Newsgeeker.com news site RSS Email Alerts

Search:-1


   
[Markets] Peloton IPO Suffers 3rd Worst Opening For Unicorn Since 2008 Peloton IPO Suffers 3rd Worst Opening For Unicorn Since 2008

Having priced the IPO at $29 - the upper-end of the range - and being lauded this morning by business media for being "oversubscribed", everyone's favorite clothes-rack, Peloton, is set to open dramatically below the IPO price.

The home-fitness company sold 40 million shares for $29 each. Peloton is valued in the listing at about $8.1 billion based on the shares to be outstanding as listed in its filings with the U.S. Securities and Exchange Commission.

Having been indicated as high as $31.50 early on, interest in PTON slipped until it finally opened at $27:

As Bloomberg pointed out, the worst opening trades for a $1 billion or greater IPO since 2008 are:

  • SmileDirectClub -11% (Sept. 12)

  • ADT -9.6% (2018)

  • Uber -6.7% (May 10)

The $27 open is a 6.9% drop opening and thus the third worst opening trade for a unicorn IPO.

There have been nearly 100 IPOs with better starts since 2008 after raising at least $1 billion.

This should not be a huge surprise, as Grizzle recently noted, looking at the value of Peloton on a fundamental basis, we also struggle to get anywhere close to $29/sh.

Based on the exercise equipment market we defined in the section above, there is $7.5 billion of sales up for grabs by 2030.

If as we expect, Peloton achieves a 30% share in its market or $2.3 billion in annual sales, the stock is only worth $14.00/sh, 50% lower than the IPO price.

Below is a chart showing the buy and sell bands for this stock over time.

Though we think Peloton is only worth $14/sh at most longer-term, if you do decide to trade Peloton use this visual guide to determine when you should buy, sell or hold.

 

And as we noted previously, Peloton has truly come closer than any other product to bringing the gym experience into your own home.

But though the product may be amazing, it requires significant ongoing commitment from the customer.

Consumers rarely stick with exercise goals and for that reason, Peloton has to work harder and harder just to maintain revenue let alone grow it.

For this reason, we think Peloton will struggle as a public company.

Once investors realize Peloton is on the New Year’s resolution treadmill just like every other exercise company, both the multiple and the stock price have a long way to fall.

Additionally, of note, 181 days after the S-1 was filed, the majority of insider shares can now be sold. This date falls on February 24th, 2020.

Under certain circumstances the lock-up period will expire 120 days after the filing of the S-1, falling on 12/26/2019.

Given the low cost basis of insiders, we expect at least some of the 84 million shares issued below $0.50 will be sold once the lockup expires.

We have a possible solution - pop this up on users' screens...

They already sent a letter to users...

Tyler Durden Thu, 09/26/2019 - 12:01
Published:9/26/2019 11:07:43 AM
[Entertainment] Kate Middleton Proves Once Again She's the Queen of Recycling Outfits Kate MiddletonKate Middleton knows what she likes. The Duchess of Cambridge wore one of her favorite pieces to an event in Birkenhead, England on Thursday. The royal donned a blue Alexander McQueen...
Published:9/26/2019 10:36:36 AM
[Markets] Cryptos Tumble For 3rd Day As "Manipulation" Fears Build Cryptos Tumble For 3rd Day As "Manipulation" Fears Build

Crypto markets were hit hard again this morning (bouncingback now) as the 3rd sudden plunge in prices hit this week.

 

Source: Bloomberg

This is the 3rd big selling wave this week...

Source: Bloomberg

Bitcoin tested down to the lows from Tuesday's flash-crash...

Source: Bloomberg

These moves come as CoinTelegraph's William Suberg reports that new research this week has added to suspicions that futures settlement dates end up manipulating the Bitcoin price.

image courtesy of CoinTelegraph

Bitcoin drops 75% of the time before futures expire

According to findings from Arcane Research reported by Norwegian crypto news outlet Kryptografen on Sept. 24, CME Group’s Bitcoin futures settlement dates, in particular, appear to negatively influence BTC markets.

Analyzing price behavior from January 2018 to August 2019, the company found that 75% of the times immediately before CME issued payouts, Bitcoin fell. 

CME was one of the first operators to launch Bitcoin futures in December 2017. Since then, interest has peaked, with this year seeing frequent all-time highs for trading volumes.

Arcane published the numbers just hours before Bitcoin nosedived 15%, bottoming out at $8,000. That event happened to occur days before a major settlement date: on Friday, 50% of open interest in Bitcoin options is set to expire

The week’s timing is also conspicuous following the launch of a new futures product from institutional trading platform Bakkt. Despite volumes being low, executives have already claimed the effectiveness of the product in helping markets with price discovery. 

According to the company on social media, the unexpected drop in Bitcoin price was a sign of the market finding its true value. 

Mulling “deliberate manipulation”

For Arcane, however, such price behavior is highly suspect. 

“The figures thus support a hypothesis that the bitcoin price is manipulated in advance of CME settlement,” Kryptografen concluded. It added:

“However, the figures do not say anything about ‘deliberate manipulation’ or, for example, only a result of investors’ strategy of hedging.”

In August, Arcane hit the headlines again when separate findings suggested Bitcoin’s market dominance was in fact over 90%, rather than the roughly 70% reported by trackers.

Tyler Durden Thu, 09/26/2019 - 10:18
Published:9/26/2019 9:36:23 AM
[Entertainment] Gwyneth Paltrow Calling Her Teens "Dicks" Is Her Most Relatable Moment Apple Martin, Gwyneth Paltrow"Sorry America!"-Gwyneth Paltrow The Politician star and Goop mogul gave Today a reason for its 7-second delay on Thursday when the star got to chatting about raising teenagers....
Published:9/26/2019 9:36:23 AM
[Politics] 33% Say New York Times Is Usually Accurate

Fake news or the real thing? Only one-in-three voters think the New York Times gets it completely right most of the time.

A new Rasmussen Reports national telephone and online survey finds 49% of Likely U.S. Voters read the New York Times at least occasionally, although just seven percent (7%) say they read it daily or nearly every day. (To see survey question wording, click here.)

(Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

The survey of 1,000 Likely Voters was conducted on September 17-18, 2019 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

Published:9/26/2019 9:36:23 AM
[Entertainment] Anna Kendrick Is Either the Absolute Best or Worst Travel Partner Of All Time Anna KendrickThe hills are alive...with the sound of Anna Kendrick. The actress appeared on Late Night with Seth Meyers on Wednesday to promote her new film The Day Shall Come and took the opportunity...
Published:9/26/2019 9:09:00 AM
[Markets] Pending Home Sales Confirm Housing Market Rebound Pending Home Sales Confirm Housing Market Rebound

After new- and existing-home-sales rebounded notably in August, expectations were that pending sales would complete the trifecta and sure enough it did (rising 1.3% MoM, better than the 1.0% expected jump)

Source: Bloomberg

Pending home sales rose 2.48% YoY - the biggest annual jump since April 2016...

Source: Bloomberg

All regions saw an increase in sales in August:

  • Northeast up 1.4%; July fell 1.6%

  • Midwest up 0.6%; July fell 2.4%

  • South up 1.4%; July fell 2.4%

  • West up 3.1%; July fell 3.4%

But we note that The Northeast (-1.1%) and Midwest (-1.6%) both fell year-over-year.

The question is - what happens next? As mortgage rates have rebounded higher and mortgage applications have already tumbled since this sales data...

Source: Bloomberg

Tyler Durden Thu, 09/26/2019 - 10:05
Published:9/26/2019 9:08:59 AM
[Entertainment] Zendaya, Jake Gyllenhaal & More Have The Best Clap Backs To These "Mean Tweets" Zendaya, Celeb Mean TweetsBrushing off trolls is nothing new for celebrities--and the stars of Jimmy Kimmel Live!'s 12th edition of "Celebrities Read Mean Tweets" handled their social media haters like...
Published:9/26/2019 8:34:24 AM
[Entertainment] Andi Dorfman Doesn't Have Anything Nice to Say About Her Ex Josh Murray Josh Murray, Andi DorfmanAndi Dorfman and Josh Murray's relationship ended years ago; however, their drama still lives on. The former Bachelorette proved this to be true on Wednesday's episode of Watch...
Published:9/26/2019 7:35:22 AM
[Markets] Second Term Repo Oversubscribed As Funding Shortage Keeps Getting Worse And Nobody Knows Why Second Term Repo Oversubscribed As Funding Shortage Keeps Getting Worse And Nobody Knows Why

Overnight, we cited two icons in rates/repo business, both of whom confirmed that contrary to what so-called self-professed twitter "experts" claimed, what is going on in the repo market is bad and getting worse, and more problematic is that nobody knows what is causing it.

The first one was BMO's rates guru, Ian Lyngen who had this to say:

As we approach quarter-end, it’s intuitive that funding markets are attracting heightened attention after last week’s repo fiasco. One thing has become clear, however, and that is that the Fed is willing to provide significant  amounts of liquidity to primary dealers to alleviate as much stress as possible. By upsizing injections to $250 bn or  more (assuming overnight remains at $100 bn through October 1 and the terms are $30 bn/$60 bn/$60 bn, respectively) the fact that we’re discussing a quarter trillion dollars is telling as to the depth of the constraint in repo.

The second one was from Curvature securities repo wizard, Scott Skyrm, who was even more laconic:

It's great that the Fed is pumping liquidity into the system, however, why were the existing operations insufficient?

As of today, the Fed had injected $105 billion in liquidity into the Repo market, but rates were still stubbornly high. Whatever changed last week to cause the funding spikes is clearly still an problem.

Which in turn brought us to this morning's commentary from ICAP's Lou Crandall. As a reminder, ICAP is the world's biggest interdealer broker, and as such the plumbing in the bond market is its bread and butter. This is what Crandall had to say ahead of the conclusion of today's second, expanded (from $30BN to $60BN term repo), quoted by Bloomberg:

Increases in the Fed’s overnight and term-repo operations Thursday may be “sufficient to ensure that the remainder of the Fed’s operations through quarter-end are undersubscribed."

As a result, Wrightson ICAP’s “tentative guess” is that dealers take $50b of the term operation and $60b of the overnight action, though risks are on the high side of the term estimate and on the low side for the overnight. However, as Crandall added, "risk remains that dealers might take the full $60 billion of term operations."

And... Bingo, because moments ago, the NY Fed confirmed that one day after the most oversubscribed overnight repo operation yet, which saw $92BN in securities tendered for the latest overnight repo op before it was expanded from $75BN to $100BN...

... moments ago the Fed announced results from the second Term Repo meant to address the quarter-end liquidity shortfall is what ICAP would have dubbed the worst case scenario: not only was it oversubscribed, but it was so by a whopping $13BN, as some $72.5BN in securities ($43BN in TSYs, $29.25BN in MBS, $0.5BN in Agencies), were submitted for today's $60BN repo.

In other words, not only is the liquidity shortage getting worse, but the more liquidity the Fed provides via repos, the more liquidity primary dealers indicate they need.

And with it now appearing guaranteed that the full allotment of $250BN across term and overnight repo will be used up, we look to today's overnight repo result in a few minutes, where if the term repo is any indication, the full $100BN allotment will be blown through with ease as banks confirm that their dollar shortage is far, far worse than anyone expected... and certainly is not going away after last week's "one-time" tax payment and bill settlements.

Tyler Durden Thu, 09/26/2019 - 08:29
Published:9/26/2019 7:35:22 AM
[Markets] Beyond Meat Fries Short Sellers, Soaring 20% After McDonald Launches Its Burgers In Canada Beyond Meat Fries Short Sellers, Soaring 20% After McDonald Launches Its Burgers In Canada

On Thursday morning Beyond Meat punished short-sellers, again, this time with a press release, stating that it has signed an exclusive agreement with McDonald's to test new plant-based burgers in Canada.

McDonald's will be conducting a 12-week test of a new plant-based burger called the P.L.T. (Plant. Lettuce. Tomato). The new P.L.T. will be available in 28 restaurants across Southwestern Ontario, starting next Monday [September. 30].

"McDonald's has a proud legacy of fun, delicious and craveable food—and now, we're extending that to a test of a juicy, plant-based burger," said Ann Wahlgren, McDonald's Vice President of Global Menu Strategy. "We've been working on our recipe, and now we're ready to hear feedback from our customers."

The P.L.T. has no artificial colors, artificial flavors, or artificial preservatives, it's a great-tasting "open wide and sink your teeth into it" sandwich, said, Wahlgren, adding that it'll be priced around $5.

Shares of Beyond Meat were up nearly 20% on light volume at 7:37 am est., while McDonald's was flat.

As of September 12, short interest in Beyond Meat was 5.452 million, or a whopping 42% of the float, explains why any press release with a major fast-food chain can pop the stock on relatively low volume.

Short interest has declined fractionally since hitting a record high in mid-August, perhaps an indication that the hedge fund community had suffered bigly in shorting the stock when it rocketed +257% from May to July, and has since fallen into late summer.

However, the squeeze is clearly still one with a borrowing rate well into the triple digits: Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners tweeted Tuesday that Beyond Meat "is still a short squeeze candidate. Shorts are down $697mm in year-to-date mark-to-market losses & stock borrow rates are 114% of existing shorts & over 200% fee on new stock borrows - a rally would probably squeeze some shorts out of their losing and expensive shorts."

When Beyond Meat soared over 150 to 220 per share earlier this summer, people in New York, New Jersey, Florida, and California were Googling how to short the company.

As far as global tests of its plant-based burgers, Beyond Meat likely has a war chest of press releases to punish short-sellers, but as we might add, once the press releases become ineffective in driving short-covers, then lookout, the stock will crater.

Tyler Durden Thu, 09/26/2019 - 07:59
Published:9/26/2019 7:10:04 AM
[Entertainment] Kristen Bell's Next Act After The Good Place? Being Herself The Good Place, Kristen BellKristen Bell once told me, "I have no big plans for what I'm going to do with my career," but after finding herself at a crossroads having finished work on the acclaimed NBC comedy The...
Published:9/26/2019 7:10:04 AM
[Entertainment] The Brady Bunch Turns 50: Here's the Story... The Brady BunchIt's an opening credits sequence that's instantly recognizable to generations of TV viewers. Blue squares with smiling faces in them, all looking around at those in the squares above or...
Published:9/26/2019 6:11:45 AM
[Entertainment] We're Obsessed With This Halloween Haunted House Cat Scratcher Ecomm: Cat Lovers Halloween Must-HaveWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not...
Published:9/26/2019 5:36:02 AM
[Markets] The Brexit Battle Shows Democracy Is Only Allowed When The Regime Likes The Outcome The Brexit Battle Shows Democracy Is Only Allowed When The Regime Likes The Outcome

Authored by Ryan McMaken via The Mises Institute,

The United Kingdom's Supreme Court ruled "illegal" a parliamentary tactic used by PM Boris Johnson to ensure Brexit would be carried out on October 31, more than six months after Brexit was supposed to take effect.

While the court wasn't ruling on Brexit, per se, the context of the situation makes it clear the ruling is really just the latest move from the UK's political class designed to postpone Brexit yet again.

Given the history of EU-related referenda in Europe, we can already guess how the situation will play out. British voters will either be asked to vote again on Brexit - so that this time, they can get it "right" - or the Brexit agreement will be constructed in such a way that Brexit will be a British exit in name only.

At the same time, bizarrely, Johnson's moves in parliament have been credited as being "undemocratic" or even a "coup." This charge comes even though Johnson had attempted to call an early election, but was denied.

In the meantime, any sort of democracy that might actually strengthen the pro-Brexit position will not be allowed, as noted by Raphael Vassallo :

To recap, then: Britain first turned to the electorate to decide on its future in the European Union by means of a nationwide referendum…and ignored the result. Then its Parliament made it technically impossible to actually deliver on that mandate, by reducing the present government to the status of a lame duck. And to cap it all, it has now even shut the door to an election: which is about the only thing left that can possibly resolve the entire Brexit impasse to begin with.

But at least, the Commons’ reluctance to hold an election can easily be explained in purely party-political terms. Clearly, the Remainers have understood that Boris Johnson would most likely enlarge his parliamentary majority in an election. ... Britain’s Parliament seems hellbent on preventing the British people from even expressing their will at all.

By now, this is a tried and true tactic in European politics. Only votes that help the pro-EU position are allowed. Everything else is declared "undemocratic" or is simply ignored.

In 2001, Irish voters rejected the Nice Treaty in a referendum (or, to be more accurate, rejected proposed amendments to the Irish Constitution, that would have made ratification of the Nice Treaty possible).

Ireland's political class quickly went to work declaring that the Irish voters had made a mistake and didn't really understand the importance of ratifying the treaty. Vassallo notes

… the response was to doggedly "pursue" the same rejected reforms anyway, with even greater determination than before.

So much so, that just a year later, the Irish were presented with a second national referendum… to approve a second raft of changes to Ireland’s Constitution, so as to once again permit the ratification of pretty much the same old Nice Treaty they had earlier rejected.

The second time, the majority voted "correctly" and demands for additional referenda, of course, ended.

Another tactic was used on the continent when the French and the Dutch were allowed to vote on the ratification of a new EU constitution. The voters rejected it.

But it naturally didn't end there. French and Dutch politicians simply ignored the results of the referenda and devised an alternative strategy. They slightly revised the text of the constitution, called it the "Lisbon Treaty" and then ratified that without asking the voters.

Brendan O'Neill summed it up in The Guardian:

When French and Dutch voters rejected the European constitution in 2005 (and according to Valery Giscard d'Estaing , the current Lisbon treaty is the "same as the constitution"), they were sneeringly insulted by their betters in Brussels. Neil Kinnock said it was a "triumph of ignorance". Andrew Duff, Liberal Democrat MEP, labelled the "rejectionists" as an "odd bunch of racists, xenophobes, nationalists, communists, the disappointed centre left and the generally pissed off". He asked whether it is wise to "submit the EU Constitution to a lottery of uncoordinated national plebiscites".

But by 2008, the Irish still hadn't learned their lesson, and the majority voted incorrectly in a 2008 referendum on the Lisbon Treaty.

Sure enough, Irish politicians demanded a second vote, and the second time, the voters got it "right."

But not before they were roundly denounced by their betters in Parliament and in Brussels who knew better. O'Neill writes:

As soon as the Irish people's ballots were counted in June [2008], their rejection of Lisbon was treated as the "wrong" answer, as if they had been taking part in a multiple-choice maths exam and had failed to work out that 2+2=4. Now, they will be given a chance to sit the exam again, "until [they] come up with the right answer," says George Galloway , attacking EU elitism. The notion that the Irish "got it wrong" exposes gobsmacking ignorance about democracy in the upper echelons of the EU. The very fact that a majority of Irish people said no to Lisbon made it the "right answer", true and sovereign and final. "No" really does mean no.

Here, O'Neill gets it slightly wrong. The "upper echelons of the EU" know exactly how democracy works. It is only to be tolerated if it leads to the outcomes preferred by the ruling classes. If not, then something must be done to correct the situation.

Just keep voting until the voters do things properly.

Calling Upon the Courts to Void the Vote

In the US, of course, we don't bother having additional elections out of the usual schedule. We just have judges overrule the voters whenever the voters get uppity.

One such case occurred in California in 1994, when nearly 60 percent of the voters approved a measure to deny government services to foreign nationals living illegally in the US. It didn't call for any deportations, or for any prosecution of any residents.

The measure was passed with "yes" votes from of 56% of African Americans, 57% of Asians, and  a third of Hispanics. It won in every region of California except the Bay Area. In heavily Hispanic Los Angeles County, it passed by a 12-point margin.

After the votes were counted, the result was simply ignored and thrown out. All that was required was to have a federal judge declare the will of the democratic majority to be null and void.

In more recent years, the courts have wised up and no longer allow the voters to even have a say. In 2018, a measure to split California into three smaller states was successfully placed on the ballot after gaining the required number of signatures from voters and jumping through the usual hoops required of such measures.

But before a vote could occur, the California Supreme Court deleted the measure from the ballot, ruling:

"We conclude that the potential harm in permitting the measure to remain on the ballot outweighs the potential harm in delaying the proposition to a future election," the justices wrote.

In other words, allowing the voters to have a say on the matter is too risky. Thus, a tiny number of wealthy California judges instead decided for the voters that the only acceptable vote is "no."

And who needs voting when you have government judges, anyway? Once upon a time, it was widely accepted that significant changes to the federal constitution required a vote, in the manner prescribed by the Constitution itself.

During the early twentieth century, for example, constitutional amendments were seen as the proper way to do this. It's why Prohibition required a constitutional amendment and not just a federal law declaring a "war on booze." It was recognized that new federal powers — like those needed to outlaw alcohol consumption — could not be invented by either the courts or the President, or Congress.

By the 1960s, however, voting on constitutional amendments was passé. It became far more convenient to go to federal judges instead, and have them simply invent a new version of the constitution.

Should abortion be regulated by the federal government even though everyone agreed for 180 years that no such federal power existed? No problem, just have the Supreme Court declare it to be so.

Should the federal government have the power to force people to buy health insurance? Don't bother with an Amendment. Just have nine federal judges decide the matter for 320 million Americans.

Want to declare a war on drugs? An amednment is no longer required, as it was in the days of Prohibition. Now, federal judges can grant us feds any power we want!

Meanwhile, politicians never tire of lecturing us about the sanctity of democracy. But it's clearly only sacred when the Important People agree with the outcome.

Tyler Durden Thu, 09/26/2019 - 02:00
Tags
Published:9/26/2019 1:05:09 AM
[Markets] China Launches New Attack Ship With Capabilities Of Invading Taiwan China Launches New Attack Ship With Capabilities Of Invading Taiwan

We have outlined that China represents one of the greatest long-term strategic threats to the Indo-Pacific region and the US military that operates with-in. President Trump made it extremely clear last week that the People's Liberation Army Navy (PLAN) is a "threat to the world."

New reports surfaced on Twitter indicating the PLAN has started the launch process of a new amphibious assault ship that could soon be capable of launching an attack on Taiwan.

A statement from the PLAN Wednesday said the Type 075, a helicopter carrier displacing more than 30,000 tons, is undergoing launch preparations at China State Shipbuilding Corporation's Hudong-Zhonghua shipyard, reported Naval News.

The statement said water is being pumped into the dry dock in which the ship's hull was built.

PLAN officials said Type 075 is a new class of warship, entirely produced in China, will be able to carry out amphibious combat missions.

Development work on Type 075 started in 2011, and it will be a "vertical" amphibious assault vessel capable of launching attacks on the mountainous East Coast of Taiwan.

For comparison, the Type 075 is slightly smaller than the US Navy's landing helicopter assault vessel and more comparable to ones that are currently deployed in the Australian Navy.

The expected launch of Type 075 could be during a massive military parade in Beijing next week (Oct. 01). The PLAN will show the world its advanced vessels, fifth-generation fighters, advanced combat drones, robots, main battle tanks, and a show of force that could result in a few angry tweets from President Trump.

China has declared Taiwan as its territory although it has never controlled it, and threatens to invade by military force if Taipei resists unification.

Chinese and foreign analysts don't see China launching an amphibious attack on Taiwan in the near term, rather a conflict with the US could spiral out of control in the South/East China Sea.

"Looking at various flashpoints in Asia including the Korean peninsula and the South China Sea, I have come to the conclusion that Taiwan is the most dangerous one," Brendan Taylor, a strategic studies professor at Australian National University, told the Financial Times.

China has a long term plan, and it's by the year 2049, Taiwan will be under Beijing control, which means sometime in the coming decades, a war could break out between both countries.

The world is positioning for conflict, and the reports we bring you -- detail how countries are actively preparing for that inevitable day.

Tyler Durden Thu, 09/26/2019 - 01:00
Tags
Published:9/26/2019 12:23:52 AM
[Entertainment] Who Won Big Brother Season 21? Big Brother, Julie ChenCongratulations are in order! Big Brother just named the winner of season 21, and in the end it wasn't much of a surprise. Jackson Michie walked away with the prize, after a wild...
Published:9/25/2019 10:32:01 PM
[Entertainment] Cassie Randolph Sets the Record Straight on Her Relationship With Colton Underwood Colton Underwood, Cassie Randolph, Las VegasCassie Randolph's relationship with Colton Underwood is not up for discussion. On the heels of a tabloid report alluding to The Bachelor's "mismatched feelings" for each...
Published:9/25/2019 10:04:32 PM
[Markets] "Concerned For His Safety:" Oil Trader In Hiding After Losing $320 Million On Wrong-Way Derivatives Bets "Concerned For His Safety:" Oil Trader In Hiding After Losing $320 Million On Wrong-Way Derivatives Bets

In a wrong-way derivates bet, we reported last week that a 'rogue trader' from Mitsubishi Corp. was fired after losing a whopping $320 million. Now Bloomberg is providing some clarity on what exactly happened after conversations with the trader's lawyer.  

The trader, who worked for Petro-Diamond Singapore Pte Ltd, a wholly-owned subsidiary of Mitsubishi Corporation, incurred significant losses when a "premature" settlement of a derivatives positions had to be closed out, said Joseph Chen, the Singapore-based lawyer for the trader, Wang Xingchen.

"Our client takes the position that he had not engaged in unauthorized trades in crude oil derivatives," Chen said in a statement.

Mitsubishi Corp. and Petro-Diamond said the trader had been taking unauthorized derivatives positions since January, and suffered massive losses over the summer as oil prices plunged.

Xingchen reportedly occupied a relatively senior position, and was in charge of all transactions involving China for the subsidiary.

Mitsubishi Corp. said Petro-Diamond launched an investigation into Xingchen's trading logs while he was on vacation and sick leave in August. They found unauthorized positions, and decided to unwind them in August. The losses are expected to be about 6% of Mitsubishi's projected profit for the fiscal year.

Both companies allege Xingchen had manipulated its risk-management system, and was able to make it look like the derivative trades were associated with customer orders.

Chen told Bloomberg his client followed internal reporting procedures and policy at all times. "Internal controls were in place" throughout the period in question, he said. 

Chen said his client is in hiding because of concerns for his safety, adding that Wang has given “appropriate responses” to Petro-Diamond.

Singapore Police Force officials confirmed to Bloomberg that they're investigating the matter, declined to give further details. 

Mitsubishi and Petro-Diamond said after an internal review - all-sufficient controls were in place at the time. It added that new controls could be put in place to detect trading mishaps "at a much earlier stage."

The incident is a reminder of the destruction that a rogue trader can cause to a large financial institution.

* * *

Read Mitsubishi's announcement below:

Losses from Overseas Subsidiary’s Crude Oil Trading

This is to inform you that Mitsubishi Corporation (hereinafter “MC") can confirm that one of its subsidiaries based in Singapore has realized a previously unidentified loss from derivatives trading. Investigations are currently ongoing to determine all of the details, but what is known so far is outlined below.

MC recognizes the seriousness of this matter and shall be redoubling efforts throughout the entire MC Group to ensure that it does not happen again.

1. Situation at Present

Petro-Diamond Singapore (Pte) Ltd. (hereinafter “PDS"), a subsidiary of MC that engages in the trade of crude oil and petroleum products, has confirmed that it expects to book a loss of approximately 320 million USD from its trade of crude oil derivatives.

Although PDS has already closed the position in question and determined how much was lost on the underlying derivatives, we are now examining the total amount of losses.

2. Facts Determined Thus Far

An employee who was hired locally by PDS to handle its crude oil trade with China (hereinafter “the employee”) was discovered to have been repeatedly engaging in unauthorized derivatives transactions and disguising them to look like hedge transactions since January of this year. Because the employee was manipulating data in PDS’s risk-management system, the derivatives transactions appeared to be associated with actual transactions with PDS’s customers. Since July, the price of crude oil has been dropping, resulting in large losses from derivatives trading. PDS began investigating the employee’s transactions during his absence from work in the middle of August, and that is when the unauthorized transactions were discovered.

3. MC's and PDS’s Response

After recognizing that the transactions being investigated could result in a loss for PDS, MC and PDS immediately consulted with an outside lawyer and established an investigation team, including local outside experts, to gain an overall picture of the situation and identify the causes.

  • PDS quickly closed the derivatives position in question and determined the losses caused by the transactions which were not associated with any crude oil transactions with PDS’s customers. PDS also has since prevented the commencement of any similar transactions.
  • MC conducted internal investigation at PDS, which included inspections of PDS’s contracts, rules, risk-management system and internal controls. Based on its findings, MC has reconfirmed that PDS has sufficient internal controls in place, including a middle office responsible for risk management. MC also confirmed PDS already tightened its governance to ensure that any similar improprieties can be detected at a much earlier stage.
  • MC also performed investigations at its other MC group companies and MC’s in-house business departments engaged in derivatives trading to determine whether or not any similar improprieties have been taking place. These investigations confirmed that there are no such problems or risks at present.
  • PDS terminated the employment of the employee on September 18. In order to take a strong action in response to the violation of internal rules and laws committed by the employee, which has caused PDS this significant loss, PDS lodged a police complaint against the employee on September 19.

4. Impact on MC’s FY2019 Forecast

How the losses will impact MC’s forecast for FY2019 is under investigation and shall be announced if and when a performance review is necessary.

Tyler Durden Wed, 09/25/2019 - 22:50
Published:9/25/2019 10:04:32 PM
[Entertainment] The Masked Singer Season 2 Unmasks Its First 2 Celebrities The Masked Singer, Season 2The Masked Singer has been back for one night and two celebrities have already been unmasked. We met the first half of the contestants tonight, with pairs of singers going head-to-head...
Published:9/25/2019 9:33:47 PM
[Markets] Here's How We Are Silenced By Big Tech Here's How We Are Silenced By Big Tech

Authored by Charles Hugh Smith via OfTwoMinds blog,

This is how they silence us: your content has been secretly flagged as being "unsafe," i.e. "guilty of anti-Soviet thoughts;" poof, you're gone.

Big Tech claims it isn't silencing skeptics, dissenters and critics of the status quo, but it is silencing us. Here's how it's done. Let's start with Twitter. Twitter claims it doesn't shadow ban (Setting the record straight on shadow banning), which it defines as deliberately making someone's content undiscoverable to everyone except the person who posted it, unbeknownst to the original poster.

Nice, but what do we call labeling legitimate websites "unsafe" and banning Twitter users from retweeting links to posts on those sites? This is what's happening to oftwominds.com-- Twitter has labeled this site "unsafe" due to unspecified violations of the Twitter User Agreement, which I have reviewed and can categorically state the oftwominds.com site and posts have never violated the terms of the Agreement or the Twitter Rules, except if posting several tweets that contain the URL of my current post somehow violates the Rules. (If bloggers can't list the URL of their original content more than once a day, then the Twitter Rules are prejudicial and should be amended.)

Note that Twitter doesn't identify or provide the user with evidence of the violation of its User Agreement that justifies the "unsafe/can't retweet" shadow-banning. The process of contesting such arbitrary and opaque censorship is absurdly unsatisfactory. There is no form for content owners/Twitter users to contest being tossed in the "unsafe/can't retweet" gulag; users must click through a bunch of "contact us" screens, none of which have an option for contesting being tossed in the "unsafe/can't retweet" gulag.

When you give up and just send Twitter Support a "report on spam," i.e. that your own site is wrongly being labeled spam, you get (of course) an automated response in which Twitter promises to do nothing and tell you nothing.

If original content that is obviously not violating the Terms of Service/User Agreement can be arbitrarily banned from being retweeted without any evidence or due process, how is this not censorship? This is straight out of Kafka: an unaccountable, all-powerful, completely opaque bureaucracy arbitrarily bans your Twitter followers from retweeting a link to your original, copyrighted content.How is that not flat-out censorship (by a privately owned and operated entity with extra-legal powers)?

This is exactly like the Soviet Union, where citizens were routinely tossed in the gulag for having "anti-Soviet thoughts." Twitter, Facebook and Google routinely hold the equivalent of extra-legal administrative "trials" in which those accused of violating open-to-interpretation ("anti-Soviet thoughts") Terms of Service are not presented with evidence of their "crimes" nor are they given a chance in a transparent, fairly administered process to contest their "guilty" verdict.

