth now -3.1%).

Meanwhile, just 11% of FMS investors expecting higher global CPI in the next 12 months, which while up 3%t MoM and 10%t from recent low in Jul'19, is just barely higher than the most bearish FMS inflation outlook since Jul'12.

Amid such apocalyptic sentiment and expectations for plunging rates (to even lower levels from the current record lows), it is perhaps no surprise that fund managers remain overweight assets that outperform in a backdrop of low growth and low rates and have not shown signs of a rotation into value assets (those geared toward rising interest rates and earnings). This would mean that for all the drama over last week's quant quake, virtually not a single (human) investor has actually changed their strategic positioning.

Furthermore, since the market tends to be a reflexive machine which is driven as much by beliefs as money, it is troubling that even after last week's historic outperformance of value over growth, only net 7% of FMS investors expect value to outperform growth over the next 12 months... which nonetheless is up 12ppt vs. last month, which was the lowest level since the Global Financial Crisis.  Here BofA rubs some more salt in the wound reminding its readers that capitulation into growth stocks by FMS investors last month coincided with a sharp outperformance of value in the past three weeks.

Ironically, all this takes place even as investors refuse to accept reality, and a whopping 64% of respondents said they do not think an inversion of the 2s10s US Treasury curve means there will be a recession in the next 12-months... even as they allegedly are positioning for just such a recession.

Finally, focusing on everyone's two favorite charts from the monthly FMS survey, we find no surprises in either the biggest tail risk, or the "most crowded trade", because in 17 of past 19 months, trade war has been the top tail risk (with monetary policy impotence now #2; onus shifts to "fiscal policy" which FMS investors say is most restrictive since Dec'16;

There was also no surprise what consensus saw as the "most crowded trade", which for a 4th month was "Long US Treasurys",  although market leadership has been relatively narrow and since 2013 it has shifted from high yielding debt; long US$; long Quality; long Tech; long Emerging Markets; and now long rates.

Finally, outside "trade deal" (38% FMS investors expect no resolution), top 3 most bullish policy actions = German fiscal stimulus, 50bps cut by Fed, China infrastructure = steeper yield curve.

Incidentally, if anything, the chart above confirms just how clueless Wall Street is as a German fiscal stimulus, all €50BN of it, would have absolutely no impact on the bigger economic picture, as that less than is the amount of liquidity the Fed just injected in one overnight repo.

Tyler Durden Tue, 09/17/2019 - 15:11
Published:9/17/2019 2:16:48 PM
[Markets] Divesting From Oil Companies Does 'Nothing' To Save The Climate, Bill Gates Says Divesting From Oil Companies Does 'Nothing' To Save The Climate, Bill Gates Says

Climate activists who have convinced pension funds to divest from energy stocks as a way of taking a stance on the climate can save their breath, because according to Microsoft founder Bill Gates, they're wasting their time.

Those who are trying to save the world from climate change would be better served by simply investing in companies that are researching disruptive non-carbon energy sources, Gates said (they might also want to consider $MSFT shares). 

For example, investors might have better results if they choose to place their money in Beyond Meat and Impossible Foods - or other companies chasing similarly green business models.

Gates suspects that, for all of the money that has been drained out of the energy sector because of the divestment movement, nothing has been done to reduce emissions.

And the divestment movement hasn't been confined to a few fringe groups. In recent years, it has gained real traction; Now the Church of England, an array of pension funds and sovereign wealth funds, and an investment vehicle that manages the wealth of the Rockefeller family.

"Divestment, to date, probably has reduced about zero tonnes of emissions. It’s not like you’ve capital-starved [the] people making steel and gasoline," he said. "I don’t know the mechanism of action where divestment [keeps] emissions [from] going up every year. I’m just too damn numeric."

During an interview with the FT published Tuesday, Gates questioned the strategy's "theory of change," arguing that it's more effective to support companies trying to fight carbon emissions and disrupt established markets like food and fuel than trying to starve energy giants like ExxonMobil of capital.

"When I’m taking billions of dollars and creating breakthrough energy ventures and funding only companies who, if they’re successful, reduce greenhouse gases by 0.5%, then I actually do see a cause and effect type thing," he said.

Gates is making the media rounds ahead of the UN General Assembly meeting later this month. He and his wife, Melinda, with whom he started the Bill & Melinda Gates Foundation, released their organization's "Goalkeepers" report on Tuesday. The UN is hoping to fulfill these goals by 2030, the FT said. But Bill and Melinda Gates are trying to convince the world that not enough is being done, and that achieving their goals would be "unrealistic" on the current trajectory.

The Goalkeepers report says the response to climate change can't be limited to reining in emissions, and should instead focus on helping society cope with the changes to the climate that have already happened.

"We’re nowhere near improving fast enough to reach those goals," Gates said.

"It is a terrible injustice that the people who suffer the most are the poorest farmers in the world. They didn’t do anything to cause climate change, but because they rely on rain for their livelihoods, they are at the front lines of coping with it," Gates said.

Gates has also been grappling with some unwanted publicity this week, following reports that he made a $2 million donation to the MIT Media Lab on Jeffrey Epstein's behalf. Gates and his people have denied that the two men had any kind of "business or personal relationship."

Tyler Durden Tue, 09/17/2019 - 14:24
Published:9/17/2019 1:45:18 PM
[Markets] The Tell: ‘Apple a value stock?’ The Great Rotation takes a strange spin As markets churn, there’s some unexpected fallout in fund holdings, including classifying Apple, one of the world’s biggest companies, as a “value” play.
Published:9/17/2019 1:45:18 PM
[Markets] Chesapeake Energy's stock tumbles as oil prices pull back sharply Shares of Chesapeake Energy Corp. tumbled 13.8% in very active afternoon trading, weighed down by the pullback in crude oil prices following the previous session's rocket ride. Trading volume topped 74.6 million shares, compared with the full-day average of about 60.3 million shares, and enough to make the stock the most actively traded on the major U.S. exchanges, according to FactSet data. Chesapeake's stock had run up 15.7% on Monday, as the weekend attacks on Saudia Arabian oil facilities sent crude oil futures shooting up 15%, the biggest one-day gain since January 2009. On Tuesday, crude futures fell 5.6%, extending declines after Saudi's energy minister reportedly said oil production will be fully back online by the end of the month. On Tuesday, crude oil prices dropped 5.6%. Chesapeake's stock has lost 15.5% year to date, while the SPDR Energy Select Sector ETF has gained 8.4% and the Dow Jones Industrial Average has advanced 16.0%. Published:9/17/2019 1:45:18 PM
[Markets] Gold notches second straight gain, adds to climb toward 1-week high Gold futures climb on Tuesday, building on the hefty gain seen a day earlier to settle at a more than one week high for a second session in a row, with traders continuing to monitor developments tied to the attacks on Saudi Arabian oil-infrastructure as they shift focus to the Federal Reserve meeting this week. Published:9/17/2019 1:13:23 PM
[Markets] Yet another death has been linked to vaping-related lung illness Meanwhile, the CDC said Monday it had activated its Emergency Operations Center.
Published:9/17/2019 1:13:23 PM
[Markets] Could Ultra-Low Interest Rates Be Contractionary? Could Ultra-Low Interest Rates Be Contractionary?

