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[Entertainment] Kim Kardashian Defends "Single Mom" Khloe Kardashian for Attending Event Post-Split Khloe Kardashian, Kim KardashianKim Kardashian is standing up for her sister, Khloe Kardashian. On Wednesday night, Khloe stepped out for her first public appearance since news broke that she had called it quits with...
Published:2/21/2019 4:49:24 PM
[Entertainment] Long Island Medium's Larry Caputo Reveals His New "Baby Boo" After Divorce Larry CaputoLarry Caputo appears to be moving on from his divorce. The Long Island Medium star got fans buzzing Thursday afternoon when he took to Instagram and shared a photo with his new...
Published:2/21/2019 4:18:10 PM
[Entertainment] Jordyn Woods Is "Living Her Worst Nightmare" After Tristan Thompson Cheating Scandal Jordyn Woods, Tristan ThompsonSince news emerged of Tristan Thompson allegedly cheating on Khloe Kardashian with her, Jordyn Woods' personal life has been turned upside down. Earlier this week, reports surfaced...
Published:2/21/2019 3:50:13 PM
[Markets] McConnell Fast-Tracks Vote On Ocasio-Cortez's "Green New Deal"

Majority Leader Mitch McConnell could toss a major stinkbomb into the 2020 Democratic Primary as soon as next week.

According to the Hill, the Republican leader is planning to call a vote on the "Green New Deal" resolution championed by Alexandria Ocasio-Cortez and Sen. Ed Markey.


Though no Republicans have expressed support for the deal, McConnell's wants to fast-track a vote on the resolution as a ploy to divide Democrats between supporters and opponents and force 2020 primary contenders to go on the record either supporting or opposing the non-binding resolution. So far, most of the contenders have spoken favorably of the deal, including Kamala Harris, Kirsten Gillibrand, Cory Booker and Elizabeth Warren, while others, including Amy Klobuchar, have been somewhat more tentative.

As a reminder, here are some of the more "radical" proposals included in the original GND (or "Green Dream", as Nancy Pelosi once called it), at least before some major rewrites when even the GND's advocates balked at the lunacy that was presented before them.

  • Rebuild every single building in the U.S.

“Upgrade or replace every building in US for state-of-the-art energy efficiency."

  • Will end all traditional forms of energy in the next ten years.

The Green New Deal is “a 10-year plan to mobilize every aspect of American society at a scale not seen since World War 2 to achieve net-zero greenhouse gas emissions."

  • Plans to ban nuclear energy within 10 years if possible.

It’s unclear if we will be able to decommission every nuclear plant within 10 years, but the plan is to transition off of nuclear and all fossil fuels as soon as possible."

  • Build trains across oceans and end all air travel.

“Build out highspeed rail at a scale where air travel stops becoming necessary."

  • Don’t invest in new technology of Carbon Capture and Storage, just plant trees instead.

We believe the right way to capture carbon is to plant trees and restore our natural ecosystems. CCUS technology to date has not proven effective."

  • Mandates all new jobs be unionized.

"Ensure that all GND jobs are union jobs that pay prevailing wages and hire local."

  • May include a carbon tax.

We’re not ruling a carbon tax out, but a carbon tax would be a tiny part of a Green New Deal."

  • May include cap and trade.

The Hill included a litany of critical comments about the GND from Republicans and Democrats.

  • “It is difficult to support the resolution right now when one of the lead sponsors says one of the intentions is to make air travel unnecessary,” Rep. Rick Larsen (D-Wash.), the chairman of the House Transportation and Infrastructure Subcommittee on Aviation, said in a statement in early February.
  • “I’m looking forward to voting against the Green New Deal because it’s just so bad for the economy and we’ll have an opportunity for the Democrats to see if they want to rubber stamp this lurch to the left, this hard left turn that their party seems to be taking right now,” said Sen. John Barrasso (R-Wyo.), chairman of the Senate Environment and Public Works Committee.
  • Sen. Cory Gardner (R-Colo.), who faces a tough reelection race next year, equated the plan to socialism. “This idea is about socialism. That’s what this is. Look at it. Read it,” Gardner said. “And it’s important that we tell the American people what it is.”
  • Sen. Joe Manchin (D-W.Va.), another centrist in the Democratic caucus, characterized the plan in an interview with CNN last week as a “dream,” suggesting he’d vote against it.
  • “I’ll vote on the motion to proceed and then we’ll see after that,” Manchin, the ranking Democrat on the Senate Natural Resources Committee, told The Hill.

But Chuck Schumer, who has refused to explicitly support the resolution, brushed aside questions about McConnell's decision and told reporters that he would welcome a vote on the resolution, saying "bring it on."

"You think it might embarrass Democrats to vote on a nonbinding resolution that some of us may support but not others?" Schumer asked. "Trust me, we’ll be fine, because the American people know that our entire party believes that climate change is happening and it’s caused by humans."

Maybe Schumer will change his tune after his office conducts a few rounds of polling about Americans' support for air travel and beef.

Published:2/21/2019 3:50:13 PM
[Entertainment] Scheana Marie and Kaitlyn Bristowe Fight Back Against Body Shamers Scheana Shay, Kaitlyn BristoweScheana Marie and Kaitlyn Bristowe have had enough of the Internet trolls. As reality stars, the pair is used to receiving honest feedback from fans and followers about what's going...
Published:2/21/2019 3:17:44 PM
[Markets] Stocks Slide As "Bad News Is Bad News" Again

After a seemingly endless series of trading days in which the market would spike higher as either the US or China would release some "trade deal optimism", today was a stark disappointment for the bulls because while the latest round of trade talks started in DC between the US and Chinese delegations, there were no "optimistic" leaks or Trump tweets. Instead, overnight in a surprising twist, reports hit that China had "indefinitely" banned Australian coal imports, a report which send AUD traders in for a rollercoaster of a day, stopping out both longs and short, with the currency first jumping on good economic data, then sliding on a bank's forecast for an RBA rate cut, then tumbling on the China export halt, and sliding for the rest of the day.

The news also hit the Chinese Yuan, which first jumped to a seven month high against the dollar, only to sink subsequently, ending the day at the lows, while the Bloomberg dollar index predictably rose for much of the day, reversing all of yesterday's losses.

It wasn't just the latest developments in the trade war saga that hit investor sentiment: the latest economic data also hurt, with PMIs out of Japan, Germany and the Eurozone, all sliding into contraction territory...

... and while the US manufacturing PMI remained above 50, it printed at a fresh 17 month low today, sparking more fears about a manufacturing contraction.

The fears only rose after the Philadelphia Fed tumbled by the most since the August 2011 US sovereign rating downgrade...

... ominously led by the biggest drop in the New Orders index since the Lehman bankruptcy.

There was more bad economic news out of the US which saw core capex in the form of Capital Goods Orders non-def ex. Air unexpectedly declining for a third consecutive month, the longest stretch in the red since late 2015.

Meanwhile, the latest existing housing data also confirmed that the US economy is broadly slowing, with the first sub-5 million (annualized) housing print since 2015 as increasingly more potential homebuyers find themselves priced out of the market.

And with no "trade optimism" to fall back on, bad news was for once bad news, which meant that stocks sold off for much of the day, and after rising briefly into the green in the morning session, drifted lower in a subdued manner, with today's best and worst sectors a mirror image of yesterday, as homebuilders were in the green while energy and tech in the red.

Meanwhile, Treasurys sold off across the curve as yields rose in a parallel curve shift.

And while there was little to write home about, precious metals which had posted impressive gains in recent days, tumbled today, with gold tumbling 1.1%, its biggest drop since early November.

So with earnings season almost done and no economic news tomorrow, can traders relax for a bit? Hardly: expect headlines from the ongoing US China trade talks to start leaking over the next few hours, while tomorrow's barrage of Fed speakers virtually assures that the market will be talked higher come hell or high water:

  • 08:15 AM Atlanta Fed President Bostic (FOMC non-voter) speaks
  • 10:15 AM New York Fed President Williams (FOMC voter) and San Francisco Fed President Daly (FOMC non-voter) speak
  • 12:00 PM Fed Vice Chairman Clarida (FOMC voter) speaks
  • 12:30 PM New York Fed Executive Vice President Potter speaks
  • 01:30 PM Vice Chairman for Supervision Quarles (FOMC voter) speaks
  • 01:30 PM St. Louis Fed President Bullard (FOMC voter) speaks
  • 01:30 PM Philadelphia Fed President Harker (FOMC non-voter) speaks
  • 05:30 PM New York Fed President Williams (FOMC voter) speaks
Published:2/21/2019 3:17:44 PM
[Entertainment] Lifetime Casts Their New Prince Harry and Meghan Markle for Royal Sequel Tiffany Marie Smith, Charlie Field, Introducing the new TV versions of the Duke and Duchess of Sussex! Lifetime has found its new Prince Harry and Meghan Markle for Harry & Meghan: Becoming Royal, the sequel to last...
Published:2/21/2019 2:17:05 PM
[Entertainment] Why Kate Middleton Was Missing From Meghan Markle's Baby Shower Kate Middleton, Meghan Markle, ChristmasWhere was Kate Middleton?! That was the question royal fans were asking Wednesday afternoon after Meghan Markle was treated to an intimate baby shower celebration in New York...
Published:2/21/2019 1:49:19 PM
[Markets] Illinois Hopes to Fix $134 Billion Pension Shortfall By Issuing More Debt

Back in December we noted that the lack of basic economic common sense by its politicians led the state of Illinois to a $134 pension shortfall. Now, the latest Democrat failing to understand simple math, and that the answer to fixing a debt problem is not more debt, is billionare Illinois governor J.B. Pritzker.

Pritzker is said to be preparing his first address on the state's budget for Wednesday, where he will address his desire to issue $2 billion in bonds in order to raise cash for the state's horrifically insolvent retirement system. This is the same tactic that the state tried in 2003 which, of course, failed miserably. All the while, in the years following 2003, Illinois' credit rating has moved closer and closer to junk with the state just one notch above the embarrassing level.

Pritzker's deputy governor, Dan Hynes, thinks that the bond sale might be a way for the government to shirk its annual contributions to the funds, which is what happened 16 years ago after Governor Rod Blagojevich’s $10 billion debt sale. After the 2003 debt sale, the state failed to make sufficient annual payments into pension funds from 2005 to 2008, which added nearly $12 billion to the state's obligations.

The hilarious thing is that even while advocating for selling more debt, people involved are claiming to have "learned from their mistakes." Robert Martwick, a state representative who chairs the House’s pension committee told Bloomberg: "This time you have people who understand the devastating effects of doing what he did."

No, Bob. You don't.

The borrowing is part of a new plan that includes – you guessed it – raising taxes, and other clinically insane and brutally useless ideas for addressing a $134 billion shortfall, like handing government assets, including office buildings, over to the retirement system. Hynes said that the $2 billion debt sale would supplement Illinois' annual contribution and would be yet another wager on the stock market. He hopes that investment earnings will reduce the amount that the state owes.

Thus, the Ponzi-like house of cards continues to grow.

In 2010, a $3.5 billion bond was sold and used to cover the state's pension contributions before a $3.7 billion bond issuance took place in 2011.

Thad Calabrese, a professor at New York University, tried to offer a reality check. "There’s going to have to be some actual sacrifice," he said. While Calabrese is dancing around the issue a little, the facts are clear: more debt is simply not going to fix the problem and Illinois simply doesn’t seem to understand that.

A Bloomberg article uses the word "luck" in describing what's necessary for Pritzker’s plan to work. This "luck" is nothing more than a gamble that the stock market is going to move higher, despite being near all-time highs right now. 

Triet Nguyen, managing partner at Axios Advisors said: "All these gimmicks with the pension bonds and trying to transfer state assets into the pension funds -- it seems more like an accounting gimmick than a true funding mechanism."

Is it still any wonder the Fed bases monetary policy on day-to-day moves in the stock market, when all idiot politicians can do is kick the can and pray the Minsky moment won't come crashing down on their heads?

Published:2/21/2019 1:49:19 PM
[Entertainment] How Miley Cyrus Is Redefining Relationships After Marrying Liam Hemsworth Liam Hemsworth, Miley CyrusIt was the wedding fans were hoping for, but didn't know when would exactly happen. But just before ringing in 2019, Miley Cyrus and Liam Hemsworth confirmed on Instagram that they...
Published:2/21/2019 1:17:37 PM
[Entertainment] Don't Miss a Red Carpet Moment! Here Are All the Details on E!'s 2019 Oscars Coverage Giuliana Rancic, 2018 OscarsThe 2019 Oscars are upon us and we at E! have got you covered! Specifically, E! has confirmed that coverage of the Hollywood event will be made available to fans on MULTIPLE platforms....
Published:2/21/2019 12:48:47 PM
[World] [Eugene Volokh] "The American Legion Briefing: Four Characters in Search of an Establishment Clause Standard"

An analysis of the amicus briefs in the Establishment Clause / cross monument case, from Eric Rassbach at the Becket Fund.

I've been backlogged on various projects recently, so I haven't blogged as much as I'd have liked about many things, including the Court's latest Establishment Clause case. But I thought that I'd pass along this analysis of the briefs in the case from Eric Rassbach of the Becket Fund; unsurprisingly, it track some of the analysis in the Becket Fund's own brief, but I still found to be an interesting, if opinionated, guide.

My own view is that both the Lemon v. Kurtzman test and the endorsement test have ultimately failed to deliver workable legal rules; and I think they have exacerbated religious tensions in American life, even though they have often been advocated as means of supposedly reducing such tensions. I'm also generally inclined towards Becket's history-based approach; though it can yield its own uncertainties, I think it's likely to be better than the current mess. (I have no firm views on the standing argument that Becket makes in Part II of its brief.) In any event, though, here's Eric's analysis; I'd also be glad to post other interesting perspectives from people who have been closely following the case, if anyone wants to pass them along.

The American Legion Briefing: Four Characters in Search of an Establishment Clause Standard [by Eric Rassbach]

The Maryland Peace Cross case, American Legion v. American Humanist Association, will be argued on February 27. The briefs are now in, and the arguments are shaping up much as my colleague Luke Goodrich predicted they would: some people still want the Supreme Court to save the notorious Lemon test from a well-deserved death, some want the Court to punt, some want the Court to adopt a coercion standard, and some want the Court to focus on the historical elements of an establishment of religion. There are thus four main groups of characters searching for an Establishment Clause standard:

The Diehards

First, the plaintiffs American Humanist Association and some of their amici want to save the Lemon test, arguing at times fantastically that Lemon "has brought clarity and consistency to religious-display cases." But there is an air of defeat surrounding this position; it feels like a last stand. Typical in this regard is the amicus brief of Professor Douglas Laycock, which dwells at length (pp. 31-37) on how the Court might uphold the Peace Cross without changing much else in Establishment Clause doctrine. Professors Walter Dellinger and Marty Lederman even filed in support of neither party, saying that this particular Peace Cross ought not be a problem, but other ones they can imagine probably would be. If they think an Establishment Clause case is a loser, it's a loser.

More fundamentally, the Diehards' position is doctrinally adrift. Because Lemon doesn't provide a coherent rule, but the Diehards can't let Lemon go, their briefing often devolves into "here's a bunch of facts about why we should win." These repeat church-state litigants would be better served by renouncing Lemon and starting anew with a more intellectually coherent foundation for their position. In any case, they haven't offered one to the Court here.

The Punters

Another possible outcome for American Legion is a punt. That is, the Court could again avoid dealing with Lemon and apply a totality-of-the-circumstances test. As with previous decisions in this genre (e.g., Van Orden, Buono), such a decision would be valid for one journey only, and would provide no meaningful guidance to the lower courts.

Nevertheless, the Maryland-National Capital Park and Planning Commission defendants ask the Court to do just that—arguing that "the Court should not revisit [its] precedents here," but should instead uphold the cross "under existing law," which "would provide substantial clarity for lower courts" and would avoid "generat[ing] deep religious divisions."

Whatever the motive behind this position, it is willfully blind to the reality of Establishment Clause litigation nationwide. As multiple Justices and lower court judges have lamented, the Court's precedents already "generate deep religious divisions." And far from providing "clarity," using existing law (read: Lemon) to decide American Legion would keep lower courts and local governments in the state of Establishment Clause purgatory they've been lamenting for decades.

The Abstract Expressionists

By contrast, the American Legion defendant-intervenors offer a rule, but it is still not quite right. They say that history—and specifically Town of Greece's "historical practices and understandings"—ought to be the Court's guiding principle. So far, so good. But then they take a second step, attempting to reduce all of that history to a single principle: no coercion. There are three problems with this approach.

The first is that as a matter of history it simply isn't true. Professor McConnell's scholarship identifies six characteristics of a religious establishment during the founding era, and in their opening brief the American Legion defendants dwelled at length on those characteristics and Professor McConnell's scholarship. But not every one of the six characteristics of historical establishments is in fact rooted in coercion.

For example, a formal government proclamation of an official state church, with nothing more, is not coercive, though it would certainly have been a problem for the founding generation. The American Legion defendants say in their reply brief that such actions, though "arguably non-coercive," should nevertheless be treated as coercive. But relying on "arguably non-coercive" actions to be deemed coercion simply demonstrates the standard's unworkability. Similarly, government funding—particularly from non-tax revenue streams like park fees or rental income—is not always coercive, even though from a historical perspective the source of the funding would be largely irrelevant.

Second, even where coercion could be alleged, a coercion test does not provide a clear rule of decision. For example, all taxes can in some sense be viewed as coercive, but not all tax-supported funding of religious organizations is unconstitutional. Some funding is problematic—like when the government gives aid exclusively to religious groups for religious purposes. But other funding is permissible—like when government broadly funds both religious and nonreligious groups. The "coercion" test can't distinguish among these types of funding.

Third, like abstract art, abstract legal terms like "coercion" can mean different things to different people. That makes them poor rules of judicial decision. Take the idea of government "endorsement"—the Jackson Pollock of legal ideas. Different courts have taken radically different views about whether a particular government practice "endorses" religious belief or practice. To a certain degree, endorsement is in the eye of the beholder, which is why the endorsement test vexes lower courts and local governments alike.

But the American Legion defendants would replace one Rorschach test with another, because "coercion" is almost as abstract an idea as "endorsement." It is not too hard to imagine scenarios where almost any challenged practice—the Pledge of Allegiance, "In God We Trust" on the currency, or Moses in the courtroom frieze—would be seen as coercive by some (very sincere) litigants. Indeed, in this very case the plaintiffs argue that the Peace Cross is coercive. The upshot is that adopting a coercion standard would put the Court back into the "heaven of legal concepts" it is trying to escape.

The Historians

A simpler rule is the one we offered in our amicus brief: a government practice violates the Establishment Clause only if it shares the characteristics of a historical establishment—as determined by objectively known "historical practices and understandings" at the time of the Founding. And as Professor McConnell has demonstrated, history discloses six main characteristics of a historical establishment: (1) government control over doctrine and personnel of the established church; (2) mandatory attendance in the established church; (3) government financial support of the established church; (4) restrictions on worship in dissenting churches; (5) restrictions on political participation by dissenters; and (6) use of the established church to carry out civil functions.

The historical approach gets the balance between church and state correct. It forbids the state from controlling religious doctrine, compelling religious observance, or providing exclusive funding for religious institutions. But it also avoids needlessly hostility toward religion in the public square.

Several of the briefs criticize our proposed approach. The American Legion defendants say their "general coercion standard" is superior to a historical test for three reasons: (1) "because coercion is the common denominator underlying" the six hallmarks of a religious establishment; (2) because a general coercion test "would likely be more manageable to apply, and (3) because a general coercion test "has already been adopted in this Court's cases[.]" None of these distinctions has merit.

First, as noted above, coercion is not a common denominator of the six characteristics of a historical establishment. Coercion offers no basis for distinguishing between permissible and impermissible types of government funding of religion. It also fails to address non-coercive actions like the use of non-tax government revenues or a government proclamation that "Zeus is Lord of America." Since coercion and history are not coextensive, and the coercion principle is based on history, coercion cannot be a common denominator because it is underinclusive.

Similarly, in practice coercion will also be overinclusive, because the abstract nature of the coercion inquiry will mean that many practices—including passive displays like the Peace Cross—will, for some judges in some locations, be considered coercive. In short, the American Legion defendants are incorrect when they state that "either formulation will lead to the same results."

Second, for the reasons stated above, a coercion test will not be more manageable because its abstract nature would divorce the judicial inquiry from concrete historical fact.

Third, a historical approach has been used by the Supreme Court both in deciding cases like Everson and more recently in cases like Town of Greece. The problem is not that the test has never been used—it is that it has been used inconsistently.

There a few other criticisms of the historical approach. At one point, Doug Laycock claims it is an "anything goes" standard. But this is also not true. As we have pointed out, the historical approach aligns with the outcomes in this Court's Establishment Clause cases since 1947.

Similarly, one of the amicus briefs decries the idea that "eighteenth century apples" can be compared to "twenty-first century oranges". But this is a silly attack on the judicial use of history altogether and belies the general trend in Bill of Rights jurisprudence towards a historical approach, not to mention Town of Greece. If one cannot look at eighteenth century apples, then much of the Supreme Court's jurisprudence in many other areas of the law must go.

In short, there are good reasons to adopt the historical approach, and no plausible reason not to adopt it.

The End, or A Beginning?

As the briefing shows, there are four main paths the Court can follow with respect to the governing Establishment Clause standard. Those paths lead in very different directions. Lemon is a dead end. Punting would leave the courts stuck in the Lemon dead end. A reductio ad coercion would mean decades of wandering in a different wilderness of abstraction.

Only the historical approach offers a method of deciding Establishment Clause cases that can be built out over the long term. Future cases can investigate how the founders thought about funding, or government proclamations, or displays on coinage, and the like. But for now it is enough to undertake a new beginning for Establishment Clause jurisprudence by grounding it in history.

Published:2/21/2019 12:18:12 PM
[Entertainment] The Haunting of Hill House Renewed For Season 2 With New Story The Haunting of Hill HouseThe Haunting of Hill House will be back, but it will look a little different. Netflix has a new multi-year deal with The Haunting of Hill House executive producers Mike Flanagan and...
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[Markets] Russia "Prepared For Another Cuban Missile Crisis", Putin Warns US

Russia is militarily ready for a "Cuban Missile-style crisis" President Putin said late on Wednesday, commenting on nuclear first strike capability amidst growing tensions with the US. The remarks were given to Russian media following a prior speech wherein he warned Moscow will match any attempt by the US to station intermediate-range nuclear missiles in Europe in the wake of the now collapsing INF treaty.

Putin specifically threatened deployment of hypersonic missiles on ships and submarines which could enter US territorial waters without detection if American intermediate-range missiles move into Europe.  

“(We’re talking about) naval delivery vehicles: submarines or surface ships. And we can put them, given the speed and range (of our missiles)... in neutral waters. Plus they are not stationary, they move and they will have to find them,” Putin said, according to a Kremlin transcript. “You work it out. Mach nine [the speed of the missiles] and over 1,000 km [their range],” he boasted of the Kremlin's latest claimed capabilities. 

He urged an easing of tensions after last week the Russian Foreign Ministry left the door open for talks to rescue the INF treaty as well as extend the New START nuclear reduction treaty, set to expire in 2021. Speaking of the current stand off and ratcheting tensions with Washington, Putin said“They [the tensions] are not a reason to ratchet up confrontation to the levels of the Cuban Missile Crisis in the 1960s. In any case that’s not what we want.” He said further, “If someone wants that, well OK they are welcome. I have set out today what that would mean. Let them count [the missile flight times].”

Emphasizing that Moscow doesn't want to enter a new arms race with the United States, Russia would be left with "no choice" but to escalate if US advanced missiles were moved to Europe.

Putin noted such intermediate missiles could strike Moscow within 10-12 minutes. However, Russia's developing hypersonic capabilities would give his military the edge, Putin said, delivered through its advanced submarine and other stealth capable vessels. 

Speaking of US strike capabilities, Putin added: “It [the calculation] would not be in their favor, at least as things stand today. That’s for sure,” according to Reuters. 

In the past weeks Russia has emphasized it is open for talks but will not continue to knock on closed doors, referencing the White House's pulling out of the INF while blaming Russia for long being in violation of the Reagan-era treaty. 

Published:2/21/2019 12:18:12 PM
[Entertainment] Blac Chyna and Soulja Boy Break Up Blac Chyna, Soulja BoyBlac Chyna and Soulja Boy have called it quits after just a few weeks of dating. The 30-year-old model and the 28-year-old rapper, who first sparked romance rumors earlier this month,...
Published:2/21/2019 11:47:35 AM
[Entertainment] The 2019 Brit Awards Brought the Heat When It Came to Red Carpet Style: Vote for the Look You Love Most Dua Lipa, Brit Awards 2019Another day, another killer red carpet scene courtesy of award season. On Wednesday, some of your favorite musicians headed across the pond to celebrate the 2019 BRIT Awards, which is one...
Published:2/21/2019 11:17:11 AM
[Markets] For The First Time Since 2000, Most Assets Are Overbought

What a difference two months makes. Back in December, with virtually every asset class getting clobbered ahead of the year-end flood of hedge fund redemption requests, the most popular chart was one from Deutsche Bank showing how virtually every single asset class would post negative returns in 2018.

Fast forward to today when just days after we noted that stock market breadth had just hit an all time high, prompting some commentators to describe the move in January and February as a blow off top (similar to what we saw one year ago), the "buying panic" as Nomura described it earlier this week has spread to virtually every asset class, a carbon copy of what traders encountered in the early days of QE... which is perhaps to be expected: after all, with the Fed now admitting that a rate cut is inevitable, what follows next is QE.

In any case, as Bloomberg notes this morning, stocks, corporate bonds (both investment grade and junk), oil and gold have all been resounding winners in the new year. Each of the five asset classes - simultaneously - had a 14-day relative strength index at or above the overbought level of 70 on Wednesday.

That hasn’t happened since at least the year 2000, according to data compiled by Bloomberg.

Alas - for the bulls - with everything having triggered the overbought signal, it means that the good times are coming to an end. Because whatever the cause behind this buying euphoria - one made even more bizarre since both retail and institutional investors have been mostly selling for the duration of this rally - one hedge fund warns that the euphoria might be the last gasp in the 9-week old rally.

"In our view, September of 2018 marked the peak of the economic cycle with U.S. stocks at record valuations across eight fundamental measures," Crescat Capital's Tavi Costa told Bloomberg. "We are now seeing a typical bear market rally, and the next downward leg is likely to be just as abrupt as the first one."

The only question is what will be the catalyst for the next abrupt move lower.

Published:2/21/2019 10:46:42 AM
[Entertainment] Gwyneth Paltrow Alleges She's the Victim in Hit-and-Run Ski Accident Case Gwyneth PaltrowGwyneth Paltrow has filed a countersuit revolving around an alleged ski accident that occurred in 2016, according to court documents obtained by E! News. On Jan. 29, E! News reported that...
Published:2/21/2019 10:17:00 AM
[Markets] Corruption Scandal Could Cost Trudeau His Job, Polls Show

Since it was exposed by a report in Canada's Globe and Mail newspaper earlier this month, the scandal that's become known as the SNC-Lavalin affair has already led to the firing of one of Trudeau's closest advisors and raised serious questions about whether the prime minister was complicit in pressuring the attorney general to offer a deferred prosecution agreement with a large, Quebec-based engineering firm.


And according to the first round of polls released since the affair exploded into public view...

Polls could cost Trudeau his position as prime minister and return control to the conservatives, according to the CBC.

Campaign Research showed the Conservatives ahead with 37% to 32% for the Liberals, while both Ipsos and Léger put the margin at 36% to 34% in the Conservatives' favour. Since December, when both polling firms were last in the field, the Liberals have lost one point in Campaign Research's polling and four percentage points in the Ipsos poll, while the party is down five points since November in the Léger poll.

The polls also showed that a large proportion of the public believes the prime minister for abruptly firing former Justice Minister Jody Wilson-Raybould over what many suspect was her decision not to bend to his will. Some 67% of Canadians are paying attention to the story, the polls show. But not everybody has made up their minds about Trudeau's involvement.

Of those with some knowledge of the controversy, 41% agreed with this statement: "Yes, the prime minister did something wrong." "Only 12% said that the prime minister "did not do anything wrong."

Another 41 per cent said that they were "not sure either way," suggesting that many Canadians are still waiting to learn more before coming down on one side or the other.

Trudeau claims that when he discussed the case with Wilson-Raybould, he told her to handle it as she saw fit. Shortly after, she was ousted in an abrupt cabinet reshuffle, and soon resigned. She has reportedly hired an attorney to advise her on what she can and cannot say about the scandal.

And while the October general election is still a long way off, there's plenty of time between now and then for the other shoe to drop.

Published:2/21/2019 10:17:00 AM
[Entertainment] Best Picture Tournament: The Winner Is... Titantic, The GodfatherThe 2019 Oscars are almost here (they're just days away actually) and we are so ready to see which movie wins Best Picture! Will it be A Star Is Born, Green Book, Roma,...
Published:2/21/2019 9:47:00 AM
[Markets] Fitch Warns Of "Coming Storm" For CLOs

The last time we discussed trends in the US CLOs market - so critical for leveraged loan demand as CLOs account for 60% of the US leveraged loan market - we observed the sudden freeze in new issuance, which was a function of the lockup in the leveraged loan market itself a function of the sharp drop in loan prices in late 2018. Oddly, despite a sharp rebound in loan prices in the 2019...

... the CLO market remains effectively frozen, with new issuance in 2019 at roughly half its 2018 run-rate.

And, according to Fitch, the collapse in CLO volumes may be set to get far worse: the reason is that with U.S. life insurers loading up on collateralized loan obligations since the financial crisis, those CLOs might prove troublesome in the next recession according to Fitch.

In a Thursday report, the rating agency warned that Insurers’ portfolios have become more risky since 2007 as corporate bonds were downgraded, highly rated bonds became scarcer and investors sought higher yields to counter low interest rates. None of this is new and is merely the scramble for new paper - any paper - which always comes alongside FOMO. And while most insurers have enough cushion to deal with a moderate economic slowdown, a more severe slump could drag credit ratings down, Fitch said.

As reported first by Bloomberg, in a report titled descriptively enough "The Coming Storm: How U.S. Life Insurers Are Positioned for a Downturn" Fitch warned that "investments in collateralized loan obligations increased markedly in recent years and could pose a significant risk if investor protections weaken late in the credit cycle," which as most know by now, they have as a result of a near uniformity of covenant line loan issuance.

In fact, according to LCDNews, covenant lite loans now constitute just under 80% of all outstanding paper, which means that during the next recession, "secured" recoveries will be negligible at best, and far below the 80% or so that "secured" investors are used to.

Meanwhile, Bloomberg notes that A or higher-rated bonds accounted for 61% of insurer investment portfolios in the third quarter of 2018, down from 69% at the end of 2007, while holdings of BBB-rated bonds, meanwhile, rose to 34% from 25% in the same period.

“We’ve been in a period of historically low interest rates and investment yields,” Mark Rouck, group credit officer for insurance at Fitch, said in a phone interview from Chicago. “That’s put a squeeze on life insurers’ profitability. As a result, they’ve gone a little further down the credit spectrum.”

* * *

And while Fitch is worried about the "coming storm" for US insurance companies, don't forget to spare a thought for the Japanese banks which have become some of the most aggressive buyers of CLOs in recent years, with UBS and the Bank of England estimating that these bank have been buying between 50-75% of AAA-rated CLO tranches and a third of the total market.

Japanese banks have been buying the top-rated AAA pieces of CLOs because they have higher yields than like-rated sovereign debt, according to UBS, with the lenders making up about 33% of total inflows into the asset class in the past several years.  Additionally, as noted above, Japanese banks may be buying between half and three-quarters of AAA rated CLO tranches, UBS said, citing evidence from clients and analysis of the market for cross currency basis swaps. Without the Japanese bid for AAA rated CLO paper, top-rated CLO spreads would likely widen back to at least 2014 levels, or 50 basis points wider, the bank estimated.

“The Japanese bid for U.S. loans will not be easily broken,” analysts led by Stephen Caprio wrote in research published last December and first noted by Bloomberg. “Most Japanese banks are buy-and-hold investors; outright selling will be fairly limited unless the prospect of outright credit losses becomes likely, necessitating much higher recession risk than today.”

Furthermore, despite recent record outflows, Japanese banks should in theory continue to anchor the market as long as government yields stay low and the Bank of Japan clings to its ultra-easy monetary policies, UBS said quoted by Bloomberg.

And while Japanese demand is vulnerable to a pullback, it should help provide stability to the market in the face of a recent sell-off, UBS said. Unless of course, an unexpected regulatory intervention emerges making it far more cumbersome and complicated for Japanese banks to invest in US CLOs.

And yet, that's precisely what may soon happen because as Bloomberg reported, citing law firms, a proposal is being floated by a Japanese regulator which could bait some U.S. CLO managers to readopt risk retention.

Specifically, the proposal floated by the Japanese Financial Services Agency (JFSA) would allow certain types of Japanese investors to buy only securitizations where the originator retains a 5% piece, according to a client note sent by legal practices Anderson Mori & Tomotsune and Milbank Tweed. The Japanese Financial Services Agency (JFSA) recently proposed the risk retention rule, which appears to be a carbon copy of the Frank-Dodd rule that was scrapped last year in the US, and which had held back demand from local buyers of CLOs.

Investors governed by the rule would include banks such as Norinchukin Bank, credit unions, and credit cooperatives, among other entities. If investors don’t adhere to new rule, they would be subject to a much higher capital charge, with a maximum weighting of up to 1,250%, the law firms said.

Commenting on potential impact of this proposal, should it be implemented, the law firms said that "any regulatory change that impacts investment in CLOs could have a dramatic effect on the market," and added that "the imposition of the Japanese Retention Requirement may therefore see a return to retention-compliant U.S. CLO structures to the extent that such transactions are to be marketed in Japan."

That said, this arguably huge development for one of the biggest sources of demand in the CLO, and thus loan market, is still one "potentially big news" because as Bloomberg's Sebastian Boyd notes, we don't know whether this is going to happen or whether it will include an exemption for "open market" CLOs. Only "open-market" CLOs, those in which loans are bought on the open market, are free from risk retention. The April ruling didn't apply to private credit funds that set up CLOs.

Commenting on the "open market" CLO exemption, the law firms notes that this "has been raised as a possibility and is under consideration by the JFSA." In February 2018, a U.S. appeals court decided that risk retention rules don’t apply to U.S. "open market" CLOs, and by April U.S. CLO managers were officially released from risk-retention rules.

Still, in a world where volatility has risen sharply recently, and where macroprudential policies are encouraging regulators to become far more critical of bank balance sheets especially after the worst year for global capital market since the financial crisis, it is a distinct possibility that Japan's regulator will implement such a buffer. After all, European CLOs are already structured to include risk retention and disclosure obligations which are more far-reaching than the Japanese proposal, so European CLOs should generally meet the Japanese retention requirement.

While it is impossible to handicap the odds of a regulatory intervention, if law firms have already been engaged to lobby against the passage of this proposal, they are certainly non-trivial. Yet one thing is certain: should the proposal be enacted, and Japanese buying collapse due to risk-retention demands, then up to a third of demand for CLOs could be eliminated overnight. In that case watch out below as loan yields soars, price tumble, and the leverage loan market is rocked to its core with the potential aftershocks stretching first to junk, then to investment grade, and ultimately the entire credit space.

Certainly, it would be ironic if in their attempt to make the overall loan market safer, Japanese regulators end up triggering the avalanche that finally bursts the credit market bubble, potentially concluding in the next financial crisis.

Published:2/21/2019 9:46:59 AM
[Featured News] Watch Live: Chicago Police Press Conference on Smollett Arrest

By R. Mitchell -

Chicago police officials brief the media on the arrest of “Empire” actor Jussue Smollett. Smollett was indicted Wednesday night for disorderly conduct in relation to his alleged filing of a false police report detailing an alleged hate crime. Superintendent Eddie Johnson and Commander of Area Central Detectives Edward Wodnicki will ...

Watch Live: Chicago Police Press Conference on Smollett Arrest 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:2/21/2019 9:16:47 AM
[Markets] US Manfucaturing PMI Tumbles To 17 Month Low: Weather, Trade Cited

Following a dismal Philly Fed print and disappointing Durable Goods, moments ago the Markit Manufacturing PMI made it a trifecta of trouble, when the closely watched index printed at 53.7, down from 54.9, and missing expectations of 54.3. This was the lowest Manufacturing index print in 17 months, since Sept 2017, and indicates that the recent rebound in the Manufacturing ISM, which rose to 56.6 last month, won't last.

The output index fell to to 53.7 from 55.7 in Jan (also the lowest reading since Sept. 2017) while New Orders also fell.

While the Service PMI posted a modest rebound from 54.2 to 56.2, the latest manufacturing survey signalled a loss of momentum across the manufacturing sector.  Anecdotal evidence from survey respondents cited a soft patch for client demand, partly linked to uncertainty across manufacturing supply chains and concerns about the global trade outlook. According to the report, there were also some reports that adverse weather conditions had disrupted production schedules in February.

Curiously, just like with the strong employment components in the Philly Fed, despite a slowdown in production and new order growth, the latest Markit data signalled another solid upturn in manufacturing employment. Moreover, input buying continued to rise at a relatively strong pace in February, which added to signs that manufacturers remain in expansion mode despite concerns about gathering storm clouds.

Meanwhile, and also like in the Philly Fed instance, input price inflation eased for the fourth month running and reached its lowest since August 2017. Survey respondents still noted that trade tariffs had pushed up the cost of imported materials, although there were some reports that prices charged by domestic steel producers had begun to moderate.

Commenting on the flash PMI data, Tim Moore, Associate Director at IHS Markit said: "The main worrying development was the loss of momentum reported by manufacturing companies in February. Businesses that experienced a soft patch for production cited a range of factors holding back growth, including adverse weather, worries about the global economic outlook and ongoing international supply chain uncertainty.

The silver lining: at least the US isn't Europe or Asia. “Nonetheless, relatively strong domestic business conditions mean that US manufacturers remain on a much more positive trajectory than the recent downbeat production trends signalled by IHS Markit’s Manufacturing PMI surveys across Europe and Asia."

Published:2/21/2019 9:16:47 AM
[Entertainment] All the History-Making Moments From This Year's Oscar Nominees Lady Gaga, A Star Is Born, Black PantherThe 2019 Oscars are this weekend! Last month, Tracee Ellis Ross and Kumail Nanjiani announced the nominees for this year's award show, which is set to take place on Sunday, Feb. 24 at...
Published:2/21/2019 9:16:47 AM
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Published:2/21/2019 8:17:00 AM
[Markets] Shocking Philly Fed Collapse: Biggest Drop Since 2011 US Rating Downgrade

Just in case US stocks needed some more shitty data to surge on, they got it this morning when first the Durable Goods report disappointed, printing below expectations while core CapEx declined for the 3rd consecutive month - its longest stretch below zero since late 2015 - and then the latest Philly Fed print was an absolute shocker, as the regional manufacturing Business Idnex collapsed from 17.0 to -4.1, the first negative and the lowest print since May 2016...

... and the biggest drop in point terms since the US downgrade in August 2011.

Both the new orders and shipments indexes also fell this month. The current new orders index decreased nearly 24 points to -2.4, and the current shipments index decreased 17 points to -5.3. In fact, the monthly drop in the New Orders index was the biggest since the Lehman bankruptcy.

In the latest sign that peak inflationary pressures have passed, price pressures originating from purchased inputs continued to abate the Philly Fed reported. The prices paid index tumbled 11 points to 21.8, and has been trending down since last July and is now at its lowest reading since July 2017. Over 28 percent of the firms reported higher input prices this month, down from 40 percent last month. With respect to prices received for firms’ own manufactured goods, almost 33 percent of the firms reported higher prices, and 5 percent reported lower prices. The prices received index increased 3 points to 27.7, which is good news for profit margins as the smaller the delta between prices paid and received, the more the company gets to pocket.

In employment news, firms continued to add to their payrolls this month, with the current employment index improved from a reading of 9.6 in January to 14.5 this month. Nearly 24 percent of the responding firms reported increases in employment, while 9 percent of the firms reported decreases in employment. The current workweek index also remained positive but decreased 1 point to a reading of 4.7. This bizarre divergence between economic sentiment and a very strong labor market continues to surprise and puzzle economists.

Finally, while the current reading collapsed, the outlook remained buoyant, and the survey’s indexes for future conditions were mostly steady, with firms remaining generally optimistic about growth over the next six months.

Published:2/21/2019 8:16:59 AM
[Entertainment] Lupita Nyong'o Best Looks Deserve a Trophy of Their Own Lupita Nyong'o, 2019 SAG Awards, Red Carpet FashionsLupita Nyong'o has proved she is more than just an A-list actress. Aside from starring in blockbuster hits like Black Panther, Lupita has become one of the most recognizable fashion...
Published:2/21/2019 7:20:07 AM
[Markets] Market Rally Fizzles As New Front Breaks Out In Global Trade War

Another strong overnight market rally, built on the back of - what else - trade deal optimism, fizzled with US futures paring gains, European stocks edging lower and Asian shares rising as initial optimism was dented following more revelations that for all pompous talk, and now multiple MoUs, the trade war is actually escalating behind the scenes.

Europe's Stoxx 600 Index drifted lower, weighed down by bank shares as individual companies including Centrica and shipping giant Maersk also underperformed after disappointing earnings. Over in the US, futures on all three main indexes levitated higher following Fed minutes that merely added to dovish sentiment, after a late Wednesday report that negotiators are working on multiple memorandums of understanding that would form the basis of a final trade deal; however the latest trade deal optimism - which has now become a daily joke as the market now prices in a successful outcome to the trade war every single day - faded, Chinese stocks dropped the yuan pared an advance and the Aussie plunged after a report that China’s Dalian port banned coal imports from Australia while Westpac, called for two RBA rate cuts this year.

The Aussie was last trading at $0.7105, down 0.8 percent on the day but it was not the only one struggling. The Kiwi dollar got  bundled down 0.5 percent and the euro had given back its early gains to stand at $1.1320. The slide in the Aussie dollar had helped its share market close at a six-month high. Japan’s Nikkei had ended 0.1% stronger too and though Chinese shares sagged, the “offshore” yuan firmed to its strongest level since July on the trade hopes.

MSCI’s main Asia-Pacific index rose to a 4-1/2 month high, lifted by the initial, more optimistic trade reports, while generally ignoring the new trade war between Australia and China.

As noted earlier, the reported banning of Australian coal imports at the Chinese port of Dalian is seen as a sign that Beijing is flexing its economic muscles and warning nations not to bar its next-generation, 5G wireless technology or Huawei for that matter. The indefinite coal restrictions started this month and are part of an overall plan to cap imports into the customs region this year, Reuters reported, citing an unnamed Dalian Port official.

How China blocking Australian exports is conducive to a trade deal is beyond any rational thinking person, however, since algos are neither, they merely digested the "optimistic" headlines and futures are still higher, but fading gains fast.

In any case, the "steady" progress toward a trade agreement between the world’s biggest economies - one which could take years sending the S&P above 3,000 on "optimism" a deal is coming any moment, could give further impetus to a risk rally with the MSCI world index up about 15 percent since Christmas Day. But the new front in the global spat, this time between China and Australia, risks denting investor sentiment before concrete progress is seen in Washington.

Meanwhile, the global economic picture is going from bad to abysmal, with manufacturing PMIs in Germany, Japan and the Eurozone all now officially in contraction, i.e. recession, territory.

“The euro zone economy remained close to stagnation in February. The general picture remained one of a more subdued business environment than seen throughout much of last year,” Chris Williamson, IHS Markit’s chief business economist said. Williamson said the results pointed to first-quarter euro zone growth of just 0.1 percent, below the latest Reuters poll estimate for 0.4 percent. They come soon after the European Central Bank ended its more than 2.6 trillion euro asset purchase stimulus program.

Elsewhere, Treasuries drifted lower with the 10Y yield rising 3bps to 2.67% while European bonds were mixed and the euro fluctuated.

Today's trading session follows a muted day in the markets yesterday, following a FOMC Minutes release that had something in it for everyone: the overall tone of Fed rhetoric should “help to keep financial markets relatively steady as we head toward the weekend, all in the context of the recent risk asset roller coaster that has resulted from overly hawkish miscommunication from the Fed late last year, followed in January by an apparent overly-dovish policy U-turn,” Simon Ballard, a macro strategist at First Abu Dhabi Bank, wrote in a note.

In other FX, the dollar relinquished an Asia-session advance as the pound reversed losses amid growing Brexit optimism, only to tumble after an official said a deal was not coming. Sterling also shrugged off Fitch putting its UK credit rating on a formal downgrade warning amid uncertainty about whether the country’s parliament will be able to agree a transition deal before next month’s planned Brexit date.

Europe’s common currency swung between gains and losses and euro-area bonds traded mixed amid concerns over a slump in manufacturing in the region. Treasuries traded in the red, while European stocks were mixed and U.S. futures pointed to a higher open.

In the commodity market, crude prices rose more than 1 percent on Wednesday to their highest in 2019 on hopes that oil markets will balance later this year. U.S. crude was last up 0.3 percent, or 17 cents, at $57.33 per barrel. Brent was 0.1 percent, or 5 cents, higher at $67.13.

Initial jobless claims, durable goods orders and Markit PMI data are due. Scheduled earnings include Intuit and Hormel Foods

Market Snapshot

  • S&P 500 futures up 0.1% to 2,790.25
  • STOXX Europe 600 down 0.06% to 371.23
  • MXAP up 0.2% to 159.07
  • MXAPJ up 0.3% to 521.17
  • Nikkei up 0.2% to 21,464.23
  • Topix unchanged at 1,613.50
  • Hang Seng Index up 0.4% to 28,629.92
  • Shanghai Composite down 0.3% to 2,751.80
  • Sensex up 0.4% to 35,908.47
  • Australia S&P/ASX 200 up 0.7% to 6,139.25
  • Kospi down 0.05% to 2,228.66
  • German 10Y yield rose 1.0 bps to 0.11%
  • Euro down 0.04% to $1.1333
  • Brent Futures down 0.09% to $67.02/bbl
  • Italian 10Y yield rose 7.0 bps to 2.499%
  • Spanish 10Y yield fell 1.5 bps to 1.185%
  • Gold spot down 0.3% to $1,334.15
  • U.S. Dollar Index up 0.1% to 96.56

Top Overnight News

  • The reported banning of Australian coal imports at the Chinese port of Dalian is maybe a sign that Beijing is flexing its economic muscles and warning nations not to bar its next- generation wireless technology. The indefinite coal restrictions started this month and are part of an overall plan to cap imports into the customs region this year, Reuters reported, citing an unnamed Dalian Port official.
  • U.S. and Chinese negotiators are working on multiple memorandums of understanding that would form the basis of a final trade deal, according to a person briefed on the talks. The MoUs would cover areas including agriculture, non-tariff barriers, services, technology transfer and intellectual property, said the person, who asked not to be identified because the discussions are private
  • U.K.’s Hammond said deadline pressure in the Brexit talks was helping officials to make progress and British lawmakers could vote on a revised deal next week. He said there were positive signs coming from Brussels that the EU is moving its position and giving ground on the Irish border backstop, and it was “significant” that the EU is now promising “guarantees” that the contentious backstop will be temporary
  • In a sign of the challenge that U.K. Prime Minister Theresa May faces next week, as many as 15 government ministers are debating voting against her Brexit strategy and then challenging her to fire them in next week’s planned ballots, three people familiar with the matter said. The senior officials want to back a cross- party effort to stop Britain crashing out of the EU without a deal

Asian equity markets eventually traded mostly higher with the region supported by US-China trade hopes after reports that negotiators were drafting MOUs on key structural issues and are looking at a list of measures to address the trade imbalance. This helped the region shake off the early cautious tone brought on by another marginal performance of their US counterparts and a mixed-perceived FOMC minutes. ASX 200 (+0.7%) was underpinned by strength in Financials as well as outperformance in Consumer Discretionary after Wesfarmers shares rallied post-earnings, while the trade hopes inspired a turnaround for the Nikkei 225 (+0.2%) which was initially dampened by currency effects and after Nikkei Manufacturing PMI data slipped into contraction territory for the 1st time since August 2016. Elsewhere, the KOSPI (+0.1%) lagged with index heavyweight Samsung Electronics lacklustre after it unveiled its ground-breaking foldable smartphone which comes with an eye-watering price of nearly USD 2000, while Hang Seng (+0.4%) and Shanghai Comp. (-0.3%) were also initially choppy before the trade-related optimism provided a rising tide across the region. Finally, 10yr JGBs found support from the early cautious tone and after disappointing Nikkei Manufacturing PMI data, but then reversed course as risk sentiment improved and after weaker results in the enhanced liquidity auction for longer-dated bonds.

Top Asian News

  • Top PC Maker Lenovo Gains Most in a Decade as Turnaround Sticks
  • Goldman Says Asian Funds Positioned All Wrong for 2019’s Rally
  • Hong Kong Monetary Authority Chief Norman Chan to Retire Oct. 1

Major European indices are mixed [Euro Stoxx 50 +0.1%] in spite of the firmer trade seen in Asia following reports that negotiators are drafting MOU’s. The FTSE 100 (-0.6%) is underperforming its peers, weighed on by BAE Systems (-7.0%) and Centrica (-11.8%) following earnings for both Co’s; additional downward pressure is applied by Anglo American (-0.1%) after earnings and Glencore (-1.5%) who are in the red following a tax demand and mine production cut. Sectors are mixed, with some mild outperformance in consumer discretionaries. Other notable movers include Bouygues (+3.4%) near the top of the Stoxx 600 as their FY profit came in above the prior. Also performing well after earnings are Barclays (+0.2%), with the Co. stating they are considering additional returns which include buybacks. Of note are Maersk (-9.6%) in the red after stating that 2019 guidance is subject to considerable uncertainty from trade risks, also the Co. and Maersk Drilling are to trade separately from April 4th.

Top European News

  • Telecoms Trail in Europe as Results From Heavyweights Fall Flat
  • European Banks Caught Between Nordic Contagion and Barclays Joy
  • Just Eat Drops on Report Uber Eats Eyes U.K. Marketplace Service

In FX, it was a really rough night for the Antipodean Dollars, and especially the Aud that failed to glean any lasting benefit from a robust if not stellar January jobs report, as Westpac delivered an extremely dovish RBA outlook with not just one, but two rate cuts pencilled in for this year (August and November). Aud/Usd recoiled from just over 0.7200 in response and then reversed even more sharply on headlines reporting that China was blocking coal imports as several ports including the main Dalian hub, hitting lows under 0.7100. Meanwhile, Aud/Nzd fell from around 1.0490 to circa 1.0400, but is holding above the base as Nzd/Usd suffers knock-on losses towards 0.6800 vs 0.6875 at one stage.

  • CAD/CHF/EUR - All on a softer footing vs the Greenback, as the DXY recovers from its post-FOMC minutes lows and with the overall take from the release not as dovish as many anticipated or were positioned for (end of balance sheet reduction by end 2019 favoured by most, but prospect of further rate normalisation this year left on the table) – index straddling 96.500 vs 96.390 at one stage. The Loonie is close to the bottom of a 1.3207-1.3163 range, while the Franc is back below parity, albeit just, and the single currency is pivoting 1.1350 amidst mixed Eurozone flash PMIs, volatile trade on stops and near term technical with some hefty option expiries also thrown in for good measure. Specifically, 1.1365, 1.1371-73 represent resistance, with the latter zone incorporating Wednesday’s high and the 30 DMA, while 1.2 bn rolls off at the 1.1300 strike and almost 3 bn at 1.1400.
  • GBP/JPY - Relative G10 outperformers as Cable holds firmly above 1.3000, after a few wobbles, and not far from overnight peaks just over 1.3100 following a record UK public finance haul in January, a well received 2057 Gilt auction and comments from Chancellor Hammond suggesting the EU is showing some willingness to budge on the Irish backstop. Meanwhile, the Jpy has pared some losses within a 110.60-87 range in wake of another drop in the PBoC’s mid-point Usd/Cny fixing rate.
  • NOK/SEK - The Scandi Crowns are both back under pressure, with Eur/Nok nudging above 9.7900 against the backdrop of stagnating oil prices and a somewhat disappointing Norwegian energy investment report, while Eur/Sek has rebounded to 10.6000+ from around 10.5600 following the IMF’s annual report that revealed a downward revision to Sweden’s 2019 GDP forecast and urged the Riksbank to hold off from another repo rate hike.

In commodities, Brent (+0.1%) and WTI (+0.5%) prices are largely unchanged after a mixed overnight session, with both Brent and WTI trading within a narrow USD 1/bbl range. Yesterday’s delayed API release showed a crude oil inventories build of 1.26mln barrels, although this was less than the expectation for a 3.1mln barrel build. EIA’s delayed weekly report is to be published later today where expectations are for a crude stock build of 3.1mln, which would make it the fifth consecutive week of builds. Elsewhere, reports show that Venezuela are paying large premiums for Russian and European fuel imports due to a limited number of available sellers, following US sanctions against PDVSA. Gold (-0.2%) is weaker after trading largely sideways overnight, with the yellow metal approaching the bottom of its USD 10/oz range. Elsewhere, Barrick Gold have outlined a deal reached with the Tanzania government, which features a USD 300mln payment, regarding disputes with Acacia Mining. Separately, China’s northern Dalian port bans imports of Australian coal and are to cap overall imports for the year at 12mln tonnes; this ban follows other Chinese ports taking 40 days to clear Australian coal. China's Dalian customs bans Australian coal imports indefinitely and sets 12mln tons overall coal import quota for this year, according to sources.

