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[Markets] Key Words: Warren Buffett took Occidental CEO ‘to the cleaners,’ says Carl Icahn Safe to say, Carl Icahn is not a fan of Occidental Petroleum Corp.’s effort to buy Anadarko Petroleum Corp.
Published:7/22/2019 9:19:35 PM
[Markets] The Non-Hack That Hurt Hillary - On The 3rd Anniversary Of WikiLeaks Release Of The DNC Emails

Authored by Ray McGovern via,

Three years ago Monday WikiLeaks published a trove of highly embarrassing emails that had been leaked from inside the Democratic National Committee. As has been the case with every leak revealed by WikiLeaks, the emails were authentic. These particular ones, however, could not have come at a worse time for top Democratic Party officials.

The emails made it unmistakably clear that the DNC had tipped the scales sharply against Democratic insurgent Bernie Sanders, giving him a snowball’s chance in hell for the nomination. The posting of the DNC emails is also widely seen as having harmed the the electoral prospects of Hillary Clinton, who could not escape responsibility completely, while a handful of the very top DNC officials were forced to immediately resign.

Relatively few Americans read the actual emails, their attention diverted to the incessant media-fostered question: Why Did the Russians Hack the DNC to Hurt Hillary? For the millions of once enthusiastic Democrats who favored Sanders, however, the disclosure that the nomination process had been fixed came as a bitter pill, leaving a sour taste in their mouths and a passive-aggressive reluctance to promote the candidacy of one they considered a usurper. Having had a huge stake in Bernie’s candidacy, they had little trouble seeing through the diversion of attention from the content of the emails.

Clinton Prevails

A mere four days after the WikiLeaks release, a well orchestrated Democratic Convention nominated Clinton, while many Sanders supporters loudly objected. Thus, she began her campaign under a cloud, and as more and more Americans learned of the fraud that oozed through the DNC email correspondence — including the rigging of the Democratic primaries — the cloud grew larger and darker.

On June 12, 2016, six weeks before the convention, WikiLeaks publisher Julian Assange had announcedin an interview on British TV, “We have upcoming leaks in relation to Hillary Clinton … We have emails pending publication.”

Independent forensic investigations demonstrated two years ago that the DNC emails were not hacked over the Internet, but had been copied onto an external storage device — probably a thumb drive. Additional work over recent months has yielded more evidence that the intrusion into the DNC computers was a copy, not a hack, and that it took place on May 23 and 25, 2016.

The DNC almost certainly knew what had happened — not only that someone with physical access to DNC computers had copied thousands of emails, but also which ones they had copied, and thus how prejudicial to the Clinton campaign they would be when they saw the light of day.

And so, candidate Clinton, the DNC, and the mainstream media (forever quoting anonymous “current and former intelligence officials”) appear to have colluded, deciding the best defense would be a good offense. No one knew how soon WikiLeaks would publish the emails, but the DNC offense/defense would surely have to be put in place before the convention scheduled to begin on July 25. That meant there were, at most, six weeks to react. But it only took two days. As early as July 24, about 48 hours after the leaks were published, and a day before the convention, the DNC first blamed Russia for hacking their emails and giving them to WikiLeaks to sabotage Clinton.

A Magnificent Diversion

Granted, it was a stretch — and the DNC would have to hire a pliable cybersecurity firm to back up their claim. But they had good reason to believe that CrowdStrike would perform that service. It was the best Clinton campaign manager Robbie Mook and associates could apparently come up with. If they hurried, there would be just enough time to prepare a PR campaign before the convention and, best of all, there was little doubt that the media could be counted on to support the effort full bore.

Clinton: Already blaming the Russians at DNC 2016 convention. (Wikipedia)

When WikiLeaks published the emails on July 22, 2016, just three days before the Democratic convention, the propagandists were ready to deflect attention from the damning content of the DNC emails by repeating incessantly that the Russians hacked the emails and gave them to WikiLeaks to hurt Clinton.

It pretty much worked like a charm. The late Senator John McCain and others were quick to call the Russian “hack” an “an act of war.” Evidence? None. For icing on the cake, then-FBI Director James Comey decided not to seize and inspect the DNC computers. Nor, as we now know, did Comey evenrequire a final report from CrowdStrike.

Eight months after the convention, in remarks at the Clinton/Podesta Center for American Progress on April 6, 2017, Clinton’s PR director, Jennifer Palmieri, could scarcely contain her pride that, after a difficult start, she was ultimately successful in keeping the Russian bear front and center.

Transcribed below (verbatim) are some of Palmieri’s more telling remarks when asked to comment, from her insider perspective, on “what was actually going on in late summer/early fall.”

“…I did appreciate that for the press to absorb … the idea that behind the stage that the Trump campaign was coordinating with Russia to defeat Hillary Clinton was too fantastic for people to, um, for the press to process, to absorb…. But then we go back to Brooklyn and heard from the — mostly our sources were other intelligence, with the press who work in the intelligence sphere, and that’s where we heard things and that’s where we learned about the dossier and the other story lines that were swirling about … And along the way the administration started confirming various pieces of what they were concerned about what Russia was doing. … [Emphasis added.]

“And we did finally get to the point on October 7, when the administration came out with a very stunning [memorandum]. How stunning it was for both the Director of National Intelligence and the Director of Homeland Security to put out a statement – a long statement – that said with high confidence that Russia was interfering in the election and they were also directing the timing of the leaks. And it named the institutions – WikiLeaks, DC Leaks, and Guccifer – as being Russian-led, and how stunning that was to be that certain and that public. … So I do think that the answer for the Democrats now … in both the House and the Senate is to talk about it more and make it more real ….”

And so, the Magnificent Diversion worked as intended.

Recognizing Liminal Time

But not all journalists fell for it.

Patrick Lawrence (once of The Nation, now of Consortium News) was onto the ruse from the start. He says he had “fire in the belly” on the morning of July 25, 2016, the day the Democratic convention began, and that he dashed off an article “in one long, furious exhale” within 12 hours of when the media started really pushing the “the Russians-did-it” narrative. The title of his article, pointed out to me a few months ago by VIPS member Todd Pierce, was “How the DNC fabricated a Russian hacker conspiracy to deflect blame for its email scandal … a disturbing resemblance to Cold War red-baiting.”

Lawrence’s off-the-cuff ruminations, which Salon published the next day are extraordinarily prescient and worth reading in full. He instinctively recognized the email disclosure-cum-media-obfuscation campaign as a liminal event. Here are some excerpts, reprinted here with Lawrence’s permission:

”Now wait a minute, all you upper-case “D” Democrats. A flood light suddenly shines on your party apparatus, revealing its grossly corrupt machinations to fix the primary process and sink the Sanders campaign, and within a day you are on about the evil Russians having hacked into your computers to sabotage our elections … Is this how lowly you rate the intelligence of American voters? …

The Sanders people have long charged that the DNC has had its fingers on the scale … in favor of Hillary Clinton’s nomination. The prints were everywhere … Last Friday WikiLeaks published nearly 20,000 DNC email messages providing abundant proof that Sanders and his staff were right all along. The worst of these, involving senior DNC officers, proposed Nixon-esque smears having to do with everything from ineptitude within the Sanders campaign to Sanders as a Jew in name only and an atheist by conviction. …

The caker came on Sunday, when Robby Mook … appeared on ABC’s “This Week” and … CNN’s “State of the Union” to assert that the D.N.C.’s mail was hacked “by the Russians for the purpose of helping Donald Trump.” He knows this … because “experts” — experts he will never name — have told him so.

the Clinton campaign now goes for a twofer. Watch as it advances the Russians-did-it thesis on the basis of nothing, then shoots the messenger, then associates Trump with its own mess — and, finally, gets to ignore the nature of its transgression (which any paying-attention person must consider grave). Preposterous, readers. Join me, please, in having absolutely none of it. There is no “Russian actor” at the bottom of this swamp, to put my position bluntly. You will never, ever be offered persuasive evidence otherwise. …[Emphasis added.]

Trump, to make this work, must be blamed for his willingness to negotiate with Moscow. This is now among his sins. Got that? Anyone who says he will talk to the Russians has transgressed the American code. … I am developing nitrogen bends … Which way for a breath of air?”

Sad Sequel

A year later Lawrence was commissioned by The Nation to write an investigative report on the so-called “Russian hack.” On August 9, 2017, after he interviewed several Veteran Intelligence Professionals for Sanity, among others, The Nation published his findings in an article entitled “A New Report Raises Big Questions About Last Year’s DNC Hack.” Lawrence wrote, “Former NSA experts, now members of Veteran Intelligence Professionals for Sanity (VIPS), say it wasn’t a hack at all, but a leak—an inside job by someone with access to the DNC’s system.”

Again, Lawrence got it right — this time relying less on his own experience and intuition than on applied science as practiced by real technical experts with no axes to grind. But, sadly, that cut across the grain of the acceptable Russia-gate narrative, and a furor erupted among Hillary followers still licking their wounds over her loss. It proved simply too much for them to entertain the notion that Clinton was quite capable, with help from the likes of Mook, to snatch defeat out of the jaws of victory — without any help from Vladimir Putin.

Published:7/22/2019 9:19:35 PM
[Markets] Oil Will "Go Bust" If Recession Hits

Authored by Nick Cunningham via,

Oil prices plunged last week, dragged down by fears of slowing demand, and shrinking geopolitical risk premia.

An unexpected increase in inventories underscored the downside risk to oil prices. The EIA reported a drawdown in crude stocks, but a huge 9.25 million barrel combined increase in gasoline and diesel inventories, which surprised traders. Also, gasoline demand plunged by 0.5 mb/d in the week ending on July 12, although week-to-week changes are typical and make the data a bit noisy.

Crude prices sold off on the news, falling by nearly 3 percent on Thursday.

The data release renewed fears of a slowdown in demand. But cracks in U.S. demand are larger than one week’s worth of data. “The [year-on-year] increase in demand for the year to 11 July was just 29 thousand barrels per day (kb/d), up 0.1%,” Standard Chartered wrote in a note.

“Demand will have to be strong for the rest of the year if consensus forecasts for 2019 growth are to be achieved.”

The investment bank sees U.S. oil demand only rising by 89,000 bpd this year, while the EIA expects a stronger 248,000-bpd increase. Standard Chartered says U.S. oil demand “appears consistent with a slowing economy.”

The worrying thing for the oil market is that the U.S. economy has held up better than elsewhere.

In China, GDP growth has slowed to its weakest pace in nearly three decades. India, which is widely seen as the most important source of oil demand growth in the medium- and long-term, has also disappointed.

The International Energy Agency (IEA) said that global oil demand only grew by 0.45 mb/d in the second quarter. That contributed to a surprise 0.5 mb/d supply/demand surplus in the second quarter. As recently as June the IEA anticipated the oil market would see a 0.5 mb/d deficit.

The agency said that there were many reasons for tepid demand in recent months.

“European demand is sluggish; growth in India vanished in April and May due to a slowdown in LPG deliveries and weakness in the aviation sector; and in the US demand for both gasoline and diesel in the first half of 2019 is lower year-on-year,” the IEA wrote in its July Oil Market Report.

Nevertheless, the IEA stuck with its full-year forecast for demand growth at 1.2 mb/d, arguing that economic growth would rebound in the second half of 2019. Some of that optimism hinges on a resolution to the U.S.-China trade war, which seems a bit speculative. Reports suggest that trade negotiations are “stalled” while the Trump administration wrestles with how to handle Chinese tech giant Huawei. The Trump-Xi meeting on the sidelines of the G20 conference in June was supposed to lead to a restart in trade talks, but as the Wall Street Journal reports, no meetings have been scheduled as of yet. The WSJ also said that the Trump administration “appears to have resigned itself to a drawn-out battle.”

That certainly calls into question the optimism surrounding the IEA’s demand growth figures. “Both IEA and EIA remain optimistic in assuming an economic rebound in 2H19 and see global demand growth nearly tripling from ~0.6 mb/d y/y in 1H19 to ~1.5-1.8 mb/d y/y in 2H19,” said Allyson Cutright, Senior Analyst at Rapidan Energy Group. “While we do see some pickup in 2H19, in particular in China due to macroeconomic stimulus and eased restrictions on gasoline-cars, the overall trend in agency revisions is still probably headed down.”

Weak demand and rising supply are creating a perfect storm heading into 2020. The IEA said that the “call on OPEC” could fall by 0.8 mb/d next year, and even that is based on the agency’s rather optimistic demand growth figures.

As a result, OPEC+ has a serious problem on its hands. On the one hand, it can continue to cut production in order to prevent oil prices from collapsing. But that would require mustering up consensus and taking on deeper sacrifice. The alternative is not much better. OPEC+ can keep the current production cuts in place (or abandon them altogether) and let prices crash.

“Our balances have long assumed OPEC+ would have to extend and deepen cuts next year and project Saudi Arabia will be the brunt of the additional cuts,” Allyson Cutright of Rapidan Energy Group said.

“Our most recent update sees Saudi Arabia need to cut production toward the low-9 mb/d range next year, and that's assuming decent economic growth.”

Rapidan is betting that OPEC+ will opt for cutting, which might be just enough to head off a price slide. “However, if a recession develops or US sanctions on Iran are removed, then the deluge of new oil would more likely prove too large for OPEC+ to manage and oil prices would bust,” Cutright said.

Published:7/22/2019 8:46:12 PM
[Markets] Chinese Dissident Tycoon Hiding In Ritzy NYC Hotel Accused Of Spying For Beijing

If this story sounds like it was ripped from the plot of "House of Cards," well, we'll concede that it has all of the necessary elements of a best-selling spy novel. In a story published in Monday's WSJ, the paper recounts the story of Chinese businessman Guo Wengui, who has been holed up in an 18th-floor apartment at the Sherry-Netherland Hotel in New York City, where he has been living while his application for asylum moves through the US legal system.

Hardliners like Steve Bannon have taken up Guo's cause - he claims to be one of China's most-wanted dissidents - but a recent legal dispute raised questions about what, exactly, Guo is doing in the US.

Chinese businessman Guo Wengui

Here's the problem: Guo contracted a well-known security firm to dig into a list of names whom Guo alleged were Chinese agents out to kill him. But the firm, Washington, DC-based Strategic Vision, soon developed a sneaking suspicion that Guo might be a Chinese spy using the firm's services to root out US agents working counter-intelligence. SV sued Guo, and in the latest filings, submitted on Friday, the firm accused Guo of hiring investigators to put American personnel in safety.

Strategic Vision is owned by the widow of a once-powerful Senator, Malcolm Wallop, a now-deceased Republican from Wyoming.

Mr. Guo asked the company to investigate the financial history, social-media presence and travel details of a list of Chinese nationals he claimed were linked to top Chinese Communist Party officials, according to a court document filed by Strategic Vision. He wired the company $1 million to start the project, according to filings from both sides in the dispute.

Strategic Vision, based in Virginia, is owned by French Wallop, who was married to now-deceased Wyoming Sen. Malcolm Wallop, a Republican. The company said in Friday’s court filing that Mr. Guo’s representation that he wanted to destabilize the Chinese Communist Party was “in alignment with Strategic Vision’s worldview.”

SV soon discovered that the first 15 names on Guo's list were "Records Protected" individuals, which suggests that they might have been intelligence assets working on behalf of the federal government.

Strategic Vision enlisted investigators who are former intelligence or law-enforcement personnel to perform the research, according to Friday’s filing. The filing said investigators determined the first 15 names provided by Mr. Guo had been designated by the U.S. as "Records Protected" individuals, for whom certain information wasn’t subject to disclosure. Such a designation is used in highly classified and access-restricted government databases, former intelligence officials said. The immigration status about such designees is often blocked in restricted government databases, and can suggest the person may be a foreigner who is assisting the U.S. government, experts said.

Strategic Vision said it concluded Mr. Guo was seeking information on Chinese nationals who may have been helping the U.S. government in national-security investigations or who were involved in other sensitive matters, according to the filing.

In the filing, SV determined that Guo "was not the dissident he claimed to be."

"Guo never intended to use the fruits of Strategic Vision’s research against the Chinese Communist Party," the court filing said. "That is because Guo was not the dissident he claimed to be. Instead, Guo Wengui was, and is, a dissident-hunter, propagandist, and agent in the service of the People’s Republic of China and the Chinese Communist Party."

Mr. Guo’s lawyer, Mr. Podhaskie, denied the allegations. "Mr. Guo is the most-wanted dissident worldwide by the Chinese Communist Party and has been their most outspoken and vitriolic critic since his arrival in the United States," he said in his statement.

Still, the Chinese government has purportedly frozen Guo's assets and threatened his family. Guo is subsisting on a massive pile of cash he managed to smuggle out of China with him.