Authored by Ernest Liu, Atif Mian, and Amir Sufi via Project Syndicate,

Although low interest rates have traditionally been viewed as positive for economic growth because they encourage businesses to invest in enhancing productivity, this may not be the case. Instead, extremely low rates may lead to slower growth by increasing market concentration and thus weakening firms' incentive to boost productivity.

The real (inflation-adjusted) yield on ten-year US treasuries is currently zero, and has been extremely low for most of the past eight years. Outside of the United States, meanwhile, 40% of investment-grade bonds have negative nominal yields. And most recently, the European Central Bank further reduced its deposit rate to -0.5% as part of a new package of economic stimulus measures for the eurozone.

Low interest rates have traditionally been viewed as positive for economic growth. But our recent research suggests that this may not be the case. Instead, extremely low interest rates may lead to slower growth by increasing market concentration. If this argument is correct, it implies that reducing interest rates further will not save the global economy from stagnation.

The traditional view holds that when long-term rates fall, the net present value of future cash flows increases, making it more attractive for firms to invest in productivity-enhancing technologies. Low interest rates therefore have an expansionary effect on the economy through stronger productivity growth.

But if low interest rates also have an opposite strategic effect, they reduce the incentive for firms to invest in boosting productivity. Moreover, as long-term real rates approach zero, this strategic contractionary effect dominates. So, in today’s low-interest-rate environment, a further decline in rates will most probably slow the economy by reducing productivity growth.

This strategic effect works through industry competition. Although lower interest rates encourage all firms in a sector to invest more, the incentive to do so is greater for market leaders than for followers. As a result, industries become more monopolistic over time as long-term rates fall.

Our research indicates that an industry leader and follower interact strategically in the sense that each carefully considers the other’s investment policy when deciding on its own. In particular, because industry leaders respond more strongly to a decline in the interest rate, followers become discouraged and stop investing as leaders get too far ahead. And because leaders then face no serious competitive threat, they too ultimately stop investing and become “lazy monopolists.”

Perhaps the best analogy is with two runners engaged in a perpetual race around a track. The runner who finishes each lap in the lead earns a prize. And it is the present discounted value of these potential prizes that encourages the runners to improve their position.

Now, suppose that sometime during the race, the interest rate used to discount future prizes falls. Both runners would then want to run faster because future prizes are worth more today. This is the traditional economic effect. But the incentive to run faster is greater for the runner in the lead, because she is closer to the prizes and hence more likely to get them.

The lead runner therefore increases her pace by more than the follower, who becomes discouraged because she is now less likely to catch up. If the discouragement effect is large enough, then the follower simply gives up. Once that happens, the leader also slows down, as she no longer faces a competitive threat. And our research suggests that this strategic discouragement effect will dominate as the interest rate used to discount the value of the prizes approaches zero.

In a real-world economy, the strategic effect is likely to be even stronger, because industry leaders and followers do not face the same interest rate in practice. Followers typically pay a spread over the interest rate paid by market leaders – and this spread tends to persist as interest rates fall. A cost-of-funding advantage like this for industry leaders would further strengthen the strategic contractionary impact of low interest rates.

This contractionary effect helps to explain a number of important global economic patterns.

First, the decline in interest rates that began in the early 1980s has been associated with growing market concentration, rising corporate profits, weaker business dynamism, and declining productivity growth. All are consistent with our model. Moreover, the timing of the aggregate trends also matches the model: the data show an increase in market concentration and profitability from the 1980s through 2000, followed by a slowdown in productivity growth starting in 2005.

Second, the model makes some unique empirical predictions that we test against the data. For example, a stock portfolio that is long on industry leaders and short on industry followers generates positive returns when interest rates fall. More important, this effect becomes even stronger when the rate is low to begin with. This, too, is consistent with what the model predicts.

The contractionary effect of ultra-low interest rates has important implications for the global economy. Our analysis suggests that with interest rates already extremely low, a further decline will have a negative economic impact via increased market concentration and lower productivity growth. So, far from saving the global economy, lower interest rates may cause it more pain.

Tyler Durden Tue, 09/17/2019 - 14:07
Published:9/17/2019 1:13:23 PM
[Markets] "Socrates, Yogi Berra, And Donald Rumsfeld Walk Into A Bar..." "Socrates, Yogi Berra, And Donald Rumsfeld Walk Into A Bar..."

Authored by Danielle DiMartino Booth via QuillIntelligence.com,

  • With stocks at all-time highs, any significant correction will have a devasting effect on the 55% of boomers who have retirement savings; of the 10,000 boomers retiring daily 1,500 have at best two years of living expenses while 4,000 will be living solely off Social Security

  • University of Michigan data isolates a source of risk to the business outlook households perceive but can’t articulate which has spiked recently; “Background Risk” which cannot be avoided or diversified has become the second largest driver of recession odds

  • Even with spreads a third narrower since December, the junk bond market issued $13B of new paper last week, a two-year high; spreads for the lowest-rated junk bonds, ‘CCC,’ have only narrowed by 11% from the end of last year indicating that taking on risk has its limits

Heresay is all we get when it comes to Socrates. But we take what we can get because it’s so good. With that, according to Plato, Socrates coached hubristically inclined mortals as such:

“I only know that I don’t know anything.”

Some 1,600 years after his untimely death in 399 B.C., the philosopher Ibn Yami categorized this thinking. We’d like to focus today on Yami’s third level of actualization:

One who doesn’t know, but knows that he doesn’t know... his limping mule will eventually get him home.” 