Looking at the day ahead, we get the delayed December durable and capital goods orders data which should help to further sharpen Q4 GDP expectations. The consensus expects a +0.3% mom pickup in core durable goods orders and +0.2% mom core capex orders reading. Also due out is the October Philly Fed survey which will be worth watching for a mid-quarter update on the factor sector. The consensus expects a 3pt decline to +14.0. Away from that we’ll also get the latest weekly initial jobless claims print – where the four-week moving average has ticked up in recent weeks – the flash February PMIs, January leading index and January existing home sales. Other than data, we’ll also hear from more central bank speakers with the ECB’s Praet due to speak this morning and afternoon, and the Fed’s Bostic this afternoon. The ECB is also due to publish the accounts of the January meeting while EU trade ministers are due to meet. Today also see’s China’s Vice Premier Liu He join trade talks in Washington with Lighthizer and Mnuchin.

US Event Calendar

  • 8:30am: Philadelphia Fed Business Outlook, est. 14, prior 17
  • 8:30am: Initial Jobless Claims, est. 228,235, prior 239,000; Continuing Claims, est. 1.74m, prior 1.77m
  • 8:30am: Durable Goods Orders, est. 1.7%, prior 0.7%; Durables Ex Transportation, est. 0.25%, prior -0.4%
  • 8:30am: Cap Goods Orders Nondef Ex Air, est. 0.2%, prior -0.6%; Cap Goods Ship Nondef Ex Air, est. 0.0%, prior -0.2%
  • 9:45am: Markit US Manufacturing PMI, est. 54.8, prior 54.9; Markit US Services PMI, est. 54.3, prior 54.2
  • 10am: Existing Home Sales, est. 5m, prior 4.99m; Existing Home Sales MoM, est. 0.2%, prior -6.4%

DB's Jim Reid concludes the overnight wrap

Ahead of today’s important flash PMIs (preview later), I was in Frankfurt last night for a macro dinner and it’s fair to say that whilst nervous, most investors thought the pain trade was a further tightening of spreads and higher equity markets - in-line with my thought. In a show of hands no-one thought we’d get a hard Brexit and the vast majority thought we’d get some kind of supportive US-China trade deal in the coming weeks. So that’s the bias of views. There was less certainty beyond the next few months but some who previously were worried about the US cycle, like me, were a little less pessimistic about 2020 now due to the Fed 180 degree pivot in 2019. A lot of the conversation was taken up by the bubbling momentum of socialism in US politics. I think this could be a huge topic as we hit the primaries ahead of the 2020 election. So it’s something I’m going to write about in more depth soon.

Politics remains highly changeable at a global level and in an otherwise quiet week it’s the reshuffling of UK political lines which is proving to be the most interesting story at the moment. Yesterday’s news that three Conservative MPs had quit to join a new Independent Parliamentary Group might not have an immediate direct Brexit read-through but it does mean that May is becoming perilously close to losing her majority, especially with one of the defectors – Heidi Allen – saying that she expects more Tories to quit. This means the medium term risk of a new election is surely rising even if the gang of three made it clear that they would likely support the government outside of Brexit votes. Yesterday’s YouGov poll – while a little less meaningful at this stage and covering Feb 18-19 just before the Tory defections - put support for the Tories at 38% versus 26% for Labour. This is a remarkable collapse for the opposition party and only a small decline for the Tories. Whatever you think of Tory party tactics and handling of Brexit there is only one party that is pursuing Brexit as per the voter mandate and I think they are keeping support for them high because of this. Back to the poll and the new Independent Group scored 14%, followed by the Lib Dems at 7%. Could this be the start of a significant change in UK politics like the en Marche movement in France? The problem for them is that the U.K. has a constituency system and is “first past the post”. Indeed in the UK, winning a vote share in the low-20s has not historically been high enough to make much progress in Parliament. In 2010 the Lib Dems got 23% of the vote but fewer than 10% of the seats in Parliament. In 1983 the SDP-Liberal Alliance got 25% of the vote but didn't even manage 5% of the seats. Indeed at a general election people usually vote tactically and unless a party can win, voters will often vote for one of the two main parties to ensure the one they don’t want to win has a better chance of losing. So a long road ahead for a centrist movement but unusual things are happening all over the world.

The pound took a roundtrip yesterday, initially depreciating -0.38% versus the dollar on the above resignations, before reversing to trade +0.36% stronger on possibly positive Brexit stories. Spain’s Foreign Minister Josep Borrell told reporters that “I think the accord is being hammered out now,” helping the pound to jump higher. His office subsequently walked back those comments, and the currency ultimately ended the session close to flat. There were also reports that the EU would want the UK Parliament to formally vote on any new agreement before the EU leaders considered it themselves. This would be new sequencing, which could indicate a subtle shift in positions that might allow a breakthrough, though it’s also an indictment of May’s inability to make promises given her fractured caucus. Elsewhere, the UK PM May and the EU President Juncker released a joint statement post their meeting saying that they discussed which guarantees could be given to underline once more the "temporary nature" of the Irish border backstop while adding that they have tasked chief Brexit negotiators of both sides - EU’s Michel Barnier and UK’s Stephen Barclay - with considering role for "alternative arrangements" in replacing backstop in future. They also discussed on any amendments that could be made to the political declaration consistent with their respective positions. In the meantime, yesterday Fitch placed the UK’s AA long term rating on a negative watch citing the “heightened uncertainty over the outcome of the Brexit process.”

Markets are a lot less complicated than Brexit at the moment with incremental positive returns the name of the game for now. That was the case last night even after the FOMC minutes with the S&P 500, DOW and NASDAQ turning in gains of +0.19%, +0.24% and +0.03% respectively. Treasuries closed around +1bp higher across maturities and the 2s10s yield curve remains steady at 14bps. HY spreads were -4bps in the US and the dollar also closed flat on the session.

Just on the minutes, the main highlights were confirmation that the FOMC is likely to end its balance sheet runoff later this year and a reaffirmation that rate hikes remain on hold for now. Due to a snow storm in Washington, DC, reporters did not receive embargoed access to the minutes before the official release, so the details trickled out as everyone read through the details. The market reaction was somewhat more muddled than usual, with the S&P 500 dropping -0.38% in the 20 minutes after the release but subsequently fully retracing. Perhaps investors initially focused on hawkish excerpts like “participants continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes over the next few years.” However, the minutes also said that "maintaining the current target range for the federal funds rate for a time posed few risks at this point" which suggests no imminent change in policy and “almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year.” That’s a very clear confirmation that we should expect a formal announcement and an end to the balance sheet runoff by year-end.

Meanwhile, overnight Bloomberg reported that the US and Chinese negotiators are working on multiple memorandums (6 in total as per Reuters) of understanding that would form the basis of a final trade deal and the MoUs are likely to cover areas including agriculture, non-tariff barriers, services, technology transfer and intellectual property. The report also added that the enforcement mechanism for the MoUs remains unclear as of now, but would likely be a threat of re-imposition of tariffs if conditions aren’t met and also indicated that China’s Vice Premier Liu He is likely to meet with President Trump on Friday. As a reminder China Vice Premier Liu He is set to meet Lighthizer and Mnuchin today. Elsewhere, President Trump reiterated his threat to impose tariffs on cars imported from the EU if the US can’t reach a trade deal with the EU. He said that “If we don’t make the deal we’ll do the tariffs. We’re trying to make a deal. They’re very tough to make a deal with, the EU.”

Asian markets pared losses on the above positive US-China trade headlines and are heading higher. The Nikkei (+0.49%), Hang Seng (+0.53%) and Shanghai Comp (+0.36%) are all up while the Kospi (-0.06%) is trading flattish. China’s onshore yuan also rose (+0.39%) on positive trade headlines to 6.6950, highest since July 2018. Elsewhere, futures on the S&P 500 are up +0.31% while 10y treasury yields are up +1.9bps this morning. In terms of overnight data releases, and a bit worrying ahead of today’s other flash numbers, Japan’s preliminary February manufacturing PMI was in contractionary territory at 48.5 (vs. 50.3 last month) for the first time since September 2016. The subindex for production fell to 47.0 (vs. 49.4 last month), indicating that actual output declined further. Joe Hayes, an economist at IHS Markit, said that “unless service sector activity can offset manufacturing weakness, the chance of Japan entering a recession in 2019 looks set to rise.”

In Europe, the STOXX 600 rallied +0.67% yesterday, closing above its 200-day moving average for the first time since September. Bunds were little changed and BTPs weakened a further +7.1bps after the ECB’s Praet confirmed that while the ECB will discuss a new TLTRO, it’s unclear that a decision will actually be made. Along with Lane and Rehn, that is 3 senior figures who have suggested that a new TLTRO might not come as soon as the next ECB meeting on March 7.

In other news from yesterday , the US Trade Representative Lighthizer is to testify about China trade matters before the House Ways and Means Committee on February 27th according to CNBC. As for the S232 report, it was interesting to note yesterday’s Politico report which suggested that there are rising calls for the White House to release the report with a source suggesting that it does find a threat and recommends tariffs of up to 25%. Despite those rumours, automaker stocks rallied +2.30% and +1.08% in Europe and the US, respectively.

Moving on. While it’s not been the most exciting of weeks in markets this week we do have the flash February PMIs to look forward to today in Europe. A reminder that we’ve seen the composite Euro Area PMI decline in 10 of the last 12 months to a five-and-a-half year low of 51.0 in January. The consensus is for a very modest pick-up to 51.1 this month. The services reading is expected to rise to 51.3 (from 51.2) however the manufacturing reading is expected to slide a little further, to 50.3 from 50.5 in January. That print has fallen in 12 of the last 13 months and last month hit the lowest since November 2014. As for the country level data, there will be plenty of focus on the data out of France given the recent slide with only a modest pick-up in the composite to 48.9 expected (from 48.2 in January). Germany’s composite reading is expected to nudge down slightly to 52.0 from 52.1.

Back to yesterday, where in EM land it was a bit of a roundabout session for South African assets following the release of the latest budget deficit forecasts. The Rand weakened as much as -2.28% at one stage and bonds blew wider with the National Treasury forecasting a budget deficit of 4.5% for the year starting April 1 which would be the widest since 2010. Growth rates were also cut, however the announcement of an operational overhaul of Eskom and discussions about privatising part of the transmission business helped assets to pretty much fully recover by the end of play. Wider EM FX was flat yesterday while the MSCI EM index finished +0.57%.

Looking at the day ahead, this morning we’ll get the final January CPI revisions in Germany and France, as well as February confidence indicators in the latter. The PMIs are out just after that before we can get a look at January public finances data in the UK. Over in the US this afternoon we’re due to get the delayed December durable and capital goods orders data which should help to further sharpen Q4 GDP expectations. The consensus expects a +0.3% mom pickup in core durable goods orders and +0.2% mom core capex orders reading. Also due out is the October Philly Fed survey which will be worth watching for a mid-quarter update on the factor sector. The consensus expects a 3pt decline to +14.0. Away from that we’ll also get the latest weekly initial jobless claims print – where the four-week moving average has ticked up in recent weeks – the flash February PMIs, January leading index and January existing home sales. Other than data, we’ll also hear from more central bank speakers with the ECB’s Praet due to speak this morning and afternoon, and the Fed’s Bostic this afternoon. The ECB is also due to publish the accounts of the January meeting while EU trade ministers are due to meet. Today also see’s China’s Vice Premier Liu He join trade talks in Washington with Lighthizer and Mnuchin.

Published:2/21/2019 6:45:21 AM
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Published:2/21/2019 6:15:49 AM
[Markets] Trade War Goes Global: China "Indefinitely" Bans Australian Coal Imports

Just days after it warned its citizens against traveling to New Zealand, Beijing has reportedly cracked down on imports of coal from Australia, cutting off the country's miners from their biggest export market and threatening the island nation's economy at a time when it and its fellow "Five Eyes" members who have sided with the US by blocking or banning Huawei's 5G network technology.


Customs agents at the port of Dalian have banned imports of Australian coal "indefinitely" while reportedly capping all coal imports from all sources at 12 million tonnes per day, Reuters reported overnight. Elsewhere in China, Australian coal - the combustible rock is the country's biggest export - has faced customs delays of up to 40 days, just as Rabobank analyst Michael Every anticipated when he pondered earlier this month whether Australian coal might face "bureaucratic delays" at Chinese ports following the country's "Huawei moment." This is what Every said two weeks ago:

Billionaire political donor Huang Xiangmo, Beijing's former top lobbyist/fixer in Australia has just had his long-standing application for Aussie citizenship rejected and his permanent residency cancelled while travelling overseas, leaving him stranded and locked out of his USD10m Sydney mansion. The citizenship application refusal apparently comes on both character grounds and concerns about the reliability of his answers in interviews and correspondence with authorities including ASIO, the Australian intelligence service. Note that Mr. Huang has donated AUD2.7m to both major political parties over the last five years and also funds former foreign minister Bob Carr’s Sydney think tank - Carr himself having made several recent public statements arguing for Australia to side with China due to their economic links.

Does this smell like a real US-China trade deal is on the cards? And is this Australia’s Huawei moment? Might Aussie exports to China suddenly run slap-bang into bureaucratic delays or boycotts? And should we add Australia to the list of nationalities that might want to rethink visits to China? But silly me: China is already holding one captive. Germany might be about to push the EU onto that China hit-list too, as it is apparently setting the following standard for Huawei to operate: “A guarantee its data will not be shared with Beijing”. So that’s nein then, nicht war

And while at least one Wall Street analyst had anticipated some form of retaliation, the ban apparently took Australian diplomatic officials by surprise. Here's more from Reuters:

Five harbors overseen by Dalian customs - Dalian, Bayuquan, Panjin, Dandong and Beiliang - will not allow Australian coal to clear through customs, said the official. Coal imports from Russia and Indonesia will not be affected.

"I’m aware of unconfirmed and unsourced media reports and have asked our Ambassador in Beijing to urgently clarify their veracity," said Australia’s Minister for Trade Simon Birmingham.

"We continue to engage closely with industry on matters of market access...China is a valued partner of Australia and we trust that our free trade agreement commitments to each other will continue to be honored."

It would be hard to understate how big of a problem this is for Australia. The ramifications will be felt, not only by the country's miners, but by the broader Australian economy, and as economist Robert Rennie notes, a ban would have a major impact on Australian exports as 22% of Australian coking coal exports  in 2018 went to China (39mt). 24% of Australian thermal coal exports  in 2018 went to China (49mt).

... which is why the Aussie, and shares of Australian miners, tumbled on the news...

... while the Chinese Yuan dropped as well, which prior to the report had hit a 7 month high.

Meanwhile, shares of Chinese coal miners climbed.

Which brings us to our next point. Aside from showing the international community what they stand to lose if they side with the US in the dispute over Huawei (the DOJ recently filed two criminal indictments against the company alleging both IP theft and sanctions violations, and the US has been pressing its allies to ban Huawei 5G network equipment over security concerns), Beijing may have an ulterior motive in cracking down on coal imports: Support domestic prices.

As Reuters adds, Beijing has been trying to restrict imports of coal more generally to support domestic prices. A Beijing-based coal trader said Dalian had cleared about 6 million tonnes of coal in January that had been delayed since late 2018 as China slowed customs clearance to curb imports.

The delayed cargoes would not be included in the 12 million tonnes under the 2019 quota, he added, citing customs information. Dalian handles both thermal and coking coal imports but the clamp down is expected to have a bigger impact on coking coal, used in steel making, than thermal coal, used to generate electricity.

Spot Australian coking coal at the northern Chinese port of Jingtang is 200 yuan ($29.85) cheaper per tonne than domestic prices, according to data tracked by Orient Futures. The price difference for thermal coal is about the same.

"It is hard to find a replacement for Australian coking coal since its sulfur content is very low," said a purchasing manager at a large plant in Hebei province that produces coke, used in the steelmaking process, from coking coal. "Current inventory at ports should be sufficient to support usage for one or two months, but it could be a problem in the long term, especially if other ports also tighten imports," he added.

So far, at least, the ban has apparently had the desired effect. Diplomats in Canberra don't know what the hell is going on. The Aussie is sliding, as are shares of the country's miners. Soon enough, we will probably hear from economists and maybe even the RBA for an analysis of what the impact might be on Australian GDP.

So will Australia capitulate on its decision to ban Huawei from building a 5G network in the country on national security grounds. Given Germany and the UK's decisions to begrudgingly allow Huawei access following demands from their telecoms industries, and with the threat of losing one of its biggest trading partners, it at least has a convenient excuse.

Published:2/21/2019 5:45:34 AM
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Published:2/21/2019 5:15:23 AM
[Markets] Merkel Defends Deal For Putin's Gas; Fumes Over Taunts By Trump Admin

Donald Trump is really starting to ruffle Angela Merkel's feathers, as the German chancellor continues to fend off attacks by the Trump administration over the $10.8 billion (9.5 billion-euro) 758-mile (1,220 km) 'Nord Stream 2' undersea gas pipeline between Germany and Russia, according to Bloomberg

U.S. diplomats leaned on officials in Paris and Brussels to join their opposition to the Nord Stream 2 project over the past 10 days as Merkel thrashed out an agreement over the plan with France, the people said. -Bloomberg

In January, the US ambassador to Berlin, Richard Grenell, sent letters to German companies working on the Nord Stream 2 pipeline warning them of "significant risk of sanctions" if they don't abandon the project. The letter suggested that the pipeline would make Europe dependent on Moscow, increasing the threat of Russian interventions. 

The Nord Stream 2 project is headed up by former German chancellor Gerhard Schröder, who is also a consultant to bank Rothschild

The 1,220 kilometer (758-mile) Nord Stream 2 undersea link to Germany initiated by Russia in 2015.

On Saturday, Vice President Mike Pence urged EU nations to reject the undersea pipeline during a speech in front of Merkel and other world leaders at the Munich Security Conference. 

Merkel fought back

The German chancellor had harsh words for the Trump administration - delivering an impassioned speech to Security Conference attendees defending the multilateral order "challenged by Trump," according to Bloomberg, earning a standing ovation from the audienced filled with presidents, prime ministers and senior defense officials. 

"Merkel was on fire," said former Swedish Prime Minister Carl Bildt via Twitter. 

Merkel was apparently "pleased" with the response to her address according to her chief spokesman, Steffen Seibert, who said she also had some "really very good discussions afterward" with allies from other nations. 

Trump's criticism of Germany for relying on Russian gas is nothing new. In July, he slammed Germany for being "captive of Russia because it is getting so much of its energy from Russia." 

"It’s very sad when Germany makes a massive oil and gas deal with Russia where we’re supposed to be guarding against Russia and Germany goes out and pays billions and billions of dollars a year to Russia," Trump said before meeting with NATO Secretary General Jens Stoltenberg on Wednesday morning, according to a Bloomberg report from last year. 

Trump's criticisms have threatened to leave Merkel isolated among her European allies, where many leaders have expressed concern over their increasing reliance on Russia, as well as risks of undermining Ukraine - which earns $2 billion a year in transit fees for Russian gas delivered through a competing pipeline. 

U.S. opposition appeared to gain traction on Feb. 6 with a report in Sueddeutsche Zeitung that France would oppose Germany and back EU regulations that would pose a hurdle to the pipeline. That prompted a flurry of talks leading to a French-German agreement on Feb. 8, diluting the restrictions in an EU directive.

A French official said President Emmanuel Macron had faced enormous U.S. pressure on Nord Stream, but rejected charges that it had influenced its position. -Bloomberg

In response to a question from a Ukrainian lawmaker on Saturday, Merkel promised that the Baltic pipeline won't undermine Ukraine's status as a gas-transit nation. 

"Consciously shutting Russia out politically, I think that’s also wrong," said Merkel - of the project led by the former German chancellor. "Europe can’t have a geopolitical interest in halting all relations to Russia."

Published:2/21/2019 4:15:41 AM
[Markets] Taiwan's Leader Says Threat Of Chinese Invasion "Growing Every Day"

President Trump's at times warm, at times contentious relationship with his Chinese counterpart has been an exercise in cognitive dissonance that's reflective of a broader truth about the relationship between the world's two largest economies. The veneer of economic cooperation belies deeper military tensions as China's expansionist military aims threaten US security in the Pacific.

Just last week, the top US Navy commander in the Pacific warned that China represents the “greatest long-term strategic threat to a free and open Indo-Pacific and to the United States." And the country's insistence on carrying on with its military buildup in the South China Sea, one of the most vital waterways for global trade, has angered the US and nearly all of its neighbors. But while the US public labors under the illusion that a military conflict with the Chinese is only a vague possibility somewhere off in the indeterminate future, for the island of Taiwan, China's increasing muscular military presence in the region is a daily threat that requires 24/7 vigilance, according to CNN.


As she struggles with waning poll numbers ahead of an election later this year, Taiwan's pro-independence leader Tsai Ing-wen claimed in yet another interview with a western media organization that the world is underestimating the growing threat posed by Beijing.

After President Xi claimed during a landmark speech early this year that Taiwan would eventually be re-unified with the mainland in an arrangement similar to that of Hong Kong or Macau - something the Taiwanese people popularly oppose - and threatened any meddling foreign powers (ie the US) who dare to interfere), Tsai said that China crushing Taiwan would be a "setback for global democracy."

In response to Xi's threat, Tsai said earlier this year that Taiwan "would never accept" reunification with Beijing.

"If it's Taiwan today, people should ask who's next?" she said. "Any country in the region - if it no longer wants to submit to the will of China, they would face similar military threats."


"If a vibrant democracy that champions universal values and follows international rules were destroyed by China, it would be a huge setback for global democracy," she said.


"With China becoming increasingly strong and ambitious, we are faced with growing threats," Tsai said.

In the face of the growing threat (Beijing has carried out military exercises in the Strait of Taiwan to try and intimidate Tsai) the president said that she was strengthening Taiwan's military capabilities in the face of China's rapid modernization, and that Taiwan would be "on alert 24/7" for the first sign of a Chinese strike.

"What we are expecting is, after withstanding the first wave of Chinese attacks ourselves, the rest of the world would stand up to exert strong pressure on China," she said.

Indeed, the biggest challenge facing Taiwan, in Tsai's view, is its "continued existence."

"Our challenge is whether our independent existence, security, prosperity and democracy can be maintained. This is the biggest issue for Taiwan."

After the interview, Tsai reiterated to a group of reporters that the island would not accept any deal that "threatens democracy," according to Al Jazeera.

"Taiwan society will not accept any treaty that harms Taiwan's national sovereignty and democracy," Tsai told reporters in Taipei on Wednesday, adding that there would not be real peace unless China ruled out using force to bring Taiwan under its control.

Meanwhile, an editor for the Beijing-backed Global Times accused Tsai of warmongering.

Published:2/21/2019 2:44:45 AM
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Published:2/21/2019 1:13:48 AM
[Markets] "Consequences for NATO": Germany Rebuffs UK Call To Back Off Saudi Arms Freeze

Germany is feeling the pressure from western allies over its weapons exports freeze in the wake of the Saudi killing of Jamal Khashoggi, a freeze first announced in November, which included plans to reject any future export licences to Riyadh, but not previously approved deals. 

German allies like the UK have lately implored the German government to soften its stance, noting the potential broader economic impact on Europe. British foreign minister Jeremy Hunt, currently in Berlin to discuss the terms of Brexit, reportedly wrote to the German foreign minister, Heiko Maas, in a private letter first revealed by Der Spiegel that UK defense companies would be hindered in contractual obligations related to Eurofighter Typhoon and the Tornado fighter jet delivery, namely to supply parts affected by the German arms freeze. 

F-5E J-3065 and Eurofighter Typhoon. Image source: Eurofighter Gmbh-Austrian AF

Hunt told Maas in the letter published in German press: “I am very concerned about the impact of the German government’s decision on the British and European defence industry and the consequences for Europe’s ability to fulfil its Nato commitments.”

This follows comments by German chancellor Angela Merkel at the past weekend's Munich Security Conference acknowledging the need for "common export controls guidelines" across Europe. She said during a question-and-answer session after her speech at the conference:

We have because of our history very good reasons to have very strict arms export guidelines, but we have just as good reasons in our defense community to stand together in a joint defense policy. And if we want … to develop joint fighter planes, joint tanks, then there’s no other way but to move step-by-step towards common export controls guidelines.

However, German Economy Ministry spokeswoman indicated that no change was imminent when questioned by Reuters. “The view of the government is clear and there is no new situation. There is at the moment no basis for further approvals,” she said.

Germany has further said the decision to halt new arms sales is connected to the worsening humanitarian catastrophe still unfolding in Yemen, led by the Saudis and its gulf and US/UK allies. 

On Wednesday Mass reaffirmed while speaking to reporters following the meeting with Hunt: “We are not delivering any weapons to Saudi Arabia at the moment and we will make future decisions depend on how the Yemen conflict develops and whether what has been agreed in the peace talks in Stockholm is being implemented,” according to Reuters

Interestingly, the UK also appears ready to play the Russia and China card, warning Germany that Riyadh could turn to Russia and Chinese defense companies should Europe prove an unwilling partner. 

But the most pressing and immediate UK concern remains the pending jet deal. Reuters notes that this week's meeting in Berlin "followed complaints last week from a top Airbus official who told Reuters that the halt was preventing Britain from completing the sale of 48 Eurofighter Typhoon warplanes to Riyadh. He said the issue was also affecting potential sales of other weapons such as the A400M military transporter."

The four countries involved in the production of the Eurofighter include Germany, Britain, Italy, and Spain, involving the companies Airbus, BAE and Italy’s Leonardo.

Published:2/21/2019 1:13:48 AM
[Markets] Let's Face It: The U.S. Constitution Has Failed

Authored by Charles Hugh Smith via OfTwoMinds blog,

Elections provide the bread-and-circuses staged-drama that is passed off as democracy.

Despite the anything-goes quality of American culture, one thing remains verboten to say publicly: the U.S. Constitution has failed. The reason why this painfully obvious fact cannot be discussed publicly is that it gives the lie to the legitimacy of the entire status quo.

The Constitution was intended to limit 1) the power of government over the citizenry 2) the power of each branch of government and 3) the power of political/financial elites over the government and the citizenry, as the Founders recognized the intrinsic risks of an all-powerful state, an all-powerful state dominated by one branch of government and the risks of a financial elite corrupting the state to serve their interests above those of the citizenry.

The Constitution has failed to place limits on the power of government, on the emergence of unaccountable states-within-a-state agencies and on the political power of financial elites.

How has the Constitution failed? It has failed in three ways:

1. Corporations and the super-wealthy elite control the machinery of governance. The public interest is not represented except as interpreted / filtered through corporate/elite interests.

2. The nation's central bank, the Federal Reserve, has the power to debauch the nation's currency and reward the wealthy via issuing new currency and buying Treasury bonds in whatever sums it deems necessary at the moment. The Fed is only nominally under the control of the elected government. It is in effect an independent state-within-a-state that dominates the financial well-being of the entire nation.

3. The National Security State--the alphabet agencies of the FBI, CIA, NSA et al.--are an independent state-within-a-state, answerable only to themselves, not to the public or their representatives. Congressional oversight is little more than feeble rubber-stamping of the Imperial Project and whatever the unelected National Security leadership deems worthy of pursuit.

The Constitution's core regulatory element--the balancing of executive, legislative and judicial power--has broken down. The judiciary's independence is as nominal as the legislative branch's control of the central bank and National Security state: the gradual encroachment of corporate and state power is rubber-stamped and declared constitutional.

The secret power of the National Security agencies was declared constitutional early in the Cold war, when unleashing unaccountable and secret agencies was deemed necessary.

The bizarre public-private Federal Reserve was deemed constitutional at its founding in 1913, and the Supreme Court famously declared that corporations have the same rights to free speech (including loudspeakers that cost millions of dollars) as living citizens.

The powers of the Imperial Presidency also continue expanding, regardless of which party is in office or the supposed ideological tropisms of Supreme Court justices.

Every step of this erosion of public representation and the elected government's power is declared fully constitutional, in classic boiled-frog fashion. The frog detects the rising temperature of the water but isn't alarmed as the heat is increased so gradually.

Since the rise of unaccountable states-within-a-state are constitutional, as is the dominance of corporate / private-wealth elites, on what grounds can citizens protest their loss of representation?

Elections provide the bread-and-circuses staged drama that is passed off as democracy. The key goal of the corporate/state media coverage, of course, is to foster the illusion that elections really, really, really matter, when the reality is they don't. The National Security State grinds on, the Federal Reserve grinds on and the dominance of corporate-wealth elites grinds on regardless of who's in office.

Every emergency is met by the ceding of more power to unelected elites in positions to serve their own interests. The Cold War, financial panics, Cold War Redux--every crisis is an excuse to expand the powers of the unaccountable, opaque states-within-a-state.

The media is already gearing up with 24/7 coverage of the 2020 elections. The constant churn of drama-trauma serves to mask the impotence and powerlessness of the citizenry and the unaccountability of the states-within-a-state that rule the nation.

*  *  *

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Published:2/20/2019 11:15:05 PM
[Markets] Michael Cohen Gets Two-Month Delay Before Starting Prison Sentence

Former Trump attorney Michael Cohen was granted a 60-day delay before he has to report to prison, ruled a federal judge in Manhattan on Wednesday. 

The decision by US District Judge William Pauley III was granted after Cohen's attorneys cited the need to recover from recent shoulder surgery and prepare for congressional testimony before three committees - one of which is scheduled for February 28, while dates for the other two have not been publicly announced. 

Cohen was sentenced to three years in prison for a series of crimes, including tax evasion, financial fraud and campaign finance violations stemming from a scheme to pay off women who claimed to have had decade-old affairs with Donald Trump. 

Cohen has attracted massive attention since he pleaded guilty to the offenses last August in a deal with federal prosecutors in New York. He separately pleaded guilty to lying to Congress about discussions within the Trump Organization about building a property in Moscow, and agreed to cooperate in special counsel Robert Mueller’s ongoing investigation into Russian interference.

Cohen was a longtime ally of Trump but their relationship quickly turned sour last year, after Cohen implicated Trump in the hush-money scheme. Trump has denied wrongdoing and lambasted Cohen as a liar. -The Hill

The former Trump attorney is scheduled to appear before the House Oversight and Intelligence Committees, as well as the Senate Intelligence Committee, after the latter subpoenaed him to for closed-door testimony. 

Cohen was originally scheduled to report to prison on March 6, however the 60-day delay was granted following a letter from his attorney, Michael Monico, in a letter released by the court on Wednesday. 

"Defendant makes the request because he recently underwent a serious surgical procedure and he needs to undergo intensive post-surgical physical therapy and be monitored by his physician for recovery," wrote Monico, who added: "Mr. Cohen also anticipates being called to testify before three (3) Congressional committees at the end of the month.

"Doing so will require Mr. Cohen to spend substantial time in preparation that will limit the time he has to get his affairs in order and spend time with his family, especially given such a short period between the anticipated hearings and the present reporting date."


Published:2/20/2019 10:14:21 PM
[Entertainment] The Masked Singer Unmasks the Lion and the Rabbit in the Semi-Finals The Masked SingerThree singers remain! The Masked Singer revealed two singers tonight in the semi-finals, unmasking the Lion and the Rabbit to reveal exactly the two people we thought it was going to be:...
Published:2/20/2019 9:44:49 PM
[Entertainment] Doctors Terry Dubrow & Paul Nassif Enlist the Help of a Former CIA Professional! See Why on Tonight's Botched Paul Nassif, Terry Dubrow, Botched 512Accidents happen, but a bad nose job is unacceptable! On Wednesday's all-new Botched, new patient Laura turned to Dr. Terry Dubrow and Dr. Paul Nassif after an accident involving her...
Published:2/20/2019 9:12:59 PM
[Markets] World's First Anti-Tank Drone Debuts At IDEX 2019

MBDA Missile Systems and Milrem Robotics unveiled an anti-tank unmanned ground vehicle (UGV) on Sunday at the IDEX-2019 arms exhibition in the United Arab Emirates.

Claimed to be the world’s first anti-tank UGV, the new weapon system integrates the Milrem Robotics THeMIS (Tracked Hybrid Modular Infantry System) unmanned ground vehicle with the MBDA IMPACT (Integrated MMP Precision Attack Combat Turret) system fitted with two MMP 5th generation ground combat missiles and a self-defense machine gun.

“This combination of two of the most modern technologies in their field is a very good example how robotic warfare systems will bring disruption to the battlefield and make some traditional technologies obsolete,” said Kuldar Väärsi, CEO of Milrem Robotics.

Väärsi added: “Our unmanned land combat system under study together with MBDA will be very efficient in keeping our troops safe and significantly increasing the capability to fight main battle tanks, as well as any other ground target.”

Due to the UGV's lightweight and size, the remotely operated drone can be deployed with mounted and/or dismounted units, requiring less logistical efforts.  Powered by a diesel engine and an electric generator, the hybrid function of the UVG enables it to operate for 8 to 10 hours. For maximum stealthiness, the UGV can run on electric for .5 to 1.5 hours.

The UGV has a low heat and noise signature so it can remain undetected, hidden from the enemy’s surveillance equipment while hunting for main battle tanks. 

The command and control center is displayed remotely in a vehicle cab so the operator of the UGV remains safe from enemy fire.

The purpose of the UGV is clear: Disrupt the main battle tank which has had dominance on the battlefield for almost the last half century of wars.

Published:2/20/2019 9:12:59 PM
[Markets] Not So Fast: China Will Not Allow Use Of Yuan As Bargaining Chip To Resolve Trade War

With market optimism brimming that it's just a matter of days, if not hours, before the US and China reach a truce in the ongoing trade war - even though there have been countless accurate analyses in recent weeks explaining why an actual trade deal is impossible since the object of contention is not trade at all but China's creeping technological dominance, something which Beijing will never voluntarily concede - Beijing has poured cold water over expectations of an imminent deal when China's Ministry of Foreign Affairs said on Wednesday that China will not use the yuan’s exchange rate as a bargaining chip to resolve the trade war with the United States, Caixin reported

Speaking at a press briefing, foreign ministry spokesman Geng Shuang, said that China won’t resort to currency depreciation for competitive purposes in trade and hopes the U.S. can respect market rules and not politicize currency issues.

Geng’s comments followed a Tuesday report from Bloomberg that the U.S. is pressing China to keep the yuan stable and not devalue the currency as part of an agreement intended to end the countries’ trade war (a paradoxical position as it presupposes China would manipulate to keep its currency strong, while at the same time the US is pushing Beijing to liberalize its currency, even if it means market forces set the yuan weaker).

Bloomberg also reported that officials from the two countries have been discussing how to address currency policy in a memorandum of understanding that would form the basis of a U.S.-China trade deal. However, it now appears that any concessions by China over its currency are a non-starter, meaning the two negotiating positions will be even further alienated following Beijing's denial to comply.

The Ministry's terse response also follows an earlier report from SCMP, according to which Beijing would likely accept conditions requiring a "stable" yuan to be included in the memorandum of understanding. "Analysts" quoted by the SCMP pointed out that by insisting that China change its currency-management strategy to prevent the yuan from depreciating past a certain level, Washington would be playing into Beijing's hands. Because the PBOC has already been trying to accomplish with its strict rules on capital outflows since at least the summer of 2015.

A deal between China and US that requires Beijing to keep the yuan exchange rate above a certain level would be a recognition of Beijing’s long-held guiding principle of “keeping the yuan stable at a reasonable equilibrium”, said Ken Cheung Kin-tai, senior Asian currency strategist at Mizuho Bank. "From China’s perspective, this would also be acceptable," he added.

Cheung said that China has already been making efforts to stabilise its currency to alleviate fears of yuan depreciation and to boost the currency’s international appeal.

"Yuan stabilisation will be the optimal solution to balance out risks of capital outflow, trade negotiations and China growth slowdown," he added.

In retrospect, the analyst was wrong.

As a reminder, Chinese Vice Premier Liu He will visit Washington this week for another round of trade negotiations, his second trip in three weeks, as the two countries race the clock to strike a deal to avert an escalation in the trade war before a March 1 deadline; The talks follow a round of negotiations that ended in Beijing last week without a deal but with signs of progress, and curiously take place even as the market has effectively priced in a favorable outcome.

Published:2/20/2019 8:14:25 PM
[Entertainment] Jussie Smollett Charged in Attack Investigation Hours After Being "Officially Classified as a Suspect" Jussie SmollettUPDATE: The Cook County's State Attorney's Office has approved charges against Empire star Jussie Smollett. He was charged with Disorderly Conduct and Filing a False Police Report, which...
Published:2/20/2019 7:43:34 PM
[In The News] Report: Mueller Probe Could End Next Week

By Chuck Ross -

The special counsel’s investigation could wrap up as soon as next week with the delivery of a confidential report to the Justice Department, CNN is reporting. According to the network, Attorney General William Barr is preparing to receive a report from Special Counsel Robert Mueller, who took over an FBI ...

Report: Mueller Probe Could End Next Week 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:2/20/2019 7:43:34 PM
[Entertainment] Chanel Announces Karl Lagerfeld Will Be Cremated Without a Ceremony Karl LagerfeldKarl Lagerfeld's final wishes are being honored by Chanel. The visionary creative director died just one day ago at the age of 85 and plans to lay him to rest are under way. People ...
Published:2/20/2019 7:13:22 PM
[Markets] Buchanan: Why Autocrats Are Replacing Democrats

Authored by Patrick Buchanan via,

“If you look at Trump in America or Bolsonaro in Brazil, you see that people now want politicians who are tough enough to do what they promise,” said Spanish businessman Juan Carlos Perez Carreno.

The Spaniard was explaining to The New York Times what lay behind the rise of Vox, which the Times calls “Spain’s first far-right party since the end of the Franco dictatorship in 1975.”

Indeed, the growing impatience of peoples with elected leaders and legislators who cannot or will not act decisively explains two realities of our time: the eclipse of Congress and the rise of autocracy worldwide.

In condemning President Donald Trump’s decision to declare a national emergency and use Pentagon funds to build his wall, Beltway elites have charged the president with a multitude of sins against the Constitution.

He has usurped the “power of the purse” that the Founding Fathers invested in Congress. He has disregarded the “checks and balances” of Madisonian democracy. He is acting like an imperial president.

Yet the decline of Congress is not a recent phenomenon. And the principal collaborator in its fall from grace, from being “the first branch of government” to the least esteemed, has been Congress itself, its own timidity and cowardice.

Contrast, if you will, the now-inveterate torpor and inaction of Congress with how presidents, declared by historians to be great or near great, have acted.

Thomas Jefferson seized upon Napoleon’s sudden offer to sell the vast Louisiana territory for $15 million in an act of dubious constitutionality by Jefferson’s own judgment. History has validated his decision.

Andrew Jackson — “John Marshall has made his decision; now let him enforce it!” — shoved aside a Supreme Court ruling denying him the right to transfer the Indians of Florida to the middle of the country.

Abraham Lincoln arrested Maryland legislators to prevent a secessionist-minded legislature from meeting, violated the habeas corpus rights of thousands, ordered Chief Justice Roger Taney arrested, shut down newspapers, and, in January 1863, declared free all the slaves of every state still in rebellion against the Union.

“I took Panama!” said Theodore Roosevelt, whose agents helped rebels shear off the province from Colombia to build his canal.

FDR ordered some 110,000 Japanese, 75,000 of them U.S. citizens, into detention camps in 1942 for the duration of the war.

Without authorization from Congress, Harry Truman ordered U.S. troops into South Korea in 1950 to resist the invasion by North Korea, calling it a police action.

Though a Republican House voted against attacking Serbia in 1998, Bill Clinton continued his 78-day bombing campaign until Belgrade yielded up its cradle province of Kosovo.

Yet while presidents have acted decisively, without congressional authorization and sometimes unconstitutionally, Congress has failed to defend, and even surrendered, its legitimate constitutional powers.

Congress’s authority “to regulate commerce with foreign nations” has been largely ceded to the executive branch, with Congress agreeing to confine itself to a “yeah” or “nay” vote on whatever trade treaty the White House negotiates and sends to the Hill.

Congress’s authority to “coin money” and “regulate the value thereof” was long ago transferred to the Federal Reserve.

Congress’s power to declare war has been ignored by presidents since Truman. Authorizations for the use of military force have replaced declarations of war, with presidents deciding how broadly they may be interpreted.

In declaring the national emergency Friday, Trump rested his case on authority given the president by Congress in the National Emergencies Act of 1976.

The Supreme Court has usurped Congress’ powers with impunity.

While the civil rights acts of the 1960s were enacted by Congress, the desegregation of America’s public schools was simply ordered by the Warren Court in 1954.

In the ’60s and ’70s, Congress sat indolent as busing for racial balance was imposed on countless school districts by federal judges.

As the Supreme Court, for decades, exploited the establishment clause of the First Amendment to de-Christianize all public schools and public places, Congress did nothing. A triumphant court then moved on to declare abortion and same-sex marriage constitutional rights.

Yet Congress had the latent power, in Article III, Section 2, to restrict the jurisdiction of the Supreme Court and every other federal court. But the big stick the founders left for Congress to corral a runaway Supreme Court was never picked up, never used.

High among the reasons Trump was elected was that, for all his flaws and failings, he was seen as a doer, a man who “gets things done.”

And high among the reasons that autocrats are on the rise is that the centrist parties being shoved aside are perceived as having failed the people in their most basic demands - fewer migrants, more secure borders, preservation of national identity, putting their own people and their country own first.

Whatever may be said of the autocrats, be it Trump, Putin or Xi Jinping, they are not talkers but doers. They act.

And they may very well own the future.

Published:2/20/2019 6:44:14 PM
[Markets] Russiagate In Flames: No Evidence Of Collusion, New Findings Challenge DNC Hack Narrative

Authored by Elizabeth Lea Vos via Disobedient Media,

In the last few weeks, we have witnessed two pillars of the Russiagate narrative continue to disintegrate and erode. First, we heard that a bipartisan inquiry by the Senate Intelligence Committee admitted that they have yet to find evidence indicating that the Trump campaign coordinated with Russia in the run-up to the 2016 US Presidential election. Secondly, new light was shed on the process by which the DNC Emails published by WikiLeaks may have been sourced, thanks to two reports: one authored by former NSA Technical Director Bill Binney and former CIA analyst Larry Johnson, with the other work penned by Disobedient Media's Adam Carter.

Of course, this does not entail that the establishment-backed media will stop promoting the neo-McCarthyist insanity that has held legacy press audiences captive for the last two and a half years.

No Evidence For Trump-Russia Collusion

A recent report from NBC related an admission from both Democratic and Republican members of the Senate Intelligence Committee, indicating that they have discovered no evidence of Trump-Russia collusion to date. NBC's report reads in part:

"The Senate Intelligence Committee's investigation into the 2016 election has uncovered no direct evidence of the Trump campaign conspiring with Russia, Democrats and Republicans on the committee told NBC News. But different parties' investigators in the probe, which is winding down, disagree over the implications of a pattern of contacts between Trump associates and Russians." 

Let's review that again: the only thing the Democrats and Republicans disagree on is the significance of an alleged "Pattern of contacts between Trump associates and Russians."

Note: the "pattern" here does not specify that the "Russians" in question were associated in any sense with the Russian government. One should not have to stress the significance of differentiating between a nationality versus affiliation with the Kremlin. Meanwhile, the characterization of "Trump associates" is entirely vague.

To conclude from such sentiments that anyone who so much as has "contacts" with "Russians" (again, not the same thing as contacts with proxies or employees of the Russian state) must be working at the behest of Putin would represent an intense strain of xenophobia, if not outright racism.

Independent journalist and comedian Jimmy Dore also commented on NBC's report, saying: "For two and a half years, [Rachel Maddow] has been an out-of-her-mind conspiracy theorist. She said that Russia is going to freeze you when it gets cold... These people are the biggest conspiracy liars in the world."

One does not have to rely on the statements of the Senate Intelligence Committee to understand that no shred of evidence of Trump-Russia collusion has yet been shown to the public. Last month, The Nation's Aaron Mate wrote:

"Not a single Trump official has been accused of colluding with the Russian government or even of committing any crimes during the 2016 campaign. As The New York Times recently noted, “no public evidence has emerged showing that [Trump’s] campaign conspired with Russia.”

In the wake of the latest news regarding such lack of evidence, Mate wrote via Twitter:

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The Intercept's Glenn Greenwald also chimed in on NBC's report, writing via Twitter: "When even NBC, [Ken Dilanian] and Democrats (excuse the redundancy) are admitting this so clearly in the first paragraph of their article, it's time for people to start facing some facts about what they've been telling people."

Of course, many have long pointed to evidence countering the Trump-Russia collusion narrative, expecting such contrary evidence to become the "death of Russiagate." Unfortunately for the sake of truth and sanity, it seems that this writer's opinion on the immortality of Russiagate is going to continue to prove true, as long as the saga serves the establishment's need for deflection from real election interference and other pressing domestic issues.

As this author opined last year:

 "Standing on the shoulders of this methodical evidence, it seems at this point that no amount of contrary evidence, exposure or implosion will ultimately kill the undead Russiagate monster. If that were possible, the Thing would have been put irrevocably into the ground over a year ago. Or six months ago. Or a few weeks ago."

Russian Hacking Narrative Implodes

The Russian hacking aspect of the scandal was also severely discredited in recent days, in the wake of two new reports. One article was authored by Disobedient Media's Adam Carter, with a separate piece published by Bill Binney and Larry Johnson. Binney is a former NSA Technical Director; Johnson an ex-CIA analyst.  Both are active members of Veteran Intelligence Professionals for Sanity (VIPS).

The two articles discussed revelations arising from studies of the DNC Emails released by WikiLeaks in 2016. We remind our readers that, while Adam Carter, Disobedient Media, The Forensicator, Veteran Intelligence Professionals for Sanity, Stephen McIntyre, and others have regularly reported regarding documents published by the Guccifer 2.0 persona, the latest pieces focus instead on the DNC Emails as published days before the DNC convention.

Though this writer will not attempt to present every aspect or technical detail contained in the articles, we will endeavor to make our readers aware of the essential points which Carter, Binney, and Johnson have raised.

Carter's work suggests that the DNC Emails were originally accessed via a USB thumb drive or similar device, concluding: "The evidence strongly suggests that the first three batches of DNC emails were transferred via a USB storage device at some stage between acquisition and then subsequently being published by WikiLeaks."

As noted by Carter, such a scenario aligns with allegations made by former UK Ambassador Craig Murray, who claimed that he was the recipient of the files via an intermediary rather than the original source. Carter adds: "However, transfer speeds observed for the batches with last-modified dates matching the dates of acquisition indicate that they were transferred at approximately 3 megabits/second, a lot slower than we would expect if it were a local or LAN transfer, so the transfer we’re looking at likely involved a remote transfer at some point between acquisition and delivery."

Carter continued: "... It seems likely that the original emails were copied soon after acquisition... The (hypothetical) existence of an intermediary doesn’t tell us anything about the individual (or individuals) who originally acquired the emails. Thus, this scenario does not necessarily rule out the possibility of an insider acquiring the emails. If we contemplate the intermediate use of cloud storage, this could have been used as a method to decouple the acquisition of the emails from delivery to another party that subsequently delivered them to Wikileaks."

The article by Binney and Johnson also discusses the relevance of indications that the DNC emails published by WikiLeaks were likely accessed via a storage device, rather than leaked. They state in part:

"An examination of the Wikileaks DNC files do not support the claim that the emails were obtained via spearphishing. Instead, the evidence clearly shows that the emails posted on the Wikileaks site were copied onto an electronic media, such as a CD-ROM or thumb-drive before they were posted at Wikileaks... We believe that Special Counsel Robert Mueller faces major embarrassment if he decides to pursue the indictment he filed--which accuses 12 Russian GRU military personnel and an entity identified as, Guccifer 2.0, for the DNC hack—because the available forensic evidence indicates the emails were copied onto a storage device."

Binney and Johnson conclude: "Taken together, these disparate data points combine to paint a picture that exonerates alleged Russian hackers and implicates persons within our law enforcement and IC taking part in a campaign of misinformation, deceit and incompetence. It is not a pretty picture."

The Real Cost Of Russiagate

Though Russiagate may be summed up as a never-ending theatrical performance designed to hold attention rather than prove itself, that ineffability does not mean that the saga has had no tangible effects in the real world. Regardless of what one makes of the legitimacy of Russiagate or any one of its sub-narratives, we can all agree that it has wreaked havoc directly and indirectly on many fronts.

Journalist and award-winning author Patrick Lawrence wrote a ground-breaking article with The Nation in August of 2017, covering a Veteran Intelligence Professionals for Sanity (VIPS) memorandum to President Trump. The memo, and Lawrence's article, indicated that the Guccifer 2.0 persona had published documents that were likely accessed locally, rather than hacked remotely.

The repercussions for Lawrence - professional, financial, personal - continued for many months. In an interview, Lawrence told Disobedient Media: "My working principle from the first is that disagreements and other such matters internal to a publication - any publication - shouldn't be aired outside the newsroom door. When I was trained, you'd be summarily fired if you went public with such a stunt. I thought this at the time my article came out, and on that same principle, I won’t comment now." Lawrence concluded: "I should add I have no reason to retract a single syllable of what I wrote."

hit-piece authored last year by Duncan Campbell saw the doxxing of Disobedient Media's Adam Carter, putting his livelihood in jeopardy and conflating anonymity with wrongdoing, among other things. Campbell's text received much criticism from this outlet and others for its disastrously inaccurate depiction of the opinion of Bill Binney and other VIPS members.

NSA Whistleblower Thomas Drake was also quoted in the piece, comparing CIA veteran and VIPS co-founder Ray McGovern with George W. Bush's politicization of intelligence in the lead-up to the Iraq War.

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Most readers do not require the reminder that McGovern and other members of VIPS were strongly opposed to the faulty intelligence used by the Bush administration as a pretext for the 2003 war in Iraq. This history makes Drake's comparison particularly odious and is additionally damaging because like McGovern, Drake is a respected member of VIPS. Disobedient Media reached out to Drake for comment on this point and others, to which we received no reply by the time of publication.

McGovern spoke with Disobedient Media, saying:

"I knew Tom Drake to be a straight shooter, an impression strengthened by our teamwork in Moscow presenting Ed Snowden with the Sam Adams integrity award that Tom himself had won two years before. I normally cut Tom some slack, in view of all he has been through. But when he belatedly took issue with the key VIPS memo of July 24, 2017 on “Russian hacking,” and made claims unsupported by evidence (claims strongly challenged by his fellow NSA "alumni" in VIPS), I, as chair of that memo, had to call him out of order. He reacted poorly and seems now to be in for further embarrassment."

Disobedient Media also spoke with Bill Binney, who told this author:

"Tom has been a friend of mine for about 20 years. During that time he has demonstrated sound analytic judgment on technical issues with the exception of one. That is the issue of Russiagate and association with the Trump campaign and administration. In this case, I believe he has allowed himself to be diverted by the rather large hoard of emotionally motivated who are intent on associating the Russians with Trump to form the basis for impeachment. They have and continue to convict Trump based on statements made by large numbers of people - as if that were proof of anything. So, on this issue, a good chunk of the US population have lost their objectivity and instead of demanding proof based on observable facts (available to be inspected) they accept assertions generated by emotion. The true test will be in a court of law where all these assertions would be treated as hearsay and inadmissible as none are first-hand observers."

Disobedient Media has been separately smeared by entities like Media Bias Fact Check, whose report appraising this outlet laughably alleged that we have been a "defender" of the Guccifer 2.0 persona. While such an absurd statement would carry no weight with even the most cursory of Disobedient Media's readers, it is nonetheless noteworthy in that it specifically uses a false neo-McCarthyist narrative to attempt to assassinate the credibility of this outlet.

When asked about the real-world implications of Russiagate thus far, Ray McGovern - who, as we remind our readers, is a former CIA analyst with decades of experience during the cold war period - expressed deep concern, saying:

"I worry about what conclusions President Putin may draw from attempts to demonize him and to make Russia a pariah. Inflammatory rhetoric can be prelude to war. Worse still, the temperament and hubris of President Trump’s advisers are a far cry from the sage, sober advice Ambassador Llewellyn Thompson, for example, gave President Kennedy during the Cuban missile crisis in 1962. Shattered, at this point, is any residual hope Putin may have harbored that Trump would be able to improve ties with Russia. Trump is not his own man. Putin, thus, must prepare for the worst. This is the most serious damage from the Russia-gate narrative so far."

Patrick Lawrence also appraised the damage done by Russiagate in a piece published via Consortium News, writing: "Numerous sets of sanctions against Russia, individual Russians, and Russian entities have been imposed on the basis of this great conjuring of assumption and presumption."

As described by McGovern and Lawrence, the tensions raised between two major nuclear powers is perhaps the most important real-world result of over two years of neo-McCarthyist fervor in the US. However, the smearing of members of the independent press and the worsening division amongst VIPS members comprise additional serious damage stemming from a scandal-that-never-was.

In terms of the larger political picture, Russiagate has been endlessly hyped to deflect from public outrage that rightfully erupted in response to overt election interference by the Democratic Party in the 2016 primary season. It has been used in an attempt to mask the failure of the Democrats and specifically Hillary Clinton as a Presidential candidate.