Since then, Chinese authorities have frozen his assets and threatened his family, according to Mr. Guo. Still, he settled at the Sherry-Netherland in 2015, paying $67.5 million for the apartment overlooking Central Park. He has continued to travel frequently and got a membership at Mr. Trump’s Mar-a-Lago club in Palm Beach, Fla.

In 2017, after saying he had applied for U.S. asylum, Mr. Guo told the Journal he had set aside more than $150 million for legal fees to continue his fight against Beijing.

Mr. Podhaskie said in his statement that "certain of Mr. Guo’s assets in China valued at approximately USD$30 billion have been sold for pennies on the dollar" by Chinese Communist Party officials and that Mr. Guo “has never taken a penny out of China or Hong Kong since he began speaking out” against them.

But will the Trump Administration decide to use Guo as a bargaining chip in its trade talks with China? It's not outside the realm of possibility.

Published:7/22/2019 8:17:51 PM
[Markets] "Electromagnetic Attack" Sparks Massive Blackouts Across Venezuela

Widespread power blackouts were first reported on Monday evening across 15 Venezuelan states and Caracas, as per a report from Reuters Caracas newsroom.

Venezuelan information minister Jorge Rodrigues said an "electromagnetic attack caused the nationwide blackout" and power companies along with government officials, are in the process of restoring the nation's power grid.

Back in March, the country experienced the most damaging rolling blackout in decades that brought the country, already devastated by an economic crisis, even closer to outright collapse.

"It terrifies me to think we are facing a national blackout again," said Maria Luisa Rivero, a 45-year-old business owner from the city of Valencia, in the central state of Carabobo.

"The first thing I did was run to freeze my food so that it does not go bad like it did like the last time in March. It costs a lot to buy food just to lose it," she said.

Netblocks, a civil society group observing internet traffic around the world, sent out several alerts via Twitter starting around 5:45 pm est. about widespread power loss across Venezuela that disrupted the country's internet.

The group said even state television, a key source of government propaganda, was brought offline.

Netblocks tweeted a photo of internet outage broken down by region:

The latest disruption comes a little more than four months after widespread blackouts crippled the country for about one week in March.

As of Monday evening, most of Venezuela's 23 states have no internet connectivity. 

In the previous blackout, we documented how cryptocurrency transaction volumes plummeted throughout the region. Some residents were prepared for the chaos, they set up local transaction networks via powerful WiFi repeaters powered by generators.

NetBlocks diffscans, which tracks the entire IP address space of a country in real-time, indicates the latest internet outages occured during the same time of the power cuts, labels the incident impact as severe for most of the states.

"Internet outages caused by electricity grid disruptions have a distinct network pattern used by NetBlocks to determine and attribute the root cause of an outage, a process known as attribution which follows detection and classification stages," NetBlocks said in a blog post.

Widespread power outages and no internet connectivity have occurred just before Juan Guaidó, the self-proclaimed interim president of Venezuela, is expected to launch nationwide anti-Maduro protests on Tuesday.

Published:7/22/2019 7:45:45 PM
[Markets] Facebook’s Messenger Kids had flaw that let children chat with unapproved users Facebook Inc.’s Messenger Kids app had just one job: Prevent children from chatting with people who weren’t approved by their parents. But it apparently couldn’t even get that right.
Published:7/22/2019 7:45:45 PM
[Markets] Why The United States Won't Launch A Ground War Versus Iran

Authored by Steve Brown via The Duran,

In recent weeks we have seen numerous probing attempts and provocations in and around the Strait of Hormuz — whether false flags or actual events — intended to raise the profile of the US’s unilateral withdrawal from the JCPOA, and renewed US sanctions versus Iran.  Iran is pushing the issue with the United States, and is apparently offering a sacrificial pawn on the board (or perhaps knight!) by seizing two British oil tankers alleged to be operating illegally in the Strait of Hormuz.

While it is too soon to predict how the United States and its allies Israel and Saudi Arabia (both sworn enemies of Iran) will react, let’s explore the reasons why any US reactionary response will be largely symbolic, even if that involves a token strike versus Iran.

Global alliances have shifted

Turkey has defacto announced its withdrawal from NATO, by its purchase of S-400 missiles. That purchase and collaboration with Russia guarantees its departure from NATO, even if Turkey has not publicly announced such a withdrawal.  Furthermore, while Turkey’s military bases host US aircraft and operations, Turkey says it will not allow its bases to be used in any attack on Iran, by the US.

Iraq, an ally of Iran, has likewise stated that it will not allow its territory to be used as a base for attacking Iran.

Next, Imran Khan’s Pakistan has moved away from its alliance with the US to court China. China is Pakistan’s largest trading partner, and China has guaranteed security to Pakistan for Kashmir. Thus, no bases in Pakistan will be provided to the United States for any attack on Iran.

China and Russia have warned Washington too that it must not attack Iran. Iran has guarantees from Russia, China, Pakistan, Turkey, and even Japan and India that its economic future is secure… despite US sanctions.

So, only Saudia remains as a host for US aggression versus Iran.  But Saudia has much to lose by hosting US aggression, especially with Russia pushing OPEC+.  And even the largely defunct Arab League opposes US aggression versus Iran, from any Saudi base.

Iran will fight back

Next, consider the military force that Iran has at its disposal. From advanced Grad rockets to the Kornet, expect an announcement soon that S-400’s and other advanced armaments will be provided to Iran to ensure its right to defend itself. That, in conjunction with an already formidable array of defensive weapons to secure Iran’s borders and sea lanes will guarantee a formidable defense.

The United States cannot afford another new war

While the Federal Reserve may print the USD at will, a new war – especially a major war versus Iran – will weaken the US economically, despite the gamed casino numbers we see daily from Wall Street.

If the US were to attack Iran, be sure that the oil market will be mightily affected, causing oil prices to surge exponentially. Gold too will surge. Indeed, such an oil and gold price effect may be the prick needed to deflate the multi-quadrillion inflated USD bubble of public debt and derivative speculation that can burst again… just as it burst in 2008-2009.  But this time when the financial collapse occurs, and as Donald Trump has warned, the new collapse will render the financial collapse of 2008-2009 to be a picnic.

The US is not capable of defeating Iran in a conventional war

This time, there is no “coalition of the willing” to posture and pretend that the US has many and varied allies engaged in some just cause to rid the world of evil, as it proclaimed in 1994 versus North Korea, and in 2003 versus Iraq.  Apparently, the Marshall Islands, Micronesia, Palau and Solomon Islands have no real grievance versus Iran right now.

But the possibility exists that France, the UK and Germany will consider Iran enough of a threat around the Strait of Hormuz to impose additional sanctions on the country, and increase Naval military patrols to accompany tankers through the Strait. The increased patrols will increase tensions in the region, but should not result in war unless the US takes the bait of Iran sacrificing a knight to leave the West’s queen exposed, ie a greater war in the Middle East which may involve Iraq, Syria, Israel, Lebanon and Saudi Arabia.

Last time, just ten minutes prior to pulling the trigger (depending on accounts!) to consummate the Neocon’s dream for war with Iran, Trump had other ideas.

Now,  let’s review the reasons the United States cannot initiate a ground war versus Iran.

Iran Strike Strategic map


Most likely candidate here would be to stage US air strikes on Iran from Bagram air base. But at this time Afghanistan seeks closer ties with Iran on trade; for example, to trade with India via Iran’s Chabahar port.

And while the US could stage air strikes from Bagram, to launch a ground attack from this region would be a virtual impossibility. That is, due to mountainous terrain and firmly entrenched and well-armed IRGC mountain troops, neighboring.

Furthermore, it is exceedingly likely that Dostum/Ghani would forbid any attack by the US on Iran from Afghanistan, that would result in a major new war. And note that Dostum is pushing for the removal of US troops from Afghanistan, including its air bases.

As a matter of conjecture, it is likely that the US presented Dostum / Ghani with an enticing “deal” to host US forces for staging their new war on Iran. And while initially accepting Trump’s deal, it is thought that with such high stakes for Afghanistan it would have ultimately been rejected. (An interesting bit of propaganda along these lines appears here.)

There is noise too from Trump about withdrawing from Afghanistan, but that eventuality is highly unlikely.


The “Hermit Kingdom” proves even more problematic for the US than Afghanistan, for attacking Iran. There is little infrastructure, no existing US air base, only a “secret base” proposed by various alt media sources. While such a base could be used for US harassment vs Iran, to initially stage a new US war versus Iran from Turkmenistan is exceedingly unlikely. Especially so, since Turkmenistan (a former Soviet republic) has very close relations with China, and China has already warned the US to refrain from attacking Iran.


Imran Khan has sought close ties to Iran, and agreed to mutual border protection.

US State is so concerned with Khan and his shifting alliance to Iran and China, the department recently released a counter to allegations re deteriorating US – Pak relations.

Based on its history and current leadership, Pakistan will not allow the United States to use Pakistan as a base for a ground war versus Iran.

United Arab Emirates

The US RQ-4 shot down by Iran on June 19th was launched from the UAE via a US military base there. This base is alleged to be devoted to US action versus ISIL, but is thought to be a major US base for reconnaissance on Iran.

The UAE is hostile to Iran, but has no land bridge with Iran, being directly across the Strait of Hormuz. Its location on the strait would certainly close the Strait in a full-blown US war, for which the UAE would be blamed as an accomplice.  The UAE has trade relations with Arab states too, that prevent it from being used as initial staging for a US war of aggression versus Iran.

It may be reasonably conjectured that the UAE agreed to allow US harassment strikes on Iran from its airfield there, but then withdrew that agreement abruptly.

Saudi Arabia

Saudi Arabia is an ally of the US only for financial reasons, and a sworn enemy of Iran. Recently Saudi Arabia turned to China in an attempt to broaden trade and diversify its economy. Saudi Arabia must look to the future despite its cold war with Iran, and maintain reasonable relations with other Arab states.

Besides having no land mass directly adjacent to Iran, and based on its history, for Saudi Arabia to host US troops capable of undertaking a ground war of aggression versus Iran seems unlikely. However, the Crown Prince is a noted war hawk and apparently not averse to wars of aggression (example, Yemen) so reports of Saudi Arabia hosting a new US air base and hundreds of US troops in Saudi Arabia may present an opportunity for the US to threaten Iranby its military presence there.


Iraq has a significant history with the US military and has lost many thousands of its people to war and sanctions imposed on it by the United States. Even though the US has a significant presence in Iraq and many US bases still present there, the Iraqi government has on numerous occasions expressed its desire that the US’s 5,200 troops leave the country.

Recently, the call for US troops to leave Iraq has become more vocal and pronounced. Analyst consensus is of course that the US continues to occupy Iraq as a means to counter Iran’s influence in the country and elsewhere.

Iraq has a strong majority who now favour Iran, for trade, political, and cultural reasons.  Iraq has significant trade with Iran, and Iran leverages that trade in oil and electricity.

Many militias operate in Iraq, supportive of Iran, and anti-US. These militias are well-armed and battle-tested, and for the US to stage a ground war versus Iran from Iraq would be quite alarming to the populace generally, likely resulting in serious retaliation in Iraq, versus US forces.

So, while the US still has a significant presence in Iraq, a US attack and war on Iran based in Iraq would likely result in serious and immediate setbacks for the US.


Syria has no land border with Iran. In spite of Syrian objections, the US does host air bases to protect the terrorist region of al Tanf, and in Manbij. US harassment air raids on Iran could be launched from these bases, but a ground war could not be launched from Syria without a massive expansion of US bases there.  Such an expansion would constitute a move that would surely be militarily resisted by Syrian security forces and their significant allies.

What Options Does the US Have Versus Iran? 

Being a major military power, the US does have limited military options versus Iran, in addition to economic sanctions already imposed, while noting that an attack could certainly provoke the Russian or Chinese leadership to aid Iran. While the United States has never ‘won a war’ — and only in the case of Vietnam, Laos, Cuba, and North Korea has the US ever been forced to flee its chosen theater — as Greer points out, there is a difference between outright losing a war, when compared to not winning one.

Even if a war is not won, the result may benefit western powers, as it has (arguably) in the case of Israel-Palestine, Vietnam, Korea, Laos, Lebanon, Cambodia, Panama, and perhaps even Iraq, if imposed western participation in Iraq’s oil business and production is considered.

For the US to consider Iran to be among the “attack-worthy” group noted above, the US must first consider Iran to be weak enough (economically and militarily) to be worth attacking — since an outright quick US military victory versus Iran is an odds-on impossibility. The US must also consider the response of either Russia or China to be muted, as trade and diplomatic relations continue to sour exponentially with both countries.

Neither scenario above (militarily/economically weak) really applies in Iran’s case, so any attack on Iran must be largely symbolic and unlikely to result in massive retaliation; or to provoke the Russian or China’s leadership to intervene militarily, to assist Iran in its defense.

According to the western press, the targets chosen for Trump precisely one month ago on June 19th were three military and radar installations within Iran, the destruction of which would have resulted in relatively few deaths. Will those same targets be on the cards for the US military again?  We shall see.

Should Trump fire cruise missiles at those targets or bomb them from the air, it is highly likely that Russia’s or China’s leadership (China still receives significant amounts of oil from Iran) will quickly provide Iran with upgraded air defenses and possibly even warplanes.  And as this author has already suggested, the latter is the greatest concern for Washington in the face of a US-led attack on Iran.

Indications that the United States will attack Iran or not, even in a limited air strike, will likely appear on social media with the usual attack dogs – Bolton and Pompeo – rattling their sabers and exhorting the usual nonsense about the “danger” Iran poses to the west… or not. So far social media is quiet on the subject, but Trump may hold his counsel and engage in a surprise move. We shall see who is surprised!

This author speculates, perhaps incorrectly, that the US will take no action versus Iran for now, assuming the UK’s oil tankers are released promptly within the next few days… probably subsequent to a joint US-UK statement/demand.  Should the tanker seizure drag on, I believe the odds of a limited US strike versus Iran will rise exponentially by the day. That’s because the UK is of course a NATO participant, and the US could thus consider seizure of British ships to be militarily actionable.

What of Iran’s Motives?  

The culture that invented the game of chess never makes a move without careful and calculating consideration. Iran has been forced to play black for decades now, and has done so with skill, alacrity, and will take the initiative whenever possible.

Whether Iran has sensed a particular point of weakness in the West at this time, or Iran has hidden agreements in place with significant allies to come to its defense in the event of an US attack, is of course unknown.

That Iran may be holding a surprise move in check with support from its allies must be of extreme concern to the US Hegemon.  And eventually that concern must be all of ours, when the hegemon inevitably fails to intimidate and control the board with its white advantage, and its queen is taken.

Published:7/22/2019 7:15:47 PM
[Markets] The Wall Street Journal: Trump agrees to ‘timely’ decisions on licensing U.S. companies to resume Huawei sales President Donald Trump agreed Monday to grant timely licensing decisions to U.S. technology companies that want to continue lucrative sales to Huawei Technologies Co., as the administration seeks to restart trade talks with China.
Published:7/22/2019 6:50:21 PM
[Markets] Undeterred By Intimidation, Tesla Whistleblower Karl Hansen Files New Lawsuit Against Elon Musk

Tesla whistleblower Karl Hansen doesn't seem to be deterred by the intimidation tactics that the company has used against whistleblowers in the past. He's also dead set on trying to help other whistleblowers come forward, according to The Drive

He filed a lawsuit on July 19 in Nevada against Elon Musk for violations of the Sarbanes-Oxley act, intentional interference with business relations and breach of contract. 

Hansen said:

 “It’s taken a long time to get to this point, and I remain steadfast regardless of any monetary outcome. The only thing we are guaranteed to take to our graves is our name. I’ve spent a career of integrity, and won’t stand idly by when someone like Elon Musk runs roughshod over others because he happens to be a billionaire.

He continued:

 “Even though this has been and continues to be one of the most wrenching experiences of my life, it’s important for people to do the right thing, even if it means doing it alone. If you stay in the arena long enough, even by yourself, people will notice that, and the right people are going to notice your courage, and will support you.”

In his lawsuit, he says that the company interfered with his ability to find work. It's a similar claim that some former Buffalo factory workers made, alleging Tesla “intentionally interfered with efforts to seek employment with other employers in retaliation for outspoken union support.”

According to the report, Hansen also alleges: 

  • Musk and Tesla’s management actively concealed and participated in misconduct including spying on employees

  • Thefts ranging between $37 and $150 million dollars, along with links to a Mexican drug cartel

  • A Tesla employee was terminated after reporting the theft of $13,000 of copper wire to law enforcement, foreshadowing Hansen’s own termination from the company shortly after briefing management about his findings into criminal activities taking place 

With regard to the cartel claims, it's also worth noting that "Pablo Escobar’s brother recently demanded $100 million in cash or Tesla shares from Musk for purportedly stealing his flamethrower idea". Nothing to see here...