Or if you prefer the over-cooked version of this adapted in the modern era by Donald Rumsfeld, the “known unknowns,” things we’re aware of, but can’t fathom, or in one word – risk.

In the canyons of Wall Street, traders are paid based on their knack for gauging real-time risk. Throughout America, mom and pop investors are rewarded based on their ability to anticipate the megacycles elongated by the Federal Reserve. There are millions of baby boomers who would have long since retired if they hadn’t been wiped out by the busts that followed booms in their adult lives. The exceptions are those who were willing to cash out early and got back in, a.k.a. the lucky few.

Today, countless members of this same cohort live in more home than they can afford to carry into retirement and don’t have the luxury of time to wait out their stock portfolio’s next body blow. As per fresh data out of the Insured Retirement Institute, of the 55% of boomers who have retirement savings, one-in-four have less than $100,000The Bureau of Labor Statistics reports that those 65 and older spend $48,885 a yearQuick math dictates that 15% of the 10,000 boomers retiring daily have at best two years of living expenses while 40% will immediately be living solely off Social Security. With that as a backdrop, how would a 56% decline in the S&P, matching the last downturn, go over?

It’s no secret that acute overvaluation heightens the odds of a financial event, whether the trigger is a drone attack or a massive strike at a Big 3 automaker. The problem is neither of these contingencies were known knowns as of the close of trading Friday.

This somewhat Socratic exercise brings us to some micro data via the University of Michigan. Every month, those surveyed are asked about the source of bad news they’re hearing about changing business conditions. The categories include government/elections, unemployment, lower consumer demand, higher prices, tighter credit, energy crisis, stock market or trade/global economy. And then there is the unknown, the factor making things worse that households just can’t articulate even though they know it’s there. As you can see on the blue line above, the last two months have seen a spike in unidentifiable risk.

A parallel gauge backs this growing anxiety. According to J.P. Morgan, the largest contributor to the current 45% probability of recession striking within a year is Historical Average, at 17%. Add up the other economic components and you get to 33%. And then there’s  “background risk,” which at 12% is the second largest driver of recession odds. As per Google, “Background risk is risk that cannot be avoided or diversified…(it) makes people less willing to take other independent risks.” QI’s Dr. Gates sagely asked, “Got trade war?”

We would add that high yield investors’ fear of the unknown is heightened despite its intangibility. To much fanfare, corporate bond issuance has been on fire. The party has extended to the junk bond market where companies sold $13 billion of bonds last week, a two-year highThe premiums investors pay over comparable maturity Treasuries have narrowed by nearly a third, to 365 basis points (bps) from 526 bps at the end of last year.

The same cannot be said of ‘CCC’ junk bonds, the last rung on the credit rating scale before an issuer defaultsSpreads have come in 11%, to 878 from 989 in December and averaged an elevated 821 bps over the past 12 monthsWe don’t deny that the trade has been “Risk On” but only up to a point.

As QI friend Peter Cecchini of Cantor Fitzgerald wrote recently, junk bond investors are buying “pure froth” as leverage pushes seven times EBITDA at a growing number of firms while that same EBITDA equates to less than 1.5 times annual interest expenses. We concur with Bloomberg’s choice of a closing quote from Cecchini’s:

“It’s unclear what the catalyst for a severe sell-off might be, but we don’t expect more spread compression.”

The outlook overall is clearly “unclear” for a growing number of investors, big and small. But just because you can’t identify the risk doesn’t mean it’s not there.

Tyler Durden Tue, 09/17/2019 - 13:25
Published:9/17/2019 12:41:58 PM
[Markets] Outside the Box: Blockchain will soon revolutionize our opaque and inefficient capital markets Blockchain will speed up trading, eliminate outdated processes and give individuals access to more investment options.
Published:9/17/2019 12:41:58 PM
[Markets] US STOCKS-Wall Street subdued as focus shifts to Fed U.S. stocks were modestly lower on Tuesday as investors moved to the sidelines ahead of the Federal Reserve's two-day policy meeting, while the impact of weekend attacks on Saudi Arabia's biggest oil refinery faded. Equity markets took a hit on Monday as the attacks wiped out nearly half of Saudi Arabia's oil production, sending oil prices soaring, while fuelling geopolitical tensions. "It looks like the market is largely overlooking the possibility of conflict at this point," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, in Charlotte, North Carolina. Published:9/17/2019 12:41:58 PM
[Markets] Bull trend absorbs oil shock, S&P 500 maintains first support Technically speaking, the major U.S. benchmarks have weathered a September oil shock against a still comfortably bullish bigger-picture backdrop, writes Michael Ashbaugh. Published:9/17/2019 12:12:57 PM
[Markets] Apple’s new iPhone 11s mean the two-year upgrade cycle is officially dead Apple Inc.’s new iPhones have great cameras and battery life, but the key question remains whether consumers will deem them worth an upgrade.
Published:9/17/2019 12:12:57 PM
[Markets] JP Morgan Blames Bear Stearns For 'Criminal Enterprise' At Precious Metals Trading Desk JP Morgan Blames Bear Stearns For 'Criminal Enterprise' At Precious Metals Trading Desk

Now that prosecutors have blamed what they have described as a criminal organization operating inside JP Morgan, it appears the largest bank in the US by assets is resorting to an old strategy for sloughing off accusations of corporate fraud: Blaming it all on an acquisition.

According to Bloomberg, two traders who joined JPM's precious metals trading desk after the takeover of Bear Stearns helped introduce the illegal manipulation strategy known as 'spoofing' to their peers on the desk, including the bank's now-former head of the bank's precious metals trading desk, Michael Nowak, who was one of three employees charged with participating in an organized fraud yesterday. Though prosecutors allege that some of the desk's employees were already engaged in 'deceptive practices'.

The two men who purportedly brought 'spoofing' to JP Morgan are Gregg Smith, one of the men arrested yesterday, and Christiaan Trunz, who joined the desk after JPM's government-backed takeover of Bear Stearns. Trunz was famously quoted in yesterday's indictment, including one exchange where he was telling a co-conspirator about fake orders being put out by Smith.

Prosecutors said that ultimately 12 JPM employees used the strategy during the years between 2008 and 2016 that are the primary focus of the investigation.