As long as the legacy press continues to use Russiagate to gaslight the public from focusing on ongoing domestic election interference, it remains imperative to point out that Russiagate, to date, has no basis whatsoever in fact. For that reason, Disobedient Media will continue to report on the subject as it develops.

Published:2/20/2019 6:12:43 PM
[Entertainment] Why Jeopardy!'s Alex Trebek Calls the All-Star Games "Frightening" Jeopardy, Alex Trebek Jeopardy! is celebrating 35 years on the air by doing something it's never done before: the All-Star Games. Yep, for the first time ever, Jeopardy! will be played in teams. The tournament...
Published:2/20/2019 5:14:43 PM
[Entertainment] Kim Kardashian Officially Unfollows Jordyn Woods and Tristan Thompson Amid Cheating Allegations Tristan Thompson, Kim Kardashian, Jordyn WoodsKim Kardashian low-key breaks her silence on the alleged Tristan Thompson and Jordyn Woods cheating scandal. The KKW Beauty founder has officially cut ties with the NBA star and...
Published:2/20/2019 4:42:13 PM
[Entertainment] How Amal Clooney and Serena Williams Threw Meghan Markle the $80,000 Baby Shower of Her Dreams Meghan MarkleMeghan Markle is having a baby shower fit for a royal. The lucky few guests who nabbed an invite to the Duchess of Sussex's New York City baby shower are in for a treat! Tatler...
Published:2/20/2019 3:45:30 PM
[Markets] Sleepy Stocks Drift As Fed Minutes Fail To Ignite Buying Boost

The market's hopes that today's snow-delayed Fed minutes would resolve the debate over the fate of the balance sheet unwind, were dashed with the Fed confirming what traders already knew: the Fed would remain patient, data dependent, focused on the fading inflation impulse, and would seek a plan for when the Fed's balance sheet unwind end by the end of 2019 suggesting that the QT may continue well into 2020 depending on what the Fed concludes is a "sufficient" amount of bank reserves.

As Bloomberg notes, "small moves in stocks, bonds and FX as the Fed minutes portray a central bank that still sees a decent economy, slow-growing inflation, a tight labor market and an uncertain path for interest rates." The Minutes punctuated another rather quiet session that saw economically-sensitive stocks such as steel makers, chemical and industrial companies outperform against a flat tape.

Following the ambivalent minutes, rate hike expectations were broadly unchanged, with the Fed Funds still pricing in a rate cut in 2020 as the divergence with the Fed's hawkish dots continues.

As a result, stocks initially slumped, then rebounded, and traded modestly in the green, with the nasdaq hugging the flatline, as banks, small caps and energy stocks outperforming, offset by losses in homebuilders.

 Treasurys were mixed, with the long end taking on water and the curve initially steepening led by 30Y yields higher, even as the short end and 10Ys were more or less flat for the day...

... however by the close of trading, today's steepening had faded most of the intraday move.

Despite today's modest appetite, the scramble into safe havens observed in late December remains a distant memory, and the short end continued to trade about 10bps higher than Fed Funds.

In single names gainers, Caterpillar stood out, with its rally accelerating after it said Chinese demand is “very strong.”

In commodities, WTI crude rose to 2019 highs, up roughly a dollar on the day...

... helping to push 5Y breakevens similarly to 2019 highs...

... while nickel and copper were among the biggest commodity gainers, with some traders citing China’s latest easing steps overnight as a catalyst.

After swinging higher, then lower, the dollar ended mostly unchanged, even as the recent surge in the offshore yuan extended its advance toward the 6.70 level in the New York session despite analyst expectations that gains will be short-lived as China’s weak economy eventually outweighs optimism from a potential trade deal.

And so, with the Minutes coming and going, the critical 2,800 level in the S&P remains untouched, with the broader index trading about 15 points away, and facing massive resistance to break out above what has now been called a "quadruple top."

When and how the S&P can breach this level remains a question for another day after today's sleepy, snowy, stock drift.

Published:2/20/2019 3:11:52 PM
[Entertainment] Survivor Returns: Look Back on the Most Shocking Moments Before Edge of Extinction Survivor: Edge of ExtinctionIt's the Wednesday we've all been waiting for, the Wednesday when Survivor comes back into our lives. Tonight, CBS premieres Survivor: Edge of Extinction, a season apparently...
Published:2/20/2019 2:45:00 PM
[Markets] Bernie Sanders Raised $6 Million In One Day After Launching Campaign

Just one day after officially launching his campaign for the 2020 Democratic nomination during an interview on Vermont Public Radio, Bernie Sanders has already raised more than $6 million through more than 220,000 individual contributions, according to CNN.

Sanders, who consistently ranks near the top of most polls alongside former Vice President Joe Biden, saw the money pour in from donors in all 50 states. The average contribution was $27, which is roughly in line with the average contribution from Sanders 2016 upstart primary campaign against Hillary Clinton, in which he won a number of crucial primaries (all while actively working against the DNC). Confirming his outsize popularity in an increasingly crowded field, the self-described "Democratic Socialist"'s haul dwarfs the $300,000 raised by Elizabeth Warren during the 24 hours after her official campaign launch.


Of the $6 million raised, some 10% (about $600,000) came in the form of recurring donations, providing "a huge, dependable grassroots donor base that will afford the campaign a consistent budgeting baseline."

During his last race, Sanders regularly touted the fact that his campaign was largely funded by small donations. And it appears this is already emerging as a central theme for the 2020 race.

"The only way we will win this election and create a government and economy that work for all is with a grassroots movement - the likes of which has never been seen in American history," Sanders said in his message announcing his campaign. "They may have the money and power. We have the people."

On top of that $6 million haul, Sanders is entering the race with more than $9 million left in his US Senate campaign committee: funds that he can transfer to his presidential campaign. That puts him behind only Warren ($11 million) and Sen. Kirsten Gillibrand ($10.3 million).

That ought to give Sanders plenty of cushion to stick it to the "millionaihs and billionaihs".

Published:2/20/2019 2:11:25 PM
[World] [Ilya Somin] Supreme Court Rules that Excessive Fines Clause Applies to States and Constrains Civil Asset Forfeiture

The decision in Timbs v. Indiana is a significant step forward for property rights and civil liberties, though a key issue remains to be resolved by lower courts.

Earlier today, the Supreme Court issued its ruling in Timbs v. Indiana. The decision is potentially a major victory for property rights and civil liberties. The key questions before the Court are whether the Excessive Fines Clause of the Eighth Amendment is "incorporated" against state governments and, if so, whether at least some state civil asset forfeitures violate the Clause. The justices answered both questions with a unanimous and emphatic "yes." As a result, the ruling could help curb abusive asset forfeitures, which enable law enforcement agencies to seize property that they suspect might have been used in a crime - including in many cases where the owner has never been convicted of anything, or even charged. Abusive forfeitures are a a widespread problem that often victimizes innocent people and particularly harms the poor.

It would have been a major anomaly for the Court to conclude that the Excessive Fines Clause does not apply to state governments, after it has previously ruled that the Fourteenth Amendment incorporates nearly all of the rest of the Bill of Rights against the states, including the Excessive Bail and Cruel and Unusual Punishment Clauses of the very same amendment. Justice Ruth Bader Ginsburg's majority opinion offers a good explanation of why incorporation of the Clause is easily justified under the Court's precedents, which require "incorporation" of those provision of the Bill of Rights that protect rights understood to be "fundamental" to our legal tradition:

A Bill of Rights protection is incorporated, we have explained, if it is "fundamental to our scheme of ordered liberty,"or "deeply rooted in this Nation's history and tradition..."

The Excessive Fines Clause traces its venerable lineage back to at least 1215, when Magna Carta guaranteed that "[a] Free-man shall not be amerced for a small fault, butafter the manner of the fault; and for a great fault after the greatness thereof, saving to him his contenement . . . ."

Despite Magna Carta, imposition of excessive fines persisted. The 17th century Stuart kings, in particular, were criticized for using large fines to raise revenue, harass their political foes, and indefinitely detain those unable to pay....

When James II was overthrown in the Glorious Revolution, the attendant English Bill of Rights reaffirmed Magna Carta's guarantee by providing that "excessive Bail ought not to be required, nor excessive Fines imposed; nor cruel and unusual Punishments inflicted...."

Across the Atlantic, this familiar language was adopted almost verbatim, first in the Virginia Declaration of Rights, then in the Eighth Amendment, which states: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted."

Adoption of the Excessive Fines Clause was in tune not only with English law; the Clause resonated as well with similar colonial-era provisions...

An even broader consensus obtained in 1868 upon ratification of the Fourteenth Amendment. By then, the constitutions of 35 of the 37 States—accounting for over 90% of the U. S. population—expressly prohibited excessive fines.....

Today, acknowledgment of the right's fundamental nature remains widespread. As Indiana itself reports, all 50 States have a constitutional provision prohibiting the imposition of excessive fines either directly or by requiring proportionality....

For good reason, the protection against excessive fines has been a constant shield throughout Anglo-American history: Exorbitant tolls undermine other constitutional liberties. Excessive fines can be used, for example, to retaliate against or chill the speech of political enemies, as the Stuarts' critics learned several centuries ago.... Even absent a political motive, fines may be employed "in a measure out of accord with the penal goals of retribution and deterrence," for "fines are a source of revenue," while other forms of punishment "cost a State money." Harmelin v. Michigan, 501 U. S. 957, 979, n. 9 (1991) (opinion of Scalia, J.)...

In short, the historical and logical case for concluding that the Fourteenth Amendment incorporates the Excessive Fines Clause is overwhelming. Protection againstexcessive punitive economic sanctions secured by the Clause is, to repeat, both "fundamental to our scheme of ordered liberty" and "deeply rooted in this Nation's history and tradition."

Justice Ginsburg also rejected the State of Indiana's argument that the Excessive Fines Clause does not apply to in rem civil asset forfeitures, where the government - in theory - files a claim against the property itself, rather than against the owner, as such. She did so in large part because the Supreme Court had already ruled that the Clause applies to at least some civil forfeitures in its decision in Austin v. United States (1993), and Indiana had not asked for Austin to be overruled. In theory, therefore, the Court could decide to overrule that precedent in a future case, where the issue was properly raised. But it seems unlikely that the justices have any desire to do that.

It is also significant that the Court rejected the argument that the Excessive Fines Clause should be incorporated because its application to in rem civil forfeitures is not "deeply rooted" in American history, even if application to other kinds of forfeitures is:

As a fallback, Indiana argues that the Excessive Fines Clause cannot be incorporated if it applies to civil in rem forfeitures. We disagree. In considering whether the Fourteenth Amendment incorporates a protection contained in the Bill of Rights, we ask whether the right guaranteed—not each and every particular application of that right—is fundamental or deeply rooted. Indiana's suggestion to the contrary is inconsistent with the approach we have taken in cases concerning novel applications of rights already deemed incorporated.

For example, in Packingham v. North Carolina, 582 U. S. ___ (2017), we held that a North Carolina statute prohibiting registered sex offenders from accessing certain commonplace social media websites violated the First Amendment right to freedom of speech. In reaching this conclusion, we noted that the First Amendment's Free Speech Clause was "applicable to the States under the Due Process Clause of the Fourteenth Amendment...." We did not, however, inquire whether the Free Speech Clause's application specifically to social media websites was fundamental or deeply rooted.

In sum, the Court unanimously agrees that the Excessive Fines Clause applies to state governments and that it covers civil asset forfeitures. That is a potentially significant victory for property rights and civil liberties, because it could help curb widespread asset forfeiture abuse. While virtually all states have similar clauses in their state constitutions, many are not aggressively enforced by state courts in asset forfeiture cases.

The Court did leave one crucial issue for future consideration by lower courts: the question of what exactly counts as an "excessive" in the civil forfeiture context. That is likely to be a hotly contested issue in the lower federal courts over the next few years. The ultimate effect of today's decision depends in large part on how that question is resolved. If courts rule that only a few unusually extreme cases qualify as excessive, the impact of Timbs might be relatively marginal. But, hopefully, that will not prove to be the case.

In my view, the Timbs case itself should be fairly easy to decide on remand. In United States v. Bajakijian, the Court ruled that "a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense." The same approach could be applied to civil forfeitures. It is hardly a precise standard, and it may often be hard to tell whether a forfeiture is "grossly disproportionate" or not. But Timbs seems clearly on the "gross" side of the line. The state of Indiana seized the defendant's brand new Land Rover LR2, a vehicle worth about $42,000, even though the maximum fine for his actual offense was only $10,000 - a very large disparity. But there are likely to be cases where things are much less clear.

Ginsburg's majority opinion was joined by a total of eight justices. In separate concurring opinions, Justices Clarence Thomas and Neil Gorsuch argue that "incorporation" should proceed under the Privileges or Immunities Clause of the Fourteenth Amendment, rather than under the Due Process Clause (the vehicle used by the Court for the last century or more). Thomas' opinion reprises many of the arguments he made for this theory in his insightful concurring opinion in McDonald v. City of Chicago (2010), the case that incorporated the Second Amendment against the states.

The idea of reviving the largely moribund Privileges or Immunities Clause enjoys widespread (though not universal) support from legal scholars across the political spectrum. Supreme Court justices have been much more wary. It is notable that Thomas' quest to bring it back now has a supporter in Gorsuch, whereas previously he was largely alone. But, as he is still three votes short, it seems unlikely that Thomas will succeed in his effort anytime soon.

In the meantime, it is clear that both Thomas and Gorsuch (like the other justices) agree that the Excessive Fines Clause should apply to the states, and that the Clause constrains civil asset forfeitures. Thomas is in fact a longtime advocate of stronger judicial review of forfeiture cases.

NOTE: Timbs was represented by the Institute for Justice, a prominent public interest law firm, with which I have longstanding connections, and for which I have done pro bono work on other property rights cases. I did not, however, have any involvement in this case.

Published:2/20/2019 1:42:43 PM
[Entertainment] Henry Golding, Amandla Stenberg and More Stars Attend 2019 Pre-Oscars Party Henry Golding, Machine Gun Kelly, Tom Payne, Vanity Fair and LOréal Paris Pre-Oscars PartyThe 2019 Oscars are just around the corner, and a few stars kicked off the celebrations early. Vanity Fair and L'Oreal Paris toasted to "New Hollywood" at Ysabel in West...
Published:2/20/2019 1:42:43 PM
[Entertainment] Why Willow Smith Opened Up About Her History With Self-Harm Red Table Talk, Jada Pinkett Smith, Willow Smith, Adrienne Banfield-JonesWhen you gather around this table, things always get personal. Back in May of 2018, Willow Smith appeared on the second episode of her mom Jada Pinkett Smith's Facebook Watch series...
Published:2/20/2019 1:11:20 PM
[Right Column] Watch: Morano on Eric Bolling’s TV show: Morano says there’s NO current Cabinet member willing to stand up to the U.N., Al Gore, or MSM on science of global warming’

Broadcast February 13, 2019 - The Blaze - Eric Bolling's America 

Marc Morano says there's NO current Cabinet member willing to stand up to the U.N., Al Gore, or MSM on science of global warming. The ONLY person is Trump himself.

Published:2/20/2019 1:11:20 PM
[Entertainment] Noah Centineo and Lily Collins Get Flirty on Instagram Noah Centineo, Lily Collins Noah Centineo and Lily Collins are sparking romance rumors! Fans of the actors are buzzing over a recent social media exchange between the To All the Boys I've Loved Before star and...
Published:2/20/2019 12:42:10 PM
[Markets] The "Powell Call": What Do We Need To See For The Fed To Hike Again

There was significant shock two months ago when Powell made public the Fed's dramatic dovish reversal, effectively ending the Fed's rate hiking trajectory and at the same time unleashing a dramatic market rally. But why? Perhaps it has to do with the popular view that the Fed has an advantage in forecasting and in some cases has "inside information". In fact, as BofA notes, the Fed's forecasting accuracy is on par with that of market consensus, in other words rather dismal, and swayed more by the market than underlying fundamentals.

To assess the Fed's forecasting record, BofA looked at two sets of forecasts: the Board of Governors staff forecasts (Greenbooks) and the FOMC's summary of economic projections (SEP); whereas the academic literature has focused on the former, BofA examines the SEP forecasts from 2009 to the present.

What it found is that when looking at forecasts for real GDP growth, the unemployment rate and core PCE inflation, the forecast errors increased over time across the board (Chart 3). No surprise. The errors are the largest for GDP, which means that the Fed has the poorest record for estimating GDP. Comparing the forecast errors of the Fed vs the Blue Chip and Bloomberg consensus shows that they are comparable. Focusing on GDP, both the Fed and the consensus has underestimated GDP growth one to two quarters out over this recovery but has significantly underestimated growth thereafter (Chart 4).

Naturally, the Fed's infamous "dots", or fed funds projection, will be a function of these forecasts. Given the errors in forecasting growth and inflation, BofA notes that investors should be cognizant of the challenges in predicting the rate path.

Fed Chair Powell has been alluding to such, arguing that market participants shouldn't overemphasize the path of the dots given that they are only modal forecasts. Nonetheless, they are part of the Fed's communication strategy and will be under the market microscope in this world of enhanced transparency.

Of course, the current episode in which the Fed unexpectedly hit the breaks on its hiking intentions has striking similarities to what happened in early 2016 when the Fed delivered a hike in December 2015 during a period of heighted uncertainty in markets. Shortly thereafter, the markets and economy were hit by the combination of the surprise renminbi devaluation in August 2015, falling oil prices, Brexit and a rapidly strengthening dollar. Indeed, both Powell and Yellen have recently made parallels between the two episodes with Yellen explicitly stating in a recent CNBC interview that "what's going on now reminds me a lot of 2015/2016."

The Fed's communication shifted quickly back then as well: in December 2015, the minutes focused on the improvement in the labor market and strong growth prospects. By March, the Committee underscored that "global economic and financial developments" posed risks. Indeed, the dots went from 4 hikes to 2 hikes for 2016 between the December and March meetings. The rapid shift in Fed guidance prompted many market participants to argue that the Fed was "one and done" (it was merely put on hold for about a year).

The Fed then stuck with this dovish narrative until the April 26-27 meeting where they again signaled that hikes were on the horizon. But market participants were not pleased and further priced out the possibility of a hike. Finally by the summer, the market moved toward pricing in another hike at year-end as shown below.

The move down in market pricing and Fed communication is more extreme today than in 2016 but the lesson learned is that expectations can shift fairly quickly. One should note, however, that in 2016 the Fed was not also engaging in QT, i.e., reducing its balance sheet by up to $50 billion per month (if, in reality, the monthly number averages about $36 billion).

Which brings us to the big question everyone is asking: what do we need to see for the Fed to hike again?

According to Bank of America, there are three key signals that traders - and the Fed - should be especially focused on:

  • Get through a few big risk events, most notably the designation of auto import as a national security risk (February 19), the deadline for China/US trade talks (March 1), reinstatement of the debt ceiling and the subsequent negotiations (March 1) and the Brexit deadline (March 29). If a bad outcome is avoided in each case, it will reduce downside risks and make the Fed more comfortable with the outlook.
  • US data slow but remain at or above trend. After the bad December retail sales report, perhaps the next key data point is the January report (release date has yet to be set by the Census Bureau). One bad number is a fluke, two is a problem.
  • Global growth also needs to stabilize, particularly in Europe and China.

BofA concludes that if these three factors hold, market conditions will likely remain accommodative, giving the Fed the green light to consider another rate hike. Furthermore, most Fed officials still believe that we are about 50bp away from neutral rates, as suggested by the long-run dot, which means rates can head higher while still delivering the desired soft landing for the economy.

There is also the risk of a "Powell Call": if, as many know if don't necessarily vocalize, the Fed is driven mostly by the market, then when the S&P approaches its all time high above 2,800, it is likely that the Fed's thinking will make another U-turn, and even though Powell does not want to be seen as flipflopping with the market, he will also be cognizant of the risk of reflating the asset bubble, and purely for the sake of equities, may suggest that hikes are again on the horizon, even if the three key catalysts listed above are not all met.

The challenge, of course, will be how to communicate the hawkish shift without once again shocking the markets.

This brings us to the next two events where Powell will address an audience: the Fed's semi-annual monetary policy testimony to Congress on Feb 26 and 27 followed by the March 20 FOMC meeting. Powell will likely deliver similar comments as in the January press conference. However, as BofA notes, it gets more complicated in the March meeting as that is when the FOMC will have to release an updated SEP, including a new set of "dots". In December, the dots signaled three more hikes in total but since then Powell has refused to signal the direction of the Fed's next move. As such the key question is whether the dots move all the way down to zero hikes? To BofA, the answer is "Doubtful." This means that Powell might have to dance around the signal from the dots, perhaps underscoring that they are just a forecast… one made by mere mortals who get their forecast wrong more often than not...

Published:2/20/2019 12:42:09 PM
[Entertainment] The Masked Singer Reveals Intense Secret-Keeping Measures in Behind-the-Scenes Video The Masked SingerKeeping a secret in the TV industry is no easy feat. There are cell phones, audiences, social media, talent teams, all sorts of hurdles--just look at the lengths Game of Thrones went to for its...
Published:2/20/2019 11:45:30 AM
[Entertainment] Make Way for PEN15 and Prepare to Relive Your Adolescence PEN15The coming-of-age show is a mainstay on television, running the gamut in quality and genre, from The Wonder Years and Freaks and Geeks to the recent 13 Reasons Why. Hulu's PEN15 (yes, just...
Published:2/20/2019 11:11:05 AM
[Markets] Illinois Doubles Minimum Wage To $15 An Hour

As if Illinois sky-high taxes, outsize cost of living and teetering public pension fund weren't enough reasons for people and business to flee the state (it suffered record population loss in 2018, the fifth straight year of declines), newly inaugurated Democratic Gov. JB Pritzker - heir to the Pritzker fortune - signaled Thursday that he would sign a bill to double Illinois minimum wage from $8.25 to $15 by 2025 after it passed both houses of the state legislature.

As the Daily Caller reported, the bill will raise the state minimum wage incrementally to $9.25 on Jan. 1, 2020, then to $10 an hour the following July, and it will continue to increase by $1 a year until 2025.


JB Pritzker

"Phasing in the minimum wage over the next six years will put $6,300 a year into the pockets of nearly a quarter of our state’s workforce and billions of dollars into local economies in every corner of our state," Pritzker said in a statement.

Of course, while fighting economic equality sounds like laudable goal, minimum wage hikes ignore the fact that by raising costs, employers will be incentivized to hasten their adoption of automation, which, as McKinsey warned in a study published back in 2017, is expected to kill 800 million jobs by 2030.


Illinois' wage hikes are among the most extreme being adopted by US states in 2019.

Pritzker's decision to sign the bill comes after his predecessor, Republican Gov. Bruce Rauner, vetoed a similar proposal back in 2017.

To be sure, Illinois won't be the first state to reach a $15 minimum wage. That honor will likely go to California, which is expected to adopt a $15 minimum wage in 2022. Massachusetts is set to have a $15 minimum wage in 2023 and New Jersey in 2024. New York’s minimum wage will eventually hit $15 through a series of increases tied to inflation. Cities like New York City and Seattle have already caved to unions demands - pushed by the "Fight for $15" initiative - and hiked minimum wages independently.

In fact, a study of Seattle's minimum wage hikes found that, contrary to the city council's stated intentions, the decision to raise wages actually had an adverse impact on the city's poor by killing thousands of jobs.

Published:2/20/2019 11:11:05 AM
[The Blog] Thank you, Pres. Trump: 18 trillion gallons of rain fall on thirsty California

If it rains, it pours.

The post Thank you, Pres. Trump: 18 trillion gallons of rain fall on thirsty California appeared first on Hot Air.

Published:2/20/2019 11:11:03 AM
[Entertainment] Every Time Rihanna's Entire Existence Was a Big Mood Rihanna, Birthday FeatureThere's a new challenge going 'round the internet that goes a little something like this: You open up Google and type in Rihanna's name followed by the month and day of your...
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[Entertainment] Lisa Rinna's Secret Real Housewives Origins Revealed Lisa Rinna, RHOBH, Real Housewives of Beverly HillsBelieve it or not, there was a time when Lisa Rinna was not involved with The Real Housewives franchise. The soap star was on Watch What Happens Live with Andy Cohen alongside Carson Kressley and...
Published:2/20/2019 9:10:16 AM
[Markets] Russia Will Target US With New Hypersonic Weapons If It Deploys Missiles To Europe

In his first major public address since the US formally pulled out of the INF arms-control treaty, Russian President Vladimir Putin warned on Wednesday that Russia would point its new arsenal of hypersonic missiles - which can purportedly bypass NATO's ABM systems - directly at the US if it dares to reintroduce ground-based intermediate-range missiles to Europe.

According to Fox, Putin threatened to deploy Russia’s new Zircon missiles, which Putin said can fly at nine times the speed of sound and carry a range of 620 miles and are part of the country's drive to upgrade its defensive capabilities against an increasingly aggressive US and NATO.


Putin also took a few moments to praise Russia's weapons program, comparing the new Avangard hypersonic missile - which Russia infamously tested on the day after Christmas, sending a shiver of alarm through Western intelligence and defense analysts - to the 1957 launch of Sputnik-1, the world’s first artificial satellite, which was built by the Soviet Union. The weapon has demonstrated that Russia has the technological capabilities to surpass the US, according to RT.

And in another warning that, if true, will likely aggravate the US defense community, Putin revealed that Russia has been carrying out successful tests of its  Burevestnik cruise missile and the Poseidon nuclear-powered underwater drone.

"It seemed until recently that Russia can't make a breakthrough in defense technologies, but we made it," Putin said.

Though Russia won't deploy weapons preemptively, Putin said that if the US does place weapons in Europe, Russia will deliver an "asymmetric" response and target not only the host countries of those weapons, but "decision-making center" in the US (presumably Washington).

Still, Putin said he's hoping the US and Russia can work out their differences.

"We don't want confrontation, particularly with such a global power as the US."

With the US and Europe reportedly close to agreeing on a fresh raft of sanctions against Russia (just in time for the Mueller report), Putin also criticized what he described as a "destructive" US policy of targeting Russia.

Moving on from national security-related issues, Putin also spoke about plans to increase welfare spending and embark on public works projects. As reports have shown that his popularity in the Russian hinterlands has taken a hit in response to a controversial plan to ship Moscow's garbage to Siberia, Putin promised improved healthcare and education spending, while promising to upgrade 60 airports during the coming year.

Published:2/20/2019 9:10:16 AM
[Entertainment] Daniel Radcliffe Admits He Turned to Alcohol to Deal With Harry Potter Fame Daniel RadcliffeAs Daniel Radcliffe well knows, "There is no blueprint for starting young and working stuff out." The longtime actor, who got his very famous start as Harry Potter before he even...
Published:2/20/2019 8:43:13 AM
[Markets] Trump Demands $2.5Bn Back For California's High-Speed Rail Fail; Pulls $929Mn Grant

The US Department of Transportation (DOT) says it is exploring legal options to claw back $2.5 billion from California in federal funds which have already been spent on the ill-fated statewide high-speed rail system, according to the New York Times

The Trump administration is also canceling a $929 million grant which was allocated to the California High-Speed Rail Authority detailed in a letter from DOT, just one week after California Governor Newsom announced that the project had been derailed by cost overruns and numerous delays. Instead of canceling the entire project, however, Newsom announced that the state will focus on finishing the line currently under construction, running 171 miles from Merced to Bakersfield - and could open as soon as 2027

Construction at a site near Fresno, Calif., for the new high-speed rail tracks. Photo: Jim Wilson/The New York Times

The decision to yank the grant money and claw back the billions in federal funds comes one day after California filed a lawsuit along with 15 other states challenging President Trump's emergency declaration on the border. 

The $77 billion Los Angeles-to-San Francisco bullet train, which has been a goal of California transportation planners for decades, has long faced opposition from Mr. Trump and other Republicans. But on Tuesday morning, the president explicitly tied the rail line to efforts to stymie construction of the Mexican border wall. -New York Times

Trump slammed California's decision to sue, noting on Tuesday over Twitter that "The failed Fast Train project in California, where the cost overruns are becoming world record setting, is hundreds of times more expensive than the desperately needed Wall!"

One day after California canceled the project, President Trump tweeted of California: "They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a “green” disaster!" 

And on Wednesday, Trump tweeted: "California now wants to scale back their already failed “fast train” project by substantially shortening the distance so that it no longer goes from L.A. to San Francisco. A different deal and record cost overruns. Send the Federal Government back the Billions of Dollars WASTED!" 

Newsom slammed the DOT decision as retaliation for the border lawsuit, saying in a statement. "It’s no coincidence that the administration’s threat comes 24 hours after California led 16 states in challenging the president’s farcical ‘national emergency,’" adding "This is clear political retribution by President Trump, and we won’t sit idly by. This is California’s money, and we are going to fight for it."

On Tuesday, Trump hit back - disparaging the way California wasted the rail money, as well as the state's decision to spearhead the national emergency lawsuit. 

"California, the state that has wasted billions of dollars on their out of control Fast Train, with no hope of completion, seems in charge!" tweeted Trump on Tuesday. 

Ronald Batory - administrator of the Federal Railroad Administration wrote that the federal funds were being pulled after the California High-Speed Rail Authority had "failed to make reasonable progress on the project."

The Transportation Department said in a separate statement on Tuesday that it was “actively exploring every legal option” to seek the return of the $2.5 billion. That threat, however, was not mentioned in Mr. Batory’s letter.

Late Tuesday, a Trump administration official pointed to Mr. Newsom’s remarks last week as an indication that the project was too costly and would “never be constructed as planned.”

Given that acknowledgment, the official said, the administration had a responsibility to taxpayers to “cancel the financial support for this boondoggle.” -New York Times

There may be hope for California's $929 million, however, as former chairman of the board of the high-speed rail project, Dan Richard (who stepped down last Thursday), noted that the federal notice reads that the Trump administration intends to terminate the agreement, rather than saying it was canceling it outright. 

Richard believes this may give California room to negotiate. 

"Of course it’s a serious matter — the federal government has a lot of power in this situation," said Richard, adding: "I’m hoping that the phrase ‘intends to terminate’ gives an opportunity for parties to resolve this issue."

The high speed rail project was going to be former California Governor Jerry Brown's legacy. 

Published:2/20/2019 8:43:13 AM
[Markets] Rosenstein Will Step Down Mid-March: DOJ Official

US Deputy Attorney General Rod Rosenstein is expected to step down in mid-March, according to Reuters, citing a Justice Department official.

Rosenstein - who has refused to testify in front of Congress since reports emerged that he wanted to secretly record President Trump and invoke the 25th Amendment to remove Trump from office, had been expected to leave his position shortly after newly minted Attorney General William Barr assumed his office. 

The DOJ official said Rosenstein's departure was not connected to the 25th Amendment or surveillance allegations. 

Of note, Rosenstein recommended the firing of former FBI Director James Comey, then launched the special counsel probe using Comey's hand-written 'evidence' that Trump obstructed justice by pressuring him to end the investigation into former National Security Adviser Michael Flynn. 

According to a September New York Times report and renewed allegations by former acting FBI Director Andrew McCabe, Rosenstein considered wearing a wire in meetings with Trump - an accusation that the Deputy AG has called "inaccurate and factually incorrect." 

Earlier on Monday Trump accused both McCabe and Rosenstein of planning a “very illegal act,” which he described in a tweet as “illegal and treasonous.”

Rosenstein ceased overseeing Mueller’s probe on Nov. 7 when Trump named Matt Whittaker acting attorney general.

Barr now has oversight of the investigation. -Reuters

President Trump has repeatedly fumed over the Mueller probe, which has yet to report any evidence of collusion between Trumpworld and Russia surrounding the 2016 US election.

Published:2/20/2019 8:13:38 AM
[Markets] "Go Get Them Nick!": Trump Cheers Covington Student's Defamation Suit Against Washington Post

President Trump cheered Covington High School student Nick Sandmann, whom he invited to the White House in the aftermath of the controversy surrounding his "fake news" confrontation with Native American activist Nathan Phillips, after lawyers for the teen filed a $250 million defamation lawsuit against the Washington Post.

In his tweet, Trump quoted from the lawsuit, which accused the post of ignoring "basic journalistic standards because it wanted to advance its well-known and easily documented biased agenda against President Donald J. Trump."

The lawsuit is expected to be the first of many filed against journalists, media organizations and celebrities who helped spread the false narrative about the confrontation, which led to the formation of an angry mob of people on the Internet calling for Sandmann to be punished.










Published:2/20/2019 7:10:42 AM

Published:2/20/2019 6:40:35 AM
[Markets] Global Stocks Hit 4 Month High As US Futures Drop Ahead Of Fed Minutes; Yuan Soars

World stocks hit a four-month high on - what else - hopes of progress in trade talks between the United States and China, even as US equity futures drifted lower, offsetting a rise in European and Asian stocks as traders awaited the release of minutes from the latest Fed meeting. The dollar snapped a 4-day losing streak while the yuan jumped after a Bloomberg report that Trump is asking China to keep its currency stable (and hence less market-determined).

The bullish mood was boosted after Donald Trump said negotiations with China were going well and suggested he was open to extending the deadline to complete them beyond March 1 which is anything but "magical."

European automakers led an advance in the Stoxx 600 Index, which erased Tuesday’s drop, even as miner Glencore fell on lower-than-expected earnings, while Lloyds rose after it unveiled a 1.75 billion pounds ($2.3 billion) buyback plan. UK. grocer J Sainsbury plunged on antitrust objections to its planned takeover of Walmart’s Asda.

Meanwhile, European banks continued to be pressured by expectations that the ECB will restart a program to provide long-term cheap loans, or TLTROs, to banks to boost a faltering economy, depressing yields, while on Monday the BOJ flagged its readiness to ease further.

Earlier, the MSCI index of Asia-Pacific ex-Japan rose as much as 1.1% to mark its highest levels since Oct. 2. Hong Kong’s Hang Seng gained as much as 1.3 percent to six-month highs, while Korea’s Kospi and Taiwan’s index recovered to levels last seen in early October. Japan’s Nikkei added 0.6 percent to two-month highs.

Boosted by fresh dovish sentiment, emerging-market stocks and currencies jumped the most in three weeks amid optimism that trade negotiations between Washington and Beijing will lead to a deal. The South African rand and Turkish lira bucked the rally.

The yuan led the advance among developing markets, bolstering its Asian peers, after Bloomberg reported that the U.S. is asking China to keep the value of its currency stable as part of the negotiations. The onshore Yuan strengthened as much as 439 pips on Wed to close at 6.7236/USD, its biggest intra-day gain in more than a month, and the highest since the end of Jan, and the biggest rise since Jan 10th. The offshore yuan was last trading at 6.7265 after rising as high as 7.164.

And speaking of China's currency, Premier Li said that China has not and will not change monetary policy; will not resort to 'flood-like' stimulus. RRR cut in January reflected that there is sufficient room for cuts, adding that increasing bill financing and short-term loans may create the potential for risks.

Elsewhere in FX, the dollar snapped a four-day losing streak before the release of Fed January minutes, rising 0.2 percent against the yen after Japan recorded its biggest annual drop in exports in January for more than two years, and on recent dovish Bank of Japan signals.

The pound slipped as Prime Minister Theresa May headed back to Brussels in a last-ditch attempt to save her Brexit deal and as three Conservatives quit to join a new party, while the euro lacked a clear sense of direction after ECB’s Praet said a decision on TLTROs may not be made at the March meeting. The rand dropped before Finance Minister Tito Mboweni’s budget speech on Wednesday.

In rates, European bonds mostly edged up, but Italian notes fell while US Treasuries were unchanged after some mixed trading earlier.

In the latest Brexit news, PM May is reportedly to present the EU with fresh legal proposals to break the Irish backstop deadlock and which will hopefully convince Brexiteers to support her deal. In related news, a spokesperson said PM May and Brexit Ministers updated cabinet on Brexit and that the UK is still looking to reopen the withdrawal agreement. Meanwhile, in a shocking development, UK Tory MPs Heidi Allen, Anna Soubry and Sarah Wollaston have resigned from the Conservative Party and joined the Independent Group; talkRadio's Kempsell confirms, with the news sending cable to session lows.


Prior to this, ITV's Peston tweets that if, as he expects, four Tory MPs quit the party today to become independent, PM May's minority government will become even more of a minority, with less grips on the Commons, so a general election moves nearer.

Finally, UK Chancellor Hammond said a no-deal Brexit would be mutual calamity for UK and EU, while he also noted that the most urgent task is to reach an agreement that will protect trading relationship with EU. Furthermore, Hammond said the Malthouse initiative is a valuable effort to allay backstop concerns in the future but added that EU will not consider a replacement to the backstop now.

Looking at key trading catalysts, Bloomberg notes that as the U.S. and China continuing tough negotiations toward a trade deal, focus has shifted to a key campaign promise made by President Donald Trump, namely addressing Beijing’s periodic devaluation of the yuan. Investors will also be preoccupied by the release of minutes from the Federal Reserve later on Wednesday and from the European Central Bank a day later, and they’ll have a glut of German data to contend with toward the end of the week.

“At the start of the year with the upshoot in equities, everything was sort of moving together,” Peter Borish, chief strategist at Quad Capital LLC, told Bloomberg TV in New York. “We are now starting to not see that and that is always the first sign of warning signals in the market place that it might be getting ready for a correction.”

Elsewhere, oil prices hovered near 2019 highs, supported by OPEC-led supply cuts and U.S. sanctions on Iran and Venezuela, but further gains were capped by soaring U.S. production and expectations of an economic slowdown. International Brent crude futures stood at $66.30 per barrel, having hit a three-month high of $66.83 per barrel earlier this week. Gold traded at the highest since April and palladium soared to a record as a shortage started to bite.

Expected data include mortgage applications and FOMC minutes. Analog Devices, CVS, Synopsys and Cheesecake Factory are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures down 0.1% to 2,775.50
  • STOXX Europe 600 up 0.2% to 369.58
  • MXAP up 0.8% to 158.66
  • MXAPJ up 1.1% to 519.33
  • Nikkei up 0.6% to 21,431.49
  • Topix up 0.4% to 1,613.47
  • Hang Seng Index up 1% to 28,514.05
  • Shanghai Composite up 0.2% to 2,761.22
  • Sensex up 1% to 35,688.98
  • Australia S&P/ASX 200 down 0.2% to 6,096.49
  • Kospi up 1.1% to 2,229.76
  • German 10Y yield fell 0.7 bps to 0.098%
  • Euro up 0.1% to $1.1353
  • Italian 10Y yield rose 2.2 bps to 2.429%
  • Spanish 10Y yield fell 0.5 bps to 1.203%
  • Brent futures down 0.5% to $66.13/bbl
  • Gold spot up 0.3% to $1,345.24
  • U.S. Dollar Index little changed to 96.56

Top Overnight News from Bloomberg

  • The U.S. is said to have asked China to keep its currency stable as part of a new trade deal, a move aimed at discouraging officials in Beijing from devaluing the yuan to offset the impact of American tariffs. That request is at odds with years of global pressure on China, from the Group of 20 economies in particular, to move toward a free-floating currency
  • British government sees Theresa May’s meeting on Wednesday with EC President Juncker in Brussels as a crucial chance to get legally binding changes to the so- called Irish border backstop
  • Joan Ryan becomes the eighth U.K. Labour MP to quit the party, accusing Leader Jeremy Corbyn of “presiding over a culture of anti-Jewish racism and hatred of Israel,” according to a tweet from the lawmaker
  • Corbyn’s closest ally Shadow Chancellor John McDonnell, says the Labour leader must listen to critics x
  • Theresa May faces many problems as she tries to nail down a divorce agreement with the European Union but one looms over them all: pro-Brexit Tories do not trust her.
  • Japanese exports fell in January as shipments to China tumbled, adding to signs slowing global demand is weighing on the export-dependent economy
  • President Trump said he is no rush to conclude a nuclear deal with North Korean leader Kim Jong Un because he has a strong relationship with the North Korean leader and U.S. sanctions against the country remain in place
  • ECB officials will discuss new long-term loans for banks shortly, even though it’s unclear yet whether a decision will be taken, according to Executive Board member Peter Praet
  • The British government sees May’s meeting on Wednesday with European Commission President Jean-Claude Juncker as a crucial chance to get legally binding changes to the so-called Irish border backstop, which has proved the biggest obstacle to getting a Brexit deal
  • Indonesia’s finance ministry is studying various forms of incentives for sovereign bond holders, including lower tax for those holding the securities for a longer period

Asian stocks traded somewhat indecisively following the cautious gains seen on Wall St. ahead of this week’s key events including FOMC minutes and US-China trade talks. ASX 200 (-0.2%) and Nikkei 225 (+0.6%) were mixed with Australia dragged lower by continued underperformance in Consumer Staples after Woolworth shares slumped more than 5% post-earnings, while Tokyo stocks were propped up as the impact of a weaker currency eclipsed the concerns from the steepest decline in Japanese Exports for more than 2 years. Elsewhere, Hang Seng (+1.0%) and Shanghai Comp. (+0.2%) were also varied as the mainland lagged despite the PBoC announcement of its first liquidity injection since before the Lunar New Year, as the amount was a relatively paltry CNY 20bln and with participants also kept tentative ahead of upcoming senior level trade discussions between US and China. Finally, 10yr JGBs were subdued with price action contained by an indecisive risk tone in the region and after having recently hit resistance at 153.00, while the absence of the BoJ in the market also contributed to the lacklustre trade.

Top Asian News

  • Zhenjiang Said to Be Mulled for Local Debt Resolution Test Unit
  • Hong Kong to Take Back Part of Biggest Golf Course for Homes
  • Baht Reaches Highest Since 2013 Amid Broader Dollar Weakness
  • India’s Giant IT Industry Rode a Rally in Global Tech Spending

Major indices in Europe have somewhat waned off earlier highs [Euro Stoxx 50 Unch] following a relatively indecisive Asia-Pac session. Sectors are mixed with outperformance in industrials given the price action in the base metal complex, while energy names marginally lag their peers. In terms of notable movers, Sainsbury’s (-16.4%) shares plumbed the depths after the supermarket was dealt a blow by the UK CMA, which stated that the proposed Sainsbury’s-Asda has extensive competition concerns, whilst adding that the two companies will have to shut a significant number of stores or face rejection. The companies now have until 13th March to respond to the CMA's findings, with a final report by the CMA to be issued by 30th April. Elsewhere, Swedbank (-11.1%) has become the latest financial institute embroiled in the Danske Bank (-1.0%) money laundering scandal, following reports of the Co. being linked to USD 4.3bln in illicit transfers. Finally, regarding earnings-driven stocks, Glencore (-0.5%) gave up initial gains as indices came off highs, while Lloyds (+3.9%) maintained its positive at the top of the FTSE amid a GBP 1.75bln share buyback programme alongside a dividend hike.

Top European News

  • Brexit Jobs Boom Has a Flip Side That’s Holding the Economy Back
  • Lloyds Unveils $2.3 Billion Buyback Ahead of U.K. Turmoil
  • Glencore Plans New Buyback as Trading Profit Disappoints
  • Daimler Joins Jumbo Euro Corporate-Bond Rush as Spreads Tumble

In FX, the Greenback has regained some poise after its relatively pronounced downturn late yesterday amidst uncharacteristically dovish comments from Fed’s Mester regarding balance sheet run-offs, as she intimated a willingness to back an end to QT by or even before the end of 2019, albeit keeping options open for a 25 bp hike later this year. However, the index remains depressed and not far off sub-96.500 lows in anticipation that the upcoming FOMC minutes will reiterate the shift in policy guidance to a pause in normalisation and patience before any further adjustments.

  • AUD/JPY/NZD/GBP - All on the backfoot vs the Usd, or paring gains to be more precise, as Aud/Usd eases back towards 0.7150 from circa 0.7175 at best in wake of moderately softer than forecast Q4 Aussie wage data overnight. Meanwhile, a bigger than expected Japanese trade deficit due to the worst export showing since October 2016 compounded post-BoJ Governor Kuroda Jpy weakness as it slips a bit further towards 111.00, but again could glean some traction from option expiry interest given 1.1 bn rolling off between 110.75-85 at the NY cut. Indeed, the Kiwi and Pound are marginally underperforming as Nzd/Usd hovers near the bottom end of a 0.6885-63 range and the Aud/Nzd cross consolidates recovery gains above 1.0400, while Cable runs out of steam ahead of 1.3100 having spiked from sub-1.2900 through 1.3000 in double quick time on Tuesday and topping out around 1.3075 ahead of today’s UK PM May-EU Juncker showdown later today.
  • CAD/EUR - The Loonie continues to reap the most from pre-Fed minutes US Dollar defensive positioning and remains close to multi-week peaks above 1.3200 even though crude prices have encountered more offers/resistance around 2019 highs, while the single currency has formed a firmer base over 1.1300 having closed above a 1.1313 Fib and now eyeing another resistance level at 1.1362 for a stronger bullish technical signal.
  • EM - Contrasting performances for the Yuan and Rand, as the former draws momentum from a stronger PBoC fix, fresh liquidity and positivity surrounding US-China trade talks to test 6.7200 levels vs the Usd, but pre-budget jitters hit the latter with the Zar down to 14.1500 at one stage.

In commodities, Brent (-0.4%) and WTI (-0.3%) prices are subdued after being rangebound throughout the Asia session where WTI reached 2019 highs of USD 56.39.bbl, as markets await today’s FOMC minutes and the beginning of high-level US-China trade talks tomorrow with USTR Lighthizer. The EIA forecasts that US total shale regions oil production will average 8.3938mln barrels in March, which is 84mln barrels above February’s estimate of 8.31mln barrels. Separately, there have been reports of a fire at a PDVSA crude pumping station, which has a 300k BPD capacity; although, as details surrounding the fire are sparse the impact on production is currently unclear. Looking ahead, API’s weekly inventory numbers are to be released today due to the US market holiday on Monday, market expectations are that US crude oil inventories increased over the prior week by 3.1mln barrels. Note, some abnormality may be observed today in WTI trading due to the expiration of the March WTO contract. Gold (+0.1%) is trading within a thin USD 5/oz range, as the yellow metal follows cautiousness seen in the dollar ahead of today’s FOMC. Elsewhere, spot-Palladium has convincingly moved above the USD 1500/oz level reaching USD 1504.46/oz; as the metals 7-month rally, which has been driven by a supply shortage, continues. Separately, German inspection frim TUV SUD has stated that it will no longer certify Vale owned tailings dams, following a Vale owned dam bursting last month.

Looking at the day ahead now, while there’s no data due in the US, we will get the FOMC meeting minutes from the January meeting. Expect the minutes to shed more light on how the Fed’s domestic and global growth outlook may be evolving and the lens through which the Committee may view incoming inflation data in the near term. Expect some focus on the balance sheet normalisation program too, which may reiterate Brainard’s view that the Fed will likely end the roll-off of maturing securities by year-end. Away from that, we’re due to hear from the ECB’s Praet this morning and Fed’s Kaplan this evening, while the US-China trade meetings and meeting between UK PM May and EC’s Juncker should also be a big focus for the market.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -3.7%
  • 2pm: FOMC Meeting Minutes

DB's Jim Reid concludes the overnight wrap

Last month I highlighted the strange occurrence where over the course of a week my Spotify account was seemingly hacked as obscure French/Moroccan music was mysteriously added to my library. If you missed that one you can review it here . Well today it’s our turn to hack into your Spotify account as DB has just launched a new podcast series called Podzept. We have a selection of articles at our launch including one from me on “What the history of populism can teach us today”. They are available on Spotify, Apple Podcast and Stitcher. Feel free to search for Deutsche Bank Research, Podzept or simply follow the links to these sites on this page . We’d be interested to hear from readers (and listeners) whether this is an interesting medium on which to receive research. On public sites like this there is a regulatory restriction on the type of research we can provide so the EMR is at this stage unlikely to be a candidate. However if there is large enough demand for it we’ll look into how we might be able to do it in the future. So all thoughts on whether some research works as a podcast are welcome.

Markets are quiet this week so no excuse to not download Podzept. Nevertheless, one gets the sense that we are all on tenterhooks to a certain degree, waiting for what could be major developments on trade and the now infamous S232 report on autos and US national security. One of our US economists Justin Weidner did some digging last night into the timeline from last year’s 232 steel report. That report was submitted to the President on January 11th, but was not released to the public (in its redacted form) until February 16th. The President subsequently made a determination on March 8. So if history repeats itself it would suggest that (official) details about the 232 auto report won’t come out until mid-March, or whenever they are done redacting the private information.

However, history may not repeat itself but it’s interesting that Mr Trump has yet to make any comments (even via tweets). This could mean one of three things; a) the above timeline is reasonable, b) the results are market friendly, c) Mr Trump and the administration are being careful not to escalate trade tensions at such a delicate stage of the China talks. Unfortunately, I’ve no idea which is closest to reality but it feels like we’re all now constantly looking over our shoulder with this report lurking on someone’s desk somewhere. It’s very important as with European growth so low it could be the straw that breaks the camel’s back in terms of a recession if it goes the wrong way.

On the other main trade front, news flow has the potential to pick up pace with meetings continuing between the US and China today. Mnuchin and Lighthizer will then join talks with China Vice-Premier Liu He again tomorrow. After Europe closed last night, headlines emerged that the US is asking China to keep the yuan stable as part of the negotiations between the world’s two largest economies to ensure devaluations aren’t used to offset tariff increases. The same article on Bloomberg suggested the two countries are discussing how to address currency policy in a “Memorandum of Understanding” that would form the basis of a deal that ultimately will have to be approved by Mr Trump and Xi Jinping. On the positive side, this story hints that talks are progressing. However, later in the session, top White House economist Kevin Hassett told reporters that there is still a lot of progress to make. The overall feeling is that it is 1 step forward, three-quarters of a step back at the moment. So positive momentum but still fragile. Before we review markets, the other main event today is the latest FOMC minutes. See the day ahead at the end for a preview of what to expect.

Steady incremental US positivity seems to be the theme at the moment with Europe a little more in limbo. Last night the S&P 500, DOW and NASDAQ closed +0.15%, +0.03% and +0.19% respectively. The retail sector outperformed, gaining +0.65%, largely thanks to a bumper earnings report from Walmart (+2.21%), which showed their best holiday season performance in a decade. The report from the world’s largest retail store provided some comfort after last week’s terrible retail sales report for December, as it looks increasingly likely that the poor data was an aberration. Commodity markets were also in focus, as the S&P 500 materials index was the best performing major subindex on the day, up +0.58%. Copper (+2.63%) and gold (+1.07%) both rallied, helping mining firms, aided by the weaker dollar which depreciated -0.41%. Gold hit a 10-month high and is now within 2 percentage points of its highest level in 5 years.

Prior to this, Europe had reversed much of the good progress made on Monday with the STOXX 600 ending -0.22%. High yield spreads closed +3bps wider in the US and flat in Europe, while in bond markets both Treasuries (-2.9bps) and Bunds (-0.4bps) firmed up a bit, which was in contrast to BTPs, which sold-off +2.3bps. Disappointing data (more on that below) appeared to be the catalyst.

Overnight in Asia, markets are trading mixed with the Nikkei (+0.38%), Hang Seng (+0.66%) and Kospi (+0.90%) all up while the Shanghai Comp (-0.15%) is heading lower in directionless trading. China’s onshore yuan is up +0.56% this morning likely on the story above that the US are demanding that China keep its currency stable. However, most EM currencies are generally trading strong against the greenback this morning. Elsewhere, futures on the S&P 500 (-0.07%) are trading flattish. In terms of data, Japan’s January trade balance was released overnight with exports declining -8.4% yoy (vs. -5.7% yoy expected) and imports at -0.6% yoy (vs. -3.5% yoy expected) leading to an adjusted trade balance of JPY -370.0bn (vs. JPY -150.7bn expected). The data highlighted that Japan’s exports have now declined for two months in a row for the first time since 2016 and sent the Japanese yen weaker (-0.18%).

Meanwhile, the latest on Brexit is that UK PM May is due to meet with EC President Juncker in Brussels this evening at 5.30pm GMT in what was being billed as a “significant” meeting according to the UK Government yesterday. Bloomberg quoted a source as saying that the meeting is expected to be a “stock-take” of the progress both sides have made ahead of Attorney General Cox potentially setting out his legal position on the backstop tomorrow. Yesterday, we got reaffirmation that the EU will not reopen the withdrawal agreement with the UK and will not accept a time limit on the Irish backstop. So, little sign of any softening of the EU approach, which isn’t a great surprise given next week’s parliamentary vote, which is still targeted for before February 27th. Sterling rallied +1.08% last night for its best session since November, when it rallied +1.93% on positive Brexit momentum and a broadly weaker dollar.

As for other snippets of news, ECB Vice-President Guindos continued the mantra of a more dovish way of thinking between the ECB Council, saying yesterday that policy makers are analysing the slowdown and have a large range of tools to respond with, which includes changing the language on forward guidance. Guindos did add that this wouldn’t happen before a “thorough analysis”. Elsewhere, over in the US, we learned that Bernie Sanders was seeking to run for the 2020 Democratic presidential nomination. Expect there to be more and more newsflow picking up ahead of the next presidential election with tax policy in particular becoming more of talking point. Yesterday, Bloomberg ran a story concerning Elizabeth Warren’s proposal for a universal child care plan funded by a tax on the ultra-wealthy. This higher-tax agenda from the left looks set to run a lot further.