As for Facebook: direct links from Facebook users to oftwominds.com dropped by 90% last year over the course of a few days. What could have caused this sudden collapse? The only possible cause is Facebook limiting the number of people who could see my posts on their feeds. If this isn't shadow-banning, then what do we call it, other than censorship?

As for Google--who knows how your rankings in search are jiggered? We do know that having "anti-Soviet thoughts" will get you de-platformed from YouTube, which not only silences you but also demonetizes your content, so not only are you thrown into the censorship gulag, you're stripped of your livelihood as well.

I have long suspected that the root of oftwominds.com being censored by the Big Tech platforms is my "false arrest for sedition" via the scurrilously fabricated PropOrNot list that was gleefully promoted by the odious propaganda organ Washington Post-- promoted, we should note, without any journalistic investigation or even rudimentary fact-checking.

Having been put on a list of sites deemed "guilty of anti-Soviet thoughts" by propagandists purporting to reveal propaganda, I've been shadow-banned and censored without any recourse or opportunity to contest my sentence in the Big Tech gulag. This is how Big Tech silences us, quietly, without any evidence, without any hearing, without any recourse, in secret extra-legal proceedings where we are refused the opportunity to question our accuser and contest the "evidence," if any.

Big Tech is a privately owned and operated gulag straight out of Kafka. As I have argued before, the only way to dismantle this privately owned and operated gulag, whose sole purpose is to maximize profits from adverts and selling user data, is to turn their services into public utilities that cannot collect any data and cannot target adverts.

This is how they silence us: your content has been secretly flagged as being "unsafe," i.e. "guilty of anti-Soviet thoughts;" poof, you're gone.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

Tyler Durden Wed, 09/25/2019 - 22:30
Published:9/25/2019 9:33:46 PM
[Entertainment] Cassie Marries Alex Fine One Month After Announcing Engagement Alex Fine, Cassie, InstagramYou may now call Cassie and Alex Fine husband and wife. After just a few weeks of being engaged, Cassie and Alex exchanged vows in a small and intimate ceremony on the cliff sides of...
Published:9/25/2019 9:01:24 PM
[Markets] Second Parent In College Admission Scandal Gets Four Months In Prison Second Parent In College Admission Scandal Gets Four Months In Prison

California businessman Devin Sloane is now the second parent to be sentenced to prison for participating in the largest ever college admissions scandal in the U.S., according to Reuters. Sloane was accused of offering bribes to help get his son into a prestigious university and was charged with fraud. 

The 53 year old Sloane was sentenced to four months in prison and was also ordered to pay a $95,000 fine and perform 500 hours of community service. 

Sloane said he wanted to do what was best for his son, telling the court: “There are no words to justify my behavior.”

He had pleaded guilty to one count of conspiracy to commit mail fraud and one count of honest services mail fraud. 

Sloan's sentence was significantly harsher than the 14 day prison term given to Emmy-award winning actress Felicity Huffman, which we reported on earlier this month.

Huffman was fined $30,000 and was ordered to perform 250 hours of community service.

More than 50 people have been charged in the scheme where wealthy parents have been accused of offering bribes and other forms of fraud to guarantee admission to several universities for their children. The schools in question included names like USC, Georgetown, Stanford and Yale, among others.

Fifteen parents in total have pleaded guilty in the scandal.

Sloan will remain free on bond and has been ordered to report to the Bureau of Prisons on December 3. Back in May, we reported that Sloane was accused of paying scandal mastermind William "Rick" Singer $250,000 to help his oldest son gain admission to USC as a purported recruit for the school's water polo team.

Tyler Durden Wed, 09/25/2019 - 21:30
Tags
Published:9/25/2019 8:32:28 PM
[Entertainment] How Miley Cyrus Is ''Hitting the Reset Button'' Following Back-to-Back Breakups Miley CyrusLife goes on and Miley Cyrus is ready to move on with it. In the span of nearly two months, the musician went from being married to Liam Hemsworth, to dating The Hills star Kaitlynn...
Published:9/25/2019 8:01:25 PM
[Entertainment] Cardi B Will "Never Forget" Being Sexually Harassed During Magazine Photo Shoot Cardi B, 2019 Diamond BallNot everyone has treated Cardi B with the respect she deserves. While she may be one of the biggest rappers in the world, the Grammy winner is opening up about some of the struggles she...
Published:9/25/2019 7:32:51 PM
[Markets] Softbank Planning To Quadruple-Down On WeWork, FT Softbank Planning To Quadruple-Down On WeWork, FT

With billions already ploughed into the money-losing real estate company, and a combination of massive cash-burn and a $6bn loan contingent on its IPO, Softbank's Masa-san appears cornered into quadrupling down on the giant tech company's investment in Adam Neumann's 'creation'.

As a reminder, for every dollar WeWork earned in revenue last year, it lost roughly two.

And as its IPO-contingent funding evaporates, bond market investors are getting anxious...

Source: Bloomberg

To the point where WeWork is riskier than Tesla, Ukraine, and South Africa...

Source: Bloomberg

However, there is hope. As The FT reports, SoftBank is in talks with WeWork to increase a $1.5bn investment the Japanese telecoms-to-technology group has agreed to put into the office leasing company next year, according to people briefed on the matter.

A recut deal would see SoftBank invest at least $2.5bn, but would reduce the price per share at which it acquires WeWork stock, giving it a larger stake in the lossmaking property group, the people said.

Critically, the equity investment from SoftBank could unlock additional financing options for WeWork, without which it could quite clearly be a zero (the group burnt through more than $2.5bn of cash in the first half of 2019).

It appears this future investment would be the fourth 10-figure money drop:

  • Aug 2017 - $1.3bn

  • Jan 2019 - $1bn

  • Jan 2019 - $5bn

  • Apr 2020 - $2.5bn

But who's counting?

Tyler Durden Wed, 09/25/2019 - 20:30
Published:9/25/2019 7:32:51 PM
[Entertainment] Lindsay Lohan's ''Xanax'' Music Video Paints a Bizarre Picture of Her Life Lindsay LohanYou're gonna want to grab a seat, a pair of headphones and some popcorn for this. In case you missed it, Lindsay Lohan has made a jaw-dropping return to music in over a decade (can...
Published:9/25/2019 7:01:56 PM
[Markets] New, Shocking Poll Says Americans Think Vaping Is As Dangerous As Smoking Cigarettes New, Shocking Poll Says Americans Think Vaping Is As Dangerous As Smoking Cigarettes

A new Reuters/Ipsos poll has revealed that a growing number of Americans say vaping is as dangerous as smoking cigarettes, following a mysterious outbreak of vaping-related illnesses and deaths

The new poll was published Tuesday morning, found that 63% of adults disagreed with the statement that "vaping is healthier than traditional cigarettes." 

Reuters/Ipsos conducted a similar poll in 2016, back then, only 47% disagreed with the above statement, that's a 16% increase over the last three years.

The poll was conducted Sept. 17-18, around the time when government officials confirmed vaping-related illnesses reached more than 500. 

It found that 29% of adults think vaping is the best way to help a traditional smoker quit, and 77% said vaping should be regulated just like cigarettes. 

The Food and Drug Administration (FDA) is investigating the outbreak of illnesses across the country. So far, eight people have died in California, Illinois, Indiana, Kansas, Minnesota, Missouri, and Oregon, and hundreds more have been hospitalized with severe respiratory issues. 

After the Centers for Disease Control and Prevention's (CDC) alarmist briefing last Thursday about the number of deaths and illnesses, Walmart on Friday announced plans to halt all sales of e-cigarettes while citing "uncertainty" amid the outbreak.

"Given the growing federal, state and local regulatory complexity and uncertainty regarding e-cigarettes, we plan to discontinue the sale of electronic nicotine delivery products at all Walmart and Sam's Club US locations," the company said in a statement. "We will complete our exit after selling through current inventory."

 Altria's $12.8 billion investment in e-cig maker Juul last year has sent the company's stock tumbling in the last 15 days, down nearly -15%, after a government ban on flavored e-cigarettes severely dent sales.

Greg Conley, president of the American Vaping Association, spoke with Reuters about the chaos unfolding in the vape industry. Conley said, "This is the natural consequence of a seemingly unending stream of misleading news stories." 

He said many of the vaping-related illnesses "involved people who used e-cigarettes to smoke street-bought drugs or liquids that contain ingredients from cannabis, not tobacco." 

Several days ago, we covered a story out of The Boston Globe that specified how oil-filled vaporizer cartridge sales in Massachusetts collapsed 25% in the last month.

CDC and FDA officials have said vaping oils containing marijuana ingredient tetrahydrocannabinol (THC) or vaping oils with vitamin E acetate, a substance found in some THC products, could be the cause of the outbreak. 

Several weeks ago, the FDA sent a warning letter to Juul for marketing its e-cigarettes as safer than cigarettes. 

E-cigarettes have been a massive hit with millennials -- now it's killing them. About half of all 18 to 34-year-olds have tried vaping.

Tyler Durden Wed, 09/25/2019 - 19:30
Published:9/25/2019 6:31:50 PM
[Entertainment] Meghan Markle's Everlane Jumpsuit Is Royally Affordable Meghan Markle, Duchess of SussexWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not E!. OK,...
Published:9/25/2019 6:02:11 PM
[Markets] For The First Time, Warren Beats Out Biden For No. 1 Spot In National Poll For The First Time, Warren Beats Out Biden For No. 1 Spot In National Poll

Thanks to an unceasing string of gaffes that have made him look like an addled, senile old man, Joe Biden has apparently lost his luster as the Democrats' presumptive nominee and "most electable" candidate - the only one of the bunch who stands a chance at beating Trump, as many believe.

But a series of recently released polls in Iowa and New Hampshire (the two earliest primary states) showed Elizabeth Warren tied, or leading, Biden. 

And on Wednesday, a national Quinnipiac poll showed Warren had support from 27% of Democratic and Democratic-leaning voters, compared with 25% for Biden. Though it's well within the 4.9% margin of error, it's the first time another candidate has usurped Biden's lead since Quinnipiac started the survey back in March.

Warren's poll numbers have been steadily improving since her performance at the Democratic debate in Houston earlier this month.

Biden and Warren were followed by Vermont Sen. Bernie Sanders with 16%, South Bend Mayor Pete Buttigieg with 7% and California's Kamala Harris at 3%.

Warren's rise comes as several of the long-shot candidates have dropped out (including, most notably, New York City Mayor Bill de Blasio).

And according to a Buzzfeed report from Des Moines, Cory "Spartacus" Booker might soon be forced to abandon his floundering campaign unless he can bring in nearly $2 million over the next week.

Though Warren's rise is definitely notable, the Real Clear Politics' polling data aggregator still has Biden way ahead.

Meanwhile, Kamala Harris has seen her poll numbers evaporate since the beginning of the summer.

And now that the Democrats have taken Trump's bait and made a circus out of allegations that Trump tried to strongarm the president of Ukraine into investigating the Biden family, once the substance of their shady dealings in the country are exposed, it could create a serious problem for Biden.

Tyler Durden Wed, 09/25/2019 - 18:50
Tags
Published:9/25/2019 6:02:11 PM
[Entertainment] Meghan Markle Donates Baby Archie's Lightly Used Clothes to South Africa Charity Prince Harry, Meghan Markle, Archie Harrison,Meghan Markle and Prince Harry are raising one special son! Baby Archie Harrison is already making a splash on his royal tour debut. On Wednesday, the 4-month-old made his first official...
Published:9/25/2019 5:33:04 PM
[Markets] Google's Quantum Computer Breakthrough Not A Risk To Bitcoin, Says Dev Google's Quantum Computer Breakthrough Not A Risk To Bitcoin, Says Dev

Authored by Wiliam Suberg via CoinTelegraph.com,

A well-known cryptographer has poured cold water on fresh fears that recent advances in quantum computing could endanger Bitcoin (BTC) security. 

image courtesy of CoinTelegraph

Bitcoin versus Google’s “quantum supremacy”

In a Twitter discussion on Sept. 24, ex-Bitcoin Core developer Peter Todd led the criticism, which followed claims from Google it had achieved “quantum supremacy.”

In a paper seen by the Financial Times, the tech giant said it had created a computer that solved an equation which would otherwise take 10,000 years in just 3 minutes 20 seconds. 

“To our knowledge, this experiment marks the first computation that can only be performed on a quantum processor,” the publication quoted the paper as saying. 

Quantum computing has previously formed an area of contention for cryptocurrency proponents. In 2017, for example, experts dispelled myths that such machines could undermine the security of the Bitcoin blockchain. 

“Nowhere near breaking cryptography”

Similarly, Todd now concluded that financial impediments to Google’s latest creation alone would keep Bitcoin free from potential trouble. 

“It means nothing because Google's quantum breakthrough is for a primitive type of quantum computing that is nowhere near breaking cryptography,” he wrote about the new achievement.

He added: 

“We still don't even know if it's possible to scale quantum computers; quite possible that adding qbits will have an exponential cost.”

Earlier this month, details emerged that the United States’ National Security Agency, or NSA, was attempting to research and create quantum-resistant cryptography.

Tyler Durden Wed, 09/25/2019 - 17:50
Published:9/25/2019 5:02:23 PM
[Entertainment] Here's the Girl Everyone Thought Was Taylor Swift at the 2019 Emmys 2019 Emmys, Eve Coffman, Taylor SwiftEverything has changed, because the Taylor Swift doppelgänger from the 2019 Emmys has been revealed. On Sunday night, fans of the Grammy winner could not calm down when they spotted...
Published:9/25/2019 4:31:30 PM
[Entertainment] From The Office to True Blood, How Anna Camp's TV Past Prepared Her for Perfect Harmony Anna Camp, Perfect HarmonyAnna Camp has quite the resume. You might know her from Pitch Perfect, where you heard her aca-amazing singing chops on the big screen, but Camp previously popped up in some of your favorite TV...
Published:9/25/2019 3:00:42 PM
[Entertainment] How Hailey Bieber Is Prepping for Her Wedding With Justin Bieber Hailey Baldwin, Justin BieberIt's almost time for Justin Bieber and Hailey Bieber's big day! But before the 25-year-old singer and the 22-year-old model say "I do" (again), the bride-to-be is...
Published:9/25/2019 2:30:09 PM
[Entertainment] Proof Baby Archie is Basically Prince Harry's Identical Twin Prince Harry, Meghan Markle, Archie Harrison,Like father, like son. Archie Harrison has embarked on his first royal tour with parents Meghan Markle and Prince Harry. The royal couple spent the first two days of the African tour...
Published:9/25/2019 2:00:51 PM
[Customs, Border and Immigration News] Montgomery County Named One Of The Worst ‘Sanctuary Communities’ In The US

By Jason Hopkins -

Montgomery County, Maryland, a jurisdiction that has witnessed a string of rapes by illegal aliens, has just been placed on a list of “worst sanctuary communities” in the entire United States. The Immigration Reform Law Institute (IRLI), a legal organization that works to reduce illegal immigration into the country, released ...

Montgomery County Named One Of The Worst ‘Sanctuary Communities’ In The US is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/25/2019 1:30:20 PM
[Markets] "Who Could Have Known?" ...What The Repo Fiasco Entails "Who Could Have Known?" ...What The Repo Fiasco Entails

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

Imagine approaching a friend that you think is very wealthy and asking her to borrow ten thousand dollars for just one night. To entice her, you offer as collateral the title to your 2019 Lexus parked in her driveway along with an interest rate that is 5% above that which she is earning in the bank. Shockingly, your friend says she can’t. Given the risk-free nature of the transaction and excellent one-day profit, we can assume that our friend may not be as wealthy as we thought.

On Monday, September 16th, 2019, a similar situation occurred in the overnight repurchase agreement (repo) funding market. On that day, banks were unwilling or unable to lend on a collateralized basis, even with the promise of large risk-free profits. This behavior reveals something very important about the banking system and points to the end of market stimulus that has been around for the past decade.

The Plumbing of the Banking System and Financial Markets

Interbank borrowing is the engine that allows the financial system to run smoothly. Banks routinely borrow and lend to each other on an overnight basis to ensure that all banks have ample funds to meet daily cash flow needs and that banks with excess funds can earn interest on them. Literally, years go by with no problems in the interbank markets and not a mention in the media.

Before proceeding, what follows is a definition of the funding instruments used in the interbank markets.

  • Fed Funds are uncollateralized interbank loans that are almost exclusively done on an overnight basis. Except for a few exceptions, only banks can trade Fed Funds.

  • Repo (repurchase agreements) are collateralized loans. These transactions occur between banks but often involve other non-bank financial institutions such as insurance companies. Repo can be negotiated on an overnight and longer-term basis. General collateral, or “GC,” is a term used to describe Treasury, agency, and mortgage collateral that backs certain repo loans. In a GC repo, the particular securities backing the loan are not determined until after the transaction is agreed upon by the counterparties. The securities delivered must meet certain pre-defined criteria.

On September 16th, overnight GC repo traded as high as 8%, almost 6% higher than the Fed Funds rate, which theoretically should keep repo and other money market rates closely tied to it. The billion-dollar question is, “Why did a firm willing to pay a hefty premium, with risk-free collateral, struggle to borrow money”?  Before the 16th, a premium of 25 to 50 basis points versus Fed Funds would have enticed a mob of financial institutions to lend money via the repo markets. On the 16th, many multiples of that premium were not enticing enough.

Most likely, there was an unexpected cash crunch that left banks and/or financial institutions underfunded. The media has talked up the corporate tax date and a large Treasury bond settlement date as potential reasons. We are not convinced by either excuse as they were easily forecastable weeks in advance.

Regardless of what caused the liquidity crunch, we do know, that in aggregate, banks did not have the capacity to lend money. Given the capacity, they would have done so in a New York minute and at much lower rates.

To highlight the enormity of the aberration, consider the following:

  • Since 2006, the average daily difference between the overnight GC repo rate and the Fed Funds effective rate was .025%.

  • Three standard deviations or 99.5% of the observances should have a spread of .56% or less.

  • 8% is a bewildering 42 standard deviations from the average, or simply impossible assuming a traditional bell curve.

What was revealed on the 16th?

The U.S. and global banking systems revolve around fractional reserve banking. That means banks need only hold a fraction of the cash deposits that they hold in reserve accounts at the Fed. For example, if a bank has $1,000 in deposits (a liability to the bank), they may lend $900 of those funds and retain only 10% in reserves. This is meant to ensure they have enough funding on hand to make payments during the day and also as a buffer against unanticipated liquidity needs. Before 2008, banks held only just as many reserves as were required by the Fed. Holding anything more than the required minimum was a drag on earnings, as excess reserves were unremunerated at the time.

Quantitative Easing (QE) and the need for the Fed to pay interest on newly formed excess reserves changed that. When the Fed conducted QE, they bought U.S. Treasury, agency, and mortgage-backed securities and credited the selling bank’s reserve account. The purpose of QE1 was to ensure that the banking system was sufficiently liquid and equipped to deal with the ramifications of the ongoing financial crisis. Round one of QE was logical given the growing list of bank/financial institution failures. However, additional rounds of QE appear to have had a different motive and influence as banks were highly liquid after QE1 and had shored up their capital as well. That is a story for another day.

The graph below shows how “excess” reserves were close to zero before 2008 and soared by over $2.5 trillion after the three rounds of QE. Before QE, “excess” reserves were tiny, measured in the hundreds of millions. The amount is so small it is not visible on the graph below. The reserves produced by multiple rounds of quantitative easing may have been truly excess, meaning above required reserves, on day one of QE. However, on day two and beyond that is not necessarily true for any particular bank or the system as a whole, as we are about to explain.

Data courtesy: St. Louis Federal Reserve

The Fed, having pushed an enormous amount of reserves on the banks, created a potential problem. The Fed feared that once the smoke cleared from the financial crisis, banks would revert to their pre-crisis practice of keeping only the minimum amount of reserves required. This would leave them an unprecedented surplus of excess funds to buy financial assets and/or create loans which would vastly increase the money supply with inflationary consequences. To combat this problem, they incentivized the banks to keep the reserves locked down by paying them a rate of interest on the reserves that were higher than the Fed funds rates and other prevailing money market rates. This rate is called the IOER or the interest on excess reserves.

The Fed assumed banks would hold excess reserves because they could make risk free profits at no cost. This largely worked, but some reserves were leveraged by the banks and flowed into the financial markets. This was a big factor in driving stock prices higher, credit spreads tighter, and bond yields lower. This form of inflation the Fed seemed to desire as evidenced from their many speeches talking about generating household net worth.

From the banks’ perspective, the excess reserves supplied by the Fed during QE were preferential to traditional uses of excess reserves. Historically, excess bank reserves were invested in the Treasury market or lent on to other banks in the Fed Funds market. Purchasing Treasury securities had no credit risk, but banks are required to mark their Treasury holdings to market and therefore produce unexpected gains and losses. Lending reserves in the interbank market also incurred counterparty risk, as there was always the chance the borrowing bank would be unable to repay the loan, especially in the immediate post-crisis period. Additionally, as QE had produced trillions in excess reserves, there was not much demand from other banks. Therefore, the banks preferred use of excess reserves was leaving them on deposit with the Fed to earn IOER. This resulted in no counterparty risk and no mark to market risk.

Beginning in 2018, the Fed began reducing their balance sheet via QT and the amount of excess reserves held by banks began to decline appreciably.

Solving Our Mystery

It is nearly impossible for the public to figure out how much in excess reserves the banking system is truly carrying. Indeed, even the Fed seems uncertain. It is common knowledge that they have been declining, and over the last six months, clues emerged that the amount of “truly excess reserves,” meaning the amount banks could do without, was possibly approaching zero.  

Clue one came on March 20th, 2019 when the Fed said QT would end in October 2019. Then, on July 31st, 2019, as small problems occurred in the funding markets, the Fed abruptly announced that they would halt the balance sheet reduction in August, two months earlier than originally planned. The QT effort, despite assurances from Bernanke, Yellen, and Powell that it would be uneventful, ended 22 months after it began. The Fed’s balance sheet declined only $800 billion as a result of QT, less than a quarter of what the Fed added to their balance sheet during QE.

Clue two was the declining spread between the IOER rate and the effective Fed Funds rate as the level of excess reserves was declining, as seen in the chart below. The spread between IOER and the Fed Funds rate was narrowing because the Fed was having trouble maintaining the Fed Funds rate within the targeted range. In March 2019, the spread became negative, which was counter to the Fed’s objectives. Not surprisingly, this is when the Fed first announced that QT would end.

Data courtesy: St. Louis Federal Reserve

The third and final clue emerged on September 16, 2019, when overnight repo traded at 7%-8%. If banks truly had excess reserves, they would have lent some of that excess into the repo market and rates would never have gotten close to 7-8%. It seems logical that banks would have been happy to lend on a collateralized basis at 3%, much less 7-8%, when their alternative, leaving excess reserves to the Fed, would have earned them 2.25%.   

Further confirmation that something was amiss occurred on September 17th, 2019, when the Fed Funds effective rate was above the upper end of the Fed’s target range of 2-2.25% at the time. This marked the first time the Fed Funds rate traded above its target since 2008.

On September 17th, the Fed entered the repo markets with a $53 billion overnight repo operation, whereby banks could pledge Treasury collateral to the Fed and receive cash. The temporary liquidity injection worked and brought repo rates back to normal. The following day the Fed pumped $75 billion into the markets. These were the first repo transactions executed by the Fed since the Financial Crisis, as shown below.

These liquidity operations will likely continue as long as there is demand from banks. The Fed will also conduct longer-term repo operations to reduce the amount of daily liquidity they provide.

The Fed can continue to resort to the pre-QE era tactics and use temporary daily operations to help target overnight borrowing rates. They can also reduce the reserve requirements which would, at least for some time, provide the system with excess reserves. Lastly, they can permanently add reserves with QE. Recent rhetoric from Fed Chairman Powell and New York Fed President Williams suggests a resumption of QE in some form may be closer than we think.

Why should we care?

The QE-related excess reserves were used to invest in financial assets. While the investments were probably high-grade liquid assets, they essentially crowded out investors, pushing them into slightly riskier assets. This domino effect helped lift all asset prices from the most risk-free and liquid to those that are risky and illiquid. Keep in mind the Fed removed about $3.6 trillion of Treasury and mortgage securities from the market which had a similar effect.

The bottom line is that the role excess reserves played in stimulating the markets over the last decade is gone. There are many other factors driving asset prices higher such as passive investing, stock buybacks, and a broad-based, euphoric investment atmosphere, all of which are byproducts of extraordinary monetary policies. The new modus operandi is not necessarily a cause for concern, but it does present a new demand curve for the markets that is different from what we have become accustomed to.

Summary

Short-term funding is never sexy and rarely if ever, the most exciting part of the capital markets. A brief recollection of 2008 serves as a reminder that, when it is exciting, it is usually a harbinger of volatility and disruption.

In a Washington Post article from 2010, Bernanke stated, “We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time.”

Much more recently, Jay Powell stated, “We’ve been operating in this regime for a full decade. It’s designed specifically so that we do not expect to be conducting frequent open market operations to keep fed fund [sic] rates in the target range.” 

Today, a decade after the financial crisis, we see that Bernanke and Powell have little appreciation for the inner-workings of the financial system. 

In the Wisdom of Peter Fisher, an RIA Pro article released in July, we discussed the insight of Peter Fisher, a former Treasury, and Federal Reserve official. Unlike most other Fed members and politicians, he discussed how hard getting back to normal will be. As we are learning, it turns out that Fisher’s wisdom from 2017 was visionary.

“As Fisher stated in his remarks, The challenge of normalizing policy will be to undo bad habits that have developed in how monetary policy is explained and understood.” He continues, “…the Fed will have to walk back from their early assurances that the “exit would be easy.”

Prophetic indeed.

Tyler Durden Wed, 09/25/2019 - 14:24
Published:9/25/2019 1:30:19 PM
[Markets] Two Ways Impeachment Could Hurt Equity And Risk Markets Two Ways Impeachment Could Hurt Equity And Risk Markets

Authored by Bilal Hafeez via MacroHive.com,

It’s official. Speaker Nancy Pelosi has formally announced an investigation of President Trump. This is in response to conversations the US president held with the Ukrainian president, Volodymyr Zelensky, in which Trump allegedly pushed for the investigation of the son of Democrat Presidential nominee Joe Biden.  A simple majority in the Democrat-held House of Representatives would be needed to impeach Trump. It would then go to the Senate for a trial, where a two-thirds vote would be needed to convict.

Infographic: What an Impeachment Would Look Like | Statista

You will find more infographics at Statista

Given that the Senate is Republican-held, however, it would be unlikely that Trump would be convicted – Bill Clinton was similarly impeached without conviction in the 1990s.

Given this low probability of conviction, the question is whether or not the impeachment process will impact markets. We think there are two ways it could:

1. It increases political and economic uncertainty. 

Markets have been affected by the up-and-downs of the trade war drama with China. The uncertainty this has engendered has seen a stronger dollar, weaker stocks, and lower rates. With the odds of impeachment on the rise, we’ve also seen a concomitant rise in policy uncertainty too (see Chart 1).

Yesterday, the day of the Pelosi’s announcement saw weaker stocks and lower rates. Depending on to what extent the impeachment hearings lead to more erratic behaviour by the President or distract him from current geopolitical issues like Saudi-Iran, we could see uncertainty continue to rise. This would support the dollar and be negative for risk markets.

2. Democrat Presidential nominee Warren’s odds of winning the primary could rise. 

One of the ironies of the impeachment process is that it could attract negative publicity around Joe Biden. The fact that Biden’s son was on the board of a Ukrainian gas company in itself could draw criticism from the public. If Biden supporters look elsewhere then the question is whether they turn to another moderate candidate or go more progressive. If the latter, that might well favour Elizabeth Warren who has made impressive gains in recent months. (see Chart 2).

Equity markets are likely to view a left-leaning candidate unfavourably. So at the margin, the declining support for Biden could be seen as risk negative.

We’re still at the very early stages of the impeachment process, so much could change in the coming weeks. Considering the potential damage to risk markets, though, we’d maintain a defensive position in markets.

Tyler Durden Wed, 09/25/2019 - 13:40
Tags
Published:9/25/2019 1:00:22 PM
[Entertainment] Jennifer Lopez Shading Gwyneth Paltrow and More A-List Stars Has Fans Shook 21 Years Later Jennifer Lopez's Best LooksJenny from the Block didn't come to play! There's no debate that Jennifer Lopez is a big star. Singer, actress, director and businesswoman are just some of the titles she can put...
Published:9/25/2019 12:30:26 PM
[Political Cartoons] Blue Plight Special – A.F. Branco Cartoon

By A.F. Branco -

The Democrats keep trying to bring down Trump but keep failing like Wylie Coyote in the cartoon Roadrunner. Political cartoon by A.F. Branco ©2019. See more Branco toons HERE

Blue Plight Special – A.F. Branco Cartoon is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/25/2019 12:03:35 PM
[Politics] Voters Are More Likely Now To Put Environment Ahead of the Economy

With a robust economy and a booming jobs market, voters are feeling more protective of the environment than they have in the past.

A new Rasmussen Reports national telephone and online survey finds that only 43% now think it’s more important to create new jobs than to protect the environment. Just as many (43%) disagree and say it’s more important to protect the environment. Fourteen percent (14%) are undecided. (To see survey question wording, click here.)

(Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

The survey of 1,000 Likely Voters was conducted on September 9-10, 2019 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

Published:9/25/2019 12:03:35 PM
[Entertainment] Justin Hartley's Daughter Is Doing This and He Wants to "Crawl in a Hole and Die" Justin Hartley, Isabella Hartley Concerned papa alert! This Is Us star Justin Hartley stopped by The Tonight Show on Tuesday night to talk to Jimmy Fallon about the premiere of season four. Before getting to what the...
Published:9/25/2019 12:03:35 PM
[Entertainment] Kelly Clarkson and Kate Upton Detail "Painful" Reality of Breastfeeding and Postpartum Hormones Kate Upton, Kelly Clarkson, The Kelly Clarkson ShowBreastfeeding is no easy feat. Just ask Kelly Clarkson and Kate Upton. The 27-year-old model and 37-year-old singer bonded over their struggles with it in an interview on The Kelly...
Published:9/25/2019 10:06:53 AM
[Entertainment] Mac Miller's Death: Another Man Arrested in Connection With Star's Overdose Mac Miller, One Year Anniversary of His DeathA second suspect has been arrested in connection with the death of Mac Miller. The 26-year-old rapper, born Malcolm James McCormick, died of a drug overdose in September 2018. On Monday,...
Published:9/25/2019 9:38:58 AM
[Entertainment] Gwen Stefani's Kids Just Want Her to Hook Them Up With Ellen DeGeneres Gwen Stefani, Ellen DeGeneresEveryone wants to be friends with Ellen DeGeneres--even Gwen Stefani's kids! The singer revealed that her older sons, Kingston, 13, and Zuma, 11, aren't quite into in her music...
Published:9/25/2019 9:04:26 AM
[Entertainment] Weigh In On Mixed-ish and Emergence Mixed-IshFall TV premiere week continues! ABC got in the game tonight with Mixed-ish and Emergence, two very, very different shows that do at least share a sort of fish-out-of-water story. Sort...
Published:9/24/2019 10:26:09 PM
[Entertainment] Ashton Kutcher Holds Back From Making ''Really Snarky'' Comment Amid Demi Moore's Claims Ashton Kutcher, Demi MooreAshton Kutcher is biting his tongue when it comes to Demi Moore's recent revelations--or so it seems. Amidst his ex-wife's ongoing press tour, the actor has maintained his silence...
Published:9/24/2019 9:57:49 PM
[Entertainment] This Is Us Season 4 Premiere Introduces a Few New Surprises With New Characters This Is Us, Season 4This Is Us had some new tricks up its sleeve for the premiere of season four. While we did follow Jack and Rebecca's return from California and see Jack meet both Miguel and...
Published:9/24/2019 9:26:27 PM
[Markets] Normal Intrusions: Globalising AI Surveillance Normal Intrusions: Globalising AI Surveillance

Authored by Binoy Kampmark via Oriental Review,

They all do it: corporations, regimes, authorities.  They all have the same reasons: efficiency, serviceability, profitability, all under the umbrella term of “security”.  Call it surveillance, or call it monitoring the global citizenry; it all comes down to the same thing.  You are being watched for your own good, and such instances should be regarded as a norm.