That pair, Gregg Smith and Christiaan Trunz, showed their new JPMorgan colleagues “a new style of layering multiple deceptive orders at different prices in rapid succession," prosecutors said. The strategy made their market spoofing more difficult to execute and detect, prosecutors wrote in the indictment of Smith and two others. Trunz pleaded guilty last month and is cooperating with authorities.

The strategy was adopted by Michael Nowak, who was JPMorgan’s global head of precious metals trading when he was put on leave last month. Federal prosecutors charged Nowak, Smith and a third man, Christopher Jordan, of "conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity" - language that sounds more like RICO charges.

On Monday, Jordan and Nowak appeared handcuffed in federal court in Newark, New Jersey, where US Magistrate Judge Michael Hammer released them on $250,000 bond. They could face up to 30 years in prison on the most serious charges. Meanwhile, Jordan was released to the custody of his parents pending being released this week to a residential alcohol treatment program (“Chris Jordan is innocent of these heavy-handed charges, and we intend to defend him vigorously," his attorneys said. Nowak was ordered to receive mental health testing and treatment. The men were forbidden to have any contact with any other current or former employees of the JPM precious metals trading desk.

Earlier, Trunz, a former Georgetown lacrosse player, and the other former JPMorgan trader who admitted guilt said the manipulation was routine and sanctioned by higher ups on the desk.

"While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I intended to cancel before execution," former trader John Edmonds said at a October 2018 hearing, after admitting to commodities fraud and conspiracy. Edmonds entered into a cooperation agreement with the CFTC in July.

Trunz told a federal judge in Manhattan last month that spoofing trades of precious metals was rampant at the bank and that he learned the technique from other traders at Bear Stearns and JPMorgan. Trunz, who entered his guilty plea on Aug. 20, said he manipulated futures markets for gold, silver, platinum and palladium from offices in New York, London and Singapore from 2007 to 2016.

Of course, the traders who are facing trial have reason to be optimistic. Prosecutors have failed to convict traders in the last two big securities fraud trials.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tyler Durden Tue, 09/17/2019 - 13:04
Tags
Published:9/17/2019 12:12:57 PM
[Markets] What Happens Next In Repo? The World's Biggest Interdealer Broker Explains What Happens Next In Repo? The World's Biggest Interdealer Broker Explains

When it comes to the shady events in the shadow banking world of collateral assets and repurchase agreements, nobody does it better than interdealer broker, ICAP, which is not only intimately familiar with just how the Fed's plumbing vision takes place in the real world, but also happens to be the go to firm for pricing on such suddenly critical market stress indicators as repurchase rates.

And sure enough, it was none other than ICAP which first - correctly - said this morning when overnight G/C repo hit 10%...

... that the Fed would announce its first repo hike in a decade, but also did so with alarming accuracy and detail, as the following note sent out by Icap's Mike Derrico at 6:45am laid out:

Tax Date Funding Squeeze:  Overnight System RPs?

This week’s funding squeeze has raised a number of questions about the outlook for the Fed’s balance sheet.  We’re going to punt most of the longer-term questions because we want to focus this morning on one very short-term option that the Fed might consider:  for the first time in many years, we think it is at least conceivable that the Fed’s Open Market Desk this morning might arrange an overnight system RP with primary dealers of the sort that was commonplace before the expansion of the Fed’s balance sheet in 2009.

The Desk has stood by and watched any number of episodes of temporary repo market pressure in recent years without responding by injecting cash.  (The most notable case was the spike in the Treasury GCF average to more than 5.00% on December 31.)  While the Desk has some leeway to respond to major market -functioning disruptions (blackouts, etc.), the FOMC has never instructed it to intervene solely for the purpose of limiting repo-rate volatility.  The Desk’s directive is framed solely in terms of the FOMC’s effective federal funds rate target.

This week’s episode is different.  We think there is a significant risk that the fed funds rate for Tuesday will set above the 2.25% target upper boundary of the Fed’s target rate.  Our very tentative guess is that the effective funds rate for Monday, due out at around 9:00 this morning, will remain within the range, but only because the effective rate is calculated as a median.  A significant volume of activity, including much that trades directly rather than in the broker market, may have been booked before the extent of the repo market carnage was apparent.  The mean weighted average for fed funds on Monday probably moved above the target range, but the median may have been below it.

That probably won’t be true to today.  With overnight repo trading at rates above 3% in the reg market yesterday afternoon, lenders in the fed funds market are likely to be pickier this morning.  Even if repo market pressure in general eases a bit from yesterday, the effective funds rate could move up from yesterday’s level.  We think the odds favor a reading above 2.25% for September 17, regardless of whether the September 16 fixing that will be published around 9:00 AM today is in the target range or not.

That poses a challenge for the Fed.  On the one hand, traditional funds rate-targeting guidelines would not only allow a traditional overnight RP with the primary dealers this morning; they would appear to call for one.  On the other hand, the first large-scale system RP in a decade would raise a huge number of questions in the market, which might be difficult to disentangle from the broader policy message.  We will confidently predict that many traders in many markets would gloss over the nuances of the difference between EFFR and GCF volatility, and jump directly to the conclusion that Fed balance sheet policy had reached another major inflection point.  Even though we think that an overnight or short-term system RP with the primary dealers would qualify as “business as usual” in some important ways, we also know that the first system RP in a decade would reverberate through the markets. 

We have been lobbying for months for the Fed to pre-announce its intention to arrange traditional RPs with the dealers on key pressure points (mid-month, month-end) as a way of limiting the scope for overnight volatility and to gather information about how Fed repo injections would affect broader market conditions.  Despite that, we’ll confess that we are a little daunted by the communications challenges of making a technical change of this nature purely reactively, and on the first day of an FOMC meeting to boot.  We think a strong argument could be made for arranging a system repo this morning, but we’re not sure it’s a convincing argument.

Operational Details.  If the Fed does arrange an overnight or term RP this morning, we would expect the operation to follow the format of the Desk’s most recent small-value “operational readiness” exercise.  As matter of “prudent planning”, the Desk conducts small-scale test operations with the primary dealers on a regular basis.  The most recent tests were in May, when the Desk arranged $75 million of 2-day terms RPs on May 8 and $75 million of overnight RPs on May 13

Both operations were multi-tranche RPs in which the Fed accepted Treasury, agency and MBS collateral, with potentially different stop-out rates for each of the three asset classes.  (The MBS stop-out was just 1 basis point above the Treasury stop-out in those operations, but the Desk might impose a wider spread if it were to conduct an operation today.)  We would not expect the Fed to pre-announce a size for any operation conducted this morning, as there would be a benefit in reviewing dealer propositions before determining the amount of funding to provide. 