Finally, in terms of the data that was out yesterday, in the UK we saw the unemployment rate hold steady in December at 4.0% as expected, while headline wages missed slightly (+3.4% 3m/yoy vs. +3.5% expected), albeit offset by an in-line core wages reading (+3.4% 3m/yoy). The data was largely in line with BoE forecasts and continues to underscore the divergence between soft survey data and the firming labour market. In Germany, the headline February ZEW survey reading disappointed at +15.0 (vs. +20.0 expected). That represented a drop of 12.6pts from January. Meanwhile, in Italy, as noted at the top, both industrial sales (-7.3% yoy from +0.5% previously) and orders (-5.3% yoy from -2.2% previously) data was very soft.

In the US, the only noteworthy data release was the NAHB home builders market index, which rose +4pts to 62, its biggest jump since 2017 and a potential signal that the real estate sector is bottoming out. A reading above 50 indicates that more builders view conditions as good than poor. The S&P 500 homebuilders index outperformed yesterday, gaining +0.79%.

On the Fedspeak front, NY Fed President Williams said that it would take “a different outlook either for growth or inflation” for him to support additional rate hikes. This isn’t a huge surprise given his previous comments, but it does further solidify the view that policy is on hold for now unless there is a major upside or downside surprise. Cleveland Fed President Mester said that she supports ending the balance sheet runoff by year-end, endorsing the view articulated by Governor Brainard last week. This is certainly a topic that will be discussed more this year, and maybe in the FOMC minutes due later today.

Looking at the day ahead now, the early release this morning comes from Germany with the January PPI report. Later this morning we’ll get the February CBI survey in the UK before the February consumer confidence reading for the Euro Area is out this afternoon. While there’s no data due in the US, we will get the FOMC meeting minutes from the January meeting. Our US economists expect the minutes to shed more light on how the Fed’s domestic and global growth outlook may be evolving and the lens through which the Committee may view incoming inflation data in the near term. Expect some focus on the balance sheet normalisation program too, which our colleagues expect to reiterate Brainard’s view that the Fed will likely end the roll-off of maturing securities by year-end. Away from that, we’re due to hear from the ECB’s Praet this morning and Fed’s Kaplan this evening, while the US-China trade meetings and meeting between UK PM May and EC’s Juncker should also be a big focus for the market.

Published:2/20/2019 6:40:35 AM
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[Markets] UK Manufacturers Deny "Scaremongering", Fear "Catastrophic" No-Deal Brexit

While 'Project Fear' runs rampant through the British media - regurgitating government-sanctioned propaganda to the masses to put pressure on hardline Brexiteers - the head of the country’s main manufacturing association said on Tuesday that Britain faces the “catastrophic prospect” of a no-deal Brexit next month due to the selfishness of some politicians and chaotic parliamentary proceedings.

As Reuters reports, the strong warning from Make UK, previously known as the EEF, comes as Japanese carmaker Honda is expected to say it is preparing to shut its main UK plant with a loss of 3,500 jobs.

Nissan earlier this month canceled plans to build its X-Trail sport utility vehicle in Britain, mostly blaming “business reasons” but also citing Brexit uncertainty.

Make UK’s chair, Judith Hackitt, said in remarks ahead of the group’s annual conference...

“Let me be clear ... for those hard Brexiteers who accuse us of scaremongering. This is very real and very serious,”

“The clock has almost run down and it is now essential that the pantomime in parliament ends."

Britain’s parliament overwhelmingly rejected the transition deal that May negotiated with the EU and time is running out to avoid a disruptive no-deal Brexit on March 29 which would lead to the re-imposition of customs checks on British exports.

“Some of our politicians have put selfish political ideology ahead of the national interest and people’s livelihoods and left us facing the catastrophic prospect of leaving the EU next month with no deal,” Hackitt said.

British manufacturers are facing a global slowdown as well as Brexit uncertainty. Official data last week showed their output fell by the most in over five years in the final quarter of 2018.

“It’s a big shock,” said David Bailey, a professor of industrial strategy at Aston University.

“But it’s not a surprise. Many of us have been warning for several years of the risks to UK automotive over Brexit, that we needed to nail down the uncertainty as soon as possible.”

As The FT reports, Ford said last week it had repeatedly urged the government not to leave the EU without a deal, in response to reports it had warned Theresa May it could move production overseas.

“Such a situation would be catastrophic for the UK auto industry and Ford’s manufacturing operations in the country,” the carmaker said, adding it would take “whatever action is necessary to preserve the competitiveness of our European business”.

Some 49 percent of 429 manufacturers surveyed for Make UK said a no-deal Brexit would make Britain unattractive, compared with 28 percent who said Britain would still be an attractive location, with bigger companies more likely to express concerns.

Published:2/20/2019 1:39:11 AM
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[Markets] The Outlook For Automation And Manufacturing In Seven Charts

Submitted by Visual Capitalist

Over the last decade, the prospect of mass automation has seemingly shifted from a vague possibility to an inescapable reality. While it’s still incredibly difficult to estimate the ultimate impact of automation and AI on the economy, the picture is starting to become a bit clearer as projections begin to converge.

Today’s infographic comes to us from Raconteur, and it highlights seven different charts that show us how automation is shaping the world – and in particular, the future outlook for manufacturing jobs.

The Age of Automation

The precise details are up to debate, but here are a few key areas that many experts agree on with respect to the coming age of automation:

Half of manufacturing hours worked today are spent on manual jobs.

  • In an analysis of North American and European manufacturing jobs, it was found that roughly 48% of hours primarily relied on the use of manual or physical labor.
  • By the year 2030, it’s estimated that only 35% of time will be spent on such routine work.

Automation’s impact will be felt by the mid-2020s.

  • According to a recent report from PwC, the impact on OECD jobs will start to be felt in the mid-2020s.
  • By 2025, for example, it’s projected that 10-15% of jobs in three sectors (manufacturing, transportation and storage, and wholesales and retail trade) will have high potential for automation.
  • By 2035, the range of jobs with high automation potential will be closer to 35-50% for those sectors.

Industrial robot prices are decreasing.

  • Industrial robot sales are sky high, mainly the result of falling industry costs.
  • This trend is expected to continue, with the cost of robots falling by 65% between 2015 and 2025.
  • With the cost of labor generally rising, this makes it more difficult to keep low-skilled jobs.

Technology simultaneously creates jobs, but how many?

  • One bright spot is that automation and AI will also create jobs, likely in functions that are difficult for us to conceive of today.
  • Historically, technology has created more jobs than it has destroyed.
  • AI alone is expected to have an economic impact of $15.7 trillion by 2030.

Unfortunately, although experts agree that jobs will be created by these technologies, they disagree considerably on how many. This important discrepancy is likely the biggest x-factor in determining the ultimate impact that these technologies will have in the coming years, especially on the workforce.

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[Trending Commentary] Trump Looks to Uproot Numbers-Only Bias Test Widely Used Across America

By American Media Institute -

By Paul Sperry In what would be one of the Trump administration’s most far-reaching moves regarding race relations, top White House officials are planning a sharp pullback from federal efforts to correct imbalances in outcomes for minorities in everything from housing to hiring. On the table: a ban on the ...

Trump Looks to Uproot Numbers-Only Bias Test Widely Used Across America 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.

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[Markets] The Uncertainty Hiding In The Recent Market "Rally"

Via Birch Gold Group,

If you look at the Dow year-to-date, you might think the market has rallied fairly well for the start of 2019. You might even think the uncertainty from 2018 was accounted for to some degree.

But not so fast. According to a recent report, Liz Ann-Sonders from Charles Schwab highlighted concerns about an imminent earnings recession.

Ann-Sonders said that an earnings recession – two straight quarters of year-over-year profit declines – is possible. It’s just not “something that the market is forecasting right now.”

She attributed the possibility of this recession to waning effects from last-year’s tax cuts. And over at MarketWatch, Mike Wilson from Morgan Stanley says their earnings recession call is playing out “faster than we thought.”

He also “downgraded S&P 500’s earnings-per-share growth target for the year to 1% from 4.3% and warned of a looming earnings recession.”

Ann-Sonders added more fuel to the fire by highlighting China as a second “wild-card” inside the recent rally:

Sonders and her team pointed out in a report released earlier this month that many big US companies, including paint maker PPG (PPG), chip giant Texas Instruments (TXN) and auto parts supplier Lear (LEA), have cited weakening demand in China on their recent earnings conference calls.

John Butters of FactSet Research provided more insight into what may be a historically “sputtering” market rally:

As of Feb. 8, with 66% of S&P 500 components having announced results, fourth-quarter earnings rose 13.3%. If this holds, it will be the first quarter that the index has not posted an increase of 20%…

So it appears the tax cuts that helped last year’s earnings aren’t going to help this year’s earnings. It also seems like Q4 earnings could be spinning tires in the mud.

Wilson finished the MarketWatch piece by expecting a “full-year decline of about 3.5% in S&P earnings.”

So even if Wall Street optimists are beating the “It’s a rally!” drum, the sound may not be as loud as they claim.

Take Off the Rose-Colored Glasses – And Uncertainty Still Looms

The Dow may have risen 2,000 points to start this year, but it lost over 5,000 points last year between October 3 and December 24.

And if you examine this year’s rise, the “slope” actually seems fairly flat, almost like the market is struggling to recover (see YTD chart below):

So the Dow is recovering, but the momentum may not be enough to sustain a rally much longer. And the S&P average level is flat compared to last year (at 2,745 for this year according to MarketWatch).

Nothing much has changed since last quarter of 2018, either.

You still have trade war concerns and economic slowdowns in Europe and China.

And even though Federal Reserve Chair Powell has slowed short-term rate hikes, according to an article from MarketWatch, he doesn’t control the longer-term rates (emphasis ours):

… most economists say the key figure in finance is the rate on 10-year Treasury notes, which he doesn’t control. That rate on Dec. 31: 2.69%. Today it’s 2.69%.

To add fuel to the fire, a recent paper from Cambria research surprisingly suggests that some of the biggest “gain” days took place during bear markets.

So this rally might actually be a “black swan” for this bear market. One thing is certain - market uncertainty still hides amongst the market hype.

Don’t Let “Hidden” Uncertainty Ruin Your Retirement Plans

The impact of the recent rally on optimistic investors is telling. Who knows what could happen in any renewed trade war talks, prolonged earnings recession, or other downturn.

It just goes to show that market volatility still operates in the background. And at some point, it’ll take over. After all, that’s what happened in 2008.

Don’t let a volatile market that seems to obscure reality hit your retirement the way it did to so many people in our last recession. Start taking action to protect your savings.

Having a diversified portfolio with assets known for their protection during uncertain times such as gold and silver is a strategic way to protect your retirement.

Published:2/19/2019 7:07:17 PM
[Markets] Alabama's "Democrat-Reporter" Newspaper Calls For Return Of KKK

The editor of a small weekly Alabama newspaper is facing an avalanche of criticism after penning an editorial calling on the KKK to return and stop Alabama lawmakers whom he said were plotting to raise taxes in the state.

Goodloe Sutton

Goodloe Sutton

The editorial was written and published by Goodloe Sutton, the editor of the small Democrat-Reporter newspaper in Linden, Ala. In the editorial, Sutton declared that it's time "for the KKK to night ride again" as "Democrats in the Republican Party and Democrats are plotting to raise taxes in Alabama."

Sutton wrote that Democrats "do not understand how to eliminate expenses when money is needed in other areas," adding that "this socialist-communist ideology sounds good to the ignorant, the uneducated, and the simple-minded people."

Instead of stopping at the Alabama statehouse, Sutton said the KKK should "raid the gated communities" up in Washington DC.


When approached for comment about the editorial by a reporter for the Montgomery Advertiser, Sutton doubled-down on his controversial commentary while comparing the KKK to the NAACP. He added that he wasn't calling for the lynchings of "Americans" - but of "socialist-communists".

He said the country would ultimately be better off if the KKK could "get the hemp ropes out" and hang all of the elites in Washington.

"...It's not calling for the lynchings of Americans. These are socialist-communists we're talking about. Do you know what socialism and communism is?" Sutton said.

When asked if he recognized the KKK as a racist and violent organization, Sutton disagreed, comparing the Klan to the NAACP.

"A violent organization? Well, they didn't kill but a few people," Sutton said. "The Klan wasn't violent until they needed to be."

As the backlash to the editorial grows and Alabama lawmakers demand that Sutton resign from his position (which would likely be tantamount to closing the tiny 3,000-circulation weekly newspaper), the University of Southern Mississippi’s School of Mass Communication and Journalism has removed Sutton from its Hall of Fame.

Sutton's family has owned the paper since 1917. He has worked there since 1964, and previously published an award-winning investigation back in the 1990s that led to the federal indictment of an Alabama sheriff. He published that series with his late wife, Jean, who died in 2003.

Published:2/19/2019 6:36:43 PM
[World] [Stewart Baker] How to draft an Executive Order on alien abductions

Episode 251 of the Cyberlaw Podcast

The backlash against Big Tech dominates this episode, as we cover new regulatory initiatives in the US, EU, Israel, Russia, and China. The misbegotten link tax and upload filter provisions of the EU copyright directive have survived the convoluted EU legislative gantlet. My prediction: the link tax will fail because Google wants it to fail, but the upload filter will succeed because Google wants YouTube's competitors to fail.

Rumors are flying that the FTC and Facebook will agree on a billion-dollar-plus fine on the company for failure to adhere to its consent decree. My guess? This is not so much about law as about the climate of hostility around the company since it took the blame for Trump's election.

And, in yet another attack on Big Tech, the EU is targeting Google and Amazon for unfair practices as sales platforms. Uncharacteristically, I refuse to criticize the EU over this policy.

Artificial intelligence is so overworked a tech theme that it has even attracted the attention of the White House and DOD. We ask a new contributor, Jessica "Zhanna" Malekos Smith, to walk us through the President's Executive Order on AI. I complain that it's a cookie-cutter order that could as easily apply to alien abductions. DOD's AI strategy, in contrast, is somewhat more substantive.

If you can't beat 'em, ban 'em. Instead of regulating Big Tech, Russia is looking to take its own Internet offline in an emergency. The real question is whether Russia is planning to cause the emergency it's protecting itself against. If so, the West is profoundly unready.

CFIUS is contagious! Brian Egan tells us that under US pressure Israel is considering restrictions on Chinese investment as the world keeps choosing sides in the new cold war.

China's Ministry of Public Security is now authorized to conduct no-notice penetration testing of Internet businesses operating in China. I must say, it was nice of them to offer the service in beta to OPM, Anthem, and Equifax. Speaking of which, this mayspell (more) trouble for Western firms doing business in China.

Brian touches on Treasury's new sanctions against Iranian organizations for supporting intelligence and cyber operations targeting US persons. It turns out that the hackers had help – and that there is no ideology so loathsome it can't win converts among Americans.

Nate Jones describes the EU's plan to use "cyber sanctions" to fend off hackers during upcoming elections.

This Week in Old Guys You Shouldn't Mess With: Nate reveals how 94-year-old William H. Webster helped take down a Jamaican scam artist. Of course, if he was any younger, he probably wouldn't have picked up when the landline rang.

Our colleagues Nate Jones and David Kris have launched the Culper Partners Rule of Law Series. Be sure to listen as episodes are released through Lawfare.

Do you have policy ideas for how to improve cybercrime enforcement? Our friends at Third Way and the Journal of National Security Law & Policy are accepting proposals for their upcoming Cyber Enforcement Symposium. You can find the call for papers here.

Download the 251st Episode (mp3).

You can subscribe to The Cyberlaw Podcast using iTunes, Google Play, Spotify, Pocket Casts, or our RSS feed!

As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!

The views expressed in this podcast are those of the speakers and do not reflect the opinions of the firm.

Published:2/19/2019 6:06:24 PM
[Entertainment] Khloe Kardashian and Tristan Thompson Break Up: See Their Cutest Couple Moments Khloe Kardashian, Tristan ThompsonIt's the end of the road for Khloe Kardashian and Tristan Thompson 10 months after welcoming their daughter. E! News confirmed on Tuesday that the couple split up right around the...
Published:2/19/2019 6:06:24 PM
[In The News] Jussie Smollett Pleaded Guilty to Giving Officials False Information In 2007

By Neetu Chandak -

“Empire” actor Jussie Smollett pleaded guilty for not only driving under the influence of alcohol, but also for driving without a license and giving law enforcement false information in 2007. Smollett was sentenced to two years of probation, the Los Angeles City Attorney’s office confirmed with NBC News Tuesday. He ...

Jussie Smollett Pleaded Guilty to Giving Officials False Information In 2007 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:2/19/2019 6:06:24 PM
[Markets] Citi Ready To Replace "Tens Of Thousands" Of Call-Center Workers With Robots

Citigroup is apparently preparing to follow through on its promise it shed as many as 20,000 operations and technology positions, according to an interview with CEO Mike Corbat that was published Tuesday in the Financial Times.


Mike Corbat

CEO Mike Corbat has suggested that "tens of thousands" of people working in Citi's call centers will likely be replaced by machines in the near future - machines that can "radically change or improve" customers' experience while cutting costs. Corbat also ruled out a merger like the $66 billion SunTrust-BB&T tie-up that is expected to usher in a new wave of bank consolidation.

Corbat's comments, according to the FT, were the "most explicit" the company has ever been about how its spends the $8 billion it has allotted every year for technology.

Citigroup chief executive Mike Corbat has suggested that "tens of thousands" of people working in the US bank’s call centres are likely to be replaced by machines that can "radically change or improve" customers’ experience while cutting costs. Mr Corbat, who runs America’s fourth-largest bank by assets, made the comments in an interview with the Financial Times in which he also ruled out Citi’s involvement in any wave of US banking consolidation triggered by the $66bn SunTrust-BB&T merger and justified its continued presence in China. Under pressure to bring its cost base in line with peers, Citi executives have been upfront about the impact of technology on their 209,000-strong global workforce, including last summer’s warning that as many as half of the 20,000 operations staff in its investment bank could be supplanted by machines.

Though, fortunately for the few people who will still have job's in Citi's call centers once the bloodletting is over, Corbat said the bank doesn't intend to get rid of all of its human employees. Just most of them.

Citi has no plans to get rid of humans in its call centres altogether though. "There’ll always be the kind of thing where you’ve actually got to have someone to help solve,” said Mr Corbat. “We don’t want people frustrated in that." Mr Corbat cited the potential of Citi’s technology as one of the reasons that his bank would not take part in the wave of US retail banking mergers that some analysts expect to be kicked off after BB&T and SunTrust unveiled the sector’s biggest post-crisis merger a fortnight ago.

Corbat also tried to spin concerns about Citi's sprawling global presence (something investors have typically interpreted as one of its biggest liabilities, particularly in the wake of the Citibanamex scandal, which led to a damaging revision of the bank's quarterly earnings back in 2014) into an advantage.

In the era of Trumpian trade wars, critics have questioned Citi’s geographic spread and its exposure to Mexico, where it owns the country’s second-largest bank. Citi is also the most prominent of the US banks in China. "China needs soy, China needs beef, China needs pork, China needs import of raw materials into their supply chain," said Mr Corbat.

"Those routes may change. So as we [in the US] get tariffs and embargoes and things, those soy routes may move from the US to Brazil and Argentina - two places where we operate. We’ve seen a redrawing of these trade routes, but the demand hasn’t gone away." He added that Citi remained the best owner for Citibanamex in Mexico because "if you look at the pace of digital adoption and the expectation of consumer clients, the technology we’re already using in Asia and the US is totally portable to Mexico today."

While it's probably tempting for Citi's bankers to brush this off as something that doesn't concern them, as State Street just showed, they likely won't be impervious to the bank's technology spend forever.

Published:2/19/2019 6:06:24 PM
[Entertainment] Khloe Kardashian Reacts to Jordyn Woods Cheating Rumors After Tristan Thompson Split Khloe Kardashian, Tristan Thompson, Jordyn WoodsKhloe Kardashian and Tristan Thompson's love story is officially over... and she's reacting to reports that Jordyn Woods is the cause. E! News can confirm the famous couple has...
Published:2/19/2019 5:37:20 PM
[Markets] Russian Warships Shadow US Destroyer Donald Cook In Latest Naval Close Encounter

In the latest indicator of heightened and ratcheting tensions between Moscow and the West, the Russian navy is reportedly shadowing an American warship, the USS Donald Cook, as it transits the Dardanelles Strait on Tuesday.

The US ship is en route to its second Black Sea deployment in only under a month, and fourth since the dangerous Kerch Strait incident. 

The Arleigh Burke-class guided-missile destroyer Donald Cook during prior Jan. 25 Black Sea exercises. Image source: US Navy 

A US Navy statement confirmed that the Arleigh Burke-class guided-missile destroyer began transiting the strait on Tuesday on a mission to conduct what it called "maritime security operations" and to "enhance regional maritime stability" with NATO allies and partners in the region. According to Russia's TASS news agency "the Russian Black Sea Fleet’s guard ship Pytlivy tracked the US vessel’s movements at the time."

The US military newspaper Stars and Stripes additionally noted the Russians boasted of “continuously tracking” the Donald Cook’s movements since entering the region.

The Russian National Defense Control Center said Tuesday: "On February 19, 2019, at 05.00 pm Moscow time [14:00 GMT], US Navy Donald Cook guided-missile destroyer entered the Black Sea. Russia's Black Sea Fleet assigned forces and means to continuously monitor the actions of the American destroyer."

The United States' Black Sea operations, which have routinely been dubbed "freedom of navigation" related deployments, come months after Washington and its allies condemned Russia’s seizure of three Ukrainian vessels and the arrest of 24 sailors in late November at the Kerch Strait. The Kremlin for its part condemned Ukrainian aggression and attempt to interfere in Russian naval operations. 

The USS Donald Cook's prior Black Sea operation involved naval drills with the Georgian Coast guard on Jan. 25 of this year. At that time US defense officials told CNN that its heightened Black Sea presence would be specifically in response to Russia's actions against Ukraine during the Nov. 25 Kerch Strait incident

Prior to the late January operations the US Navy's 6th Fleet said "We routinely conduct operations to advance security and stability throughout the US 6th Fleet area of operations to include the international waters and airspace of the Black Sea," and further, "We reserve the right to operate freely in accordance with international laws and norms."

Pentagon officials also previously addressed what the US sees as "expansive" maritime claims of Russia in the region, framing the comments in relation to the Kerch Strait incident. The US officials claimed that "Moscow lays claim to areas that far exceed the 12 miles from the Russian coastline that is guaranteed by international law," according to CNN

Published:2/19/2019 5:37:20 PM
[World] Lady Gaga and Christian Carino call off their engagement ahead of the Academy Awards Lady Gaga has been turning heads on the red carpet, but her ringless finger at the Grammys made fans wonder: Is she still with fiance Christian Carino?
Published:2/19/2019 5:07:19 PM
[Entertainment] Tristan Thompson Speaks Out About Allegedly Cheating on Khloe Kardashian With Jordyn Woods Jordyn Woods, Tristan ThompsonTristan Thompson has broken his silence on cheating allegations involving Kylie Jenner's BFF Jordyn Woods. Reports surfaced on Tuesday claiming that the NBA star had cheated on Khloe...
Published:2/19/2019 4:36:06 PM
[Markets] How A "Rank & File" Banker Went From Subordinate To $360 Million Man In Ten Years

Tomomichi Takahashi is a Japanese entrepreneur who stumbled into becoming a multimillionaire by just doing his job.

A former Softbank employee and an early mover into robotic process automation, Takahashi eventually found himself running his own public company in a burgeoning industry. It's a field he was forced into as a last resort when his consulting firm was close to death during the financial crisis, according to Bloomberg.

“It was like hell. We decided to do whatever it took to survive,” he said of the crisis.

Takahashi started out in the consulting industry working for Anderson Consulting before joining Softbank in 1996. When Softbank was a much smaller company, he was involved in corporate planning and accounting. He said the company's founder, Masayoshi Son, had a profound influence on him.

Takahashi said: “I was lucky because I could work directly with Son. He always told us that if anyone was going to ride the digital and IT revolution, shouldn’t it be us?”

He established his own consultancy company in 2000, which helped larger firms enter the internet business. He drew upon his experience and knowledge of the IT world from his time at Softbank. He transitioned industries to robotic process automation years later during the aftermath of the Great Recession. 

Now, his firm provides software bots for more than 500 companies like Nippon Life Insurance and Mitsubishi. These bots help companies automate routine tasks like data input and checking invoices.

“I thought the business I’d been building for eight years was going to disappear. Firms can cut consulting contracts with no problem. I wanted to do something where we’d have a deeper involvement with customers, where we’d be a source of value,” Takahashi told Bloomberg.

Taking Son's advice paid off: Takahashi's company, RPA Holdings, listed last year on the Tokyo stock exchange and, as a result, he saw his wealth and stake in the company become worth more than $360 million. 

His company now sits on the forefront of an industry that grew to about $680 million in 2018, up 57% from the year before. The industry is on course to grow to $2.4 billion by 2022 and Takahashi's native Japan has become the world's first adopter for such technology.

Takahashi says the next step is to go beyond robotic process automation to create other services and businesses using artificial intelligence. And while the company forecasts that sales will more than double to 9.1 billion yen in the fiscal year ending February, he’s setting his sights on much higher revenue in the years ahead.

“There’s a huge market for software robots using AI technologies,” he said. “Just like industrial robots in factories, if software bots can take on the tedious routine work in offices, we can create a productivity revolution for white-collar jobs."

As to whether Japan, which has virtually zero slack in the labor force with unemployment in the low single digits and yet still can not hit 1% inflation for decades despite the BOJ monetizing all debt, is the country where menial office workers should be replaced by robots en masse, eventually sparking a wave of domestic unemployment is where this robotic revolution should be tested out, that is a different matter entirely.

Published:2/19/2019 4:36:06 PM
[Entertainment] How Many Iconic Things Can The Real Housewives of Beverly Hills Fit In a One Minute Clip? Cast, The Real Housewives of Beverly Hills, Season 9Sometimes, all you need is one minute of The Real Housewives of Beverly Hills to satisfy all your Housewives cravings. Nothing too crazy is actually happening in the exclusive clip...
Published:2/19/2019 4:07:34 PM
[Markets] NYC's De Blasio Declines To Endorse Bernie, Says He Hasn't Ruled Out 2020 Run

Just hours after Bernie Sanders announced that he will be seeking the 2020 Democratic nomination, New York City Mayor Bill de Blasio, who came ever-so-close to endorsing the "Democratic Socialist" in 2016, even threatening his relationship with the all-powerful Clintons by delaying his endorsement of Hillary by a few months, revealed that - once again - he would not be endorsing Bernie during the 2020 primary.

De Blasio

According to Bloomberg, not only did de Blasio decline to endorse Bernie Sanders’ bid for the Oval Office, the newly reelected New York City mayor affirmed that he hasn't ruled out a 2020 bid of his own.

"I think Bernie did an incredible service for this country in his campaign in 2016, and it fundamentally changed the debate," de Blasio said of the Vermont senator during a news conference in Brooklyn on Tuesday. "I think we’re in a new situation here. There’s obviously a different dynamic, and I think everyone should assess the current situation we’re in."


"I do not rule out any particular path for myself," de Blasio said when asked by reporters whether he’s considering his own run for the presidency.

By flirting with a Sanders endorsement in 2016, de Blasio tried to show that he might be willing to put his principles above his allegiance to Hillary, whose 2000 Senate campaign he managed. De Blasio also worked in the Clinton administration. And the former president swore him in when he started his first term as mayor.

Since then, De Blasio has made three-well publicized appearances with Bernie - who has already started staking his campaign on both his opposition to Trump and his support for pioneering support for a $15 minimum wage and Medicare for All - and even asked the Vermont Independent Senator to swear him in for his second term.

But it's clear that de Blasio, riding high after his highly publicized tut-tutting of Amazon CEO Jeff Bezos in the New York Times, feels he has a shot at being the progressive, billionaire-bashing champion that the Democratic Party will inevitably choose to go up against Donald Trump in 2020.

Published:2/19/2019 4:07:34 PM
[Entertainment] Teen Mom's Mackenzie McKee Raises Concern by Threatening Suicide on Social Media Mackenzie McKee, Teen MomTeen Mom fans are worried about Mackenzie McKee after she threatened to commit suicide on Twitter on Monday night. According to The Blast, McKee was driven to post the alarming message...
Published:2/19/2019 3:35:39 PM
[World] :@WilliamBaude: Justice Thomas's Skepticism of New York Times v. Sullivan

First Amendment limitations on libel and other torts are complicated

In a separate opinion today, Justice Clarence Thomas argued that the Supreme Court should reconsider one of its most famous First Amendment precedents, New York Times v. Sullivan (which holds that the First Amendment requires defamation claims against public figures to demonstrate "'actual malice'—that is ... knowledge that [the statement] was false or ... reckless disregard of whether it was false or not").

I've seen some unduly dismissive reactions already, so a few thoughts:

1. Beware the reductio ad Trump. It's true that candidate/President Trump has called for "open[ing] up our libel laws," and it's true that reconsidering New York Times v. Sullivan could lead to opening up our libel laws but it doesn't follow that it's a bad and wrong thing to do.

2. Overturning or modifying the New York Times v. Sullivan standard doesn't have to mean imposing no First Amendment scrutiny whatsoever on private law tort claims involving speech. For instance, co-blogger Eugene Volokh has documented the widespread presence of free speech principles in private law claims shortly after the founding. Justice Thomas might be open to recovering and articulating these principles even if they fall short of the rule adopted in Sullivan.

3. The question of how exactly to apply the First Amendment to private law claims is genuninely hard. Across property law, libel law, and other torts, I don't think the Court has yet found a consistent approach. (You can find the start of such a theory in this recent lecture by Richard Epstein, which, yes, also critiizes New York Times v. Sullivan as a "constitutional mistake.")

4. If one is results-oriented about these things, there were other paths to the result in New York Times v. Sullivan. For instance, around the same time, the Fifth Circuit had limited the ability of southern states to take jurisdiction over libel claims against the New York Times. I am not saying that was right, but if we are reconsidering things, there is a lot to reconsider.

5. I don't think it's that likely to happen, but this isn't a crazy position.

Published:2/19/2019 3:06:22 PM
[Entertainment] Can You Make It Through The Toe Bro Sneak Peek Without Cringing? The Toe BroFirst came Dr. Pimple Popper, now it's The Toe Bro. A&E is introducing viewers to Jonathan Tomines, the Toe Bro, a foot specialist who treats a range of problems. In the above...
Published:2/19/2019 3:06:22 PM
[Military and Defense] Space Policy Directive-4: Establishment of the Space Force [Full Text]

By R. Mitchell -

President Donald Trump officially created the United States Space Force on Tuesday. The new military branch will operate under the Air Force, similar to the Marine Corp’s relationship with the Department of the Navy. February 19, 2019 Space Policy Directive-4 MEMORANDUM FOR THE VICE PRESIDENT THE SECRETARY OF STATE THE ...

Space Policy Directive-4: Establishment of the Space Force [Full Text] 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:2/19/2019 3:06:22 PM
[World] This Is Us Is Taking On Beth's Backstory in One Of Its Best Episodes Ever This Is UsTonight, This Is Us is taking a bit of a break from the Pearson family. The show is taking a moment to follow Beth (Susan Kelechi Watson) and her cousin Zoe (Melanie Liburd) home to...
Published:2/19/2019 3:06:22 PM
[Markets] Mester, "Magic" Lift S&P To Overbought As "Puzzling" Gold Surge Accelerates

It started out as yet another disappointing day, with Asian markets going nowhere and Europe in the doldrums, dragged lower by the Dax and European auto and bank stocks following poor HSBC earnings and fears about US auto tariffs on European car exports. However, the mood quickly reversed - in very thin volume with the S&P trading about 20% below its 30DMA - after Walmart’s stellar which pushed the stock to its 5th best day in the past 2 years ...

... boosted consumer shares, even as Treasuries once again refused to confirm the stock bullishness, sending 10% yields as low as 2.635%, led by the belly of the curve, as the bond market - unlike stocks - remains concerned that the trade truce will end March 1 without a deal, resulting in fresh tariffs.

Stocks got a second, and then a third wind, after first Cleveland Fed president Loretta Mester echoed what Lael Brainard said recently, when the former hawk urged an end to the Fed's balance sheet unwind later this year, and then Trump spoke to reported, saying March 1 is not a magical date for the China trade deal, giving traders fresh hopes that trade talks with China could be extended and tariffs won't automatically "spring" on March 1.

While today's rally was relatively muted, it was sufficient to send the market into overbought territory, with the RSI rising above 70 for the first time since August, making further gains from here that much more questionable, especially if investors continue to sell stocks and equity ETFs as they have for the past 8 weeks.

Earlier in the day, China’s currency strengthened against the greenback after a Bloomberg report that the U.S. is pressing for a stable Chinese currency as part of negotiations, which in turn pushed the Aussie dollar to session highs as well.

And while Trump's penchant to ignite momentum and trigger algo buying is well-known with the occasional trade-related keyword, one surprise today was gold's spike with the precious metal surging above $1,340, the highest price since last April.

As we first discussed, and as Bloomberg later noted, it's a bit of a head-scratcher as to why gold is gaining today. There's no new meltdown in international politics to drive haven flows, inflation is stable and the dollar, while weaker, isn't moving all that much. Perhaps it really just comes down to the fact that the dollar is weaker. After all, copper is higher and oil is advancing. One obvious catalyst for gold's surge was Kuroda's dovish commentary overnight, in which the BOJ head said the central bank may ease more and buy more assets "if necessary", although other factors cited included "uncertainty surrounding the EU parliament elections, the possibility of Brexit chaos and instability in Venezuela."

Meanwhile, as we noted and as BBG's Andrew Cinko picked up, "even more curious is the side-by-side rally of both gold and equities. Over the last four years, gold and the S&P 500 have had a negative 40-day correlation 72% of the time; the latest reading remains negative at -0.26."

And today's sizeable 1.6% gain in gold is typically not taken well by equities. When the precious metal has risen by that amount or more since the start of 2015, the S&P 500 was lower 64% of the time (18 of 28 instances), with stocks suffering an average loss of 0.4% (average of all 28 instances). Seeing both of them rise is an aberration -- one that probably can't last no matter what the rationale is for gold's strength today.

Whatever the reason, and whether gold is no longer a safe asset, ever since the December lows, both gold and stocks have soared, and as many traders have noted, they can't both be right (unless of course, more QE is imminent).

Meanwhile, as gold jumped, the dollar fell erasing an earlier loss, ahead of the FOMC minutes release tomorrow and speeches from Fed officials this week.

Not saying anything traders didn't know, Kim Forrest, senior portfolio manager at Fort Pitt Capital, said that "there’s a lot going on out there and I think for the most part investors are looking at China and the trade talks. We’ve been down this road a couple of times before -- not just this year, but last year as well -- and this March deadline is really approaching quickly. That’s really where companies are focused, as we heard today on Walmart, but also investors."

In other news, after getting hammered for the past few weeks, the pound rose to the highest leve in 2 weeks on reports U.K. and European officials are working on new legal text for the contentious Irish border backstop.

Meanwhile, as we continue to look for just who is buying the market, the SMART index - which collapsed into the end of 2018 - has continued it sharp rebound, and has been straight up virtually every day since December 24 when Steven Mnuchin called the PPT, prompting questions about the reversal in market trading patterns, as the overnight selloff is now more than matched with late afternoon buying, suggesting that pensions funds could be quietly accumulating positions in the late afternoon.

Published:2/19/2019 3:06:22 PM
[Markets] The Little Known Precious Metals Hedge Fund That Returned 502% in Six Years

With under €18 million in assets, the Plethora Precious Metals Fund is a tiny, or "under the radar" as it prefers, hedge fund that you have probably never heard of - and they like it this way. The fund's strategy, according to a Bloomberg article, is to stay small and seek out small companies on the verge of large discoveries. The fund isn’t focused on increasing the amount of assets it has under management to rake in higher fees, either. It is only focused on performance, its founder, Peter Vermeulen said.

“We invest in small teams of geologists that are looking for ore deposits. Those companies are so small that it is practically impossible to allocate a lot of money there. However, their returns - when they have found gold - are huge,” he said, replicating a strategy many traders use with early stage biotechs.

The company is based in Utrecht and invests in young stage mining exploration companies, most of which focus on gold. This strategy helped the fund reap astronomical returns of more than 500% over the last six years. This blows away the VanEck Vectors Junior Gold Miners ETF, which dropped 62% over the same course of time.

Despite its impressive track record, Plethora has fallen 17% this year as its main holding, Westhaven, has also fallen to start the year.

Plethora owns between 5% and 15% of about 20 different microcap companies that have market valuations of $20 million or less. All companies they own are generally at stages prior to a significant discovery. Because the fund is so small, it’s able to research and invest in companies that are also small and often overlooked by larger funds.

Fund manager Douwe van Hees stated: “We can allocate money very specifically and don’t have to invest in a limited number of less performing assets. [Up until 2014] we invested in large companies that already discovered the gold. We just tried to beat the index but this didn’t turn out to be very successful, so we changed strategy."

In order to stay small, the fund often returns capital to investors. It returned nearly €1 million to investors this year, the second such distribution in two years. The fund also hasn’t taken any new money since 2016. The next route of expansion for the company will be setting up a private equity fund to invest in exploration funds run by geologists.

"This will cut out the middle man and maintain the same strategy as the equities fund," Van Hees said. 

Published:2/19/2019 2:37:00 PM
[Entertainment] Charo Breaks Her Silence After Husband's Suicide Charo, KjellCharo is mourning the death of her husband Kjell Rasten. In a statement shared with E! News Tuesday morning, the singer and actress remembered her husband of nearly four decades with a...
Published:2/19/2019 2:37:00 PM
[Markets] Stocks Hit Session Highs After Trump Says March 1 Not A "Magical Date" For China Deal

Stocks climbed to fresh session highs Tuesday afternoon after yet another bullish - if repetitive - trade-related headline hit the tape. Responding to a question posed by a reporter following the start of the latest round of US-China trade talks, Trump said that the March 1 "hard deadline" for raising tariffs on $200 billion on Chinese goods is not a "magical date" for reaching a trade deal with China - yet another hint that the White House is planning to extend the talks, to the consternation of China hardliners like US trade rep Robert Lighthizer, who has been charged with leading the US delegation.

Following reports last week that the White House has been weighing a 60-day extension of the trade deadline, some Wall Street analysts have postied that an extension would be the best-case scenario for stocks (since Trump has warned that there won't be a deal at least until he has a chance to sit down with President Xi).

Trump has repeatedly insisted that the talks are going "well", even as leaks from the talks suggest that the two sides have yet to reach a memorandum of understanding - a framework on what a deal should look like.

In addition to the "positive" trade news, Cleveland Fed President Loretta Mester did her part to pump the market by chiming in on the other big topic that the market cares about right now - namely whether the Fed is planning to pause its quantitative tightening plans - when she said the central bank should pause its balance sheet runoff, becoming the second Fed member after governor Lael Brainard to urge a hard stop to QT in 2019.


"There are very complex talks," Trump says about ongoing negotiations with the world’s second-largest economy "They are going well. We are asking for everything that anyone has ever suggested."

As markets build on their best start to a year in decades, and prepare for the 9th consecutive week of gains, this headline was just the latest reminder for Trump that all he needs to do to pump stocks higher is remind the market just how "well" talks are going, no details necessary. And, since it keeps on working, Trump will keep on saying just that, day after day, until the S&P hits 2,800 on nothing but hope.

Published:2/19/2019 2:07:28 PM
[Customs, Border and Immigration News] ICE Catches 26 Illegal Aliens at San Diego Market Then Releases Them

By R. Mitchell -

SAN DIEGO – Special agents from U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations executed a federal warrant during a worksite enforcement operation at a San Diego market today. During the operation, 26 individuals working at the market were determined to be in the United States without authorization. They ...

ICE Catches 26 Illegal Aliens at San Diego Market Then Releases Them 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:2/19/2019 1:37:18 PM
[Markets] Fox Cuts Jussie Smollett's Screen Time After Brothers Flip On 'Empire' Star

Empire star Jussie Smollett's screen time has been significantly reduced by Fox in the wake of a rapidly raveling hate-crime hoax in after two brothers of Nigerian-descent reportedly told Chicago PD that Smollett paid them to stage a January 29 attack meant to frame Trump supporters as bigots. 

According to TMZ, Smollett was supposed to have 9 scenes along with a "big musical number" in the second-to-last episode being filmed now, however five of his scenes have been cut, and he's "no longer the focus" in the remaining four scenes. 

With his duties pared down, Jussie will be spending way less time on set. Instead of working every day this week, we're told Jussie's working Friday and possibly Thursday, and he won't be rehearsing.

Less work for Jussie means more work for writers, who are busy making edits. In the past 24 hours, we're told the script has undergone multiple revisions. -TMZ

According to BuzzFeed, the fate of Smollett's Empire character is being kept under wraps by Fox - which has so far stood by the actor. 

Smollett's case is reportedly heading to a Grand Jury as early as Tuesday according to law enforcement sources, who say the focus is presenting evidence that could lead to a felony indictment against Smollett for filing a false police report

As we reported on Monday, evidence has emerged that Smollett concocted the January 29 attack because he was upset that a racist letter sent to the Empire studio didn't get a "bigger reaction," according to CBS 2 Chicago.

Smollett received a letter containing a "white substance" at Empire's Chicago Cinespace Studios where the show is filmed, prompting a HAZMAT response that failed to gain much traction. The "white substance" was later found to be aspirin. 

As a result of the letter's failure to impress, Smollett allegedly paid two acquaintances $3,500 each to rehearse and then attack him a week later in an attempt to frame Trump supporters as violent racists. 

When the letter didn’t get enough attention, he concocted the staged attack,” a source told CBS 2 Investigator Brad Edwards. Other sources corroborated that information.

The blockbuster revelation into at least part of Smollett’s potential motive comes two days after CBS 2’s Charlie De Mar reported Smollett and two brothers — Ola and Abel Osundairo — staged the attack on Jan. 29 in Streeterville. -CBS 2 Chicago

CBS 2 reporter Charlie De Mar spoke on the phone with the Osundario brothers Monday afternoon, who said in a joint statement: "We are not racist. We are not homophobic, and we are not anti-Trump. We were born and raised in Chicago and are American citizens.
While Chicago PD still wants to talk to Smollett, his crisis management team says he has no plans to do so this week. 

Published:2/19/2019 1:37:17 PM
[Entertainment] Watch the Chilling Trailer for Michael Jackson Documentary Leaving Neverland Michael Jackson, Wade RobsonPrepare yourselves for a new perspective of Neverland. Less than a month after Leaving Neverland premiered at the 2019 Sundance Film Festival, HBO has released a brand-new trailer of the...
Published:2/19/2019 1:37:17 PM
[Entertainment] Meghan Markle Is Glowing as She Heads to Baby Shower Meghan Markle, Baby ShowerMeghan Markle's baby shower is underway! The Duchess of Sussex was spotted leaving her hotel in New York City ahead of the celebration with her closest pals. The expecting royal, who...
Published:2/19/2019 1:05:33 PM
[Markets] Grenell Launches Trump Admin Effort Towards Global Decriminalization Of Homosexuality

US Ambassador to Germany Richard Grenell is spearheading a global campaign by the Trump administration to end the criminalization of homosexuality in dozens of nations where it is illegal to be gay, according to NBC News. News of the effort - which has reportedly been in the works for some time, comes after Iran made headlines for executing a gay man.

Grenell - America's highest-profile openly gay official and favorite among Trump's base to replace Nikki Haley as UN Ambassador, is kicking off the effort Tuesday evening in Berlin - as the U.S. embassy is flying in European LGBT activists for a strategy dinner during which they will discuss efforts to decriminalize homosexuality. The campaign will be "mostly concentrated in the Middle East, Africa and the Caribbean," writes NBC, which notes that the effort began before the UN job opened up. 

"It is concerning that, in the 21st century, some 70 countries continue to have laws that criminalize LGBTI status or conduct," said a US official involved in organizing the event. 

Although the decriminalization strategy is still being hashed out, officials say it’s likely to include working with global organizations like the United Nations, the European Union and the Organization for Security and Cooperation in Europe, as well as other countries whose laws already allow for gay rights. Other U.S. embassies and diplomatic posts throughout Europe, including the U.S. Mission to the E.U., are involved, as is the State Department’s Bureau of Democracy, Human Rights and Labor.

Narrowly focused on criminalization, rather than broader LGBT issues like same-sex marriage, the campaign was conceived partly in response to the recent reported execution by hanging of a young gay man in Iran, the Trump administration’s top geopolitical foe. -NBC News

Grenell has been an outspoken critic of Iran, which executed a 31-year-old man who Iranian state-sponsored news agencies say kidnapped two 15-year-olds. The Islamic Republic also executed a 16-year-old student in 2016 for what Amnesty International says was consensual gay sex. 

Speaking with Germany's Bild earlier this month, Grenell wrote "This is not the first time the Iranian regime has put a gay man to death with the usual outrageous claims of prostitution, kidnapping, or even pedophilia. And it sadly won’t be the last time they do it either. Barbaric public executions are all too common in a country where consensual homosexual relationships are criminalized and punishable by flogging and death."

The Trump administration's new effort is likely to cause tensions with close US allies with anti-gay legislation such as Saudi Arabia

In Saudi Arabia, whose monarchy Trump has staunchly defended in the face of human rights allegations, homosexuality can be punishable by death, according to a 2017 worldwide report from the International Lesbian, Gay, Bisexual, Trans and Intersex Association (ILGA). The report identified 72 nations that still criminalize homosexuality, including eight where it’s punishable by death.

That list includes the United Arab Emirates, Pakistan and Afghanistan — all U.S. allies — although those countries aren’t known to have implemented the death penalty for same-sex acts. In Egypt, whose leader Trump has effusively praised, homosexual relations aren’t technically illegal but other morality laws are used aggressively to target LGBT people. -NBC News

Secretary of State Mike Pompeo is reportedly supporting the work by US embassies and consulates to fight for the rights of LGBT people, saying during his confirmation hearing "I deeply believe that LGBTQ persons have every right that every other person in the world would have."

Grenell discussed the global campaign over the weekend at the Munich Security Conference with a bipartisan congressional delegation which included Sen. Lindsey Graham, R-S.C.; Sen. Chris Coons, D-Del.; and Rep. Sheila Jackson Lee, D-Texas.

"While a student at Evangel University, a Christian liberal arts college in Missouri, I was taught by biblical scholars that all truth is God’s truth, no matter where it is found. The truth for LGBT people is that we were born gay," wrote Grenell in Bild. "People can disagree philosophically about homosexuality, but no person should ever be subject to criminal penalties because they are gay."

Published:2/19/2019 1:05:32 PM
[Entertainment] Gwyneth Paltrow Almost Turned Down Shakespeare in Love Amid Brad Pitt Breakup Gwyneth Paltrow, Shakespeare in LoveGwyneth Paltrow originally turned down her Oscar-winning role in Shakespeare in Love. When the actress was first offered the lead in the movie, she was not at the best place in her...
Published:2/19/2019 12:34:09 PM
[Markets] Elizabeth Warren Wants To Tax The Rich To Fund "Universal Childcare"

Elizabeth Warren has been setting a breakneck pace - even for a Democrat - for finding new social programs to pay for with new tax proposals. Reuters reported that Warren's most recent proposal - a universal childcare program - would, like everything else Warren has proposed, be paid for by higher net worth individuals.

The program would be funded by the federal government and would use existing childcare facilities and in-home providers. The tax would apply to individuals that have a net worth of $50 million or higher - outside of Warren's own reported $8 million net worth.

Warren has labeled the tax the "ultra millionaire tax" and her campaign believes that it would generate $2.75 trillion in government revenue over 10 years.

“In the wealthiest country on the planet, access to affordable and high-quality child care and early education should be a right, not a privilege reserved for the rich,” Warren said.

Despite the fact that most states already offer public education around the age of five, Warren wants early education and universal childcare to be available to every family. The proposal says that the cost of childcare would depend on a family‘s income. Families that make 200% more than the federal poverty line, which is about $50,000 or less for a family of four, would get childcare for free. For those who make more, payments would be capped at 7% of their income.

As an example, a family making $125,000 a year would pay no more than $8,750 a year for childcare. An average family in New Hampshire currently pays about $21,000 a year, according to Warren.

With candidates like Bernie Sanders now entering the election fray, there seems to be several main themes for the Democrats in 2020: going as far left as possible, raising taxes and expanding federal programs. Given what Trump's tax cuts did for the stock market, and with our national debt now eclipsing $22 trillion, we're not sure how that's going to go over with voters. 

Of course, if you're worth $50 million or more, even if you don’t have children, this just adds to the list of things you will be subsidizing for the rest of the country.

Published:2/19/2019 12:34:09 PM
[Entertainment] Cardi B Slams Jussie Smollett Over Claims He Staged Attack Cardi B, Jussie SmollettCardi B had something to say about Jussie Smollett. The rapper did not mince words when she went live on Instagram to address her fans over the weekend and speak her mind. During the...
Published:2/19/2019 12:05:42 PM
[Politics] Democrats Say Best People Belong in Government Roles

The Green New Deal would undoubtedly lead to an expansion of the federal government. Democrats think the best thing for the United States is if the country’s best employees find government work, but Republicans aren’t so convinced.

A new Rasmussen Reports national telephone and online survey finds that 43% of Likely U.S. Voters think it is better for America if the best people take government jobs, while 31% think the best people should work in the private sector. A sizable 26% are not sure. (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 February 13-14, 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:2/19/2019 11:35:02 AM
[Entertainment] Kate Beckinsale Claps Back at Troll Over Her Dating Choices Kate Beckinsale, Producers Guild Awards 2019Kate Beckinsale is over the critical comments about her personal life. The Underworld actress, who has been spotted out with Saturday Night Live star Pete Davidson in recent months, took...
Published:2/19/2019 11:03:39 AM
[Markets] Market Juggernaut: Stock Breadth Hits All Time High

Back in December, when the S&P was breaking down and taking out every support level, the financial press was flooded with cheesy headlines warning of "bad breadth" as decliners steamrolled advancers.

What a difference two months makes, because with the largest stock market in the world - the $30 trillion NYSE Composite - having recently broken above its 200DMA if finding some resistance near the level where the last three break outs failed as the NYSE hit the dreaded Triple Top (as a reminder, there is no such thing as a Quadruple Top)...

... it is time to roll out the Mentos, i.e., "good breadth" commercials, because as of Friday's close, Bloomberg notes that NYSE company breadth - advancing stocks over than declining - just hit a record, joining the S&P 500 cumulative advance-decline line and NYSE Composite A-D line at new highs.

Meanwhile, as buying begets buying, more optimism can be gleaned from trading patterns because as Nomura noted last night, when looking at historical price patterns when the S&P500 breaches above its 200-day simple moving average (SMA) while its 20-day SMA is below 200-day SMA as is the case currently, suggests a case where S&P500 is likely to make shallow dips before heading higher.

Now if only we knew who was buying, this rally would make sense. Alas, as discussed extensively over the past month, the big question with the current rally is that aside for short covering and stock buybacks, investors have been patiently dumping stocks the higher the market goes, begging the question who throws in the towel first, shorts and CFOs buying back their stock, or the general public, which refuses to trust this ongoing rally, despite 8 straight weeks of gains.

Published:2/19/2019 11:03:39 AM
[Entertainment] Nikki Bella Contemplates Going on a Date With Taye Diggs on Total Bellas: "He's Hot!" Nikki Bella, Total Bellas 406Matchmaker, matchmaker, make Nikki Bella a match? In this clip from Sunday's all-new Total Bellas, Brie Bella takes the lead in attempting to set twin sister Nikki up. Apparently, the...
Published:2/19/2019 10:34:46 AM
[Entertainment] Heidi Klum Says Goodbye to America's Got Talent Heidi Klum, America's Got TalentHeidi Klum marked the end of her time with America's Got Talent like a true professional. The reality TV mainstay and super model took to Twitter to pay tribute to the NBC series she called...
Published:2/19/2019 10:06:36 AM
[Entertainment] New Patient La Demi Proves She's "Fearless" With a Daring Photo Shoot on Botched La Demi, Botched 512This Botched patient is ready to "break the Internet." In this clip from Wednesday's all-new episode, beauty guru La Demi participates in a daring photo shoot ahead of her...
Published:2/19/2019 9:36:12 AM
[Markets] Italian Senate Blocks Kidnapping Investigation Into Salvini

Five Star Movement lawmakers overcame their reservations about impeding investigations into politicians and on Tuesday voted to block an investigation into Deputy Prime Minister Matteo Salvini - the leader of M5S's coalition partner - over allegations that he "kidnapped" 177 undocumented migrants last summer when he refused to let them disembark from a ship in a Sicilian port for five days.


The Senate's Immunity Committee would have needed to lift Salvini's immunity for the investigation to proceed. Instead, it voted to back immunity for Salvini. The vote resolves what had become a serious source of tension between the two coalition partners, even prompting some of Salvini's allies to publicly push their leader to call for fresh elections to try and oust M5S and take advantage of the League's rising popularity.

The investigation into Salvini was initiated in August by a Sicilian prosecutor. Salvini has publicly mocked the probe, saying it would be "an honor" to go to prison for defending Italy's borders.