Given the weaknesses of international law and the general hiccupping that accompanies efforts to formulate a global right to privacy, few such restrictions, or problems, preoccupy those in surveillance.  The entire business is burgeoning, a viral complex that does not risk any abatement.

The Carnegie Endowment for International Peace has released an unnerving report confirming that fact, though irritatingly using an index in doing so.  Its focus is Artificial Intelligence (AI) technology.  A definition of sorts is offered for AI, being “an integrated system that incorporates information acquisition objectives, logical reasoning principles, and self-correction capacities.”

When stated like that, the whole matter seems benign.  Machine learning, for instance, “analyses a large amount of information in order to discern a pattern to explain the current data and predict future uses.”

There are several perturbing highlights supplied by the report’s author, Steven Feldstein.  The relationship between military expenditure and states’ use of AI surveillance systems is noted, with “forty of the world’s top fifty military spending countries (based on cumulative military expenditures) also [using] AI surveillance technology.”  Across 176 countries, data gathered since 2017 shows that AI surveillance technologies are not merely good domestic fare but a thriving export business.

The ideological bent of the regime in question is no bar to the use of such surveillance.  Liberal democracies are noted as major users, with 51 percent of “advanced democracies” doing so.  That number, interestingly enough, is less than “closed autocratic states” (37 percent); “electoral autocratic/competitive autocratic states” (41 percent) and “electoral democracies/illiberal democracies” (41 percent).  The political taxonomist risks drowning in minutiae on this point, but the chilling reality stands out: all states are addicted to diets of AI surveillance technologies.

Feldstein makes the fairly truistic point that “autocratic and semi-autocratic” states so happen to abuse AI surveillance more “than governments in liberal democracies” but the comparisons tend to breakdown in the global race for technological superiority.  Russia, China and Saudi Arabia are singled out as “exploiting AI technology for mass surveillance purposes” but all states seek the Holy Grail of mass, preferably warrantless surveillance.  Edward Snowden’s revelations in 2013 did more than anything else to scupper the quaint notion that those who profess safeguards and freedoms are necessarily aware about the runaway trends of their security establishment.

The corporation-state nexus is indispensable to global surveillance, a symbiotic relationship that resists regulation and principle.  This has the added effect of destroying any credible distinction between a state supposedly more compliant with human rights standards, and those that are not.  The common thread, as ever, is the technology company.  As Feldstein notes, in addition to China, “companies based in liberal democracies – for example, Germany, France, Israel, Japan, South Korea, the UK, the United States – are actively selling sophisticated equipment to unsavoury regimes.”

These trends are far from new.  In 1995, Privacy International published a report with the unmistakable title Big Brother Incorporated, an overview of surveillance technology that has come to be aptly known as the Repression Trade. 

“Much of this technology is used to track the activities of dissidents, human rights activists, journalists, student leaders, minorities, trade union leaders, and political opponents.”

Corporations with no particular allegiance except to profit and shareholders, such as British computer firm ICL (International Computers Limited) were identified as key designers behind the South African automated Passbook system, Apartheid’s stand out signature.  In the 1980s, the Israeli company Tadiran, well in keeping with a rich tradition of the Repression Trade, supplied the murderous Guatemalan policy with computerised death lists in their “pacification” efforts.

The current galloping power in the field of AI surveillance technology is China, underpinned by the clout-heavy Belt and Road Initiative rosily described by its fans as a Chinese Marshall Plan Where there are market incentives, there are purchasing prospects for AI technology. 

“Technology linked to Chinese companies are found in at least sixty-three countries worldwide.  Huawei alone is responsible for providing AI surveillance technology to at least fifty countries.” 

Chinese technology, it is speculated, may well boost surveillance capabilities within certain African markets, given the “aggressiveness of Chinese companies”.

Other powers also participate in what has become a field of aggressive competitors.  Japan’s NEC is its own colossus, supplying technology to some 14 countries.  IBM keeps up the pressure as a notable American player, doing so to 11 countries.  That particular entity made something of a splash in May, with a report revealing sales of biometric surveillance systems to the United Arab Emirates security and spy agencies stirring discussion in May this year.  Another recipient of IBM surveillance technology is the Philippines, a country more than keen to arm its police forces with the means to monitor, and more than occasionally murder, its citizens.  (The Davao City death squads are a bloody case in point.)

Issues with the report were bound to arise.  A humble admission is made that the sampling method may be questionable in terms of generating a full picture of the industry.  “Given the opacity of government surveillance use, it is nearly impossible to pin down by specific year which AI platforms or systems are currently in use.”  Nor does the index “distinguish between AI surveillance used for legitimate purposes and unlawful digital surveillance.”  A murky field, indeed.

For all the grimness of Feldstein’s findings, he is also aware of the seductive element that various platforms have offered.  Rampant, amoral AI surveillance might well be a hideous by-product of technology, but the field teems with promise in “deep learning; cloud computing and online data gathering”, “improved performance of complex algorithms; and market-driven incentives for new uses of AI technology.”  This shows, in a sense, the Janus-faced nature in critiquing such an enterprise; such praise tends to come with the territory, given Feldstein’s own background as former deputy assistant secretary of state in the Democracy, Human Rights, and Labor Bureau of the US State Department.

Feldstein leaves room to issue a warning.  “As these technologies become more embedded in governance and politics, the window for change will narrow.”  The window, in many instances, has not so much narrowed as closed, as it did decades ago.

Tyler Durden Tue, 09/24/2019 - 22:25
Published:9/24/2019 9:26:27 PM
[Entertainment] Jenna Dewan Debuts Her Baby Bump as She Calls Steve Kazee a ''Gift From Above'' Steve Kazee, Jenna DewanJenna Dewan and Steve Kazee are practically screaming their love from the rooftops. But who can blame the couple for being excited about the life they created together? After all, the two...
Published:9/24/2019 8:25:50 PM
[Markets] Pakistan Threatened India With Nuclear War And No One Noticed Pakistan Threatened India With Nuclear War And No One Noticed

Authored by Darius Shahtahmasebi via TheMindUnleashed.com,

A nuclear-armed state threatened another nuclear armed-state with nuclear war and no one's talking about it...

In a recent interview with Al-Jazeera, Pakistan’s Prime Minister Imran Khan made some controversial statements regarding the use of nuclear weapons against India.

First, Khan started off by saying he was anti-war—a “pacifist.” He then developed his stance, stating that “when two nuclear-armed countries fight, if they fight a conventional war, there is every possibility that it is going to end up into nuclear war.” However, this scenario, as Khan described, is “the unthinkable.”

Khan went on to say:

“If say Pakistan, God forbid, we are fighting a conventional war, we are losing, and if a country is stuck between the choice; either you surrender or you fight ‘til death for your freedom, I know Pakistanis will fight to death for their freedom.

So when a nuclear-armed country fights to the end, to the death, it has consequences.”

Granted, Khan spoke to RT not long after in an attempt to provide a disclaimer to these eye-opening statements. But for all intents and purposes, the nuclear elephant in the room is no longer hiding.

Throughout the last week, the top global news story was the recent drone attack on a major Saudi Aramco facility, which was unanimously pinned on Iran. The whole world appears to be bracing for a regional confrontation between the Kingdom of Saudi Arabia and Iran, and what would inevitably be another disastrous war in which the U.S. finds itself intervening heavily on the side of Riyadh, if it doesn’t take the lead and strike Iran directly itself.

Notwithstanding the seriousness of the potential for U.S.-Iran relations to further spiral into the abyss, no one is talking about the fact that a nuclear-armed state just threatened another nuclear armed-state with nuclear war. How can this be? And how seriously should we take this threat?

“I take Khan’s statement to be almost truism,” Professor Noam Chomsky told the Mind Unleashed via email. 

“Do you know of a country that wouldn’t use whatever weapons it has if it were on the verge of destruction by a bitter enemy? The crimes in this case are India’s. What Modi is doing in Kashmir, with strong public support, is truly criminal. Not to speak of his tearing to shreds what remains of Indian democracy.”

Chomsky then added:

“Quite agree with you about the serious dangers [of a potential war between Pakistan and India].”

Unsurprisingly, no major western news network appears to see the issue in the same way that Chomsky aptly phrased in a one paragraph email, with very few exceptions.

There has been no statement from the NATO chief Jens Stoltenberg that he is concerned about rising tensions. There have been no accusations that Pakistan or India are destabilizing the region.

I fail to accept that a non-nuclear armed Iran poses a larger threat to the global community than a nuclear-armed Pakistan and nuclear-armed India fighting a major war against each other. Last week, Pakistan’s Foreign Minister Shah Mahmood Qureshi quite bluntly acknowledged that the two nations were on the brink of war after—as Chomsky rightly pointed out—India’s decision to turn its back on Kashmir and revoke its special status under Article 370 of the Constitution of India. If overseas reports are to be believed, even India’s Supreme Court has taken issue with India’s stance on Kashmir.

We also must bear in mind that when it comes to Kashmir, Pakistan and India have fought two major wars already. Since the partition, the two nations have gone to war three times—and has almost launched a fourth. History shows us that the potential for a war between two countries who have already fought three wars—and who maintain deep, mutual points of differences—seems to be more than hyperbolic.

A few days ago, U.S. presidential candidate Joe Biden suggested the U.S. move its troops from Afghanistan to Pakistan. If he had suggested this as a means of preventing a war between India and Pakistan, this may have actually made sense. Unfortunately, this was his mind-numbing solution to win the war in Afghanistan—again reaffirming how out of touch anyone who is involved with any major political clout really is.

At this stage, it is unlikely that either Pakistan or India are willing to risk it all. It seems as though both countries have to pander to a nationalist support base domestically in order to score points at home. In the case of Pakistan, the country has to genuinely attempt to address India’s reckless moves in Kashmir, and to make it clear that if the two countries go to war, then the “unthinkable” could very well happen. In that sense, Khan’s statements were likely more of a deterrence than anything else. And at the end of the day, both Pakistan and India have friends to a certain degree, and all of those friends hold significant spheres of influence over both parties.

Admittedly, this outlook is rooted in optimism and even bluffing about the use of nuclear weapons seems to be a potential violation of international law. To Khan’s credit, it would appear that India was the first one to begin violating international law when it decide to punish the Kashmiri population for no credible reason.

Tyler Durden Tue, 09/24/2019 - 21:05
Published:9/24/2019 8:25:50 PM
[Entertainment] Christina Anstead Reveals She Is Back on Bed Rest After Postpartum Injury Christina Anstead Welcomes BabySometimes you have to put yourself first! Flip or Flop star Christina Anstead gets real about the importance of taking care of yourself after giving birth. Earlier today, the HGTV star...
Published:9/24/2019 7:57:36 PM
[Entertainment] How Life Has Completely Changed for the Stars of This Is Us This Is Us, Season 4"It's fundamentally changed all of our lives." That's what Mandy Moore once told Today about the impact This Is Us had has on her life, as well as the live of her...
Published:9/24/2019 7:26:35 PM
[Entertainment] Shane Dawson's New YouTube Series Will Explore the ''Beautiful World'' of Jeffree Star Jeffree Star, Shane DawsonJeffree Star and Shane Dawson have had the YouTube community waiting with bated breath, but the highly-anticipated trailer is finally here. On Tuesday, the two vloggers dropped the...
Published:9/24/2019 6:28:17 PM
[Entertainment] Jon Cryer Responds to Demi Moore's Memoir Claim That She Took His Virginity Demi Moore and Jon CryerJon Cryer is setting the record straight on his virginity, or lack thereof. How did this become a topic of conversation, some may ask? Well, it all started when Demi Moore somberly...
Published:9/24/2019 5:58:08 PM
[Entertainment] Zoë Kravitz and Karl Glusman Make Their Red Carpet Debut as Husband and Wife During Paris Fashion Week Zoe Kravitz, Karl GlusmanParis continues to prove it will always be the city of love! Zoë Kravitz and new husband Karl Glusman have made their marriage red carpet official! The newlyweds tied the knot on...
Published:9/24/2019 5:26:33 PM
[Entertainment] Charlize Theron Gets Sweet Support From Oscar Isaac While Celebrating Her 2019 PCAs Nom: Watch! Charlize Theron, Long Shot PremiereCharlize Theron is all smiles over her E! People's Choice Awards nomination! At the press junket for her upcoming film, The Addams Family, out Oct. 11, E! News asked how she felt...
Published:9/24/2019 5:00:13 PM
[Entertainment] Jennifer Lawrence and More Bring Star Power to Dior's Paris Fashion Week Show Christian Dior show, Jennifer LawrenceStars are going back to basics with the new Christian Dior Spring 2020 collection. In honor of the time of the year, the brand's creative director, Maria Grazia Chiuri, took...
Published:9/24/2019 4:26:57 PM
[2020 Election News] RNC Calls On Biden To Release Transcripts Of Discussions He Had With Ukraine While Vice President

By Chris White -

Republican National Committee Chairwoman Ronna McDaniel is calling on former Vice President Joe Biden to release transcripts of conversations he had with Chinese and Ukrainian officials while he served in the Obama White House. McDaniel’s requests come after President Donald Trump decided to release the transcript of his call with Ukrainian ...

RNC Calls On Biden To Release Transcripts Of Discussions He Had With Ukraine While Vice President is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/24/2019 4:26:56 PM
[Entertainment] Khloe Kardashian Strips Down in Bed for Steamy Nude Photo Khloe Kardashian, Bikini, Beach, InstagramKhloe Kardashian just posed for her most intimate photo yet! The Keeping Up With the Kardashians star stripped down for a stunning new picture for Kourtney Kardashian's website,...
Published:9/24/2019 3:24:33 PM
[Markets] Stocks Slammed On Sentiment Slump, Trade Turmoil, & Impeachment Anxiety Stocks Slammed On Sentiment Slump, Trade Turmoil, & Impeachment Anxiety

What started off as a positive day thanks to overnight algos liftathon after TSY Secretary Mnuchin spoke on Fox Business and broke old news about China talks, ended up rather ugly as the triple whammy of consumer confidence crumbling, Trump talking down China in his UN speech, and battling impeachment headlines sparked risk-off moves in stocks and a bid for bonds and gold.

What the algos saw...

  • 1605ET BUY - Mnuchin on China Vice Premier talks.

  • 1000ET SELL - Cons Confidence.

  • 1020ET SELL - Trump dissing China at UN

  • 1210ET SELL - Pelosi says she will make an announcement, Impeachment fears rise.

  • 1410ET BUY - Trump to release transcript of Ukraine call, reducing impeachment odds.

  • 1440ET SELL - Pelosi formal impeachment headlines.

  • 1544ET BUY - Kashkari pushes 50bps rate cut

However, as @Sentimentrader noted, the outcome of impeachment inquiries is uncertain...

All of which makes you think...

 

Small Caps and Nasdaq were the day's worst performers...

 

Nasdaq and Small Caps broke below the key 50DMA and tested the 100DMA...

Momentum stocks were manically bid early on...

Source: Bloomberg

"Most Shorted" stocks were hammered from the open and basically never looked back...

Source: Bloomberg

China stocks ramped overnight early on the Mnuchin trade headlines...

Source: Bloomberg

European stocks opened higher also, but faded as confidence data and Trump UN speech hit...

Source: Bloomberg

Treasury yields plunged today (down 8-10bps across the curve) - biggest yield drop in a month...

Source: Bloomberg

30Y Yields are now down 6 of the last 7 days, testing back towards 2.00%...

Source: Bloomberg

The yield curve collapsed today...

Source: Bloomberg

The Dollar plunged today back into the range...

Source: Bloomberg

Yuan tossed and turned on the heels of the China headlines...

Source: Bloomberg

Cryptos were a bloodbath...

Source: Bloomberg

With Bitcoin back to $8500...

Source: Bloomberg

Mixed bag in commodityland today with gold outperforming as silver, crude, and copper dropped...

Source: Bloomberg

WTI tumbled further today on Saudi production headlines...

Gold jumped back up above $1540...

Finally, it looks like we're gonna need some more liquidity to keep this potemkin stock market alive...

Source: Bloomberg

Because fun-durr-mentals won't do it...

Source: Bloomberg

 

Tyler Durden Tue, 09/24/2019 - 16:00
Published:9/24/2019 3:24:33 PM
[Entertainment] Sarah Hyland Shares the Sweet Details Of Her First Date With "Forever Person" Wells Adams Sarah Hyland, Wells AdamsSarah Hyland and Wells Adams are here to bring the world a daily dose of relationship goals! The recently engaged couple has no shortage of sweet Instagram content and adorable romantic...
Published:9/24/2019 2:58:09 PM
[Entertainment] How Channing Tatum Feels About Jenna Dewan's Pregnancy Jenna Dewan, Steve Kazee, Channing Tatum InsetChanning Tatum is "happy" for his ex, Jenna Dewan, amid her pregnancy news. On Tuesday morning, The Resident actress announced that she's expecting a baby with her beau, Steve...
Published:9/24/2019 2:24:16 PM
[Entertainment] Watch The Weeknd Fight Adam Sandler In The Intense Uncut Gems Trailer The Weeknd, Uncut Gems TrailerThe Weeknd is coming to the big screen! The singer stars in the upcoming Safdie brothers' film Uncut Gems alongside Adam Sandler, which tells the story of a high-end New York City...
Published:9/24/2019 1:23:47 PM
[Markets] Stocks Surge As Trump Authorizes Release Of "Complete, Unredacted" Ukraine Transcript Stocks Surge As Trump Authorizes Release Of "Complete, Unredacted" Ukraine Transcript

Stocks are bouncing back hard and impeachment odds tumbling after President Trump announced he has "authorized the release tomorrow of the complete, fully declassified and unredacted transcript..." someone spoiling Nancy Pelosi's party later...

 

Stocks surged back...

And impeachment odds are tumbling down from 66% to 42%...

We suspect Biden's election odds will also start to drop...

Tyler Durden Tue, 09/24/2019 - 14:20
Tags
Published:9/24/2019 1:23:47 PM
[Entertainment] Meet the Mixed-ish Family: Everything You Need to Know About Black-ish's Latest Spinoff Mixed-IshThere's a new ish on the block. Premiering Tuesday, Sept. 24, mixed-ish tells the story of Rainbow Johnson before she was Dr. 'Bow Johnson. The series, narrated and produced by black-ish...
Published:9/24/2019 12:57:32 PM
[World] Jessica Simpson Celebrates 100-Pound Weight Loss After Welcoming Baby No. 3 Jessica Simpson Jessica Simpson is an extra proud mama today. On Tuesday morning, the business mogul took to social media where she celebrated a major milestone in her health journey. As it...
Published:9/24/2019 12:57:32 PM
[Markets] How To Safely Navigate A Late-Stage Bull Market How To Safely Navigate A Late-Stage Bull Market

Authored by Lance Roberts via RealInvestmentAdvice.com,

In this past weekends newsletter, I discussed the issues surrounding “dollar cost averaging” and “buy and hold” investing. That discussion always raises some debate because there is so much pablum printed in the mainstream media about it. As we discussed:

“Yes, a ‘buy and hold’ portfolio will grow in the financial markets over time, but it DOES  NOT compound. Read this carefully: “Compound returns assume no principal loss, ever.”

To visualize the importance of this statement, look at the chart below of $100,000, adjusted for inflation, invested in 1990 versus a 6% annual compound rate of return. The shaded areas show whether the portfolio value exceeds the required rate of return to reach retirement goals.”

“If your financial plan required 6% “compounded” annually to meet your retirement goals; you didn’t make it.”

Does this mean you should NEVER engage in “buy and hold” or “dollar-cost averaging” with your portfolio?

No. It doesn’t.  

However, as with all things in life, there is a time and place for application. 

As shown above, when markets are rising, holding investments and adding to them is both appropriate and beneficial as the general trend of prices is rising. 

There is a reason why not a single great trader in history has “buy and hold” as an investment rule. Also, when it comes to DCA, the rule is to never add to losers…ever. 

17. Don’t average trading losses, meaning don’t put ‘good’ money after ‘bad.’ Adding to a losing position will lead to ruin. Ask the Nobel Laureates of Long-Term Capital Management.” – James P. Huprich

That reason is the permanent impairment of investment capital. By investing fresh capital, or holding current capital in risk assets, during a market decline, the ability of the capital to create future returns is destroyed.

“17. Don’t focus on making money; focus on protecting what you have.” – Paul Tudor Jones

Investing is about growing capital over time, not chasing markets. 

This is also why all great traders in history follow the most simplistic of investing philosophies:

“Buy that which is cheap, sell that which is dear” – Ben Graham

It’s Getting Very Late

When trying to navigate markets, and manage your portfolio, you have to have a reasonable assumption of where you within the investment cycle. In other words, as Jim Rogers once quipped:

“It’s hard to buy low and sell high if you don’t know what’s low and what’s high.”

This is the problem that most individuals face during late-stage bull market advances. Following a “bear market,” most individuals have been flushed out of the markets, and conversations of “armchair investing methods” vanish from the financial media.

However, once the “bull market” has lasted long enough, it becomes believed that “this time is different.” It is then you see the return of concepts which are based on the assumption:

“If you can’t beat’em, join’em.” 

That is where we are today and we have created a whole bunch of sayings to support the idea of why markets can’t fall:

  • BTFD – Buy The F***ing Dip

  • TINA – There Is No Alternative

  • The Central Bank Put

  • The Fed Put

  • The Trump Put

You get the idea.

However, there is little argument that valuations are expensive on a variety of measures, as noted by Jill Mislinksi just recently.

Importantly, markets are also grossly extended on a technical basis as well. The chart below shows the S&P 500 on a quarterly basis. Note that the index is pushing rather extreme levels of extension above its very long-term moving average, and is more overbought currently than ever before in history. 

Note that a reversion to its long-term upward trend line would take the market back to 1500 which would wipe out all the gains from the 2007 peak. Such a correction would also set back portfolio returns to about 2% annualized (on a total return basis) from the turn of the century.

As a portfolio manager, however, I can’t sit in cash waiting for a “mean-reverting” event to occur. While we know with absolute certainty that such an event will occur, we don’t know the “when.” Our clients have a need to grow assets for retirement, therefore we must navigate markets for what “is” currently, as well as what “will be” in the future. 

The question then becomes how to add equity exposure to portfolios particularly if one is in a large cash position currently.

How To Add Exposure In A Late Stage Bull Market

The answer is more in line with the age-old question:

“How do you pick up a porcupine? Carefully.”

Here are some guidelines to follow:

  1. Move slowly. There is no rush in adding equity exposure to your portfolio. Use pullbacks to previous support levels to make adjustments.
  1. If you are heavily UNDER-weight equities, DO NOT try and fully adjust your portfolio to your target allocation in one move. This could be disastrous if the market reverses sharply in the short term. Again, move slowly.
  1. Begin by selling laggards and losers. These positions are dragging on performance as the market rises and tend to lead when markets fall. Like “weeds choking a garden,” pull them.
  1. Add to sectors, or positions, that are performing with, or outperforming, the broader market. (We detail these every week at RIAPRO.)
  1. Move “stop-loss” levels up to current breakout levels for each position. Managing a portfolio without “stop-loss” levels is like driving with your eyes closed.
  1. While the technical trends are intact, risk considerably outweighs the reward. If you are not comfortable with potentially having to sell at a LOSS what you just bought, then wait for a larger correction to add exposure more safely. There is no harm in waiting for the “fat pitch” if the current market setup is not viable.
  2. There is nothing wrong with CASH. In investing, if you don’t know what to do for certain, do nothing. There is nothing wrong with holding extra cash until you see the “fat pitch.”
  3. If none of this makes any sense to you – please consider hiring someone to manage your portfolio for you. It will be worth the additional expense over the long term.

The current rally is built on a substantially weaker fundamental and economic backdrop. Thereforeit is extremely important to remember that whatever increase in equity risk you take, could very well be reversed in short order due to the following reasons:

  1. We are moving into the latter stages of the bull market.
  2. Economic data continues to remain weak
  3. Earnings are beating continually reduced estimates
  4. Volume is weak
  5. Longer-term technical underpinnings are weakening and extremely stretched.
  6. Complacency is extremely high
  7. Share buybacks are slowing
  8. The yield curve is flattening

It is worth remembering that markets have a very nasty habit of sucking individuals into them when prices become detached from fundamentals. Such is the case currently and has generally not had a positive outcome.

What you decide to do with this information is entirely up to you. As I stated, I do think there is enough of a bullish case being built to warrant taking some equity risk on a very short-term basis. We will see what happens over the next couple of weeks. 

However, the longer-term dynamics are turning more bearish. When those negative price dynamics are combined with the fundamental and economic backdrop, the “risk” of having excessive exposure to the markets greatly outweighs the potential “reward. “

While it is certainly advisable to be more “bullish” currently, like picking up a “porcupine,” do so carefully.

Tyler Durden Tue, 09/24/2019 - 13:45
Published:9/24/2019 12:57:32 PM
[Entertainment] Why Demi Moore Is Finally Ready to Talk About Her Marriage With Ashton Kutcher All These Years Later Demi Moore, Ashton Kutcher14 years ago today, Demi Moore and Ashton Kutcher exchanged vows in a small ceremony, attended by her ex-husband and close friend Bruce Willis, and the former couple's three daughters, Rumer,...
Published:9/24/2019 11:54:49 AM
[Markets] Impeachment Scare? Gold Spikes As Stocks & Bond Yields Extend Drop Impeachment Scare? Gold Spikes As Stocks & Bond Yields Extend Drop

The S&P is back to post-Powell lows (before his QE4 hint) following weak macro data, Trump's China comments, and increasing likeliness of a Trump impeachment proceeding. Bonds and bullion are bid...

Nasdaq and Small Caps are testing their 50-day moving-average...

30Y Yields are tumbling...

Source: Bloomberg

And gold is soaring...

Since Jay Powell dropped his rate-cut promises, things are not going well...

 

Tyler Durden Tue, 09/24/2019 - 12:37
Published:9/24/2019 11:54:49 AM
[Entertainment] Hailey Bieber Just Showed Some Subtle Support For Selena Gomez Selena Gomez, Hailey BaldwinPutting the past behind them? Hailey Bieber is showing support for Selena Gomez and her best friends, and it's all for a great cause. Despite rumored tension between the 22-year-old...
Published:9/24/2019 11:23:17 AM
[Markets] Why The Saudis Are Lying About Their Oil Production Why The Saudis Are Lying About Their Oil Production

Authored by Simon Watkins via OilPrice.com,

Saudi Arabia’s comments about its hydrocarbons industry have long been regarded by industry experts as being as believable as China’s comments about its economic growth: that is, not at all. Saudi Arabia’s skill in lying is definitely improving, though, from the outright transparent lies about its level of oil reserves, spare capacity, and why the omni-toxic Aramco should nonetheless be valued at US$2 trillion.

Its latest lies - along the lines of ‘everything is fine after the attacks and we will be back to full production really quickly’ – are relatively nuanced.

The Saudi statements may not contain any direct falsehoods as such but nor are they entirely being fulsome with the truth,” Richard Mallinson, senior energy analyst for Energy Aspects, in London, told OilPrice.com last week.

The stage was set for the Saudis’ latest lying extravaganza with the aerial attacks on its massive Abqaiq oil processing facility and Khurais oil field launched, according to various sources, by Houthi ‘rebels’ in Yemen or by Iranian operatives in Yemen or in Iran. The effect of the combined attack on Abqaiq and Khurais caused the temporary suspension of 5.7 million barrels per day (bpd). This equates to well over half of Saudi Arabia’s actual crude oil production capacity, not the capacity figure that Saudi has plucked out of nowhere for geopolitical power purposes in recent years, and resulted in the biggest rise in oil prices in a single day ever.

Once the hedge funds, who had handily positioned themselves long some days before the attacks, had taken their profits, and younger traders remembered that the U.S. can release vast amounts of oil at the drop of a hat from its Strategic Petroleum Reserve to keep the price of oil – and, crucially ahead of an election year, the highly correlated and politically enormously sensitive gasoline pump price in the U.S. down – oil prices came down again, obviously.

A number of interesting things happened from the Saudi Arabian side as the prices went up and then went back down again. The first of these, as OilPrice.com was informed repeatedly by senior oil traders throughout the day, was the lack of real understanding that senior Saudi officials seem to have on how the oil market works or any details of Saudi’s own oil industry.

“I used to think the Saudis thought all of us [oil traders] were idiots, with all the rubbish they used to come out with and thought we’d believe, but recently it’s occurred to me that they genuinely don’t know anything about the oil industry, so they don’t understand that other people actually do know what they’re talking about and this has also been one of the reasons for the constant delaying of the Aramco sale, by the way,” one senior oil trader based in Asia told OilPrice.com.

The Aramco sale to one side for another time (although OilPrice.com has exclusively previously highlighted all of the lies pertaining to it), one particularly striking comment came from Saudi Arabia’s new oil minister, Prince Abdulaziz bin Salman, just after the attacks. He stated that the Kingdom plans to restore its production capacity to 11 million bpd by the end of September and recover its full capacity of 12 million bpd two months later.

“It was extremely telling that he spoke of ‘capacity’ and later of ‘supply to the market’, as these are terms that Saudi tends to use in order to avoid talking about actual production, as capacity and supply are not the same thing at all as actual production at the wellheads,” said Energy Aspects’ Mallinson.

“What Saudi is trying to do by not revealing the true picture is to protect its reputation as a reliable oil supplier, especially to its target clientele in Asia, so we have to take all of these comments with a hefty pinch of salt,” he added.

So hefty a pinch of salt as to be mountainous in the case of its capacity and corollary spare capacity figures. The country has stated for decades that it has a spare capacity of between 2.0-2.5 million bpd, implying – given actual production during virtually all of this time averaging less than 10 million bpd - total production capacity of 12.0-12.5 million bpd. This level, though, or anywhere near it, has never been even remotely tested, with the highest production ever recorded being just over 11 million bpd in November last year.

This is despite the all-out oil price war that Saudi started in 2014 against U.S. shale producers to try to destroy the industry through low prices caused by flooding the markets with oil.

“If the Saudis had anything near 12 million barrels per day capacity, that would have been the time to pump it but all it managed was just under 10 [million bpd] with 10.5 [million bpd] managed for just one month over that two-year period [2014-2016 before Saudi reversed it strategy],”

Additionally, the EIA defines spare capacity specifically as production that can be brought online within 30 days and sustained for at least 90 days, whilst even Saudi Arabia has said that it would need at least 90 days to move rigs to drill new wells and raise production to the mythical 12 million bpd or 12.5 million bpd level. Many serious oil market players now do not believe that the Saudis have anywhere near 2 million bpd of spare capacity, as it would imply production of 12 million bpd plus. Instead, many now believe that the Saudis have sustainable spare capacity of no more than around 0.5-1.0 million bpd.

Whatever Saudi’s actual capacity, there is absolutely no way that it can have made any accurate assessment of how long it would take to get back to any particular capacity level either – another lie. “Engineers we have spoken to have said that following an incident like this it would take several weeks just to assess the damage, never mind to begin doing anything about it, rather than the few days that the Saudis have taken and then announced the actual timeline – and a very short timeline at that – to bring back various stages of capacity,” said Energy Aspects’ Mallinson. 

“Instead, what the Saudis will do to keep exports up is draw down supplies to its domestic industry and reduce the amounts it is sending to domestic refineries – one big refinery, SASREF, is conveniently bringing forward its planned maintenance for later in the year to now - and we hear very mixed reports which of the other refineries are operating at regular rates,” he added.

“But some buyers are already being warned of delays, some are being offered swaps with other grades and so on,” he underlined.

Specifically, a number of customers of Saudi’s Arab Light and Arab Extra Light grades – the grades most affected by the recent attacks – have been offered Saudi’s Arab Medium or Arab Heavy as substitute grades. OilPrice.com understands from oil trading sources. This even applies to Saudi’s number one target country, China. A number of refineries have been told by Aramco that their rolling orders for Arab Extra Light crude cannot be supplied for the time being but can be switched for either Arab Medium or Arab Heavy, depending on the set-up of the refinery. Others, looking for their usual monthly supply of Arab Light have been told that this will be switched to Arab Heavy as a substitute for September loading at least.