Hansen's own termination is reminiscent of a former Tesla Director of Environment, Health, Safety and Sustainability who claimed they were fired after reporting safety violations. An assembly line worker was also reportedly fired after reporting anti-gay harassment. 

And, of course, whistleblower retaliation was the main theme of the Martin Tripp case:

...after Tesla identified him as the source for a Business Insider article, Tesla’s Security team gave police a tip that they’d received an anonymous call that Tripp was planning a mass shooting at the Nevada factory where he had worked. That evening, when police confronted the tearful, unarmed Tripp he expressed his terror of Musk; they concluded Tripp posed no threat, meaning he had been the victim of a ‘swatting’.

Tesla provided a comment for the article, which included the following paragraphs:

Tesla takes misconduct like Mr. Hansen’s very seriously and the company has every right to expect its employees and contractors to abide by its policies, and to be fully honest and cooperative when dealing with an internal investigation. As a result of the discovery of Mr. Hansen’s misconduct and misappropriation of confidential information, Tesla informed Mr. Hansen’s third-party employer and asked the firm to no longer assign Mr. Hansen to the Gigafactory. However, Mr. Hansen’s termination from the third-party contractor is a matter between his employer and Mr. Hansen, and does not involve Tesla.

Elon was not personally involved in the decision to request that Hansen be reassigned from the Gigafactory, and doesn’t remember having ever met Hansen and certainly wouldn’t be able to identify him out of more than 40,000 employees at Tesla.”

Certainly, he wouldn't, right? We'd bet Mr. Hansen may disagree with this take...

Published:7/22/2019 6:50:21 PM
[Markets] Wall Street Trading Desks Suffer Worst First Half In Over A Decade

With Morgan Stanley reporting Q2 results yesterday, the first half earnings of all "big 5" US banks are now public, and when it comes to sales and trading they are nothing short of a disaster.

With the S&P at or near all time highs, institutional traders have, paradoxically, been increasingly moving to the "sidelines" for much of the second quarter as Wall Street trading desks posted their worst first half to a year in a decade, according to Bloomberg calculations. David Solomon, CEO of Goldman Sachs, made note of this over the last two quarters, and other major banks like JP Morgan and Citigroup have followed.

The slowdown in trading revenue has been due to uncertainty about trade war politics and global Central Bank policy. However, in the past, these types of uncertainties have spurred more trading, not less. This has raised the question of whether or not the slowdown in trading is permanent, instead of temporary.

Morgan Stanley CFO Jon Pruzan said in an interview Thursday: “It’s more of a subdued up than sort of the animal spirits you would generally characterize in this type of environment. We haven’t seen some of the traditional things in a market like this -- we haven’t seen a lot of people repositioning their portfolios, we haven’t seen leverage increase.”

Trading revenue at the five biggest Wall Street banks was down 8% in the second quarter, which followed a 14% slide in the first quarter. European banks are expected to post even larger drop offs next week when they report.

This will likely push revenue from equity and fixed income trading substantially below the $60.8 billion that was posted in the first half of 2017. These major firms generated $77.5 billion as recently as the first half of 2012.

One reason for the shrinkage - hedge funds have suffered outflows, which has also helped slow down trading volume. In addition, new rules that have limited lenders' ability to make principal bets with their own money have acted as a headwind. Technological advancements have also narrowed spreads in many areas of trading.

And over the last couple of quarters, Wall Street firms can’t decide whether or not they want to complain about too much volatility – or too little.

Jim Shanahan, an analyst at Edward Jones said: “I’m not sure what the Goldilocks scenario is for the banks. Part of the problem is that it’s too late to hedge interest-rate volatility, there’s not currency volatility to hedge. Speculators need volatility to hedge and enter the market.”

As a response, banks have cut costs. Front office headcount in trading units is down over the last five years and divisions like consumer lending and wealth management have picked up the slack that have led banks to record profits. As a result, the six biggest US banks set another record with $32.6 billion in (adjusted, non-GAAP) net income in the second quarter.

Go figure.

Citi CFO Mark Mason bemoaned the top-line sluggishness of the trading business: “Many of the investor clients remained on the sidelines,” he said on Monday. 

One can only imagine if equity revenue is slumping when the S&P is at all time high what will happen when the market finally crashes...

Published:7/22/2019 6:14:42 PM
[Markets] Leaked Documents Expose Huawei's Role In Building North Korean Wireless Network

Huawei has already been accused, with good reason, of violating US and UN sanctions over doing business with Iran. Now, the Washington Post reports, citing clandestine internal documents, that Huawei secretly helped build a North Korean wireless network.

The revelation is the latest threat to undercut trade talks between Washington and Beijing, which have already reportedly stalled.

The telecoms giant partnered with a Chinese state-owned firm called Panda International Information Technology Co. on a variety of projects in North Korea over the span of eight years, according to past work orders, contracts and detailed spreadsheets taken from a database that charts the company’s telecom operations worldwide.

The way the partnership was structured made it difficult to detect Huawei's involvement. The spreadsheets and other documents were provided to The Post by former Huawei employees who believed the information is in the public interest. Other sets of documents were provided to WaPo by others who hoped to see them made public. All three sources spoke with WaPo on the condition of anonymity, fearing reprisals.

Taken together, the revelations raise questions about whether Huawei, which uses American technology and components in its products, violated US export controls regarding business dealings with North Korea.

The Commerce Department has been investigating potential links between Huawei in North Korea since 2016, but it hasn't publicly connected them. Meanwhile, Huawei said it has "no business presence" in North Korea. Spokesman Joe Kelly didn't comment, and he didn't dispute the authenticity of the documents, either.

"Huawei is fully committed to comply with all applicable laws and regulations in the countries and regions where we operate, including all export control and sanction laws and regulations" of the United Nations, United States and European Union, the statement read. A spokesman for Panda Group, Huawei's alleged partner, also declined to comment.

A State Department official explained the administration's frustration with Huawei over the situation.

"All of this fits into a general concern we have about corporate responsibility and a company like Huawei that is not trustworthy because of its company culture and numerous incidents indicating a willingness to evade or outright violate laws," the official said. "Working with regimes like North Korea, who deprive individuals on a regular basis of their basic human rights, raises concern."

When Koryolink, the first major North Korean wireless network, emerged in 2008, it solved a serious problem: North Korea's inability to find foreign multinationals willing to work with it. But the company only came about after a 2006 visit by Kim’s father, Kim Jong Il, to Huawei’s headquarters in Shenzhen, China.

"This was the time that confirmed not only the top leadership’s interest in dealing with Huawei but pretty much revealed a choice of Huawei as the primary supplier of technology," said Alexandre Mansourov, an adjunct professor at Georgetown University’s School of Foreign Service, who in 2011 wrote about North Korea’s digital transformation. "They decided to work with Huawei from that time on."

Koryolink was built through a 2008 joint venture of Egypt's Orascom Telecom Holding and North Korea's state-owned Korea Post and Telecommunications Corp. The venture was called CHEO Technology. Panda, and Huawei, via its relationship with Panda, was also heavily involved with building Koryolink's network.

Panda has a long history of doing the Communist Party's bidding.

A key player was Panda International, part of the storied electronics conglomerate Panda Group that has sometimes served China’s foreign policy. In 2001, for instance, during a visit to Havana, China’s president at the time, Jiang Zemin, gave Cuba 1 million Panda-made TV sets and introduced a company representative to Cuban leader Fidel Castro, who "excitedly shook hands and embraced" him, the firm recounts on its website.

And Huawei was more than willing to supply the equipment needed to build the network.

Huawei worked closely with Panda, using it as the conduit to provide North Korea with base stations, antennas and other equipment needed to launch Koryolink, internal documents show. For years, Huawei and Panda employees worked out of an inexpensive hotel near Kim Il Sung Square in Pyongyang, according to a person familiar with the arrangement.

Huawei was involved in "network integration" and "software" services as well as at least one "expansion" project for Koryolink, the documents show. It also provided "managed service" and "network assurance" services. One current Huawei employee reached by The Post, Yin Chao, said he worked in 2012 and 2013 on Koryolink’s automated callback system, one of several improvements the company offered the North Koreans.

Huawei has other shady links to companies accused of violating sanctions related to their dealings with Pyongyang.

Internal documents show that Huawei has done business with a separate Chinese company, Dandong Kehua, which in November 2017 was sanctioned by the US Treasury Department for exporting and importing goods to and from North Korea - trade seen by U.S. officials as financing Pyongyang’s nuclear and ballistic missile programs.

Documents obtained by The Post also illustrate the North Koreans’ concern with foreign spying on regime officials and their family members who would be using Koryolink. In spring 2008, Orascom and Korea Post tasked Huawei with developing an encryption protocol for the network, noting that the government would create its own encryption algorithm, according to the documents.

"Both sides had common agreement that the ordinary people will use the international standard mobile phones and special users will use different mobile phones which will contain locally developed encrypted algorithm," state the minutes of a 2008 meeting, a document signed by Korea Post’s chief engineer and an Orascom board member.

Soon, the North Korean government was building a rival wireless network, and used equipment from another Chinese telecoms giant, ZTE. It's likely that both of these networks contain American-made components.

The original joint venture agreement gave Orascom exclusive license to operate the mobile network through 2015, according to media reports, but the North Korean government launched a rival network, Kang Song, in 2013 using another Chinese telecom equipment supplier, ZTE. Kang Song quickly supplanted Koryolink as the dominant wireless provider in North Korea.

In 2014, the Commerce Department banned the export of U.S.-origin components to Panda, alleging it had furnished such parts to the Chinese military “and/or” to countries under U.S. sanctions. Since then, any company to provide Panda with telecom items intended for North Korea and containing at least 10 percent U.S.-origin content without a license would be in violation of the export ban.

Several experts, including the supply-chain analysis firm Interos, consider it to be likely that Huawei’s 3G equipment contained American components, though it is difficult to know whether it surpassed the 10-percent threshold outlined in export regulations.

So, will the Trump Administration change its plans to ease up on Huawei and blow up the trade talks over this? It's unlikely, but that doesn't mean a trade deal is any more likely.

Published:7/22/2019 5:45:13 PM
[Markets] Trump says compromise deal on budget, debt ceiling reached Trump says compromise deal on budget, debt ceiling reached Published:7/22/2019 5:24:11 PM
[Markets] Illinois Lawmakers Push Property Tax Hikes To Fund Affordable Housing

Authored by Mark Glennon via,

Property taxes will go up to pay for affordable housing if legislation now pending in the General Assembly passes. It’s not styled as a property tax increase, but that’s exactly what it is. It’s styled as property tax caps or reductions for affordable housing, which would directly result in increases for homeowners and everybody else.

Senate President John Cullerton

Two bills are pending. The first is Senate Bill 2259, sponsored by Senate President John Cullerton (D-Chicago). It would artificially limit increases in assessments of new or rehabilitated apartment complexes if the owner commits at least 20 percent of the building’s units to a rent cap for families that make less than a set income depending on the area. The second, House Bill 2168, goes further and would directly reduce assessments on similarly defined affordable apartments. It has nine House sponsors.

In other words, both bills would give a property tax break to owners of apartments for lower income renters. The problem is that the levy – the total amounts collected by each taxing authority – wouldn’t change. That means all other property owners pay the difference. The end result is simple and undeniable: Property owners would fund a special subsidy for affordable housing.

You’d think lawmakers had learned their lesson. In 2017, Chicago wanted a way to soften the blow of the city’s property tax increases, or at least make them look softer. Singling out the city wasn’t workable, so it got Springfield to pass increases in the homestead and senior exemptions for all of Cook County. We wrote about the dismal results for other taxpayers here, which the Chicago Tribune detailed. Other property owners got clobbered, especially in lower income areas.

As the Tribune reported on those results, “Many, many people are saying it’s not financially beneficial for them to pay the taxes they pay on their homes, when every 11 to 13 years, they’re paying the total costs of their home in taxes,” said Harvey Ald. Keith Price, economic development committee chairman.

“I’ve talked to a couple of people that have personally told me that they are not paying their taxes anymore. They’re going to save their money, and within the two years they have (before they lose the house), they’ll just save all their money and leave.”

It has only worsened since then.

If Illinois wants to pay for affordable housing it should be done smartly. The simplest and most efficient means to provide housing assistance is vouchers, not convoluted incentives like Springfield is moving towards. The pending bills would require a whole new level of bureaucracy for assessors and administrators to enforce.

The pending bills have other major flaws. Projects that would have been built anyway will still get the tax break. On them, the subsidy will have been wasted. And there’s no way to measure results. How will we know how many new projects, if any, get built thanks to the tax incentive? We won’t. That’s unknowable. For that same reason, we won’t know the full cost until after the fact.

Most importantly, property taxes are the last place to look to for funding. Illinois rates are already neck and neck with New Jersey’s for the highest in the nation. Hundreds of thousands of Illinois homeowners have had their equity erased or worse, been trapped with underwater mortgages. Suppressed values, primarily because of those taxes, have already cost Illinois homeowners a quarter trillion dollars just in the last ten years.

Published:7/22/2019 5:24:11 PM
[Markets] Dow Jones Futures: Apple-Intel Modem Chip Report Lifts Intel; Qualms For Qualcomm? Stock futures: Apple reportedly is close to a deal to buy the Intel modem chip unit. Intel stock rose late, while Qualcomm stock fell. Published:7/22/2019 5:24:11 PM
[Markets] The Margin: The internet weeps for Tom Hanks as Mister Rogers in new trailer The first trailer for “A Beautiful Day in the Neighborhood” dropped Monday and emotions were raw.
Published:7/22/2019 5:24:11 PM
[Markets] Our Ruling Elites Have No Idea How Much We Want To See Them All In Prison Jumpsuits

Authored by Charles Hugh Smith via OfTwoMinds blog,

Even the most distracted, fragmented tribe of the peasantry eventually notices that they're not in the top 1%, or the top 0.1%.

Let's posit that America will confront a Great Crisis in the next decade. This is the presumption of The Fourth Turning, a 4-generational cycle of 80 years that correlates rather neatly with the Great Crises of the past: 1781 (Revolutionary War, constitutional crisis); 1861 (Civil War) and 1941 (World War II, global war).

What will be the next Great Crisis? Some anticipate another great-power war, others foresee another civil war, still others reckon a military coup is likely, and some view a collapse of the economy and U.S. dollar as inevitable.

While anything's possible, I propose a novel crisis unlike any in the past, a Moral Crisis in which the people challenge the power of the nation's corrupt Ruling Elites: not just elected officials, but the technocrats of the Deep State, the vested interests pillaging the nation, the New Overlords of Big Tech, the financier New Nobility, the Corporate Media and the self-serving state/corporate technocrat Nomenklatura who do the dirty work of the Ruling Elites.

Divide-and-Conquer has been the absurdly easy strategy of the Ruling Elites to fragment and disempower the citizenry. It's child's play for the Ruling Elites to ceaselessly promote a baker's dozen of divisive issues via the corporate media, and then watch the resulting conflicts split the citizenry into fragmented camps which subdivide further with every new toxic injection.

The one issue that could unite the fragmented citizenry is moral revulsion: As the Epstein case promises to reveal, there is literally no limit on the excesses and exploitations of the privileged few in America, no limit on what our Ruling Elites can do with absolute impunity.

The Nobility of the feudal era had some reciprocal obligation to its serfs; our New Nobility has no obligation to anyone but themselves. It is painfully obvious that there are two sets of laws in America: bankers can rip off billions and never serve time, and members of the Protected Class who sexually exploit children get a wrist-slap, if that.

Here's the sad reality: everybody in the Ruling Elites looked the other way: all the self-described "patriots" in the Intelligence services, all the technocrats in the Departments of Justice, State, etc., the Pentagon, and on and on. Everybody with any power knows the whole class of Ruling Elites is completely corrupt, by definition: to secure power in the U.S., you have to sell your soul to the Devil, one way or the other.

Like all Ruling Elites, America's Elites are absolutely confident in their power:this is hubris taken to new heights.

That the citizenry could finally have enough of their corrupt, self-serving Overlords does not seem in the realm of possibility to the Protected Few.There's always a way to lawyer-up and plea-bargain for a wrist-slap, a way to bend another "patriot" (barf), a way to offer a bribe cloaked as a plum position in a philanthro-capitalist NGO (non-governmental organization), and so on.