The Desk has generally employed a multi-price discriminatory format than a Dutch-auction format for its open market repo operations.  We have no reason to expect that to change.

The Desk would presumably want to give dealers some time to think through their bidding strategy if it were to announce an RP this morning.  The two May operations both closed at 10:00 AM.  If the Fed has not announced an operation by 9:00 AM, the odds of a repo injection this morning would drop off quickly.  (If the Fed’s goal is to prevent the median fed funds rate from rising above the target range, it needs to make its intentions clear as early in the session as possible to prevent early trades from going through at elevated levels.)

So what happens next? Well, now that the Fed has successfully put out the fire in the monetary basement, if only for the day until the repo rolls tomorrow, the question is what the Fed will do or say tomorrow to ease the market's fear that a funding crunch is deteriorating (immediately catalysts for today's move being temporary notwithstanding). Here, according to ICAP, there are at least three other longer-term options that the FOMC could consider in its implementation note tomorrow afternoon. 

  • Another IOER Tweak. Picking up on what BofA's Mark Cabana said overnight, namely that the Fed will cut IOER by at least 5bps and as much as 10bps depending on sustained FF pressure, ICAP notes that there was a lot of speculation yesterday about the possibility of another 5 basis point IOER tweak.  On the assumption that the top of the target range will be lowered by 25 basis points to 2.00%, the IOER could be cut by 30 bp to 1.80%, which would be just 5bps above the 1.75% bottom range of the Fed Funds rate. ICAP notes that it has "no institutional objection to such an adjustment, but we’re not sure it would address the particular challenges the Fed faces at present." Specifically, as Derrico explains, the problem yesterday was disorderly trading rather than a continued incremental evolution in the spread between the major overnight indexes and the IOER.  As such, it’s not clear that tweaking the IOER by 5, or even 10, basis points will help a lot on a day when fed funds traded up to 3.00%.  Still, ICAP "wouldn’t rule out an IOER tweak, but our guess is that the FOMC would conclude that another tweak would not address the specific problem the FOMC is facing."
  • A Standing Repo Facility. Having been discussed for months, the interdealer broker notes the Fed is likely to introduce a standing repo facility at some point in the coming six to twelve months, "but this remains an extremely complicated issue for the Fed. " Questions of who would have access, at what price and for what specific purpose remain to be determined, and the FOMC is not going to rush into any decisions. As such, this will likely be a 2020 discussion, not a 2019 event.
  • Pre-Announced System RPs on Peak Pressure Dates. We haven’t disguised the fact that we’re in favor of this as a short-term expedient.  Even if the Fed does not intervene in the repo market this week, we would encourage it to announce tomorrow that it would be prepared to intervene on the September 30 quarter-end statement date, and on future high-pressure days.  We think we would all learn a lot from the results, and the Fed would be able to reduce near-term funding cost volatility in the process.
  • QE. A fourth option would be to resume permanent purchases of Treasuries on a net basis to prevent the further erosion in reserve balances.  As ICAP notes, "this may have been the single most popular suggestion in our conversations with customers, but we think it is highly unlikely that the Fed would rush into something that would be perceived as a resumption of quantitative easing in response to a couple of days of technical pressure." Derrico's view is that this week’s squeeze reflects temporary seasonal flows "and can be best addressed by temporary open market operations", i.e. QE.  It is highly unlikely that the Fed would consider doing additional outright purchases large enough to ease funding market pressure on the scale seen this week, and it is almost certainly unnecessary as well.  If the Fed is feeling aggressive, two-week term RPs would meet the market’s needs quite well.

Which one (or more, or none) of these four options the Fed picks will be unveiled tomorrow (somehow we doubt Powell will launch QE but who knows - at least it would get Trump off his back); Meanwhile, all else equal, the market has the following funding considerations in the coming week, all according to ICAP.

  • Wednesday:  The influx of GSE cash on Wednesday may provide a little relief.
  • Thursday:  The widely-anticipated quarter-point Fed rate cut will push all the major overnight indexes down on Thursday.  However, the precise degree of pass-through to the secured and unsecured markets is uncertain given the extent of the technical distortions in the early part of the week.
  • Friday:  Our highly tentative and very low-conviction guess is that technical pressures will retreat heading into the weekend.
  • Monday:  In our (perhaps overly optimistic) base case, mid-month pressures could recede a little more on Monday.
  • Tuesday:  Bill settlement pressures and the initial outflow of GSE cash could push rates higher next Tuesday.

Bottom line: even if the Fed does nothing tomorrow, convinced that today's repo was sufficient to put out the funding fire, things will be relatively normal... until next Tuesday when the  blowout in repo rates is likely to repeat.

Tyler Durden Tue, 09/17/2019 - 12:24
Published:9/17/2019 11:42:42 AM
[Markets] The Dow Is Down 40 Points Because Investors Are Caught Between the Fed and Saudi Arabia Nordstrom fell 8.3% and Macy’s lost 4.3% as retailers got hit by fears of higher gas prices and a pullback from their recent gains. Published:9/17/2019 11:42:42 AM
[Markets] Bitcoin Is A Hedge Against Gov't "Fiscal Irresponsibility", Analyst Bitcoin Is A Hedge Against Gov't "Fiscal Irresponsibility", Analyst

Authored by Marie Huillet via CoinTelegraph.com,

Equities portfolio manager turned crypto fund executive Travis Kling has argued that Bitcoin has come into its own as a unique hedge within the current macroeconomic climate.

image courtesy of CoinTelegraph

In an interview with CNN on Sept. 15, Kling argued that the specific properties of Bitcoin make it an exceptional insurance policy against monetary and fiscal irresponsibility from central banks and governments globally.

“Crypto has been created for such a time as this”

Kling — a veteran of the multi-billion-dollar hedge fund Point72 —  outlined how his interest in cryptocurrencies had evolved over the course of Bitcoin’s decade-long history and how, as he garnered more knowledge, he had come to recognize the asset as being the “most significant investment opportunity of a generation.”