The other measure that Saudi is taking - which it has vehemently denied but OilPrice.com can confirm from various oil trading sources and from sources in the Iraq Oil Ministry – is looking to buy Iraq oil grades, which are close to the key export grades that Saudi ships to various destinations, including Asia. “Aramco Trading Company has been aggressively checking prices and lot sizes for Iraqi crude with various [oil] trading houses since the attacks and are looking are shorter-term potentially rolling contracts,” one trading source told OilPrice.com last week.

“A number of the Iraqi grades are close in specifications to their Saudi counterparts, and part of this activity by Saudi to fill customer supply quotas for these grades is to make sure that the demand we are still seeing for such Iranian grades from Asia, but mainly China, is not boosted to make up for the shortfall from Saudi.,” a senior source who works closely with Iraq’s Oil Ministry told OilPrice.com.

The supreme irony, of course - as OilPrice.com has repeatedly underlined, and as many in the oil markets now know, although apparently not the Saudis - is that a cornerstone strategy used by Iran to circumvent current U.S. sanctions against it (as was also the case in the previous period of sanctions) is to rebrand its oil into Iraqi oil, which is extremely easily done, both at the massive and porous border between the two or via various pipeline and shipping routes.

It may well be, then, that Saudi Arabia ends up boosting the bank accounts of the very people that it thinks was behind the attacks on its own oil infrastructure, the Islamic Revolutionary Guards Corps – a staunch and active supporter of Yemen’s Houthis - through its various oil-industry associated businesses by buying Iranian oil, albeit with the stickers changed on the barrels.

Tyler Durden Tue, 09/24/2019 - 12:16
Published:9/24/2019 11:23:17 AM
[Markets] Bitcoin Tumbles After Network Hash-Rate Mysteriously Flash-Crashes By 40% Bitcoin Tumbles After Network Hash-Rate Mysteriously Flash-Crashes By 40%

Authored by Marie Huillet via CoinTelegraph.com,

Bitcoin’s network hash rate dipped a record 40% yesterday, Sept. 23, in a sudden shock for the network.

Bitcoin network hash rate, Nov. 2018-present. Source: Coin.dance

Data from Coin.dance - corroborated by other sources - indicates that the network’s hash rate plummeted yesterday from over 98,000,000 TH/S to 57,700,000 TH/s.

Mystery flash crash remains unexplained

The flash drop remains unexplained as of press time and is all the more striking given the Bitcoin network’s record-breaking string of new all-time high hash rates throughout summer.

Just five days ago, Cointelegraph had reported that Bitcoin’s hash rate had passed a record 102 quintillion hashes in a historic milestone.

As previously noted, the hash rate of a cryptocurrency — sometimes referred to as hashing or computing power — is a parameter that gives the measure of the number of calculations that a given network can perform each second. 

A higher hash rate means greater competition among miners to validate new blocks; it also increases the number of resources needed for performing a 51% attack, making the network more secure.

By press time, Bitcoin’s hash rate has somewhat recovered back to almost 88,300,000 TH/s — yet remains well below its earlier records.

Throughout summer, cryptocurrency analysts had argued that the network’s record-breaking streak of all-time hash rate highs was a bullish indicator for the top coin’s price performance. 

In a tweet posted this August, Bitcoin investor Max Keiser had claimed that:

“Price follows hashrate and hashrate chart continues its 9 yr bull market.”

But, sure enough, Bitcoin is sliding today after that drop in the hash-rate:

Source: Bloomberg

Altcoins are getting hit worse however...

Source: Bloomberg

Back in November 2017, Bitcoin had seen a sudden hash rate downturn of almost 50%, accompanied by slowed transaction processing times, a price dip, and even miners’ short-lived switch over to the forked network, Bitcoin Cash (BCH).

Tyler Durden Tue, 09/24/2019 - 11:35
Published:9/24/2019 10:55:08 AM
[Entertainment] Jonathan Van Ness Recalls the Dreadful Moment He Found Out He Was HIV Positive Jonathan Van NessJonathan Van Ness is quite literally an open book. In his new memoir Over the Top, the fan favorite Queer Eye star gets candid about his experience with sexual abuse, drug addiction and...
Published:9/24/2019 10:24:16 AM
[Markets] Trump Impeachment Odds Soar On Heavy Volume  Trump Impeachment Odds Soar On Heavy Volume 

PredictIt odds of President Trump's impeachment by the end of his first term have soared in the last 12 hours in heavy volume. 

About 14 hours ago, volume started pouring in, increasing the odds from about 35% to almost 60% in the overnight hours.

Tuesday morning, the odds have traded from 40% to 60% range - consolidating after a massive ramp. 

As of Tuesday morning, nearly 150 House Democrats are supporting impeachment action after "President Trump repeatedly pressured the president of Ukraine to investigate Joe Biden and his son Hunter at a time when Ukraine was desperate for military aid from the United States," said Michael Snyder via The End of The American Dream blog

The political storm surrounding President Trump's admitted call for Ukraine's President to investigate Joe Biden may have been what sparked impeachment odds to spike. 

According to Politico, sources have been telling them that the possibility of impeachment proceedings is "approaching a certainty."

"But House Democrats have been pulling together a wide-ranging case to impeach President Donald Trump on a series of alleged past and ongoing crimes against the country — a set of charges that goes far beyond the Mueller report — and all signs point to a possible public inflection point later this week, when acting Director of National Intelligence Joseph Maguire testifies before the House Intelligence Committee."

"The dam could break on Thursday," one senior House Democratic aide, whose boss has not endorsed impeachment, told NBC News.

Multiple senior House Democrats and congressional aides told The Washington Post that Speaker Nancy Pelosi has been strategizing on whether the time is right to impeach President Trump. 

Pelosi has been assessing the mood of her caucus members about whether they believe the allegations that Trump urged the Ukrainian president to investigate a political opponent is enough to start impeachment proceedings. 

The sudden jump in PredictIt impeachment odds of the president could have been led by Washington insiders who are in the know. 

As shown below, heavy volume started pouring in yesterday evening and into the overnight.

The odds of President Trump being impeached by year-end appear to be in a new bull market. 

With E-mini S&P 500 futures contracts near record highs, the market has yet to price in an impending political storm in Washington. Add the threat of impeachment to the market's long list of troubles. 

Tyler Durden Tue, 09/24/2019 - 11:13
Tags
Published:9/24/2019 10:24:16 AM
[Entertainment] This Stumptown Sneak Peek Will Tell You Everything You Need to Know About Cobie Smulders' Dex Parios StumptownDex Parios isn't your normal detective--and that's exactly what makes Stumptown special. Cobie Smulders stars in the new ABC drama as Dex, a veteran who's making a living as a...
Published:9/24/2019 9:54:00 AM
[Markets] S&P Falls Back Below 3,000; Bitcoin & Bond Yields Tumble S&P Falls Back Below 3,000; Bitcoin & Bond Yields Tumble

Momentum is dramatically bid this morning as bond yields and bitcoin tumble and the S&P 500 reverses early gains following disappointing consumer confidence data...

Value factor is being sold as momo goes fomo...

Source: Bloomberg

Treasury yields are also diving, below yesterday's lows...

Source: Bloomberg

And Bitcoin is being dumped to near one-month lows...

Source: Bloomberg

As the S&P 500 loses 3k again...

 

Tyler Durden Tue, 09/24/2019 - 10:20
Published:9/24/2019 9:24:17 AM
[Politics] Most in America Like Its Diversity and Live It

Just over half of Americans think diversity is a good thing and say they live in neighborhoods that reflect that.

A new Rasmussen Reports national telephone and online survey finds that 52% of American Adults believe America’s racial and ethnic diversity is mostly good for the country. Only 17% think diversity is mostly a bad thing, while 22% say it has no impact. (To see survey question wording, click here.)

(Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

The survey of 1,000 American Adults was conducted on September 17-18, 2019 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

Published:9/24/2019 9:24:17 AM
[Entertainment] Obsessed Miley Cyrus Fan Arrested at Her Concert Following Threats Against Singer Miley CyrusCareful, Miley Cyrus! Police arrested a fan attending her iHeartRadio Music Festival show in Las Vegas this weekend. According to police records, the fan--a 42-year-old male named David...
Published:9/24/2019 8:52:45 AM
[In The News] Democrat On AOC Fracking Claim: ‘We Do Ourselves No Favors When We Ignore Science’

By Jason Hopkins -

Alexandria Ocasio-Cortez visited a fracking site in Broomfield, Colorado and tweeted out a video that purported to show it was releasing toxic emissions.  However, several hydraulic fracturing experts went on record to note that no fracking was actually taking place at the rig, and that the camera was not showing ...

Democrat On AOC Fracking Claim: ‘We Do Ourselves No Favors When We Ignore Science’ is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/24/2019 8:24:48 AM
[Entertainment] Tom Hanks to Receive Cecil B. deMille Award at 2020 Golden Globes Tom Hanks, 2019 Toronto International Film FestivalTom Hanks is one of the latest and greatest actors to be honored with the Cecil B. deMille award at the 2020 Golden Globes. In an announcement, the Hollywood Foreign Press Association...
Published:9/24/2019 7:59:55 AM
[Markets] Fed's Term Repo 2x Oversubscribed As Banks Brace For Quarter End Funding Shortage Fed's Term Repo 2x Oversubscribed As Banks Brace For Quarter End Funding Shortage

The NY Fed's first term repo operation in over a decade, which has a 14 day term and thus captures the liquidity-draining quarter end period, has just concluded, and it confirmed that banks are hunkering down ahead of quarter-end, by tendering some $62BN in securities for the $30BN operation, making it more than 2x oversubscribed.

And while we await the details of the regular, overnight repo to be printed, which is being held again today, and every day into October, here are some more details on today's term repo:

  • The NY Fed accepted $22.7BN of Treasuries at a stop-out rate of 1.90%, with a weighted average rate was 1.961%, both well above IOER and confirming that there was indeed quite a bit more demand than supply.
  • And while the Fed did not accept agency debt, it accepted $7.27BN of mortgage-backed debt at 1.95%, with a weighted average rate of 2.007%

To be sure, the Fed's term-repo was always expected to be heavily used, which is also why there are at least two more $30BN term repos this week, which assuming there was just $32BN in additional submissions that did not get access to the Fed's facility, should be more than met with little need for the third and final term repo. Alternatively, some banks may be simply waiting to get closer to the quarter end before tipping their cards: after all, just like the Discount Window, the repo operation has become the modern "stigmatizing" equivalent, and if reporters or clients get a whiff that a bank is in a dire liquidity state, the consequences could be dramatic.

Furthermore, the closer we get to quarter end, the tighter liquidity will get, and as a result, the overnight general collateral repo rate rose on Tuesday after trading within the Federal Reserve’s target range late last week: according to ICAP GC repo opened at 2.10%/2%, before drifting lower to 2.05%/2.03%; meanwhile term repo rates continue to be in the mid-2% range.

Commenting on the upcoming cash crunch, Wrightson ICAP expected weekly Treasury bill settlements and the “early liquidity- chilling effects” of approaching quarter-end statement date to "start to move repo rates back up this morning", and that's precisely what happened.

Tyler Durden Tue, 09/24/2019 - 08:33
Published:9/24/2019 7:59:55 AM
[Entertainment] Kristen Stewart Tells the Embarrassing Story of How She Met Her Charlie's Angels Co-Stars Kristen StewartKristen Stewart will never forget the first time she met Naomi Scott. The 29-year-old actress told the story of their awkward encounter on Monday's episode of Jimmy Kimmel...
Published:9/24/2019 7:24:16 AM
[Entertainment] Big Little Lies Group Halloween Costume: How to Pull It Off EComm: Big Little Lies, Halloween CostumesWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not...
Published:9/24/2019 6:23:28 AM
[Startups] Investors: Prospect for early-stage startup gold at Disrupt Berlin 2019 Got an early stage fund? Then grab an Investor pass, pack your bags and head to Disrupt Berlin 2019 on 11-12 December. We’ll host hundreds of exhibiting startups, which makes this tech conference prime prospecting territory for investors looking to add only the best early-stage startups to their portfolio. Buy your Investor pass and join thousands […] Published:9/24/2019 6:23:28 AM
[Entertainment] Rachel Antonoff and Keds Team Up for National Voter Registration Day ECOMM: Rachel Antonoff x KedsWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not...
Published:9/24/2019 5:53:25 AM
[Entertainment] Mariah Carey and Mixed-ish Aren't the First: 14 Pop Stars Who've Recorded TV Theme Songs TV Theme Songs - Mixed-ish, Mariah CareyWhen Black-ish fans tune in to new spinoff Mixed-ish's series premiere on Tuesday, Sept. 24, they should recognize a very familiar voice when the show's opening credits roll. And...
Published:9/24/2019 5:24:03 AM
[Markets] Will Merkel's Green Plan Work? Will Merkel's Green Plan Work?

Authored by Daniel Lacalle via DLacalle.com,

A few months ago we commented that there will be no energy transition without competitiveness, and given the proposal of Germany to carry out another huge green plan, the European Union faces the opportunity to correct the mistakes made in the past with the wrong subsidies and policies. An opportunity to strengthen the economic fabric of the eurozone. However, the risks of repeating the same mistakes are not small.

The German Energiewende has been a huge and costly mistake (more than 500 billion euros in cost) due to very specific factors of German policy that are not being repeated in other countries. According to a study by Thomas Unnerstall, Germany’s two big mistakes in its green plan have been stubbornness and excess. Obstinacy in the elimination of a large part of the nuclear park during the transition period and the excess of subsidies at the initial moment of the development of renewable energies. These two errors explain 75% of the excess cost.

The results of that huge plan have been very poor. In 2018, in Germany, coal continues to lead the energy mix (lignite 22.5% and coal 12.9%), and fossil energies almost 50% (49.4%), while renewables add up to 34, 9%. 

The most worrying thing is that electricity prices for households have increased by 60% since 2006, and the consumer has not benefited from the drop in wholesale energy prices. While the costs of supply, distribution, and networks in the price of electricity have fallen by 17% since 1998, the percentage of fees, taxes, and subsidies increased by 196% (subsidies soared from 0.08 ct / kWh to 6.4 ct / kWh in 2018).

There are many important factors to remember. Citizens must be aware that demagogy cannot dictate energy policy. The European Union cannot ignore security of supply risks and loss of competitiveness if it promotes a volatile, intermittent and costly energy mix . Environmental strategies have to be aligned with innovation and competition so that policies do not destroy consumption, investment, growth, and citizens’ disposable income.

Politicians ignore the reality: Energy transition is unstoppable and does not need interventionist policies. The US has proven that technology and competition have done more to reduce CO2 emissions and improve efficiency than the constant increase in indirect taxes seen in the EU.  Energy transition will only happen if competitiveness and economic logic support environmental objectives. Taxpayers cannot be, again, those who pay for political planning errors. If Europe makes the mistakes of the past, there will be no energy transition but there will be more unemployment and recession.

Germany must learn from its policy mistakes and, with it, the rest of the Europeans. The slowdown of the eurozone is not a coincidence and is not detached from the mistakes in energy policy. The Eurozone weakness can be explained in an important part by a wrong policy of taxes and interventionism that has prevented citizens and businesses from benefiting from energy technological development. By denying the undoubted benefits of competition, which allowed the United States to reduce emissions and lower prices to consumers while strengthening investment and employment, Europe has lost a great opportunity that it can now solve.

If this plan is channeled towards improved competition and not unnecessary increases in taxes and management, Europe can substantially improve its energy mix by taking advantage of what we have learned from past mistakes and experiences. What would be suicidal is to redouble the wrong bet .

Unfortunately, when they talk about a ” New Green Deal“, what it is about is to delve into familiar mistakes: Massive tax increases and more unnecessary subsidies when technology, innovation, and competition are already working.  Raising taxes on airline tickets is not a stimulus plan, it means harming the most disadvantaged so that the rich travel more comfortably by plane.

A much more ambitious and effective plan can be carried out learning from what has worked. In the United States, tax credits and power purchase agreements between parties have been more effective in strengthening new energy technologies than the European tax and intervention directives. The winning combination of natural gas and renewables competing has done more to improve the environment and consumers’ lives than large government-spending plans. A true energy transition plan would have a much greater multiplier effect if no obvious disincentives are generated, because the European Union cannot be approximately 10% of the world’s emissions but 100% of the cost, with a CO2 pricing mechanism that works as a subsidy to keep obsolescence, leading to an unplanned resurgence in the use of hard coal and lignite. Why? Because the CO2 price mechanism has made power prices more expensive and technologies that would not be viable in a competitive environment have been revived by the same scheme that tries to make them less competitive. Prices rise, margins are low but acceptable.

Europe can benefit from what has been learned from the mistakes of Energiewende to reorient its incentives by eliminating subsidies and exchanging those for tax cuts and facilitating competition. When, for example, barriers to interconnections continue to be in place to support obsolete semi-state owned national champions, the cost of interventionism is passed to the taxpayer and energy transition is actually delayed.

Europe has enormous advantages: leading global companies, the experience of previous mistakes and some successes, a spectacular potential through investment in interconnection, and a potential market that can increase by 30% if investment in isolation, energy efficiency, and savings are combined with the attraction of technological investment and innovative capital. More government-spending plans disguise a desire to keep the directed-economy model at all costs with huge subsidies to the unproductive areas and more taxes to the high productivity sectors. It generates a double negative economic impact.

We must be aware of the opportunity and not fall into the complacency of denying past mistakes.

Will the 100 billion euro plan be the solution for Europe? Let us give it the benefit of the doubt before it is fully announced, but headlines so far show it is very likely that it will be similar to the ones of the past. Let us not forget that the German government is talking about a figure that is one-third of what has been mobilized in the Juncker plan with indiscernible effects on growth, and much lower than the  650 billion euro of the InvestEU Program 2021-2027. despite -or because of- those enormous plans the European Union is on the way to recession.

If Europe wants to relaunch its economy, it will not be by repeating exactly what has led it to stagnation. It’s time to bet on competition and innovation.

Tyler Durden Tue, 09/24/2019 - 05:00
Published:9/24/2019 4:23:06 AM
[Entertainment] Weigh In On Bluff City Law, Prodigal Son, All Rise and Bob Hearts Abishola Bluff City LawFall is officially here, and so is Fall TV, and the networks kicked it off with a bang of four new shows at once! We want to know what you thought of each of the new series, so below...
Published:9/24/2019 2:59:08 AM
[Markets] Mish: Negative Interest Rates Are Socio-Political Poison Mish: Negative Interest Rates Are Socio-Political Poison

Authored by Mike Shedlock via MishTalk,

The interest rate business model is dead. Negative interest rates killed it, with no replacement in sight.

Anne Kunz and Holger Zschäpitz co-authored an excellent article for Welt (in German) called the Interest Rate Business Model is Dead.

Here are some excerpts via Google translate with many of my own modifications. For example, the title itself is my translation, not Google's.

Google has the title as "Business Model With the Interest is Dead".

I made an educated guess that Google's title isn't quite right.

I picked up the article from this Tweet.

Translation errors below may be Google's or mine. I took a fair amount of liberty, adding some words, deleting others, or changing the word order so the result makes sense to me.

Apologies to the authors for any of my errors.

Interest Rate Business Model is Dead

The cash cow bank lending model is dead, buried by the European Central Bank (ECB).

The coup de grace came at the recent meeting. As ECB President Mario Draghi squeezed the negative interest rate for banks even deeper.

The ECB will restart its bond purchase program in November. This time, without a time limit. Thus, the monetary authorities have permanently chained the long-term interest rate at a low level and cut the profit opportunities of the financial sector to a level that isn't sustainable. For a long time, institutions have made good money from the difference between long-term and short-term interest rates.That time is now over.

In 2016, Commerzbank employed more than 50,000 people. CEO Martin Zielke wants to close one-fifth of the 1,000 branches and even wants to part with an important source of income including his Polish subsidiary MBank. The workforce should be reduced to around 38,000 by the end of 2020.

The sale of Mbank is a desperate attempt at salvation.

In terms of stock market value, Deutsche Bank and Commerzbank are now loosely hanged even by more regionally active institutions from Norway and Sweden. [That is a direct translation that reads wrong but I do not know how to fix it].

Even the once proud Landesbanken is a restructuring case. This is a dangerous development.

"With the allowance, the ECB has relieved the German banks in the short term by around 500 million euros. At the same time, banks will be burdened considerably by the continuation of the low interest rates for an indefinite period, "says Peter Barkow, financial expert at Barkow Consulting. "Especially the German banks are very much dependent on income from the long-term investment of customer deposits at higher interest rates, called maturity transformation. This strategy only works very limited, "warns the expert. [The allowance refers to the ECB not charging banks a portion of the negative interest on excess reserves]

However, the corresponding earnings impact on the banks will only be delayed. "Many German banks have to find new sources of income in the medium term. In the short term, a further reduction in costs will probably be necessary, "says Barkow.

For more than a hundred years, banks lived on long-term lending or investing in securities their clients entrusted to them in the short term .

Historically, banks made money out of time. If time no longer has a price, because there is no more interest, nothing can be earned. Ten-year Bunds yielded around 1.5 percentage points more than two-year issues in historical terms. Currently, the difference is just under 0.2 percentage points.

In the multi-billion loan portfolios, the institutions are losing a lot of money due to ECB policy. Accordingly, the shares of Deutsche Bank and Commerzbank have fallen in sync with the interest rate differential. How dramatic the situation is for the banks, the analysts of JP Morgan have written down.

In a 120-page analysis, JP Morgan analysts calculated what effects the ECB policy will have on the banks. They used Japan as an example. Japan has had negative interest rates for some time now and there institutions have been unable to earn anything for two decades with time. The JP Morgan analysts' conclusion: Interest margins could continue to shrink and continue to weigh on the earnings side.

"The negative interest rate policy of the ECB is ruining the financial system and is a socio-political poison," says Frank Kohler, CEO of Sparda-Bank Berlin. The financial system is absurd if we have to explain to the children that money has a negative value - and thus debt is good, because you may not have to repay everything.

Socio-Political Poison

Bingo.

Thanks to Anne Kunz and Holger Zschäpitz for an excellent article and apologies again for any translation errors I may have made.

Tyler Durden Tue, 09/24/2019 - 03:30
Published:9/24/2019 2:59:08 AM
[Politics] 43% Say U.S. Heading in Right Direction

Forty-three percent (43%) of Likely U.S. Voters think the country is heading in the right direction, according to a new Rasmussen Reports national telephone and online survey for the week ending September 19.

(Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

The national telephone survey of 2,500 Likely Voters was conducted by Rasmussen Reports from September 15-19, 2019. The margin of sampling error for the survey is +/- 2 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

Published:9/23/2019 9:52:27 PM
[Entertainment] Dancing With the Stars Season 28 Eliminates First Star With New Rules Dancing With the StarsDancing With the Stars just eliminated its first star under the new elimination rules. Instead of leaving it all up to the viewer votes, contestants are now eliminated by the judges,...
Published:9/23/2019 9:52:26 PM
[Markets] General Dynamics Unveils 'Light Weight' Tank That Could Be Deployed By 2025 General Dynamics Unveils 'Light Weight' Tank That Could Be Deployed By 2025

The Department of Defense (DoD) is anticipating the next-generation of main-battle tanks to hit the modern battlefield by 2025. 

In the meantime, General Dynamics showed off its next-generation of main-battle tanks during the 2019 Modern Day Marine expo in Quantico, Virginia, over the weekend, reported Defense Blog.

General Dynamics Land Systems, a segment within General Dynamics, unveiled the advanced, 'light tank,' called the Griffin II. 

The DoD/Army is currently searching for new tracked armored vehicles able to defend infantry squads on the modern battlefield. 

Griffin II is part of a more significant effort by the DoD to develop weapons that can be quickly deployed around the world. The new tank is light enough that it can be airlifted into battle. 

The Army is shifting focus from counterinsurgency to high-intensity war-fighting against China and Russia, and will need a new lightweight tank for the next conflict. 

Griffin II has a 120mm main gun and weighs around 38-tons. It will "provide soldiers with speed, protection, lethality and the ability to wage a multi-domain battle, working in concert with other ground forces to overwhelm the enemy with multiple simultaneous challenges," said Defense Blog. It has a scaled-down version of the M1 Abrams turret with a similar overall design. 

The new tank is expected to have a higher rating of survivability than the M1 Abrams, a tank that entered service in 1980, and has been used in all US involved Middle Eastern wars since the Gulf War (1990-1991).

The new tank will feature advanced armor, more lightweight than ever before, along with intelligent sensors that are integrated with the hardware, software, and effectors to create an overarching, layered system of passive and active self-defense measures, Defense Blog said. 

Griffin II could enter service by 2025, and be flown to any battlefield in the world via a Boeing C-17 Globemaster III transport aircraft.

Tyler Durden Mon, 09/23/2019 - 22:45
Published:9/23/2019 9:52:26 PM
[Open Threads] Bookworm Beat 9/22/19: the anthro-moronic climate change illustrated edition

I admit that I got carried away in this illustrated edition — 69 pictures! — but between climate change cultism and general Leftism, I couldn’t resist.

The post Bookworm Beat 9/22/19: the anthro-moronic climate change illustrated edition appeared first on Bookworm Room.

Published:9/23/2019 7:31:34 AM
[Entertainment] Kit Harington Admits He Never Watched Game of Thrones' Final Season At the 2019 Emmys Kit Harington, 2019 Emmy Awards, 2019 Emmys, Red Carpet FashionAfter hours and hours and hours spent watching Game of Thrones, fans rightfully had some hot takes about the HBO hit's final season. (Bran the Broken? Jon and Daenerys?? Daenerys and her power...
Published:9/23/2019 7:31:33 AM
[Markets] French Officials Doubt Macron Will Hit Goal Of Rebuilding Notre Dame In 5 Years French Officials Doubt Macron Will Hit Goal Of Rebuilding Notre Dame In 5 Years

French President Emmanuel Macron was never more popular than the day that a massive blaze erupted on the roof of the Cathedral of Notre Dame, the most popular tourist attraction in France, and an icon of Catholicism, and of French culture.

Seizing the opportunity to be a "leader," Macron delivered a fiery speech about the importance of Notre Dame to the spirit of the French people, and vowed to finish restoring the burned-out cathedral as soon as possible.

Caught up in the passion of the moment, Macron delivered what he asserted was an unshakeable vow: He would rebuild Notre Dame in 5 years. 

Now, roughly six months in, some French officials are questioning the feasibility of that time frame, according to FT.

The latest to doubt Macron's 5 year timeline is French culture minister Franck Riester, who said in an interview over the weekend that there had been 'complications' at the site during emergency repairs that might delay the project. He hopes now that the cathedral can open to the public within 5 years while restoration continues.

"The most important thing is the quality of the restoration and of the project," he told the newspaper Le Parisien. "It must be done in a reasonable time."

He added that "we're not focused on a timetable."

"We're not focused on a timetable. Our aim is five years, but there’s no countdown. The president never asks me when the work will begin. I’m not being put under pressure and there is no obsession."

Even as some experts warned that it could take decades to finish restoring Notre Dame, Macron declared during his first live television address after the fire: "We Will rebuild the cathedral of Notre-Dame and make it even more beautiful than before and I want this to be completed within five years...we can do it, and we will mobilize to do it."

Even the architect in charge of the restoration now doubts Macron's timeline, agreeing instead with Riester, who said that five years might be enough time to reopen the cathedral to the public, but completing the project will likely take even longer.

Philippe Villeneuve, the architect in charge of the restoration, has been more cautious. He said: "In five years, we can rebuild the vaults and the roof, and reopen the church to both worshippers and public. But not much more."

But not everyone sees the five-year target as impossible.

Not everyone regards the five-target as impossible, however. André Finot, the cathedral’s communications director who once attended services as an altar-boy and was at the building on the night of the fire, said: "It can be done in five years. That’s my point of view."

"I’m here and I see how the works are going fantastically well. In the first three months workers were here seven days a week, 24 hours a day."

Still, after passing a law in July limiting the new materials and techniques that can be used during reconstruction, many suspect that management of the restoration is slipping from a presidential priority to something that will be governed by the innerworkings of the French bureaucracy.

Tyler Durden Mon, 09/23/2019 - 08:25
Published:9/23/2019 7:31:33 AM
[Entertainment] Real Housewives of Beverly Hills Star Teddi Mellencamp Talks Pregnancy Cravings Teddi MellencampThis isn't Teddi Mellencamp's first time at the rodeo. With baby number three on the way, the Real Housewives of Beverly Hills star is opening up about her pregnancy with E! News....
Published:9/21/2019 11:08:32 PM
[Entertainment] Rachel Brosnahan, Sandra Oh and More Celebs Dazzle at the 2019 BAFTA TV Tea Party Rachel Brosnahan, BAFTA Los Angeles TV Tea Party 2019It was a fashion affair! On Saturday afternoon, Hollywood's biggest and brightest stars put on their finest attire for the BAFTA Los Angeles + BBC America TV Tea Party at the Beverly...
Published:9/21/2019 9:06:17 PM
[Markets] 12 Tons Of Cocaine Worth $575 Million Seized In Malaysia's Largest Drug Bust 12 Tons Of Cocaine Worth $575 Million Seized In Malaysia's Largest Drug Bust

Royal Malaysia Police have seized 12 tons of cocaine worth about $575 million in the most massive drug bust ever in the country, reported Malay Mail

The cocaine, found at the North Butterworth Container Terminal (NBCT) earlier this month, was divided in three 40ft shipping containers, which had 60 sacks of charcoal blended with the drug, a new technique used by drug smugglers to evade drug-sniffing dogs and or electronic sniffers.

Inspector-General of Police Tan Sri Abdul Hamid Bador said in a press conference on Sept 20 that government forces conducting Op Eagle, a drug busting operation at the country, deployed new technology that discovered the drugs.  

"Normal drug-detecting technology would not be able to detect it. (But) our chemistry department has advanced technology that was able to detect the cocaine among the coal," Abdul Hamid said.

 

Abdul Hamid said the drugs originated in South America and were transited via containership to Malaysia, with the intent of distributing across Asia.  

"With the hard work and experience of the members of the chemistry department, we were able to uncover the hidden cocaine."

All three containers were declared as coal, was the biggest drug bust in the country's history he said at the press conference. 

Abdul Hamid added that police have arrested a man, aged 29, who was responsible for handling the containers at NBCT. 

The man tested positive for methamphetamine at the time of the incident and will remain in jail until Sept 23. There is no word from authorities if the man is associated with the drug cartel responsible for shipping the cocaine from South America or the distribution network in Malaysia. 

Last month, police seized nearly 3.7 tons of ketamine and cocaine worth about $161 million. The sacks of drugs were found at a commercial facility in Puncak Alam, on the outskirts of Kuala Lumpur, during a raid by government forces on Aug 18. 

The series of drug seizures in Malaysia shows the country is a transit point for international drug cartels. Authorities provided very little detail of where the drugs were headed next. 

So we used various known shipping routes in the region to gain a perspective of where the end destination could've been. And judging by our map below, it's likely these drugs were headed towards China and or Japan, and or Australia. 

It remains unclear if JPMorgan had any ownership claim to the ship that delivered the CoCo's (i.e., cocaine containers) to Malaysia the same way that JPMorgan owned the ship - the MSC Gayane - that was busted for transporting a record $1.3 billion worth of cocaine in Philadelphia this past June.