"If he wants to interrogate me or even arrest me because I defend the borders and security of my country, I’m proud...Being investigated for defending the rights of Italians is a disgrace," Salvini said at the time.

The Diciotti crisis, named in reference to the rescue vessel that carried the migrants, began on Aug.15 when 190 migrants fleeing Eritrea were rescued from an overcrowded boat off the Italian island of Lampedusa. Salvini refused to allow them to disembark at a Sicilian port. After allowing 43 unaccompanied minors and some in need of urgent medical care off the ship, Salvini and his ministry refused to allow the rest to disembark, purportedly violating EU rule stipulating that migrants detained for more than 48 hours should be released and allowed to apply for asylum.

Now that the dispute, which had blossomed into a serious threat to political stability in Italy, has been resolved, investors have one more reason to pile back into Italian after data released Tuesday showed money managers sold $68 billion in Italian debt last year amid Rome's showdown with Brussels over its budget deficit, according to Bloomberg.

Published:2/19/2019 9:36:11 AM
[Politics] Most See Crime in Justice, FBI ‘Coup’ Against Trump, Want Special Prosecutor

Most voters say top Justice Department and FBI officials are likely to have acted criminally when they secretly discussed removing President Trump from office and think a special prosecutor is needed to investigate.

Fifty-six percent (56%) of Likely U.S. Voters believe senior federal law enforcement officials are likely to have broken the law in their discussions in May 2017 to oust Trump, with 37% who say it is Very Likely. The latest Rasmussen Reports national telephone and online survey finds that 36% consider that unlikely, with 19% who say it’s Not At All Likely that they broke the law. (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 February 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:2/19/2019 9:36:11 AM
[Entertainment] Rejoice! HGTV Has Another New Property Brothers Show Coming Out Property Brothers, Drew Scott, Jonathan ScottThe Property Brothers are at it again. HGTV announced another new show for Jonathan Scott and Drew Scott, Property Brothers: Forever Home, is coming to the network in May 2019. Property...
Published:2/19/2019 9:04:51 AM
[Markets] BOJ Unexpectedly Reaffirms Readiness To Ease Further, Buy More Stuff

Just hours after we asked if the world's most famous "widowmaker" trade, shorting Japanese government bonds, is finally over, after bond traders remitted the most JGBs to the BOJ during Monday's rinban (POMO) operation, pushing the 10-to-25 year Offer-to-Cover ratio to 4.71, the highest in over 4 years amid investor fears that the BOJ's tapering of QE is accelerating...

... and could result in sharply higher bond yields, the BOJ scrambled to avoid an adverse reaction by the market, when overnight BOJ Governor Haruhiko Kuroda joined the rest of his central bank peers in making a hard-dove turn, saying on Tuesday the central bank was ready to ramp up stimulus if sharp yen rises hurt the economy and derail the path toward achieving its 2 percent inflation target.

The yen promptly tumbled after Kuroda’s comments, which confirmed that the BOJ has now officially jointed the race to the currency bottom, launched by the Federal Reserve, which shocked everyone by turning full-blown dove last month, and dragging the rest of the world's central banks with it.

"If currency moves are having an impact on the economy and prices, and if we consider it necessary to achieve our price target, we’ll consider easing policy,” Kuroda said, repeating that possible easing tools the BOJ could deploy included cutting short- and long-term interest rates, expanding asset buying or accelerating the pace of money printing.

That said, considering that the BOJ is rapidly running out of stuff to buy, as it already owns over 40% of the country's bonds and about 80% of its equity ETFs, the BOJ chief said the central bank would "carefully consider the benefits and costs of any further policy easing", suggesting that the hurdle for topping up stimulus would be high given how financial institutions’ profits have been hurt by years of near-zero interest rates.

“Whatever we do, however, we need to carefully balance the benefits and the costs of the step such as the impact on financial intermediation and market functioning."

Kuroda was responding to a question by an opposition lawmaker on whether the BOJ had the necessary tools to boost stimulus to counter the pressure from a sharp yen rise. Offsetting Monday's weakness which we discussed overnight, Japanese government bond prices turned higher and the yen slumped.

Like every other activist central bank, the BOJ faces a dilemma as years of heavy money printing has dried up market liquidity and hurt commercial banks’ profits, stoking concern over the rising risks of prolonged easing, with the risk of an out-of-control yield surge and inflation explosion threatening the economy should the BOJ lose control.

And yet, subdued inflation - due to the BOJ's relentless monetization of the long-end - has left the BOJ well behind its U.S. and European counterparts in dialing back crisis-mode policies, leaving it with little ammunition to battle an abrupt yen spike that could derail an export-driven economic recovery.

Meanwhile, growing fears of a global slowdown (thanks China and Europe) have added to the BOJ’s headaches and shifted the market’s attention away from the likelihood of a future exit from easy-policy, especially as many major central banks have shifted their position over recent months toward an accommodative stance.

Confirming that the BOJ is effectively trapped in perpetuity, Kuroda also said the BOJ had no plans now to stop or review its purchases of ETF, despite growing criticism from market players that the central bank’s huge presence was distorting the market.  And while Kuroda conceded the BOJ is now impacting the equity amrket, he added the BOJ will scrutinize the most appropriate means to balance the pros and cons of its policy.

“We will continue our ETF buying while taking into account market moves and the impact on financial institutions, as well as economic and price developments,” Kuroda said.

In other words, nothing will change until one day the market revolts and forces the BOJ to act.

Published:2/19/2019 8:35:13 AM
[Entertainment] MVP? More Like MVH! Here's Why Kristin Cavallari's Man Jay Cutler Deserves the Most Valuable Husband Trophy Kristin Cavallari, Jay CutlerFor Kristin Cavallari, husband Jay Cutler is the MVP of her life. Why? Well, after an illustrious football career, Jay has since retired and is lending a helping hand at home. This is...
Published:2/19/2019 7:33:04 AM
[Markets] Car Wars: Episode I

Submitted by Rabobank strategist, Michael Every

Turmoil has engulfed the Galactic Republic. The taxation of trade routes to outlying star systems is in dispute.

Hoping to resolve the matter with a blockade of deadly battleships, the greedy Trump Federation has stopped all shipping to the small planet of EU.

While the congress of the Republic endlessly debates this alarming chain of events, the Supreme Chancellor has secretly dispatched two Jedi Knights, the guardians of peace and justice in the galaxy, to settle the conflict....

Source: Bloomberg

20 years after I sat down in a London cinema, saw the above trailer crawl (minus two small edits astute readers might notice), sighed and thought to myself “I watch Star Wars to get away from this kind of thing,” here we have life imitating George Lucas. 

It’s impossible to ignore we are potentially close to several major conflicts. India is considering military retaliation against Pakistan for a recent terrorist outrage – that’s two nuclear powers; Iran and Israel have both warned the other that war is a real threat – that’s one and a half nuclear powers; the West is upping the rhetorical ante in Venezuela even as President(?) Maduro shows no signs of leaving office; and China is still building a huge modern army, navy, and air-force that I am sure the US is going to see as strictly decorative. (In the same way China promised not to decorate the South China Sea with runways and missiles.) And on top of all that, as the recent Munich Security Conference showed, the US and EU are drifting ever-further apart on most of those fronts – and on the economic angle too.

Some might see the US under the Trump administration as the Empire; and some see them as the Rebels against a Russian/Chinese Empire and the risk of an Iranian Death Star. Of course Germany sees itself as Naboo: peace-loving, cultured, innocent, free-trading, and full of renaissance architecture and star würst - and unable to defend itself against physical predations from outside. The complication today is that it may be the Jedi who impose 25% tariffs on Naboo because the latter refuses to join in a greater struggle against others “Made in Empire 2025” plans. I have a bad feeling about this.

As we noted in a report yesterday (“Very dangerous cars”), the 90-day clock is now ticking over the potential imposition of 25% tariffs on EU autos into the US market. Naboo/EU (“Nab-EU?”) is saying that it will fight back with its own tariffs on US products if attacked, which suddenly takes us closer to at least a US-EU trade war, with a US-China trade war still likely too. Indeed, Bloomberg notes in an editorial: “Trump Should Stop Before He Loses Germany”, arguing tariffs would push Germany into recession and that a recent survey shows 58% of Germans already think the country needs to distance itself from the US. (And presumably they will then be paying to defend themselves, right? General Jar-Jar Binks to the front, please.)

Meanwhile, Politico has an article today written by Bruno Maçães, a former Europe minister for Portugal, titled (with one edit from me) “Russia to China: [Join me and] Together we can rule the world”. In it former Putin advisor Sergey Karaganov is quoted as saying Russia is throwing its lot in with China and is lobbying Beijing to join it in a push to replace the US as global hegemon.  Maçães states Karaganov argued “China is deluding itself if it thinks issues between Beijing and Washington can be conveniently resolved to the benefit of both sides. If Beijing places its bets on peace and cooperation, the great Chinese adventure will come to an end, and China will have to live in the shadow of the US for another generation — perhaps forever...Chinese authorities, he argued, have no more than five years to make a decision.” Then we come back to Nab-EU again, where “…if China has a word on whether we see the creation of an Eastern bloc, so does Europe. European markets and European technology are critical resources for China. More and more, Chinese authorities know what to expect from America, and they know all too well what to expect from Russia. But Europe is a different matter. Beijing will hesitate to push it away, and will wait for Europeans to make up their minds. We can keep them waiting. We can keep them pondering. In a dangerous world, Europe is the holder of the balance.

So the EU strategy is not to join the US, but to wait and do nothing. Is that attitude going to see the US back off vs. the EU? Or will the US see the EU as too weak and too fundamentally untrustworthy to bother with? Yes, the US is still global hegemon and needs the EU, Japan, Australia/NZ, etc., in its camp to remain one; but some think it can raise the drawbridge and go back to splendid isolation, telling the rest of the world to go hang: no more Clone Wars; just the The Revenge of the Sith, as some would see it. In short, there is a potentially paradigm-shattering geopolitical shift being discussed all over: does anyone have any idea how to trade it…or are we all just waiting for a New Hope? I fail to see how this is anything other than USD and US Treasury positive, for now at least. Longer term, we are all throwing light-sabres at a board.

And talking of paradigm-shattering, at the national level we see the same theme repeated, as seven UK Labour MPs split from the party over Brexit and anti-Semitism. Will they forge a new centre grouping, or are they the just showing how impotent the centre actually is in a world increasingly driven to polarities? GBP doesn’t seem to care.

Day ahead   

Today is still relatively quiet as the US returns from the Presidents’ Day holiday. However, once again we aren’t short of talking points on many fronts. One of them is that we got the RBA’s February minutes, and WE GOT SOME MORE NEW LANGUAGE! After so many copy-and-paste conclusions before now, the final paragraph stated:

“Members would continue to assess the outlook carefully. However, given that further progress in reducing unemployment and lifting inflation was a reasonable expectation, members agreed that there was not a strong case for a near-term adjustment in monetary policy. Rather, they assessed that it would be appropriate to hold the cash rate steady and for the Bank to be a source of stability and confidence while further progress unfolds. Members judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

In other words, the RBA aren’t talking more strongly about cutting rates yet because they still think wages will pick up into a new-normal housing collapse, and because they believe it shows more confidence to do nothing. I repeat: rates down - sooner than you think; and AUD down with it. Nothing doing today though – I guess the market is glued to Twitter waiting to see if the rumours of Episode IX being called “The Balance of the Force” are true or not. If it is, the 20-year rule George Lucas forecast rule tells me 2039 is when we should expect all this global flux to have sorted itself out.

Before 2039 we also have UK unemployment, which will stay low, and the German ZEW survey, which is seen declining sharply to 20.0 for current situation and rising to -13.6 for expectations. I’d suggest the other way round is more logical.

Published:2/19/2019 7:33:04 AM
[Entertainment] Karl Lagerfeld Dead: Fashion Icon Was 85 Karl LagerfeldKarl Lagerfeld has passed away at the age of 85, multiple outlets report. The iconic fashion designer was the creative director for Chanel and Fendi. News of his death comes one month...
Published:2/19/2019 7:02:27 AM
[Markets] An Obituary For California's Bullet Train

California's ill-fated statewide bullet train project - which has been reduced to a "train to nowhere" between Merced and Bakersfield so the state doesn't have to return $3.5 billion in federal funds - took residents of the Golden State on a ride for over a decade.

While initially projected to cost $33.6 billion in 2008, former Gov. Jerry Brown's "special legacy project" ballooned in estimated size to nearly $100 billion in 2018, with service beginning from Los Angeles to San Francisco in 2033. 

Opining on the demise of the bullet train in an "I told ya so" Op-Ed, the WSJ editorial board provides a post-mortem on yet another failed attempt towards a progressive utopia using taxpayer dollars.


Via the Wall Street Journal Editorial Board

Death of a California Dream
Gavin Newsom gives up on Jerry Brown’s bullet-train fiasco.

Like Richard Nixon and the Vietnam War, California Gov. Gavin Newsom inherited a quagmire in the state’s bullet train with no good options. Rather than attempt a full-out retreat, the Governor announced Tuesday that he would cut taxpayer losses by completing a segment in the sparsely populated San Joaquin Valley. But please don’t call it a train to nowhere.

A decade ago California voters approved a $10 billion bond measure to build a 520-mile high-speed train that would supposedly take riders from San Francisco to Los Angeles in two hours and 40 minutes. The choo-choo’s supporters vowed that the federal government and private investors would foot most of the estimated $33 billion bill, and the referendum explicitly stated there would be no subsidy. President Trump’s promise to make Mexico pay for a border wall was more believable.

The Obama Administration chipped in $3.5 billion on the condition the first 160-mile segment be built in the San Joaquin Valley district of Democratic Rep. Jim Costa, a longtime bullet-train supporter who provided a critical vote for ObamaCare. Former Gov. Jerry Brown made the train his special legacy project, his contribution at taxpayer expense to the illusion of stopping climate change. His people sent letter after letter claiming that our editorials were mistaken.

Our criticisms have now been validated by none other than Mr. Newsom. Cost projections for the train have soared to around $80 billion amid litigation, engineering challenges and ordinary government morass. Private investors have run the other way. The state rail authority has spent more than $5 billion acquiring and destroying hundreds of properties but not yet laid tracks. Taxpayers have lost patience, and Mr. Newsom stated the obvious on Tuesday that “there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to LA.”

The new Governor is thus proposing to finish the initial planned route from Merced to Bakersfield, now with the stated goal of revitalizing rural areas that have been parched due to water rationing. Lo, high-speed rail is “about economic transformation and unlocking the enormous potential of the Valley,” which is “hungry for investment” and “good jobs.” Mr. Newsom in his speech also pared back a project championed by Mr. Brown to deliver more water to farmers.

Liberals envision that the bullet train will someday turn Fresno and Merced into Silicon Valley suburbs and ease the Bay Area’s housing shortage. But this too is a dream. As economic consultants William Grindley and Bill Warren document in a recent study, a worker who lives in Fresno would spend 10 hours and 20 minutes each day commuting to San Jose at a cost of $154 round trip—assuming no subsidies.

California’s bullet train provides a miniature model of the Green New Deal. Alas, the main reason liberals like Mr. Newsom are likely turning against it is they are eager to redirect taxpayer money to entitlements and other green largesse.

Published:2/19/2019 7:02:26 AM
[Markets] "Sea Of Red" As Global Rally Reverses; Banks Drag Europe Lower

While the US was closed for President's Day holiday, the European rally sputtered on Monday ignoring a renewed surge higher in Chinese stocks following a record credit injection, and on Tuesday a "sea of red" in global markets has returned, as US equity futures slumped dragged lower by European banks following a mixed session in Asia as investors appear unable to go for even one day without fresh "hope" on US-China trade talks, while the dollar climbed, snapping a three-day decline, and Treasuries edged up before U.S.-China trade talks resume in Washington.

Global markets were struggling for direction after a slow start to the week and with a fresh round of Sino-U.S. trade talks, this time in Washington, being held later, as stocks traders were largely happy to keep their powder dry.

Europe's Stoxx 600 retreated after two days of gains, led lower by banks following disappointing earnings from HSBC Holdings, while weak macro data has sent increasingly dovish signals from the region’s central bank. HSBC - Europe’s biggest bank - saw its shares tumble as it missed forecasts due to slowing growth in its two home markets of China and Britain. HSBC’s U.K. shares follow their Hong Kong peers lower after worse-than-expected results, with the stock sliding as much as 4.6% and the biggest decliner on the FTSE 100 Index. The Stoxx 600 Banks index down as much as 1.7%, with banks the worst performing industry group on Tuesday.

The results spoke to a wider problem for European banks, which are struggling to return to growth after a decade of post-crisis restructuring due to a worsening global economic outlook.

In addition to poor earnings from Europe's largest bank, the sector is facing is facing additional headwinds due to receding hopes for any quick interest-rate rise after ECB chief economist Peter Praet said officials could push back plans to raise rates as a first response against a deeper downturn

Automakers were also under pressure as the European Union vowed prompt retaliation if the U.S. imposes tariffs on imported vehicles.

Earlier in the session, Bank of Japan Governor Haruhiko Kuroda unexpectedly told parliament the central bank would consider extra monetary easing if required, helping lift the Topix index and send the yen lower, even as shares in China were little changed as equities in Hong Kong dropped after Monday's blockbuster gains. Japan’s Nikkei nudged up 0.1 percent after holding flat for most of the day.  Australian shares climbed 0.3 percent to a 4-1/2 month peak, after gaining over 8 percent so far this year, partly on expectations the central bank could ease policy to temper pressure on growth. Chinese shares slipped into the red though after surging in the previous session, with the blue-chip index off 0.2 percent.

China Vice Premier Liu He will visit Washington for trade talks on February 21st-22nd, while there were comments from White House Press Secretary Sanders that trade meetings with China in Washington D.C. will begin today and that higher-level talks which will be led by USTR Lighthizer are to begin on Thursday. Furthermore, trade talks are said to focus on needed structural changes in China which impact trade, as well as China's pledge to buy a substantial amount of goods and services from the US.

Despite today's muted action, Chinese shares have risen rapidly so far this month, with MSCI’s China A shares index up 6.5%, by far the best performance among major markets despite China’s weakening economy. Additionally, investors are now seen returning to riskier asset markets after the U.S. Federal Reserve signalled earlier this year it could halt rate hikes in light of U.S. economic softness.

“In the last week, it seems like global central banks have started a possible process of monetary easing,” Bank of America-Merrill Lynch strategist Ajay Singh Kapur said in a note. “If so, this would be very positive for Asia/EM stocks,” Kapur said.

Across the Pacific, contracts on the Nasdaq, Dow and S&P 500 edged lower as traders kick their heels before the next round of trade talks between America and China. Italian bonds fell while most European notes climbed.

With earnings season coming to an end, the latest minutes from the FOMC and ECB due this week and U.S. President Donald Trump weighing an extension of the deadline for a trade deal with China, investors have plenty to digest. Uncertainty over the outlook for global growth hangs over everything, and traders will be hoping for some good news from the world’s two largest economies when talks resume in Washington on Tuesday.

“There is a recession coming,” Steen Jakobsen, the chief economist at Saxo Bank said in an interview on Bloomberg Television with Anna Edwards. He reckons markets are too optimistic on a trade deal between the U.S. and China. “There will by some Pyrrhic victory for the two sides to claim and extend the timeline, but in terms of material impact, no,” he said.

Overnight, President Trump said US is seeking a peaceful transition of power in Venezuela but added that all options are open.

EU Commission President Juncker said Trump gave his word there wouldn't be tariffs on European cars for the time being; if Trump breaks the promise, EU will break its promise to buy more soy and LNG; according to Stuttgarter Zeitung. European Commission President Juncker says if UK requested extension of talks, no one in Europe would oppose it; adds he has no timeframe for length of extension.

In FX, the Bloomberg Dollar Spot Index climbed, snapping a three-day decline, and Treasuries edged up before U.S.-China trade talks resume in Washington. The euro broke a tight range and dropped as much as 0.3% to 1.1276 after more talk of ultra-cheap ECB bank loans, as the Bloomberg dollar index index climbed to fresh day high. The Australian dollar swung to a loss after the nation’s central bank reaffirmed mounting concerns over consumer spending.

The pound followed suit as Margaritis Schinas, a spokesman for the European Commission, said the EU won’t reopen the U.K.’s withdrawal agreement and won’t accept a time limit on the Irish border backstop despite a report that showed U.K. wages were growing at their fastest pace in a decade. The yen had slipped to 110.70 per dollar after Japan’s central bank governor had said it could redeploy stimulus if the yen’s relative strength this year hurt the economy and inflation prospects.

“Stokkie (dollar vs Swedish crown) is off to the races,” said TD Securities’ head of global research, Richard Kelly. “You had especially weak inflation and as you see (from the yen and euro) it comes against this backdrop of central banks becoming more dovish again,” although he also said that bond markets has seen far less reaction to the Swedish data.

In commodities, oil prices were mixed, with Brent futures off 29 cents at $66.21, although that was not far from Monday’s $66.83 which was the highest since mid-November. U.S. crude futures added 21 cents to $55.8. The precious metals market was more animated, with palladium surging to a record high of $1,471.0 per ounce as stricter emissions standards are seen increasing demand for the auto catalyst metal. Gold held around $1,323.66 per ounce after earlier rising to a near 10-month high of $1,327.64 too.

Expected data include NAHB Housing Market Index. Ecolab and Walmart are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures down 0.2% to 2,772.50
  • STOXX Europe 600 down 0.4% to 368.32
  • MXAP down 0.1% to 157.11
  • MXAPJ down 0.3% to 512.60
  • Nikkei up 0.1% to 21,302.65
  • Topix up 0.3% to 1,606.52
  • Hang Seng Index down 0.4% to 28,228.13
  • Shanghai Composite up 0.05% to 2,755.65
  • Sensex down 0.3% to 35,394.88
  • Australia S&P/ASX 200 up 0.3% to 6,106.88
  • Kospi down 0.2% to 2,205.63
  • German 10Y yield fell 1.9 bps to 0.091%
  • Euro down 0.03% to $1.1308
  • Italian 10Y yield fell 3.2 bps to 2.407%
  • Spanish 10Y yield fell 1.5 bps to 1.212%
  • Brent futures down 0.4% to $66.26/bbl
  • Gold spot up 0.2% to $1,329.52
  • U.S. Dollar Index little changed at 96.90

Top Overnight News

  • U.K. and European officials are working on a new legal text for the most contentious part of the Brexit deal, but time is running out for Prime Minister Theresa May to persuade a fracturing Parliament to unite behind her plan
  • Italy’s bonds are enjoying a period of relative calm while Spanish politics hogs peripheral euro-area headlines. But the market’s sense of stability looks increasingly fragile as risks mount with the economy in recession, a widening budget deficit and the threat of a rating downgrade
  • The European Central Bank’s chief economist added to the chorus of policy makers signaling concern on the economic slowdown, saying officials could push back plans to raise interest rates as a first response against a deeper downturn
  • Chinese and U.S. trade negotiators will start the next round of talks this week in Washington, after discussions in Beijing last week that President Donald Trump called "very productive."

Asian stocks were mixed as the region struggled for firm direction following yesterday’s rally and after a non-existent lead from the US which was shut for President’s Day. ASX 200 (+0.3%) was positive with the index led higher by outperformance in the tech and financials sectors, although consumer staples and healthcare were on the other end of the spectrum amid losses in Coles and Blackmores due to weak earnings. Elsewhere, Nikkei 225 (+0.1%) just about remained afloat with price action largely reflecting jittery trade in the domestic currency, while Hang Seng (-0.4%) and Shanghai Comp. (U/C) were indecisive as focus remained on US-China trade discussions which will resume today before the higher level talks on Thursday, and with some disappointment from a miss on HSBC earnings. Finally, 10yr JGBs were initially softer amid a pullback from the prior day’s gains and with demand suppressed by the mild upside across stocks, although prices later recovered after firmer results at the 20yr JGB auction. China Vice Premier Liu He will visit Washington for trade talks on February 21st-22nd, while there were comments from White House Press Secretary Sanders that trade meetings with China in Washington D.C. will begin today and that higher-level talks which will be led by USTR Lighthizer are to begin on Thursday. Furthermore, trade talks are said to focus on needed structural changes in China which impact trade, as well as China's pledge to buy a substantial amount of goods and services from the US

Top Asian News

  • PBOC Rate Cut Bets Have China Analysts Asking ‘Which Rate?’
  • Kaisa Group Dollar Bonds Rally to Highest Level in Nine Months

Major European indices are mostly lower after trading choppily this morning, taking the lead from a directionless Asia session [Euro Stoxx 50 -0.6%]. The FTSE 100 (-0.6%) is weighed on by poor performance in HSBC (-4.0%) following their earnings; the Dax (-0.2%) is outperforming its peers bolstered by Wirecard (+4.5%) and Heidelberg Cement (+3.4%) following Bafin prohibiting new/extending shorts yesterday and a Q4 revenue beat respectively. Sectors are broadly in the red, with some underperformance in banking names, weighed on by the aforementioned HSBC who carry around a 2% Stoxx 600 weighting; and are the largest banking component. Other notable movers include, Danone (-0.7%) who are in the red in-spite of a beat on their sales, with some analysts highlighting weaker than expected margins. Automakers, such as Volkswagen (-0.9%) and Daimler (-1.0%) are in negative territory after EU Commission President Juncker stating that US President Trump gave his word that there wouldn’t be tariffs on European cars for the time being; alongside the EU agreeing to cut new truck CO2 emission levels by 30% before 2030.

Top European News

  • U.K. Wage Growth Fastest Since 2008 Amid Labor Shortages
  • VW Wins Appeal in German Suit Over Diesel Emissions Scanda
  • Danske Bank Watchdogs Get Drawn Deeper Into European Probe
  • Sweden’s Krona Slumps Most in Eight Months After Inflation Slows
  • Siemens, Fortum Join Europe’s Jumbo Corporate Bond-Deal Dash

In FX, the Swedish Crown has slumped in wake of much softer than expected inflation data, and a slump in housing starts that together raise valid question marks over the Riksbank’s relatively confident outlook on the domestic economy and CPI/CPIF remaining close to target. On that note, Governor Ingves is due to speak later today and will get a chance to comment, as Eur/Sek spikes from sub-10.5000 through several chart resistance levels and only a whisker away from offers said to be lined up at 10.6000.

  • AUD/NZD - Very volatile trade overnight on the back of latest RBA minutes that initially underpinned the Aud on confirmation of no likelihood of a change in policy rates for some time (so no ease in the offing), but then underlined the shift to a more neutral stance and highlighted significant risks to the economic outlook. Aud/Usd retreated swiftly in response and is currently holding just above 0.7100, while the Kiwi has been dragged down in sympathy as the cross remains just above 1.0400, with Nzd/Usd hovering around 0.6825 vs just a few pips short of 0.6900 on Monday.
  • JPY/CAD - The next worst G10 performers, as Usd/Jpy grinds back up into a higher range and closer to 111.00 again amidst dovish rhetoric if not firm or official guidance from BoJ Governor Kuroda (mulling more accommodation if Jpy strength weighs on growth and hampers efforts to achieve the 2% inflation target, which has already proved extremely elusive of course). The headline pair is now probing 110.80, but could be held back by decent option expiry interest at 110.60 (1 bn). Meanwhile, the Loonie remains anchored around 1.3250 vs its US counterpart, eyeing crude to see whether prices push further ahead or consolidate around 2019 peaks.
  • GBP/EUR/CHF - All narrowly mixed and pretty flat vs the Dollar that has edged up from yesterday’s lows (DXY close to 97.000 at one stage), with Cable maintaining 1.2900+ status, albeit just, awaiting more Brexit developments/headlines following a solid if not quite as upbeat as forecast UK labour market report. Similarly, the single currency is clinging to 1.1300 and showing resilience in the face of yet more dire Italian data, perhaps drawing a degree of encouragement from a more mixed ZEW survey, while the Franc is still chipping away at recent losses and inching through 1.0050 after a wider Swiss trade surplus.
  • EM - More depreciation for the likes of the Rand and Lira, but the pressure and spotlight may switch somewhat to the Real later given political jitters due to the dismissal of a key aide to President Bolsonaro and potential adverse repercussions for pension reform. For reference, Usd/Brl settled around 3.7330 on Monday.

In commodities, the energy complex is ultimately flat-to-lower on the day thus far, with WTI (+1.0%) little changed net-net after missing a price settlement yesterday due to the President’s Day holiday over in the States. The holiday has also delayed the release of the API weekly inventory release by a day. In terms of macro themes for the complex, eyes remain on whether the OPEC-led supply curbs will ultimately ease glut concerns against the backdrop of 5 consecutive weeks of record-high US crude output. Furthermore, sources stated today that Saudi are mulling diminishing exports of Arab extra-light crude to the Asia region from March. The sourc es added that the move has improved demand in Abu-Dhabi’s Murban and Das in Asia’s spot market. Elsewhere, spot gold (+0.2%) is on the front foot and hovers near 10-month highs despite a rise in the USD as demand for the yellow metal grows ahead of the widely-anticipated dovish FOMC minutes tomorrow. Meanwhile, Shanghai aluminium fell following Malaysia announcing it will not extend a prohibition on mining bauxite when it expires on March 31st, with some noting it’ll potentially reduce costs in the aluminium supply chain for China.

US Event Calendar

  • 8:50am: Fed’s Mester Speaks on Economic Outlook and Monetary Policy
  • 10am: NAHB Housing Market Index, est. 59, prior 58

DB's Jim Reid concludes the overnight wrap

With US markets shut, it’s been a predictably quiet last 24 hours. One of the few talking points yesterday though was the differing views on whether or not the US government would be forced to make public the results of the S232 report on the investigation of the national security risk posed by imported cars. There appears to be differing opinions on if the government has to make the findings public with some confusion around the legal language. With US markets open again today though, if the government is forced to make the findings public then in theory we would find out today, although Axios did quote a source yesterday as saying that "the White House was in favour of keeping the findings private so that Trump could have it in his back pocket as a threat". So it remains up in the air.

In any case Trump had 90 days from receiving the report to decide on whether or not to take further action. His Twitter account has so far remained dormant on the subject too which is perhaps a positive sign right now insofar as not wanting to raise tensions across the pond. The only comment we’ve heard from the European Commission was Juncker saying in an interview with Germany’s Stuttgarter Nachrichten that “Trump gave me his word that there won’t be car tariffs for the time being” and that “I regard this promise as reliable”. He also said that “should he break his word we won’t feel bound to our promise either to buy more US soy and liquid gas”. We’ve heard a similar comment from Japan’s economy minister Motegi, who said that the US won’t apply higher tariffs on imports of Japanese cars and auto parts so long as negotiations toward a trade deal continue. One to watch.

Speaking of tariffs and trade, White House Spokeswoman Sanders said overnight that the US-China trade negotiations are set to begin today while, China’s Commerce Ministry released a statement saying that China’s Vice Premier Liu He will travel to DC on February 21-22 for meetings with Lighthizer and Mnuchin. In the meantime, Steve Censky, the US Department of Agriculture’s deputy secretary, said yesterday that talks are picking up pace ahead of the March 1 deadline, "but we still have ways to go."

As for markets, well bourses in Asia have been a bit directionless overnight with the Nikkei (+0.21%) up while the Hang Seng (-0.36%), Shanghai Comp (-0.21%) and Kospi (-0.13%) are down having erased earlier gains. Elsewhere, futures on the S&P 500 (-0.01%) are trading flat. Meanwhile there’s been some focus on the BoJ where Governor Kuroda sounded a touch dovish in his address to parliament, saying that the BoJ will consider extra easing to hit price targets if needed while adding that additional easing could also be considered due to moves in the Japanese yen if they impact economy and prices. However, he added that all decisions will be taken after carefully examining policy benefits and costs. JGBs have rallied a bit after the comments, and are now trading at -0.035%. The Yen is back to flat after trading a bit stronger in the early going.

Those moves follow a low-volume inspired but mildly positive day for risk assets in Europe yesterday. The STOXX 600 initially spent an hour or so in the morning trading in and out of the red but eventually closed up +0.23% for its fifth daily gain in the last six days. That also means that the index is now up +9.52% for 2019 so far which is the best start to a year since 2015 and in fact the fifth best – out of 33 - since the index started back in 1987. As for other markets yesterday, the DAX (-0.01%) lagged a bit further behind however European Banks (+0.91%) continue to reap the rewards from Friday’s TLTRO comments. That’s now +5.25% from the Friday morning lows for the index while Greek Banks were up +6.20% yesterday and the most since early December after Greece’s government submitted a plan to the Commission to speed up bad-loan disposals.

There was also a marginal outperformance for the FTSE MIB (+0.58%) and IBEX (+0.35%) while the same was true in bond markets where 10y BTPs closed 3.1bps lower and Bunds 0.7bps higher – with little follow through from the ECB Governing Council member Villeory’s comments about a “significant” slowdown of the European economy. That puts the spread between the two at 266bps and the lowest in two weeks. Post Villeroy’s comments we also heard from Praet who added that “if the Euro Area economy were to slow more sharply, we could adapt our forward guidance on interest rates and this could be complemented by other measures”. Praet also called TLTROs a “very useful tool” in the past.

Elsewhere in markets, HY credit spreads finished 4.4bps tighter in Europe which now makes them 65bps tight from the January wides. Speaking of credit, yesterday we published a short note looking at trends around liquidity premiums in the EUR and USD HY markets. See this link for the full report.

In other news, here in the UK it was a better day for Sterling (+0.27%). That seemed to partly reflect the Times article suggesting that progress was being made on legally binding assurances on the Irish backstop, albeit one that was light on specifics. Less relevant but nonetheless headline grabbing all the same was the announcement of 7 MP resignations from the Labour party yesterday. The resignations are unlikely to have much of a read-through from a Brexit perspective however there is the possibility for wider ramifications insofar as it may reduce Corbyn’s chances of receiving a majority at the next general election.

Before we wrap up, a quick mention that yesterday we published a report that forecasts CAPE valuations for US and European stock markets. CAPE is set to drop significantly this year as 2009’s terrible earnings roll-off, however, several factors are coalescing that could pull down earnings from their historically-high levels. That means CAPE may not fall as much as the market expects. See the report here .

To the day ahead now, which this morning kicks off here in the UK with December and January employment stats due out. The consensus expects a small one-tenth of a percent pick up in earnings to +3.4% while the unemployment rate is expected to hold steady at 4.0%. Shortly after that we get December construction output data for the Euro Area before the February ZEW survey is due in Germany. In the US, the only data due out this afternoon is the February NAHB housing market index reading. Away from that we’ve got the first Fed speaker of the week when Mester speaks this afternoon on the economic outlook and monetary policy. The ECB’s Guindos and Praet are also due to speak at separate events today while the EU general affairs council gathers to discuss the 2019 budget and March summit agenda.


Published:2/19/2019 6:35:14 AM
[Markets] "He's Back" - Bernie Sanders Officially Enters 2020 Race 

Following a litany reports teased an imminent announcement, only to be denied by his staff, Bernie Sanders has finally officially thrown his hat into the ring, officially acknowledging his plan to seek the 2020 Democratic nomination during an interview Tuesday with Vermont Public Radio.


Unlike his last sparsely-attended campaign announcement in 2015, which attracted a few idle jokes from the Daily Show's John Stewart about Sanders' resemblance to Seinfeld co-creator Larry David...

...Sanders enters the 2020 race as one of the front-runners, placing near the top of most polls along side Vice President Joe Biden. Though he has refused to refused to officially join the Democratic Party, many of the positions that he has advocated - including Medicare for All and a $15 minimum wage - have been endorsed by many of his campaign rivals.

Though Sanders has seen his profile rise from relative unknown to one of the leading lights of the party's revitalized "socialist" faction over the past few years, he delivered his announcement during an interview to a local public radio station in Vermont.

"I wanted to let the people of the state of Vermont know about this first," Sanders told VPR's Bob Kinzel. "And what I promise to do is, as I go around the country, is to take the values that all of us in Vermont are proud of — a belief in justice, in community, in grassroots politics, in town meetings — that's what I'm going to carry all over this country."

Sanders said he's running because he opposes Donald Trump, whom he called "an embarrassment", a "homophobe" and a "racist."

"I think the current occupant of the White House is an embarrassment to our country," Sanders said. "I think he is a pathological liar... I also think he is a racist, a sexist, a homophobe, a xenophobe, somebody who is gaining cheap political points by trying to pick on minorities, often undocumented immigrants."

Sanders said his campaign hopes to enlist one million people in a "grassroots movement of people prepared to stand up and fight."
Sanders acknowledged he will encounter a "very different campaign," than in 2016, when he emerged as the sole serious challenger to former Secretary of State Hillary Clinton and won 23 primaries and caucuses.

He's also announcing as a scandal over allegations of sexism during his 2016 campaign loom over the senator and his presidential ambitions. Now that he has officially announced, Bernie has become the sixth Senator to declare his intention to run.

Published:2/19/2019 6:03:00 AM
[Entertainment] Breaking Down the 2019 Oscars By the Numbers Lady Gaga, Academy Awards, Oscars 2016, Best DressesRoll out the red carpet, because it's that time of year again! The 2019 Oscars is right around the corner, and we've got all the details about the star-studded...
Published:2/19/2019 5:31:59 AM
[Markets] "But They Are Dangerous!" European Leaders Shocked At Trump's ISIS Ultimatum 

After President Trump's provocative tweets on Sunday wherein he urged European countries to "take back" and prosecute some 800 ISIS foreign fighters as US forces withdraw from Syria, or else "we will be forced to release them," the message has been met with shock, confusion and indifference in Europe. Trump had warned the terrorists could subsequently "permeate Europe"

Possibly the most pathetic and somewhat ironic response came from Denmark, where a spokesperson for Prime Minister Lars Lokke Rasmussen said Copenhagen won’t take back Danish Islamic State foreign fighters to stand trial in the country, according to the German Press Agency DPA“We are talking about the most dangerous people in the world. We should not take them back,” the spokesperson stressed, and added that the war in Syria is ongoing, making the US president's statement premature. 

Image source: Alamy News/BBC

Germany's response was also interesting, given a government official framed ISIS fighters' ability to return as a "right".  A spokeswoman for Germany’s interior ministry said, “In principle, all German citizens and those suspected of having fought for so-called Islamic State have the right to return.” She even added that German ISIS fighters have "consular access" — as if the terrorists would walk right up to some embassy window in Turkey or Beirut! 

Noting that the Iraqi government has also of late contacted Germany to transport foreign fighters to their home country for trial, she added, “But in Syria, the German government cannot guarantee legal and consular duties for jailed German citizens due to the armed conflict there.”

France, for its part, has already agreed to repatriate over 130 French Islamic State members as part of a deal reached in January with US-backed Syrian Democratic Forces (SDF) who are holding them, after which they will go through the French legal system. However, French Secretary of State Laurent Nuñez still insisted that the west's Kurdish allies would never merely let ISIS terrorists walk out their battlefield prisons free

"It's the Kurds who hold them and we have every confidence in their ability to keep them," Nuñez told French broadcaster BFMTV on Sunday. "Anyway, if these individuals return to the national territory, they all have ongoing judicial proceedings, they will all be put on trial, and incarcerated," he said, in comments which appeared to leave it up to others to make happen. 

And representing the Belgian government, Justice Minister Koen Geens charged Trump with blindsiding his European allies with the demand, which included Trump underscoring that it is "time for others to step up and do the job" before it's too late. "It would have been nice for friendly nations to have these kinds of questions raised through the usual diplomatic channels rather than a tweet in the middle of the night," Geens said during a broadcast interview on Sunday, according to the AFP.

Meanwhile in the UK the issue has recently become politically explosive as debate over so-called British jihadist bride Shamima Begum continues. The now 19-year old joined Islamic State in 2015 after fleeing the UK when she was just 15. She's now given birth in a Syrian refugee camp and is demanding safe return to Britain for fear that she and her child could die in the camp, so near the war zone.

Conservatives in Britain, such as Interior Minister Sajid Javid have argued that "dangerous individuals" coming back to the UK from battlefields in the Middle East should be stripped of their British citizenship. He said this option has already been "so far exercises more than 100 times," otherwise he also advocates prosecution of apprehended returning suspects "regardless of their age and gender." 

Identified as French nationals fighting within ISIS' ranks, via Khaama press news agency

The UN has estimated that in total up to 42,000 foreign fighters traveled to Iraq and Syria to join IS — which appears a very conservative estimate — and which includes about 900 from Germany and 850 from Britain.

SDF leaders have previously complained about the "lack the capacity" for mass incarceration of ISIS terrorists and the inability to have proper battlefield trials for them. Recent estimates have put the number of ISIS militants in US-SDF battlefield jails at over 1000, though Trump put the number at 800 in his tweet. 

However, even once they do return to Europe it's unclear the extent to which they'll be properly prosecuted and locked in prison by European authorities.

For example, another fresh controversy that lately erupted in Britain involved a 29-year old UK woman who traveled to join ISIS, and was convicted for membership in a terrorist group upon her return to Britain. She was jailed on a six year sentence in 2016, but is now already walking free a mere less than three years after her conviction. 

Published:2/19/2019 2:02:34 AM
[Entertainment] The Bachelor Did Not Jump the Fence Again, But Another Woman Has Dumped Him Colton Underwood, The BachelorWhat is up with this season of The Bachelor, man? Three women have now left of their own accord: Elyse, Sydney, and now first kiss Heather. Just ahead of hometown dates, where each of...
Published:2/18/2019 10:24:28 PM
[Markets] GE, Boeing, T-Mobile Among Latest Victims Of Chinese IP Theft

As US and Chinese negotiators prepare to begin their seventh round of trade talks this week, more reports are being leaked to the media about China's efforts to steal trade secrets from US companies via "Operation Cloudhopper", the Ministry of State Security-backed infiltration campaign that used service providers in the US and Europe to infiltrate the systems of their clients.

According to a report in the New York Times that detailed how China and Iran have ramped up their hacking efforts since 2015, when the now-abandoned Iran deal was initially struck, and China promised the Obama administration that it would pull back on its cyberespionage efforts. After an 18-month lull, China's 10-year-long commercially motivated campaign was revitalized in the midst of growing trade tensions between the US and China (tensions that predated Trump's trade war).


Among the latest targets of China's hacks, according to the NYT's military and private sources, were GE Aviation, Boeing and T-Mobile.

A summary of an intelligence briefing read to The New York Times said that Boeing, General Electric Aviation and T-Mobile were among the recent targets of Chinese industrial-espionage efforts. The companies all declined to discuss the threats, and it is not clear if any of the hacks were successful.

Offering some background on China's hacking strategy in recent years, sources described how China has managed to carry out more sophisticated attacks that have been increasingly difficult to detect.

But the 2015 agreement appears to have been unofficially canceled amid the continuing trade tension between the United States and China, the intelligence officials and private security researchers said. Chinese hacks have returned to earlier levels, although they are now stealthier and more sophisticated.

"Cyber is one of the ways adversaries can attack us and retaliate in effective and nasty ways that are well below the threshold of an armed attack or laws of war," said Joel Brenner, a former leader of United States counterintelligence under the director of national intelligence.

Federal agencies and private companies are back to where they were five years ago: battling increasingly sophisticated, government-affiliated hackers from China and Iran - in addition to fighting constant efforts out of Russia - who hope to steal trade and military secrets and sow mayhem. And it appears the hackers substantially improved their skills during the lull.


Mr. Segal and other Chinese security experts said attacks that once would have been conducted by hackers in China’s People’s Liberation Army are now being run by China’s Ministry of State Security.

These hackers are better at covering their tracks. Rather than going at targets directly, they have used a side door of sorts by breaking into the networks of the targets’ suppliers. They have also avoided using malware commonly attributed to China, relying instead on encrypting traffic, erasing server logs and other obfuscation tactics.


"The fingerprint of Chinese operations today is much different," said Priscilla Moriuchi, who once ran the National Security Agency’s East Asia and Pacific cyber threats division. Her duties there included determining whether Beijing was abiding by the 2015 agreement’s terms. "These groups care about attribution. They don’t want to get caught."

One of Beijing's primary motivations in carrying out these attacks has been to bolster its latest five-year economic plan to make China a leader in AI and other cutting edge technology.

But Chinese hackers have resumed carrying out commercially motivated attacks, security researchers and data-protection lawyers said. A priority for the hackers, researchers said, is supporting Beijing’s five-year economic plan, which is meant to make China a leader in artificial intelligence and other cutting-edge technologies.

"Some of the recent intelligence collection has been for military purposes or preparing for some future cyber conflict, but a lot of the recent theft is driven by the demands of the five-year plan and other technology strategies," said Adam Segal, the director of the cyberspace program at the Council on Foreign Relations. "They always intended on coming back."

This is only the latest in a string of leaks about China's espionage efforts since 2015. But the constant stream of evidence being leaked to the press, all of which seems to corroborate Robert Lighthizer's claims that China's cyberespionage efforts have continued unabated since the trade war began, are happening at an interesting time. Which would seem to raise serious questions about the US's ability to strike a sweeping trade compromise without President Trump looking like he has caved to the Chinese.

Published:2/18/2019 9:31:32 PM
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[Entertainment] Steve Harvey Clarifies Remarks to Mo'Nique After Backlash: "I Misspoke" Steve Harvey, Mo'Nique Steve Harvey wants to clarify comments about money and integrity that he made to Mo'Nique during a heated conversation on his talk show. The Oscar-winning actress and comedienne...
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Published:2/18/2019 7:32:08 PM
[Markets] The CTAs Are About To Stop Buying: What Happens Next

Following the December plunge, the S&P has staged one of the most vicious snapback rallies in history, rising for 8 consecutive weeks, most bizarrely without either institutional or retail investors actually buying this unprecedented short squeeze/buyback-driven rally which has seen near constant ETF selling even as the S&P has soared...

... which culminated with what may be capitulatory buying last Friday, when the Dow soared 444 points due to the Street’s positive reaction to the so-called progress of the Sino-US trade talks and the large-scale liquidity injection in January by Chinese authorities. At the same time, Nomura’s gauge of equity market sentiment in US and global markets has returned to positive territory for the first time since last October. Since some investors, whose scope is not only short-term but also medium- and long-term, may be aware of the potential risk of NOT holding US equities, it seems a “panic buying” mood, with purchases by investors who had been lagging the broader market, has accelerated according to Nomura .

Yet even though the US equity market is expected to edge higher in the short-run with the help of some buying inertia - which is basically Marko Kolanovic's entire (latest) bullish thesis, Nomura warns that "a sense of overheating in the markets’ upward momentum is rising at the same time and thus a cooling-off phase is likely forthcoming."

Specifically, according to Nomura's quant team, based on past behavior of systematic trend following algos, the Japanese bank expects CTAs to preventatively take profits on long positions sporadically starting around 26 February.

In addition, looking at technicals-based historical price patterns when the S&P500 breaches above its 200-day simple moving average (SMA) while its 20-day SMA is below 200-day SMA as in the present case – suggest a similar conclusion where S&P500 is likely to make shallow dips before heading higher.

Of course, since in this "market", where only central planning and central bankers matter, predicting what actually happens next - and being accountable for one's forecast - is the fastest way to getting a pink slip, Nomura was quick to hedge, adding that considering the resilience of current market sentiment and the market-friendly stance of Fed and the Chinese authorities, "the next price correction of S&P500 will likely be healthy and not a very severe one."

Nomura's conclusion: a drop may be coming, but don't forget to BTFD, to wit: "We believe as a short-term trading strategy of buying on dips from end-February to beginning-March targeting a subsequent return-reversal is attractive. In the past, S&P500 has experienced a long-lasting rising trend after the 20-SMA exceeded 200-SMA"

Published:2/18/2019 7:03:25 PM
[Markets] The Fed Conundrum - Data Or Markets?

Authored by Lance Roberts via,

Following the Fed’s last meeting, we published for our RIA PRO subscribers (use code PRO30 for a 30-day free trial)a simple question:

“What does the Fed know?”

Of course, this meeting followed the stock market plunge at the end of 2018 where their tone that turned from “hawkish” to “dovish” in the span of just a few weeks. Seemingly, despite the previous commentary about concerns over rising inflationary pressures, it was pressure from Wall Street and the White House that quickly “realigned” the Fed’s views.

  • The Fed will be “patient” with future rate hikes, meaning they are now likely on hold as opposed to their forecasts which still call for two to three more rate hikes this year.

  • The pace of QT or balance sheet reduction will not be on “autopilot” but instead driven by the current economic situation and tone of the financial markets.

  • QE is a tool that WILL BE employed when rate reductions are not enough to stimulate growth and calm jittery financial markets.

This change in stance, not surprisingly, buoyed the stock market as the proverbial “Fed Put” was back in place.

But the change view may have also just trapped the Fed in their own “data dependent” decision-making process.

The Fed Should Be Hiking Rates

As we noted in our RIA Pro article:

“During the press conference, the Chairman was asked what has transpired since the last meeting on December 19, 2019, to warrant such an abrupt change in policy given that he recently stated that policy was accommodative, and the economy did not require such policy anymore.

In response, Powell stated:

‘We think our policy stance is appropriate right now. We do. We also know that our policy rate is now in the range of the committee’s estimates of neutral.'”

Powell’s awkward response, and unsatisfactory rationale to a simple and obvious question, the question must be asked if it is possible that economic or credit risks are greater than currently believed which would account for the policy U-turn?

However, given that the Fed’s two primary mandates are supposed to be “full employment” and “price stability,” the conflict between managing inflation and supporting the markets is a conundrum.

For example, there is currently sufficient data which suggests “real inflationary pressures” are mounting in the economy. For example, with a 300,000 job print in January and rising wage pressures, the Fed should raise interest rates. The chart below of labor costs clearly show the problem business owners are facing.

As noted employment remains strong and data suggests there is upward pressure on companies to hire more workers.

That pressure to hire is coming from the reality there are currently more demands on labor than there are people to fill them.

Wage pressures are clearly rising in recent months putting additional upward pressures on pricing as companies pass on higher labor costs.

More importantly, inflationary pressures as measured by both PPI, CPI, and the Fed’s preferred measure of Core PCE, continue to rise as well.

The chart below is the spread between PPI and CPI, historically, when “producer price” inflation rises faster than consumer prices, it has impacted economic growth by suggesting that inflation can’t be passed on to consumers.

The composite inflation index is also screaming higher suggesting that if the Fed pauses they could potentially get well “behind the curve.” 

Even the Federal Reserve’s favorite measure of inflation, PCE, is also suggesting the Fed should be hiking rates rather than pausing.

All of this data clearly suggests that the Fed should be hiking rates currently, rather than pausing. 

The Conundrum

However, all of this data is also consistent with the end of an economic cycle rather than a continued expansion. As we quoted last week from John Mauldin:

I think because unemployment is lowest when the economy is in a mature growth cycle, and stock returns are in the process of flattening and rolling over. Sadly, that is where we seem to be right now. Unemployment is presently in the ‘low’ range which, in the past, often preceded a recession.

That loss of confidence is already beginning to show signs as noted recently by Zerohedge:

“American small-business owners are growing increasingly anxious about a looming economic slowdown.

After a report published last week by Vistage Worldwide suggested that small-business confidence had collapsed with the number of small business owners worried that the economy could worsen in 2019 numbering more than twice those who expected it to improve, the NFIB Small Business Optimism Index – a widely watched sentiment gauge – apparently confirmed that more business owners are growing fearful that economic conditions might begin to work against them in the coming months.”

Furthermore, most of these data points are at levels that typically precede economic slowdowns and recession, so hiking rates further from current levels could exacerbate the recessionary risk.

The problem the Fed faces currently, as we discussed previously, is that when the last recession started the Fed Funds rate was at 4.2% not 2.2% and the Fed balance sheet was $915 billion not $4+ trillion.

“If the market fell into a recession tomorrow, the Fed would be starting with roughly a $4 Trillion dollar balance sheet with interest rates 2% lower than they were in 2009. In other words, the ability of the Fed to ‘bail out’ the markets today, is much more limited than it was in 2008.”

But…what do you do?

The Trap

There are clearly rising inflationary pressures on the market, which are also beginning to impede economic growth. Those pressures, combined with a sharp decline in asset prices, spurred the Fed to react to political and market pressures.

The Fed is most likely aware that if a recession were to occur, their main lever for stimulating economic activity, interest rate reductions, will have little value. Given the amount of debt outstanding and the onerous burden of servicing it, the marginal benefit of lower rates will likely not provide enough benefits to lift the country out of a recession. In such a tough situation the next lever at their disposal is increasing their balance sheet and flooding the markets with liquidity via QE.

Sure, Powell might be taking a dovish tone to placate the markets, the President and his member banks and concurrently buying time to further normalize the balance sheet? But this approach is like pouring liquid out of your cup so you can add more when the time is right. You would do this because it is not clear just how much “the cup”will ultimately hold.

Bernanke and Yellen have both acknowledged that they were aware that each successive round of QE was somewhat less effective than prior rounds. That certainly must be a concern for Powell if he is called upon to re-engage QE in a recession or another economic crisis.

If this is the case, Powell will continue to publicly discuss minimizing reductions to the balance sheet and refrain from further rate hikes. Despite such dovish Fed-speak, he would continue to shrink the balance sheet at the current pace. This tactic may trick investors for a few months but at some point, the market will question his intentions and damage Fed credibility.