The possibility that moral outrage could spark a revolt seems improbable in such a distracted culture, but consider the chart below: even the most distracted, fragmented tribe of the peasantry eventually notices that they're not in the top 1%, or the top 0.1%, and that the Ruling Elites have overseen an unprecedented concentration of wealth and power into the hands of the few at the expense of the many:

Our Ruling Elites have no idea how many of us already want to see them all in prison jumpsuits, and they also have no idea how fast the moral revulsion with their corrupt "leadership" might spread. Scanning the distracted, consumerist rabble from the great heights of their wealth and power, they reckon the capacity for moral outrage is limited, leaving them safe from any domestic crusade.

They also trust that the citizenry can be further fragmented, further distracted, and so they will continue to be invulnerable. Or worst case scenario, a few especially venal villains will need to be sacrificed, and then all will return to the bliss of Neofeudal exploitation.

But they may have misread the American citizenry, just as they've misread history.

*  *  *

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Published:7/22/2019 4:44:13 PM
[Markets] Apple close to buying Intel's modem business: report Apple close to buying Intel's modem business: report Published:7/22/2019 4:44:13 PM
[Markets] Market Extra: U.S. housing bonds, left out of rally, are poised for a rebound Amundi Pioneer makes bull call on U.S. housing bonds with government backing
Published:7/22/2019 4:44:13 PM
[Markets] NewsWatch: Fed could worsen the next recession with a July rate cut, says Mizuho economist Some argue the Federal Reserve risks exacerbating any coming economic slowdown by keeping interest rates excessively low.
Published:7/22/2019 4:20:04 PM
[Markets] The Algos Are Starting To Sell Stocks Ahead Of Next Week's FOMC

Over the weekend, we pointed out that in addition to the biggest conundrum facing markets in 2019, namely that the higher stocks rise, the greater the (now record) outflows from equity funds, there has recently emerged another especially bizarre divergence: whereas discretionary investors have been cutting equity positioning as growth has slowed...

... systematic strategy allocations - i.e., quants, "robots", and the like - have been buying up stocks the worse the economic picture became, and have been pushing the S&P higher.

And here an odd observations: whereas historically, positioning for both discretionary and systematic strategies have typically moved together and were highly correlated with growth indicators, this year however, discretionary investors have steadily reduced their exposure which is now below average, in line with their behavior historically when growth is slowing.

What this means is that not only do broader markets track systematic rather than discretionary flows, but the marginal price setter is no longer of human (discretionary) origin, but rather robotic.

In other words, the good news is that while humans may have gotten cold feet, robots continued to buy... for now.

And now the bad news: whereas global equities have maintained upward momentum for the most part, that momentum seems to be losing steam, and at least one major class of robotic investors may soon seek to exit too.

As Nomura's quant team writes, with the FOMC having now entered the blackout period ahead of next week's potentially historic FOMC meeting (30-31 July) when the Fed is widely expected to restart monetary easing, market participants are converging on the view that the Fed will cut interest rates by 25bp - but not by more - and as a result market sentiment is softening in markets worldwide.

Indeed, it appears to Nomura that, rather than expecting a risk rally once the rate cut decision has been made, the market is starting to worry that a rate cut would be followed by a round of "selling the fact". As a result, given that Nomura sees signs of ebbing risk appetite, the Japanese bank thinks it best to be on the lookout for selling of global equities for profit-taking purposes ahead of the event, particularly among speculative traders. Furthermore, the bank's quant team also notes that "hedge funds have staked out positions that look especially vulnerable to a combination of rising volatility and falling stock prices."

Global stock market sentiment has continued to soften, most obviously in the US, as the perceived likelihood of a 50bp rate cut has dropped off. Although sentiment is still slightly on the risk-taking side of neutral, we would expect investors to remain fairly unenthusiastic if the July FOMC meeting ends innocuously with a 25bp rate cut.

Hedge funds, meanwhile, are still positioned in a way that would lead one to believe that they:

  1. expect volatility to remain consistently low; and
  2. see little downside risk for equities.

For example, the overall performance of hedge funds as measured by the HFRX Global Hedge Fund Index (HFRXGL) is still closely correlated with returns on an S&P 500 put write strategy, which leads Nomura to believe that speculative traders are by and large not taking profits on this sort of high-risk, bullish position in equities.

At the same time, the growth in VIX futures shorts is another manifestation of this risk-taking behavior on the part of speculative traders. According to latest data from the CFTC (dated 16 July), the net short position of non-commercial traders has grown to around 140,000 contracts, which is to say that the outstanding net position of hedge funds is now highly vulnerable to a rise in volatility paired with a drop in stock prices.

Which brings us to the proverbial "robots", or CTAs, which after bidding up stocks for much of the past month are preemptively taking profits on long positions in US equity futures.

As mentioned above, US stock market sentiment has softened somewhat. Even if the Fed were to go through with a 25bp rate cut at the July FOMC meeting, the appetite for risk may continue to fade unless the Fed pairs the rate cut with some additional dovish surprise. And, as the charet below shows, trend-following CTAs have already begun preemptively taking profits on long positions in US equity futures.

And as Nomura's Masanari Takada writes, "trend-following CTAs are in the process of scaling back their net long position in US equity futures." Specifically, CTAs have been shrinking their net position in S&P 500 futures in increments since 17 July.

Finally, because the outstanding net long position of CTAs breaks even at around 2,955 (based on what Nomura calculates the average cost of their net buying since the beginning of June), this selling is still mostly a matter of preemptive profit-taking commensurate with what the market is actually doing.

Said otherwise, should the S&P dip below 2,955 ahead of next week's FOMC, the Fed may have no choice but to cut 50bps as the market will be delighted to once again force Powell's hand.

On the other hand, discretionary traders (global macro hedge funds and equity long/short funds) following aggressive selling for much of 2019, are slightly on the side of adding to their net exposure and BTFD, or as Takada notes, "the buying of US equities by global macro hedge funds sticks out here."

Nomura's conclusion: "The US stock market is currently the scene of a head-on collision between selling by technically minded CTAs and buying by fundamentals-oriented global macro hedge funds."

Whether this collision will result in an acceleration in the market's meltup, or a painful reacquaintance with gravity will depend on what the Fed does next week.

Published:7/22/2019 4:20:04 PM
[Markets] The Dow Rose 18 Points Ahead of Major Earnings and Big-Time Economic Data All three major indexes closed with gains on Monday at the beginning of a busy week. About a third of S&P 500 companies report second-quarter earnings this week, including United Technologies, Snap, Coca-Cola, and Chipotle Mexican Grill on Tuesday. Published:7/22/2019 4:20:04 PM
[Markets] Giuliani: Epstein Case "Going To Implicate A Lot Of People"

President Trump's personal attorney Rudy Giuliani said on Monday that the Jeffrey Epstein case "is obviously going to implicate a lot of people," adding "I can’t tell you who but it’s not going to end up with just Jeffrey Epstein."

Speaking with Hill.TV, Giuliani said that investigators will undoubtedly focus on Epstein's inner circle, and whether individuals knew or participated in Epstein's sex crimes. 

"If you spent this much time with him and he was so involved with these underaged girls — who did you see him with and what was he doing and what did he tell you and what did he say to you and how could you have missed it," said Giuliani. "Maybe some were innocent — maybe some weren’t, but I think they’re going to investigate everybody." 

The new charges against Epstein come more than a decade after the sixty-five-year-old pleaded guilty to sex trafficking and was sentenced to 13 months in prison. They have since renewed scrutiny on a 2008 plea deal that was secured in part by outgoing Trump administration Labor Secretary Alex Acosta, who resigned this month over the backlash.

Acosta was a U.S. attorney at the time of Epstein’s conviction for soliciting prostitution from underage girls, and allowed Epstein to serve 13 months in "custody with work release.” -The Hill

While Epstein's involvement with the Clintons and other famous liberals is well known (A donor to the Clintons, Epstein bragged about co-founding the Clinton Global Initiative at one point), many have questioned President Trump's involvement with the convicted pedophile. 

That said, Giuliani's Monday decree suggests the President is most likely in the clear.  

Published:7/22/2019 3:48:28 PM
[Markets] Dow Jones Up, These Chip Stocks Give Nasdaq Oomph; 4 Big Cap Stocks To Watch Now The Dow Jones Industrial Average lagged the Nasdaq composite as the latter got a bigger boost from chip stocks. Data storage and telecom shares rose. Published:7/22/2019 3:48:28 PM
[Markets] Earnings Watch: Chipotle earnings: Stock hits all-time high but questions arise about how long growth will last Analysts are bullish about Chipotle’s same-store sales results for the second quarter.
Published:7/22/2019 3:48:28 PM
[Markets] U.S. stocks end higher, led by rally in information technology U.S. stocks end higher, led by rally in information technology Published:7/22/2019 3:25:14 PM
[Markets] Semis Soar, Small Caps Sink, Silver Surges

Seemed appropriate...


Chinese stocks were not pretty. Despite STAR soaring, ChiNext tumbled along with Shenzhen as it appears liquidity moved to the new index...


European markets (except Spain) managed to cling to gains on the day thanks to 4 notable impulses...


Nasdaq dramatically outperformed led by semis. Small Caps were the biggest losers. Dow ended unchanged (Boeing down vs Apple up)

NOTE - Trannies and Small Caps notably decoupled at around 1400ET only to see a mysteriously large buy program strike at 1500ET


Small Caps continue to dramatically diverge from big caps (and mega cap tech)...


Small Caps also closed below their 100DMA...


Volume was low - around 20% below average...


There were two 'failed' attempts at yet another short-squeeze today...


Semis soared on the day following Goldman's upgrade on Micron...


But while Semis spiked, FANG stocks were flat...


Bonds and stocks remain in their own - buy all the things - worlds...


Treasury yields traded in a narrow range today, with yields down across the curve led by the belly...


10Y Yield dropped to 2.02% intraday but the yield curve (3m10Y) remains inverted (41st day in a row)...


The odds of a 50bps cut next week has dropped to 18%...


The T-Bill curve remains kinked around potential debt ceiling X-date...


The dollar index managed very modest gains, holding above last week's Williams' speech plunge levels..


Cryptos were mixed over the weekend with Bitcoin Cash holding gains but ETH and BTC lower after a leg lower this morning...


Bitcoin continues to hover between $10,000 and $11,000...


Dr.Copper is lagging as silver resurges...


Oil prices managed some gains today as Iran tensions resurfaced in the narratives...


Silver continues to rise...


Silver has outperformed gold for six straight days (longest streak since June 2018), erasing most of the relative gains for the year...


Finally, don't forget, it's different this time...

Except it's all about liquidity, stupid...

Published:7/22/2019 3:25:14 PM
[Markets] US STOCKS-S&P 500 climbs toward record high, earnings in focus The S&P 500 climbed toward a record high on Monday, supported by expectations of lower interest rates, while investors awaited quarterly earnings from marquee companies Facebook, Alphabet and Amazon later this week. Facebook Inc rallied 2.0% ahead of its report due out after the bell on Wednesday, while Inc and Google-parent Alphabet Inc were each up more than 0.7% ahead of their reports on Thursday. Investors' reactions to the reports of these top-tier growth companies could affect broader market sentiment, with the S&P 500 about 1% below its July 15 record high close. Published:7/22/2019 3:25:14 PM
[Markets] The Margin: Team Trump sells $200,000 worth of plastic straws, mocks liberals in the process Politics aside, paper straws are lame. The movement to ban the plastic version we’ve used our entire lives, while surely well-intentioned, took aim at a problem without offering a proper solution. Anybody who’s tried to suck a milk shake through one of those disintegrating tubes knows this all too well.
Published:7/22/2019 3:25:13 PM
[Markets] Capitol Report: Here’s what’s in Washington’s emerging debt and spending deal A deal on new spending levels and boosting the government’s borrowing limit was reportedly getting closer Monday, though an agreement isn’t final and President Donald Trump has yet to comment.
Published:7/22/2019 2:51:32 PM
[Markets] Techs Continue To Lead Late In Session; FANG Earnings Loom Major stock indexes rose, buoyed by tech stocks and a flood of corporate earnings this week, including FANG names Facebook, Google and Amazon. Published:7/22/2019 2:51:27 PM
[Markets] Generic-drug make Lannett's stock leaps 40%, but the reason is a mystery Generic-drug make Lannett's stock leaps 40%, but the reason is a mystery Published:7/22/2019 2:51:27 PM
[Markets] Schiff Says Inspector General's Work 'Tainted' Ahead Of Report On Surveillance Abuses

House Intelligence Committee Chairman Adam Schiff (D-CA) has pivoted from 'deepfake doom' influencing the 2020 election, to downplaying an upcoming watchdog report by the DOJ's Inspector General due sometime in September. 

Speaking at the Aspen Security Conference (where he had a pow-wow with Fusion GPS founder Glenn Simpson last July), Schiff claims that DOJ Inspector General Michael Horowitz was co-opted into a scheme to protect President Trump by instigating a "fast track" report last year at Trump's behest, according to the Washington Examiner's Daniel Chaitin. 

Schiff claimed the president wanted McCabe, who briefly took over as acting FBI director after Trump fired James Comey in May 2017, investigated and his pension taken away and suggested someone such as former Attorney General Rod Rosenstein obliged the president by making a referral.

"The inspector general found that McCabe was untruthful. He may very well have been untruthful," the California Democrat said, but noted that is not where main his concern lies.


The initiation of the inspector general's inquiry in McCabe happened, Schiff said, "because the president wanted it politically." He added, "Once you go down that road, it leads to disaster." -Washington Examiner

"I have no reason to question the inspector general's conclusion, but that investigation was put on a fast track. It was separated from a broader inspector general investigation, which is still ongoing," said Schiff. "Why was that done? It was done so he could be fired to not get a pension. It was done to please the president when the initiation investigation is tainted. So are the results of that investigation."

McCabe was fired on March 16, 2018 - less than two days before his planned retirement. Had he not been fired, he would have collected his full pension on his 50th birthday. 

Of course, a GoFundMe campaign set up in the wake of McCabe's firing raised $538,000 for his 'legal-defense fund,' so we imagine he'll be OK unless the DOJ decides to pursue charges against the former Deputy Director. 

In April 2018, it was revealed that the Justice Department inspector general referred its findings to the U.S. attorney’s office in Washington for possible criminal charges, and his lawyer confirmed as recently as February that McCabe was still under investigation.

McCabe, whom Trump has accused of planning to carry out an "illegal and treasonous" plan to oust him as president, has argued that his firing was an attempt to discredit the FBI and special counsel Robert Mueller's investigation into Russian interference in the 2016 election. -Washington Examiner

It's far from over...

While the Mueller investigation is over, Horowitz's investigation into potential FISA abuse is significant - and Attorney General William Barr is now 'weapons free' to work with Horowitz to 'investigate the investigators.' According to the Examiner, "The inspector general can recommend prosecutions, and U.S. Attorney John Durham, whom Barr tasked to lead the review, has the ability to convene a grand jury and subpoena people outside of the government. Beyond that, Senate Judiciary Committee Chairman Lindsey Graham, a close Trump ally, has promised a "deep dive" into the origins of the Trump-Russia investigation after Horowitz completes his work." 

Two questions remain; will Schiff continue to push the taint angle, and will AG Barr and Horowitz's efforts lead to any notable prosecutions before the 2020 election? Or ever?

Published:7/22/2019 2:51:27 PM
[Markets] US STOCKS-S&P 500 climbs toward record, marquee reports in focus The S&P 500 climbed toward a record high on Monday, supported by expectations of lower interest rates, while investors awaited quarterly earnings from marquee companies Facebook, Alphabet and Amazon later this week. Facebook Inc rose 1.6% ahead of its report after the bell on Wednesday, while Inc and Google-parent Alphabet Inc were each up about 0.5% ahead of their reports on Thursday. Investors' reactions to the reports of those top-tier growth companies could affect broader market sentiment as the S&P 500 trades about 1% below its July 15 record high close. Published:7/22/2019 2:23:17 PM
[Markets] Why US Shale Is Doomed No Matter What They Do

Authored by Nick Cunningham via,

With financial stress setting in for U.S. shale companies, some are trying to drill their way out of the problem, while others are hoping to boost profitability by cutting costs and implementing spending restraint. Both approaches are riddled with risk.

“Turbulence and desperation are roiling the struggling fracking industry,” Kathy Hipple and Tom Sanzillo wrote in a note for the Institute for Energy Economics and Financial Analysis (IEEFA).

They point to the example of EQT, the largest natural gas producer in the United States. A corporate struggle over control of the company reached a conclusion recently, with the Toby and Derek Rice seizing power. The Rice brothers sold their company, Rice Energy, to EQT in 2017. But they launched a bid to take over EQT last year, arguing that the company’s leadership had failed investors. The Rice brothers convinced shareholders that they could steer the company in a better direction promising $500 million in free cash flow within two years.