Tyler Durden Sat, 09/21/2019 - 19:45
Published:9/21/2019 7:14:14 PM
[Entertainment] Kylie Jenner Cuddles With Stormi and Accidentally Gets Hit in the Face Stormi Webster, Kylie Jenner, InstagramWe bathe them, feed them, change their stinky diapers and how do they repay us...? Kylie Jenner gave her fans an inside look at the not-so-glamorous, real parts of parenting on Saturday,...
Published:9/21/2019 7:14:14 PM
[Entertainment] Joe Giudice's Request for Release From ICE Custody Denied Pending Deportation Appeal Joe Giudice, Teresa Giudice Joe Giudice will not get to go home to be with his family before a possible deportation. On Friday, an immigration judge denied a bond for the Italian national and permanent U.S....
Published:9/21/2019 6:36:17 PM
[2020 Election News] Now THAT’S Funny: Booker Campaign Begs for $1.7 Million In Donationsto Keep Him In The Race

By Audrey Conklin -

2020 Democratic presidential candidate Cory Booker’s campaign published a memo Saturday asking readers to help raise $1.7 million in next 10 days to keep him in the race. There are still 20 candidates in the running for the Democratic nomination, and Booker currently ranks at No. 7 as the candidate ...

Now THAT’S Funny: Booker Campaign Begs for $1.7 Million In Donationsto Keep Him In The Race is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/21/2019 6:08:29 PM
[Entertainment] Queer Eye Stars Send Their Love After Jonathan Van Ness Reveals He's HIV-Positive Jonathan Van NessJonathan Van Ness is feeling the love and support from his Queer Eye co-stars. The 32-year-old star opened up about being HIV-Positive, something that he revealed in his upcoming memoir...
Published:9/21/2019 6:08:29 PM
[Entertainment] Jennifer Lopez Was Almost Convinced Not to Wear That Iconic Green Versace Dress Jennifer Lopez, Grammy Awards 2000, Versace DressThe dress that made the world stop. Jennifer Lopez is taking a walk down memory lane and opening up about the iconic green Versace dress she wore to the 2000 Grammys. Yes, the one that...
Published:9/21/2019 5:39:05 PM
[Entertainment] Mike Johnson Talks Budding Demi Lovato Romance: "No Pressure" Demi Lovato, Mike Johnson Mike Johnson appears to be smitten with Demi Lovato! The 31-year-old Bachelorette season 15 and Bachelor in Paradise season six star and Air Force veteran recently went on a date with the...
Published:9/21/2019 5:13:15 PM
[Markets] Peloton IPO Guide... And Why It Makes No Sense Peloton IPO Guide: It Makes Sense... If 60% Of All Gym Equipment Sold Is A Peloton

Authored by Scott Willis via Grizzle.com,

BOTTOM LINE

At the end of the day, Peloton is a gym membership pretending to be a tech company.

We fully admit the product is exciting and unique in the market, but Peloton still faces the same problem that keeps every gym owner up at night.

People just don’t stick to a workout schedule.

Peloton is built on a business model that breaks even on the bikes with the hopes that big money is made on recurring monthly fees for digitally distributed classes.

However, with the average gym losing 50% of members within the first year, even the best technology hasn’t proven it can keep people engaged long term.

Peloton has been a smashing success, but at an IPO valuation of $10 billion, the company will have to literally take over the market for investors to avoid a loss.

To justify a valuation of $10 billion, we would have to live in a world where 40% of U.S. households with a gym membership now own a Peloton instead, up from 3% today.

Peloton may be the best piece of home exercise equipment ever invented, but at $29/sh the company is pricing in a penetration rate never achieved in history by a consumer good.

We think the company will struggle as a public company and recommend investors steer clear, or bet on a fall in price as the fundamental value is at best $14/sh and more likely $7/sh.

THE PELOTON BUSINESS MODEL EXPLAINED

Peloton management realized long ago that the exercise equipment game is hard.

For this reason, they built a business model that effectively breaks even on the sale of the equipment hoping that once the bike or treadmill is in your basement you will be easier to hook on a lucrative ongoing monthly subscription.

They are the first company to successfully use technology to digitally beam an exercise class experience to your home.

Thanks to technology, Peloton can now offer half a million people a live spinning experience while only paying for one studio and one instructor. This is economies of scale on overdrive.

However, the Peloton of today still has to deal with the costs of running a large business, which go beyond just a studio and an instructor.

Peloton made about $1,500 on each subscriber in 2019, but because they’ve ramped up headcount and R&D to prepare for public company life, they ultimately lose $870 on every single customer they add.

The key for Peloton is to reach a size where corporate costs per subscriber are dwarfed by the cash generated from equipment sales and monthly subscriptions fees.

We estimate the company will breakeven by the middle of 2022 once they hit 2 million subscribers, up 300% from 600,000 today. 

THE SMOKING GUN: RETENTION

As much as Peloton management likes to tell us they are revolutionizing exercise through technology, no technology can overcome the problems inherent in the subscription fitness business model.

We’ve all been there.

You sign up for a new gym membership energized by your New Year’s resolution to finally get in shape:

Week 1: “I’m going to crush it” – 4 days at the gym

Week 2: “Crushing it!” – 7 days at the gym

Week 3: “Can’t make it this Thur/Fri because of work drinks” – 4 days at the gym

Week 4: “I’ll go tomorrow” – 3 days at the gym

It’s not your fault, the human brain just seems to have problems sticking to a task, especially exercise.

To drive home the point, we came across a video review of the Peloton Tread done by a writer at website The Verge.

The writer had the motivation of training for an upcoming 5k run, but within two weeks she was already fading on her resolve.

In the final week of the month, she was down to three runs from a peak of six only two weeks before, a decrease of 50%.

According to the International Health, Racquet & Sportsclub Association (IHRSA), even the best global fitness clubs lose 34% of new members within a year.

On average the fitness industry has to replace half the customer base each year just to keep membership stable. 

According to Peloton management, the company is absolutely crushing the industry with a retention rate of 93%.

However, digging into how they actually calculate that number we can see some serious liberties are being taken.

Peloton’s attrition numbers (# who cancel) count subscribers who quit in the quarter but divides them not by the number of members who originally joined from that group but by the current membership instead.

If 100 members joined last Christmas and 20 have quit so far, attrition should be 20%, however, because 400 new members joined recently, Peloton reports retention as 20 lost over 480, or only 4%!

When you look at retention the right way, we estimate Peloton’s retention rate is more like 80% (20% quit over 12 months”.

To Peloton’s credit, 80% is potentially the highest retention rate in the industry.

This means that Peloton is currently losing only 1 in 5 members in the first year compared to a typical gym that loses half their members every year.

Attrition is still a big problem and is the reason why Peloton is not a typical technology disruptor, even though they claim to be.

Attrition requires Peloton to continually spend marketing dollars to replace members who quit, keeping them from building a truly repeatable source of high margin revenue.

We think the attrition rate at Peloton is close to an all-time low and will only go higher.

As the recent blistering growth slows and the company loses some of its high-class catchet due to ubiquity, attrition will increase closer to the industry average.

HOW BIG IS PELOTON’S MARKET?

In the IPO filing Peloton estimates their immediate addressable market is 12 million households in the U.S. and another 2 million abroad.

These are consumers directly interested in purchasing a Peloton product.

Even 12 million potential customers is an aggressive goal as it would represent 50% of all U.S. households with a gym membership.

Zooming out even more, management thinks 100% of households with more than $100,000 of disposable income (36 million in the U.S.) have at one time expressed potential interest in a Peloton product and could be future customers.

Peloton is effectively telling us they think every person with a gym membership could one day own a Peloton.

Possible but highly unlikely.

Throwing out what management wants us to think, our preferred market potential is based on annual sales of exercise equipment.

According to the Sport & Industry Fitness Association (SFIA), $5.5 billion of similar exercise equipment was sold to consumers and gyms in 2018.

We estimate sales will grow to $7.5 billion by 2030.

We are talking bikes, treadmills, ellipticals and any other equipment that could likely be replaced with a Peloton.

To justify a $29/sh stock price, Peloton would have to capture 83%, or $6.2 billion of retail and gym equipment sales, in effect upending the entire gym ecosystem.

There is no way this is going to happen.

Even if we looked at the entire equipment market, worth $10.5 billion, Peleton would need a market share of 60% to be worth $29/sh.

We think the company can realistically capture 30% of its addressable equipment market, up from their current market share of 16%.

A $10 BILLION DOLLAR COMPANY PELOTON IS NOT

If Peloton goes public at the indicated offering price of $27-$29/sh, it would value the company at almost $10 billion dollars.

Whichever way you look value, relative to other stocks or on a fundamental basis, Peleton is overpriced.

If we compare Peloton’s forward price to sales multiple to peers, it’s coming out of the gate at a premium price.

Nautilus (NYSE: NLS), one of the only publicly-traded competitors to Peloton has never traded above 1.5x next year’s revenue even when it was growing at 25-30% a year.

SoulCycle, another private competitor, attempted to go public in 2015 at a price to sales of 5.3x, but the IPO never found enough buyers and was scrapped for good in 2018.

Peloton is hoping investors have short term memory loss as it looks to be trying for a valuation that previously fell flat with investors.

From a relative value approach, Peloton is worth far less than $10 billion.

Looking at the value of Peloton on a fundamental basis, we also struggle to get anywhere close to $29/sh.

Based on the exercise equipment market we defined in the section above, there is $7.5 billion of sales up for grabs by 2030.

If as we expect, Peloton achieves a 30% share in its market or $2.3 billion in annual sales, the stock is only worth $14.00/sh, 50% lower than the IPO price.

Below is a chart showing the buy and sell bands for this stock over time.

Though we think Peloton is only worth $14/sh at most longer-term, if you do decide to trade Peloton use this visual guide to determine when you should buy, sell or hold.

A LOOK THE CAPITAL STRUCTURE

Peloton has been through six funding rounds raising $940 million.

The latest round, series F raised $550 million in August 2018 at a price of $14.44/sh.

The $29/sh IPO price is a huge jump from the last funding round which will likely create some uncertainty among institutions if $29/sh is a fair price for the stock.

Between all six rounds, insiders have an average cost basis of only $4.51 with 25% of shares issued at only $0.45/sh. Insiders are sitting on 6x-64x returns.

LOCKUP EXPIRATION DETAILS

181 days after the S-1 was filed, the majority of insider shares can now be sold. This date falls on February 24th, 2020.

Under certain circumstances the lock-up period will expire 120 days after the filing of the S-1, falling on 12/26/2019.

Given the low cost basis of insiders, we expect at least some of the 84 million shares issued below $0.50 will be sold once the lockup expires.

The impact on the stock will all depend on short interest and the daily volume at the time.

WRAPPING IT ALL UP

Peloton has truly come closer than any other product to bringing the gym experience into your own home.

But though the product may be amazing, it requires significant ongoing commitment from the customer.

Consumers rarely stick with exercise goals and for that reason, Peloton has to work harder and harder just to maintain revenue let alone grow it.

For this reason, we think Peloton will struggle as a public company.

Once investors realize Peloton is on the New Year’s resolution treadmill just like every other exercise company, both the multiple and the stock price have a long way to fall.

Tyler Durden Sat, 09/21/2019 - 16:15
Published:9/21/2019 3:38:03 PM
[Entertainment] Queer Eye's Jonathan Van Ness Reveals He Is HIV-Positive Jonathan Van NessQueer Eye star Jonathan Van Ness has something he wants the world to know: He is HIV-Positive. The 32-year-old fan-favorite Netflix star revealed his diagnosis in his new memoir, Over the...
Published:9/21/2019 3:05:33 PM
[Markets] Former Head Of Plunge Protection Team Says Fed Has To Buy More Debt Former Head Of Plunge Protection Team Says Fed Has To Buy More Debt

We have lift off.

Last Wednesday, as stocks hit session lows amid fears that the Fed was so polarized on further easing and with the Fed's dot plot suggesting no more cuts this year that odds of further rate cuts in 2019 dropped precipitously, Chair Powell catalyzed a dramatic rebound in risk assets when during his press conference  he said that "It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought."

One day later, with the Fed engaging in overnight repos to unfreeze the clogged up plumbing in the repo market, the release of the Fed's weekly H.4.1 statement confirmed that Powell was spot on: the Fed had indeed resumed the growth of the Fed's balance sheet "sooner than we thought." Whether or not said growth is "organic" is the topic of a separate discussion, but as expected the week's rolling $75 billion overnight repo facility meant that the Fed's balance sheet posted its first substantial increase for the first time since the end of QE3 in 2014, rising by $75 billion to $3.845 trillion.

The offsetting balance sheet liability was the Treasury General Account, or the cash the US Treasury holds at the Fed, which soared by a whopping $119 billion in one week, rising to $303 billion as of September 18, which increase frequent readers will recall, was precisely the catalyst we said at the start of August would precipitate a dollar shortage, and unleash a tantrum in the repo market. That's precisely what happened.

Incidentally, we also said that since both overnight and term repos would be insufficient to resolve a problem that was ultimately a function of too few reserves in the system, that this would culminate with a return of open market purchases of securities by the Fed, i.e. QE. This, we now know, is what Goldman also now believes will happen some time around the November FOMC, with the bank predicting a roughly $15bn/month rate of permanent OMOs, enough to support trend growth of the balance sheet plus some additional padding over the first two years to increase the size of the balance sheet by $150bn, restoring the reserve buffer and eliminating the current need for temporary OMOs. That strategy would result in balance sheet growth of roughly $180bn/year and net UST purchases by the Fed (the sum of the red and grey bars) of roughly $375bn/year over the next couple of years.

Ok, but a conspiracy theory blog (first) and then Goldman Sachs (eventually) predicting a return of POMO/QE does not mean it will happen, right? Perhaps... but throw in the highly respected former head of the NY Fed's open markets desk (and plunge protection team) predicting that bond purchases are coming, and one can be certain that it's just months, if not weeks, before QE is back (just as we said last week).

Speaking during a Friday conference call hosted by Bank of America for its clients, Simon Potter who oversaw the NY Fed's trading desk until he was fired in May, echoed what we have said for the past week, namely that the actions taken so far to normalize this turmoil in money markets would not be enough to keep conditions calm, and warmed tjat fresh debt purchases will be needed.

Potter, quoted by Bloomberg, cautioned that the Fed "may have to expand the central bank’s balance sheet through outright purchases of U.S. Treasury securities, to ensure stable liquidity conditions at the end of the quarter as well as at year-end."

Potter's recommendation followed a tumultuous week of upheavals in money markets which saw overnight repo rates soar as much as 10%, and pulled the Fed’s benchmark rate outside its target range. In response, the NY Fed announced on Friday that it would offer term repo agreements over the upcoming quarter-end, which would allow financial institutions to borrow cash from the Fed either overnight or for two-week periods, secured by Treasury collateral, and which would provide much-needed funding during the critical quarter end period when bank funding needs tend to surge by hundreds of billions of dollars. The question is whether the Fed's makeshift term repos - three for $30 billion all maturing well in October - will be sufficient to meet the liquidity needs of the US financial system.

To Potter, the answer is no, because in his view the core problem has to do with a shortage of reserves in the system (why there would be a shortage when there is currently $1.4 trillion in "excess reserves" will be something we cover in a subsequent post, although as we noted previously, the Fed will urgently need to elevate the level of reserves to at least $1.8 trillion to normalize funding markets).

This recommendation for the Fed to resume open market bond purchases comes from the person who is perhaps most intimately familiar with the plumbing of the US financial system: as a reminder, the 21 year Fed veteran served as head of the Fed's markets desk from 2012 until May 2019, when he was unexpectedly fired by the NY Fed's new president, career economist John Williams, who as consensus came to realize, is completely clueless about the functioning of markets and whose recent bloviating prompted the New York Fed to issue a statement refuting what he had recently said to avoid sparking a crash by a "disappointed" market. Even Bloomberg admits that "the departure of Potter... raised concerns about Williams -- a widely-respected monetary economist -- because of his relative lack of experience with financial markets. The New York Fed has yet to announce Potter’s successor."

While virtually nobody, except this website and a few others, were discussing the return to POMO as recently as a month ago, it is now "consensus" that the Fed has to resume POMO/QE, and even Bloomberg now writes that this week's repo turmoil "raised questions about whether the Fed went too far in removing cash from the financial system, and focused attention on when the central bank would begin resuming balance-sheet expansion to keep pace with the needs of a growing economy."

Of course, with first Goldman and then someone as "erudite" as Potter chiming in to clue his former boss, John Williams, what has to be done, we expect it is now only a matter of time before POMO is back. The only question is whether the Fed will ram it through no questions asked, or if - just like 2008 - the Fed will first create an "event" that has Congress begging (on one knee a la Hank Paulson... if not the president, after all Trump has already been urging Powell to launch "some QE"), the Fed to do everything in its power to stabilize the financial system. We'll find out in the coming days.

Tyler Durden Sat, 09/21/2019 - 15:15
Published:9/21/2019 2:34:41 PM
[Entertainment] Inside the Pre-2019 Emmys Parties With Mandy Moore, Sarah Hyland and Other Stars Mandy Moore, Emmy Party 2019Could she be more adorable? First-time Emmy nominee Mandy Moore was the belle of the balls on Friday night, as she hit up not one but three pre-2019 Emmys parties. The actress,...
Published:9/21/2019 1:05:45 PM
[Markets] The Bear Case The Bear Case

Authored by Sven Henrich via NorthmanTrader.com,

It’s a dirty job and someone has to do it. May as well be me and I’ll make the bear case here as difficult as it is. And I say difficult, because it is. I think I’ve been very consistent on this point: The dividing line between the bull and bear case are central banks and their efficacy in interfering in markets and managing to re-inflate growth once again, prevent a recession and keep all sell-offs contained.

Following the 20% correction last year central banks have managed to do just that, prevent larger sell-offs. In doing so they’ve pushed markets on a path of multiple expansion. And this remains the bull case. Continued multiple expansion.

No bull market without central bank intervention. I’ve stated this repeatedly a mantra also confirmed in other words by former Goldman Sachs CEO Lloyd Blankfein this week:

The tweet is an implicit acknowledgement that central banks drive equity prices. Full stop.  And they have done so again in 2019 and they continue to do so by fully intervening again and markets keep reacting to it, and the obvious chink in the bear case is that, if they succeed again, there is no bear case. Fully acknowledged, especially now that we are clear on this point:

So the bear cases rests on central banks losing control. Are there any signs of this on the horizon?

Consider: September’s market gains were once again inspired by trade optimism and a front run into central bank meetings. The ECB cut rates and announced QE, the Fed cut rates and suddenly found itself in repo panic mode, totally caught off guard by a sudden jump in overnight funding rates as markets ran into liquidity issues. And what turned into a one time operation, turned into 2, 3, 4 days and now has become a regular scheduled program into October with much larger reaching consequences:

So much for the balance sheet roll-off. Bears have been absolutely right on this, it was always a fantasy and central banks will keep inflating balance sheets because without natural market forces would demand the great unwind.

This is the market forcing the Fed into action. This is exposing the Fed to be surprised by market realities. This is suggestive there may be more things going on than the Fed is willing to admit to, either to itself or to the public. I’ve highlighted similarities to 2007 this week in the language as well as in the economic backdrop.

And hence it was notable when Jame Bullard of the St Louis Fed came out yesterday and actually highlighted the risks that Powell left unstated by saying markets shouldn’t ignore recession signals:

“First, there are signs that U.S. economic growth is expected to slow in the near horizon. Trade policy uncertainty remains elevated, U.S. manufacturing already appears in recession, and many estimates of recession probabilities have risen from low to moderate levels. Moreover, the yield curve is inverted, and our policy rate remains above government bond yields for nearly every country in the G-7”.

No, for Bullard the yield curve actually matters. Tick tock as I called it:

But markets are ignoring recession risks, they are ignoring multiple expansion, they keep running toward central bank meetings and hope for a trade deal that may never come. Fool me once shame on you, fool me 100 times shame on you. How many times will markets fall for trade optimism headlines?

There still is no trade deal and Friday’s pullout by the Chinese from attending agricultural meetings in Montana and Nebraska speak to continued issues in the negotiations. But hope dies last.

Look, I’ve been very consistent on this: For new highs to be convincing, they need to be sustained and the previous laggards need to be breaking above their respective resistance points.

Well, we not only don’t we have new sustained highs we don’t have new highs period, and none of the laggards have broken above their points of resistance. The Fed cut rates in July as we had approached the Sell Zone, markets fell from there, now the Fed has cut again following the ECB cutting as well. New highs to come were advertised by bulls all over the place. Hasn’t happened. In fact, as of Friday, the Sell Zone was again rejected as $SPX closed below 3,000 on Friday.

And because new highs haven’t happened bulls are now staring at a potential failure of epic proportions: The dreaded DT’s, no, not the delirium tremens, although it may lead to those eventually ;-), but rather DT’s as in double tops. Weekly double tops, monthly double tops.

Whereas before bulls needed to make sustained new highs, they now absolutely must make new highs or else.

To follow up on an important conversion, technicals and central bank efficacy, I’ve stated clearly that, following the 2019 trend break and rejection off of the megaphone trend line, bulls needed to repair technical damage and break above the megaphone pattern and repair the broken 2019 trend by lift everything up.

The September trade optimism rally has indeed  lifted things up, but it hasn’t repaired the broken trend and it has so far failed to make new highs or break above the upper megaphone trend line. If anything this recent price action is suggestive of a potential failed backtest:

And this means bulls haven’t proven anything yet. All they’ve done so far is ride the Fed’s coattails and hope they remain in control, especially now that multiple expansion is all they have run on. But neither have bears proven their case. What bears need to do now is take advantage of failed new highs and start filling some gaps below:

Volatility patterns remain intact and remain suggestive of higher volatility to come.

As I’ve also outlined multiple times before, markets, despite all the noise, remain engaged in a typical pre-presidential election seasonal pattern:

This pattern suggests mid September market strength is a sell and further volatility and downside is to come before a standard year end rally can emerge. And this may still be the script and bears have to invalidate it, hence I mentioned the bear case is difficult and bears may be running out of time.

Yet I maintain what I said last week: At 144% market cap to GDP US markets remain priced to perfection in an increasingly imperfect world making markets accident prone to unexpected events. Markets need sustained new highs or face technical consequences.

What’s the bear case then? It’s in the technicals and it suggests that last week’s failure to make new highs could set up for quite a different picture in the next few weeks:

*  *  *

To get notified of future videos feel free to subscribe to our YouTube Channel. For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

Tyler Durden Sat, 09/21/2019 - 12:14
Published:9/21/2019 11:36:20 AM
[Entertainment] Zoë Kravitz's Response to Beyoncé's Lisa Bonet Tribute Is Everything Beyonce, Twins, Lisa Bonet, Halloween 2018Are you my mother?? On Friday, Beyoncé posted on her website on Friday a massive number of photos of her and her family taken from the past year. She included pics from Halloween,...
Published:9/21/2019 11:04:54 AM
[Entertainment] Allison Mack and the Story of NXIVM: Inside the Sex Cult That Turned Women Into Recruiters for Their ''Master'' Allison MackWhen Smallville ended after 10 seasons in 2011, Allison Mack found herself a little adrift, having played journalist and town truth-seeker Chloe Sullivan for almost the entirety of her adult...
Published:9/21/2019 9:34:13 AM
[Entertainment] Morning Dream Team! See Kelly Ripa and Ryan Seacrest's Cutest Live Moments Kelly Ripa, Ryan SeacrestRyan Seacrest and Kelly Ripa are sure to put a smile on your face each morning. Live with Kelly and Ryan is filled with lively chatter, interesting interviews and fun segments that...
Published:9/21/2019 8:33:22 AM
[Entertainment] The Good Place's Megan Amram Is Living Her Dream (Even Without an Emmy) Megan AmramDespite her now-multiple Emmy losses (truly sorry), Megan Amram is living her dream. The Good Place writer and co-executive producer, who is also the An Emmy for Megan star and creator,...
Published:9/21/2019 7:40:50 AM
[Markets] Billionaire Tim Draper: Bitcoin Will Hit $250,000 By 2022 Billionaire Tim Draper: Bitcoin Will Hit $250,000 By 2022

Billionaire venture capitalist Tim Draper told BlockTV that in the next several years, Bitcoin could reach $250,000 per coin. 

"$250,000 means that bitcoin would then have about a 5% market share of the currency world and I think that maybe understating the power of bitcoin," Draper told the BlockTV hosts.

His prediction is on the premise that the adoption of digital currency will spread like wildfire across the world as fiat continues a fiery death into the early 2020s. 

The billionaire investor has maintained his bitcoin forecast for some time, calling it "absolutely solid" back in 2018.

Though, it's easy to say Bitcoin is still complicated for the mainstream user. The global population still uses fiat controlled by governments and central banks and have to risk devaluations in a global currency war that is currently underway. And of course, fiat is still the easiest way for people to pay for goods and services at the moment. Draper said the adoption curve of digital coins in Argentina is evidence that people in countries where currencies have crashed are rotating into digital assets at lightning speed. He said once Bitcoin and other alternative coins become easier to use, that will be the moment when the global population will start the transition; it also might need to take a few more devaluations of major currencies, and or another crash or two of fiat to drive people into digital assets. It's usually during an economic crisis people will make decessions on how to protect their wealth, or at least what's left of it. 

Adoption rates have rocketed higher in Argentina, Venezuela, and Turkey over the last several years, as their respected currencies have collapsed. 

Draper made similar remarks at the Brightline Initiative hosted in Toronto in June. He lauded bitcoin for being "open, transparent, and frictionless."

He said blockchain is the future and has sparked other game-changing technologies: "For instance, the blockchain allows for a perfect ledger. It keeps perfect track of money. It could also keep perfect track of data."

He even said bitcoin is "magic technology that allows us to have a trusted, global currency that isn't tied to any political force."

Back in February, Draper said Bitcoin would be used to pay for coffee by 2021.

Though, in the short term, Bitcoin is far from $250,000, currently trades in a sideways pattern around the $10k-handle. 

Tyler Durden Sat, 09/21/2019 - 07:35
Published:9/21/2019 7:04:10 AM
[Entertainment] Mandy Moore, Michelle Williams and More Former Child Stars Who Are Nominated for Emmys These Former Child Stars Are Now Nominated for Emmy Awards, Mandy Moore, Princess Diaries, This Is UsWe're just one day away from the 2019 Emmys! On Sunday evening, actors will gather at the Microsoft Theater in Los Angeles for the 71st Primetime Emmy Awards. During the ceremony,...
Published:9/21/2019 6:33:04 AM
[Entertainment] Every Time the Ladies of Game of Thrones Slayed on the Red Carpet Maisie Williams and Sophie TurnerOnscreen, there's no doubting the power of the ladies of Game of Thrones. After all, they've conquered kingdoms, dragons and a few knights, to say the least. (Sorry, but you just can't...
Published:9/21/2019 5:08:12 AM
[Entertainment] 2019 iHeartRadio Music Festival: See All the Stars Taking Over Sin City Julianne Hough, 2019 iHeartRadio Music FestivalThe 2019 iHeartRadio Music Festival is on and popping! Now in its eighth year, the two-day event hosted by Ryan Seacrest boasts its most star-studded performance lineup yet. Miley Cyrus,...
Published:9/20/2019 10:31:23 PM
[Markets] The End Is Near: US House Flipping Returns Plunge To 8 Year Low  The End Is Near: US House Flipping Returns Plunge To 8 Year Low 

ATTOM Data Solutions has published its Q2 2019 U.S. Home Flipping Report, which states revenue from home flipping has plunged to an eight-year low.

According to Todd Teta, chief product officer at ATTOM, diminishing returns on home flips could be a sign that the real estate market is nearing a crisis.

"Home flipping keeps getting less and less profitable, which is another marker that the post-recession housing boom is softening or may be coming to an end. Flipping houses is still a good business to be in and profits are healthy in most parts of the country. But push-and-pull forces in the housing market appear to be working less and less in investors' favor. That's leading to declining profits and a business that is nowhere near as good as it was a few years ago."

The report shows that 59,876 homes and condos were flipped in 2Q, up 12.4% QoQ, but down 5.2% YoY.

Homes flipped in the quarter represented 5.9% of all home sales, down from 7.2% in 1Q. 

In the quarter, homes flipped generated a gross profit of $62,700, up 2% QoQ, but down 2% YoY. The $62,700 in 2Q translated into a 39.9% ROI, down from 40.9% ROI in 1Q. 

Returns on home flips have fallen for six consecutive quarters and eight of the last ten, now reaching levels not seen since 4Q11.

But with returns at eight-year lows, investors, especially the mom-and-pop ones watching too much HGTV, were the ones flipping like crazy in 2Q. Flipping rates increased in 2Q YoY in 104 of 149 metropolitan statistical areas analyzed by ATTOM.

Many of these so-called investors, not conscious whatsoever about a housing slowdown, nevertheless an economic downturn, are financing their flips at a record clip. The total dollar volume of financed home flips in 2Q was $8.4 billion, up 31.3% from $6.4 billion in 2Q18, to the highest level since 3Q06.

Forty-one percent of homes flipped in 2Q were financed, marginally higher QoQ, but down from 45.9% in 2Q18.

The hottest metropolitan statistical areas analyzed in the report with at least a million people were Salt Lake City, UT; Austin, TX; Dallas-Fort Worth, TX; San Antonio, TX, and Kansas City, MO.

Homes flipped in 2Q19 sold for an average of $220,000, with a gross flipping profit of $62,700. The 2Q figure was up from a gross flipping profit of $61,500 in 1Q, but down from $64,000 in 2Q18. These homes are staying on the market much longer than ever before, which is leading to margin compression of the flipper as buyers negotiate lower prices.

House flipping returns are plunging at a time when Robert Shiller sat down with Bloomberg earlier this month and dropped a bombshell that might have every flipper wetting their pants: "I wouldn't be surprised if home prices started falling, and it could be accompanied by a recession." 

Tyler Durden Fri, 09/20/2019 - 23:25
Published:9/20/2019 10:31:23 PM
[Markets] "Stiff, Strong, And Tough" - Researchers Discover New Plastic That Could Revolutionize Body Armor  "Stiff, Strong, And Tough" - Researchers Discover New Plastic That Could Revolutionize Body Armor 

Researchers at the University of Buffalo (UB), funded by the Army Research Office (ARO), have developed a new plastic that could be used for advanced body armor, combat helmets, ballistic plates, and or even armor for vehicles.

The UB-led research team, fascinated by mollusk-grown gems, used inspiration from nature to create a lightweight plastic that is 14 times stronger and eight times lighter than steel and "ideal for absorbing the impact of bullets and other projectiles," UB Now said.

The findings were published in a recent edition of the journal Applied Polymer Materials, published by the American Chemical Society (ACS).

"The material is stiff, strong and tough," says lead author Shenqiang Ren, a professor in the Department of Mechanical and Aerospace Engineering and a member of UB's RENEW Institute. "It could be applicable to vests, helmets and other types of body armor, as well as protective armor for ships, helicopters, and other vehicles."

The new lightweight plastic is an advanced version of ultrahigh molecular weight polyethylene (UHMWPE).

Researchers said while developing the UHMWPE-based material; they examined "mother of pearl, which mollusks create by arranging a form of calcium carbonate into a structure that resembles interlocking bricks. Like, mother of pearl, the material has an extremely tough outer shell with a more flexible inner backing that's capable of deforming and absorbing projectiles."

Evan Runnerstrom, the ARO program manager, said UB's new plastic might "lead to new generations of lightweight armor that provide both protection and mobility for soldiers."

Runnerstrom said the UHMWPE-based material is easier to mold into intricate shapes that would make it more affordable to create protection for soldiers, vehicles, and other Army assets.

The new plastic is so advanced that it could replace Kevlar, a heat-resistant and durable synthetic fiber, used in the production of ballistic plates.

The ability for the new plastic to rapidly dissipate heat further helps it absorb the energy from a bullet and or shrapnel.

The team even blended the UHMWPE-based material with silica nanoparticles, which created an even strong armor.

"This work demonstrates that the right materials design approaches have the potential to make big impacts for Army technologies," Runnerstrom said.

The next step for researchers would be creating ballistic plates of the new material for live-fire testing.

 

Tyler Durden Fri, 09/20/2019 - 22:45
Published:9/20/2019 10:01:38 PM
[Markets] Women Are Having Plastic Surgery To Fix "Resting Bitch Face" Women Are Having Plastic Surgery To Fix "Resting Bitch Face"

More and more women are flocking to plastic surgery to correct a devastating condition known as "resting bitch face", according the New York Post.