So, therein lies the trap. Do you hike rates and reduce the balance sheet anyway to be better prepared for the onset of the next recession, OR reverse policy to try to “kick the recession can” down the road a bit which leaves you under-prepared for the next crisis?

For the Fed, it is a choice between the lesser of two evils. The only question is did they make the right one?

While the Fed has a long history of using economic jargon and, quite frankly, non-truths to help promote their agenda, they also have a long history of making the wrong policy moves which spark either some sort of crisis, recession or both.

As Michael Lebowitz concluded for our RIA PRO subscribers last week:

“The market has largely recovered from the fourth quarter swoon, as such the Fed should be resting more comfortably. Economic data remains strong, and if anything it is slightly better than December when the Fed was ready to raise rates three times and put balance sheet reduction on “autopilot.”

Today the Fed has all but put the kibosh on further rate hikes and, per Mester’s comments, will end balance sheet reduction (QT) in the months ahead.

It is becoming more suspect that the Fed knows something the market does not.”

But, exactly what is it?

Published:2/18/2019 6:32:48 PM
[Markets] Thousands Sign Petition To Sell "Useless" Montana To Canada

More than 6,000 people have signed a petition to sell the "useless" state of Montana to Canada for $1 trillion in an effort to help pay down the national debt, which climbed above $22 trillion earlier this week.

"We have too much debt and Montana is useless. Just tell them it has beavers or something," reads the petition. Additional reasons provided by supporters of the petition, who weighed in on the comments section of the petition, included the state’s "insignificant population" and their "aesthetic" which some argued doesn't fit with the broader US.


Surprisingly, despite the accusation of being “useless", some purported Montana residents chimed in in the comments to say that they're supportive of the sale, and would love to join Canada without any of the associated expense of moving.

"Honestly, most Montanas are totally OK with this let's do it I'm fine with being out of this hellhole," one petitioner wrote. "Montana will get legal weed, health care and decent's a win-win."

Some Canadians also sounded supportive of the idea.


"Montana and its people would be a beautiful addition to our beautiful country. Welcome!...Dear Montana, we love you but we can’t afford that. Ditch the USA and join us for free. You don’t need that much debt."

Apparently, selling off US states may be a viable alternative to fiscal restraint, or ordering the Federal Reserve to print a trillion-dollar "coin" and deposit it in the Treasury.

Published:2/18/2019 6:02:53 PM
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[Markets] A Return To Sound Money: Echoes Of 1929 & The Threat To 'Unbacked' Currencies

Authored by Alasdair Macleod via,

In this article I draw attention to the similarities between the current economic situation and that of 1929, and the threat to today’s unbacked currencies. There is the coincidence of trade protectionism with the top of the credit cycle, and there are the inflationary events that preceded it. The principal difference today is in modern macroeconomic delusions, which hold that regulating inflation of money and credit is the solution to all ills. I conclude that economic salvation can only come from ditching today’s macroeconomic theories and by returning to monetary stability through credible gold exchange standards.


There is an assumption in economic circles that when the general level of prices changes, it is always due to changes in supply and demand for goods and services. Prices change all the time, but without a change in the public’s preference for or against holding money and with all else being equal, the general level of prices simply cannot change. Changes in the general level of prices are due to changes in the purchasing power of the money, which stems from the public’s preferences for or against it and do not emanate from goods and services.

This may not at first sight appear to matter, but it calls into question the widespread assumption that price changes are only due to changes in supply and demand for goods and services. It is a basic error behind modern monetary theory (MMT), whose supporters are busy reviving Georg Knapp’s Chartalist theories of money, the theories that permitted Bismarck’s inflationary pre-war armament financing and the subsequent collapse of the German currency in 1923. Believers in a divine right for the state to issue currency will not let themselves be distracted by inconvenient facts. MMT followers are only one group of neo-Keynesian inflationists, who are generally blind to the blunders of their revisionist economics.

Instead, they assume that the purchasing power of a state-issued currency is objectively fixed, only varied by changes in its quantity. Preferences for or against money are not in their economic lexicon. They ignore the evidence of hyperinflations, where the loss of purchasing power is never a straight-line affair. A myopic approach allows them to believe their feared deflation can be offset simply by regulating the increase in the quantity of money to ensure price stability, when in fact they are advocating what amounts to a hospital pass.

This notwithstanding, it is the apparently innovative solutions of MMT and other whacky ideas to address the evolving global credit crisis that are likely to unite inflationists in their drive to buy off with yet more monetary inflation the consequences of their disruptive actions earlier in the credit cycle.

This article is the third in a series about a prospective credit crisis, and its likely characteristics. The first (Trade wars – a catalyst for economic crisis) discussed the consequences of American trade protectionism coinciding with the top of the credit cycle. The second (Why monetary easing will fail) gave three reasons why monetary easing would fail to secure intended economic objectives. This article is about the consequences of accelerating inflationary policies for the purchasing-power of state-issued currencies. The comparison upon which our analysis is based is the credit cycle that terminated in the Wall Street crash of 1929 and the slump that followed, for reasons that will become clear. But first, we must remind ourselves of those depressing events.

The 1930s experience

Until 1933, the American dollar was on a gold exchange standard, whereby members of the public could exchange their dollars for gold at the rate of $20.67 to the ounce. By then the great depression was well advanced, and prices of commodities and raw materials had fallen heavily. An index of raw material prices fell approximately 50% between September 1929 and Spring 1933. Semi-manufactured products lost 40% and finished goods 30%. Agricultural prices were especially hard hit, with farm products falling 60% and wholesale food prices declining over 45%.

It was the fall in prices which led to the dollar’s devaluation to $35 per ounce of gold in January 1934, which by then was no longer available for public exchange. The dollar’s devaluation was an attempt to manage an economic outcome through price manipulation. But the reason for the collapse in prices in the first place was the dollar was tied to gold, and preferences for gold compared with goods had increased.

In effect, it was prices measured in gold through the medium of the dollar that was the issue. As noted above, when the general level of prices shifts, it is always because the purchasing power of the money they are measured in changes. Therefore, measured by an index of raw material prices, gold’s purchasing power doubled between September 1929 and Spring 1933. By the time of the dollar’s devaluation ten months later, the index of raw materials had recovered to a level which indicated a new dollar-gold relationship of $35 to the ounce was roughly right.

Today, there is no such relationship between the dollar and gold. While the US Treasury holds gold reserves, they are not available for monetary exchange. Furthermore, it is the stated objective of monetary policy to maintain a rate of price inflation targeted at two per cent. Therefore, if we face a replay of the slump following the Wall Street Crash then it is the purchasing power of gold that will rise, while that of the dollar will fall. This assumes the general price level can be controlled, which is never the case. And to the extent that other currencies use the dollar as their international yardstick, they will lose purchasing power as well.

The next crisis could be on the scale of 1929-34

We have no way of knowing the future in advance, but there are enough common factors that suggest the next credit, financial and systemic crisis might be of a similar or even greater level of disruption compared with the stockmarket collapse in 1929 and the great depression that followed it. This is why it was worth revisiting those events. Factors common to both periods are summed up in the following four bullet points:

  • On 30 October 1929 Congress passed the Smoot-Hawley Tariff Act. Getting wind of it in advance, investors sold stocks, driving prices down 34% in just fifteen days. Smoot-Hawley coincided with the top of the credit cycle, which made the combination brutal for both markets and the economy. Not only did 1929 mark the end of the greatest bull market in stocks since the South Sea bubble, but the destruction of personal wealth was wholly unexpected throughout society. Today, we face a similar combination of American trade protectionism being introduced at the top of the credit cycle. Stockmarket psychology seems equally unprepared today for the consequences.

  • There has been a prolonged period of monetary inflation since the Lehman crisis, lasting ten years to date. This compares with the inflationary period between 1921-29 of eight years. Furthermore, today’s inflationary phase of the credit cycle is in addition to a series of previous inflationary cycles, leaving a heritage of past distortions still to be unwound. Before the 1921-29 period, a short sharp depression in 1920-21 meant there was an insignificant legacy of economic and financial distortions carried over. Therefore, a credit and systemic crisis today has the potential to be more damaging than the crisis that preceded the great depression.

  • In 1921-29, the price-inflation consequences of monetary expansion were concealed by benefits from improved farming and manufacturing methods. Today, price inflation is also concealed through statistical manipulation. The lack of apparent price inflation in the earlier period coupled with low long-bond yields (less than 4%) fuelled a stock market boom that ended in 1929. The same dynamics today have fuelled a similar stock market boom, which may have ended last year.

  • In 1921-29, the growth of bank lending at approximately 50% over the period was similar to commercial and industrial bank lending between 2009-18, which increased by 57%. The reason for this comparison is bank lending in the 1920s was substantially to commercial and industrial customers. Additionally, in the 1920s finance through discounted bills became highly inflationary. The current period commenced with a massive monetary injection by the Fed, and in addition both consumers and the government are also heavy borrowers.

There are also some additional factors to consider for the current credit cycle.

  • The overall consequences of a credit and economic crisis are greatly magnified by the lower proportion of genuine production relative to the whole economy today. Compared with the 1920s, state finances today are more highly geared to economic outcomes.

  • What has been ignored by inflationists is the economic destruction from monetary inflation, which transfers wealth from bank depositors and wage-earners to the banks, their favoured customers, the government and the central bank. Therefore, inflationary monetary policies conceal the true extent of an economic slump, make it worse and certainly do not cure it.

  • In 1929-34, Banks defaulted in large numbers. Central banks today do their utmost to stop commercial banks from failing. The demands for yet more monetary inflation will be impossible to resist because of the need to support both the banking system and rapidly deteriorating government finances.

  • Central banks are breaking ranks, with Russia and China leading Asian states away from the dollar. Russia already has gold as its principal reserve currency, and China has successfully become the world’s largest gold miner and refiner, while her people take up nearly two-thirds of global mine supply[v]. The consequences for currencies whose issuing banks do not follow this Asian path could be significantly worsened if they continue to insist gold plays no part in their monetary policy.

  • Bond yields in the 1929-34 period fell to levels that are still higher than those of today, with the lowest yield on long bonds at 3.26% in April 1931.[vi] The originary rate at that time reflected the dollar’s convertibility into gold. The originary rate of interest is set by the time-preference accorded to money in free markets, so is primarily the public’s view of the quality of that money. Today, dollar and other currency bond yields remain heavily suppressed, with five out of six major central banks still expanding their balance sheets and three of them with negative interest rates.[vii]The risk is that when markets adjust to a time-preference value that takes account of this aggressive monetary debasement, a massive interest rate shock will be triggered.

  • The widespread use of exchange-traded and indexed funds divorces investors from investment risk. If and when an increase in market risk becomes apparent, the public are likely to become indiscriminate sellers of ETFs and other index trackers, accelerating a stock market decline and bringing forward a collateral-led shock.

In summary, greater monetary forces appear to be at play today than existed in 1929-34. If they undermine the ability of policymakers to manage outcomes, the monetary consequences are bound to be very serious. But they will different in one important respect compared with ninety years ago: the purchasing power of gold can be expected to rise substantially while the purchasing powers of currencies fall. The success of policymakers in managing a crisis similar in scale to that of the great depression depends on their understanding of economics, which is our next topic.

The great depression informed today’s academics

The monetary policies followed by central banks will be crucial for the survival of state-issued currencies in the coming years, if as seems increasingly likely, we are on the verge of a new credit crisis.

Experience gained from the great depression is behind today’s economic theories. By that time, leading proponents of the Austrian school of economics had demonstrated that the causes of the great depression had their roots in the monetary expansion of the previous decade. Leading theorists, particularly Von Mises and Hayek perfected market-based sound-money theories, their validity honed and confirmed by Europe’s post-war monetary collapses in the early 1920s.

Meanwhile, in 1913 the US had established a federal banking system, which flourished in the 1920s on the back of credit expansion. The warnings of Austrian economists about credit expansion were ignored. When the crash they predicted occurred, the federal banking system excused itself from culpability. Instead, theories that deflected blame to free markets and absolved the federal system were actively promoted. A new theory of statism that enhanced the supposed virtues of state-issued money gradually evolved. And it is this which has become the basis of today’s macroeconomic theory.

Austrian and other laissez-faire free-market economic theories were passed over. Today, nearly everyone subscribes to macroeconomics. Its high priests claim it fundamentally differs from classical economics, which they assert is relevant only to microeconomic analysis. It became a handy way for neo-classical economists to absolve themselves from addressing fundamental questions, such as Say’s law, the socialist calculation problem, and other established truths impossible to explain away.

At the heart of macroeconomics is mathematics. Macroeconomists imply that in aggregate, the uncertainties of future human action cancel out, validating a mathematical approach. With this comes statistics aggregating transactions and prices. To neo-Keynesians, monetarists and MMT followers alike, government statistics are the basis for economic and monetary policies. But because they exclude human action, they are fundamentally flawed and badly misleading for policy determination.

These economic policies are sure to be applied even more vigorously to resolve the next crisis. They are the sources of the errors that if continued are bound to lead to a devastating conclusion. The logical outcome is the end of fiat currencies and all state theories of money. The Austrians had a description for it, having experienced it in 1922 and observed Germany the following year: the crack-up boom, or flight out of state currency into real values.

The likely progression of a new credit crisis

If, as seems likely, central banks see an increasing probability of recession, then interest rate policies will initially be eased. The rally in stock markets since mid-December has been discounting this possibility, which is now emerging as fact. However, cautious cuts in interest rates at the start of a cyclical downturn usually fail to stimulate the economy, only leading to a market rally, which in 1929-30 lasted five months. This one has lasted two so far and still counting.

The future course for advanced economies depends on the confidence of lending bankers in the medium-sized and small businesses that make up roughly 80% of total business activity. We have already seen funding dislocations in the corporate bond markets, which will have confirmed to bankers the increasing risk attached to offering working-capital facilities for businesses. Businesses which based their calculations on cheap credit being available are putting investment plans on hold and considering cutting existing commitments, at least in part because of their bankers’ cautious attitude. This is already evident in capital investment statistics around the world.

It appears that the psychology underlying productive activity has changed. Every time a central banker makes a reassuring statement, instead of applauding it, commercial bankers question the motive, saying there’s no smoke without fire. It’s the same for investors. Next time the stockmarket slides, look out for senior government figures attempting to reassure investors, and investors taking the hint that things must be worse than they appear if they need reassuring.

If suspicions are correct that trade tariffs being introduced at the top of a credit cycle is lethal timing, then equities could be embarking on a substantial bear market. It follows that there will be a switch from owning stocks as a sure-fire way of making money to owning stocks rapidly becoming a liability. The speed of the switch in sentiment will depend on a number of influences. But given that a comparison with the 1929-32 crash has some validity, it could be unexpectedly severe. There is also uncertainty over an additional factor, the presence of index-tracking funds.

Index trackers are not investments, though they are authorised and marketed as such. They are bets on a market’s direction. It stands to reason that when the direction changes, there will be widespread liquidation of bullish trackers and increased interest in trackers which profit from falling markets. Therefore, the speed of the fall could be accelerated significantly by liquidation of these funds.

The effect of a deepening economic crisis on government finances in welfare-driven states is potentially catastrophic. Not only will welfare commitments rise, but tax revenues will fall. And as noted above, the genuinely productive element of a modern welfare state upon which the whole economy depends has already shrunk as a proportion of the whole. Furthermore, governments will be reluctant to return to the days of austerity. So-called, but not austerity at all, because only expected increases in spending were scaled back. Simultaneously, governments everywhere will be increasing their borrowing, thereby draining wealth and capital resources from the already depleted productive sectors of their economies at an accelerating pace.

Central banks will find themselves attempting to finance escalating government deficits and underwriting their commercial banking systems with all their derivatives at the same time. Monetary inflation can only be cranked up, on top of the monetary inflation that persisted for all the cycle just ended, with five of the major central banks still expanding their balance sheets and three of them still imposing negative interest rates.

This is why, unless there is a major change of policy direction, the purchasing power of unbacked fiat currencies will be undermined. The destruction of wealth through monetary inflation, far from rescuing the economy, simply adds to the national woes by devaluing the efforts and wealth of ordinary people. Accordingly, unless there is a rapid acceptance that self-serving macroeconomic policies are at the root of this evil, interest rates will quickly rise beyond the authorities’ control as the fiat money delusion is revealed for what it is.

There is a way to stabilise interest rates, which government economists won’t like: return to a credible gold exchange standard, then interest on long-term government borrowing will be capped at under 5% and falling, assuming credibility in government finances is restored. It will require far higher gold prices to stick, which will catch out any government which has been lying about its bullion reserves. But at least that will give government finances a chance to stabilise while other actions to reduce the burden of government on the productive sector of the economy are put in place.

Published:2/18/2019 5:03:18 PM
[Markets] Live Feed: Trump Courts Latino Vote In Miami Speech: Venezuela's Move To Democracy Is "Irreversible"

Live Feed:

It’s been all Venezuela, all day in Miami thus far on Presidents’ Day ahead of Trump's remarks at Florida International University, in a region where Venezuela politics have often become local politics in South Florida, given the nearly 40,000 registered voters in the state who've self-identified as being born in Venezuela

Trump is expected to repeat calls for Venezuela's embattled President Nicolas Maduro to leave power, and looking ahead to 2020, he'll be appealing to both the tens of thousands of Venezuelan expatriates who could inch Republicans past Florida, as well as the generals in the Maduro government after popular protests and unrest within the country appears to have lost momentum, compared with the thus far loyal army's staying power. 

Image source: ZUMA Press

According to a White House preview of Trump’s speech, the president will reaffirm US backing of opposition head and self-declared "Interim President" Juan Guaido while asserting “the current path toward democracy is irreversible.” He's also expected to warn the power military officers that back Maduro of severe consequences should they remain loyal to the end

“Venezuelan military officials have a clear choice: work toward democracy for their future and the future of their families, or they will lose everything they have,” according to preview statements issued by Press Secretary Sarah Huckabee Sanders. “The United States knows where military officials and their families have money hidden throughout the world.”

Meanwhile the venue of Florida International University is in the heart of the Venezuelan and Latin American immigrant community in South Florida, according to Bloomberg. Picking up on prior themes of the Trump presidency, he's expected to couple the anti-Maduro message with a condemnation of socialism: “We renew our resolve that America will never be a socialist country,” Trump said recently, perhaps readying his re-election campaign message. 

A number of expected re-election campaign threads will come together during the speech, as Bloomberg explains:

Trump’s speech in Miami will cap a Presidents Day holiday weekend spent at his Mar-a-Lago resort in Palm Beach and his nearby golf club, in a swing state where the Hispanic vote, including Venezuelan expats, is a key bloc.

Democrats have also eyed the Hispanic vote in Florida, especially the state’s growing Puerto Rican population. Trump was heavily criticized for his administration’s response to 2017’s Hurricane Maria, and thousands of residents who fled the island after Maria now reside -- and can vote -- in Florida.

The Venezuelan-American vote may provide Republicans a counterweight given the economic and humanitarian crises under Maduro and Trump’s willingness to respond.

Over the weekend the US Treasury indicated it would “consider lifting sanctions” on those who take action and steps to “restore democratic order” in the country, aiming its message to state-run oil giant Petroleos de Venezuela SA. However it also put new sanctions on five Maduro associates, not the least of which is Venezuelan Oil Minister and PDVSA Chairman Manuel Quevedo.

The Treasury also echoed Trump's label on Caracas' leadership, calling Maduro the "illegitimate former president". This after outspoken Florida Republicans, Senator Marco Rubio and Representative Mario Diaz-Balart, traveled to the Colombia-Venezuela border over the weekend as the first shipments of US military cargo aid arrived. 

Upon returning to Florida from Cúcuta, Colombia as part of the lead-up to Trump's speech, Sen. Rubio said, “The only invasion that people have talked about around me is an invasion of food and medicine.”

Published:2/18/2019 4:03:55 PM
[Entertainment] Kourtney Kardashian and Travis Barker Enjoy a Night Out in Malibu Kourtney Kardashian, Travis BarkerHi neighbor! On Sunday, Kourtney Kardashian enjoyed a night out in Malibu with blink-182 drummer Travis Barker and other pals. The two have been friends for years and live in the same...
Published:2/18/2019 3:02:49 PM
[Markets] One-Third Of Millennials Believe They Have A Better Chance Of Dating An A-Lister Than Owning A Home

There isn't a lot American millennials wouldn't do to have a chance at owning a home some day.

According to a survey of 500 millennials conducted by OnePoll, nearly half of millennials would swear off Instagram forever, and one in four would be willing to spend a week in jail, if it would help them one day achieve the American dream of owning their own home. One in four survey respondents said they would have attended the Fyre Festival - the doomed festival on a Bahamanian island that led to millions of dollars in lawsuits and a jail sentence for its organizer.

In a sign of how desperately out of reach most millennials consider homeownership to be, some 30% of respondents said they felt they had a better chance of dating an A-list celebrity than ever owning their own home. Meanwhile, 40% of respondents said they felt homeownership is "completely out of the question" unless they inherit property from their parents, and 42% said they would like to buy a home, but they simply can't afford it. Nearly half of respondents believe (correctly) that buying a home would be more difficult now than it was 30 years ago. In a similar vein, only 8% of millennials disagreed with the belief that life is harder now than it was for Baby Boomers.

Here's a complete rundown of the survey responses, courtesy of the New York Post.


In another unsurprising finding, nearly one-quarter of respondents said they have actually put off having children because they can't afford homes. And this state of affairs is unlikely to change - at least not any time soon. Burdened by student debt, another study published late last year found that half of millennials have no money saved for a down payment.

Published:2/18/2019 3:02:48 PM
[Markets] Motive Revealed In Smollett Case; Actor Concocted Hate Crime After Racist Letter Failed To Impress

Actor Jussie Smollett appears to have concocted a hate-crime hoax because he was upset that a racist letter sent to the Empire studio didn't get a "bigger reaction," reports CBS 2 Chicago. As a result, Smollett allegedly paid two men $3,500 each to rehearse and then attack him a week later in an attempt to frame Trump supporters as violent racists. 

When the letter didn’t get enough attention, he concocted the staged attack,” a source told CBS 2 Investigator Brad Edwards. Other sources corroborated that information.

The blockbuster revelation into at least part of Smollett’s potential motive comes two days after CBS 2’s Charlie De Mar reported Smollett and two brothers — Ola and Abel Osundairo — staged the attack on Jan. 29 in Streeterville. -CBS 2 Chicago

CBS 2 reporter Charlie De Mar spoke on the phone with the Osundario brothers Monday afternoon, who said in a joint statement: "We are not racist. We are not homophobic, and we are not anti-Trump. We were born and raised in Chicago and are American citizens.

Smollett received a letter containing a "white substance" at Empire's Chicago Cinespace Studios where the show is filmed, prompting a HAZMAT response that failed to gain much traction. The "white substance" was later found to be aspirin. 

The note was crafted with letters apparently cut out from magazines to form words. The pieced-together message contained racial and homophobic threats directed at Smollett. A magazine is one of the pieces of evidence retrieved from the brother’s home last week during a search conducted by CPD. Investigators also recovered a book of stamps. 

The brothers are acquaintances of Smollett.

When asked about the letter in a televised interview last week, Smollett said, “On the letter, it had a stick figure hanging from a tree with a gun pointing toward it.” It also had “MAGA” — reference to President Donald Trump’s campaign slogan Make America Great Again – written as the return address.

In due course all the facts will reveal themselves and at the end of the day my clients are honest and credible” the brothers’ attorney Gloria Schmidt said.

-CBS 2 Chicago

Smollett appeared in a play with a similar "assault"

The Daily Mail reported on Monday that Smollett "landed in Chicago shortly after midnight" one day after he was in New York City for a reading of the play "Take Me Out," which features a gay character who is attacked using "the same racial slurs Smollett told police his attackers screamed at him, including 'f****t' and 'n****r.'"

On Monday, Smollett's new crisis management rep Anne Kavanaugh reported "There are no plans for Jussie to meet with Chicago police today. Any news reports suggesting otherwise are inaccurate. Smollett's attorneys will keep dialogue going with Chicago police on his behalf."

Smollett picked the wrong camera

After the alleged "attack" on January 29 in which Smollett alleged that two attackers recognized him, shouted racist and homophobic slurs at him (from the reading he had just flown back from), beat him up, poured a bleach-like liquid on him, wrapped a noose around his neck, and warned him "This is MAGA country!" - Smollett made sure to tell Good Morning America last week that he spotted a surveillance camera that caught the entire incident

Alas, as Breitbart's John Nolte notes, Smollett then admitted his disappointment that the camera was facing the wrong way

And one can imagine, had there been surveillance footage of the attack, the investigation would have proceeded very, very differently.

Once police had the footage, it would leak. Once cable and network news had the footage, it would loop endlessly. The fact that the two brothers are black wouldn’t matter. CBS Chicago reports that a black face mask was found in their apartment. Smollett told police the attackers wore face masks. With those face masks, the organized left (the media, Democrats, celebrities) were allowed to assume his racist attackers were white. Breitbart

Just another hate crime hoax in America (allegedly, of course).  

Published:2/18/2019 2:34:55 PM
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Published:2/18/2019 2:01:55 PM
[Markets] Is The "World's Biggest Widowmaker" Trade Finally Dead? JGB Buyers Stage Revolt

Could the world's most popular "widowmaker" trade - shorting Japanese government bonds - be finally died itself?

While over the past 20 years, ever since the BOJ cut rates to 0% for the first time back on February 12, 1999...

... all too many investors have repeatedly shorted JGBs, expecting the collapse of Japan's fiscal and monetary house of cards at any moment, only to be carted out feet first as Japan has has successfully prevented a blow up in its bond market for over two decades, entirely thanks to the BOJ which thanks to NIRP and QE, now owns 43% of all government debt, just shy of 1.1 quadrillion yen, an amount which is more than 100% of Japan's GDP.

And yet, despite this amazing track record which saw anyone who fought the BOJ crumble and suffer massive losses for over 20 years, increasingly JGB traders are casting nervous glances at the exit door, especially after the Bank of Japan unveiled its first taper of 2019 on February 12, when it cut bond purchases in the key 10-to-25 maturity bucket from 200 to 180 billion; this was the first taper by the BOJ since mid-December, and it's only set to accelerate as the BOJ runs out of eligible bonds to monetize.

And, as Bloomberg notes, the move is already impacting market behavior, with signs that traders are already bracing for further tapering by the central bank. Case in point: following the BOJ's offer to buy bonds due in more than 25 years on Monday, the offer-to-cover ratio surge to 4.71 times, the highest since October 2014, showing traders' surging "willingness"
to part with the super-long securities by selling them to the central bank.

Monday's was the first open market operation in the long-end of the JGB curve since the BOJ trimmed purchases of debt due in 10-25 years, on Feb 12.

The rise in offers for bonds due in more than 25 years was due to "caution that the BOJ may cut purchases in the segment" following last week’s reduction in the 10-25 year zone, says SBI Securities chief bond strategist Eiji Dohke.

Meanwhile, investors' positioning for further reductions in long-end purchases - i.e., accelerating selling of duration - can be seen as an attempt to steepen the JGB curve, which on one hand would be consistent with the BOJ’s previous guidance about the negative impact of excessive flattening. On the other, if the selling accelerates from a trickle to an avalanche, the market will once again call the BOJ's bluff and force it to ramp up purchases of long maturities lest the 10Y yield spike above 20bps, signalling to the market that after two decades, the BOJ has finally lost control.

Finally, what is even more surprising is just how quickly sentiment has flipped: it was just 10 days ago when appetite for long-term JGBs seemed insatiable, when an auction of 30-year debt drew the strongest demand since July on Feb. 7, two days after a blockbuster 10-year sale that lured the highest investor interest since 2005. And to think all it took was for the BOJ to fractionally taper purchases and the market freaked out.

One wonder just how, if ever, the BOJ will be able to "normalize" its own QE if just a gentle tapping on the breaks can send such a shockwave across the bond market (please don't answer, that's rhetorical).

Published:2/18/2019 2:01:54 PM
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Published:2/18/2019 1:32:26 PM
[In The News] President Trump Will Demand that Venezuela’s Maduro Steps Down

By American Media Institute -

By AMI Newswire President Trump will call on Venezuela’s dictator Nicolas Maduro to leave office according an advanced text of a speech he will deliver today in Miami. Trump will also demand that Venezuela’s military allow humanitarian aid to arrive in that beleaguered socialist state. If the military leaders refuse, he ...

President Trump Will Demand that Venezuela’s Maduro Steps Down 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:2/18/2019 1:32:26 PM
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Published:2/18/2019 1:04:42 PM
[Markets] The VC Bubble Just Burst: Soft Bank's Top 2 Investors Complain About Overpayment For Tech Companies

After venture capital spending hit an all-time high in 2018, evidence that the VC bubble may finally be about to burst has continued to mount, just as some of Silicon Valley's most overvalued tech darlings have been preparing for their long-anticipated public offerings.

And in the latest sign that Silicon Valley's latest crop of unicorns could be headed for a brutal "down round", the Wall Street Journal reported on Monday that the two biggest backers of Soft Bank's $100 billion Vision Fund (the Japanese telecoms conglomerate/VC giant and the Bay Area tech scene's most reliable marginal investor) have been complaining about the high valuations at which it has invested in some of its holdings.

In addition to being one of Uber's largest shareholders, with a $9.3 billion stake, the Vision Fund has also invested in WeWork, dog-walking service Wag, GM Cruise and DoorDash among its investments, according to ReCode.


Masayoshi Son

The backers in question are Saudi Arabia's Public Investment Fund and Abu Dhabi’s Mubadala Investment Co, who together have contributed roughly two-thirds of the Vision Fund's capital. Should they balk at the relationship, it could spell trouble for any deals that the fund has planned, because according to the most recent reports, Vision has only deployed about $60 billion of its $100 billion in capital, and reportedly has about 20 deals in the pipeline.

While Soft Bank's chairman Masayoshi Son and the Saudis have maintained a cordial relationship, at least in public, the reports of the Saudis dissatisfaction with the Son and his management style isn't all that surprising. The FT reported earlier this year that Soft Bank had abruptly scaled back plans to increase its stake in WeWork by $16 billion. The fund ended up investing another $2 billion, one-eighth of the originally planned investment.

Apparently, the WeWork investment wasn't the only deal to collapse in recent months. Plans for Soft Bank to increase its investment in Hong Kong-based AI startup SenseTime in a joint $1 billion investment with Mubadala.

Soft Bank had invested several hundred million dollars into SenseTime last fall, bringing the company’s valuation to about $7.7 billion, according to people familiar with the deal. The Vision Fund then considered making a joint $1 billion investment with Mubadala in SenseTime, as part of a potential fundraising round that could value the company at $10 billion, according to people familiar with the matter.

The deal never came together after Mubadala backed away in recent weeks, people familiar with the matter said. The fund balked at what it considered a high valuation target, a person briefed on the matter said.

Some Vision Fund employees also considered the valuation to be high, some of the people said. SenseTime rival Megvii Technology Inc. is currently raising funds at a $3.5 billion valuation, according to people familiar with the matter.

SenseTime and Mubadala said they weren’t aware of any potential co-investment by the Vision Fund and Mubadala, and SenseTime said it never launched a $1 billion financing round at a valuation of $10 billion.

In addition to the fund's investment strategy, its backers are also growing suspicious of a practice that's peculiar to the Vision Fund: Soft Bank's strategy of investing in companies first, then transferring the stakes to Vision Fund. The fund's backers are reportedly worried that Soft Bank is trying to take advantage of high valuations to realize gains for itself at the expense of Vision's investors.

One person familiar with the Middle East investors’ thinking expressed concerns about whether Soft Bank was taking advantage of high tech valuations to crystallize gains at the expense of PIF and Mubadala. Soft Bank has transferred, sold or is planning to sell to the Vision Fund at least $26.3 billion worth of stakes in companies that it originally purchased for around $24.9 billion during the past few years, according to company filings.

Soft Bank’s transfers include a stake in Chinese car-hailing giant Didi Chuxing Technology Co., which it bought for $5.9 billion and has agreed to sell to the Vision Fund for $6.8 billion, and a stake in Indian hotel-booking site OYO Hotels, which it transferred to the Vision Fund last year for double the $100 million it paid in 2015.

The issue isn’t necessarily the premium over Soft Bank’s cost for the investments; it is that the company is buying and transferring stakes while the market is high, potentially setting the fund up for losses.

Another complaint is that Soft Bank has been inadvertently ballooning valuations by leading large financing rounds...

In some cases, Soft Bank itself has contributed to rising valuations by leading massive fundraising rounds. In OYO’s case, Soft Bank or its Vision Fund have led increasingly large financing rounds, culminating in a recently closed $1 billion investment, which pushed the startup’s valuation to around $5 billion, according to people familiar with the matter. That is 13 times as high as when Soft Bank first invested in 2015, according to investment data tracker Dow Jones VentureSource.

...And concerns about Masayoshi Son's increasingly autocratic investment style have also been cropping up.

Concerns about valuation of the fund’s investments are closely linked to concerns about its investment process, in particular the power wielded by Mr. Son. In recent weeks, Mr. Son overruled objections from partners within Soft Bank to a Vision Fund investment valued at as much as $1.5 billion into Chehaoduo Group, a Chinese online car-trading platform, according to people familiar with the matter. Chehaoduo was accused of fraud in recent weeks by a competitor.

A spokeswoman for Chehaoduo pointed to a statement from January that denied the accusations. Mr. Son told The Wall Street Journal that Soft Bank had conducted its own due diligence and found the accusations groundless.

The investment would value Chehaoduo at $8.5 billion, according to a person familiar with the deal. One of the company’s competitors, Nasdaq-listed Uxin Ltd., has a market capitalization of $1.18 billion, while another, Hong Kong-listed Yixin Group Ltd., is valued at $1.75 billion.

Perhaps, after Chamath Palihapitiya, the Silicon Valley investor behind Social Capital, warned that venture investments had become like a "Ponzi Scheme", more of the Valley's biggest backers are having second thoughts about the high valuations to which they have so blithely contributed in recent years.

If true, this could have repercussions across a broad range of markets, from Silicon Valley real-estate to the tech sector, particularly as the next round of hot unicorn IPOs approaches.

Published:2/18/2019 1:04:41 PM
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Published:2/18/2019 12:36:29 PM
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Published:2/18/2019 10:33:49 AM
[Markets] Facebook Negotiating Multibillion-Dollar US Fine As UK Labels "Digital Gangsters"

Facebook and its executives were labeled "digital gangsters" and should immediately be subject to statutory regulation, according to an 18-month investigation ordered by the UK parliament. 

The UK assessment comes as word that the Silicon Valley tech giant is negotiating a multibillion-dollar settlement with the US Federal Trade Commission, the largest handed out to a tech company in agency history. 

The UK report from the Digital, Culture, Media and Sport select committee, found that Facebook purposefully obstructed its inquiry, according to The Guardian, while the social media giant failed to tackle Russian attempts to manipulate elections. 

"Democracy is at risk from the malicious and relentless targeting of citizens with disinformation and personalised ‘dark adverts’ from unidentifiable sources, delivered through the major social media platforms we use every day," warned Damian Collins, chairman of the committee. 

Per The Guardianthe report: 

  • Accuses Mark Zuckerberg, Facebook’s co-founder and chief executive, of contempt for parliament in refusing three separate demands for him to give evidence, instead sending junior employees unable to answer the committee’s questions.

  • Warns British electoral law is unfit for purpose and vulnerable to interference by hostile foreign actors, including agents of the Russian government attempting to discredit democracy.

  • Calls on the British government to establish an independent investigation into “foreign influence, disinformation, funding, voter manipulation and the sharing of data” in the 2014 Scottish independence referendum, the 2016 EU referendum and the 2017 general election.

"We need new independent regulation with a tough powers and sanctions regime to curb the worst excesses of surveillance capitalism and the forces trying to use technology to subvert our democracy," said Labour party deputy leader Tom Watson, adding that "Labour agrees with the committee’s ultimate conclusion – the era of self-regulation for tech companies must end immediately."


In short - people are too stupid to know when they're reading fake news, which probably comes from Russia, and the UK government must now step in to control the flow of information, citizen. 

The Parliamentary report was launched in 2017 in order to analyze fake news over social media, and was "turbocharged in March the following year, with the Cambridge Analytica data harvesting scandal," writes The Guardian

The committee argues that, had Facebook abided by the terms of an agreement struck with US regulators in 2011 to limit developers’ access to user data, the scandal would not have occurred. “The Cambridge Analytica scandal was facilitated by Facebook’s policies,” it concludes.

The 108-page report makes excoriating reading for the social media giant, which is accused of continuing to prioritise shareholders’ profits over users’ privacy rights. -The Guardian

"Facebook continues to choose profit over data security, taking risks in order to prioritise their aim of making money from user data," reads the report, which concludes that "It seems clear to us that Facebook acts only when serious breaches become public.

Zuckerberg called out

The report personally criticizes Facebook CEO Mark Zuckerberg over his claim that Facebook has never sold user data - a claim the report concludes is "simply untrue." 

"Mark Zuckerberg continually fails to show the levels of leadership and personal responsibility that should be expected from someone who sits at the top of one of the world’s biggest companies," said committee chair Collins in a statement. 

Labour's Watson agreed, saying "Few individuals have shown contempt for our parliamentary democracy in the way Mark Zuckerberg has." 

"If one thing is uniting politicians of all colours during this difficult time for our country, it is our determination to bring him and his company into line." 

According to the report, Facebook is using its market dominance to crush rivals - using various technological means to prevent them from competing with Facebook or its subsidiaries. 

The committee also released new internal Facebook documents obtained from the company’s legal dispute with the company Six4Three, which it said “highlights the link between friends’ data and the financial value of the developers’ relationship with Facebook”.

“Companies like Facebook should not be allowed to behave like ‘digital gangsters’ in the online world, considering themselves to be ahead of and beyond the law,” the report warns. -The Guardian

In response to the parliamentary report, Facebook gave a very careful response, saying it was "pleased to have made a significant contribution," adding that "We are open to meaningful regulation and support the committee’s recommendation for electoral law reform." 

"We have already made substantial changes so that every political ad on Facebook has to be authorised, state who is paying for it and then is stored in a searchable archive for seven years," said the company's UK public policy manager, Karim Palant. 

FTC Fine

Meanwhile across the pond, Facebook and the Federal Trade Commission (FTC) are negotiating a multibillion-dollar fine to settle the agency's investigation into the privacy practices of the social media giant, according to SF Gate, citing two people familiar with the investigation. 

The fine would be the largest ever imposed by the independent federal agency on a technology company, however the two sides of reportedly failed to agree on an exact amount. While Facebook has balked at the FTC's official demands according to the SF Gate, the FTC can drag the company into court in what would likely be an ugly legal battle that could drag on for years. 

A multibillion-dollar fine would amount to a reckoning for Facebook in the United States after a series of privacy lapses that may have put the personal information of its users at risk. Lawmakers have faulted the company for mishandling that data while failing to crack down on other other digital ills, including the rise of online hate speech and the spread of disinformation from Russian operatives and other foreign actors. -SF Gate

"Facebook faces a moment of reckoning and the only way it will come is through an FTC order with severe penalties and other sanctions that stop this kind of privacy misconduct going forward," said Sen. Richard Blumenthal (D-CT). 

The FTC's investigation began in March of last year following the Cambridge Analytica scandal, after it appeared that the company violated a 2011 agreement between Facebook and the FTC to improve its privacy practices. Facebook claims it did not breach that agreement - which stipulated that the company had to be more transparent with how it notifies users about sharing personal data with third parties. 

Facebook is better off paying the fine vs. taking the FTC to court, many believe. "They're hemorrhaging users, they're hemorrhaging trust, and I think this would only exacerbate the problem," said Consumer Reports director of consumer privacy and technology policy, Justin Brookman. 

Meanwhile, consumer advocate groups urged the FTC in January to punish facebook with "substantial fines," perhaps exceeding $2 billion, while imposing restrictions on data collection. 

"The company's business practices have imposed enormous costs on the privacy and security of Americans, children and communities of color, and the health of democratic institutions in the United States and around the world," wrote groups spearheaded by the Electronic Privacy Information Center (EPIC), which filed the original complaint leading to the 2011 settlement with the FTC. 

Published:2/18/2019 10:33:48 AM
[Markets] Salisbury Residents Outraged After Giant Russian Flag Hung From Cathedral

Residents of Salisbury, UK awoke on Sunday to a giant Russian flag hung from the scaffolding at the North front of the local cathedral, in what many interpreted as mocking the poisoning of Sergei Skripal. 

Photo: Carol Byrne
Photo: Carol Byrne

"My initial reaction was just one of shock and sadness that someone would choose to do this at any time, but particularly as we're leading up to the first anniversary of the incident and the city is very much trying to be positive," said Conservative councillor Jo Broom, via ITV Newsadding "Residents will just be very upset, it's just a little bit of a slap in the face."

Following the flag's removal, Salisbury MP John Glen said: "Thankfully it has been removed now - what a stupid stunt - mocking the serious events sadly experienced in Salisbury last year."

Some went so far as to suggest that the flag was a psyop & "gaslighting on the British public." 

The Skripal poisoning - blamed on Russia by the UK, took a strange turn in January when it was revealed that the first responder to the scene was the Chief Nursing Officer for the British Army after her daughter spotted Skripal and his daughter collapsed on a bench at the Maltings shopping center in Salisbury on March 5 of last year. 

According to Spire FM, 16-year-old Abigail McCourt spotted the poisoned Russians while "out celebrating her brother's birthday," and then quickly alerted her mother - Alison McCourt. The two McCourts gave first aid to the Skripals until paramedics arrived. 

UK authorities initially blamed two Russian nationals they say are connected to Russia's GRU, Russia's military intelligence agency, for the attempted Skripal murder, while two days ago a third suspect was identified as a "high-ranking officer in the GRU." 

Meanwhile, as we reported in late JanuaryThe Telegraph issued a major walkback of a link between Skripal and Steele Dossier author, Christopher Steele - blaming Russia for laying a "false trail" linking the former double agent to an employee of Steele's Orbis Business Intelligence over social media. 

In March of last year, The Telegraph wrote: 

The Telegraph understands that Col Skripal moved to Salisbury in 2010 in a spy swap and became close to a security consultant employed by Christopher Steele, who compiled the Trump dossier. 

The British security consultant, according to a LinkedIn social network account that was removed from the internet in the past few days, is also based in Salisbury.

On the same LinkedIn account, the man listed consultancy work with Orbis Business Intelligence, according to reports. -Telegraph

On Sunday that entire connection - which implied that Skripal was somehow involved with the Steele Dossier, was blamed on Russia

Russian intelligence created a false trail linking the double agent Sergei Skripal to the former MI6 officer behind the Trump dossier before carrying out the Salisbury nerve agent attack, the Telegraph has been told.

Well-placed sources now believe that the plot to kill Col Skripal may have included a ‘black ops’ attempt to sow doubt on the veracity of the explosive dossier that claims Donald Trump received Kremlin backing.

The year before the attempted assassination of Col Skripal, a mysterious post on LinkedIn suggested his MI6 handler, who is not being named, worked as a “senior analyst” at Orbis Business Intelligence, the firm that produced the Trump dossier.


But a number of sources have told The Telegraph that the LinkedIn profile is false - if it ever properly existed at all - and that Skripal’s MI6 handler never worked for Orbis. 

It is now suspected that the LinkedIn profile was created by the GRU, the Russian military intelligence unit which tried to kill Col Skripal with novichok nerve agent. -Telegraph

"By creating this link, they are suggesting that MI6 are involved with the dossier or Skripal or both. It adds to the confusion and acts as a wedge between the White House and Downing Street. It is exactly the kind of operation the Russians would order to sow confusion," said the Telegraph's "well placed source." 

Oddly, however, a British spy named Pablo Miller was claimed by Russian media in 2007 as the MI6 agent who recruited Skripal in 1995. Miller apparently works (or worked) for Orbis - though it is unclear whether he is the same person noted in the original Telegraph report.

Maybe the Russian flag in Salisbury was meant to troll UK authorities over how absurd the Skripal case has become?

Published:2/18/2019 10:01:05 AM
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Published:2/18/2019 8:37:06 AM
[Markets] Cryptos Are Surging: Bitcoin, Ethereum Hit One-Month Highs As Institutions Dip Toes

Cryptocurrencies are surging while the US equity markets take the day off. Ethereum is up over 18% from Friday's 'close' and the rest of the crypto space is a sea of green. While no immediate catalyst (headline or technical level) is clear, increasing chatter over institutional investors dipping their toes in the space have prompted an extension of the positive trend.

A sea of green...

Source: Coin360

Ethereum is leading the charge followed by Litecoin and Bitcoin Cash...


Bitcoin has broken back to one-month highs...


And Ethereum is really accelerating...

As CoinTelegraph notes, the total market capitalization of all cryptocurrencies is around $128 billion as of press time, up a strong 3.7 percent on the week.

In an interview with Cointelegraph this week, prominent CNBC commentator Brian Kelly argued that Bitcoin is currently around 50 percent undervalued, and that the asset is likely near a bottom. While holding back on optimism in regard to the approval of a Bitcoin exchange-traded fund, Kelly predicted that 2019 would be better for the crypto markets overall, conceding however that 2018 had set “a pretty low bar.”

In adoption news, it appears that the forthcoming update of the Rakuten Pay mobile app from major Japanese e-commerce firm Rakuten will support cryptocurrency payments in addition to fiat.

While no immediate catalyst jumps to mind for today's surge, Bloomberg notes that institutional investors should consider dipping their toes into cryptocurrencies, according to Cambridge Associates, a consultant for pensions and endowments.

“Despite the challenges, we believe that it is worthwhile for investors to begin exploring this area today with an eye toward the long term,’’ said analysts at Boston-based Cambridge in a research note published Monday.

“Though these investments entail a high degree of risk, some may very well upend the digital world.’’

Most large institutions have steered clear of the 10-year-old, $120 billion industry because it’s largely unregulated and cryptocurrencies have been used to finance illicit trade. The collapse in crypto prices hasn’t helped either: Bitcoin, the largest digital currency, lost about 75 percent of its value in 2018.

For those prepared to take the plunge, Cambridge recommends “a considerable amount of time learning about the space,” including surveying the different ways of investing, from illiquid venture capital funds to buying tokens on an exchange. The firm advises institutions that manage more than $300 billion.

Institutional investments, though rare, bring cheer to crypto enthusiasts who say a wave of institutional investment could bring greater credibility to the market.

Published:2/18/2019 8:37:06 AM
[Markets] UK Labour Party Suffers Biggest Split In 38 Years Over Corbyn Anti-Semitisim, Brexit Bungle

In what is the biggest split in Labour since the “gang of four” senior figures left the party in 1981 to form the Social Democratic party (SDP), seven Labour MPs, including Chuka Umunna and Luciana Berger, have resigned from the party over Jeremy Corbyn’s leadership, saying they will sit as a new independent group.

In a press conference on Monday, the MPs – who also include Gavin Shuker, Angela Smith, Chris Leslie, Mike Gapes and Ann Coffey – said Corbyn’s Labour had radically departed from their values.

The main drivers behind the backbenchers decision to split seem to be:

1) the anti-semitism row within the Labour party and;

2) the lack of support for a second referendum (the awfully titled People's Vote).

As The Guardian reports, Umunna, the former shadow cabinet minister, said the established parties “cannot be the change because they have become the problem”, and put party interests above the national interest.

He said it was “time we dumped this country’s old-fashioned politics” and created an alternative.

Berger, the MP for Liverpool Wavertree, said it had been a “difficult, painful but necessary decision” for them all, before criticising Labour for becoming “sickeningly institutionally racist”.

The Jewish MP, who is heavily pregnant and has been subject to antisemitic abuse, said she had become “embarrassed and ashamed” to be in the Labour party because of its failure to tackle antisemitism in its ranks.

“I am leaving behind a culture of bullying, bigotry and intimidation. I look forward to a future serving with colleagues who respect each other,” she said.

Leslie, the MP for Nottingham East and a former shadow chancellor, said Labour had been “hijacked by the machine politics of the hard left” and was no longer the party he and others had joined.

Gapes said he was “sickened that Labour is now a racist party” and he believed its leader was “on the wrong side on so many international issues” from Russia to Syria.

In response, Corbyn said he was “disappointed that these MPs have felt unable to continue to work together for the Labour policies that inspired millions at the last election and saw us increase our vote by the largest share since 1945”.

“Labour won people over on a programme for the many not the few – redistributing wealth and power, taking vital resources into public ownership, investing in every region and nation, and tackling climate change,” he added.

“The Conservative government is bungling Brexit, while Labour has set out a unifying and credible alternative plan. When millions are facing the misery of universal credit, rising crime, homelessness and poverty, now more than ever is the time to bring people together to build a better future for us all.”

Finally, as Mizuho's Peter Chatwell concludes, if this group is to be called "The Independence Group" (contradicting the unionist agenda they surely wish to represent) then we think they are merely succeeding in:

  1. marginalising Remainers into a new entity (we assume some Tory Remainers will join in the future)

  2. leaving the Conservatives and Labour with clear pro-Brexit mandates

The creation of another political party then this will fragment UK politics further at this point, at a time when a mandate for some party to do something is what is needed --> greater tail risks.

This looks awfully like a bungled mess of the creation of a new party, which, we think is more likely to be GBP negative, gilt positive, by giving Brexit a less effective opposition.

We strongly doubt that these departures, if they happen, do lead the Labour party to back a second referendum (dropping their attempts to create a General Election). If the Labour party was to surprise us and change stance, then the kneejerk reaction should be GBP positive, gilt price negative.

Published:2/18/2019 8:00:10 AM
[Markets] Trump Slams McCabe & Rosenstein Over "Treasonous", "Very Illegal" Plan To Secretly Record President

During an interview that aired in full on CBS last night, former FBI Deputy Director Andrew McCabe - who was famously fired just hours before qualifying for his pension due to what the DOJ inspector general described as "unauthorized leaks to the press" - McCabe insisted that Rod Rosenstein was "absolutely serious" when he asked senior Trump administration officials to clandestinely record their conversations with the president in preparation for removing him under the 25th amendment - a plan that has been derided as an attempted coup by family members and allies of the president.


Clearly displeased with McCabe's revelations, Trump lashed out at again on Twitter, accusing him of telling a "deranged" story and plotting "a very illegal act".

Trump added that McCabe has "a lot of explaining to do to the millions of people who had just elected a president who they really like". He added that this was "the illegal and treasonous" insurance policy "in action."

Readers can watch the full interview here.

Published:2/18/2019 7:29:15 AM
[Markets] Doug Noland: Central Banks Are "Hostages Of Market Bubbles"

Authored by John Rubino via,

Doug Noland’s weekly Credit Bubble Bulletin is always required reading. The latest – befitting the amazing things that have happened lately – is more necessary than usual. But at 10,000 words it’s also a lot longer than usual. So while everyone should definitely read the whole thing, here are some excerpts to get you started:

I wonder if the Fed is comfortable seeing the markets dash skyward – the small caps up 16.4% y-t-d, the Banks 15.9%, the Transports 15.2%, Biotechs 18.5% and Semiconductors 17.0%. Or, perhaps, they’re quickly coming to recognize that they are now fully held hostage by market Bubbles.

Similarly, I ponder how Beijing feels about January’s booming Credit data – Aggregate Financing up $685 billion in the month of January. Do officials appreciate that they are completely held captive by history’s greatest Credit Bubble?

Bubbles have become a fundamental geopolitical device – a stratagem. Things have regressed to a veritable global Financial Arms Race. As China/U.S. trade negotiations seemingly head down the homestretch, each side must believe that rallying domestic markets beget negotiating power. Meanwhile, emboldened global markets behave as if they have attained power surpassing mighty militaries and even nuclear arsenals.

China’s banks made the most new loans on record in January – totaling 3.23 trillion yuan ($477bn) – as policymakers try to jumpstart sluggish investment and prevent a sharper slowdown in the world’s second-largest economy.

January’s record China new bank loans were 11.4% higher than the previous record from January 2018 – and 15% above estimates. Total Bank Loans expanded 13.4% over the past year; 28% in two years; 45% in three years; 91% in five years; and an incredible 323% over the past decade.

“The San Francisco Fed put out a white paper about the benefits of negative interest rates. I hope that’s not where we’re going, but we can only cut rates about 225/250 bps to be at zero” — Kyle Bass, Hayman Capital Management.

At 4.37%, 30-year conventional mortgage rates are today already below the lowest levels from 2009. And with the vast majority of borrows over recent years having refinanced at historically low mortgage rates, there’s limited prospects for reduced monthly payments to dampen financial burdens during the next recession. Worse yet, student loan debt has more than doubled since the crisis. And when the next recession hits, there will be record amounts of auto and Credit card debt.

Auto lending, in particular, has gone through a protracted – arguably unprecedented – period of loose lending. A record 7 million Americans are 90 days or more behind on their auto loan payments, even more than during the wake of the financial crisis era. Among subprime borrowers — those with credit scores below 620— the delinquency rate was 16.3% in mid-2018. A car loan is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails. When car loan delinquencies rise, it is a sign of significant duress among low-income and working-class Americans.

When it comes to Bubbles, the more conspicuous they are the less likely they are to be deeply systemic. The “tech” Bubble was obvious, yet the most egregious excess was contained within the technology sector. The mortgage finance Bubble was much more systemic, with excesses spread about and not as apparent. I believe today’s Super “Tech” Bubble is much more systemic than back in 2000.