Their bet hinged on more aggressive drilling while simultaneously reducing costs. Their strategy also depends on “new, unproven, expensive technology, electric frack fleets,” IEEFA argued. “This seems like more of the same – big risky capital expenditures.”

EQT’s former CEO Steve Schlotterbeck recently made headlines when he called fracking an “unmitigated disaster” because it helped crash prices and produce mountains of red ink.

“In fact, I'm not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change,” Schlotterbeck said at an industry conference in June.

IEEFA draws a contrast between Schlotterbeck and the Rice brothers. While the latter wants advocates a strategy of stepping up drilling in an effort to grow their way out of the problem, the former argues that this approach has been tried over and over with poor results. Instead, Schlotterbeck said that drillers need to cut spending and production, which could revive natural gas prices.

But while the philosophies differ – relentless growth versus restraint – IEEFA argues that “neither of these strategies seem viable.” On the one hand, natural gas prices are expected to stay below $3 per MMBtu, a price that is unlikely to lead to profits, IEEFA says. That is especially true if shale companies aggressively spend and produce more gas.

However, a strategy of restraint may not work either.

“[E]ven if natural gas producers coordinate their activities and reduce supply—a highly unlikely prospect—Schlotterbeck’s expectation that natural gas prices would inevitably rise is questionable,” IEEFA analysts wrote.

There are few reasons why natural gas prices might not rebound. For instance, any increase in natural gas prices will only induce more renewable energy. Costs for solar, wind and even energy storage has plunged. For years, natural gas was the cheapest option, but that is no longer the case. Renewable energy increasingly beats out gas on price, which means that natural gas prices will run into resistance when they start to rise as demand would inevitably slow.

A second reason why prices might not rise is because public policy is beginning to really work against the gas industry. IEEFA pointed to the recent decision in New York to block the construction of Williams Co.’s pipeline that would have connected Appalachian gas to New York City. In fact, New York seems to be heading in a different direction, recently passing one of the most ambitious and comprehensive pieces of climate and energy bills in the nation. Or, look to Berkeley, California, which just became the first city in the country to ban the installation of natural gas lines in new homes. As public policy increasingly targets the demand side of the equation, natural gas prices face downward pressure.

Another complication for natural gas producers is that the petrochemical industry, which is attracting tens billions of dollars in investment due to the belief that natural gas will remain cheap in perpetuity. Gas producers, who want higher prices, are in conflict with petrochemical manufacturers, who need cheap feedstocks.

“Companies like Shell, which is considering a $6 billion petrochemical investment, must choose: absorb a higher price cost structure for natural gas liquids (NGLs) needed to produce its product, while facing stiff global competition in the petrochemical business. Or, intensify capital commitments and take over the fracking business, hoping to find synergies through integration,” IEEFA noted.

“Both of these scenarios change the risk profile Shell has described to justify its aggressive expansion plans in the Ohio Valley.”

The upshot is that while companies like EQT undertake a major shift in strategy, the road ahead remains rocky either way. “More bankruptcies are all but certain as oil and gas borrowers must repay or refinance several hundred billion dollars of debt over the next six months,” IEEFA concluded.

Published:7/22/2019 2:23:17 PM
[Markets] Sexual harassment at work is finally on the decline — now for the bad news ‘There’s this myth that women falsely accuse men of harassment.’
Published:7/22/2019 2:23:17 PM
[Markets] Mayor Pete is the latest to propose this Social Security change — but is it really that good of an idea? Bolstering Social Security could help a candidate stand out
Published:7/22/2019 1:44:04 PM
[Markets] Major Stock Indexes Get Boost From Techs; Apple, Intel, AMD Lead Major stock indexes rose, buoyed by tech stocks and a flood of corporate earnings this week, including FANG names Facebook, Google and Amazon. Published:7/22/2019 1:16:15 PM
[Markets] Fed's Asymmetric Bubble-Blowing Policy In Pictures

Authored by Mike Shedlock via MishTalk,

The Fed meets on July 31 to make an interest rate policy decision. What should the Fed do?

Jim Bianco at Bianco Research says Only a Half-Point Rate Cut From the Fed Will Do.

"Anything less would fail to fix the imbalances in the global bond market, continuing to weigh on economic sentiment," says Bianco.

"By lowering its target for the federal funds rate by just a quarter point, the Fed risks no less than a recession. The Fed has a history of moving too slow to respond to evidence of weaker growth, and a bold move now would help ensure the economy achieves the rare soft landing.”

I replied

I stand corrected. With his charts, I concede that Bianco made a solid case for cuts.

Yet, his charts highlight something more important.

Fed's Asymmetric Bubble-Blowing Policy 1992-Present

Chart courtesy of Bianco. The title and blue boxes are my anecdotes.

Bianco notes "In the 1990s the fed funds contracts only went out 6 months. That is why the lines are short. In the 2000s they went out a year, lines are a little longer. Around 2007 they started going out three years, the longest lines."

Each calendar years is a different color.

So the yellow to the upper right is 2018 (each month end … so Jan 31, Feb 28 and so on, the forward curve projected up to 2021. Black, in a downtrend, is 2009)

Let's hone in on the period starting 2009.

Fed's Asymmetric Bubble-Blowing Policy 2009-Present

Market Screaming for Hikes

The market was screaming for hikes for five years.

The Fed did not deliver.

Too Low, Too Long

That the Fed did not deliver hikes as expected is part of its asymmetric policy of keeping interest rates too low, too long,

Bubbles Blown

Without a doubt the Fed blew more bubbles, and likely the biggest in history.

The market responded with a prolonged yield-curve inversion.

Yield Curve


  • The effective Fed Fund Rate is currently 2.41%.

  • The yield on the three-year Treasury Note is 1.80%.

  • The spread is -0.61 percentage points

Behind the Curve

Bianco is correct. The Fed is behind the curve.

And by his logic it's not clear that 50 basis points is enough of a cut.

But to what avail?

So What? Bubbles Already Blown

Let's return to Bianco's opening gambit: "Anything less would fail to fix the imbalances in the global bond market, continuing to weigh on economic sentiment."

On July 18, I wrote Half-Point Rate Cut Odds Explode to 71% - So What? It Doesn't Matter!

The Fed, with its asymmetric too-low too-long policy blew bubbles that are impossible to fix.

Too Late for Insurance

Rate cuts now as economic insurance is like trying to buy insurance on your car after you wrecked it.

The bubbles have been blown.

Even if the Fed can correct current "imbalances" it cannot "unblow" bubbles anymore than it can unblow a horn.

Deflationary Bust Baked in the Cake

In the Fed's foolish attempt to stave off consumer price deflation, the Fed sowed the seeds of a very destructive set of asset bubbles in junk bonds, housing, and the stock market.

The widely discussed "everything bubble" is, in reality, a corporate junk bond bubble on steroids sponsored by the Fed.

For discussion, please see Junk Bond Bubble in Pictures: Deflation Up Next

Rate Cuts Don't Matter

The bottom line at this point is an economic recession is baked in the cake. The global economy is slowing and the US will not be immune.

The debt deflation horn has already sounded. It will not be unblown no matter how big the cut.

Published:7/22/2019 1:16:15 PM
[Markets] Tofurky takes on Arkansas’ meat-labeling law for ‘censoring’ its packaging The lawsuit also claims there’s no evidence that current plant-based alternative meat labels have misled shoppers.
Published:7/22/2019 1:16:15 PM
[Markets] US STOCKS-Wall Street edges higher ahead of major earnings, central bank meetings U.S. stocks eked out small gains on Monday as investors were wary of making big bets ahead of key central bank meetings on interest rates and waited for earnings from marquee companies including Facebook and Amazon due later this week. Shares of Boeing Co fell 1.13% and pressured the blue-chip Dow index after rating agency Fitch revised its outlook on the planemaker to "negative" from "stable," while the tech-heavy Nasdaq was lifted by chipmakers. "Markets are trading sideways because there are not a lot of earnings out today, with the exception of Halliburton, but it is going to be a very big earnings week," said Tom Martin, senior portfolio manager at GlobAlt Investments in Atlanta. Published:7/22/2019 12:43:05 PM
[Markets] Key Words: How Al Franken ‘got railroaded’ Al Franken says he “absolutely” regrets resigning from the Senate in a new story from the New Yorker’s Jane Mayer.
Published:7/22/2019 12:43:05 PM
[Markets] Epstein-Clinton Connection Forged By Alleged 'Madam' Ghislaine Maxwell

Prolific pedophile Jeffrey Epstein was introduced to former President Bill Clinton through Epstein's longtime confidant and alleged procurer of young women - Ghislaine Maxwell. 

The daughter of embattled publisher and suspected Russian-funded Mossad agent Robert Maxwell, The 57-year-old Maxwell maintained a high orbit as an East Coast socialite, according to Politico.

It is unclear how Epstein and the Oxford-educated Maxwell first met, however they reportedly dated around 1992 shortly after her father's death. Then in 1995, Epstein named a now-defunct Palm Beach business "Ghislaine Corp." In 2003, Epstein described Maxwell as his "best friend." 

She was also procuring young, often underage girls, to feed Epstein's sexual urges according to Epstein accusers and witnesses. 

According to court filings, Maxwell was said to have hired, supervised and fired household staff, while directing the visits of dozens of "massage therapists" to Epstein's residence, according to a Wall Street Journal report earlier this month. 

In depositions taken in 2009 and 2010 as part of civil lawsuits against Mr. Epstein, household employees said Ms. Maxwell was a central figure in Mr. Epstein’s private life. Several said Ms. Maxwell hired, supervised, and fired household staff, while directing the visits of dozens of "massage therapists”—typically young women.

Juan Alessi, who said in one of the depositions that he served as the Palm Beach house manager from around 1992 through 2002, described a basket of sex toys in Ms. Maxwell’s bathroom closet. He said he would find them around when he cleaned up after visits from the young women. -WSJ

"The defendant worked with others, including employees and associates who facilitated his exploitation of minors, by among other things, contacting victims and scheduling their sexual encounters with the defendant," according to US prosecutors, ostensibly referring to Maxwell. 

And then there's the Clintons...

According to Politico, "Maxwell first grew close with the Clintons after Bill Clinton left office, vacationing on a yacht with Chelsea Clinton in 2009, attending her wedding in 2010, and participating in the Clinton Global Initiative as recently as 2013, years after her name first emerged in accounts of Epstein’s alleged sexual abuse." 

Chelsea was in turn introduced to Epstein through Maxwell's ex, billionaire founder of Gateway computer, Ted Waitt of La Jolla, CA. 

A person close to Chelsea Clinton described Waitt as a “very close family friend” of Clinton and her husband, Marc Mezvinsky, and said the couple met Maxwell through him in 2011. The person said Clinton and her husband ended their friendship with Maxwell when she and Waitt broke up in early 2011, and disputed that Maxwell and Chelsea Clinton were ever “close.” 

Two people familiar with the relationship between Maxwell and the Clintons said Maxwell, Clinton and Mezvinsky flew together on a private plane to rendezvous with Waitt for a trip on Waitt’s yacht. One of those people said the trip took place in 2009.

Waitt, whose philanthropic endeavors focus on the world’s oceans, has given somewhere between $10 million and $25 million to the Clinton Foundation. -Politico

Not true, according to a friend of Maxwell, who told Politico: "The Clintons were relatively intimate with her," a friend of Maxwell told Politico. Meanwhile, "In 2002 and 2003, flight logs reportedly show that Bill Clinton flew on 26 flight legs on Epstein’s private jet," according to the report. 

So that we're clear - the Clintons became "relatively intimate" with Maxwell - who was known as Epstein's inseparable assistant and 'sex scheduler' - long after Epstein admitted to being a pedophile in a controversial 2008 plea deal.

Maxwell’s ties to Clintonworld, meanwhile, would last another decade.

One friend of Maxwell’s, who spoke on the condition of anonymity, described their surprise upon showing up at a dinner party at her Upper East Side apartment around 2005 to find Doug Band, then a top adviser to Bill Clinton and the Clinton Foundation, among the 8 to 10 guests. In 2006, a charity run by Epstein, C.O.U.Q. Foundation, gave $25,000 to the Clinton Foundation, the Daily Beast reported. -Politico

"Ghislaine was the contact between Epstein and Clinton," a person familiar with the relationship told Politico. "She ended up being close to the family because she and Chelsea ended up becoming close.

A spokesperson for Clinton has disputed that the two women were ever close, while Bill Clinton issued a statement via spokesman Angel Urena, claiming "President Clinton knows nothing about the terrible crimes Jeffrey Epstein pleaded guilty to in Florida some years ago, or those with which he has been recently charged in New York." 

Urena said the flight legs comprised four trips in 2002 and 2003 and that staff and Secret Service were present on all flights. Urena said Epstein visited Clinton at his Harlem office once in 2002 and that he briefly visited Epstein’s apartment one time. -Politico

The Trump connection

Politico also reveals the depth of President Trump's relationship with the Maxwells - in particular Robert Maxwell - which went back "to at least the late 1980s" until the Czech-born Daily Mirror owner died after falling off his Yacht, Lady Ghislaine, in the Atlantic Ocean (ruled an accident). 

An item from a May 1989 gossip column placed Trump and both Maxwells at a party aboard the elder Maxwell’s yacht, named the Lady Ghislaine, that featured caviar flown in from Paris and former Republican Sen. John Tower of Texas. The item notes that Trump compared his own larger yacht with Maxwell’s.

As it happened, Trump’s yacht, the Trump Princess, had originally belonged to the Saudi arms dealer Adnan Khashoggi — the uncle of slain Washington Post contributor Jamal Khashoggi — and Maxwell’s yacht had originally belonged to one of Adnan’s brothers.

"He was a character and a colorful guy, and I think we were lucky to have seen even a short time of him in New York," Trump told Larry King of Maxwell two weeks later. "He was my kind of a guy." 

In 1997, Maxwell "bummed a ride" on Trump's private jet along with the author of a New Yorker profile of Trump - Mark Singer, who referred to Maxwell's father as an "inadequate swimmer." 

Meanwhile, Maxwell was instrumental in Jeffrey Epstein's rise within her sphere of influence. 

It is unclear whether Ghislaine Maxwell first introduced Trump and Epstein, who socialized together at least as early as 1992, but she was crucial in ensuring Epstein’s access to Trump’s world. Archival video unearthed on Wednesday by NBC from that year shows Trump and Epstein surrounded by dancing women at Mar-a-Lago, with Maxwell smiling in the background.

And with that, Maxwell also began recruiting for Epstein - as detailed in a lawsuit brought by former Mar-a-Lago changing room attendant Virginia Roberts Guiffre - who claims she was approached by Maxwell in 1998 to meet Epstein, after which the two of them participated in her sexual abuse.

Maxwell has denied the entire thing.  

According to the Daily Telegraph, Maxwell also introduced Epstein to British Royal Prince Andrew - the two of whom were pictured with Epstein accuser Virginia Roberts, who claims to have seen Bill Clinton on Epstein's infamous island while she was being sex-trafficked. 

Epstein also attended a birthday party for Queen Elizabeth at Windsor Castle in 2000. That same year, Maxwell and Prince Andrew attended what the Daily Mail described as a “hookers and pimps”-themed Halloween party hosted by Heidi Klum.

A month later, in early December 2000, Trump, his future wife Melania, Epstein and Maxwell all attended a surprise 60th birthday for Barbara Amiel, a British socialite, that was also attended by the likes of Anna Wintour, Charlie Rose and William F. Buckley.

Tina Brown, a notable magazine editor, recalled that around this period Maxwell would reach out to her to socialize when Prince Andrew came to New York. “She was a bit mysterious,” Brown recalled.

In short - when it comes to the socially awkward Jeffrey Epstein and his connection to the elite circles he mingled in, it's all about Ghislaine. 

Published:7/22/2019 12:43:05 PM
[Markets] Ceasefire On The Rocks? Trump Sanctions Chinese Firm For Importing Iranian Crude

A huge escalatory step in the US-led economic war on Tehran and its global oil exports, and amid continued trade tensions with Beijing: the US State Department said Monday the US will impose new sanctions against a Chinese company for transporting Iranian crude in contravention of US sanctions. As the WSJ reports

Secretary of State Mike Pompeo told The Wall Street Journal on Monday that Chinese company Zhuhai Zhenrong and one of its executives knowingly violated U.S. law barring the import of Iranian crude oil.

China had previously been part of the so-called waiver program, which had granted eight countries exceptions which allowed temporary imports of Iranian oil, but which expired May 2 of this year.