"Resting bitch face" is a condition wherein you look - well, bitchy - due to your normal, everyday facial expression. It's also sometimes just referred to as simply "being from New York City". 

Hope Davis, one woman who got surgery for the condition after her friends uploaded "a batch of unflattering photos to Facebook and Instagram", said: 

“I was like, ‘Oh great, I look mad in the middle of the party’. I looked like a sourpuss.”

Davis didn't comment on whether or not she actually was "mad in the middle of the party" - a road we hope she considered before having someone slice her face open. Perhaps she just wasn't having a good day at the time.

But it's too late to look back now. She, like many other women, turned right to a plastic surgeon. 

Dr. David Shafer, a double board-certified plastic surgeon and medical director of Shafer Plastic Surgery & Laser Center in Midtown, said he's familiar with the request to deal with "RBF", as he called it, and said its a common request that he gets several times each week.

Davis instructed Shafer that she didn't want a 'Joker' smile, but rather a "pleasant resting look". 

Doctors use techniques like injecting fillers into the face and Botox to achieve the look. The procedure takes about 10 to 20 minutes and can cost between $500 to $5,000. It generally lasts "up to two years". 

Shafer said:

 “The worse the ‘bitch face,’ the more effective the Botox. If you always look dumpy, or unfriendly … people are going to react to you differently.”

Shafer said that requests to fix "RBF" have more than doubled over the last year. He claims it is due to a shift in focus to the lower face, “popularized by the Kardashians” and the prevalence of selfies, which force people to look downward at their phone, accentuating their resting bitch faces.

Davis said: “Nobody can quite put their finger on it, but they notice something’s different. People have definitely complimented me saying, ‘Oh you look so pretty and cute today.’ ”

Park Avenue plastic surgeon Dr. Melissa Doft said: “People gravitate to women who they perceive as happy.”

"It helps make patients look less sad," she continued. 

But, as Davis will unfortunately find out, hacking your face apart isn't necessary going to make you happy on the inside. 

She concluded:

 “I caught a glimpse of myself out of the corner of my eye, and it gave me a positive vibe because I looked happy. This whole time, [I was focused on] how I project to the world, but I wasn’t paying attention to how I project to myself.”

Maybe they'll have plastic surgery for your soul at that point...

Tyler Durden Fri, 09/20/2019 - 22:05
Published:9/20/2019 9:10:20 PM
[Entertainment] Christie Brinkley Responds to Wendy Williams' Claim She Faked Dancing With the Stars Injury Christie BrinkleyChristie Brinkley is none too happy with Wendy Williams' claim that she is faking her Dancing With the Stars injury. The model has plenty of reasons to be upset with the accusation,...
Published:9/20/2019 8:31:52 PM
[Markets] US Army Prepares To Test New Anti-Drone BLADE System To Defend Against Drone Swarms US Army Prepares To Test New Anti-Drone BLADE System To Defend Against Drone Swarms

A new report from the U.S. Army Combat Capabilities Development Command states that the Ballistic Low Altitude Drone Engagement (BLADE) prototype is ready to conduct further trials to protect high-value military assets from small unmanned aerial system attacks. 

The BLADE is a dome of protection that uses a set of systems to combat against small drone attacks, can be mounted on various tactical vehicles providing troops and military assets with close-range protection. 

The BLADE is integrated with the Common Remotely Operated Weapon Station (CROWS) and uses advanced fire control and precision targeting enablers to detect, track, and defeat small drones. CROWS includes a sensor suite and fire control software that allow soldiers to engage targets remotely. CROWS tracks targets with several sensors, including a camera and thermal optics. The new system can be stationary or mounted on most tactical vehicles. 

Once the BLADE identifies and locks onto a target, it will fire an electronic attack on small incoming drones with short bursts of fire.

A successful test occurred earlier this summer at Fort Dix, New Jersey, proved the new system is ready for additional, more rugged field tests against drone swarms.

BLADE is expected to be mounted on M1 Abrams tanks, M2 Bradley infantry fighting vehicles, and Stryker wheeled armored fighting vehicles.

The Army said BLADE is at "final Level 6 technology readiness demonstration for the BLADE system will be conducted later this year."

"Technology readiness levels refer to the maturity of a technology and range from Level 1 to Level 9. Level 6 is a model or prototype that has been tested in an operational environment, such as an aircraft or vehicle. Once we get a technology to the point where it can transition out of CCDC, which is typically Level 6, it transitions to program managers and program executive offices who make the technology a program of record, which means funding has been approved so the program can move forward."

The proliferation of small drones on the modern battlefield, especially in Syria, and more recently, the Saudi Aramco drone/cruise missile attack over the weekend, have allowed terrorist organizations to exploit defense gaps in lower altitude air space. 

The first instance of where small drone attacks became very alarming was in Syria early last year. When terrorists strapped bombs to a swarm of small drones and attacked the Russian Khmeimim airbase.

In August of last year, a drone packed with explosives detonated near Avenida Bolívar, Caracas, where Nicolás Maduro, the President of Venezuela, was addressing the Bolivarian National Guard. 

Venezuelan President Nicolas Maduro unharmed after an assassination attemp by drones pic.twitter.com/AMBZTEu6An

— China Xinhua News (@XHNews) August 5, 2018

Earlier this year, Houthi rebels used an explosive-packed drone to target Yemen's military leaders at an army parade. 

The moment Houthi suicide drone exploding above the dias of the Saudi backed Yemeni army parade: pic.twitter.com/qhjH1RkG2J

— Carl Zha (@CarlZha) January 10, 2019

Then over the weekend, a highly disruptive small drone attack, claimed by the Houthi rebels, knocked out 5.7 million barrels per day (bpd) of total Saudi oil output, which equates to about half of their production - causing oil prices across the world to spike. 

Massive fires at 2 Saudi Aramco oil facilities caused by drone attacks - Riyadhhttps://t.co/HRA4TpGP8Tpic.twitter.com/ljc5AC7aMI

— RT (@RT_com) September 14, 2019

All of these incidents prove that the rapid proliferation of small drones on the modern battlefields and across the world have created a significant defense gap that companies, corporations, and militaries are rushing to fix. The solution could be the BLADE. 

Tyler Durden Fri, 09/20/2019 - 21:25
Published:9/20/2019 8:31:52 PM
[Entertainment] Paris Hilton Mourns Death of Her Grandfather and "Incredible Mentor" Barron Hilton Paris Hilton, Barron Hilton, 2010The Hilton family is mourning the loss of Barron Hilton, who died on Thursday, Sept. 19 at the age of 91. The son of hotelier Conrad Hilton and chairman, president and CEO of Hilton...
Published:9/20/2019 8:02:20 PM
[Entertainment] Renée Zellweger Is So Unfazed By Oscar Buzz for Judy Performance Renee Zellweger, Fashion Police WidgetRenée Zellweger's priorities have shifted, and she's perfectly fine with it. The actress is already receiving critical acclaim for her portrayal of the late Judy Garland in...
Published:9/20/2019 7:32:24 PM
[Markets] Aussie Cops Now Confiscate Loose Coins From Cars, Because "Safety" Aussie Cops Now Confiscate Loose Coins From Cars, Because "Safety"

Authored by Martin Armstrong via ArmstrongEconomics.com,

I have heard what I thought was every excuse for governments to raise taxes and seize money, but this is one I quite honestly thought was something too low for even the police.

New South Wales police have come up with the most bizarre excuse to rob your money I have ever heard of. They now claim that driver safety is the main reason for this new initiative to confiscate whatever coins you have in your car. They have the audacity to claim that “Loose coins within cars are a safety hazard.” (see Double Bay Today)

They claim that a driver may perhaps bend down to pick up a coin and get into an accident. What’s next? They confiscate your phone and then sell it back to you after you are done the driving?

Australia has become perhaps the MOST aggressive country in Western Culture to hunt down its own citizens for money. They follow school children and then investigate how the parents are paying for the school. The Australian Tax Office (ATO) has applied for access to everything to hunt for money. They want access to phone calls, emails, posts, and SMS text messages.

Australians could face two-year jail sentences and fines of up to $25,200 under proposed laws that limit the use of cash to $10,000 — a move some groups argue would create an Orwellian state by giving authorities greater control over people’s finances. The government’s slogan – Cash is for Criminals. Thus was hidden in the 2018 Australian Government budget claiming it would save $5.3 billion by banning cash payments of $10,000 or more. Australian Treasurer Scott Morrison said it was a crackdown on the black economy.

Instead of reform, they are reforming ways to hunt their own citizens. Australia began as a penal colony. The king needed money so just about anything you did from stealing an apple to any minor issue landed you not in prison, but they would sell you to a plantation for 5 years and transport you to a foreign land and leave you there. If they could torture you and get you to confess to one of 240 felonies, they carried the death penalty where the king could confiscate all your assets and throw your family out on the street. Prisoners would die under torture to save their families.

The King is Dead – Long Live The Tax Extortioner

We actually owe the Fifth Amendment and the right to remain silent to John Lilburne (1614 – 1657). He defended himself vigorously in court, quoting from the works of the great jurist Sir Edward Coke (1552-1634) whose work the Institutes was the seminal statement of English law.

The Miranda decision by the Supreme Court quoted this right to remain silent enshrined in the Constitution of the United States known as the Fifth Amendment right against compelled Self-Incrimination. Lilburn proudly declared:

“Another fundamental right I then contended for, was, that no man’s conscience ought to be racked by oaths imposed, to answer to questions concerning himself in matters criminal or pretended to be so.”

Governments have made so many promises to win votes that they cannot keep. When in danger of being exposed, they turn on their own citizens and hunt them down for money. This is how Empires, Nations, and city-states collapse into dust.

Tyler Durden Fri, 09/20/2019 - 20:25
Published:9/20/2019 7:32:24 PM
[Entertainment] The Bold Type's Katie Stevens Reveals Breast Cancer Scare Katie StevensKatie Stevens is breathing a huge sigh of relief. On Friday afternoon, The Bold Type star took to Instagram and shared a personal note to her fans and followers. After performing...
Published:9/20/2019 6:31:35 PM
[In the Courts] President Trump Is Stacking The 9th Circuit

By Kevin Daley -

Donald Trump success

President Donald Trump named two more appointees for the 9th U.S. Circuit Court of Appeals Friday.  With Friday’s announcement, there are three nominees pending for the 9th Circuit. If confirmed, Trump will have appointed 10 of the 9th Circuit’s 29 judges. Friday’s nominees, Patrick Bumatay and Lawrence VanDyke, are both ...

President Trump Is Stacking The 9th Circuit is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/20/2019 6:31:35 PM
[Entertainment] The MixtapE! Presents Celine Dion, Mandy Moore and New Music Musts The MixTapE!, Mandy Moore, Celine DionNew music Fridays are a thrilling, yet daunting prospect for any music lover. It's essentially a weekly holiday where fan-favorite artists and fresh faces alike drop their latest...
Published:9/20/2019 5:32:06 PM
[Markets] Powell, Payroll, & The Peter Principle Powell, Payroll, & The Peter Principle

Authored by Danielle DiMartino Booth via QuillIntelligence.com,

  • Powell conceding Wednesday that QE is still a viable tool reversed stocks’ declines but could not rescue FedEx’s stock; FedEx weakness may pinch the transportation sector at a critical time for seasonal hires which have offset the decline in seasonal retail hires in recent years

  • While forecasts for holiday sales remain high, the consensus is the economy is weaker than last year at this time; retail sales’ growth through August has fallen from 2018’s 5.9% pace to 4.2%; moving fewer goods in an e-commerce nation implies lower transportation headcount

  • A fourth quarter decline in transportation payrolls to a 200,000 from the last five years’ 250,000 average would translate to a print of -15,000 per month, which last occurred in 2009; despite green shoots, bellwether FedEx could foreshadow broader economic weakness

“In every hierarchy, the cream rises until it sours.” Give an outperforming underling a promotion and they will excel. Continue this process until this former bottom-rung occupant is referred to as “boss,” however, and you get incompetence personified. This is of course The Peter Principle, a book by Laurence J. Peter published in 1968. The author openly offered that the book was written as satire. But when was the last time satire sold over a million copies and stayed on the bestseller list for 33 weeks? Besides, studies have shown that overachievers often make crummy superiors.

In the spirit of giving credit where it’s due, the inspiration for today’s Feather came from a subscriber who emailed me a simple question yesterday: “Is it just my imagination that from Greenspan on, all of the captioned (including Powell) are classic examples of the ‘Peter Principle’? Just a thought!”

Some thought indeed. When the now Chair of the Federal Reserve was a rookie governor in 2012, he voiced concern that quantitative easing (QE) would become “habit-forming.” Eleven months into his current term, soon-to-be-former Powell acolytes sobbed openly (yours truly was sent many condolence letters) when Powell apologized for his naiveté back in his younger days. QE was a viable tool. And Wednesday, under extreme reporter duress, he conceded that QE was still on the table.

As is the case with addicts, investors poured money into the stock market the minute the drug dealer got them their fix with four sky-high words: Large Scale Asset Purchases (Fed code for QE). Red turned to green for the S&P 500. At the opposite end of the animal spirits spectrum, no words on earth could have salvaged the 13% decline in FedEx’s stock.

According to Powell’s way of thinking, the shellacking this bellwether took is purely a reflection of the uncontrollable nature of the ongoing trade war and nary a reflection of the U.S. economy. Indeed, the company cited a “weakening global macroenvironment driven by increasing trade tensions and policy uncertainty.” And we mustn’t forget that little thing about Amazon cancelling its contract with FedEx in June.

To Powell’s point, initial jobless claims remain at historic lows and the consumer continues to consume, albeit increasingly via the credit card channel. And we’ve definitely seen housing come off its lows in this latest batch of August data. Falling mortgage rates have found some traction. We even had industrial production turn up for the month though we would note that manufacturing production ex-autos is down 0.5% for the year. (Hat tip to QI compadre Peter Boockvar for that tidbit which has us thinking so hard, the upcoming Weekly Quill is going to revisit the global auto sector.) We’d characterize all of these recent developments as green shoots.

As for those bright green and yellow bars above, we were inspired to dig deeper into some data featured in a report on seasonal hiring by Challenger, Gray and Christmas. But it wasn’t the obvious headline – that seasonal retail hiring in 2018 was the weakest since 2009 and expected to “stagnate or fall slightly” further this year – that intriguedWith FedEx still fresh on the mind, it was the prospects for seasonal hires in transportation that resonated.

We’ve memorized the headlines. “Amazon to hire…” “UPS to hire…” “FedEx to hire…” This is indeed that time of the year. As you can see, transportation has added an average 250,000 to payrolls in the fourth quarter for five years runningOver that same period, seasonal retail hiring has come down. This is yet another picture of the e-commerce baton hand-off.

The exercise of marrying these seemingly disparate series did something that often happens – an unexpected relationship presented itself. On January 19, 2018, FedEx stock closed at its all-time high of $274.32Around that same time, seasonal transportation hiring peaked and actually fell 2% over 2017 last year.

The running assumption is the spending will carry through the holiday season with the caveat that general perceptions of the economy are not as strong as they were last year at this time. For all of the bluster about the strength of the U.S. consumer, the year-over-year growth in retail sales excluding autos and gasoline through August 2018 was 5.9%Over that same eight-month span this year, the rate has fallen to 4.2%We would add that transportation payrolls grew at a tenth of their rate over the last year in August. And yes, they are related.

As we look to the fourth quarter, even a conservative downshift in transport payrolls to a 200,000 unadjusted quarterly rate would yield average seasonally-adjusted declines around -15,000 per monthLast time we saw that was 2009. Perhaps, FedEx has the future pegged? Perhaps the cream has soured.

Tyler Durden Fri, 09/20/2019 - 18:25
Published:9/20/2019 5:32:06 PM
[Entertainment] The One With Our 25 Favorite Friends Episodes Friends EpisodesFriends is celebrating its 25th anniversary this weekend (Sunday, the 22nd to be exact), and you know what that means: endless lists of the best episodes of the iconic series. We had to...
Published:9/20/2019 4:31:55 PM
[Markets] Patriotism Erupts Across China As Consumers Ditch Apple For Huawei Patriotism Erupts Across China As Consumers Ditch Apple For Huawei

The escalating trade war is starting to damage Apple's brand in China, according to a new survey of Chinese consumer trends. 

The brand consultancy Prophet surveyed 13,500 Chinese consumers and discovered that a wave of nationalism is sweeping across the country, deterring many from using US brands. 

Apple plunged in the company's latest brand-relevance index, published Wednesday, which asked respondents which brands they liked the most.

Apple crashed to No.24 in the index, falling from No. 11 last year. Before the trade war began, Apple was No. 5.

Rivals like Huawei soared in the index to the No. 2 spot, just behind Chinese payment service Alipay.

The survey suggests that increasing nationalism in China could kill US brands, especially if the trade war continues into the early 2020s. 

Calls for boycotting US brands have already circulated onto social media platforms in China, reaching millions of consumers who believe that it's their patriotic duty in this economic war to buy Chinese, not US.

Prophet said when President Trump started attacking Huawei, banning products in the US and restricting its access to specific global markets. The Chinese people took notice and abandoned iPhones for Huawei smartphones. 

Jay Milliken, senior partner in Hong Kong with Prophet, elaborated more on how it was, in fact, President Trump's ban on Huawei products that helped spur patriotism in the country to buy only Chinese products. 

"There's a lot of nationalistic buying in that category, because Chinese consumers interpreted what happened to Huawei as an attack," he said.

The survey determined Chinese patriotism extended across many brands, not just Huawei. Sportswear maker Li Ning Co. nearly overtook Nike in the rankings.

Milliken said there were only two US brands in the top ten list this year (Android at No. 3 and Intel at No. 9), compared to five before the trade war. 

Some US brands are "integral in the lives of Chinese consumers," Milliken said, adding that "There are no Chinese alternatives, so those remain super relevant."

Melissa Guzy, a managing partner at Arbor Ventures, recently told Business Insider's Troy Wolverton, that the wave of nationalism "isn't temporary. It's a long-term shift that's happening." She continued: "I think most Chinese don't believe they need the US for anything."

And while Apple beat its latest earnings report, disappointing numbers continued to print from Asia: China revenue came in at $9.16BN, down 4.1% Y/Y. 

The full breakdown by geography is as follows:

The expanding boycott of US products in China is nowhere close to being over, and the trade war could soon morph into a tech war that will continue to spur Chinese consumers to ditch Apple for Huawei. 

And judging by the latest search volumes - after the "huge" release of iPhone 11 - things are not looking up for Tim Cook...

We're gonna need more buybacks to support that stock price.

Tyler Durden Fri, 09/20/2019 - 17:25
Published:9/20/2019 4:31:55 PM
[Entertainment] A Complete Timeline of the Ongoing Drama Surrounding Aaron Carter and His Family Aaron Carter, Nick CarterIt's been a troubling time for Aaron Carter and his family. Earlier this week, the 31-year-old singer took to social media to inform his followers that his brother, Backstreet Boys...
Published:9/20/2019 4:01:25 PM
[Entertainment] Jennifer Lopez Closes Versace's Fashion Week Show in Iconic Green Gown Jennifer LopezJennifer Lopez is leaving people speechless with her appearance in the Versace show. As the star walked out onto the runway, literal shouts filled the auditorium as people caught a...
Published:9/20/2019 3:28:57 PM
[Markets] Is California About To Get Hit By A Hurricane For The Very First Time In History? Is California About To Get Hit By A Hurricane For The Very First Time In History?

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

In the entire history of our country, a hurricane has never made landfall in the state of California.  So if such a thing actually happened, it would be considered to be an extremely unusual event.  Well, right now there are three very dangerous tropical storms swirling in the eastern Pacific Ocean.  Tropical Storm Kiko is not expected to be a serious threat to make landfall, but Tropical Storm Lorena and Tropical Storm Mario “are expected to become hurricanes by Friday as they approach the Mexican coast”Tropical Storm Lorena is the more immediate threat, and the latest forecast is projecting that it will reach Mexico’s Baja California Peninsula by Saturday.  If it maintains hurricane strength and continues to ride up the west coast, it is entirely possible that we could see something that we have never seen before.  Most forecasters don’t want to talk too much about it yet, because it truly would be an unprecedented event, but there really is a chance that California could get hit by a hurricane for the very first time in U.S. history.

Let’s back up a bit and take a look at the bigger picture.  According to USA Today, a record-tying six named storms are being tracked by meteorologists right now, and three of those are in the eastern Pacific…

Sure, it’s the middle of hurricane season. But this is ridiculous.

The six named storms whirling at once this week in the Atlantic and Pacific set a record, forecasters reported.

“While Humberto and Kiko were spinning in the Atlantic and Eastern Pacific, four new tropical cyclones formed Tuesday: Imelda and Jerry in the Atlantic Basin, and Mario and Lorena in the Eastern Pacific Basin,” the Weather Channel reported.

Tropical Storm Lorena is expected to become a hurricane shortly, and according to the Weather Channel hurricane warnings have already been issued for much of the Baja California Peninsula…

A hurricane warning has been posted on the Baja California Peninsula from La Paz to Santa Fe, Mexico. This means hurricane-force winds (74-plus mph) are expected somewhere within the warning area – in this case, within the next 24 hours. Preparations to protect life and property should be rushed to completion.

The projected track of the storm will take it very close to southern California, but that does not necessarily mean that it will make landfall.  So many things could still happen, and as we have seen in recent weeks, forecasting the behavior of hurricanes is not an exact science.

But if Lorena or Mario does make landfall along the California coastline, it will truly be a historic event.  According to NASA, there has never been a documented case of a hurricane making landfall in the state…

While there has never been a documented case of a hurricane making landfall in California, the Golden State has had its share of run-ins and close calls with tropical cyclones. In fact, California has been affected by at least a few tropical cyclones in every decade since 1900. Over that timeframe, three of those storms brought gale-force winds to California: an unnamed California tropical storm in 1939, Kathleen in 1976 and Nora in 1997. But the primary threat from California tropical cyclones isn’t winds or storm surge. It’s rainfall — sometimes torrential — which has led to flooding, damage and, occasionally, casualties.

So we are talking about something that would be considered to be an extremely strange event.

The primary reason why hurricanes usually never make landfall in California is because the water off of the California coast is usually quite cold.  The following comes from Wikipedia

Tropical cyclones usually require very warm water to depth, generally above 26.5 °C (80 °F) extending to a depth of 50 meters (160 ft).[1] However, the waters off California are cold even in summer. They rarely rise above 24 °C (75 °F) in near-shore southern California,[2] and usually remain below 17 °C (63 °F) along most of the rest of the coast and outer coastal waters, although El Niño events may warm the waters somewhat. This is due primarily to the extensive upwelling of colder sub-surface waters caused by the prevailing northwesterly winds acting through the Ekman Effect. The winds drive surface water to the right of the wind flow, that is offshore, which draws water up from below to replace it. The upwelling further cools the already cool California Current which runs north to south along coastal California and even much of coastal Baja California.

But right now a “strange anomaly” has caused water temperatures in the region to heat up dramatically.  The following comes from an article that I published earlier this month

It is being called “the Pacific marine heatwave of 2019”, and officials are warning that it could have very frightening implications if it does not dissipate soon. Right now, there is a vast expanse of water stretching from northern Alaska all the way to southern California where the water temperatures have rapidly risen to very dangerous levels. In fact, in some spots the water temperature is already “as much as 6 degrees Fahrenheit above normal”, and there is a tremendous amount of concern about what will happen if the water continues to become even warmer. At this point things are already so bad that we are being warned that this strange anomaly could “ravage marine life and decimate commercial fishing” all along the west coast.

This means that conditions along the west coast of the United States are now quite favorable for major storms, and it makes it much less likely that Lorena and Mario will quickly fizzle out once they track farther north.

And if either Lorena or Mario does make landfall in California, many will consider that to be a really, really troubling sign.

Let’s review what we know at this hour.

We know that Tropical Storm Lorena and Tropical Storm Mario are both expected to become hurricanes very shortly, and we know that Lorena and Mario are both tracking north along the Mexican coast toward California.

And we also know that water temperatures along the California coast are much, much higher than normal right now, thus creating exceedingly favorable conditions for storms such as Lorena and Mario.

That doesn’t mean that either of them will make landfall in California, but it does mean that we should be watching these storms very carefully over the next several days.

Tyler Durden Fri, 09/20/2019 - 16:25
Tags
Published:9/20/2019 3:28:57 PM
[Entertainment] Keke Palmer Is Gifting Us With "Sorry To This Man" Merch After Viral Video Keke PalmerKeke Palmer is the gift that keeps on giving. Last week, the Hustlers actress went viral for her hilarious lie detector test, during which she was asked about former Vice President of the...
Published:9/20/2019 3:03:35 PM
[Entertainment] What Makes Janice's Laugh on Friends So Memorable? Maggie Wheeler Has a Theory Maggie Wheeler, Janice Hosenstein, Matthew Perry, Chandler Bing, FriendsMaggie Wheeler can't escape Friends, but that's not a problem. "People stop me on the street and they say, 'Will you laugh? Will you do the oh my god?' whatever it is,...
Published:9/20/2019 1:59:39 PM
[Markets] Bankrupt Illinois Cities Forced To Cut Services To Fund Pensions Bankrupt Illinois Cities Forced To Cut Services To Fund Pensions

Authored by Mike Shedlock via MishTalk,

Multiple cities in Illinois are forced to cut police, fire departments and other city services to fund pension plans.

Third Domino

Illinois does not allow cities to file for bankruptcy but that is the best word to describe many of them. East St. Louis is the latest.

What Follows is a Guest Post from Wirepoints

My comments at the end.

Wirepoint reports Third domino falls: Illinois Comptroller set to confiscate East St. Louis revenues to pay for city’s firefighter pensions.

On Tuesday, the East St. Louis’ firefighter pension fund demanded that Illinois Comptroller Susana Mendoza intercept more than $2.2 million of East St. Louis city revenues so they could be diverted to the pension fund.

The fund trustees said the city shorted firefighter pensions by $880,000 in 2017 and another $1.3 million in 2018. Under a 2011 pension law, the state comptroller gained the powers to intercept city revenues on behalf of police and fire pension funds shorted by their municipalities.

Harvey was the first municipality to run afoul of the intercept law. North Chicago, a Chicago suburb of 30,000, was the second. Now it’s East St. Louis’ turn.

Back when Harvey was first intercepted last year, Wirepoints reported that comptroller confiscations could wreak havoc on hundreds of Illinois communities, potentially creating a domino effect. Hundreds of Illinois’ 650 pension funds have not received their statutorily required contributions from their respective cities in recent years, meaning the intercept law could go into wide usage under a broader crisis scenario. In the most recent analysis of Illinois Department of Revenue data, nearly half of the 650 funds were not properly funded in 2017 (see details below). 

That domino effect could be exacerbated given that municipalities have virtually no control over their own pension funds. State law sets all the rules and pensions are protected by the Illinois Constitution, meaning that in a market downturn, the pension funds may have little choice but to demand more intercepts.

The East St. Louis firefighter fund has certified to the comptroller that the municipality didn’t fully pay its required contributions to the pension fund in 2017 and 2018. Now the Comptroller has 60 days to decide whether that’s correct. After that, it can begin confiscating East St. Louis revenues. The request by the lawyers of the firefighter fund can be found here.

The intercept law was first utilized in 2018, when Harvey, Illinois, revenues were garnished to pay the city’s police and firefighter pension funds.

That intercept of nearly $3.3 million led to the layoff of 40 public safety workers so the city could avoid insolvency. The city found it couldn’t simultaneously pay for both current workers and pensioners. The city and the pension plans eventually reached a deal that relieved some of the pressure on the city.

The East St. Louis intercept

East St. Louis is no stranger to fiscal crises, but the intercept is bound to cause the city a new level of pain. The Comptroller can confiscate revenues that come from the state and an overwhelming share of the city’s general budget comes from the state.

If the full $2.2 million is intercepted, the city would end up losing the equivalent of 10 percent of its budget (the city’s 2018 general budget equaled $18 million). And what’s worse, the city’s 2019 budget is already facing millions in deficits.

East St. Louis’ fire and police pensions are some of the worst funded in the state, with funded ratios of just 31% and 9%, respectively. In total, the city has a shortfall of more than $104 million in its public safety pension plans, according to Illinois’ Department of Insurance. That’s more than $9,700 per household in a community where 43 percent of people live below the poverty line.

And with just $6.1 million in assets and annual payouts to beneficiaries totaling $3.7 million, the city’s fire fund has the equivalent of only two years of payouts in its accounts today.

Another day, another domino 

Cities like Harvey, North Chicago and now East St. Louis are the vanguard of a much wider problem faced by municipalities across Illinois.

The most recent numbers show that 301 of Illinois’ 651 public safety pension funds, or 46 percent, were shorted their full payments in 2017, according to the actuarial standards published by the Illinois Department of Insurance.

Illinois cities – from Kankakee to Danville to Alton – need pension fixes before costs bankrupt them. And while state politicians have effectively quashed any chance for reforms now, that shouldn’t stop city officials from demanding real changes.

Municipal leaders across Illinois need to demand the following if they want their cities to survive Illinois’ collective crisis:

  1. An amendment to the constitution’s pension protection clause so pensions can be reformed and workers’ retirement security saved;

  2. The ability to convert pensions to defined contribution plans for workers going forward; 

  3. A freeze on retirees’ cost-of-living adjustments (while protecting small pensioners) until pension plans return to health;

  4. Public sector collective bargaining reforms so officials can hold the line on new labor contracts, and;

  5. And the possibility of a fresh start through the ability to invoke municipal bankruptcy

The troubles brewing in Illinois are all happening during one of the longest economic expansions ever. When the economy and the stock markets inevitably correct, things will only get worse.

Without the above reforms, East St. Louis, North Chicago and Harvey might only be the first in a long list of collapsing cities.

Mish Comments

What Illinois needs most is point 5, bankruptcy reform.

Points 1-4 can only happen if 5 is addressed. There will be no bargaining until unions face the threat of court bankruptcy decisions.

Pet Peeve

Under current law, states have the right to allow bankruptcies or not, but once they do, bankruptcies proceed through Federal, not state, bankruptcy courts.

One of my major pet peeves with the Trump administration is that it failed to reform bankruptcy laws at the national level.

Trump had two years to address this issue and did nothing. Why Rand Paul failed to introduce legislation is also a mystery.

Corrupt Illinois, in deference to public unions, refuses to act.

The citizens of East St. Louis, North Chicago, Harvey, Danville, Rockford etc are at the mercy of state funding laws even to the point of the state confiscating city funds needed to provide adequate police and fire protection for cities.

Two Years and Counting

Eventually, an Illinois city will be forced to fire its entire police or firefighter force to fund pensions.

We don't have long to wait.

East St. Louis has only two year's cash left in which to pay firefighters.

I expect a case will then make it to the Supreme Court and hopefully we will have a national resolution.

Tyler Durden Fri, 09/20/2019 - 14:55
Published:9/20/2019 1:59:39 PM
[Entertainment] Prince Harry and Meghan Markle's Charity Donation With Baby Archie Makes a Splash Meghan Markle, Prince Harry, Boston Red Sox vs New York Yankees Baseball GameYou're never too young to start doing good! While Prince Harry and Meghan Markle's son may only be five months old, baby Archie is already starting to explore the charity...
Published:9/20/2019 1:33:16 PM
[Markets] Economic Confidence Drops To Lowest Since Shutdown As Dems Freak Out Over Imminent Recession Economic Confidence Drops To Lowest Since Shutdown As Dems Freak Out Over Imminent Recession

Authored by Megan Brenan of Gallup

  • 49% in U.S. think a recession is at least fairly likely in the next year
  • Economic Confidence Index +17 in September, down from +24 in August
  • 50% say economy is fair or poor and 48% say it's getting worse

Americans' confidence in the economy has become less rosy this month as Gallup's Economic Confidence Index fell to +17 from August's +24 reading, marking the lowest level since the government shutdown ended in January.

At the same time, the public is evenly divided over the likelihood of a recession in the next year. The current expectation of a recession is nine points higher than it was in October 2007, just two months before the Great Recession began but slightly below a February 2001 reading, one month before that eight-month-long recession.