While developments within the crypto markets may formerly have been isolated from the traditional financial sector, Kling argued that the latest, compelling evolution in Bitcoin’s identity is its present interaction with legacy markets. He said:

“Now is an incredibly interesting time from a global macro perspective and [...] it appears that crypto has been created for such a time as this. With what we have in terms of monetary and fiscal policies from central banks and governments, big tech overreach, government overreach, data privacy issues that are coming to the center of the collective consciousness.

As a “non-sovereign, hard cap supply, global, immutable, decentralized digital store of value,” he said, Bitcoin should be considered separately from other crypto assets — for these very properties are what distinguishes it as a particularly robust and timely investment.

“The hardest money in human history”

Kling observed that the world needs Bitcoin as an insurance policy “more today than it did yesterday” and that it’s going to need it “more tomorrow more than it does today,” in light of what central bank and government policies:

“It’s apparent that central banks are all racing to devalue their currencies [...] What are they devaluing against? They’re devaluing against assets that have provable scarcity [...] Bitcoin has even more provable scarcity than gold, it’s the hardest money in human history.”

In the throes of an uncertain world economic picture, Kling’s perspective has been broadly — if not unanimously — shared by analysts of different stripes. 

In August, digital asset research firm Delphi Digital published a report arguing that the present macroeconomic landscape is creating the “perfect storm” to ignite Bitcoin price appreciation.

Also, this summer,  the head of global fundamental credit strategy at Deutsche Bank remarked that central banks’ dovish policies are positively impacting “alternative” currencies like Bitcoin. 

Anthony Pompliano, meanwhile, has echoed this in proposing that the European Central Bank’s dovish turn will be “rocket fuel” for Bitcoin’s price performance.

Tyler Durden Tue, 09/17/2019 - 11:50
Published:9/17/2019 11:11:11 AM
[Markets] The Dow Jones Industrial Average Is Barely Moving. Nordstrom and Macy’s Are Getting Hammered. It’s a yawner of a day, what with it sandwiched between the attacks on Saudi Arabia over the weekend and the Fed’s rate decision on Wednesday. that hasn’t stopped some old-style retailer from getting hit...hard Published:9/17/2019 11:11:11 AM
[Markets] Outside the Box: Yes, millennials actually can save for retirement. Here’s how A simple guide to the many options available to young workers.
Published:9/17/2019 11:11:11 AM
[Markets] Dow remains in red as S&P and Nasdaq clamber into positive territory Dow remains in red as S&P and Nasdaq clamber into positive territory Published:9/17/2019 10:41:58 AM
[Markets] 'Low-Flying'-Missiles Used In Aramco Attack Were Launched Inside Iran: Report 'Low-Flying'-Missiles Used In Aramco Attack Were Launched Inside Iran: Report

The US has reportedly traced the cruise missiles used during a weekend attack that crippled half of Saudi Aramco's oil production back to their point of origin: Iran. Or at least that's what one US official is telling CBS News.

Many have argued that there's zero upside for Iran in carrying out attacks like this (the region has also endured several attacks on oil tankers that have been blamed on Iran), but the US has insisted that Tehran was responsible for the attack, and that the missiles used were beyond the sophistication of Yemen's Houthis, who had initially taken credit for the attacks.

According to US sources, 17 missiles or drones were fired, not the 10 the Houthis claim. Cruise missiles may have been used, and some targets were hit on the west-northwest facing sides, which suggests the projectiles were fired from the north, from Iran or Iraq.

Investigators have reportedly identified the exact location, purportedly in southern Iran, where a combination of more than 20 drones and cruise missiles were launched against the Saudi oil facilities.

Additionally, The Wall Street Journal reports that Saudi Arabia is increasingly confident that Iran directly launched a complex missile and drone attack from its southern territory on Saturday that battered the kingdom's oil industry, according to people familiar with the investigation.

"Everything points to them," said a Saudi official who wasn't authorized to speak to the media, referring to Iran.

"The debris, the intel and the points of impact."

Nevertheless, lawmakers from both parties in Washington have expressed reservations about the prospects of an American military strike on Iran.

Tyler Durden Tue, 09/17/2019 - 11:29
Tags
Published:9/17/2019 10:41:58 AM
[Markets] Caterpillar and Other Machinery Stocks Could Gain From Higher Oil Prices Higher energy prices can hurt consumer pocketbooks, affecting the overall economy, but some sectors, such as heavy-machinery makers, benefit from higher oil prices. Published:9/17/2019 10:12:25 AM
[Markets] Canadian RCMP Official's Arrest Could Compromise 'Five Eyes' Intelligence Alliance Canadian RCMP Official's Arrest Could Compromise 'Five Eyes' Intelligence Alliance

There's something rotten in the Five Eyes intelligence alliance, an intelligence sharing community that includes the US, Canada, the UK, New Zealand and Australia. Canada on Friday revealed that it had arrested the former director general of the RCMP's National Intelligence Coordination Center, one of the country's top intelligence officials, but Canada wouldn't say exactly what he had done.

That has allowed unsavory suspicions that he was some how in league with Russian criminals who laundered money through Canada to fester.

All we know is that Cameron Ortis, a director general with the RCMP’s intelligence unit, has been charged under a 2012 security of information law used to prosecute spies. According to Reuters, his arrest on what amounts to charges of leaking secret information could hurt intelligence operations by "allied nations," the RCMP said on Monday. And that could hurt Canada's standing inside five-eyes.

Here's the RCMP's only comment on the arrest so far:

"We are assessing the impacts of the alleged activities as information becomes available," RCMP Commissioner Brenda Lucki said in a statement. "We are aware of the potential risk to agency operations of our partners in Canada and abroad and we thank them for their continued collaboration."

[...]

"Mr. Ortis had access to information the Canadian intelligence community possessed," said Lucki. "He also had access to intelligence coming from our allies both domestically and internationally."

Creating even more suspense, RCMP Commissioner Lucki told Reuters that the "extremely unsettling" allegations against Ortis have "shaken many people throughout the RCMP."

Lucki is expected to provide an update on Tuesday.

But this didn't stop Reuters from quoting Bill Browder, the UK money manager who became a booster for the Russia collusion narrative that afflicted the first two years of the Trump Administration.

Browder said he met Ortis in 2017 twice after requesting the RCMP look into money laundering by Russian criminal groups.