Crude oil is unloaded at Zhoushan, East China's Zhejiang province in February 2018. Image source: VCG

The US did not renew the waiver program, known as 'Significant Reduction Exceptions,' in what was seen globally as a serious escalation by Washington attempting to bring Europe and other economic partners to heel over continued dealings with Tehran. 

The Chinese company has been identified as Zhuhai Zhengrong Co Ltd, which Pompeo accused of violating US law over its continued Iran crude imports. Notably, its CEO will also be under sanction. 

The WSJ continued:

The company and the executive will be barred from engaging in any foreign exchange, banking or property transactions under U.S. jurisdiction. The company couldn't be immediately located for comment. Chinese officials did not respond to a request for comment.

Pompeo said while addressing reporters in Florida, “We’ve said that we will sanction any sanctionable behavior and we mean it.”

Crucially, CNN noted late last week following Iran's navy capturing a British-flagged tanker that the White House could once again be on a war footing following President Trump backing off the previously planned strike on Iranian positions last month: "President Trump has privately adopted a more hawkish tone on Iran in recent days, according to three people familiar with the developments, as tensions increase in the Gulf," the report said.  

Published:7/22/2019 12:23:10 PM
[Markets] You'd think boat stocks would be a good bet this summer, but you'd be wrong You'd think boat stocks would be a good bet this summer, but you'd be wrong Published:7/22/2019 12:23:10 PM
[Markets] Futures Movers: Oil prices climb amid latest ‘ratcheting up of tensions’ between Iran and the West Oil prices shoot higher on Monday as investors continue to watch tensions in the Middle East. A new prime minister in the U.K. may only complicate a growing international crisis surrounding the seizure of a U.K. tanker by Iran.
Published:7/22/2019 12:23:10 PM
[Markets] Registered Sex Offender Weiner Moves Back In With Wife Huma Abedin And 7-Year-Old Son

Anthony Weiner has been a free man for a few months now, ever since he left a Bronx halfway house, and now it appears he's moving back in with his wife, Hillary Clinton aide Huma Abedin, and their seven-year-old son Jordan.

The Daily Mail reported that the 54-year-old ex-Congressman and former mayoral candidate was seen rolling boxes and designer garment bags into Abedin's home over the weekend. Weiner has never lived in the lower Manhattan apartment where Huma moved with their seven-year-old son Jordan soon after the disgraced politician went to prison. Abedin had filed for divorce, but has since withdrawn her petition, after the two parties decided to settle the issue privately. Abedin initially filed for divorce on the day Weiner entered his guilty plea for sexting a 15-year-old girl.

It's not clear where Weiner had been staying since leaving his Bronx halfway house, where he was sent after spending 21 months in custody.

When he was leaving his halfway house in May, Weiner told reporters he hoped to get his family back and make up for lost time.  Weiner, who is a registered level one sex offender, said "I hope to be able to live a life of integrity and service, and I’m glad this chapter of my life is behind me."


Anthony Weiner moving his things

Since his release, Weiner has reportedly been pushing a marijuana business on potential investors, and shopping a book deal around.

The DM offered some amusing eye-witness details about an awkward encounter with Weiner at a coffeeshop.

A source told of the meeting: "Weiner was advising the other man on how to approach investors and said, '"Tell them you have this great venture and then be like, I know the perfect guy'."

"Weiner appeared to be referring to himself and explaining how to get other money on board but conceal his involvement."

He told one potential investor that the "sexual stuff shouldn't matter." 

The "stuf" he referred to were explicit text messages he exchanged with a 15-year-old girl while he was married in September 2016.

Among them was one text which read: "I would bust that tight p***y so hard you would leak and limp for a week."

He originally made contact with the girl on Twitter. 

But given the Congressman's tainted reputation, we imagine a multimillion dollar book deal is his best shot at making a living comparable to what he enjoyed before his political career finished prematurely when Weiner accidentally tweeted a close-up shot of his bulging genitals.

Published:7/22/2019 11:43:16 AM
[Markets] Extreme heat kills more than 600 Americans a year — here are the best ways to stay cool Sweltering conditions can single out certain groups for more danger.
Published:7/22/2019 11:43:16 AM
[Markets] Apple stock leads Dow higher after Morgan Stanley cites ‘attractive’ earnings setup Apple Inc. shares are rising in Monday morning trading after an analyst at Morgan Stanley praised the “attractive” setup heading into the company’s earnings report next Tuesday. Published:7/22/2019 10:43:26 AM
[Markets] Key Words: Sen. Elizabeth Warren says ‘warning lights are flashing,’ cautions that ‘odds of another economic downturn are high’ Sen. Elizabeth Warren, a Massachusetts senator, warns that risks are growing in the economy and the financial market
Published:7/22/2019 10:43:26 AM
[Markets] UK Minister Resigns, Tries To Topple Johnson Government Before It's Even Official

In a race that has been marked by mostly harmless scandal (the altercation between Boris Johnson and girlfriend Carrie Symonds being an exception), some exciting developments are threatening to topple Johnson's administration before it even begins.


Alan Duncan

Ministers' discomfort with serving under Boris Johnson have manifested in a series of resignations in recent days.

And on Monday, one of Johnson's longtime enemies within the Conservative Party became the latest to resign and try to be a thorn in Johnson's side, and possibly even scuttle hiswell-laid path to No. 10.

In a letter to Prime Minister Theresa May, Sir Alan Duncan resigned his post as foreign office minister, saying it was "customary" for ministers to step aside upon the changing of a PM, and added that it would free to "express my views" ahead of May leaving office.

May accepted Duncan's offer and thanked him for his "distinguished" service.

Though many still refuse to believe that Brexit, or a no-deal Brexit, is even possible...


...Duncan immediately tried calling for a vote that, through a series of technicalities, would have amounted to a de facto confidence vote in Johnson.

But Duncan was stymied by Speaker John Bercow, who blocked his bid.

But even if enough support for the next leader was registered in the vote, it might have exposed how shaky a Johnson government would be.

In an interview with the BBC, Duncan said he wanted the Commons to hold an effective confidence vote in Johnson on Tuesday, after Johnson is declared the new Tory leader, but one day before he is sworn in as PM. Some saw the maneuver as a long-time critic trying to undercut Johnson, but Duncan insisted he wanted Johnson's government to succeed.

But, Duncan argued, this would be the first time in living memory where a minority government changes PM mid-term. To avoid a "constitutional crisis," Duncan said he thought it was important to establish that Johnson had the confidence of the Commons.

Recent polls show Johnson is expected to defeat his rival, Jeremy Hunt, by a landslide.

Infographic: Leadership election: Johnson heading for landslide victory  | Statista You will find more infographics at Statista

But with Duncan now the fourth minister to resign from May's government in recent days, the vote just underscores how tenuous Johnson's government's grip on power will be.

Duncan, who once served under Johnson when Johnson was Foreign Secretary, said he was "totally" loyal to Johnson when he was his deputy, but that he nonetheless had serious concerns about Johnson's ability to lead. He suggested that he believes Jeremy Hunt, Johnson's opponent and Secretary of State for Foreign and Commonwealth Affairs, would be the more competent leader, despite widely held expectations that Johnson will win a ballot of Tory members.

"When I was his deputy I was totally loyal. We never had an argument. I never bad mouthed him. So I’ve served both foreign secretaries. And I’ve no doubt which of the two is the more capable and more competent. So I have very grave concerns that he flies by the seat of his pants, and it’s all a bit haphazard and ramshackle. But there’s no personal animosity of any sort. I just think he’s going to go smack into a crisis of government."

Rumors have been spreading that Europe is preparing to offer Johnson a new deal to try and avert a "no deal" Brexit, something that Johnson seems increasingly intent on delivering.

Published:7/22/2019 10:43:26 AM
[Markets] Boeing Drops, Drags Dow To Session Lows After Fitch Puts Single-A Rating In Danger Of Downgrade

With the ongoing debacle over the 737 MAX seemingly getting worse by the day, a potentially far more ominous development hit today when rating agency Fitch warned that it may downgrade Boeing as the grounding of the ill-fated airplane stretches into the 5th month.

Citing regulatory uncertainty around the return to service of Boeing's workhorse jet and the “growing logistical challenge” of getting parked planes back in the air, Fitch said Boeing's credit rating was threatened as its cut its credit outlook for the aerospace giant while confirming its single-A, the sixth-highest investment-grade rating, and adding that there’s also a risk that the company will have to make costlier concessions to airlines.

The challenge for Boeing is not just how to get the grounded planes in the air; in the longer term, Fitch said the Max’s grounding presents a significant public-relations challenge that will remain a risk for “Boeing’s reputation and brand” into next year and beyond.

“Fitch also expects there will be a lingering operating-margin impact for several years after the 737 Max returns to service,” the ratings company said.

Boeing is currently rated A2 by Moody and A by S&P, which both have stable outlooks on the company, although we expect these to be cut soon now that Fitch has broken the seal. S&P said last week that Boeing’s announcement that it will be taking a $5.6 billion pretax charge to compensate for the grounding of the 737 Max wouldn’t affect the company’s credit ratings. But S&P warned that more damaging effects to Boeing’s financials or a “substantial loss” in market share to the 737 could warrant a downgrade.

While Boeing’s bonds were unchanged after Fitch’s report, BA stock dropped and since Boeing is the most important Dow member, the industrial average quickly slumped to session lows.


Published:7/22/2019 10:14:27 AM
[Markets] The Wall Street Journal: Johnson & Johnson faces key test in defense against talc-safety lawsuits Johnson & Johnson, still facing thousands of lawsuits over the safety of its signature baby powder after losing several trials, will make a high-stakes attempt to head off future losses in a courtroom battle beginning Monday.
Published:7/22/2019 10:14:26 AM
[Markets] Tech stocks keep stock market mostly buoyant; Boeing’s shares weigh on the Dow Stocks are rising Monday as investors adjust expectations around a widely anticipated rate cut by the Federal Reserve at the end of the month and brace for a deluge of corporate results after a strong start to earnings season. Published:7/22/2019 9:43:07 AM
[Markets] Comey Under DOJ Investigation For Misleading Trump While Targeting Him In FBI Probe

Former FBI Director James Comey has been under investigation for misleading President Trump - telling him in private that he wasn't the target of an ongoing FBI probe, while refusing to admit to this in public.

According to RealClearInvestigations' Paul Sperry, "Justice Department Inspector General Michael Horowitz will file a report in September which contains evidence that Comey was misleading the president" while conducting an active investigation against him. 

Even as he repeatedly assured Trump that he was not a target, the former director was secretly trying to build a conspiracy case against the president, while at times acting as an investigative agent. -RCI

According to two US officials familiar with Horowitz's upcoming report on FBI misconduct, Comey was essentially "running a covert operation" against Trump - which began with a private "defensive briefing" shortly after the inauguration. RCI's sources say that Horowitz has pored over text messages between the FBI's former top-brass and other communications suggesting that Comey was in fact conducting a "counterintelligence assessment" of the president during their January 2017 meeting in New York. 

What's more, Comey had an FBI agent in the White House who reported the activities of Trump and his aides, according to 'other officials familiar with the matter.' 

The agent, Anthony Ferrante, who specialized in cyber crime, left the White House around the same time Comey was fired and soon joined a security consulting firm, where he contracted with BuzzFeed to lead the news site's efforts to verify the Steele dossier, in connection with a defamation lawsuit. -RCI

According to the report, Horowitz and his team have examined over 1 million documents and conducted over 100 interviews - including sit-downs with Comey and other current and former FBI and DOJ employees. "The period covering Comey’s activities is believed to run from early January 2017 to early May 2017, when Comey was fired and his deputy Andrew McCabe, as the acting FBI director, formally opened full counterintelligence and obstruction investigations of the president." 

McCabe’s deputy, Lisa Page, appeared to dissemble last year when asked in closed-door testimony before the House Judiciary Committee if Comey and other FBI brass discussed opening an obstruction case against Trump prior to his firing in May 2017. Initially, she flatly denied it, swearing: “Obstruction of justice was not a topic of conversation during the time frame you have described.” But then, after conferring with her FBI-assigned lawyer, she announced: “I need to take back my prior statement.” Page later conceded that there could have been at least “discussions about potential criminal activity” involving the president. -RCI

Comey coordination

Sperry notes that Comey wasn't working in isolation on the Trump effort. In particular, Horowitz has looked at the January 6, 2017 briefing on the infamous 'Steele Dossier' - a meeting which was used by BuzzFeed, CNN and others to legitimize reporting on the dossier's salacious and unsubstantiated claims

Comey’s meeting with Trump took place one day after the FBI director met in the Oval Office with President Obama and Vice President Joe Biden to discuss how to brief Trump — a meeting attended by National Security Adviser Susan Rice, Homeland Security Secretary Jeh Johnson, Deputy Attorney General Sally Yates and National Intelligence Director James Clapper, who would soon go to work for CNN. -RCI

While Comey claims in his book, "A Higher Loyalty" that he didn't have "a counterintelligence case file open on [Trump]," former federal prosecutor and National Review columnist Andrew McCarthy notes that just because Trump's name wasn't on a formal file or surveillance warrant doesn't mean that he wasn't under investigation. 

"They were hoping to surveil him incidentally, and they were trying to make a case on him," said McCarthy. "The real reason Comey did not want to repeat publicly the assurances he made to Trump privately is that these assurances were misleading. The FBI strung Trump along, telling him he was not a suspect while structuring the investigation in accordance with the reality that Trump was the main subject."

What's more, the FBI couldn't treat Trump as a suspect - formally, as they didn't have the legal grounds to do so according to former FBI counterintelligence lawyer Mark Wauck. "They had no probable cause against Trump himself for ‘collusion’ or espionage," he said, adding "They were scrambling to come up with anything to hang a hat on, but had found nothing."

What remains unclear is why Comey would take such extraordinary steps against a sitting president. The Mueller report concluded there was no basis for the Trump-Russia collusion conspiracy theories. Comey himself was an early skeptic of the Steele dossier -- the opposition research memos paid for by Hillary Clinton’s campaign that were the road map of collusion theories – which he dismissed as “salacious and unverified.” -RCI

According to House Intelligence Committee Vice Chairman Devin Nunes (R-CA), Comey and the rest of the FBI's top team (including Peter Strzok and Lisa Page) were attempting to "stop" Trump's presidency for political reasons. 

"You have the culmination of the ultimate spying, where you have the FBI director spying on the president, taking notes [and] illegally leaking those notes of classified information" to the MSM, said Nunes in a recent interview. 

Read the rest of Sperry's report here

Published:7/22/2019 9:43:07 AM
[Markets] The Ratings Game: Micron stock rises after Goldman cheers shrinking inventories Memory companies appear to be depleting their NAND inventories more quickly than anticipated, and that’s good news for Micron Technology Inc., according to Goldman Sachs.
Published:7/22/2019 9:43:07 AM
[Markets] Pirates Storm Korean Ship In The Singapore Strait; Steal Cash, Clothes And Shoes

For years, the area around the Red Sea, the Bab al-Mandab strait and the Gulf of Aden was the preferred venue for maritime pirates - mostly of Somali and Yemeni origin - who had become the scourge of Suez-crossing tankers headed to and from the Persian Gulf, at least until a coordinated military response by US and regional navies successfully eradicated much of the local piracy threat. But as piracy off Africa's east (and occasionally west) coast faded, a nest of pirates appears to have re-emerged in the highly trafficked Singapore Strait in the South China Sea.

It was there that pirates stormed and raided a South Korean-flagged cargo ship early on Monday, "stealing thousands of dollars in cash and even the sailors’ shoes" according to Reuters citing South Korean authorities.

Two people sustained minor injuries when seven pirates - who were armed with guns and knives - boarded the bulk carrier CK Bluebell and made off with $13,000 and belongings including mobile phones, clothes and shoes from the crew of 22, officials from the oceans and fisheries ministry said.

Two of the crew on the CK Bluebell sustained minor injuries

The dry bulk vessel CK Bluebell had set sail from its anchorage off Singapore on Saturday afternoon, heading northeast for South Korea’s port of Incheon, Marine Traffic ship tracking data showed.

Korean officials said the ship was sailing normally after the robbery.

"Seven pirates, including one carrying a gun and two armed with knives, got on board and assaulted the sailors for about 30 minutes," an official at the Ministry of Maritime Affairs and Fisheries told the Yonhap news agency.

While the incident took place near the Singapore Strait, a busy sea lane that runs past Indonesia, Malaysia and Singapore, Singapore’s Maritime and Port Authority (MPA) said the incident did not take place in city-state’s waters.

“The MPA was informed by the Korea Coast Guard that it took place in the South China Sea near Anambas Islands,” a spokesman said.

The pirate attack takes place after China’s Ministry of Transport raised its security recommendation for Chinese vessels in the nearby Malacca Strait, between the Malay peninsula and the Indonesian island of Sumatra earlier this month.