Economic Confidence Index Lowest Since January

The latest Economic Confidence Index results are from a Sept. 3-15 Gallup poll. As the poll was being conducted, the stock market was less tumultuous than earlier in the summer, but the August unemployment numbers showed that fewer new jobs were created than expected, concerns about the trade war with China continued and the global economy showed signs of slowing. As has been the case for months, economists continue to express concern about the possibility of a recession in the near future. The latest interest rate cut by the Federal Reserve was announced after the poll was completed.

Gallup's Economic Confidence Index is the average of two components: Americans' ratings of current economic conditions and their views of whether the economy is getting better or getting worse. The index has a theoretical maximum of +100, if all Americans believe the economy is excellent or good and getting better. The theoretical minimum is -100, achieved if all Americans say the economy is poor and getting worse.

Although Americans' confidence in the economy has faltered this month, it remains far more positive than in the 2007-2009 recession years, when confidence bottomed out at -72 in October 2008. Still, the current +17 is well below the historic high of +56 in January 2000.

Looking at the individual components of the index, 48% of Americans currently think the economy is getting worse while 46% think it is getting better. Until this month, readings had been positive on balance since January for this measure and have been so for most of the Donald Trump administration.

Americans' rating of the nation's current economic conditions is the other factor comprising the Economic Confidence Index. The latest readings, though slightly less positive than the past few months, roughly match those of April and January. Currently, 15% of Americans rate economic conditions as "excellent," 35% "good," 36% "only fair" and 14% "poor."

Public Is Divided About Recession Coming Within the Year

Recent surveys of economists and CEOs have found that most of them are predicting a recession in the U.S. by 2021. Economists point to the uncertainty about U.S. trade with China, the inverted yield curve and faltering global economies as signs that a recession is nearing. Yet, the public is divided over a possible recession in the near future. Half of Americans say it is "not too" (32%) or "not at all" likely (18%) and a roughly equal share say it is "very" (15%) or "fairly" (34%) likely.

Gallup has not asked this question on a regular basis but has done so when a recession seemed possible. The last reading, in October 2007, showed a more optimistic public than the current reading shows. At that time, 57% said a recession was not likely and 40% said it was. Two months later, the country was in the Great Recession of 2007-2009.

Gallup also asked Americans to predict whether a recession was in the offing in 2001 when the dot-com bubble was bursting, and at that time 53% said it was likely. The question was also asked in 1990 when the country was already in a recession and between 72% and 84% of Americans said a recession was already happening or likely to be coming soon.

Differing Views on the Economy by Political Party and Income Level

Republicans' assessments of the economy and their forecast for the near future are far more positive than Democrats' (and to a lesser extent independents'). Republicans are nearly three times as likely as Democrats to rate current economic conditions positively, more than four times as likely to say the economy is getting better, and more than three times less likely to think a recession is coming within the year

Like Democrats, Americans in households earning less than $40,000 hold much more negative views than those in higher income groups of current economic conditions, the outlook for the future and the likelihood of a recession.

Bottom Line

While some economic indicators remain strong, many economists are sounding the alarm that a recession is coming in the near future. This latest polling finds that not all Americans are taking that warning to heart. Republicans hold starkly different views from Democrats which is not unusual in that those who identify with the party in the White House are typically more positive than others about the nation's economy. Yet in 2008-2010, this was not the case as economic conditions were so bad that even partisans who identified with the president did not rate the economy positively. A recession could seriously cripple President Trump's chances for re-election.

Tyler Durden Fri, 09/20/2019 - 14:14
Tags
Published:9/20/2019 1:33:16 PM
[Entertainment] Meghan Markle and Prince Harry Attend Misha Nonoo's Star-Studded Wedding Prince Harry, Meghan Markle, Misha Nonoo WeddingMeghan Markle looked stunning as she arrived with Prince Harry at her good friend and designer Misha Nonoo's wedding to energy entrepreneur Michael Hess in Rome on Friday. The Duchess...
Published:9/20/2019 12:58:09 PM
[Markets] "Suspiciously Well Placed": First Images Of Crippling Damage To Giant Khurais Oil Field Revealed "Suspiciously Well Placed": First Images Of Crippling Damage To Giant Khurais Oil Field Revealed

Much of the attention concerning the crippling damage to Saudi Aramco facilities struck in last week's aerial attack ultimately blamed on "Iranian sponsorship" by US and Saudi officials has focused on Abqaiq processing plant, but on Friday the first on the ground images from the kingdom's giant Khurais oil field — the country's second largest — have been revealed, showing scorched infrastructure, ruptured pipelines, and "a mess of oil melted to asphalt, twisted and charred metal grates" according to an on site Bloomberg report.

Sept. 20 photo showing destroyed key crude oil processing units at the giant Khurais oil field. Image source: Bloomberg

And yet Aramco has remained insistent that the field will return to pre-attack output levels this month, after the company reported losing half its daily output in the aftermath of the early Saturday attacks, impacting a whopping 5% of total global supply. 

Per Bloomberg, Khurais has a capacity of 1.45 million barrels a day, processing all oil on site; however the attack took out four 300-foot towers essential to the production process. 

Sept. 20 photo showing destroyed crude oil processing units at the giant Khurais oil field. Image source: Bloomberg

Like at the Abqaiq processing plant nearer the coast, the strikes — whether by drones or ballistic missiles (debris showed by the Saudi Defense Ministry this week featured both) — appeared remarkably precise

The Saudis have counted a total of twenty-five drones and missiles used in the twin attacks, after statements by Yemen's Houthi rebels claimed ten drones were used. 

Bloomberg reports of the recovery progress at Khurais:

The Khurais field and processing plant resumed 30% of production within 24 hours of the strike and will produce 1.2 million barrels a day by the end of September, Fahad Al Abdulkareem, general manager for Aramco’s southern area oil operations, said at a briefing on Friday. Workers are at the site 24 hours a day to speed the repairs, according to the company.

The precision nature of the strikes, which Washington has claimed can only point to Iranian involvement given the level of sophistication needed to conduct such an operation, is even more evident at the Abqaiq facility. 

Given the sheer distance the drones would have to travel, whether from Yemen or possibly Iran, combined with 18 precision strikes on the 70-year old but state of the art Abqaiq facility, a number of analysts are questioning whether the operation had inside the kingdom help

Damaged installation at Saudi Arabia’s Abqaiq oil plant, via CNBC

Bill Blain of Shard Capital is one of them, who notes "a number of my sources suggest things look increasingly questionable in the desert kingdom."

Blain comments:

Looking at the photos of the Houthi drone strikes, the damage and the holes made in the gas tanks look suspiciously regular and well placed. MBS’s shakedown of his royal cousins and the nation’s business leaders stands alongside rising revulsion at his own spending. As defacto absolute ruler he feels above question, but domestic tensions are rising. More than a few analysts suspect the Houthis may have had inside assistance for a growing Saudi domestic insurgency. 

"Trump and Kushner are going to struggle with that one.." he concluded. 

Damaged pipeline at Khurais, via CNBC

Indeed, considering the kingdom's historically restive Shia community in the eastern part of the country would also avail itself to help any operation intent on striking sensitive state facilities, the possibilities are endless. 

Tyler Durden Fri, 09/20/2019 - 13:55
Published:9/20/2019 12:58:09 PM
[Entertainment] Tom Welling Is Clark Kent Again for Arrowverse's Crisis on Infinite Earths Crossover Tom Welling, SmallvilleWell, somebody's coming to save us! E! News has learned Tom Welling will reprise the role of Clark Kent, you know, Superman, for the upcoming Arrowverse crossover on The CW. Welling played the...
Published:9/20/2019 12:30:39 PM
[Markets] Stocks Plunge After China Trade Delegation Cancels Trip Stocks Plunge After China Trade Delegation Cancels Trip

Update: This is the catalyst: Montana Farm Bureau says the Chinese delegation has cancelled its US farm visit to Montana, and agriculture officials are returning to China sooner than expected.

Sending the odds of a trade deal reeling...

Source: Bloomberg

*  *  *

Well that escalated quickly...S&P crashed back below 3,000

All major indices erasing all the post-FOMC gains...

Hog futures limit down...

Yuan plunged...

Source: Bloomberg

The 2Y Yield also tumbled...

Source: Bloomberg

Tyler Durden Fri, 09/20/2019 - 13:16
Published:9/20/2019 12:30:39 PM
[Entertainment] Lucy Boynton Is Not Cool With Boyfriend Rami Malek's Grabby Fans Lucy Boynton, Rami Malek, Venice Film FestivalLucy Boynton is not a fan of some of her beau Rami Malek's more...fanatic fans. The Bohemian Rhapsody co-stars confirmed their romance in January and have since been spotted out...
Published:9/20/2019 12:03:33 PM
[Entertainment] Chris Brown Is Thirsting Over Rihanna's Sexy Lingerie Photo Chris Brown, RihannaChris Brown is raising eyebrows with his recent social media activity. The "No Guidance" singer has sparked a bit of a social media frenzy after leaving a series of comments on...
Published:9/20/2019 11:33:45 AM
[Entertainment] Tarek El Moussa's Date Night With His Daughter and Heather Rae Young Will Melt Your Heart Tarek El Moussa, Heather Rae YoungTarek El Moussa was surrounded by his favorite girls on date night! The 38-year-old Flip or Flop star and his girlfriend Heather Rae Young, 32, recently took his daughter Taylor El Moussa...
Published:9/20/2019 10:59:27 AM
[Entertainment] Scott Disick Calls It Quits on Flip It Like Disick's Jed Smith Project: "I'm Over It" Scott Disick, Flip It Like Disick 107Real estate is a risky business. But does that necessarily mean Scott Disick should quit while he's ahead? The home renovation expert and his team aren't seeing eye-to-eye in this...
Published:9/20/2019 10:28:03 AM
[Entertainment] This kid inventor is making the hospital less scary for children 13-year-old Ella Casano came up with a way to make the hospital room a little more kid-friendly with her Medi Teddy.
      
Published:9/20/2019 10:00:36 AM
[Entertainment] Selena Gomez's Shark Tank Dreams Have Finally Come True Selena Gomez, Shark Tank, Robert HerjavecSelena Gomez just went swimming with the Sharks! Connar Franklin took to Instagram on Thursday to share a few photos of the 27-year-old singer visiting the set of Shark Tank. In the pics,...
Published:9/20/2019 10:00:35 AM
[Entertainment] Beyoncé Shares Intimate Photos of Jay-Z and Her Kids as She Says Goodbye to 37 Beyonce, Jay-ZBeyonce is saying goodbye to year 37. The singer, who turned 38 years old earlier this month, looked back on her past year in a heartfelt noted posted to her website on...
Published:9/20/2019 9:28:02 AM
[Politics] Most Don’t See More Women Leaders As Better for Society

Voters aren’t convinced that more women political leaders are the way to go, perhaps in part because most think men and women have more common interests than not.

Only 33% of Likely U.S. Voters believe it would be better for society if women held more political positions than men. A new Rasmussen Reports national telephone and online survey finds that 12% think it would be worse for society. A plurality (45%) thinks it would have no impact. (To see survey question wording, click here.)

(Want a free daily e-mail update? If it's in the news, it's in our polls). Rasmussen Reports updates are also available on Twitter or Facebook.

The survey of 1,000 Likely Voters was conducted on September 17-18, 2019 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

Published:9/20/2019 9:28:01 AM
[Entertainment] Will Smith Surprising These Viral High Schoolers Will Send You Smiling Into the Weekend Ellen DeGeneres, Will SmithThese teens just learned kindness goes a very long way. On Friday's episode of Ellen DeGeneres' eponymous daytime talk show, the comedian sat down with three Memphis high school...
Published:9/20/2019 8:58:47 AM
[Entertainment] Carson Daly's Wife Siri Is Pregnant With Fourth Child Carson Daly, Siri Pinter, 2018 Peoples Choice Awards, PCAs, CouplesCarson Daly's "Pop Start" segment on Today had a little bump in excitement this Friday. While reading off the morning's must-know entertainment news, the host revealed he...
Published:9/20/2019 8:27:24 AM
[Markets] Plastic Straws, Dog Leashes And Tech: Trump Grants Tariff Exemptions On Hundreds Of Chinese Products Plastic Straws, Dog Leashes And Tech: Trump Grants Tariff Exemptions On Hundreds Of Chinese Products

The Trump administration granted temporary exemptions to hundreds of Chinese products imposed last year, according to Politico, citing three notices published in the Federal Register on Friday. Among the 'unbanned' products are plastic straws, printed circuit boards and Christmas tree lights, to name a few. 

It is unclear how large a portion of last year's $250 billion tariff package the exemptions constitute, however the move stems from over 1,100 exclusion requests by US companies and other domestic entities, according to the documents. 

Other products on the list include: "certain single-speed bikes, water drinking fountains for pets, various types of pumps, heat exchangers, compressors, chest-type coolers, upright freezers, household water filter cartridges, anesthesia masks, electric-powered skateboards, three-wheeled carriages used by people with disabilities, chain-link fence panels, tractor-trailer skirts, x-ray tables, wick-burning torches for outdoor use, and dog harnesses and dog leashes." 

As CNBC notes, the exemptions cover a total of 437 types of products

The U.S. Chamber of Commerce in partnership with RSM US LLP, an audit and tax consulting firm, released a quarterly survey report on Thursday showing that 40 percent of midsize company leaders say Trump's tariffs on imported goods are posing challenges for their business. Twenty-six percent also reported being hurt by retaliatory tariffs that China and other countries have imposed in response to Trump's duties over the last two years. -Politico

"Rising tariffs and policy uncertainty are preventing midsize businesses — who employ millions of Americans — from investing and growing," said US Chamber of Commerce executive vice president and chief policy officer, Niel Bradley. 

"To guard against a possible recession, policymakers need to restore economic certainty, and that means deescalating trade tensions with China, passing [the U.S.-Mexico-Canada Agreement] and investing in the future through an infrastructure package," he added. 

Several factors were considered in determining exclusion requests, including whether the particular product - or an acceptable substitute - is only available from China, whether additional duties imposed on the product would cause severe economic harm to the applicant or to other US interests, and whether the US considers the product strategically important or linked to Beijing's "Made in China 2025" industrial program, or ones like it. 

Trump initially imposed duties on $50 billion worth of Chinese goods that he said benefited from Chinese government support under the "Made in China 2025" initiative. But when Beijing retaliated, Trump expanded his action to include products outside his original target zone.

By the end of the year, Trump will have imposed either a 30 percent or a 15 percent duty on as much as $550 billion worth of Chinese goods as a result of tariff hikes set to take effect in October and December. -Politico

According to CNBC, exempted products covered by Friday's USTR notices will fall into three batches based on when duties took effect in 2018.

  • One set based on the Sept. 24, 2018, implementation of tariffs on $200 billion worth of goods. This exemption will expire on Aug. 7, 2020.
  • Another based on the Aug. 23, 2018, implementation of tariffs on $16 billion worth of goods. This exemption will expire one year from the publication of the notice, at this time next year.
  • The other set of exclusions is based on tariffs on $34 billion worth of goods that took effect July 6, 2018. This exemption will also expire this time next year.

The exemptions will be in force for one year for the $34 billion and $16 billion product lists, and until Aug. 7, 2020 for the $200 billion product list. 

Meanwhile, China's Ministry of Finance announced the exemption of 16 US product lines from tariffs, after which President Trump said he would delay tariff increases on $250 billion worth of CHinese goods by two weeks until October 15. 

"This doesn’t seem to be an immediate shift in US trade policy, as the US had previously offered some type of tariff exemptions to qualified US goods," according to Nick Marro, global trade lead at The Economist Intelligence Unit, who made the comments in an email to CNBCadding "It’s more in consideration of the trade war impact on the domestic US economy than a concession to China, but this could still help build some goodwill before the trade talks in October."

The Trump administration has put Chinese telecommunications giant Huawei on a blacklist that effectively prevents U.S. suppliers from selling to the firm. Beijing, for its part, has threatened the announcement of its own “unreliable entities list.”

The Trump administration initially focused on reducing the large U.S. trade deficit with China, but the disagreement has expanded to U.S. companies’ complaints about limited access to the domestic Chinese market and being forced to hand over proprietary technology to China. -CNBC

We're guessing plastic drinking straws were one of the first items under consideration. 

Tyler Durden Fri, 09/20/2019 - 09:20
Published:9/20/2019 8:27:24 AM
[Entertainment] Why Bachelor in Paradise's Demi Burnett Is Worried About Chris Bukowski and Katie Morton Chris Bukowski, Demi Burnett, Katie Morton, Bachelor In ParadiseBachelor in Paradise season six is officially over. While viewers watched three couples walk away engaged, Demi Burnett has concerns about one pair's future. The reality star...
Published:9/20/2019 7:27:44 AM
[Markets] Trump Whistleblower Drama Puts Biden In The Hot Seat Over Ukraine Trump Whistleblower Drama Puts Biden In The Hot Seat Over Ukraine

For days we've been treated to MSM insinuations that President Trump may have betrayed the United States after a whistleblower lodged an 'urgent' complaint about something Trump promised another world leader - the details of which the White House has refused to share.

Then, we learned it was a phone call.

Then, we learned it was several phone calls.

Now, we learn it wasn't Russia or North Korea - it was Ukraine!

Here's the scandal; It appears that Trump, may have made promises to newly minted Ukrainian President Volodymyr Zelensky - very likely involving an effort to convince Ukraine to reopen its investigation into Joe Biden and his son Hunter, after Biden strongarmed Ukraine's prior government into firing its top prosecutor - something Trump and his attorney Rudy Giuliani have pursued for months. There are also unsupported rumors that Trump threatened to withhold $250 million in aid to help Ukraine fight Russian-backed separatists.  

And while the MSM and Congressional Democrats are starting to focus on the sitting US president having a political opponent investigated, The New York Times admits that nothing Trump did would have been illegal, as "while Mr. Trump may have discussed intelligence activities with the foreign leader, he enjoys broad power as president to declassify intelligence secrets, order the intelligence community to act and otherwise direct the conduct of foreign policy as he sees fit." 

Moreover, here's why Trump and Giuliani are going to dig their heels in; last year Biden openly bragged about threatening to hurl Ukraine into bankruptcy as Vice President if they didn't fire their top prosecutor, Viktor Shokin - who was leading a wide-ranging corruption investigation into a natural gas firm whose board  Hunter Biden sat on. 

In his own words, with video cameras rolling, Biden described how he threatened Ukrainian President Petro Poroshenko in March 2016 that the Obama administration would pull $1 billion in U.S. loan guarantees, sending the former Soviet republic toward insolvency, if it didn’t immediately fire Prosecutor General Viktor Shokin. -The Hill

"I said, ‘You’re not getting the billion.’ I’m going to be leaving here in, I think it was about six hours. I looked at them and said: ‘I’m leaving in six hours. If the prosecutor is not fired, you’re not getting the money,’" bragged Biden, recalling the conversation with Poroshenko. 

"Well, son of a bitch, he got fired. And they put in place someone who was solid at the time," Biden said at the Council on Foreign Relations event - while insisting that former president Obama was complicit in the threat. 

In short, there's both smoke and fire here - and what's left of Biden's 2020 bid for president may be the largest casualty of the entire whistleblower scandal. 

And by the transitive properties of the Obama administration 'vetting' Trump by sending spies into his campaign, Trump can simply say he was protecting America from someone who may have used his position of power to directly benefit his own family at the expense of justice. 

Congressional Democrats, meanwhile, are acting as if they've found the holy grail of taking Trump down. On Thursday, the House Intelligence Committee chaired by Rep. Adam Schiff (D-CA) interviewed inspector general Michael Atkinson, with whom the whistleblower lodged their complaint - however despite three hours of testimony, he repeatedly declined to discuss the content of the complaint

Following the session, Schiff gave an angry speech - demanding that acting Director of National Intelligence Joseph Maguire share the complaint, and calling the decision to withhold it "unprecedented." 

"We cannot get an answer to the question about whether the White House is also involved in preventing this information from coming to Congress," said Schiff, adding "We’re determined to do everything we can to determine what this urgent concern is to make sure that the national security is protected."

According to Schiff, someone "is trying to manipulate the system to keep information about an urgent matter from the Congress … There certainly are a lot of indications that it was someone at a higher pay grade than the director of national intelligence," according to the Washington Post

On thursday, Trump denied doing anything improper - tweeting "Virtually anytime I speak on the phone to a foreign leader, I understand that there may be many people listening from various U.S. agencies, not to mention those from the other country itself."

"Knowing all of this, is anybody dumb enough to believe that I would say something inappropriate with a foreign leader while on such a potentially ‘heavily populated’ call.

Giuliani, meanwhile, went on CNN with Chris Cuomo Thursday to defend his discussions with Ukraine about investigating alleged election interference in the 2016 election to the benefit of Hillary Clinton conducted by Ukraine's previous government. According to Giuliani, Biden's dealings in Ukraine were 'tangential' to the 2016 election interference question - in which a Ukrainian court ruled that government officials meddled for Hillary in 2016 by releasing details of Trump campaign manager Paul Manafort's 'Black Book' to Clinton campaign staffer Alexandra Chalupa.

And so - what the MSM doesn't appear to understand is that President Trump asking Ukraine to investigate Biden over something with legitimate underpinnings.

Which - of course, may lead to the Bidens' adventures in China, which Giuliani referred to in his CNN interview. And just like his Ukraine scandal, it involves actions which may have helped his son Hunter - who was making hand over fist in both countries.

 

Journalist Peter Schweizer, the author of Clinton Cash and now Secret Empires discovered that in 2013, then-Vice President Biden and his son Hunter flew together to China on Air Force Two - and two weeks later, Hunter's firm inked a private equity deal for $1 billion with a subsidiary of the Chinese government's Bank of China, which expanded to $1.5 billion

Meanwhile, speculation is rampant over what this hornet's nest means for all involved...

"As the 2020 election draws closer, President Trump and his personal attorney appear to have increased pressure on the Ukrainian government and its justice system in service of President Trump’s reelection campaign, and the White House and the State Department may be abetting this scheme," wrote the chairman of the House Intelligence, Foreign Affairs and Oversight committees wrote in a letter, citing media reports over the alleged threat to withhold $250 million.

House Democrats are also looking into whether Giuliani flew to Ukraine to 'encourage' them to investigate Hunter Biden and his involvement with Burisma. 

Tyler Durden Fri, 09/20/2019 - 08:10
Tags
Published:9/20/2019 7:27:44 AM
[Entertainment] Flashback: See Brad Pitt, Jennifer Aniston and More Stars at the 1999 Emmys Brad Pitt, Jennifer Aniston, 1999 Emmy awardsAs far as award shows go, the 1999 Emmys was one of the most star-studded events of the year. Not only did it see all of TV's biggest stars turn out, but there were a ton of movie...
Published:9/20/2019 6:27:34 AM
[Entertainment] 29 Genius Couples Halloween Costume Ideas E-Comm: Halloween Couples CostumesWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not...
Published:9/20/2019 5:56:52 AM
[Entertainment] 20 Surprising Secrets About Law & Order: SVU Revealed Law and Order: SVU21 seasons in and 20 years later, Law & Order: SVU shows no signs of slowing down. On September 20, 1999, the Law & Order spinoff centering on the Special Victims Unit of the...
Published:9/20/2019 5:27:21 AM
[Markets] Increasing Odds Of A Bad Brexit Deal As LibDems Leap Ahead Of Labour Increasing Odds Of A Bad Brexit Deal As LibDems Leap Ahead Of Labour

Authored by Mike Shedlock via MishTalk,

The latest UK polls place the Liberal Democrats ahead of labour. It's not all what it seems.

Lib Dem Leapfrog

Caution Advised

This is just one poll.

It is in contrast to another recent poll.

Clear Position

Caution aside, the poll result is not exactly surprising.

Liberal Democrat leader Jo Swinson promises a clear position: Overturn Article 50 and stay in the EU.

In contrast, Labour Leader Jeremy Corbyn promises a referendum.

Corbyn proposes a referendum in which voters decide to remain or let him negotiate a customs union.

Calculated Moves

This all seems like political madness, but it is a calculated move by both Corbyn and Swinson.

  1. Swinson wants an election before there is a result. If she can achieve that, Labour will get crushed by its wishy washy policy. But if there is a result before the election the platform of Remain is totally useless.

  2. On the other hand, Corbyn wants a result, any result, before there is an election.

  3. The problem for both Corbyn and Swinson is they do not want an election to be to the advantage of Boris Johnson.

Bad Deal Increasingly Likely

Corbyn may very well support a deal, any deal, just to prevent an election blowout.

I suspect he would even opt for Theresa May's inept deal, flat out as is.

Magic Increasingly Likely

A magic solution, despite all the protestations from the EU regarding the backstop seems increasingly likely.

It would solve a problem for Johnson (who by the way would be right about getting a deal), and it would give Labour a one-on-one go at Johnson.

Why?

Because any solution, no matter what, takes out both the Brexit Party and the Liberal Democrats.

Flies in the Ointment

One problem with what I just proposed is the EU is increasingly belligerent. And it's obvious to the UK.

Corbyn will of course grant a "free vote". He can hardly be for a people's choice and then not grant MPs the right to vote as they please. Labour might not go along.

Theresa May's deal has been defeated three times already.

But if MPs are hell bent on stopping "No Deal" to the point of getting any deal, no matter bad, then a bad deal will be the result.

Synopsis

  1. Labour wants to sidetrack the Liberal Democrats and vice versa.

  2. Corbyn does not really want a referendum. He would get killed by one.

  3. Swinson's claim that her number one priority is to stop No Deal is a lie. Her number one priority is to sink Labour.

  4. The cross section of the above points keeps no deal in play despite all sides claiming they want a deal.

Brexit Guaranteed

Brexit, by some definition, is pretty much guaranteed.

But as I have stated before, Remain is far better than a bad deal.

Later today, the UK supreme court will rule on prorogation. The resolution of the above points will have a far greater impact on a deal (or no deal) than the court decision.

Tyler Durden Fri, 09/20/2019 - 05:00
Tags
Published:9/20/2019 4:27:43 AM
[Markets] Top Tesla German Executive Leaves For Competitor Top Tesla German Executive Leaves For Competitor

Tesla just lost another key executive to a competitor: this time in Germany. Longtime German boss Jochen Rudat has left the company, according to German newsmagazine Manager Magazin

There had been a "backlog of tensions" between Tesla CEO Elon Musk and the Rudat's European organization. Musk was reportedly interfering with the introduction of the Model 3 "increasingly" in Europe, according to a translated version of the article.

And, as we all well know by now, when an employee butts heads with Elon Musk for any reason, they usually don't wind up sticking around much longer.  

We can only imagine how frustrated Rudat, whose relatively prestigious resume includes BMW Group and Porsche, was probably getting as "genius" Musk micromanaged him and likely peppered him with every Ambien and red wine induced brain-fart he conjured up. 

Rudat has reportedly been on leave since July 2019 and his contract with Tesla is set to expire at the end of September. In October, he will be working for Tesla competitor Automobili Pininfarina and will be reporting to former Audi CEO Michael Perschke, who we are guessing likely has a better grasp not only on the industry, but also on reality in general, than Musk. 

Additionally, Twitter sleuths posted yesterday that Phillipp Hempel, formerly Tesla's head of Enterprise Sales DACH in Dusseldorf, Germany, had also updated his LinkedIn to reflect that he had left the company. 

Hempel had been with the company since 2013, according to his LinkedIn, when he started as a Sales Advisor. 

 

Tyler Durden Fri, 09/20/2019 - 04:15
Published:9/20/2019 3:27:33 AM
[Markets] OECD Slashes Global Growth Outlook, Warns Germany Already In Recession OECD Slashes Global Growth Outlook, Warns Germany Already In Recession

In one of the most downbeat forecasts on the global economy that we've seen so far this year, the Paris-based organization of wealthy nations known as the OECD - the Organization for Economic Cooperation and Development - warned that the global economy is heading toward a recession, and that governments aren't doing enough in terms of fiscal stimulus to try and boost the economy.

"Escalating trade policy tensions are taking an increasing toll on confidence and investment, adding to policy uncertainty, weighing on risk sentiment in financial markets, and endangering future growth prospects," the OECD said.

The advocacy for fiscal stimulus follows reports that Germany is considering a "shadow budget" to bolster public investment as Europe's economy slides.

“Our fear is that we are entering an era where growth is stuck at a very low level," said OECD Chief Economist Laurence Boone said. "Governments should absolutely take advantage of low rates to invest in the future now so that this sluggish growth doesn’t become the new normal."

After cutting all of its forecasts from four months ago, the OECD now sees global growth slipping below 3% to 2.9%.

Of course, this pattern of cutting GDP forecasts is nothing new.

 

The OECD became the latest to warn about the global economy, after the Fed, the ECB and the PBOC have all eased policy to try and bolster growth in recent weeks. But the OECD is convinced that without government stimulus, the global economy is headed for a protracted downturn.

Manufacturing has born the brunt of the economic slowdown thanks to the tit-for-tat trade war between the US and China, while the services sector has proved unusually resilient so far. But the OECD warned that “persistent weakness” in industry will ultimately weigh on the labor market, dragging down household incomes and spending.

Not knowing whether the next Presidential tweet will ease or exacerbate tensions makes for an environment of extreme uncertainty, pushing businesses to turn cautious on investment and hiring, and households to switch from spending to saving.

“Trump’s brinkmanship on trade with China has left consumers, businesses and financial markets on edge."

The OECD said "collective effort is urgent,” and the effectiveness of monetary policy could be enhanced by "stronger fiscal and structural policy support."

According to CNBC, the OECD's lower forecast for the EU was largely due to the slowdown in the bloc's biggest economy, Germany, which was forecast to already be in a technical recession.

Of course, a report about global growth wouldn't be complete without some Brexit  fearmongering, and the OECD is no exception. If the UK leaves without a deal, as is widely expected across Europe, its economy will be 2% lower than otherwise in 2020-2021, even if the exit is relatively smooth.

It’s a point central bankers have made for months. Following the ECB’s latest monetary stimulus push, outgoing President Mario Draghi said it’s "high time" for fiscal policy to take charge, signaling there’s not much more the ECB can do. "The takeaway for the euro zone today is do not rely on monetary policy to do the job alone,” Boone said. “Start investing to do the structural reforms that need to be done for more sustainable growth, and do it now."

Tyler Durden Fri, 09/20/2019 - 02:45
Published:9/20/2019 1:58:59 AM
[Entertainment] Kim Kardashian Reveals the ''Emotional'' Moment She Ran Into O.J. Simpson Kim Kardashian West, O.J. SimpsonKim Kardashian is revealing the "emotional" moment that she and sisters Khloe and Kourtney ran into O.J. Simpson at a Miami Club. As most of the world knows, the Kardashian family...
Published:9/19/2019 11:03:12 PM
[Markets] Grade-Rigging Scandal: Baltimore Students Missed 100+ Days Of School, Failed Classes, Still Graduated Grade-Rigging Scandal: Baltimore Students Missed 100+ Days Of School, Failed Classes, Still Graduated

For the last several years, we have been covering the grade-changing scandal in Baltimore City Public Schools (BCPS). Administrators, teachers, and parents continue to come forward about the widespread fraud that allows children to graduate, even though they've missed school or failed classes. 

Project Baltimore, who has spearheaded the investigation into BCPS fraud, has uncovered another school where students missed more than 100 days of class or failed ten courses in three years, still graduated during the 2019 school year.

The school in focus is called Joseph C. Briscoe, and it's a special needs school with just 79 students. The budget for the school is $4.3 million, which means on any given school year, the city spends $54,524 per pupil. By comparison, the Baltimore Polytechnic Institute, a top BCPS high school, spends about $7,000 per student.

"That should be the number one goal that they get the right education," a Briscoe teacher told Project Baltimore.

Project Baltimore said the teacher who has come forward about the fraud doesn't want to be identified because she fears BCPS will retaliate.

She said, Joseph C. Briscoe is a troubled school with at least 89% of its students were "chronically absent." The four-year graduation rate is at 5%, the teacher said students need help, but BCPS is making sure they are just pushed through.