Today’s Bubble in leveraged lending and M&A is greater than 2006/2007. The Bubble in corporate Credit dwarfs that from the mortgage finance Bubble period. Excesses throughout the securities markets phenomenally exceed those from the prior Bubble period. Moreover, I suspect the current level of derivatives-related speculative leverage could be multiples of 2007.

Thinking Ahead to the Next Recession, we should de deeply concerned about our nation’s tenuous fiscal position. To see deficits approaching 5% of GDP – with unemployment and interest rates at such historically low levels – should have us all fearful. Of course deficits matter.

When it comes to a synchronized global policy response, keep in mind that ECB and BOJ policy rates are basically at zero – with little evidence of benefits from negative rates. The ECB just ended QE, while the BOJ just keeps printing. With little effective ammo, policymakers exploit what they can to sustain the Bubble and hold fragilities at bay.

Policymakers continue to throw enormous stimulus at global markets and economies. Instead of stabilization, we’ve witnessed ongoing Bubble inflation and intensifying Monetary Disorder. And the more Bubbles inflate, the greater the underlying financial and economic fragilities – and the quicker the Fed was to conclude “normalization” and China was to, once again, aggressively spur lending.

What worries me most is that underlying instability and vulnerabilities have policymakers resolved to abrogate bear markets and recessions. Extraordinary measures continue to be taken to nullify business and market cycles, with apparently no appreciation for how vital adjustments and corrections are to sound financial and economic systems. Worst of all, structurally maladjusted and highly speculative global markets are emboldened as never before. Party like it’s twenty nineteen – with global financial, economic and geopolitical backdrops uncomfortably reminiscent of ninety years ago.

The 400 richest Americans – the top 0.00025% of the population – have tripled their share of the nation’s wealth since the early 1980s. Those 400 Americans own more of the country’s riches than the 150 million adults in the bottom 60% of the wealth distribution, who saw their share of the nation’s wealth fall from 5.7% in 1987 to 2.1% in 2014.

U.S. small business optimism tumbled last month to its lowest level since President Donald Trump’s election more than two years ago amid growing uncertainty over the economic outlook.

The outlook for Wall Street earnings has deteriorated significantly in recent months, data shows, raising the risk that companies in the United States may slip into recession before its economy does – with Europe close behind.

China’s securities regulator has started to remove many of the curbs designed to keep out speculators, signaling an end to the highly restrictive era that started when a boom in the country’s stocks turned to bust in 2015. The result has been an intensifying appetite for risk not seen in years. A gauge of small cap stocks has surged almost 11% over the past four trading days, the most since 2016.

Two large Chinese borrowers missed payment deadlines this month, underscoring the risks piling up in a credit market that’s witnessing the most company failures on record.

The collapse in China of a complex web of debt guarantees involving several private firms highlights risks in its financial system and opens up a potentially hazardous front for an economy in the grip of its slowest growth in nearly three decades.

China’s residential mortgage-backed securities issuance more than tripled in 2018, just as the nation’s household debt to disposable income ratio exceeds that of the U.S.

Italy’s coalition government is in sharp disagreement over protecting the independence of the Bank of Italy, after senior politicians threatened to remove its leadership. Matteo Salvini, head of the anti-immigrant League party, said the central bank and Consob, the country’s stock market regulator, should be “reduced to zero.”

Bank of Japan Governor Haruhiko Kuroda said… that it was his responsibility to achieve the central bank’s 2% inflation target by persistently continuing its stimulus policy.

Published:2/18/2019 6:04:06 AM
[Markets] Do You Believe In The Deep State Now?

Authored by Robert Merry via The American Conservative blog,

The revelation that top Justice officials considered unseating Trump should answer that question for good...

Be afraid. Be very afraid.

That’s a natural reaction to the revelation of Andrew G. McCabe, the former deputy FBI director, that top Justice Department officials, alarmed by Donald Trump’s firing of former Bureau director James Comey, explored a plan to invoke the 25th Amendment and kick the duly elected president out of office.

According to New York Times reporters Adam Goldman and Matthew Haag, McCabe made the statement in an NBC 60 Minutes interview to be aired on Sunday. He also reportedly said that McCabe wanted the so-called Russia collusion investigation to go after Trump for obstructing justice in firing Comey and for any instances they could turn up of his working in behalf of Russia.  

The idea of invoking the 25th Amendment was discussed, it seems, at two meetings on May 16, 2017. According to McCabe, top law enforcement officials pondered how they might recruit Vice President Pence and a majority of cabinet members to declare in writing, to the Senate’s president pro tempore and the House speaker, that the president was “unable to discharge the powers and duties of his office.” That would be enough, under the 25th Amendment, to install the vice president as acting president, pushing aside Trump.

But to understand what kind of constitutional crisis this would unleash and the precedent it would set, it’s necessary to ponder the rest of this section of the 25th Amendment. The text prescribes that, if the president, after being removed, transmits to the same congressional figures that he is indeed capable of discharging his duties, he shall once again be president after four days. But if the vice president and the cabinet majority reiterate their declaration within those four days that the guy can’t govern, Congress is charged with deciding the issue. It then takes a two-thirds vote of both houses to keep the president removed, which would have to be done within 21 days, during which time the elected president would be sidelined and the vice president would govern. If Congress can’t muster the two-thirds majority within the prescribed time period, the president “shall resume the powers and duties of his office.”

It’s almost impossible to contemplate the political conflagration that would ensue under this plan. Citizens would watch those in Washington struggle with the monumental question of the fate of their elected leader under an initiative that had never before been invoked, or even considered, in such circumstances. Debates would flare up over whether this comported with the original intent of the amendment; whether it was crafted to deal with physical or mental “incapacitation,” as opposed to controversial actions or unsubstantiated allegations or even erratic decision making; whether such an action, if established as precedent, would destabilize the American republic for all time; and whether unelected bureaucrats should arrogate to themselves the power to set in motion the downfall of a president, circumventing the impeachment language of the Constitution.

For the past two years, the country has been struggling to understand the two competing narratives of the criminal investigation of the president.

One narrative—let’s call it Narrative A—has it that honorable and dedicated federal law enforcement officials developed concerns over a tainted election in which nefarious Russian agents had sought to tilt the balloting towards the candidate who wanted to improve U.S.-Russian relations and who seemed generally unseemly. Thus did the notion emerge, quite understandably, that Trump had “colluded” with Russian officials to cadge a victory that otherwise would have gone to his opponent. This narrative is supported and protected by Democratic figures and organizations, by adherents of the “Russia as Threat” preoccupation, and by anti-Trumpers everywhere, particularly news outlets such as CNN, The Washington Post, and The New York Times

The other view—Narrative B—posits that certain bureaucratic mandarins of the national security state and the outgoing Obama administration resolved early on to thwart Trump’s candidacy. After his election, they determined to undermine his political standing, and particularly his proposed policy toward Russia, through a relentless and expansive investigation characterized by initial misrepresentations, selective media leaks, brutal law enforcement tactics, and a barrage of innuendo. This is the narrative of most Trump supporters, conservative commentators, Fox News, and The Wall Street Journal editorial page, notably columnist Kimberley Strassel.  

The McCabe revelation won’t affect the battle of the two narratives. As ominous and outrageous as this “deep state” behavior may seem to those who embrace Narrative B, it will be seen by Narrative A adherents as evidence that those law enforcement officials were out there heroically on the front lines protecting the republic from Donald J. Trump.

And those Narrative A folks won’t have any difficulty tossing aside the fact that McCabe was fired as deputy FBI director for violating agency policy in leaking unauthorized information to the news media. He then allegedly violated the law in lying about it to federal investigators on four occasions, including three times while under oath.

Indeed, Narrative A people have no difficulty at all brushing aside serious questions posed by Narrative B people. McCabe is a likely liar and perjurer? Doesn’t matter. Peter Strzok, head of the FBI’s counterespionage section, demonstrated his anti-Trump animus in tweets and emails to Justice official Lisa Page? Irrelevant. Christopher Steele’s dossier of dirt on Trump, including an allegation that the Russians were seeking to blackmail and bribe him, was compiled by a man who had demonstrated to a Justice Department official that he was “desperate that Donald Trump not get elected and…passionate about him not being president”? Not important. The dossier was paid for by the Hillary Clinton campaign and the Democratic Party? Immaterial. Nothing in the dossier was ever substantiated? So what?

Now we have a report from a participant of those meetings that top officials of the country’s premier law enforcement entity sat around and pondered how to bring down a sitting president they didn’t like. The Times even says that McCabe “confirmed” an earlier report that deputy attorney general Rod Rosenstein suggested wearing a wire in meetings with Trump to incriminate him and make him more vulnerable to the plot.

There is no suggestion in McCabe’s interview pronouncements or in the words of Scott Pelley, who conducted the interview and spoke to CBS This Morning about it, that these federal officials ever took action to further the aim of unseating the president. There doesn’t seem to be any evidence that they approached cabinet members or the vice president about it. “They…were speculating, ‘This person would be with us, this person would not be,’ and they were counting noses in that effort,” said Pelley. He added, apparently in response to Rosenstein’s insistence that his comments about wearing a wire were meant as a joke, “This was not perceived to be a joke.”

What are we to make of this? Around the time of the meetings to discuss the 25th Amendment plot, senior FBI officials also discussed initiating a national security investigation of the president as a stooge of the Russians or perhaps even a Russian agent. These talks were revealed by The New York Times and CNN in January, based on closed-door congressional testimony by former FBI general counsel James Baker. You don’t have to read very carefully to see that the reporters on these stories brought to them a Narrative A sensibility. The Times headline: “F.B.I. Opened Inquiry into Whether Trump Was Secretly Working on Behalf of Russia.” CNN’s: “Transcripts detail how FBI debated whether Trump was ‘following directions’ of Russia.” And of course, whoever leaked those hearing transcripts almost surely did so to bolster the Narrative A version of events.

The independent journalist Gareth Porter, writing at Consortium News, offers a penetrating exposition of the inconsistencies, fallacies, and fatuities of the Narrative A matrix, as reflected in how the Times and CNN handled the stories that resulted from what were clearly self-interested leaks.

Porter notes that a particularly sinister expression in May 2017 by former CIA director John O. Brennan, a leading Trump antagonist, has precipitated echoes in the news media ever since, particularly in the Times. Asked in a committee hearing if he had intelligence indicating that anyone in the Trump campaign was “colluding with Moscow,” Brennan dodged the question. He said his experience had taught him that “the Russians try to suborn individuals, and they try to get them to act on their behalf either wittingly or unwittingly.”

Of course you can’t collude with anybody unwittingly. But Brennan’s fancy expression has the effect of expanding what can be thrown at political adversaries, to include not just conscious and nefarious collaboration but also policy advocacy that could be viewed as wrongheaded or injurious to U.S. interests. As Porter puts it, “The real purpose…is to confer on national security officials and their media allies the power to cast suspicion on individuals on the basis of undesirable policy views of Russia rather than on any evidence of actual collaboration with the Russian government.”

That seems to be what’s going on here. There’s no doubt that McCabe and Rosenstein and Strzok and Brennan and Page and many others despised Trump and his resolve to thaw relations with Russia. They viewed him as a president “who needed to be reined in,” as a CNN report described the sentiment among top FBI officials after the Comey firing.

So they expanded the definition of collusion to include “unwitting” collaboration in order to justify their machinations. It’s difficult to believe that people in such positions would take such a cavalier attitude toward the kind of damage they could wreak on the body politic.

Now we learn that they actually sat around and plotted how to distort the Constitution, just as they distorted the rules of official behavior designed to hold them in check, in order to destroy a presidential administration placed in power by the American people. It’s getting more and more difficult to dismiss Narrative B.

Published:2/18/2019 5:29:25 AM
[Entertainment] Why This Pair of Classic Levi's Is All Over Instagram E-Comm, Why This Pair of Classic Levi's Is All Over InstagramAround here we're practical people, but we also appreciate a good Instagram trend. After all, it is our job to scour the internet, keeping a close eye on what the celebs are wearing...
Published:2/18/2019 5:29:25 AM
[Markets] Russia Offered To Buy Barclays Stake During Peak Of Financial Crisis

During the peak of the financial crisis when UK banking giant Barclays was struggling to avoid taking a U.K. bailout, the Russian government made a formerly unknown approach to the bank. According to a report by Bloomberg, Russia "signaled its intention" to take a 500 million-pound ($641 million) stake in Barclays according to minutes from an October 2008 finance committee meeting that were shown to a jury during a fraud trial of senior bank executives. That trial is ongoing and has been covered by us at length.

Using the involvement of Hans-Joerg Rudloff, a Barclays banker with close ties to Russia, the country was seeking to take a 1.5% stake in the bank. The approach came to light as the bank was trying to close a deal with investors from Abu Dhabi and Qatar in order to avoid a government bailout. Barclays was said to have been "vary wary" about the investment proposal, according to the committee meeting minutes. 

Rudloff was, at the time, chairmain of Barclays Capital, the bank's investment banking arm. He also served on the Board of Directors of Russian oil conglomerate Rosneft for seven years prior to being re-elected in June 2018. 

The meeting minutes revealed that Barclays had instead proposed paying 120 million pounds in fees to help underwrite financing from Qatar, who is said to have laughed at the suggestion, before demanding 600 million pounds instead. 

The trial of banking executives pertaining to fraud that occurred during the crisis began in early January in a London courthouse. And while it has nothing to do with sales of the toxic mortgage backed securities and subprime loans that nearly brought down the financial system and forced millions of consumers out of their homes, it might be the closest thing to closure that the UK's Serious Fraud Office can offer.

As we reported in late 2018, four Barclays executives, including former CEO John Varley, are on trial for fraud related to two emergency capital raises undertaken in 2008. To try and stave off nationalization (which would have devastated shareholders and, more importantly, placed the executives' bonuses at risk) the bank turned to a group of Qatari investors who pumped a total of roughly 12 billion pounds (nearly $16 billion) into the bank.

In exchange for the emergency loans, Barclays wound up paying 322 million pounds ($423 million) in "fees" - which were, in reality, "dodgy" payoffs to the Qatari sheikh who arranged the financing. To ensure that the deal went through, the executives allegedly conspired to conceal these payments from their investors, the British state and - most importantly - the press.

Published:2/18/2019 2:27:25 AM
[Entertainment] Jussie Smollett Attack Investigation Takes a Major Turn: Everything We Know Jussie SmollettThree weeks ago, Jussie Smollett was reported to be the victim of an alleged racist, homophobic attack. Now, after questioning two men originally thought to be suspects, police say new information...
Published:2/17/2019 10:26:57 PM
[Markets] Pelosi Quietly Deletes Tweet Slamming "Racist, Homophobic" Attack On Jussie Smollett

As the Jussie Smollett "attack" is looking more and more like a class-4 felony hoax, House Speaker Nancy Pelosi (D-CA) quietly deleted a tweet sympathetic to the Empire actor who claimed that he was assaulted, in what Pelosi uncritically described as a "racist, homophobic attack." It had over 100,000 "likes" and 21,000 retweets. 

Unfortunately for Nancy, the internet never forgets

Pelosi is just one snowflake in an avalanche of liberals who accepted Smollett's bizarre story without so much as questioning the logic behind two Trump supporters, who watch Empireout at 2 a.m. in a wealthy Chicago enclave, who not only recognized Smollett - but knew he was gay, and happened to be packing a bleach-like substance and a noose (in "MAGA Country). 

The Speaker of the House wasn't alone in her uncritical support of Smollett - who faces up to three years in prison if charged and found guilty of filing a false police report.

As the Daily Caller's Kerry Pickett notes, 2020 Democratic contenders Sen. Kamala Harris (D-CA) and Corey Booker (D-NJ) have yet to delete their tweets. 

Booker - another kneejerk snowflake in the avalanche of MAGA-hate, called the Smollett "attack" a "modern day lynching." 

Harris parroted Booker 90 minutes later, also calling it a "modern day lynching."

Oddly, quickdraw Booker seems be taking his sweet time time figuring out what he thinks of the Smollett situation now that his two Nigerian friends have apparently flipped on the Empire star and accused him of paying them to stage the attack - practicing beforehand and purchasing the rope and red hats used in the "MAGA Country" attack. 

The "Democratic party's rising star," Alexandria Ocasio-Cortez has also left her Smollett tweet up, hanging there. 

Who else went off half-cocked over Smollett's unbelievable encounter? 

And many, many more. 

Or just delete it?  

Published:2/17/2019 9:55:59 PM
[Markets] Resolution To Block Border Emergency Likely To Pass, Forcing First-Ever Trump Veto

Now that a handful of influential Senate Republicans started expressing their reservations about President Trump's decision to call a national emergency to secure another $7 billion in funding for his promised border wall (or "barrier"...or "fence"...), it's becoming increasingly clear that a Congressional challenge to order will likely clear both the Democrat-controlled House and the Republican-controlled Senate, provoking the president to issue what would be the first veto of his presidency, Bloomberg reported on Sunday, citing remarks made on Sunday news shows.

Both Illinois Democratic Sen. Tammy Duckworth and Ohio Republican Rep. Jim Jordan said on ABC’s "This Week" that they expect a resolution in Congress to terminate Trump’s order would have enough votes to pass both the House and the Senate by simple majorities, thanks to Republicans who fear Trump's order would deprive the military of essential funds.

Trump will redirect $3.6 billion in military construction funding toward the border project, and will also take separate executive action repurposing about $2.5 billion from the Defense Department’s drug-interdiction program and $600 million from the Treasury Department’s asset-forfeiture fund. Officials said the goal is to ultimately build roughly 234 miles of barriers along the border, including bollard-style wall. The funding is on top of roughly $1.4 billion earmarked to build 55 miles of barrier as part of the border security compromise passed last week.


But the resolution will likely run into trouble if Trump issues the veto, because it's doubtful that the Democrats could muster enough votes in the Senate to override it.

And, assuming the resolution does pass, Stephen Miller implied during an appearance on "Fox News Sunday" that President Trump would veto it, saying that the president would "protect his emergency order" and adding that the order itself wasn't unconstitutional because Congress had passed the National Emergency Act, which enabled the president to take this step.

"He is going to protect his national emergency declaration, guaranteed," Miller said. Jordan added that once a veto is issued, "I don't think there's any chance the veto would be overridden."

Of course, Trump's national emergency declaration is also facing a challenge from several states' attorneys general (including likely New York and California), and presumably lawsuits from interest groups will follow. To that end, Congressman Adam Schiff said on CNN's "State of the Union" that Trump's admission during his press conference that he "didn't need to do this" could doom his order in the courts.

But for now, at least, the vote to block the order could backfire on the Dems, as Trump will likely use it as blatant politicking and one more example of Democratic obstructionism which he has sought to tie to Democratic leaders Nancy Pelosi and Chuck Schumer.

Published:2/17/2019 9:27:36 PM
[Entertainment] See Brie Bella Get Emotional After Accidentally Kicking a WWE Competitor in the Ring Brie Bella, Total Bellas 405Being a working mom is hard! On this week's all-new Total Bellas, Brie Bella found herself in tears as her busy work schedule left her exhausted and wracked with mom-guilt. On top of...
Published:2/17/2019 9:27:36 PM
[Markets] $166 Billion In Student Debt Is Now Officially Delinquent

According to the Federal Reserve Bank of New York's latest quarterly household debt report, student loan delinquencies surged last year, up to $166.4 billion in the fourth quarter. The report includes the total owed and the percentage of delinquent accounts past 90 days or in default. 

The percentage of delinquent accounts figure has stood at 11% since about mid-2012, but the total amount of debt outstanding has increased to a stunning $1.46 trillion at the end of December 2018 - and unpaid student debt rose to its highest levels ever. 

Delinquencies rose even as unemployment fell below 4%, telegraphing that the U.S. job market simply hasn't generated the level of wage growth necessary to deal with the country's growing debt load. 

Bloomberg Intelligence interest-rate strategist Ira Jersey said: "Income levels for graduates are not necessarily high enough for debt payments overall. If you have a choice to pay your student loan or for food or housing, which do you choose?”

According to Jersey, the loans "probably won't hurt the economy" because they are government-sponsored. Which is another way of saying taxpayers will once again come to the "rescue."

"But incrementally, it does mean higher federal deficits if the loans are not repaid,” he conceded. 

Echoing what we first said back in 2012, Bloomberg notes  that the total amount in arrears is twice the amount the U.S. Treasury paid to bail out the auto industry during the last recession.

Meanwhile, with the cost of higher education doubling over the last 20 years, even the St. Louis Fed was unsure as to whether or not "college was still worth it", according to a blog posted on their website. 

Another stunning observation: the age group that is transitioning to delinquency the fastest is not workers fresh out of college, but the 40 to 49 year old cohort, partly as a result of parents shouldering the load and borrowing to pay for their children's expenses. 

This has forced some schools to provide more support for those attending. For instance, Cornell increased tuition for 2019-2020 by "the lowest it has been in decades" and the school is "budgeting for a significant increase in financial aid". Purdue University will also not boost room and board rates for 2019-2020, the seventh year in a row it has avoided hiking these prices.

On average, however, in-state tuition and fees for a public four year institution has risen by 3.1% beyond inflation over the last decade. 

Published:2/17/2019 8:59:48 PM
[Entertainment] Miranda Lambert Got Married! See Other Top-Secret Celebrity Weddings Miranda Lambert, Brendan McloughlinMiranda Lambert made a surprise reveal on Saturday about her current relationship status. "In honor of Valentine's Day I wanted to share some news," the country singer wrote...
Published:2/17/2019 8:00:47 PM
[Entertainment] Liam Hemsworth Can't Stop Pranking Miley Cyrus: Watch His Best Pranks Liam Hemsworth, Miley CyrusWhen it comes to pranking Miley Cyrus, her fiancé Liam Hemsworth can't stop...and he won't stop. He's just being Liam! Since they first started dating in 2010, the...
Published:2/17/2019 7:25:31 PM
[Markets] Haitian Protesters Burn American Flag, Urge Russian Help Against US "Puppet" Regime

A French language AFP report over the weekend featured surprising photographs of Haitians burning American flags as the unrest and chaos continues especially in the Haitian capital of Port-au-Prince.

Major cities throughout Haiti have for days essentially been on "lockdown" due to civil unrest and mass protests demanding that President Jovenal Moise step down over charges of corruption and rampant inflation under his watch — yet unlike similar unrest happening hundreds of miles due south of the small Caribbean country in Venezuela, Washington has stood in support of the president, who since 2017 has found himself facing a flood of popular anger surrounding the PetroCaribe scandal.

A man identifying himself only as Bronson, a Haitian protester, burns the US flag on February 15, via the APF.

Though the mass protests have multiple layers in terms of motives, stemming mostly from skyrocketing inflation and the government's failure to hold to account leaders caught embezzling from a multi-billion dollar Venezuelan program that sent discounted oil to Haiti, or the PetroCaribe affair, a number of the protest gatherings are distinctly anti-American in their rhetoric and symbolism, while at the same time being pro-Russian. 

Reflecting the global geopolitical divide over the crisis in nearby Venezuela, the AFP report describes some of the anti-American elements to the protests as follows (based on a rough translation from the French): 

A group of protesters burned an American flag Friday afternoon in the heart of the Haitian capital Port-au-Prince, calling for help from Russia to solve the crisis that paralyzed the country for over a week.

The protester who set the American flag on fire, calling himself Bronson, told the AFP, “We are asking Russia, Venezuela and China to take a look at the misery we live in here.” Bronson and the group of protesters said the Haitian political system had for too long been under the thumb of Washington, and appealed to Russia and China for help.

Bronson said further, as related by the AFP

"We mean that we divorce completely Americans: we took too much occupation in the hands of the United States, we can not," said Bronson, a small group protester who set the flag on fire.

According to some 200 participants in the rally, former Haitian President Michel Martelly and his successor, the current head of state Jovenel Moise, were placed in power by the United States.

Indeed over the weekend the White House said it is sticking by Moise's leadership, and called for calm in the streets. 

Haitian protesters appealing the Russian president Putin for help, via the AFP.

Starting weeks ago Washington began putting immense pressure on Port-au-Prince to break ties with the Maduro regime in Venezuela, in recognition of self-styled "Interim President" Juan Guaido. 

These pressures were successful and the Haitian government caved earlier this month, fueling the rage of many Hatians in the street, many of which were already angered over the impact that Washington's oil sanctions on nearby Venezuelea are having on Haiti.

Thus Jovenal Moise's government so easily succumbing to Washington against Maduro was the last straw for many in a politically complex scandal which has grown for years as a result of the Petrocaribe deal, which began in earnest when it was revealed in 2017 that almost $4bn in funds earmarked for social development went missing, widely assumed to be the result of corrupt officials still holding positions of power within the Moise government ranks skimming on a mass scale. 

Meanwhile the US State Department urged all American citizens out of the country over the past days, and issued a no-not-travel advisory due to "crime and civil unrest." This was followed on Saturday by national security adviser John Bolton issuing a statement for all sides in Haiti to "respect and protect their democracy" — a bit ironic considering he spent the rest of the day tweeting regime change related messages targeting Venezuela's Maduro.

He revealed in the tweet that he met with Haitian Foreign Minister on Friday "to express the United States’ enduring support for and friendship with Haiti." He further urged "all of Haiti’s political actors to respect and protect their democracy, engage in dialogue, and put an end to the political violence."

This is certainly unlikely to mitigate the growing anti-American sentiment present in the protests, which have also included violent clashes with police, resulting in several deaths. 

Published:2/17/2019 6:55:22 PM
[Entertainment] North West Looks Like Kim Kardashian's Twin in New Photo With Chicago West Kim Kardashian, North WestDoppelganger alert! Kim Kardashian posted a photo of her two daughters North West and Chicago West sitting next to each other on a set of stairs. North wore a pair of light pink pajamas...
Published:2/17/2019 6:26:05 PM
[Markets] Hedge Fund CIO: "The Rich And Powerful Always Win"

Submitted by Eric Peters, CIO of One River Asset Management

Hope all goes well… Dusted off an anecdote from 2015 on what led to today’s growing backlash against inequality, injustice

Anecdote (Jan 2015):

"The rich and powerful always win; that’s the starting point," said the clear-eyed cynic, more interested in making mountains from molehills, than tilting at windmills.

"When upstarts periodically challenge their dominance, buying leveraged assets at wide credit spreads, central bankers throw the economy into recession, bankrupting new money, consolidating and preserving the existing power structure,” he continued. "That’s how capitalism mixed with democracy and rule of law works."

It ensures a positive correlation between competency and decision-making.

“The guys able to manage bigger bats are the ones swinging bigger bats; there’s probably no better way to do it.” What matters most is relative positioning within the wealth and power hierarchy, not absolute positioning. Which is why some crises that cleanse the system are by design, so devastating for everyone, including the powerful.

“Germany is in charge of Europe, and what do they want?” he asked, rhetorically. “They want every country on a DIP loan forever.” The last thing Germany wants is for their southern neighbors and France to pay off their debts.

“They want contractualized slavery, no different from what Hong Kong Chinese want from their Filipino maids.” But how about Germany’s acceptance of quantitative easing? “You hold off and give as little as you can,” he explained. “But giving as little as you can is different from giving nothing at all.” For all the excitement surrounding Draghi’s open-ended announcement this week, he’ll buy $1-$2trln of assets in an $80trln asset economy.

It solves no problems; buying time, while simultaneously relieving politicians of the imperative to make hard choices. Plus, with no real growth, or prospect of healthy returns on real investment, companies will now simply pay down existing debt.

“The Germans understand that even slaves need beds, and when they’re sick, you must let them go see the doctor.”

Published:2/17/2019 6:26:05 PM
[Markets] Morgan Stanley: "We Are Sceptical That The Goldilock Narrative Will Hold Together"

From "Sunday Start", authored by Andrew Sheets, Morgan Stanley chief cross-asset strategist.

Markets frequently change their mind, but even adjusting for that, the shift in ‘conventional wisdom’ in recent months has been nothing short of whiplash. In December, there was widespread agreement among investors that recession risk had risen sharply, that rising inflation pressures would keep central banks tightening policy, and that US-based risks around trade and government funding had risen sharply. Skip forward two months and these fears have been replaced by a different (if familiar) term: Goldilocks.

The Goldilocks narrative made repeated appearances from 2010-16, and the current version sounds something like this – inflationary pressures have receded, giving central banks wide latitude to pause almost indefinitely on policy tightening. Global growth is slowing, but not enough to be truly concerning. And US political risks are close to resolution, with growing investor optimism that lasting solutions to funding the US government and US-China trade are now within reach. We are sceptical that this story holds together.

The Goldilocks narrative depends on a lack of inflation, which gives central banks the opportunity (although not the obligation) to continue accommodative policy. Core inflation readings in developed markets have moved sideways in recent months, forward-looking inflation expectations have dropped sharply, and my colleague Chetan Ahya notes that emerging market inflation currently sits near 15-year lows. Taken together, investors sound more emboldened that a lack of inflation pressure means that central banks have nothing but time.

We’re not so sure. Even with recent energy-led declines, headline inflation is near the 25-year average in the US, UK, France, Germany and Japan. Unemployment is near 50-year lows in the US, 45-year lows in the UK, 25-year lows in Japan and 20-year lows in the eurozone, while measures of wage growth in the US and Europe continue to push higher. All these suggest that DM economies are working with significantly less spare capacity than they were under prior periods when ‘Goldilocks’ reigned.

It’s also important to be careful with level-setting in the inflation discussion. Yes, the current level of US core CPI inflation (2.2%Y) is ‘low’ by the standards of the last 60 years. But it is far less extreme relative to the last two decades. And lest one thinks that inflation provides a true late-cycle warning signal, this is a good time to remember that core CPI is currently at the same level as May 2007 and higher than May-December 1999.

But Goldilocks is about more than a lack of inflation; it also requires enough growth to allay downside fears. And that’s our other problem with this argument. Global growth data remain poor.

The weakness in the global economic data is notably broad. Trade data, global PMIs and earnings revisions have all turned sharply lower in the last three months, a powerful reminder that weakness in 4Q18 wasn’t simply about the Federal Reserve. And while US data have held up better, it’s hardly been immune, with this past week seeing the worst month-onmonth decline in US retail sales since the early 2000s.

There is a good debate about whether this weakness is currently troughing. Our economists think we are close to more aggressive economic stimulus from China, viewing the sharp rise in total social financing in the most recent monthly data as a sign that policy-makers are taking more aggressive action. But if these measures provide a strong boost to the Chinese (and global) economy, that wouldn’t fit the ‘Goldilocks’ script. And if those measures fail to materialise, or are unsuccessful, it wouldn’t be Goldilocks either.

Meanwhile, it’s important to remember that, for US earnings, the weakness is just beginning. Our US equity strategists now expect just 1% EPS growth for the entire year, a reminder that the challenges to the US fundamental story aren’t going away any time soon.

Finally, politics. The third part of the Goldilocks story is that risks around US trade and government funding will now provide positive catalysts. Our US public policy team, led by Michael Zezas, disagrees. This is partly because investor optimism on both issues has already risen materially while key issues remain unresolved. On trade, we don’t think tariffs go higher on March 2, but major issues remain unresolved. On government funding, the US administration’s intention to declare a state of emergency to secure funding would set up a new confrontation with Congress.

In short, we think that investors should be sceptical of the Goldilocks narrative, and look for strategies that benefit from inconsistencies within it. Big picture, we are not looking to add exposure here, and have been looking to reduce some emerging market beta into strength. Our forecasts for stimulus that will help China growth stabilise while US growth continues to moderate support the strategic case to be short the broad USD and overweight international over US equities, and a bullish view on both A-shares and the renminbi. On a smaller scale, our rates strategists continue to think that the level of US real rates is too high relative to expectations that the Fed is now done hiking for the cycle. Either those expectations of further hikes should come up, or 10-year real rates should come down.

Published:2/17/2019 5:25:22 PM
[Markets] Insys Used Rap Video To Push For Higher Opioid Doses

A little over two weeks into the racketeering trial of Insys Therapeutics founder John Kapoor, federal prosecutors last week revealed a rap video produced by the company used to motivate sales representatives to boost sales of its highly addictive opioid spray, reported Bloomberg.

The video, titled “Great by Choice,” was initially shown during a 2015 national sales conference encouraged reps to increase Subsys dosages to doctors through a process known as titration. In return, doctors across the country received millions of dollars in a kickback scheme.

“I love titration. Yeah it’s a not a problem,” rapped the cast in the video called, “Great by Choice.” “I got new patients and I got a lot of ‘em.”

“Build relationships that are healthy,” the song went on. “Got more docs than Janelle’s got selfies.”

At the end of the video, the person dressed up as the bottle of Subsys reveals himself as then-vice president of sales, Alec Burlakoff.

Burlakoff pleaded guilty last Fall to racketeering and could soon testify against Kapoor.

The video is the latest evidence in the trial, which has put a spotlight on the federal government’s efforts to crack down on the opioid crisis.

Last month, a former Insys employee told jurors that she witnessed her boss -- regional sales manager Sunrise Lee -- give an erotic lap dance at a Chicago club to a doctor that was planning to increase prescriptions of Subsys.

Beth Wilkinson, an attorney for Kapoor, told jurors that Burlakoff was solely responsible for the criminal activity. Wilkinson said Burlakoff and the government’s other key witness, former CEO Michael Babich, are liars who are trying to take down Kapoor in the hopes of getting a smaller sentence.

Babich pleaded guilty in January and told jurors last week that Kapoor pushed to get patients on higher doses to increase sales. Babich also said that Insys looked for sales reps who were “poor, hungry and driven." Insys also recruited employees who were “easy on the eyes,” he added.

“No physician wanted a quote unquote unattractive person to walk in their door,” he said.

In 2016, Insys paid out more than $2 million to doctors in the kickback scheme.

Since the Food and Drug Administration approved Subsys in 2012 for cancer patients, there have been more than 900 related deaths.

Perhaps the real opioid crisis is not on the Mexico–United States border, but it is big pharma that is pumping legal opioids to the American people.

Published:2/17/2019 4:27:03 PM
[Markets] Can "Zombie Deer" Disease Kill Humans? Research Suggests It Already Has

Authored by Dagny Taggart via The Organic Prepper blog,

An infectious disease expert has warned that a deadly disease found in deer could infect humans in the near future.

Often referred to as “zombie deer” disease because of the symptoms, Chronic Wasting Disease (CWD) has been reported in at least 24 states in the continental United States and in two provinces in Canada as of January 2019.

But is this warning too late? Because there is an extremely similar disease that has already killed quite a few people.

And before we get further into this – some of you are already thinking that the government is trying to “scare” us. Others will say that the government is trying to “cover it up.”  But rationally, neither of these is true. It took a lot of digging to find the information and piece it all together, however, all the information is readily available on the CDC website.

Minnesota has issued a warning.

Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, recently told lawmakers that CWD should be treated as a public health issue.

That unsettling news surfaced at a hearing Thursday at the Minnesota Capitol, where a number of experts from the University of Minnesota pressed upon lawmakers that the disease should be treated as a public health issue — a major expansion of its current scope as mostly a wildlife and hunting concern.

The issue is especially pressing for Minnesota, where wildlife officials are tracking the state’s largest outbreak of CWD yet in deer in the southeast portion of the state. (source)

Osterholm (who sat on a panel of experts tracking the emergence of mad cow disease, or BSE, decades ago) issued this warning during the hearing:

“It is my best professional judgment based on my public health experience and the risk of BSE transmission to humans in the 1980s and 1990s and my extensive review and evaluation of laboratory research studies … that it is probable that human cases of CWD associated with the consumption of contaminated meat will be documented in the years ahead. It is possible that number of human cases will be substantial and will not be isolated events.” (source)

While he is aware that skeptics will accuse him of fear-mongering, Osterholm said, “If Stephen King could write an infectious disease novel, he would write about prions like this.”

There is a very similar disease that has already killed people.

He noted that for years, many public health and beef industry experts did not believe a similar disease – bovine spongiform encephalopathy (BSE, also known as “mad cow disease” – could infect people. In 1996, researchers found strong evidence that BSE can infect humans as a variant known as Creutzfeldt-Jakob disease (vCJD).

Since 1996, more than 230 vCJD cases have been identified in 12 countries, 178 of them in the United Kingdom, 27 in France, and four in the United States. Just last fall, a case of mad cow disease was confirmed in Scotland, reports Food Safety News.

Also important to note: Hunters in Kentucky contracted a version of spongiform encephalopathy from squirrels in the 1990s.

Here’s what you need to know about “zombie deer” disease.

CWD is a transmissible spongiform encephalopathy disease found in deer, elk, moose, reindeer, and caribou. It is a progressive disease that always kills its victims.

The disease is believed to be caused by abnormal proteins called prions, which are thought to cause damage to other normal prion proteins that can be found in tissues throughout the body. They are most often found in the brain and spinal cord, leading to brain damage and development of prion diseases. Infected brain cells eventually burst, leaving behind microscopic empty spaces in the brain matter that give it a “spongy” look.

Prions are misfolded proteins that are somehow infectious (we’re still not really sure how or why) and for which we have no treatments or cures. If you were to catch one, you’d basically deteriorate over the course of several months, possibly losing the ability to speak or move, and eventually you would die. Doctors wouldn’t be able to do anything to save you. (source)

The disease is believed to spread through saliva, urine, or feces from live deer or through contact with high-risk parts such as the backbone, eyes, or spleen of harvested deer. The disease can spread through the natural movement of deer but it spreads farther and quicker when humans move the deer.

Symptoms develop slowly – sometimes taking years to appear – and include stumbling, lack of coordination, drooling, lack of fear of people, and aggression.

So far, CWD has been reported in 24 states, and the number of cases is increasing.

According to the Centers for Disease Control and Prevention (CDC), CWD was first identified in captive deer in the late 1960s in Colorado and in wild deer in 1981. By the 1990s, it had been reported in surrounding areas in northern Colorado and southern Wyoming. Since 2000, the area known to be affected by CWD has increased to at least 24 states, including states in the Midwest, Southwest, and limited areas on the East Coast.

The CDC notes that it is possible CWD is occurring in other regions, but that cases have not been detected yet because some areas do not have strong animal surveillance systems.

As of January 2019, there were 251 counties in 24 states with reported CWD in free-ranging cervids. This map from the CDC is based on the best-available information from multiple sources, including state wildlife agencies and the United States Geological Survey (USGS). For a full list of states and counties with reported cases, please click here.


Yesterday it was reported that the Virginia Department of Game and Inland Fisheries has found CWD in 26 deer in Northwest Virginia and two in Shenandoah County. They said 26 of the CWD-positive deer were harvested by hunters and showed no symptoms of the disease.

So you can’t depend on the fact that a deer doesn’t “look” sick.

Creutzfeldt-Jakob disease appears to have already killed several people in the past.

CJD has killed several people and in the cases mentioned below, the victims consumed venison and their cases progressed rapidly.

According to a report from Popular Science:

In the 1990s, three deer hunters contracted Creutzfeldt-Jakob (known as CJD or vCJD when referring to the variant caught from infected meat) when they were less than 30 years old, which raised concern, because these diseases typically take years to develop and people aren’t often diagnosed when they’re young. (source)

In a 2004 report titled Chronic Wasting Disease and Potential Transmission to Humans, the CDC described the three cases referenced above. Here is a summary of each.

Case 1 involved a 25-year-old man who reportedly died of a prion disease. He rarely hunted, but his grandfather hunted deer and elk throughout much of the 1980s and 1990s and regularly shared the venison with the family. He primarily hunted in southeastern Wyoming, around the known CWD-endemic area. “It remains unknown whether the possible exposure of the case-patient to CWD-infected venison potentially contributed to the early onset of his prion disease,” according to the CDC.

Cases 2 and 3 involved two men with CJD who were 26 and 28 years of age. They grew up in adjacent counties and became ill within several months of each other. In the first case, autopsy samples confirmed a CJD diagnosis. According to the report (which, again, was written in 2004), “The patient may have occasionally eaten venison originating from the Upper Peninsula of Michigan while away from home during his college years. However, ongoing surveillance has not detected CWD in Michigan deer.” In the second case, autopsy confirmed a prion disease diagnosis. “The patient did not hunt but may have eaten venison from Michigan once when he was 1–2 years old,” says the report.

The report from Popular Science referred to additional cases:

In the early 2000s, several more patients turned up with CJD and then several more with vague neurological symptoms that resembled prion diseases. Three men in particular all ate together at regular wild game feasts. (source)

The CDC report includes details about those cases.

Two CJD cases with a “positive history of exposure to venison obtained from the known CWD-endemic areas” are discussed. One of the patients was a 61-year-old woman who grew up in an area where this disease is known to be endemic. She ate venison harvested locally, and her autopsy confirmed CJD. The second patient was a 66-year-old man who was reported to have eaten venison from two deer harvested in a CWD-endemic area. Both of the deer he consumed tested negative for CWD, and his autopsy details were not provided.

Three cases from 2003 are also mentioned. Three men (ages 54, 63, and 66) from the same area died of CJD. They had “striking neuropathologic similarities”. The report states that “their illness may represent a new entity in the spectrum of prion disease”.

In a report titled Fatal Degenerative Neurologic Illnesses in Men Who Participated in Wild Game Feasts — Wisconsin, 2002, the CDC described the cases of the men referenced in the Popular Science report.

Case 1 involved a 66-year-old man from Wisconsin. He was a lifelong hunter who ate venison frequently. He hunted primarily in northern Wisconsin, but also at least once in Montana. He died in February 1993. The autopsy indicated subacute spongiform encephalopathy, compatible with CJD.

He hosted wild game feasts at his cabin in northern Wisconsin from 1976 until shortly before his death.

Case 2 involved a 55-year-old man from Minnesota. He was not a hunter but had a history of eating venison. He made an estimated 12 visits to the cabin where the wild game feasts referred to in Case 1 were held, but he participated in only one feast during the mid-1980s. He died in July 1999, and the autopsy demonstrated widespread subcortical spongiform lesions, consistent with CJD.

Case 3 involved a 65-year-old man from Wisconsin who died in August 1993. He had a history of eating venison and participated regularly in wild game feasts held at the cabin owned by the man referenced in Case 1. He was a lifelong hunter and hunted mostly in Wisconsin, but also in Wyoming and British Columbia. The autopsy showed symmetrical frontal lobe cerebral cortical atrophy and mild temporal lobe atrophy, but no evidence of CJD.

There are alarming geographic links between the deer cases and the human cases.

In states where deer are infected with CWD, there have been more cases of CJD in humans. And the fact that mad cow disease was passed to humans who ate the infected beef has caused the CDC to pay attention.

Wisconsin, Montana, and Wyoming are all states that now have known cases of CWD in deer.

According to a January 2019 report from the government of British Columbia, “The disease is widespread in the Canadian prairies and is moving west toward the B.C. border. The B.C. Wildlife Health Program has been monitoring for CWD since 2002 and has yet to find an infected animal in this province.”

The CDC report also includes alarming details about cases in Colorado and Wyoming (emphasis mine):

Despite the decades-long endemicity of CWD in Colorado and Wyoming, the incidence of CJD and the age distribution of CJD case-patients in these two states are similar to those seen in other parts of the United States. From 1979 to 2000, 67 CJD cases from Colorado and 7 from Wyoming were reported to the national multiple cause-of-death database. (source)

Here are is an excerpt from the 2004 CDC report conclusion:

The lack of evidence of a link between CWD transmission and unusual cases of CJD, despite several epidemiologic investigations, and the absence of an increase in CJD incidence in Colorado and Wyoming suggest that the risk, if any, of transmission of CWD to humans is low.

Although the in vitro studies indicating inefficient conversion of human prion protein by CWD-associated prions raise the possibility of low-level transmission of CWD to humans, no human cases of prion disease with strong evidence of a link with CWD have been identified. However, the transmission of BSE to humans and the resulting vCJD indicate that, provided sufficient exposure, the species barrier may not completely protect humans from animal prion diseases.

Because CWD has occurred in a limited geographic area for decades, an adequate number of people may not have been exposed to the CWD agent to result in a clinically recognizable human disease. The level and frequency of human exposure to the CWD agent may increase with the spread of CWD in the United States.

Because the number of studies seeking evidence for CWD transmission to humans is limited, more epidemiologic and laboratory studies should be conducted to monitor the possibility of such transmissions. (source)

CWD is extremely contagious

A 2017 study titled Chronic wasting disease: Emerging prions and their potential risk states that “CWD is one of the most contagious prion diseases”.

Here are a few excerpts from that study.

As the geographic distribution and case numbers of CWD are constantly growing, exposure of humans to CWD prions becomes more likely. To date, bovine spongiform encephalopathy is the only example of interspecies transmission of prion disease to humans. The potential zoonotic transmission of CWD is an alarming issue and still an open question.

Laboratory studies suggest that the risk of CWD transmission to humans is low.

These findings suggest a notable species barrier between cervids and humans; however, prion diseases are dynamic; interspecies passage of CWD can result in prion adaptation to new host species. Besides, the existence of more than one CWD strain may contribute to higher heterogeneity in disease and transmission profiles.

Although the evidence gathered so far is in favor of a low risk to transmit CWD to humans, results from in vitro studies indicated that the species barrier is not absolute. (source)

A report from Food Safety News titled ‘Surprising’ Discovery Made About Chronic Wasting Diseaseexplains the alarming findings of a 2015 study:

According to researchers at The University of Texas Health Science Center at Houston (UTHealth), grass plants can bind, uptake and transport infectious prions. Why this is so important takes some understanding of what prions are.

Much smaller than bacteria, prions are single proteins that cannot be destroyed by typical “kill strategies” such as extreme heat or ultraviolet light.

“With prions, nothing like that works,” said Claudio Soto, Ph.D., a UTHealth researcher and lead author of an article about the topic published May 26, 2015, in Cell Reports.

These protein-based infectious agents cause the characteristic spongy degeneration of the brain, leading to emaciation, abnormal behavior, loss of bodily functions, and death. (source)

It gets passed through plants.

Some people reading this may think, “That’s it, I’m becoming a vegetarian.”

Not so fast. Plants aren’t safe either.

Soto’s team found, to summarize, that plants can act as a carrier of CWD because they can “uptake prions from contaminated soil and transport them to different parts of the plant”.

“Surprisingly, we found that they do bind to plants very efficiently,” Soto explained. “Even more surprisingly, plants infected with the prions were able to transmit the disease when animals were fed the contaminated plants.”

An infected animal can shed the disease a lot over a year (via urine and feces), and its decomposing body can further infect the soil and therefore the plants.

Soto warns that there is a good possibility that prions have been progressively accumulating in the environment.

“We have to be careful about the potential dangers of this,” he said. “We need to take precautions.” (source)

Getting rid of CWD is impossible.

Antibiotics do not kill CWD. Neither does cooking.

To give you an idea of just how persistent prions are: In 1985, the Colorado Division of Wildlife tried to eliminate CWD from a research facility by treating the soil with chlorine, removing the treated soil, and applying an additional chlorine treatment before letting the facility remain vacant for more than a year. Those efforts failed – they were unsuccessful in eliminating CWD from the facility.

In its conclusion, the 2004 CDC report states:

Because of the long incubation period associated with prion diseases, convincing negative results from epidemiologic and experimental laboratory studies would likely require years of follow-up. In the meantime, to minimize the risk for exposure to the CWD agent, hunters should consult with their state wildlife agencies to identify areas where CWD occurs and continue to follow advice provided by public health and wildlife agencies. (source)

Soto told Food Safety News he would agree.

He said that even though there have been no confirmed cases of infections in humans from CWD, the public should know that “it’s a possibility that needs to be explored.”

“I don’t want to scare people,” he said, “but these (CWD) prions are accumulating, and prions have a long incubation period — sometimes as long as 30 to 40 years in humans.” (source)

So with an incubation period like that, a person could be infected and not know it for decades.

How you can avoid infection with CWD prions

This doesn’t mean that you must completely avoid game, but you have to be careful.

The CDC offers some guidelines for hunters:

Hunters harvesting wild deer and elk from areas with reported CWD should check state wildlife and public health guidance to see whether testing of animals is recommended or required in a given state or region. In areas where CWD is known to be present, CDC recommends that hunters strongly consider having those animals tested before eating the meat. (source)

In addition, the agency advises hunters to avoid eating meat from deer and elk that look sick or test positive for CWD. They should wear gloves when field-dressing carcasses and minimize the handling of brain and spinal cord tissues. As a precaution, they should avoid eating deer and elk tissues known to harbor the CWD agent (e.g., brain, spinal cord, eyes, spleen, tonsils, lymph nodes) from areas where CWD has been identified.

In addition, hunters should wash their hands and instruments thoroughly after field dressing is completed. When taking the game to be processed, they should request that their animal is processed individually, without meat from other animals being added to the meat from their animal.

If hunters notice animals that are unusually thin and exhibit behavior such as having trouble walking, as well as those acting tame around humans and allowing someone to approach them, they should notify their state wildlife agency.

The CDC also states that “a negative test result does not guarantee that an individual animal is not infected with CWD, but it does make it considerably less likely and may reduce your risk of exposure to CWD.”

H/T to KS

Published:2/17/2019 3:54:39 PM
[Markets] Meet Generation Z: The Newest Member Of The Workforce

Every generation approaches the workplace differently.

While talk over the last decade has largely focused on understanding the work habits and attitudes of Millennials, Visual Capitalist's Jeff Desjardins points out that it’s already time for a new generation to enter the fold.

Generation Z, the group born after the Millennials, is entering their early adult years and starting their young careers. What makes them different, and how will they approach things differently than past generations?


Today’s infographic comes to us from ZeroCater, and it will help introduce you to the newest entrant to the modern workforce: Generation Z.

Courtesy of: Visual Capitalist

There is no exact consensus on the definition of Generation Z, and demographers can differ on where it starts. Some have Gen Z beginning as early as the mid-1990s, while others see it starting in the mid-2000s.

Regardless, Generation Z is the group that follows the Millennials – and many Gen Zers are wrapping up high school, finishing up their university degrees, or looking to get their first real jobs.


While generational differences cast a wide net and don’t necessarily apply to every individual, here is what demographers say are some key similarities and differences between Gen Z and Millennials.

Generation Z tends to be more pragmatic, approaching both their education and career differently than Millennials. It appears that Gen Z is also approaching money in a unique way compared to past groups.


Generation Z does not remember a time when the internet did not exist – and as such, it’s not surprising to learn that 50% of Gen Z spends 10 hours a day connected online, and 70% watches YouTube for two hours a day or more.

But put aside this ultra-connectivity, and Gen Zers have some unique and possibly unexpected traits. Gen Z prefers face-to-face interactions in the workplace, and also expects to work harder than past groups. Gen Z is also the most diverse generation (49% non-white) and values racial equality as a top issue. Finally, Gen Z is possibly one of the most practical generations, valuing things like saving money and getting stable jobs.

You may already have Gen Zers in your workplace – but if you don’t, you will soon.

Published:2/17/2019 3:24:00 PM
[Entertainment] Serena Williams Throws Daughter Olympia a Party Just for Fun Serena Williams, Alexia Olympia Ohanian Jr.Serena Williams and Alexis Ohanian may not have celebrated their daughter Olympia's first birthday last summer, but they did throw her a party on Saturday. The tennis star posted on...
Published:2/17/2019 2:55:31 PM
[Markets] Richard Grenell Emerges As Favorite For UN Ambassador

Following the sudden withdrawal of Heather Nauert from consideration to replace Nikki Haley as America's ambassador to the United Nations, several names have been floated as contenders to fill the role. 

Among those, US Ambassador to Germany Richard Grenell has emerged as a clear favorite among President Trump's base. 

Having spent eight years serving as a U.S. spokesman and political appointee to the U.N. - the longest in U.N. history, Grenell has vast experience representing U.S. interests in controversial international matters; including the war on terror, the seemingly endless Middle Eastern conflicts and the U.N.'s oil-for-food corruption scandal. 

Grenell also served with, and advised, National Security Adviser John Bolton - a previous U.S. ambassador to the U.N. during President George W. Bush's administration. 

"He's a family favorite," reported the Washington Examiner in October, when word of Haley's departure was made public. 

It's clear that President Trump's base feels the same way. 

"I’m a huge fan of Ambassador Grenell," President Trump's former campaign manager Corey Lewandowski told Breitbart News on Saturday. "He has served the President of the United States with distinction in Germany and would make a great ambassador to the U.N."

Grenell has also garnered the support of former White House official and current adviser to Donald Trump Jr., Andrew Surabian, as well as former White House Press Secretary Sean Spicer, Turning Point USA president and founder Charlie Kirk, and former Trump adviser Sebastian Gorka - who told Breitbart News "Ric Grenell needs to be recalled and nominated forthwith for the U.N. post," adding "He has been the President’s most effective ambassador bar none. The best thing about his nomination is that with his rock solid MAGA credentials the globalist America-haters at the U.N. will be put on notice.

Trump deputy campaign manager David Bossie told Breitbart that "Rick Grenell stands for America in Germany and would do a great job at the United Nations," adding "Grenell’s unabashed belief in President Trump’s America First foreign policy would make him a fantastic UN Ambassador. Rick Grenell has extensive experience at the United Nations and would bring a depth of knowledge to hit the ground running."

Other names supporting Grenell include White House ally Arthur Schwartz, who tweeted on Sunday: "I can’t name another ambassador that has done as much as Ric." 