"If he is compromised in any way then it obviously raises questions about whether the investigation we had tried to initiate was compromised," he said by phone from London, adding that the arrest had been "a complete surprise."

Has Moscow managed to penetrate five eyes? There's no evidence of that, at least none that has been shared with the press or the public, but as Reuters makes clear, it shouldn't be ruled out.

Tyler Durden Tue, 09/17/2019 - 11:00
Published:9/17/2019 10:12:25 AM
[Markets] "There Was No Crash": Tesla In Sweden Goes Up In Flames After Passenger Seat Catches Fire "There Was No Crash": Tesla In Sweden Goes Up In Flames After Passenger Seat Catches Fire

Stunning pictures have emerged from Swedish website Aftonbladet showing a Tesla Model S fully engulfed in flames after the car's passenger seat reportedly caught fire while the car was being driven.

And the fire looks like it may just be another case of a Tesla spontaneously combusting. The car was reportedly not involved in a crash, according to the report. "The car started to burn by itself," the report says. 

The car began burning on the "E18 at Annelund's traffic area, in the direction of Västerås from Stockholm," a translated version of the article says.

The driver was able to calmly stop the car and get himself out unharmed.

Peter Pettersson, management operator at the Stockholm rescue service said that after the fire, there is only a "shell" of the car left. 

We will follow up on this story as more details become available. 

Tyler Durden Tue, 09/17/2019 - 10:20
Published:9/17/2019 9:42:22 AM
[Markets] U.S. home-builder confidence rises, despite growing concerns about economy U.S. home-builder confidence rises, despite growing concerns about economy Published:9/17/2019 9:42:22 AM
[Markets] Futures Movers: Oil prices sink on report Saudi output will recover quickly after weekend attack Oil futures on Tuesday drop by roughly 5% after registering one of the sharpest rallies on record a day earlier, following a report that output that Saudi Arabian output will be quick to recover after weekend attacks on major crude facilities disabled more than half of the kingdom’s daily crude production level.
Published:9/17/2019 9:42:22 AM
[Markets] US STOCKS-Wall Street falls as energy drags; focus shifts to Fed meeting U.S. stocks edged lower on Tuesday as a drop in oil prices weighed on the energy sector, while investors stayed away from making big bets ahead of the Federal Reserve's two-day policy meeting, where it is widely expected to cut interest rates. The U.S. central bank concludes its policy meeting on Wednesday, with traders currently expecting a 65.8% chance of a quarter percentage point cut from the Fed this week, down from 88.8% on Friday, according to CME's FedWatch. "It's just typical trading on the vigil of a Fed meeting," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. Published:9/17/2019 9:42:22 AM
[Markets] Outside the Box: Is a stop-loss order a good idea? A stock I own is soaring and I’m afraid to sell — or hold.
Published:9/17/2019 9:11:54 AM
[Markets] Questions, Not Answers, Surround U.S. Push To War With Iran Questions, Not Answers, Surround U.S. Push To War With Iran

Authored by Tom Luongo,

When President Trump fired National Security Adviser John Bolton last week rational people the world over cheered.

When there was news that Trump would meet on the sidelines of the U.N. General Assembly in a few weeks there were sighs of relief.

When Benjamin Netanyahu goes to Moscow to get Vladimir Putin’s blessing to continue airstrikes in Syria was told no, the world said, “Finally! Enough is enough.”

The problem is that there were also very powerful people who were not happy about these things.

Moreover, there are a lot of nervous people out there worried that Tuesday’s election in Israel will not go the way they want it.

A lot of people have invested a lot of time and money in ensuring Netanyahu stays in power. And I don’t just mean Bibi himself, who will likely go to jail on corruption charges if he doesn’t win.

I mean a lot of people in the U.S., Saudi Arabia, the U.K. and in Europe, all of the places where anti-Russian, anti-Iranian and pro-Israeli sentiments abound.

And this brings up the main question I always have in the wake of one of these major escalations of tensions with the country currently catching the Twin Eyes of Sauron in D.C. and Tel Aviv.

Why do they always seem to occur right after moments of de-escalation and there’s the threat of peace breaking out somewhere?

Why is it that every time President Trump tries to push the U.S. and the world away from war within a few days there’s an incident which pushes us right back to the brink of it?

Trump visits Kim Jong-un in North Korea, making history, there are attacks on UAE oil tankers. Trump refuses to attack Iran over them shooting down a Global Hawk drone in Iranian airspace escorted by a fully-crewed Poseiden P-8.

Britain seizes the Grace 1 oil tanker. Israel attacks Shi’ite Militia targets outside of Baghdad.

Go back to President Trump first, and biggest, geopolitical blunder. The Syrian Army wins a major battle and is on the verge of victory, and a chemical weapons attack happens deep in Al-Qaeda controlled territory blamed on the SAA.

Trump then launches 57 tomahawks at the Al-Shairat airbase.

Trump declares we’re pulling out of Syria, Israel openly bombs targets deep in Syria. His staff, including John Bolton, freak out and walk it back.

The Houthis send a couple of drones at an Aramco facility far beyond their known capabilities and the UAE pulls out of the Saudi coalition in Yemen.

Moscow has had its fill of Netanyahu. He’s openly mocking Trump at international forums, first offering to sell the U.S. Russia’s hypersonic missiles at the G-20 and then offering to sell S-400 missile defense systems to the Saudis to protect their people from outside actors.

All with tongue firmly implanted in cheek.

Things look bad for the alliance between the U.S., Israel and Saudi Arabia, when your opponents are laughing at you openly. In that moment Putin exposed that the emperor truly was standing naked in front of the world.

And yet, after all of these coincidences I’m supposed to believe, without evidence again, that Iran would jeopardize its future at the very moment when everything is beginning to break their way and the U.S. maximum pressure campaign is failing?

The very fact that we have been shown zero proof of what happened more than 48 hours after the event which has every neocon in the U.S. clamoring for war is your biggest tell that there is something very off about this incident.

Even President Trump doesn’t believe this as he is taking the same tack rhetorically now that he did after the U.S. Global Hawk drone was shot down.

We’ve gone from:

To

“I don’t want to have war with anybody” but our military is prepared, Trump says at the White House, where he was meeting with Bahrain Crown Prince Salman bin Hamad Al Khalifa. Furthermore, the president said the US is not looking at retaliatory options until he has “definitive proof” that Iran was responsible for attacks on Saudi Arabian oil facilities.