"If they can't read and you're not giving them a type of trade or skill, and you're pushing them through the system, where will that leave them at once they graduate or get the certificate from the school, in life? Like how will they survive?"

The teacher said six students graduated this year, one student was late 110 days his senior year and failed science. But his transcript shows he passed with a D-.

"The diploma is getting devalued," said the teacher who claims to have witnessed grades being changed. "So, the diploma value is not worth a lot."

Project Baltimore received a secret recording of a conversation from inside the school shortly before graduation this year. The transcript below shows how administrators altered the grades of one student so he could pass.

"He couldn't have any work because he wasn't here," says someone in the recording.

When it was explained the student never did extra work, the question is asked, "What can we do?"

The response was, "So, we have to do a grade change? Is the final grade in there right now?

"Yes," someone replies.

The teacher told Project Baltimore that the student who had their grade change didn't deserve the grade. His report card showed he failed ten classes in the last three years and missed an abnormal amount of days but still received a certificate of program completion. "Certificates are listed in Maryland law as an alternative to the traditional diploma. They don't count toward a school's graduation rates, but students can take part in the ceremony," said Project Baltimore. 

The student in focus said he missed 110 days of school his senior year out of 180 total days. When asked if he felt like he deserved to graduate, the student answered, "Not really."

He went on to state, "I understand what you're saying, but I'm actually happy. To be honest, I didn't think I was going to make it."

Project Baltimore requested an interview with BCPS administrators; instead, they received this statement: 

"We received your request for an interview about Joseph C. Briscoe Academy. Since then, we learned that a reporter from the station went to the homes of Joseph C. Briscoe alumni, intruding on their privacy. We understand the reporter has confidential student records and directly questioned the students. We are investigating how these records may have been received. We also disagree with the reporter's approach to this story. Given this context, we are denying your request for an interview at this time."

Project Baltimore is associated with WBFF 45, a Fox-affiliated television station licensed to Baltimore and serves as the flagship station of the Sinclair Broadcast Group, a pro-Trump, conservative company. Project Baltimore has been used by WBFF 45/Sinclair to expose fraud in the democrat controlled city. 

Tyler Durden Thu, 09/19/2019 - 22:05
Tags
Published:9/19/2019 9:25:03 PM
[Entertainment] The Internet Thinks Cardi B Just Responded to Tekashi 6ix9ine's Shocking Accusations Cardi B, 2019 Diamond BallContrary to Tekashi 6ix9ine's claim, Cardi B is the member of only one group: the Bardi gang. In his latest appearance on the witness stand, the infamous rapper made a number of...
Published:9/19/2019 8:27:12 PM
[Markets] Reinharts Rant: Jay Powell's Policy Path Will Get Trump Re-Elected Reinharts Rant: Jay Powell's Policy Path Will Get Trump Re-Elected

In a Dudley-esque op-ed, establishment economists Carmen and Vincent Reinhart reflect on Jerome Powell's Dilemma.

There is a reason that the US Federal Reserve chair often has a haunted look. Probably to his deep and never-to-be-expressed frustration, the Fed is setting monetary policy in a way that increases the likelihood that President Donald Trump will be reelected next year.

Via Project Syndicate,

Once a year, the leadership of both the European Central Bank and the United States Federal Reserve go to the mountains for policy enlightenment. The ECB conducts a forum every June in Sintra, a town in the foothills of the eponymous Portuguese mountain range. And the Fed convenes in late August in Jackson Hole, Wyoming, for the Kansas City branch’s economic symposium. In retrospect, this year’s remarks from on high by ECB President Mario Draghi and Fed Chair Jerome Powell provide insight into the global outlook and the two banks’ recent policy actions, which have been coincident, but not coordinated.

In Jackson Hole, Powell named the challenge to the global economic outlook, not personally (US President Donald Trump), but operationally: heightened trade uncertainty, he said, presented a new drag on aggregate demand. Back in 2018, most Fed officials believed that 3% annual real GDP growth was unsustainable, because resource utilization was already taut. That assessment led the Fed to hike the policy interest rate by a quarter point four times.

That episode demonstrates the pitfalls of real-time policymaking. One year later, the Bureau of Economic Analysis trimmed almost half a percentage point from GDP growth for 2018, and the Bureau of Labor Statistics revised downward its estimate of monthly employment gains. Among the mechanisms by which an increase in interest rates slows aggregate demand is the foreign-exchange market. When the Fed is set on tightening as other central banks hug the effective lower bound of their nominal policy rates, the dollar’s value rises. Essentially, dollar appreciation is a channel through which policymakers “donate” domestic economic strength to US trading partners that now have weaker, more attractive currencies. With the ECB’s policy rate distinctly negative and its asset-purchase program running out of steam, Draghi especially appreciated the gift of easier European financial conditions last year.

Of course, the transfer of domestic economic strength by an independent agency, the Fed, displeased the chief executive, and withering criticism ensued. But it was not Trump’s carping about dollar appreciation that led the Fed to change course. Rather, Trump’s trade policies elevated uncertainty about investment and growth. Investment in long-term capital is always risky for a business. When doubt about such an investment emerges before concrete is poured, less concrete will be poured.

By early 2019, the Fed viewed this new economic headwind as obviating the need to continue raising the federal funds rate. As the year unfolded and the trade winds intensified, Fed officials switched course and began to ease policy.

Some economic mechanisms, however, are asymmetric. When the Fed tightens its policy, other central banks do not always follow, preferring to allow their currencies to depreciate. In contrast, when the Fed eases its policy, far fewer international partners are willing to let their currencies appreciate so that the dollar can depreciate. No one volunteers because everyone fears upward exchange-rate pressure. An earlier generation of central bankers would have relied on direct intervention in the currency market to pursue the same goal. But while this is still done in emerging-market economies, the use of reserves by an advanced economy would draw its peers’ opprobrium. Instead, they achieve the same end by changing policy interest rates to deflect appreciation and welcome modest depreciation.

As a consequence, when the Fed pivoted, all other major central banks followed. Draghi pushed the ECB in that direction in Sintra and followed through with further easing on September 12. This similarly drew Trump’s ire, as he viewed the move as directed toward the exchange rate. He is right, indirectly. A weaker euro is the intermediate result Draghi seeks in order to support a flagging economy and move inflation up to the ECB’s target of near, but below, 2%.

The ECB’s response, of course, means less dollar depreciation, weakening the stimulus effect of the Fed’s move. And the consolation that by easing policy, the Fed single-handedly induced worldwide monetary accommodation does not get much credit from the White House. Trump would prefer that Powell were faster than his counterparts in the race to the interest-rate bottom. Powell’s problem is that the US economy apparently does not require such stimulus. Job gains remain robust, and wages are ticking up. Global trade may be in recession, but the US economy is not as dependent as its trading partners on global trade.

Probably to Powell’s deep and never-to-be-expressed frustration, the Fed is setting monetary policy in a way that increases the likelihood that Trump will be reelected next year. That instruction is not contained in the Federal Reserve Act, of course, but the Fed is supposed to deliver maximum employment and stable prices. Its mandate of sustainable economic growth thus requires Powell to attempt to offset the effects of policy uncertainty under Trump.

Fed officials are not thinking of intentionally letting the economy stumble between now and the 2020 election. Thus, if Powell succeeds, Trump will not bear the cost of his words and actions. This will invite more of the same.

There is a reason that Powell often has a haunted look, and not just at Jackson Hole.

Tyler Durden Thu, 09/19/2019 - 21:05
Published:9/19/2019 8:27:12 PM
[Entertainment] Billie Lourd Joins Will & Grace As Debbie Reynolds' Granddaughter Billie Lourd, Debbie Reynolds, 2015 SAG AwardsWill & Grace has added another guest star to its roster for the final season, and this one is extra special. Billie Lourd will be playing Fiona Adler, the granddaughter of Bobbi...
Published:9/19/2019 8:02:40 PM
[Markets] The Strategy That Added $16 Billion To Bill Gates' Net Worth This Year The Strategy That Added $16 Billion To Bill Gates' Net Worth This Year

Decades after founding Microsoft, Bill Gates is still creating immense wealth for himself. 

He added $16 billion to his net worth this year, bringing his total net worth to $106 billion, according to Bloomberg. He's second only to Jeff Bezos on the Bloomberg Billionaires Index, even after donating $35 billion to charity. 

Gates said in an interview: 

“We’re not, you know, in some defensive posture where we’re mostly in cash, or anything like that. The strategy that’s been used on the investments is to be over 60% in equities.”

And with Microsoft just announcing a new $40 billion buyback scheme, the fact that it is the most valuable company in the world is not hurting Gates...

Source: Bloomberg

As of Monday, Gates had about $60 billion of his assets in equities. This is far higher than the average family office in North America, which held about 32% of its assets in equities in 2018. 

Gates' family office, Cascade Investment, is overseen by Michael Larson and has enabled Gates to build the world's largest private foundation without making any impact on his fortune. Of course, his fortune could be at risk if politicians call for higher taxes. 

Gates said about a potential wealth tax:

 “I doubt, you know, the U.S. will do a wealth tax but I wouldn’t be against it. The closest thing we have to it is the estate tax. And I’ve been a huge proponent that that should go back to the level of 55% that it was a few decades ago.”

In his interview, Gates also pleaded for higher income taxes and more financial transparency: “I’m for way more financial transparency. I don’t like that you can have trusts where nobody knows who owns it.”

Gates also doesn't believe his stellar returns are likely to continue: 

“There’s reasons to think absolute returns for the next decade will be less than they have been for the last several decades.”

Tyler Durden Thu, 09/19/2019 - 20:45
Published:9/19/2019 8:02:40 PM
[Markets] Smart Faucets And Toilets Use Alexa To Listen To Your Conversations Smart Faucets And Toilets Use Alexa To Listen To Your Conversations

Via MassPrivateI blog,

It is hard to imagine a more intrusive home surveillance device than a faucet or toilet that listens to everyone's conversations, but that is just what Delta Faucet and Kohler have done.

Delta Faucet's "Voice IQ" takes advantage of where lots of people like to congregate and turns it into an Alexa eavesdropping center.

"Designed with the understanding that 20 percent of all WiFi-enabled homes are equipped with a connected home device, VoiceIQ Technology pairs with existing devices to dispense the exact amount of water needed, all with a simple voice command."

Delta lets Alexa decide how much water everyone gets.

"VoiceIQ Technology allows users to easily warm water and turn it on and off with voice activation, lending a hand in an active kitchen space. Consumers can command the faucet to dispense a metered amount of water in various quantities for precise measurement. Additionally, consumers can customize commands to make everyday tasks easier, like filling a coffee pot, a child’s sippy cup, or a dog bowl."(To learn more about Voice IQ click here.)

What they are really saying is Amazon will now monitor your home and individual water usage.

How is that for Orwellian?

Install Alexa in your kitchen at you own peril:

I cannot tell you how often TV shows like "Buying Hawaii" or "Caribbean Life" show prospective homeowners discussing how they want to entertain friends and family in their new kitchen.

So despite what Delta's promotional video says, 'the kitchen is not a great place for some hands-free help.'

I mean who in their right mind thinks that Alexa's "hands free help" does not include moderators listening to your conversations while entertaining?

Delta is also offering Alexa's "hands free help" to homeowners with older kitchens.

"VoiceIQ Technology will be available summer 2019 as a pre-assembled feature on select Delta Trinsic® pull-down models with Touch2O Technology. For an added level of convenience, a retrofittable module for VoiceIQ Technology will be available to upgrade existing kitchen faucets with Delta Touch2O Technology manufactured after January 1, 2018."

No thanks, I'm good. I do not want to turn my faucet into an Amazon eavesdropping device.

I mean, what's next a voice-activated toilet?

Kohler creates a voice-activated toilet

Leave is to Kohler to destroy what most people consider their most private part of life: the bathroom.

Earlier this year, Kohler unveiled their voice-activated toilet, called the "Numi 2.0" intelligent toilet.

"Numi 2.0 will come equipped with embedded Amazon Alexa for easy voice control to active toilet features as well as Alexa commands such as checking weather, traffic, accessing news, etc."

Is this really what America wants: a toilet that listens to you while you sit on the throne?

According to the Numi Intelligent video, Alexa monitors how often you go the bathroom and how much water you use.

Kohler is so sure that homeowners will want Alexa to listen to their most intimate moments that they created an app for the whole family.

"Use the Kohler Konnect app to program personalized presets for different users, and you can use voice to access the preset/profile. There is probably a difference between you, your spouse, and your children when it comes to  your interaction with Numi 2.0; this lets you easily personalize your experience."

Alexa knows the difference between you and your children's voices. How is that for creepy?

In what messed up world do we live in? Where it is OK, to let a private company monitor when you go to the bathroom?

Delta Faucet and Kohler have joined the ranks of ignominious companies like Amazon and Google who have turned our private lives into a for-profit family surveillance model. 

Tyler Durden Thu, 09/19/2019 - 19:45
Published:9/19/2019 7:08:47 PM
[Entertainment] Watch Brad Pitt's "Terrible" Attempt at Being "Unfiltered" Brad Pitt, Ad Astra premiereIf you wonder what kinds of people Brad Pitt is intrigued by, it's the folks who don't hold back. "The people I'm really drawn to, they just have no filter. They have no...
Published:9/19/2019 7:08:47 PM
[In The News] Pentagon Officials: Precision of Attack on Saudi Arabia ‘not something we’ve seen in the past’

By Terri Moon Cronk -

All indications to this point are that Iran is in some way responsible for the Sept. 14 attack on oil facilities in Saudi Arabia, a senior Defense Department official said. At a Pentagon news conference today, Jonathan Rath Hoffman, assistant to the secretary of defense for public affairs, said the ...

Pentagon Officials: Precision of Attack on Saudi Arabia ‘not something we’ve seen in the past’ is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/19/2019 6:24:41 PM
[Entertainment] Love Island Host Arielle Vandenberg and Vine Star Matt Cutshall Are Engaged Arielle Vandenberg, Matt CutshallIt's official: Arielle Vandenberg and Matt Cutshall are engaged! After dating for what seems like forever, the former Vine star popped the question to the Love Island host....
Published:9/19/2019 6:24:41 PM
[Markets] Will Chicago Be The Largest US City To Declare Bankruptcy? Will Chicago Be The Largest US City To Declare Bankruptcy?

Authored by Rick Moran via PJMedia.com,

The city of Chicago is in dire fiscal and financial straits with an almost billion dollar budget deficit, bonds rated at junk status or below, numerous extremely costly legal judgments, a shrinking tax base, and unfunded public pension liabilities to the tune of an astonishing $42 billion.

Other than that, it's a great place to live.

The state of Illinois has its own financial troubles, so the city can expect little or no help there. And good luck getting a federal bailout through the GOP Senate and signed by a president who's been called a "racist" by the mayor.

The shrinking tax base is clear proof that citizens are already over taxed. And since it's Democrats in charge, there won't be much cutting of city services.

The only option for Mayor Lori Lightfoot and the city council is restructuring the city's massive debts. In other words: bankruptcy.

RealClear Politics:

The city needs to lower taxes to start growing again, but lower taxes would mean Chicago can no longer service its debts.  Federal law offers a procedure for reducing those debts by commencing a case in bankruptcy court.  A bankruptcy judge has the power under federal law to reduce the city’s liabilities, change its pensions, reorganize its functions into a more efficient ongoing structure and eliminate some of its debts — but the judge does not have the authority to raise your taxes.

Bankruptcy is a painful process because it forces creditors who facilitated the city’s failure to take a loss: bond holders, such as hedge funds, Wall Street bankers that sold the bonds and the people who are waiting to be paid for goods and services sold to Chicago, including past and current municipal employees.  (The city can and will still be able to offer generous pension benefits to its workers, but perhaps with a cap limiting pensions of well more than $100,000 and without the automatic 3% COLA; the exact terms of any new deal would be hammered out in negotiations under the auspices of the court.)

There are several problems with this plan. Good luck getting unions to agree to any change in the way pensions are figured. Former Illinois Governor Bruce Rauner tried for 3 years to find a way to get the public unions in the state to make some tiny reforms and he was blown out of office.

Besides, it doesn't matter what the bankruptcy judge will say or do. There is going to be pain. Just ask the citizens of Detroit who endured the process in 2013. It wasn't pretty.

Indeed, there simply isn't an alternative:

This is Lightfoot’s moment: She didn’t make this crisis, but if she seeks higher taxes and less services instead of reform, Chicago’s population and property values will continue to bleed out.  A bankruptcy restructuring is in Chicago’s future; it’s immoral to wait until empty buildings fill the downtown instead of cranes, and property values for “remainers” fall further toward zero.

Unfortunately, Lightfoot can’t make this happen on her own.  Under federal law, the state must first authorize bankruptcy filings by municipalities before the city can avail itself of this procedure to restructure its debts.

Instead of lobbying Springfield to ask residents of other towns to pay Chicago’s debts, she needs Gov. Pritzker and the legislature to grant permission for the city to pursue a prudent financial reorganization and debt reduction through a federal bankruptcy procedure.

One thing is certain: a filing of bankruptcy will totally eliminate the leverage of machine politicians to bilk the public. The machine has been in decline for at least 3 decades, but remnants of the old Daley coalition survived. But there's no hiding anymore. The machine has to go if the city is to recover and thrive again.

From my 40-year observations of the Chicago political scene, I have my doubts whether Mayor Lightfoot could do what needs to be done. The powers that be are just too entrenched. It's not only politicians, it's bloodsucking businessmen, organized crime, and now street gangs who also get a cut of the action. This is the way the "City that works" has worked for more than 90 years.

Since the days of Big Bill Thompson, Chicago has been a cesspool of graft and corruption. Can waving the magic wand of bankruptcy cure the city of almost 100 years of amoral governance?

Don't bet the farm on it.

Tyler Durden Thu, 09/19/2019 - 19:05
Published:9/19/2019 6:24:41 PM
[Customs, Border and Immigration News] DOD is Building ‘About a Mile of Border Wall’ Each Day

By David Vergun -

The Army Corps of Engineers expects to build 450 miles of wall along the U.S. Southwest border, a Defense Department spokesman said. At present, about a mile of border wall is being built each day, Jonathan Rath Hoffman, assistant to the secretary of defense for public affairs, told reporters at ...

DOD is Building ‘About a Mile of Border Wall’ Each Day is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:9/19/2019 6:00:15 PM
[Entertainment] Go Inside Dwyane Wade and Gabrielle Union's $32.5 Million Miami Beach Mansion Dwyane Wade, Gabrielle Union, Real Estate, Biscayne Bay, MiamiHollywood's hottest couple has put their hot property up on the market. After renovating their Miami Beach property in 2010, Dwyane Wade and Gabrielle Union are saying goodbye to the...
Published:9/19/2019 6:00:15 PM
[Markets] "They've Created A Snowflake Market" - Mark Spitznagel Warns Of "Dangerous Over-Reliance" On Central Banks "They've Created A Snowflake Market" - Mark Spitznagel Warns Of "Dangerous Over-Reliance" On Central Banks

Last year, before the market collapsed in the XIV debacle, Universa's Mark Spitznagel warned "a reckoning always follows...something really big is coming"

This is an age of massive artificial economic imbalances and systemic risks.

Repress change, and you repress all that it means. Repressing it is sheer hubris and, in Dylan’s words, “beyond your command.” You can only defer it, not stop it. (Juxtapose this view with outgoing U.S. Federal Reserve Chair Janet Yellen’s ambitious claim that there will not be another financial crisis “in our lifetimes.”) When we try enforcing stability by decree, a reckoning always follows. An unsustainable boom leads headlong to an inevitable bust. A hard rain falls.

Rather than fear it, we should “tell it and think it and speak it and breathe it.” This is Dylan’s resolve. Something really big is coming. Let the central bankers try to keep standing in its way, but as investors we need to recognize and accept its logical consequence of a return to the meaning of volatility. Change and volatility are good. “There is nothing perpetual but change”—according to Mises, who surely must have loved Dylan just as much as I do.

While this is a common theme from the guru of tail risks, he nailed it then; and again late last year as he warned before the December collapse.:

“All assets are priced where they are today because of central banks. That’s modern finance — it’s not about psychology or flows anymore, it’s about what the central banks are going to do next.”

And now he is back with perhaps his most ominous warning yet. In an interview with Bloomberg's Eric Schatzker, the hedge fund manager exclaimed that "the negative rates we’re seeing throughout the world are an abomination, by any objective standards,"

"It’s part of this Rube Goldberg world we’re in where you’ve got these strange interconnectedness between different markets and they start lacking meaning...

"...making long term macro calls and macro trades like that successfully isn’t possible. I think it’s a fool’s errand."

"...central banks can never step away from this. They can threaten to. And they can bluff, and they can do some probing bets like they did last year, and the market may fall for that, or call that bluff in the short term. But yes I think we’re in a position now where central banks can never back away..."

Full Transcript below:

ERIK SCHATZKER: Mark you and I have both been looking at and thinking about the bond market. Bonds are supposed to mitigate the risk of an equity slide in the event the economy slows down or perhaps even goes into recession. Is that still possible with the ten-year treasury yielding 160 basis points?

MARK SPITZNAGEL: It’s a lot harder today, that’s for sure. Bonds are kind of complicated by the fact that they have these cross-currents going on. When rates are low they raise the net present value of things like stocks. But at the same time there’s this historic flight to quality to bonds. So there are these informational cross-currents and it’s not clear what we’re going to see but of course rates where they are today and the negative rates we’re seeing throughout the world are an abomination and I think it’s pretty plain to see that bonds are not a safe place to be. Certainly not a good risk mitigation strategy.

ES: What about all the strategies that are built on the notion of bonds being a good risk mitigation strategy, specifically risk parity?

MS: Yeah, it’s a big problem. It’s a big, big problem. Especially when it’s done in the levered way that risk parity requires. It’s a big problem because—so what do we have, we have these sort of statistical hedges and we have more mechanical hedges. Bonds fall in the category of the statistical hedge, and we can extrapolate into this insanity where we can take such a levered bet thinking that this is going to balance our portfolio. A mechanical hedge would be something more like an option or even credit. By cap structure arbitrage credit has to go out in a crisis, vol has to go out in a crisis, really in a big enough crisis. Bonds it’s not clear. We don’t even know what the sign of that correlation could be in bonds versus stocks. That’s how bad it is.

ES: Now, from an investor’s point of view there are a number of ways f looking at this. You should be concerned about the risks you’re taking relative to the reward that you might get, but some people are just looking for returns and they say a year ago the ten-year treasury was yield 3 percent, today it’s yielding 1.60. Some people think it’s headed negative. If that’s the case, I just need to hold it, I’m going to make a lot of money.

MS: Yeah, yeah, that’s a great point. And I can’t argue with that. You make a great point in that we need to think about a trade like that, we need to think about bond investing much more as a tactical allocation as opposed to a strategic one. A tactical one would be you’ve got to make this call right, you’re making this macro call, you’re making this call on rates. You better be right. A strategic one would be more about how you structure your portfolio for the long run, how you’re going to balance your portfolio, how you’re going to raise your rate of compounding based on how all these pieces move together vis-à-vis each other. So I think it’s really important that people understand that when they’re putting all of this money in bonds it’s no longer a very good strategic allocation, but it might be a good tactical one, I don’t know.

ES: Well what if it is a strategic allocation and you need to hedge that. Where do you hedge your bond risk?

MS: So we need to hedge the hedges. Right? And then we need to hedge the hedges of the hedges. Once you start to even have to ask those questions I think it’s plain that this isn’t a very sound, safe risk mitigation strategy.

ES: You called the situation we’re in insanity. That’s a bit of a judgement don’t you think?

MS: Negative rates is insanity, by any objective standards.

ES: 17 trillion dollars of negative-yielding debt.

MS: It’s insane. And over a trillion of negative-yielding corporate debt. That too is insane. And how do you justify that with people thinking that rates so low and the yield curve so flat is signifying panic and coming recession?

ES: At the very least, the rate market in the United States is still positively yielding. But as we’ve just discussed, elsewhere in the developed world it’s mostly a situation of negative-yielding sovereign debt and in some cases if you will crazier things. Negative-yielding Danish mortgages. From a mechanical standpoint, because you think about things mechanically, what does it mean when assets are liabilities and liabilities are assets?

MS: Again, it’s insanity. It’s part of this Rube Goldberg world we’re in where you’ve got these strange interconnectedness between different markets and they start lacking meaning. So I can’t even answer that question because there isn’t any meaning to it any more. But I hear what you’re saying. Rates are higher here than elsewhere throughout the world, is it a bad tactical play to think that bonds could even edge higher, rates are going to go lower, and I do think there’s going to be endless accommodation by central banks and by the Fed specifically.

ES: So it might not be a bad tactical bet.

MS: See I’m not even in that business. I don’t want to make these macro calls. Frankly, I think long term making macro calls and macro trades like that successfully isn’t possible. I think it’s a fool’s errand.

ES: A lot of people have been carried out of the building trying to make those calls. Not this building. The other building. But to your point, Mark, that isn’t your business. Your business is providing what I have called before catastrophe insurance. People think of you as something of a financial Grim Reaper. Today as it happens you’re not dressed in black, but you have been before. Do you really want the markets to crash?

MS: No, I don’t want the markets to crash, I’ll be good if the markets crash, my clients will be good if the markets crash, at least in terms of the fact that they insured them. But, I don’t want the markets to crash. Would you ask a bodyguard if he wants his clients to get attacked. He doesn’t. He doesn’t want them to get hurt, or for someone to even try to harm them. He just knows that he is there so they can go on and do the things in their lives that they have to do—without the risks of getting attacked. So no, I’m a cheerleader for our economy, but I do think that we’ve done some insane things across the board.

ES: You’ve told me before, Mark, that you don’t think the Fed or the ECB or the BOJ or the Bank of England or the Bank of Canada, it doesn’t matter which central bank we’re talking about, will ever be able to normalize. In other words, the era of monetary intervention is, for all intents and purposes, never ending.

MS: That’s right. I’ve been saying for years that I’ve been saying for years that central banks can never step away from this. They can threaten to. And they can bluff, and they can do some probing bets like they did last year, and the market may fall for that, or call that bluff in the short term. But yes I think we’re in a position now where central banks can never back away, which sort of begs the question how can this ever end. Can asset markets get inflated forever? Of course they can’t. There are end games here, because this is unsustainable. There is a level of debt that becomes too much, too impossible to carry, at any rate environment. But we also have to think about price levels ticking up at some point. I know that to use the word stagflation is a bit quaint. But we have to think about that the more the world is printing money.

ES: Maybe, but nobody has been able to get paid thinking that way for the past ten years.

MS: Yeah, that’s the trap isn’t it?

ES: I suppose it is. Now, what happens if, in fact, the Fed continues to ease, which is what the market is pricing in? Is it inevitable that that just prolongs not just the downturn but makes whatever the next downturn looks like that much worse?

MS: It is inevitable. Because, you know, central banks have created this world where it’s the snowflake market, everyone gets a trophy. We know what happens, we know what that implies. It implies spoiled brats and a lack of resiliency, and that’s exactly what central banks have created in this market. An overreliance, a dangerous, dangerous overreliance.

ES: What about investors themselves? I think it’s a factual statement that the Capital Asset Pricing model doesn’t work in a negative rate environment, does it?

MS: I would argue it’s not such a good model in a normal environment. But, point taken. There’s a lot of things that we need to rethink in a zero or negative rate environment. But these are things that we should have been rethinking all along.

ES: A lot of people think, and when I say people I mean people in financial markets, that the safest place to hide is in private assets. There’s no mark to market in private assets. Hedge funds don’t have to puke out private assets, you know, in the middle of the downturn that we had in 2008, 2009. Do you believe that? Do you believe it’s a safe place to hide, and that it’s a better place to compound because you don’t have the mark to market, you’re not forced to mark to market?

MS: Not having mark to market is always a preferable thing, there’s no doubt about it. If I’m able to make a Buffet-type bet where I think the market is going to be at a certain point in ten or more years I would have much more confidence doing that without getting marked to market because it is path that ultimately gets people. Having said that, I wouldn’t want to make a broad statement about private equity any more than I would necessarily about all stocks. There are subsets of the market that are priced better and are better plays than others. So I wouldn’t want to throw the baby out with the bath water. But I certainly wouldn’t want to say that just because something is private equity and just because it’s not marked to market you should rush into that. There can be very expensive, bad deals, and mark to market or not it can be very costly.

ES: Do you think though that the nature of public markets today and the way that they are influenced if not manipulated, some would use the word manipulation by central banks, makes private markets more attractive?

MS: Well it might. You know, markets are very bad at pricing risk. They’re very bad at pricing risk. At best, markets price risk by looking in the rear-view mirror. At worst, they look ahead two feet. So the markets price things very poorly and, again, that path can really hurt you in that sense. Too much mark to market, too much looking at the ticks on your Bloomberg screen is a bad thing. And being exposed to that makes it even worse. I can agree with you, but having said that, I have to assume that much of the valuation in private equity is at least as bad as the historically high valuations we’re seeing in public markets today, pretty much across the board.     

Tyler Durden Thu, 09/19/2019 - 18:45
Published:9/19/2019 6:00:15 PM
[Entertainment] Sarah Hyland Thanks Brother for Giving Her Kidney on 2 Year Anniversary of Transplant Sarah HylandSarah Hyland is celebrating another two years of life thanks to her brother Ian Hyland. In a heartfelt Instagram post, the Modern Family star shares, "2 years ago today my precious...
Published:9/19/2019 5:24:08 PM
[Markets] Tesla Installs A Supercharger Station Powered By Diesel Generator At Nürburgring   Tesla Installs A Supercharger Station Powered By Diesel Generator At Nürburgring  

Auto Motor Und Sport has revealed that Tesla installed a Supercharger station, powered by a diesel generator at Nürburgring motorsports complex, located in the town of Nürburg, Rhineland-Palatinate, Germany, earlier this week.

A large shipping container from the US arrived at the track on Monday. Tesla employees spent the day unpacking the Supercharger and a large diesel generator that has since powered the Model S, expected to perform three weeks of tests at the track. 

The German magazine said the noisy generator is running 24/7, which has made the neighbors of the racetrack very angry. The diesel generator is expected to be operational through the end of September.

Tesla tweeted on Wednesday: "We installed a Supercharger at Nürburgring. Makes it feel like home, you know?," but left out the fact that a dirty diesel generator is supplying the Supercharger power.

One social media user reportedly snapped a picture of the diesel generator at Nürburgring.

A Tesla charging map of Nürburg reveals a charging station is located about a quarter-mile away in town. But it appears the charging station isn't a Supercharger and would take too long to charge the Model S. So it makes sense, on a logistical basis, why Tesla brought a mobile diesel generator, considering the town nor racetrack have Supercharger stations.

Nürburgring track officials have so far timed the Model S at 7:23, which is 19 seconds quicker than the Porsche Taycan's record for an EV sedan around the track. Tesla had to make drastic changes to the Model S, such as a significant powertrain upgrade, new fender flares, and wider tires. It's unknown if Porsche did the same for the Taycan.

There was no mention from the German magazine about how Porsche charged Taycan's batteries. 

The magazine concluded by saying (translated by Google):

"Porsche's electric rider Taycan seems to be making sleepless nights for Elon Musk - now the Tesla boss wants to prove that he still has the sporting authority over electric cars. Should one of his charged over diesel aggregates Model S actually crack the Nordschleife time of the Taycan, Porsche is in the duty - after all, despite hype and Taycan sell-off with waiting a start as the second most sporty electric car is a salted start. If Tesla fails, that would be a hard blow for Musk. But the Laguna Seca record was already a good start to the record hunt. And the hand-stopped Nordschleife time is ever a real announcement."

And the dirty truth for virtue-signaling electric car drivers, especially those who drive Teslas, is that the energy has to come from somewhere. And it appears a diesel generator is currently powering one Tesla at the Nürburgring track this month. 

Tyler Durden Thu, 09/19/2019 - 18:05
Published:9/19/2019 5:24:08 PM
[Entertainment] Antoni Porowski Is Jumping Up and