A Chinese official declined to specify the reason for the new security level, saying only that the decision was the result of comprehensive research taking into account all factors.

While tougher policing on the route has made piracy less frequent on the strategic shipping route in recent years - similar to the decline in piracy off Africa's coastline - piracy has seen an increase on the world's seas, with the International Chamber of Commerce recording 201 incidents of maritime piracy and armed robbery in 2018, up from 180 in 2017.

The South China Sea is home to vital shipping lanes, but in recent years has also become a flashpoint for tensions between China and several regional nations which have overlapping claims over islands and reefs.

Published:7/22/2019 9:15:07 AM
[Markets] U.S. stocks edge upward ahead of earnings deluge U.S. stocks edge upward ahead of earnings deluge Published:7/22/2019 9:15:07 AM
[Markets] US STOCKS-Wall Street gains as earnings season gathers steam U.S. stocks rose on Monday, lifted by technology companies, as investors eyed fresh U.S.-China trade developments during a busy week of corporate earnings with results from marquee names including Facebook and Amazon on tap. The South China Morning Post reported U.S. trade negotiators will likely visit China next week for their first face-to-face talk with Chinese officials since the G20 meeting, when Trump held off on fresh tariffs on Chinese goods. Facebook Inc, Inc and Google-parent Alphabet Inc, up between 0.1% and 1%, are reporting between Wednesday and Thursday. Published:7/22/2019 9:15:07 AM
[Markets] Etsy to pay $275 million for vintage-musical-instrument vendor Reverb Etsy to pay $275 million for vintage-musical-instrument vendor Reverb Published:7/22/2019 8:43:06 AM
[Markets] Earnings Outlook: Biogen, Celgene, Bristol-Myers and AbbVie report earnings this week: Here’s what to expect The biotech sector’s earnings kick off in earnest this week.
Published:7/22/2019 8:43:06 AM
[Markets] U.S. stocks open slightly higher as Dow faces earnings season's busiest week U.S. stock indexes on Monday kicked off the week with slight gains as investors prepped for a barrage of earnings, including a third of the S&P 500 index and the Dow Jones Industrial Average . The Dow opened up 0.1% at 27,180, a gain of 30 points, the S&P 500 index advanced 0.2% at 2,983, while the Nasdaq Composite Index kicked off Monday trade 0.4% higher at 8,176. All three benchmarks finished Friday's session with weekly losses. There are 144 S&P 500 components expected to report corporate results this week and 10 of the Dow's 30 components, representing the busiest week for the blue-chip index and the second-busiest week for the S&P 500. Published:7/22/2019 8:43:06 AM
[Markets] Fed's National Activity Index Contracts For 7th Straight Month - Longest Streak Since 2009

Against hope-filled expectations of 0.08 print, Chicago Fed's National Activity Index disappointed once again, down 0.02 in June. This is the seventh month of declines in a row - the longest streak of contraction since the financial crisis.

36 indicators improved from May to June, while 49 indicators deteriorated (but of the indicators that improved, nine made negative contributions).

40 of the 85 monthly individual indicators made positive contributions, while 45 indicators affected the index negatively.

Only the 'employment'-related indicators suggested growth in June...

And this is all happening with stocks at record highs?

Published:7/22/2019 8:43:05 AM
[Markets] Health Exchange: These two common health issues in young adulthood can increase your risk of heart failure by up to 37% By 2035, cardiovascular disease will place a ‘crushing economic and health burden’ on the U.S. if left unchecked, according to the American Heart Association.
Published:7/22/2019 8:12:43 AM
[Markets] F.I.R.E. – Ignited By The Bull, Extinguished By The Bear

Authored by Lance Roberts via,

Do you remember this commercial?

The Etrade commercial aired during Super Bowl XLI in 2007. The following year, the financial crisis set in, markets plunged, and investors lost 50%, or more, of their wealth.

However, this wasn’t the first time it happened.

The same thing happened in late 1999. This commercial was aired 2-months shy of the beginning of the “” bust as investors once again believed “investing was as easy as 1-2-3.”

Why this trip down memory lane? (Other than the fact the commercials are hilarious to watch.)

Because this is typical of the mindset seen at the end of extremely long “cyclical” bull market cycles. 

Investing is simple. Just throw you money in the market and it goes up. Its so easy a “baby can do it.”

Here is something else you see at the end of bull market cycles:

 “This couple retired at 31 with $1 Million: Want to retire early? How “going against the grain” allowed this FIRE couple to ditch their jobs and travel the world.

How did they make this happen? Shen and Leung, who was also a computer engineer, are part of the FIRE movement — which stands for Financial Independence, Retire Early — where the goal is to save a lot so you can retire early. The couple retired at 31 with roughly $1 million in the bank. They’re currently withdrawing 3.5% a year from that nest egg, and say they can easily travel the world on that money — as they’ve got lots of practice being frugal.”

First, I want to give the couple a “fanatical thumbs up” for saving $1 million by their 30’s. That is an amazing feat which deserves respect and acknowledgment. 

Secondly, they are very budget conscious and willing to sacrifice the luxuries most people long for to live their dream.

Another “thumbs up.”

However, the rise of the “F.I.R.E.” movement is symptomatic of a late stage bull market advance. More importantly, we can also predict how things will turn out for Shen and Leung.

For this discussion I want to use the data provided by Shen and Leung to build our examples.

  • Invested asset value:  $1 million

  • Annualized withdrawal rate: 3.5%

  • Annualized return rate: 6% (Not specified but a reasonable estimate)

  • Living needs: $35,000 annually.

  • Life expectency: 85-years of age.

With these assumptions in place we can begin to do some forecasting about how things eventually turn out. However, we also have to assume:

  • The couple never has children

  • Never requires serious medical care (hopefully)

  • Never considers buying a house

  • Has no major life events, etc.

First, we need to start with the cost of living. As I showed recently in Part 1 of “Everything You’ve Been Told About Savings & Investing Is Wrong” is that the cost of living rises over time due to inflation. However, for most the increase in living costs rises dramatically more as needs for housing, children, education, travel, insurance, and health care occur through stages of life.

For this exercise, we will assume our example couple never changes their lifestyle so only inflation is a factor. We will use the historical average of 2.1% and project it out for 50-years.

Understanding this, we can now take their $1 million, compound it at 6% annually (the preferred mainstream method), and deduct 3.5% annually adjusted for inflation over their 50-year time horizon.

We need to assume that since our couple is in their 30’s, the investable assets are in taxable accounts. Also, if this is the case, and they are not touching the principal, then we need to adjust the annual withdrawals for capital gains tax. The bottom two area charts adjust for 2.1% annual inflation and inflation plus a 15% tax on withdrawals. (Tax is paid on the gains taken to fund the withdrawal and the dividends paid in on an annual basis)

Not surprisingly, if our couple can indeed live on $35,000 a year, even when adjusting for inflation and taxation, a $1 million portfolio growing at 6% annually can indeed support them for their entire lifespan.

Reality Is Different

In Part 3 of our recent series on “saving and investing,” we laid out the issue, and importance, of variable rates of return. To wit:

“When imputing volatility into returns, the differential between what investors were promised (and this is a huge flaw in financial planning) and what happened to their money is substantial over long-term time frames.”

The chart below is exactly the same as above, however, this time we have used the average annual 50-year returns from previous periods in history where starting valuations were greater than 20x earnings as they are today. (High starting valuations beget lower future returns historically speaking.) 

Over a 50-years, our couple will get the benefit of complete valuation and market cycles. In this case, since they are starting with high valuations at the outset, the first 30-years contains a long-period of lower returns, but that last 20-years receives the benefit of higher returns due to valuation reversion.

Due to market volatility and periods of negative growth, the original $1 million portfolio only grows to $3 million when including nominal spending. However, when accounting for volatility, inflation, and taxes, the survival rate of the portfolio diminishes sharply due to two reasons:

  1. Down years reduce the growth rate of the portfolio over the given time frame.

  2. Withdrawals in down years exacerbate the decline in the portfolio. (i.e. Portfolio declines by $65,000 plus the $35,000 annual withdrawal increases the 6.5% decline to 10%.)

Obviously, not accounting for volatility when planning to retire early can have severe future consequences. In this case they will run out of money in year 47.

The Big Bad Bear

As I said at the beginning of this missive, the “F.I.R.E.” movement is the result of a decade-long bull market cycle.

Most likely, our young couple will be met with a “bear market” sooner, rather than later, in their early retirement. If we use the return model from our recent article on “investors and pension funds,” we see a rather dramatic shift in life-expectancy of the portfolio.

“The chart below is the S&P 500 TOTAL REAL return from 1995 to present. I have projected an average return of every period in history where the market peaked following P/E’s exceeding 20x earnings. This provides for variable rates of market returns with cycling bull and bear markets out to 2060. I have also projected ‘average’ returns from 3% to 8% from 1995 to 2060. (The average real total return for the entire period is 6.56% which is likely higher than what current valuation and demographic trends suggest it should be.)”

The benefit of this model is that it shows the impact to portfolio returns when bear markets are “front-loaded,” as will likely be the case for most the “F.I.R.E.” followers. (Note, in the return model above the “bear market” is 5-years into the future)

The reason for the dramatic short-fall is that a major, “rip your face off,” bear market will cut asset values by 50% very early on. All of a sudden, the annual withdrawal rate of 3.5% becomes 7%, which outpaces the ability of the portfolio to grow fast enough to catch up with the withdrawal rate and the loss of principal. In this more realistic example, our couple will run out of money in 30 years.

This is the exact problem “pension funds” face currently.

The Other Problems From “Playing With F.I.R.E.”

While we have mainly addressed the issues surrounding assumptions being used by the ‘F.I.R.E.”movement in having enough assets to retire, there are some other important issues which should be considered.

  1. Loss of your skill set. In retirement it is probable your skill set erodes and becomes outdated over time. New technologies, trends, innovations, etc. are running at a faster pace than ever.

  2. Becoming unemployable. One of the things seen following the financial crisis was employers preferring to hire individuals who were already employed rather than hiring those out of work. The reasoning was that if you were good enough to keep your job during the recession, you obviously have a valuable skill set. Once you are out of the “labor force” for a while, it becomes more difficult to regain employment as employers tend to prefer those with a very steady work history, a growing career, and relevant skill sets.

  3. Life. Besides simply running out of money sooner than you planned because of a bear market, a rising cost of living more than you counted on, or higher taxes (all of which are very likely in the near future) there is also just “life.”  It doesn’t matter how carefully you plan; “S*** Happens!” More importantly, it always happens when you least expect it and at the worst possible time. These things cost money and impact our best laid spending and saving plans. The problem with “retiring early,” is that it leaves plenty of time for things to go wrong. 

  4. Unplanned Accident/Medical Problem. Young people suffer from an “invincibility syndrome.” They tend to not carry insurance, due to the cost, because they “never get sick.” While we certainly hope it never happens, a major accident or health issue can extract tens to hundreds of thousands of dollars of capital critically impairing retirement plans.

  5. Too Old To Do Anything About It. The biggest problem for “F.I.R.E.” practitioners is that running out of money late in life leaves VERY few options for the rest of your retirement years. If our math above is even close to correct, which history suggests it is, then our young couple will be faced with going back to work in the 70’s. That is not exactly the retirement most are hoping for. 

As I stated in our previous series, retiring early is far more expensive than most realize. Furthermore, not accounting for variable rates of returns, lower forward returns due to high valuations, and not adjusting for inflation and taxes will leave most far short of their goals. 

While it sounds like I am bashing the “F.I.R.E. Movement,” I am not. I am for ANY program or system that gets young people to save more, stay out of debt, and invest cautiously. The movement is a good thing and it should be embraced.

But, it is also a symptom of a decade-long period of making “easy money” in the financial markets.

These periods ALWAYS end badly and the next “bear market” will quickly “extinguish the F.I.R.E.” as losses mount and dreams have to be put on hold.

It will happen. It always appears easiest at the top.

And, given one of E*Trade’s latest commercials, the next bear market may be coming sooner than we expect.

Published:7/22/2019 8:12:43 AM
[Markets] Nasdaq, Chips Leads Stock Futures Higher; Disney Stock Lifts Dow Jones Industrial Index The Nasdaq led stock futures higher Monday as three chip stock upgrades sweetened early trade. Disney led the Dow Jones industrial index. Published:7/22/2019 7:43:31 AM
[Markets] Trump Slams Fed's "Misguided" Tightening, Warns "Far More Costly" To Wait To Cut Rates

Members of the FOMC might be in their "quiet period" ahead of the July Fed meeting, where the board is expected to cut interest rates by at least 25 bp, but President Trump's attacks on the central bank continue.

In a series of tweets, Trump combines his criticisms of the central bank's "misguided" policy with accusations that other countries are manipulating their currencies and Trump warned that it would be "Far more costly" for the Fed to wait to cut interest rates should a downturn take place, than to cut now and prevent a downturn by being proactive.

In other words, Trump has basically strung together all of his prior criticisms of the Fed to remind policy makers with just over a week to go before their next policy meeting that he's expecting a cut.


As we pointed out over the weekend, analysts at Morgan Stanley actually agree with Trump.

Will the Committee cut by 50bp all at once, or in a gradual fashion reminiscent of the recent tightening cycle? Morgan's  Matthew Hornbach asks.

In this regard, we note a deeply held view among monetary policy-makers that near the zero lower bound the Fed must act aggressively when low inflation or a downturn threatens. The message to policy-makers today? Don't keep your powder dry. In addition, our own simulations have shown that, in terms of a positive impact on the economy, 25bp in cuts is a rounding error, while 50bp might be enough to mitigate the downside risks we face today.


And the last three easing cycles all started with a 50 bp cut.

Published:7/22/2019 7:43:31 AM
[Markets] Need to Know: Trump’s stock market still lags Obama’s, but that could be about to change Donald Trump loves telling us all about how great the stock market has done under his leadership. And why not? Despite a few hiccups, it’s been a great run.
Published:7/22/2019 7:43:31 AM
[Markets] DaVita's stock rallies after profit outlook raised Shares of DaVita Inc. rallied 4.2% in premarket trading Monday, after the dialysis services company raised its profit outlook, as it looks to update investors ahead of the expected modified "Dutch auction" to buy back up to $1.2 billion worth of its shares. The company said it now expects second-quarter operating income of $460 million to $465 million, which is above the FactSet consensus of $398 million. DaVita also expects second-quarter non-acquired treatment growth of 2.1% and revenue per treatment to increase by about $1.60 from the first quarter to $350. For 2019, the company raised its adjusted operating income guidance to $1.64 billion to $1.70 billion from $1.54 billion to $1.64 billion. Separately, the company said the auction for its shares will be at a price per share of "not less than $53.50 nor greater than $61.50." The stock closed Friday at $56.05. It has gained 9.7% over the past three months, while the SPDR Health Care Select Sector ETF has advanced 6.7% and the Dow Jones Industrial Average has tacked on 2.4%. Published:7/22/2019 7:13:51 AM
[Markets] Tesla investors expect quarterly loss but hope demand is intact Tesla investors expect quarterly loss but hope demand is intact Published:7/22/2019 7:13:51 AM
[Markets] Blain: This Really Is Not A Good Time To Be A Central Banker

Blain's Morning Porridge, submitted by Bill Blain of Shard Capital

Thanks goodness for all the happy pictures of Prince George’s Birthday across the papers this morning. Not much else to celebrate here in Blighty. We’re about see a screed of cabinet ministers resign before they are pushed, while other Tories are threatening to decamp to the Liberals.. (which is likely to prove a career call ranking alongside joining Deutsche’s equity trading team..). The prospect of Boris? The Scots are going to demand immediate independence. What could possibly make the mood worse? All we really need now to complete the misery would be something scandalous from up in the Turnip growing regions.. and the country will tip into utter despair and despondency…

There is plenty of noise out there – tankers being seized in the Gulf, more demonstrations in Hong Kong and Trump digging his hole even deeper. Much talk over the weekend about how the US news about Trump’s racism is covering up the real story of the summer – who has Jeffrey Epstein been pimping for? More will no doubt be revealed.  In terms of investments – passive stock funds do best, alpha funds trying to beat the market lost. The market can stay irrational longer than you can stay solvent has never been more true.

In terms of markets the coming two weeks are likely to be dominated by Central Banks. What addictive crack of lower rates and QE infinity will the ECB foist on Europe? After last week’s spat about Fed members giving poorly coordinated academic speeches to market audiences suggesting a double cut was on the way, what will Fed do at the end of the month? (The answers: i) wait, and kick the can down road, ii) 25 bp ease.)