Still, Trump told reporters in the Oval Office that the US “is prepared” if the attacks warrant a response.

Also notably, when asked if he has promised to protect the Saudis, the president responded “No, I haven’t promised the Saudis that… We have to sit down with the Saudis and work something out.”

Moreover, the stunning lack of support from Europe and the rest of the world makes it incredibly suspect that the story that we’ve been told to date, just like with the Global Hawk drone, is anything close to the real one.

And it seems Trump may believe that as well.

In the end, as always, we should be asking the most salient question surrounding this attack.

Cui Bono? (Who Benefits?)

Because it certainly isn’t Iran.

But we know who. The bombs had barely hit their targets when AIPAC’s favorite son, Lindsay Graham, was out in full throat for war. Secretary of State Mike Pompeo told the world Iran was behind 100 strikes of this kind.

Not a shred of evidence. And Trump’s first response was to subordinate U.S. troops sworn to uphold the Constitution and defend the U.S. to the terrorist-funding, repressive regime in Saudi Arabia to do what, exactly?

The Saudis needs $80+ per barrel oil.

The U.S. frackers need $60+ and zero-bound interest rates to keep the red ink flowing just slow enough to get yield-starved pension funds to bite on the next round of unpayable loans.

Israel needs a strong alliance and U.S. presence in the Middle East lest it have to act like a normal country by respecting its borders and making nice with its neighbors now that it has been exposed as one of the chief architects and supporters of the project to turn Syria into a failed state run by Takfiri crazies and anyone else no one wants in their back yard.

But the biggest question of all in this is simple. How dumb do these people think we are?

We can read licence plates from space but we can’t tell where a swarm of missiles that hits one of the most strategically important piece of real estate in the entire world came from?

Seriously?

Whenever a major incident like this happens there’s always this ridiculous fog of war over what happened to obfuscate reality and blame the current enemy of the empire.

The truth is that the Houthis could have pulled this off with help from Iran and there’s little to stop it from happening again and again. They proved their point a few weeks ago.

The Saudis have lost in Yemen. They are now losing a helluva lot more than that.

Iran is serious about taking everyone’s ability to sell oil off the table if they are denied.

Why should anyone be surprised that the Houthis want to cripple Saudi Arabia for its disastrous war and Iran wouldn’t want to assist them in doing so?

Moreover, why isn’t their response justified given the blatant aggression against both?

When is someone in D.C. going to finally realize there is no winning play with Iran anymore?

*  *  *

Join my Patreon if you want to support asking these important questions. Install Brave if you want to continue asking them.

Tyler Durden Tue, 09/17/2019 - 09:59
Tags
Published:9/17/2019 9:11:54 AM
[Markets] The Dow Is Falling Because We Still Don’t Know If the Fed Will Cut Rates Tomorrow Heading into the weekend, a rate cut at the end of the September FOMC meeting tomorrow was all but assured. But then Saudi Arabia was attacked, oil prices jumped, and now we get to worry about whether that will give the Fed pause. Published:9/17/2019 9:11:54 AM
[Markets] U.S. stocks in decline for a second day after Saudi oil attack; Fed set to meet U.S. stocks in decline for a second day after Saudi oil attack; Fed set to meet Published:9/17/2019 9:11:54 AM
[Markets] Outside the Box: I inherited money. Should I invest it all at once? Or space it out? The ups and downs of dollar-cost averaging.
Published:9/17/2019 8:41:11 AM
[Markets] NY Fed Unleashes First Overnight Repo Operation In A Decade After Losing Control Of Rates Again NY Fed Unleashes First Overnight Repo Operation In A Decade After Losing Control Of Rates Again

Update: That didn't take long. Shortly after everyone began to realize something was very broken in the short-term liquidity markets, The New York Fed announced it will conduct an overnight repo operation for the first time in a decade.

In accordance with the FOMC Directive issued July 31, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 9:30 AM ET to 9:45 AM ET today, September 17, 2019, in order to help maintain the federal funds rate within the target range of 2 to 2-1/4 percent.

This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion. Securities eligible as collateral in the repo include Treasury, agency debt, and agency mortgage-backed securities. Primary Dealers will be permitted to submit up to two propositions per security type. There will be a limit of $10 billion per proposition submitted in this operation. Propositions will be awarded based on their attractiveness relative to a benchmark rate for each collateral type, and are subject to a minimum bid rate of 2.10 percent.

Surges in the repo rate normally occur only at quarter-end, sometimes month-end. As Bloomberg notes, the mid-month surge was attributed to a confluence of events that knocked cash reserves in the banking system out of balance with the volume of securities on dealer balance sheets: a corporate tax payment date, settlement of last week’s Treasury auctions, and last week’s bond-market selloff, in which investors sold securities back to dealers.

“This is certainly painful for firms that have to fund positions,” said Thomas Simons, an economist at Jefferies LLC. “So it’s difficult for the dealer community. But it’s not systemically threatening.”

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Something critical is going on in overnight funding markets: ever since March 20, the Effective Fed Funds rate has been trading above the IOER. This is not supposed to happen, and it just got significantly worse.

As a reminder, ever since the financial crisis, in order to push the effective fed funds rate above zero at a time of trillions in excess reserves, the Fed was compelled to create a corridor system for the fed funds rate which was bound on the bottom and top by two specific rates controlled by the Federal Reserve: the "floor" for the corridor was the overnight reverse repurchase rate (ON-RRP) which usually coincides with the lower bound of the fed funds rate, while on top, the effective fed funds rate is bound by the rate the Fed pays on Excess Reserves (IOER), which served as the corridor "ceiling."

Or at least that's the theory. In practice, the effective FF tends to occasionally diverge from this corridor, and when it does, it prompts fears that the Fed is losing control over the most important instrument available to it: the price of money, which is set via the fed funds rate.

Ever since March 20, this fear is front and center because as shown in the chart below, starting on March 20, the effective Fed Funds rate rose above the IOER first by just 1 basis point. The Fed attempted to technically tamp this down.. and failed. But today the Effective Fed Funds Rate has exploded....

Smashing above the IOER...

Source: Bloomberg

As we noted earlier, no one is sure of what is driving this apparent liquidity shortage

  • elevated UST supply,

  • bloated dealer balance sheets and year-end regulatory constraints

  • a banking system near reserve scarcity,</