Grenell has served as the U.S. ambassador to Germany for around a year after his confirmation was vehemently blocked by some Democrats. He was confirmed by the U.S. Senate with 56 votes in early 2018 when Republicans had just a 51-seat majority, which suggests he would likely sail through confirmation to the U.N. ambassadorship with ease, writes Breitbart's Matt Boyle.  

Other names under consideration include Jamie McCourt, the U.S. ambassador to France, Kelly Craft, the U.S. ambassador to Canada, and Kevin Moley, assistant secretary of state for International Organizations. 

Published:2/17/2019 2:25:10 PM
[Markets] A World Full Of Zombies: Global Revenue Growth Has Collapsed

We have previously discussed extensively (here, here and here) how a decade of ultra low rates ushered in by central banks has spawned a generation of "zombie companies": corporations which under any other conditions would not survive due to their massive debt load and subpar cash creation, yet which continue to thrive thanks to ZIRP and NIRP, which make their interest expense sustainable preventing inevitable defaults, which in turn lead to subpar productivity and a general contraction in economic and corporate output.

And while we won't spend more time on a topic that has been extensively dissected here in the past, we'll point out several observations from a recent presentation by Goldman which details the creeping zombification of the world, as increasingly manifest in both economic and market indicators, starting with the collapse in long-term real global GDP growth, which is now at a "historical low." Whereas much of investor focus in recent months has been on cyclical growth risks, spurred by concerns over rising interest rates, a slowing US fiscal boost, QT and US/China trade relations, Goldman's Peter Oppenheimer points out that we are already in if not growth hell, then certainly purgatory, as "there is a more important structural story on growth that is likely to have a meaningful impact on equity and asset market pricing over the medium term: trend growth has slowed."

Indeed, despite the move towards zero interest rates, the large expansion of central banks’ balance sheets and the substantial fiscal expansion in the US, the outcome has been the opposite of that desired by central banks as long-term growth forecasts have continue to decline, and as the chart below shows, this has been a fairly consistent pattern since the financial crisis. Meanwhile, actual nominal GDP has continued to weaken in the US, and even more so in Europe and Japan.

This secular decline in global growth is consistent with the message sent from interest rates, as nominal bond yields have also continued to decline despite central banks now collectively owning about a third of global sovereign debt. As Goldman notes, "in the UK, where we have a very long history, 10-year bond yields have fallen back towards record lows since the 1700s. Meanwhile, in Germany, 10-year yields have collapsed and could fall further." As a result, nominal yields back below zero cannot be ruled out – during the QE period, both 2-year and 5-year Bund yields fell deeply into negative territory.

While one can argue if the ongoing secular decline in global economic output and the increasing deflationary pressure is the result of "zombifiction" or various other reasons, such as demographics, the impact of technology, excess global saving and a fall in term premia, whatever the reasons, the trend is clearly consistent with the prospects for a long period of weak growth.

Yet one place where corporate "zombification" is quite obvious, is in the parallel drop in corporate revenue growth. Indeed, the abovementioned declines in GDP and interest rates, both nominal and real, are consistent with Goldman's recent view that "profit growth is likely to remain modest for a long time and, with it, stock returns." For the impact of low nominal growth look no further than nominal sales growth, which has not only been slowing since the financial crisis, but is now the lowest on a 10 year rolling average basis, in history (excluding the great depression). 

This is especially true in Europe, where one look at corporate revenue growth in just the past century shows a dramatic reversal: whereas at the start of the 21st century, high growth companies - those with revenue growth > 8% - dominated, the trend has reversed drastically in the past two decades, and as Goldman notes, there is clearly a lack of growth both economically and within the stock market in Europe, and currently the proportion of higher top line growing companies has contracted relative to those growing slowly.

As a direct consequence of this declining economic and revenue growth, overall earnings have been weak and getting weaker. As Goldman further notes, the deep falls in profits during the financial crisis were followed by a strong rebound in 2010. But in the case of both Europe and Asia, the growth rate in earnings has stalled since then. As Exhibit 14 shows, for the World ex the US, there was a brief reprieve in 2017, when a strong synchronised global economic recovery resulted in strong earnings growth, but the bank
now expects a reversion to a period of low-single-digit earnings growth without the driver of higher valuation, which was a key driver of returns in recent years. As a result, Goldman is increasingly confident that there is little if any upside to stocks.

There is one silver lining to this secular growth decline: US tech stocks, which have stuck out like a clearly differentiated "thumbs up" amid a dreary "flat profits" landscape.

To be sure, a small part of why the US has been a global profit outlier can be attributed to the boom in buybacks. As Goldman explains, the earnings yield approximates the boost to EPS in excess of earnings, and has averaged 2.6% over the past 5 years. More importantly, overall profit growth has been boosted by a boom in technology earnings (Exhibit 15). Shockingly, global profits ex technology are only moderately higher than they were prior to the financial crisis, while technology profits have moved sharply upwards (mainly reflecting the impact of large US technology companies), driven by a combination of  strong sales growth and sharply rising margins (Exhibit 16).

As discussed previously, much of the strong earnings growth has been a function of sharply rising margins in the technology industry. Half of the rise in S&P 500 margins since the crisis has been driven by the technology sector. As Exhibit 16 shows, the gap between US and European margins is cut in half when we exclude technology. So without such strong margins and earnings moving forward, aggregate index earnings are likely to progress more slowly. And while Goldman is still a fan of the tech sector, claiming that unlike 2000, it is not "in a bubble", at the same time, margins and revenue in this sector are unlikely to rise at the same rate going forward, which is another reason for expecting lower earnings growth and returns at the index level.

One final profit growth constraint is found in margins in general: as one would expect, profits as a percentage of GDP have risen consistently over the past two decades, supported by the impact of technology and globalization (hence the violent blowback against globalization as increasingly more people comprehend the unfair trade off between wages and shareholder gains). As a result, the future path for margins is unlikely to be as strong, for the following two reasons:

  • First, tight labor markets and more populist governments could lead to higher wages; logically, the is an inverse relationship between margins and wage costs.
  • Second, as mentioned above, the sharp rise in technology margins is not likely to be repeated - especially following Apple's shocking profit outlook cut- and, given higher regulatory and tax costs, are likely to come under some pressure.

What can be done to reverse these disturbing trends? The answer is simple: end the zombie companies, and allow "natural selection" among corporations and competitive capitalism to return, however for that to happen, rates will have to increase dramatically beyond the threshold that keeps most unviable companies alive currently. This is a problem because two years ago, the IMF found that some 20% of all US companies would fail if rates rise notably, a finding that was certainly noted by the Federal Reserve and is among the drivers behind Powell's recent dovish reversal. Alas, as long as central banks keep pushing on a string, keeping rates artificially low, and perpetuating the existence of "zombies", GDP, revenue, and profit growth will only continue to sink as scarce resources and capital continue to be misallocated, eventually resulting in a "Japanese" style singularity, where central banks needs to monetize all debt issuance only to prevent the financial system from imploding.

Published:2/17/2019 1:53:52 PM
[Entertainment] Victoria Beckham's Daughter Harper Is Anna Wintour's Mini-Me Harper Beckham, David Beckham, Anna Wintour, London Fashion Week 2019Everybody wants to be us... Victoria Beckham's family came out to support her at her Autumn/ Winter 2019 fashion show at the Tate Britain in London on Sunday. Her husband David...
Published:2/17/2019 1:23:49 PM
[Markets] Schiff-ting The Goal Posts: House Intel Chairman Claims Trump-Russia Collusion "Compelling" But Not Necessarily "Criminal"

House Intelligence Chairman Adam Schiff, one of the most visible purveyors of the narrative that Trump and his associates engaged in a criminal conspiracy with Russia to rig the 2016 election, apparently no longer believes that Trump committed a crime by "colluding" with the Russians.

During an appearance on CNN's State of the Union on Sunday, Schiff ticked off a litany of suspicious activities involving Trump and his associates that he said suggest that collusion did take place - but instead of labeling the behavior as evidence of a criminal conspiracy, Schiff declared that "there's a difference between seeing eidence of collusion and being able to prove a criminal conspiracy beyond a reasonable doubt" and that it would be "up to Mueller" to determine whether Trump or senior members of his campaign team broke the law.

Schiff was responding to a question about the Senate Intelligence Committee's recent decision to wind down its probe into whether the Trump campaign colluded with the Russians. Senate Intel Chairman Richard Burr - whom, as CNN said, hasn't "exactly been a rapid partisan" on this topic - declared that the committee didn't find sufficient evidence of collusion.

Thouigh Schiff said that both he and Senate Intel Ranking Member Mark Warner disagreed with this assessment, he conceded that it would be "up to Mueller" to reach a final conclusion.

BASH: This week, the chair, your counterpart in the Senate, the Republican chair of the Intelligence Committee, Richard Burr, said that his committee has found nothing to suggest collusion between the Trump campaign and Russia.

You said - quote - "That's not our view in the House."

But, you know, Burr hasn't exactly been a rabid partisan on this. Until the last couple of weeks, he's been working very closely with the Democrats. So, why do you think he's wrong?

SCHIFF: Well, it's not just that I think he's wrong. Mark Warner, the vice chair of the Intel Committee in the Senate, also disagrees with that assessment.

But, look, you can see evidence in plain sight on the issue of collusion, pretty compelling evidence. Now, there's a difference between seeing evidence of collusion and being able to prove a criminal conspiracy beyond a reasonable doubt.

But Mr. - Chairman Burr must have a different word for it, because, when you look, for example, at the e-mails to set up the meeting in Trump Tower, it was offered to the Trump campaign, to the president's own son, dirt on Hillary Clinton as part of what was described as the Russian government's effort to help Donald Trump in the campaign.

And the response from the campaign was, we would love to have the help.

Now, that's an offer of help. That's an acceptance of help. There's an overt act in the Trump Tower in furtherance of that. And, of course, that's not even contemplating the discussions with George Papadopoulos or the information about the efforts that Mike Flynn made to work with the Russian ambassador secretly to undermine sanctions and then lie about that.

All of this is evidence of collusion. And you either have to look the other way to say it isn't, or you have to have a different word for it, because it is a corrupt dealing with a foreign adversary during a campaign.

But, again, it will be up to Mueller to determine whether that amounts to criminal conspiracy.

As CNN producer Marshall Cohen pointed out in a tweet, Schiff's phrasing suggested he was "moving the goalposts a bit" as Mueller prepares to wind down his investigation.

Schiff's comments followed the revelation by Mueller that his team had come into possession of copies of Stone's correspondence with Wikileaks, which hadn't been concluded in the original indictment. When asked about this, Schiff said that it's just more evidence that there's more going on behind the scenes in the Mueller probe than has been revealed in the indictments.

But whether that includes any actual evidence of criminal wrongdoing will likely remain a mystery until Mueller's final report is released.

Published:2/17/2019 1:23:49 PM
[Entertainment] Meghan Markle and Prince Harry May Send Their Child to an American School Meghan Markle, Prince HarryWill Meghan Markle and Prince Harry forgo royal tradition when it comes to the education of their future child? The pregnant Duchess of Sussex and the Duke of Sussex are said to be...
Published:2/17/2019 12:27:57 PM
[Markets] Weiner Goes Free: Stiff Sentence Turns Soft As Ex-Congressman Gets Early Release

After he helped change the course of US history by prompting the FBI to reopen its investigation into Hillary Clinton's use of a personal email server during the final days of the 2016 campaign, former New York Congressman and ex-husband of Hillary aide Huma Abedin has been released from federal prison a few months ahead of schedule thanks to his 'good behavior' on the inside, according to a TMZ report.

To be sure, Weiner must spend a few more months under federal supervision before he's completely in the clear. Under the terms of his release, Weiner must now spend a few additional months in federal custody, either in a half way house or other supervised pre-release program, before he can lawfully reenter society. Weiner served his time at the Federal Medical Center in Devens, Mass., where he received treatment for his "condition" of being a sex offender.


Weiner resigned from Congress after his first sex offender scandal in 2011, then his comeback campaign for New York City mayor floundered in 2013 when he for sexting porn star Sydney Leathers using the now infamous alias "Carlos Danger".

The third incident, which earned him a conviction on federal sex offender charges of improper sexual contact with a minor, finally destroyed his marriage to Abedin.

Weiner began serving what was supposed to be a 21-month prison sentence in November 2017 after pleading guilty to sexting with a 15-year-old North Carolina girl. He was scheduled to be released in August, 2019, but managed to slash 3 months off his sentence for good behavior, moving his departure date from federal custody to May 14.

TMZ reported that he will leave federal custody entirely on that date.

Published:2/17/2019 12:27:57 PM
[In The News] It’s Official: Smollett investigation shifting focus from attack to hoax

By R. Mitchell -

While CDN’s reporting has been steadfast in its skepticism of Empire star Jussie Smollet’ attack allegations, it has taken almost three weeks for most other reporting to catch up, but it’s official now: Chicago police are investigating Smollett as the perpetrator of a hoax. “We can confirm that the information ...

It’s Official: Smollett investigation shifting focus from attack to hoax 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:2/17/2019 11:53:36 AM
[Entertainment] Miranda Lambert Steps Out With Brendan McLoughlin After Revealing They're Married: See Her Ring Miranda Lambert, Brendan Mcloughlin Here come the newlyweds! Country star Miranda Lambert and new husband Brendan McLoughlin were photographed sporting their wedding rings while walking in New York City together on...
Published:2/17/2019 11:23:53 AM
[Markets] Two Trump Cabinet Officials Were "Ready To Support" 25th Amendment 'Coup' As Rosenstein Tallied Votes

Two Trump Cabinet officials were "ready to support" a DOJ scheme to invoke the 25th Amendment to remove President Trump, according to Fox News, citing closed-door testimony from the FBI's former top lawyer, James Baker - who said that the claim came from Deputy Attorney General Rod Rosenstein. 

The testimony was delivered last fall to the House Oversight and Judiciary Committees. Fox News has confirmed portions of the transcript. It provides additional insight into discussions that have returned to the spotlight in Washington as fired FBI Deputy Director Andrew McCabe revisits the matter during interviews promoting his forthcoming book. -Fox News

While Baker did not identify the two Cabinet officials, he says that McCabe and former FBI lawyer Lisa Page approached him to relay their conversations with Rosenstein, including their discussions of the 25th Amendment scheme. 

"I was being told by some combination of Andy McCabe and Lisa Page, that, in a conversation with the Deputy Attorney General, he had stated that he -- this was what was related to me -- that he had at least two members of the president’s Cabinet who were ready to support, I guess you would call it, an action under the 25th Amendment," Baker told the Congressional committees. 

The 25th Amendment allows for the removal of a sitting president from office through various mechanisms - including the majority of a president's Cabinet agreeing that the commander-in-chief is incapable of performing his duties. 

Rosenstein - who is slated to leave the Justice Department in the near future, has denied the claims. 

Former FBI General Counsel James A. Baker

Baker said McCabe was cool, calm and collected throughout the discussions, telling lawmakers: "At this point in time, Andy was unbelievably focused and unbelievably confident and squared away.  I don’t know how to describe it other than I was extremely proud to be around him at that point in time because I thought he was doing an excellent job at maintaining focus and dealing with a very uncertain and difficult situation.  So I think he was in a good state of mind at this point in time." 

McCabe, meanwhile told "60 Minutes" in an interview set to air Sunday night that Rosenstein was concerned about Trump's "capacity." 

According to McCabe, Rosenstein "raised the issue and discussed it with me in the context of thinking about how many other cabinet officials might support such an effort," adding that Rosenstein was "definitely very concerned about the president, about his capacity and about his intent at that point in time."

"Rosenstein was actually openly talking about whether there was a majority of the cabinet who would vote to remove the president?" asks CBS News anchor Scott Pelly, to which McCabe replied: "That’s correct. Counting votes or possible votes."

The New York Times first reported last year that McCabe alleged in memos that Rosenstein had talked about using the 25th Amendment to oust Trump — or wearing a wire to surreptitiously monitor the president — in the hectic days in May 2017 after Trump fired James B. Comey as FBI director. At the time, Rosenstein disputed the reporting. -WaPo

Sen. Lindsey Graham (R-SC) called the 25th Amendment scheme a "bureaucratic coup" led by enemies of President Trump. On Sunday morning, Graham said he would subpoena McCabe and Rosenstein "if that's what it takes" to get to the bottom of the 25th Amendment claim. 

On Thursday, the DOJ issued a statement claiming that Rosenstein rejects McCabe's version of events "as inaccurate and factually incorrect," and also denied that Rosenstein ever approved wearing a "wire" to record Trump. 

"The deputy attorney general never authorized any recording that Mr. McCabe references," reads the DOJ statement. "As the deputy attorney general previously has stated, based on his personal dealings with the president, there is no basis to invoke the 25th Amendment, nor was the DAG in a position to consider invoking the 25th Amendment."

McCabe, meanwhile, walked back some of his "60 Minutes" statements. On Friday a spokeswoman for the former Deputy Director said: "Certain statements made by Mr. McCabe, in interviews associated with the release of his book, have been taken out of context and misrepresented," adding "To clarify, at no time did Mr. McCabe participate in any extended discussions about the use of the 25th Amendment, nor is he aware of any such discussions."

Baker acknowledged during his testimony that he was not directly involved in the May 2017 discussions, rather, McCabe and Page approached him contemporaneously following a meeting with Rosenstein in the days following former FBI Director James Comey's firing. 

"I had the impression that the deputy attorney general had already discussed this with two members in the president’s Cabinet and that they were…onboard with this concept already," said Baker. 

Question: “Do you know what direction that went? Was it Mr. Rosenstein seeking out members of the Cabinet looking to pursue this 25th Amendment approach or was it the other way around?”

Baker: “What I recall being said was that the Deputy Attorney General had two members of the Cabinet.  So he – how they came to be had, I don’t know, but…”

Question: “So he had two members, almost like he was taking the initiative and getting the members?”

Baker: “That would be speculation on my part.” -Via Fox News

Baker also suggested that "Lisa and Andy" did not know the names of the Cabinet officials who were on board with the 25th Amendment scheme.  

Baker testified in October that the alleged discussions took place during an uncertain and anxious time at the FBI and DOJ after Comey’s termination, and that the mood was “pretty dark":

Question: “Did people tell you that the DAG (Deputy Attorney General) was upset?”

Baker: “Yes.”

Question: “Did they tell you that he was making jokes?”

Baker: “No.”

Question: “Did they tell you that...”

Baker: “This was not a joking sort of time. This was pretty dark.” -Via Fox News

Pretty dark indeed. 

Published:2/17/2019 11:23:53 AM
[In The News] Smollett’s Attorneys Speak Out, Say Reports Claiming The Actor Planned Own Attack Further Victimizes Him

By Neetu Chandak -

Jussie Smollett’s attorneys said reports claiming the “Empire” actor planned his own attack on Jan. 29 “further victimized” him and were lies, according to a Saturday night statement. Smollett reported two men beat him up, tied a rope around his neck, said racial and homophobic slurs, threw an unidentified chemical ...

Smollett’s Attorneys Speak Out, Say Reports Claiming The Actor Planned Own Attack Further Victimizes Him 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:2/17/2019 11:23:53 AM
[Entertainment] Prince William and Prince Harry to Split Royal Household Within Weeks Prince Harry, Prince William, Royal WeddingPrince William and brother Prince Harry's professional "breakup" is happening sooner rather than later, E! News has confirmed. In October, the Sunday Times had reported that...
Published:2/17/2019 10:58:00 AM
[Markets] Is It A (Bull) Trap?

Authored by Lance Roberts via,

On Tuesday, I discussed the issue of the markets being stuck between various short and longer-term moving averages. To wit:

“Despite those more macro-concerns, the market has had a phenomenal run from the ‘Christmas Eve’ lows and has moved above both the Oct-Nov lows and the 50-dma. This is clearly bullish in the short-term for investors. With those levels of previous resistance now turned support, there is a little cushion for the bulls to hold on to.

The biggest hurdle for a bullish advance from current levels is the cluster of resistance sitting just overhead. Sven Heinrich noted the market remains stuck below the collision of the 200-day, the 50-week, and the 15-month moving averages.”

“As shown, this set up previously existed back in late 2015 and early 2016. The initial challenge saw the market actually break back above the cluster of resistance, which “sucked the bulls” back into the market before setting new lows.”

There are two things driving the advance currently. 

The first, is the Fed.

As we discussed with our RIA PRO subscribers (use code PRO30 for a 30-day free trial) last week, 

“Today, [Cleveland Fed Reserve Governor Loretta Mester] all but put the kibosh on further rate hikes and, per Mester’s comments, will end balance sheet reduction (QT) in the months ahead.”

John Rubino also made an important note in this regard as well.

“Take the world that we were in over the past five years and flip it upside down. For the Fed, the risk that another rate increase could cause significant economic harm outweighs the risk that not raising rates could lead to slightly higher inflation.” – Gennadly Goldberg, TD Ameritrade. 

And with that, the odds of a rate “hike” in 2019 have evaporated in favor of a rate “cut.” 

However, the problem for the Fed is that they have now effectively “boxed” themselves in. As John notes:

“If caving to the stock market re-energizes the bond market, leading corporations to increase their already record-high debt load, that will boost economic growth while raising both inflation and commodity/real estate prices – thus forcing the Fed to go back to tightening, thus causing chaos in the financial markets, thus forcing the Fed to back off and return to easing. And so on, with each iteration ratcheting up overall leverage in the economy.”

Opps….Too Late

(Real Estate, Junk Bonds, & Utilities)

The second, is “hope.”

On Friday, on headlines that talks are continuing with China, the market pushed through those resistance levels as shown below. 

 While there is nothing wrong with “hoping” for a positive outcome from “trade talks,”  the rush to “buy” equities has effectively “priced in” the best of all possible outcomes. This leaves investors vulnerable a whole host of possible disappointments:

  1. Trade deal isn’t reached as China refuses to give in to demands for economic reform. 

  2. Trade deal is made but the magnitude of concessions is disappointing.

  3. Trade deal gets extended, again, with no real progress towards a “deal.”

  4. Trade deal made and tariffs are ended, but such is likely already priced into current asset prices. 

  5. Trade negotiations collapse. (Worst possible outcome.)

The point here is that there are few outcomes for the trade deal which are extremely optimistic which would support a further surge in assets prices. The most likely outcome is this simply a “buy the rumor, sell the news” type event, and if the news is bad, the resulting sell-off could be substantial.

Market Has Gotten Way Ahead Of Itself

As I noted last weekend:

“While I am not suggesting that the markets are about to suffer a 10% correction, I am suggesting, as I wrote this past week, is that the markets have been ‘Too Fast & Too Furious.’

“Short-term technical indicators also show the violent reversion from extreme oversold conditions back to extreme overbought.

(Chart updated through Friday’s close)

As we have discussed previously, price movements are very much confined by the “physics” of technicals. When deviations from underlying moving averages become to great, reversions to mean tend to occur with great regularity throughout history.  The chart below shows the S&P 500, the slope of the advance, price momentum, and its deviation from the 50-day moving average.

Not surprisingly, when markets are as extended as they are currently, price corrections have not previously been too far away. Given the magnitude of the advance from the December 24th lows, we can use a Fibonacci sequence to “guesstimate” the magnitude of a corrective process. 

First, I am making the assumption the momentum of the market continues to push stocks toward the psychologically important level of 2800 on the index over the next few days.

A correction following that rally SHOULD be highly anticipated. 

Level 1 = 38.2%: The first correction to relieve some of the extreme overbought condition of the market, and provide investors with a better opportunity to increase equity risk is at the 38.2% retracement level. This would be a retest of the support levels from the Oct-Nov lows and the 50-dma. (Bullish)

Level 2 = 50%: If the markets are unable to hold support at the Level 1 correction, then a fall to the 50% level is highly likely. Such a correction is much more bearish in nature and suggests a retest of the December 24th lows is probable. (Bearish)

Level 3 = 61.8%: If the markets get to this level, it is likely the markets will be oversold short-term and a bounce likely. However, that bounce should be sold into as a retest of lows is highly likely. (Very Bearish)

This analysis also corresponds to the extremely rapid reversion of both technical and sentiment measures.

As Mark Hulbert noted on Friday:

“That’s because the mood has shifted from the extreme pessimism that prevailed in late December to nearly as extreme optimism today. Some call current conditions a ‘slope of hope.'”

“In other words, as you can see from the accompanying chart, in six weeks’ time this group of short-term stock-market timers has increased their average equity exposure by more than 140 percentage points: Away from being aggressively bearish (recommending that clients allocate three-fourths of their trading portfolios to short-selling) to being almost as aggressively bullish (now recommending that three-fourths of clients’ portfolios be long).

To be sure, this does not mean that a decline back to the December lows is imminent. Nevertheless, contrarian analysts are convinced that the sentiment winds are no longer blowing in the direction of higher prices.”

The same is true for our proprietary technical indicator which measures the “overbought/oversold” conditions of the market. In 8-weeks, this indicator has reversed from one of the lowest reading in 25-years back to levels starting to push more extreme historical conditions without a corrective process along the way.

The important point here is that from a contrarian standpoint, markets have gotten way ahead of the underlying fundamentals. While the market may indeed end the year on a higher note, it will most likely not do that without lower prices first. 

Like the 2015-2016 process noted in the “Not Stuck In The Middle” chart above, the bulls got “all excited” when the market broke above the confluence of moving averages at that time. Over the next 2-months, the markets set new lows. 

This is a classic “bull trap” in the making which sucks investors in before inflicting as much pain as possible. 

Erring to the side of caution, for now, will likely be the right choice.

Published:2/17/2019 10:58:00 AM
[Markets] Trump's UN Ambassador Pick Suddenly Withdraws

Three months after rumors (later confirmed) that State Department spokesperson Heather Nauert would be President Trump's pick to replace Nikki Haley as UN ambassador, the former Fox News anchor has suddenly withdrawn from consideration.

As we initially noted in December, Nauert, who came to government from Fox News, served as State Department spokesman for both Rex Tillerson and Mike Pompeo but has enjoyed a closer relationship with Trump's second secretary of state than she did Tillerson, who was privately skeptical of her close ties with the West Wing.

Her elevation to a top diplomatic role underscored the importance Trump has placed on having his top aides also serve as television surrogates. Nauert has briefed regularly from the State Department podium and had a long career in television news before that. Still, as a diplomat she lacked experience.

And now,  as Reuters reports, citing State Department officials, Nauert has withdrawn from consideration for the top UN role due to family reasons.

“The past two months have been gruelling for my family and therefore it is in the best interest of my family that I withdraw my name from consideration,” Nauert said in a State Department statement.

The statement did not specify the hardship on her family but the Washington Post said Nauert’s husband and children had remained in New York while she was working in Washington.

Of Nauert’s decision to not take up the UN role, Secretary of State Mike Pompeo said:

“Her personal decision today to withdraw her name from consideration to be the nominee for the United States ambassador to the United Nations is a decision for which I have great respect.

This is another blow for Trump after Dina Powell offered a "not interested" response after reportedly being Trump's first pick.

The State Department confirmed another nominee would be announced “soon”.

Published:2/17/2019 10:23:38 AM
[Markets] In Scathing NYT Editorial, De Blasio Claims Amazon's NYC Pull-Out "Proved Its Critics Right"

As the New York politicians who supported and helped negotiate the deal that would have brought Amazon to Queens stumble through the five stages of grief following the loss of what Gov. Andrew Cuomo's office once described as one of the greatest economic boons in recent NY history (which has been dominated largely by stories of companies and taxpayers fleeing the high-tax, high cost-of-living state for greener pastures in the Sun Belt), NYC Mayor Bill de Blasio has ratcheted up his criticism of the e-commerce behemoth for abandoning his city in the face of growing political pressure.

In an op-ed published by the New York Times, de Blasio again blasted Amazon and its CEO, Jeff Bezos, for "proving its critics right" by balking at demands from "Democratic socialists" like Alexandria Ocasio-Cortez and other progressives that Amazon be forced to pay its "fair share" in taxes (and that the $3 billion tax-incentive package extended to Amazon would be better spent fixing the subway, failing to understand that this revenue will now never be collected since Amazon has opted to abandon Queens).

De Blasio

In the scathing op-ed, de Blasio said that in the days before Amazon scrapped the deal, he had tried to reason with the company and had encouraged it to engage with the local community by addressing some of its critics concerns, perhaps by committing to hire some low-income Queens residents, or meet with organized labor.

Instead, de Blasio revealed that just hours after a meeting with community leaders, Amazon had decided to "cancel it all." And by abandoning a deal that would have led to New York reaping a nine-fold return on the $3 billion incentives package, Amazon had once again proved that concentrated corporate power has become a corrosive influence in contemporary society.

Read the full op-ed below (text courtesy of the New York Times):

The first word I had that Amazon was about to scrap an agreement to bring 25,000 new jobs to New York City came an hour before it broke in the news on Thursday.

The call was brief and there was little explanation for the company’s reversal.

Just days before, I had counseled a senior Amazon executive about how they could win over some of their critics. Meet with organized labor. Start hiring public housing residents. Invest in infrastructure and other community needs. Show you care about fairness and creating opportunity for the working people of Long Island City.

There was a clear path forward. Put simply: If you don’t like a small but vocal group of New Yorkers questioning your company’s intentions or integrity, prove them wrong.

Instead, Amazon proved them right. Just two hours after a meeting with residents and community leaders to move the project forward, the company abruptly canceled it all.

I am a lifelong progressive who sees the problem of growing income and wealth inequality. The agreement we struck with Amazon back in November was a solid foundation. It would have created: at least 25,000 new jobs, including for unionized construction and service workers; partnerships with public colleges; and $27 billion in new tax revenue to fuel priorities from transit to affordable housing — a ninefold return on the taxes the city and state were prepared to forgo to win the headquarters.

The retail giant’s expansion in New York encountered opposition in no small part because of growing frustration with corporate America. For decades, wealth and power have concentrated at the very top. There’s no greater example of this than Amazon’s chief executive, Jeff Bezos — the richest man in the world.

The lesson here is that corporations can’t ignore rising anger over economic inequality anymore. We see that anger roiling Silicon Valley, in the rocks hurled at buses carrying tech workers from San Francisco and Oakland to office parks in the suburbs. We see it in the protests that erupted at Davos last month over the growing monopoly of corporate power.

Amazon’s capricious decision to take its ball and go home, in the face of protest, won’t diminish that anger.

The city and state were holding up our end. And more important, a sizable majority of New Yorkers were on board. Support for the new headquarters was strongest in communities of color and among working people who too often haven’t gotten the economic opportunity they deserved. A project that could’ve opened a path to the middle class for thousands of families was scuttled by a few very powerful people sitting in a boardroom in Seattle.

In the end, Amazon seemed unwilling to bend or even to talk in earnest with the community about ways to shape their project. They didn’t want to be in a city where they had to engage critics at all. And it’s a pattern. When Seattle’s City Council passed a tax on big employers to fund the battle against homelessness, the company threatened to stop major expansion plans, putting 7,000 jobs at risk. The tax was rescinded.

Economic power — the kind that allows you to dangle 50,000 jobs and billions in revenue over every metropolitan area in the country — is being steadily concentrated into fewer and fewer hands.

For a generation, working people have gotten more and more productive, have worked longer and longer hours, and haven’t gotten their fair share in return. C.E.O.s are reaping the benefits of that work, while the people actually responsible for it are keeping less and less.

This is no accident. The same day Amazon announced its decision to halt its second headquarters here, it was reported that the company would pay no federal income tax on the billions in profits it made last year. That’s galling, especially at a time when millions of working-class and middle-class Americans are finding that they are getting smaller tax returns this year thanks to President Trump’s tax plan, which has hugely benefited the wealthy.

As the mayor of the nation’s largest city, a place that’s both a progressive beacon and the very symbol of capitalism, I share the frustration about corporate America. So do many of my fellow mayors across the country. We know the game is rigged. But we still find ourselves fighting one another in the race to secure opportunity for our residents as corporations force us into all-against-all competitions.
Amazon’s HQ2 bidding war exemplified that injustice.
It’s time to end that economic warfare with a national solution that prevents corporations from pitting cities against one another.

Some companies get it. Salesforce founder and chief executive Marc Benioff threw his weight behind a new corporate tax in San Francisco to fund services for the homeless. In January, Microsoft pledged $500 million to combat the affordable housing crisis in Seattle.

Amazon’s path in New York would have been far smoother had it recognized our residents’ fears of economic insecurity and displacement — and spoken to them directly.

We just witnessed another example of what the concentration of power in the hands of huge corporations leaves in its wake. Let’s change the rules before the next corporation tries to divide and conquer.

De Blasio contrasted Amazon's decision with "responsible" corporate stewards like Salesforce's Marc Benioff and Microsoft's Bill Gates, who have taken steps to combat homelessness in their increasingly gentrified home cities of San Francisco and Seattle. But one thing de Blasio didn't address was the culpability of politicians like Cortez and New York State Senator Michael Gianaris (who had threatened to sabotage the deal if is appointment to a state board wasn't blocked by Cuomo). These politicians helped drive away a deal that was, according to polls, widely popular with NYC residents, all while claiming they were acting according to "the will of the people."

Do they share any of the blame for "failing to recognize" that the $3 billion tax-incentive package wasn't a handout, but rather a discount on future tax revenue? And that their cries that this money would be better spent on the subway were disingenuous, if not outright lies?

Published:2/17/2019 7:52:31 AM
[Markets] Sweden Prosecuting Pensioners, Welcoming ISIS

Authored by Judith Bergman via The Gatestone Institute,

  • Perhaps the Council of Europe considers Åberg's successful efforts of turning in fellow Swedes to the police for perceived thought crimes an example that other European countries should emulate?

  • The pensioner explained during questioning, "I was angry when I read about how it worked with immigrants and how they avoid punishment for everything they do. They get acquitted, though they steal and do other things. It is unfair that those who commit gross crimes can go free..." The pensioner said that she would not have written what she did, had she known that it was illegal. She evidently labored under the misconception that she was still living in a democracy. In January, she was sentenced to a fine of 4,000 Swedish kroner ($443). She lives on a monthly pension of only 7,000 Swedish kroner ($775).

  • Swedish authorities clearly cannot -- or will not -- prosecute or convict the jihadists whom they so generously welcome to the country; yet they have no qualms charging and prosecuting harmless elderly pensioners. One might add that a culture that respects the human rights of returning ISIS fighters more than that of the elderly women who are afraid of them, is all but done.

While the Swedish Security Service is assuring the public that it will do "even more" to limit the growth of terrorist environments in Sweden, the Swedish government is exacerbating the problem by welcoming returning ISIS jihadist fighters back into the country. (Image source: iStock)

"Violence-promoting Islamist extremism currently constitutes the biggest threat to Sweden," according to a January 15 press release from the Swedish Security Service (Säpo). "The level of the terror threat remains elevated, a three on a five-point scale. This means that a terrorist act is likely to occur," said Klas Friberg, head of Säpo.

"In order to meet the threat from terrorism, the Security Service will in future work even more strategically to limit the growth of extremist environments. It may be about dealing with [omhänderta] persons who constitute a security threat or, in cooperation with other authorities, working harder to ensure that these individuals are prosecuted for other crimes - or have their opportunities cut."

While Säpo is assuring the Swedish public that it will do "even more" to limit the growth of terrorist environments in Sweden, the Swedish government is exacerbating the problem by welcoming returning ISIS fighters back into the country. Approximately 300 people left Sweden to fight for ISIS and it is estimated that approximately 150 Swedish ISIS fighters have returned to Sweden. Approximately 50 of those who didn't return were killed.

The head of Säpo, in January, had described[1] returning ISIS fighters as "broken people who have been traumatized by their experiences" and said that Swedish society has to "play a big role in re-integrating them". [2]

Swedish law does not allow the security services to take all necessary measures against returning ISIS fighters, even though a relatively new law, meant to address the problem of terrorists in Sweden, was adopted in 2016. The law does not allow authorities, for example, to seize or search the mobile phones and computers of returning ISIS fighters, unless there is a concrete suspicion of a crime, according to Fredrik Hallström, deputy head of Säpo's unit for "ideologically motivated actors." Furthermore, according to Hallström, the authorities do not know whether the returning fighters constitute a danger or not to Swedish citizens: "It is also difficult to answer because the assessments we make can change".

Many of the ISIS fighters took their families, including small children, with them when they joined ISIS. A Swedish-speaking family who had travelled to join ISIS had made a home movie, recently aired by the Swedish media, about their life of jihad. In one scene, the mother is practicing her shooting, while father helpfully explains to the children, "Now we will look at mommy when she is doing jihad". The home movie also shows the wife shooting off her gun while gleefully exclaiming, "That was cool!" and "Allahu Akbar" ("God is the greatest").

In another scene, the father can be seen getting ready to go out and kill, while telling his young son and his toddler daughter about how he stole a walkie-talkie from an "infidel" whom he had shot through the head and killed. The little boy explains to the father how to best use the ammunition for his assault rifle and asks to come along, but the mother tells him that his father still thinks he is "too young". The narrator of the film explains that many children of such ISIS families have returned to Sweden with their families and attend Swedish kindergartens and schools. The family in the movie is one of them. Swedish local authorities, however, do not know how many children have returned. According to a poll that Swedish Television channel SVT conducted among Swedish municipalities, Swedish municipalities are only aware of 16 adults and 10 children, out of 150 returnees.

Already in June 2017, the head of Säpo at the time, Anders Thornberg, told Swedish media that the country was experiencing a "historical" challenge in having to deal with thousands of "radical Islamists in Sweden". (As late as 2010, there were 200 jihadists in Sweden, according to Säpo). Thornberg also mentioned that his organization was receiving around 6,000 intelligence tips a month concerning terrorism and extremism, compared to an average of 2,000 a month in 2012.

Meanwhile, unsurprisingly, Swedes only feel more and more insecure in their own country. Four out of 10 women are afraid to walk outside freely, according to the new National Safety Report, published by the Swedish National Council for Crime Prevention (Brottsförebyggande Rådet or Brå).

"Almost a quarter of the population chooses a different route or another mode of transport as a result of anxiety about crime and one-fifth avoid being active on the Internet due to concerns about threats and harassment," according to Brå.

"Among women aged 20–24, 42 percent state that they often opted for another route or another mode of transport, because they felt insecure and worried about being subjected to crime. The corresponding proportion among men in the same age group is 16 percent... The degree of activity on the internet can also be affected by concerns about being subjected to crime. About every fifth person, regardless of gender, states that during the past year he has often refrained from posting anything on the Internet out of concern for becoming exposed to threats or harassment".

"Social media is an increasingly important forum for public discussion. If a fifth of the population feel that they do not dare to express themselves on the net for fear of being subjected to crime," said Maria Söderström from Brå, "then it can be a democratic problem".

Fear of threats and harassment is not all that is causing Swedes to feel that expressing themselves on the internet is something to avoid. Many who have voiced "wrong" opinions on the internet have been charged by Swedish authorities for "incitement against an ethnic group" -- a crime punishable under Swedish law. The "democratic problem" that Söderström describes, therefore, is twofold: the fear of threats and harassment from others, and the fear of prosecution from the state.

The organization believed to be largely responsible for these charges, at least since 2017, is "Näthatsgranskaren" ("The Web Hate Investigator"), a private organization founded in January 2017 by a former police officer, Tomas Åberg, who apparently took it upon himself to identify and report to the authorities Swedish individuals whom he and his organization decide are committing thought crimes and "inciting hatred" against foreigners. Åberg recently boasted that he had filed 1,218 reports with the police in 2017-2018 alone and that out of 214 charges, there had been 144 judgments. "Many are [still] awaiting charges" he wrote on Twitter.

Last November, the Information Society Group, an organization under the Council of Europe, invited Åberg to be a keynote speaker at its regional conference, "Addressing hate speech in the media: the role of regulatory authorities and the judiciary," in Zagreb. The conference examined "how hate discourse is regulated in different member States of the Council of Europe focusing on the specific role and work of national regulatory authorities, the judiciary and media self-regulatory bodies". Perhaps the Council of Europe considers Åberg's successful efforts at turning in fellow Swedes to the police for perceived thought crimes an example that other European countries should emulate?

Swedish taxpayers contributed 1.5 million SEK ($165,000) to Åberg's efforts in 2017 and 2018. Most of it, according to the Swedish news outlet Fria Tider, apparently goes towards paying Åberg's salary.

In November, Åberg's efforts led to the conviction of a 70-year-old woman for writing the following post, as a comment on an article about the violence of Muslim men against women, in a Facebook group, 'Stand up for Sweden': "Aren't we in Sweden or have we transformed the country into a damn Muslim monster?" The woman was then called in for questioning at a police station -- this would be the same Swedish police that does not have enough resources to investigate rape cases. There, she explained:

"I have been provoked by various headlines and by 'Cold Facts' [investigative journalism TV program] that they have burned and beaten their wives. I am wondering if it will be like that in Sweden, too, and it makes me upset"... I am opposed to them being nasty against women. We have so many Muslims coming. I must have meant that they are abusing women".

For an elderly woman to be concerned about the physical safety of women in Sweden, the government of which in 2016 declared itself "feminist" is, it seems, unacceptable to Swedish authorities. While returned ISIS fighters who might have raped, pillaged, tortured and murdered to their heart's delight are welcomed back to Sweden and can go on with their lives -- or plot terrorism against Swedes -- elderly Swedish women may not utter a word about their fear of such men or indeed their ideology. Chief Prosecutor Lars Göransson at the Public Prosecutor's Office in Gävle chose to prosecute the 70-year-old for "incitement against an ethnic group". In November, the woman was found guilty and sentenced to a fine of 4,800 SEK ($530).

Another result of Åberg's efforts was the January conviction of a 78-year-old woman who was charged for having written on Facebook, among other things, that Muslims are "bearded" and "ghosts". The woman became upset when she read about immigrants who commit serious crimes against the elderly and get away with low or no punishment. After Åberg had reported the woman, who apparently is poor and suffers from ill-health after a stroke and a lung disease, the prosecutor chose to charge the pensioner for six posts that she had written on Facebook. Among them the following: "Yes, all Muslims should be expelled from the country, we do not want them here. A lot of bearded men who scare the children".

The pensioner explained during questioning:

"I was angry when I read about how it worked with immigrants and how they avoid punishment for everything they do. They get acquitted, though they steal and do other things. It is unfair that those who commit gross crimes can go free. People knock down older people and take money from them".

The pensioner said that she would not have written what she did, had she known that it was illegal. She evidently labored under the misconception that she was still living in a democracy. In January, she was sentenced to a fine of 4,000 Swedish kroner ($443). The woman lives from a monthly pension of only 7,000 Swedish kroner ($775).

"Even an indirect reference to nicknames or other offensive terms about race or immigrants in general is covered by the law against incitement against an ethnic group and is punishable," wrote Judge Jon Jonasson in his judgment.

Swedish authorities clearly cannot -- or will not -- prosecute or convict the jihadists whom they so generously welcome to the country; yet they have no qualms charging and prosecuting harmless elderly pensioners. One might add that a culture that respects the human rights of returning ISIS fighters more than that of the elderly women who are afraid of them, is all but done.

Published:2/17/2019 6:27:00 AM
[Entertainment] From Princess Diana to Meghan Markle: See How the Royal Family Impacts Fashion Around the World Kate Middleton, Meghan Markle, ChristmasThere is no questioning that the royal family's impact on the world of fashion is real. Since stepping out with Prince Harry, Meghan Markle has been under a microscope as she...
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[Entertainment] Chicago Police "Shifting the Trajectory" in Jussie Smollett Investigation Jussie SmollettUPDATE: Jussie Smollett's attorneys Todd S. Pugh and Victor P. Henderson released a statement on Saturday night regarding the recent reports about his potential participation in the attack. It...
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[Entertainment] See Darren Criss and Mia Swier Ride Off in Style After Their Wedding Darren Criss, Mia Swier, Wedding ExclusiveDarren Criss and Mia Swier are starting off their marriage in style. The couple tied the knot on Saturday at the Ace Hotel in New Orleans in front of many of Criss' former Glee...
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[Entertainment] Shawn Mendes Gives a New Meaning to the Word "Smolder" in His Calvin Klein Ad Shawn Mendes, 2019 Grammys, 2019 Grammy Awards, Red Carpet FashionsShawn Mendes is baring it all--basically--in a new campaign for Calvin Klein. The "Lost in Japan" singer posted some pictures from the ad on Instagram and, understandably so, the...
Published:2/16/2019 10:19:39 PM
[Markets] Howard Marks: The Most Dangerous Thing The Fed Ever Did Was Convince Investors That "It's Different This Time"

As the infamous quote from the movie "the Usual Suspects" goes: "The greatest trick the devil ever pulled was convincing the world he didn't exist." Similarly, as the billionaire investor and Oaktree Capital Management founder Howard Marks explained during a recent interview with RealVision's Grant Williams, the most dangerous trick the Federal Reserve ever pulled was to convince investors that "it's different this time".

That in the post-crisis era, the central bank has discovered an elixir to eliminate the business cycle, installing in its place an everlasting bull market, abetted by a "goldilocks" economy, where every dip presents an immediate buying opportunity.

Williams described Marks in their interview as "a great student of [market] cycles" before questioning whether old-school thinking about the boom-bust nature of the markets was even still relevant in the post-crisis brave new world that QE and negative interest rates have brought us.


But Marks quickly dismissed this, affirming that he is still believes in the value of analyzing and timing the market cycle. Perhaps that's why his fund, Oaktree Management, seized the opportunity to deploy capital during Q4, when nothing was working (2018 will go down in history as one of the worst years for financial markets on record, given the breadth of losses across asset classes), and everybody seemed to be selling in a panic.


Elaborating further Marks explained his view on where we are in the cycle. Until Trump's arrival in the West Wing, the recovery had been chugging along slowly (while asset prices had been moving in a nearly uninterrupted diagonal line from left to right). Setting aside the direct impact of central bank liquidity, Marks explained that after the crisis, people and businesses were left traumatized, which was one reason why growth was so tepid, even once this immense monetary assistance had been factored in. But the fiscal stimulus unleashed by the Trump administration, in the form of tax cuts and increased federal spending, was like administering a "shot of adrenaline to an already healthy patient."

For this reason, Marks doesn't think the highs are in - at least not yet. But ultimately, he believes we will get to new "highs that lead to lows."

GRANT WILLIAMS: There must come a point where things get out of hand. Going back to the original question of 2005, 2006, do you see any similarities in what you're seeing and what's starting to make your spidey sense tingle?

HOWARD MARKS: Not similarities in the sense of specific things repeating. But I have felt that because people were traumatized by the great recession, the recovery has been the slowest one since World War II. And that has kept things moderate, which meant that we would certainly have a recession one of these days. But it would be moderate. When you don't have a boom, you don't have to have a bust in my belief.

But now between the tax bill, which was a shot of adrenaline into, in my opinion, an already healthy patient, and then the possibility that we're going to see a Powell put in action, I think that we may get to highs that lead to lows.

I'm a believer in cycles. I believe they always have occurred, I think I understand why. And I think they always will occur and I try to study them. And then when I kind of got to the end of writing the book I said, well why do we have cycles? If the market goes up 10% a year on average, why doesn't just go 10% every year? And in fact, it almost never goes up between 8 and 12. So the average is not the norm. Why not?

And the answer, I think, is excesses and corrections. So you have a trend line and most trend lines are upward sloping, but then you deviate from the trend line on the upside because of some combination of optimism and greed and wishful thinking. And then you have to have a correction to the downside. So now I'm thinking we may have more of an excess, which leads to more of a correction.

And the longer the Fed and the federal government forestall a recession by artificial means, the worse the fallout will be when one finally arrives. Offering an extremely apt analogy, Marks contrasted the Fed's machinations with the "good forest management" policies needed to prevent out-of-control wildfires like those that have erupted in California over the past two years (see here for an example of what we're talking about).

Marks reasoning goes, the best way to avoid an out-of-control blaze is to permit moderate fires to burn from time to time. That way, they clear out the underbrush. But if we extinguish every blaze before it has a chance to burn, then we put ourselves at risk for a "big one" that could quickly accelerate beyond our control.

GRANT WILLIAMS: When did we get to the point where a recession is something that has to be avoided at all costs?

HOWARD MARKS: Yeah, well it's a big mistake. In one of my memos - postmortem for the global financial crisis -  I talked about forest fires. Good forest management, you permit there to be fires once in a while. And if there are fires of moderate size, occasionally it burns out the fuel and then you don't get the one big one. Same thing, in my opinion.

And the fluctuations of the economy are natural, in my opinion. And should be permitted to occur. And if you try to forestall them, then when they happen - I don't think you can forestall forever. And when they happen, they're bigger.

Over the past 20 years, the whims of the financial markets have grown to outweigh the influence of the economic cycle. The financial crisis, for example, had almost nothing to do with the real economy, Marks explained. Which is why tacit Fed policies like the "Powell Put" could be far more destabilizing than many investors might suspect.

GRANT WILLIAMS: Yeah sure. Well you mentioned cycles, I know you're a great student of cycles. And they used to be so important in markets - everywhere you look. Whether it was the human cycle, whether it was a market cycle, credit cycles - everything seemed to have a rhythm.

And it made investing a lot easier because you could at least have some sense of how these cycles would turn. That seems to have changed significantly in the last 15, 20 years. You're shaking your head there.

HOWARD MARKS: I don't agree with that. If you talk about 20 years, if you came in this business 20 years ago, you have seen two profound cycles. You had the TMT bubble and crash and then you had the mortgage bubble and crash. And I think that maybe they weren't predictable, but I'm not sure they ever were.

GRANT WILLIAMS: I wouldn't classify those cycles. I kind of look at them and think they were both attempts at cycle turns that happened quickly in kind of short order in small corners of the market. And then got squashed quickly by Fed policy.

HOWARD MARKS: Well, they were market cycles - bubble and crash.


HOWARD MARKS: They weren't economic cycles in the traditional sense. And in the last 20 years, I think that developments in the financial world have taken over in importance from developments in the rest of the business world.

Ultimately, Marks still believes in the importance of understanding market cycles because, fundamentally, human nature hasn't changed. Which is why it's dangerous to believe that, in an increasingly unstable world, that stability has become the norm.

HOWARD MARKS: ...And the big theme of the book is Mark Twain - history does not repeat, but it does rhyme. And the world is just too unstable a place to believe that stability is the norm.

And you know if you think about it, in the economy a great year is up four, and a bad year is down two. So the economy has an upward trend and it kind of goes like this. Then companies have leverage - financial leverage and operating leverage. So their profits go like this. And then the market goes like this. And why? Because of people.

The risk in the market does not come from stock certificates, companies, exchanges, it comes from people. But people are prone to excess and I don't see how it can be argued otherwise.

And by the way, when people say, I don't think we're going to have cycles in the future because the astute Fed has it under control - or whatever it is - what they're saying is what I consider the four worst words in the world - it's different this time. OK until now we've had cycles, but we're not going to have anymore.

One risk that markets are probably failing to truly understand is the rise of the radical left, and their support for "confiscatory" taxation policies.

GRANT WILLIAMS: I mean, it certainly seems that way. When you look at the traction Ocasio- Cortez is getting - and Liz Warren - and it's clear that they both realize that this is how we're going to create that traction - by going against the elite.

But some of the things they're proposing are the 70% tax. Liz Warren was on MSNBC looking straight down the camera at everybody else saying, we're going to find your wealth and we're going to come and get it. These are things that I'm sure a lot of people in America never thought they'd hear in this country.

HOWARD MARKS: I think the thing in the memo that I got heated about the most, and I was trying to put it out and then Friday Elizabeth Warren came out with her wealth tax idea. But what got me was that - she tweeted it out of course - the way she did it.

She said something like - don't quote me - the rich and powerful run America and look at what they have arranged for themselves. They are allowed to keep their accumulated wealth. Well, guess what? We're all allowed to keep our accumulated wealth.

And she makes it sound like - through some skullduggery - they have exempted themselves from the wealth tax. You can't exempt yourself from something that doesn't exist. But she makes it sound nefarious. And that's populism - they, they. And it's not constructive.

I would lay a strong bet that five years from now, my tax rate will be higher than it is today. But it should be, as I said in the memo, it should be progressive, but not punitive. And not confiscatory. Among other things, people don't have to sit still and pay it.

I wrote a memo back in 2016 called "Economic Reality" and I talked about a guy I know who was the biggest taxpayer in New Jersey. They raised the rates to a point where he moved to Florida where there is no tax.

So the point is, the people who want to confiscate seemed to think that there's nothing that the confiscatees can do about it.

Marks believes the growing divisiveness in Washington will lead to increasingly counterproductive policymaking, as Democrats and Republicans focus more on spiting one another by passing major policy initiatives without any participation from the minority party (Obamacare and Trump's tax bill are both examples of this). But shifting his focus back to his investing strategy, Marks explained that he recently realized that cyclical extremes offer probably the best chances of trades with high returns. "When you are at an extreme high or an extreme low, the logic is compelling and the probability of being right is high."

But the problem is, these opportunities don't come around very often. Marks most successful market calls occurred about once a decade - 5 times in 50 years.

But another inflection point where valuations are obviously overstretched could be just around the corner.

Watch a clip from the RealVision interview below:

Published:2/16/2019 9:19:47 PM
[Entertainment] What to Know About Miranda Lambert's New Husband Brendan McLoughlin Miranda Lambert, Brendan McloughlinMiranda Lambert has found herself a new keeper of the flame of her heart! The country singer revealed on Instagram in a surprise announcement that she recently got married to Brendan...