This really is not a good time to be a central banker. For a start, the last 10 years of stunning economic growth and shared wealth expansion across the global economy, the last 10 years of stuttering faltering growth, monetary experimentation, rising social and wealth inequality and pointlessly low interest rates is being squarely blamed on their policy responses. Their solution? More of the same… It’s not a confidence building agenda.

The dangers are about credibility – what does the increasing politicisation of Central Banking mean for markets as their credentials are increasingly strained? The theme central bankers have screwed up and governments can’t be trusted is being exploited by crypto-currency snake oil salesman, and by big business that understands the attractions of non-government fiat money – unregulated - which is why banks are flirting with crypto and Facebook dipped its Libra idea to test the waters. Others are trying to crypo-ize gold – one scheme I’ve seen is a gold crypto coin backed by a fortress-vault hidden in the Swiss alps guarded by former Mossad agents! The consequences of a fiat breakdown could be horrible.

Central banks being independent is a comparatively recent notion. Giving them tightly defined objectives was designed to stop them simply juicing Government policy – but given the last 10-years of economic mayhem its hardly surprising they “tried to help”. Just a shame it’s gone so badly.

There are variations on the problems of Central Banking. The ECB is about politics – rebuilding Europe’s moribund economy needs a political figurehead to move on from the Mario Draghi age and pull Europe towards agreement on fiscal policy. However, do the German’s get that? It really worries me when I read an in-depth report by a German bank on domestic politics, and it doesn’t mention Europe once! Without German participation and agreement on fiscal union, then Europe and the Euro remains an ongoing crisis.

The Fed is a very different matter – Trump behaves like it’s his own personal piggy bank, at his beck and call to support the illusion he’s selling to his part of the electorate: “hey look, I’ve made the stock market strong, therefore I’ve Made America Great!”. For the Fed to capitulate would be a very bad thing indeed.

Why? Oh, would you really like the last 10-years of monetary distortion on financial assets to continue, ultra-low rates, corporate leverage, income inequality and financial asset inflation? Well, lots of short-term market professionals say yes – what’s not to like about rising bond and equity prices… Oh, nothing, except the higher they go, the more distorted they become..

The result is bad financial allocations – money chasing over-expensive financial assets and pushing investors to buy impossibly tighter, less liquid and more risky junk bonds and dimly understood equity models. Paying more for lower returns and lower liquidity is not a smart investment policy. And it’s just as bad in stock markets - last week I got pages of abuse for not understanding the value of Netflix. What’s not to understand? They charge too much for a lacklustre product while customers are leaving/not signing up and going elsewhere to binge-watch, while markets will be increasingly sensitive to funding them. But people buy it on the dips because they believe?

Being a central banker today has become a matter of patronage. The IMF job – which is traditionally run by a European - will be decided by the EU Brussels Blundership, largely on the basis that since Europe’s socialists didn’t get much of a share of the Brussels Jobs for the Boys, then they will get the IMF sinecure as a consolidation prize. Which one? Doesn’t much matter… But, no offense to unoffensive Dutch Finance Minister, Jerome Dijsselbloem, whomever Europe nominates is likely a bad compromise.

The best known technocratic central banker without a seat at the new table looks to be Mark Carney. He hasn’t been everyone’s cup of tea while head of the Bank of England, but he is a proper banker, rather than a second-career politician. He’s got the technical credentials and head for detail that’s needed to build credibility – a critical role for central bankers in today’s fervid markets. If confidence in the IMF and other global institutions wanes because its seen as European sideshow (which it became under Legarde), then the next move is not a compelling one.

Back to the UK…

Rumours and counter rumours about the soon to be upon us “First 100 Days of Boris” – which will  incidentally be November 1st, the day after Boris promises we leave Europe with or without a deal. Without being harsh, opinionated or balanced – I give him ZERO chance of success. But I’ll be delighted if he can pull it off.

How will his rumoured European charm offensive work? Is Europe preparing a coordinated and enticing new deal for him? Is there a solution? Does Boris think an easier Irish backstop and more open dialog with Europe will pass muster with the No-Deal Brexit hard wing? Oh what fun we have to look forward to. Still selling sterling…

My immediate bet remains an Early Election as it becomes clear i) he can’t command a majority, ii) he can’t close any deal, and then line up another Tory Leader as the UK fragments.

Published:7/22/2019 7:13:51 AM
[Markets] Market Snapshot: Stock futures point to higher start ahead of earnings deluge Stock-index futures point to a higher start for Wall Street on Monday as investors adjust expectations around a widely anticipated rate cut by the Federal Reserve at the end of the month and brace for a deluge of corporate results after a strong start to earnings season.
Published:7/22/2019 6:44:42 AM
[Markets] TSX futures rise as oil prices gain Published:7/22/2019 6:44:42 AM
[Markets] Global Markets Rebound Ahead Of Earnings And News Deluge

US equity futures followed European stocks higher, following a mixed session in Asia as investors looked ahead to a busy week of corporate earnings in which 145 S&P 500 and 10 of the Dow 30 companies are due to report. Oil gained amid tensions in the Persian Gulf, while the dollar continued to rise amid concerns the Fed may disappoint with a smaller than expected rate cut.

Europe's STOXX 600 index gained 0.1%, while Germany's DAX and France's CAC rose 0.3% and Britain's FTSE jumped 0.5% as traders reversed the wave of selling observed earlier in the Asian session. Energy and mining shares lead gains after crude oil prices jumped at least $1 per barrel, on concern that Iran’s seizure of a British tanker last week may lead to disruptions in the Middle East. European losses were led by real estate stocks which would benefit from lower interest rates and defensive sectors such as utilities and telecoms ahead of a big week for earnings.

“Sentiment about company earnings potential appears to be mixed at best, with some evidence that we might be seeing a bit of a pickup in economic data, after a slow first half of the year,” said Michael Hewson at CMC Markets. “The pickup in U.S. economic data last week, as well as contradictory commentary from Fed officials, appears to be muddying the waters for investors about the possible reaction function of the U.S. Federal Reserve at the end of this month and whether we can expect to see a 25 basis point or 50 basis point rate cut.”

The MSCI world index dipped 0.2% in early trading, pulling away from the near-year-and-a-half high reached earlier in June after most Asian stocks fell, led by health care and financials, as optimism for aggressive monetary easing dwindled and as the earnings season accelerated. Most regional markets fell, with Hong Kong and China leading losses. The Topix retreated 0.5%, driven by Asahi Group Holdings, Daiichi Sankyo Co. and Nintendo Co., after Japanese Prime Minister Shinzo Abe claimed victory in Sunday’s upper house election. Hong Kong’s Hang Seng Index extended declines in the afternoon even as Chief Executive Carrie Lam condemned political protesters and their aggressors, promising to investigate violent attacks.

Momentum looked better on Wall Street, where S&P500 Emini futures pointed to a 0.3% higher open.

Global stocks rose toward the end of last week after dovish comments by New York Fed President John Williams boosted expectations the world’s top central bank would lower rates by 50 basis points at its July 30-31 meeting. However, they gave back those gains after the New York Fed walked back Williams’ comments by saying his speech was not about upcoming policy action.

Hopes for a larger cut were curtailed even more after the Wall Street Journal reported late on Friday that the Fed was likely to cut rates by 25 bps this month, and may trim further in the future given global growth and trade uncertainties.

In FX, the dollar inched higher and U.S. Treasury yields held steady on the greater likelihood of a shallower rate cut. The dollar index gained to 97.169 against a basket of six major currencies after rising 0.4% on Friday. The euro was little changed at $1.1217 after shedding 0.5% on Friday. The New Zealand dollar leads currency gains; the pound was the biggest loser, falling from the European open as Johnson’s expected victory is predicted to spur at least two more resignations from the Conservative cabinet, further increasing the uncertainty over Britain’s departure from the EU

In rates, the benchmark 10-year Treasury yield lingered at 2.0429%. German bunds gained to support Treasuries, while Italian bonds slipped.

“The market is still exaggerating the most likely scale of Fed rate cuts, in our view, by pricing in close to 100bps of easing over the next 12 months,” according to Mark Haefele, chief investment officer at UBS Global Wealth Management. “It remains possible that the market will be disappointed by the pace of Fed easing, in our view. As a result, we are tactically short U.S. two-year government bonds, and focus on carry strategies rather than aggressively increasing equity exposure."

Meanwhile in Brexit news, EU countries are reportedly secretly wooing PM candidate Boris Johnson and signalled an intention to work out a deal to avoid a no-deal disaster. In related news, EU is to prepare an aid package for Ireland to soften no-deal Brexit. US President Trump said he spoke with UK PM candidate Johnson and looks forward to working with him and thinks he will work out Brexit, while there were also reports that Trump expressed concerns with France’s Macron regarding the proposed digital services tax.

Investors are set for a busy week ahead as earnings season ramps up and Thursday sees a monetary policy announcement from the European Central Bank. The Fed meanwhile is in a blackout period ahead of next week’s interest rate decision. Also, trade may come back into the picture soon, with face-to-face negotiations potentially resuming between the top Chinese and U.S. trade negotiators, according to Chinese state media. China Global Times Editor tweeted the Chinese side sees a face-to-face meeting with the US as not far away and expects "actions" may happen soon which would be a sign of goodwill from both sides. In related news, China is reportedly mulling a plan to boost US soybean purchases.

Expected data include the Chicago Fed National Activity Index. Halliburton, Lennox, and Whirlpool are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures up 0.3% to 2,984.75
  • STOXX Europe 600 up 0.2% to 387.82
  • MXAP down 0.5% to 160.11
  • MXAPJ down 0.5% to 527.33
  • Nikkei down 0.2% to 21,416.79
  • Topix down 0.5% to 1,556.37
  • Hang Seng Index down 1.4% to 28,371.26
  • Shanghai Composite down 1.3% to 2,886.97
  • Sensex down 0.9% to 38,012.94
  • Australia S&P/ASX 200 down 0.1% to 6,691.24
  • Kospi down 0.05% to 2,093.34
  • German 10Y yield fell 0.7 bps to -0.331%
  • Euro down 0.02% to $1.1219
  • Italian 10Y yield rose 4.9 bps to 1.252%
  • Spanish 10Y yield unchanged at 0.387%
  • Brent futures up 2.4% to $63.94/bbl
  • Gold spot little changed to $1,425.58
  • U.S. Dollar Index little changed 97.20

Top Overnight News from Bloomberg

  • Face-to-face negotiations between the top Chinese and U.S. trade negotiators could happen soon, according to Chinese state media, after Chinese companies asked U.S. exporters about buying agricultural products and also applied for exemptions from China’s retaliatory tariffs on the goods, state-run Xinhua News Agency reported Sunday
  • A night of protests and clashes in Hong Kong -- including tear gas volleys and roving groups of masked men attacking protesters -- prompted the strongest warnings yet from the Chinese government and fanned fears of escalating violence
  • Oil extended gains as tensions in the Persian Gulf remained elevated after Iran seized a British tanker, and Libyan production fell after an unidentified group reportedly shut the country’s largest field
  • Prime Minister Theresa May will lead a meeting of the UK government’s emergency committee on Monday to discuss the security of shipping in the Persian Gulf after Iran seized a British oil tanker in the Strait of Hormuz last week
  • Japanese Prime Minister Shinzo Abe’s ruling coalition won their sixth straight national election victory in Sunday’s upper house election, but fell short of the supermajority needed to launch a bid to change the pacifist constitution
  • U.S. President Donald Trump will meet with a group of senators this week to discuss possible sanctions against Turkey, the Wall Street Journal reported
  • Theresa May’s successor must move beyond Brexit to restore economic confidence and spur investment, the Confederation of British Industry said as it launched a “business manifesto” for the new government.
  • Some Chinese companies are applying for tariff exemptions as they make inquiries about buying U.S. agricultural products, more than a week after Donald Trump complained that China hasn’t increased its purchases of American farm products
  • Italy’s fractious populist coalition lurches into a make-or-break week as Matteo Salvini decides whether to try to force snap elections while Prime Minister Giuseppe Conte struggles to salvage the government

Asian equity markets traded mostly lower with the region cautious amid dampened hopes for a more aggressive Fed rate cut and geopolitical concerns after Iran seized 2 UK tankers. ASX 200 (-0.1%) and Nikkei 225 (-0.2%) were both subdued at the open although strength in commodity-related stocks briefly spurred a rebound in Australia, while the Japanese benchmark failed to take advantage of a weaker currency as participants reflected on the Upper House election results in which PM Abe’s ruling coalition won a majority of seats but failed to retain the supermajority needed to push ahead with revising the constitution. Elsewhere, Shanghai Comp. (-1.3%) and Hang Seng (-1.5%) declined despite continued liquidity efforts by the PBoC and more constructive language regarding US-China trade talks, with a rotation of funds seen into China’s new Nasdaq-style tech board known as the STAR Market which launched today and saw all of its 25 stocks surge by an average 126% in early trade and with some higher by more than 200%. Finally, 10yr JGBs were steady with only minimal support seen from the lacklustre tone in stocks and BoJ presence for JPY 1.265tln of JGBs mostly in 1yr-10yr maturities.

Top Asian News

  • RBI Easing Is More Than India’s Rate Cuts Suggest, Das Says
  • New Thai Government to Pursue Policies Championed by Junta
  • India Faces ‘Silent Fiscal Crisis’ on Tax Gap, Modi Adviser Says

Major European indices are relatively flat [Eurostoxx 50 +0.1%], albeit near highs of the day following on from a cautious Asia-Pac trade. Sectors are mixed with outperformance seen in the energy sector amid the price action in the complex. In terms of individual movers, Philips (+4.0%) shares rose on the back of optimistic earnings whilst Julius Baer (+2.7%) shares are supported by an 8% in assets under management.

Top European News

  • Italy’s Populists Near Crunch Time, With Salvini Playing God
  • Brexit Nightmare Looms for U.K. Lawyers Forced Out of EU Courts
  • U.K.’s Hammond to Quit If Boris Johnson Wins Race to Succeed May
  • Philips Profit Shows How Plant Rejig Offers Trade War Remedy

In FX, the DXY index has consolidated recovery gains above the 97.000 handle within a relatively tight 97.126-247 range following the final official Fed rhetoric ahead of the pre-FOMC backout period from Bullard who reiterated his preference for a 25 bp cut instead of anything larger. Meanwhile, WSJ sources chimed in with similar ‘guidance’ as recent economic developments do not suggest an imminent downturn that would warrant bolder action, although more easy could be flagged after July, and current market pricing reflects the latest commentary with less than 20% chance of a 50 bp ease.

  • NZD/CAD/AUD - The non-US Dollars are outperforming or at least holding up better than G10 peers, with the Kiwi leading the way on favourable cross-winds as Aud/Nzd retreats through 1.0400 and Nzd/Usd holds nearer last week’s peaks than Aud/Usd between 0.6782-58 and 0.7047-32 respective bands. From a fundamental perspective, the Aussie may glean fresh direction from RBA Assistant Governor Kent later, while the Loonie will be watching Canadian wholesale trade alongside crude prices that are currently supportive and nudging Usd/Cad down through 1.3050 within 1.3068-41 parameters.
  • GBP/JPY/CHF/EUR - All on the backfoot vs the Greenback, and the Pound in particular awaiting the Tory leadership result that is widely expected to see Brexit hard-liner Boris Johnson appointed as new PM and fresh Cabinet faces before the whole process of negotiating with the EU really starts again. Cable is back below 1.2500 and from a chart standpoint looking more bearish as it slips beneath last Friday’s 1.2476 base. Next up would be July 18’s 1.2429 session low, but Sterling is keeping its head just above 0.9000 vs the Euro that is only just maintaining 1.1200+ status vs the Buck ahead of preliminary PMIs on Wednesday and the ECB on Thursday. Note, the probability of a 10 bp reduction in the depo rate is 50%, while some are also looking for the QE taps to be reopened, albeit not this month. Elsewhere, the Franc is hovering just below 0.9800 and 1.0100 vs the single currency, wary that any ECB stimulus or more pronounced safe-haven gains will be countered by the SNB in some shape or form. Similarly, with this month’s BoJ policy meeting looming on the eve of the FOMC the Yen is erring towards the side of caution closer to 108.00 compared to recent highs and unlikely at this stage to arouse decent option interest sitting from 107.50 to 107.35 in 2.3 bn).
  • EM - The Lira has Central Bank action to look forward to as well, but US sanctions may be back on the radar to undermine sentiment given reports that President Trump is scheduling a meeting with Republican Senators to discuss options. Meanwhile, the consensus range is suitably wide for the CBRT as estimates cover a whopping 100-500 bp easing, and Usd/Try is near the top of a 5.6925-6490 at present.

In commodities, WTI and Brent futures are on the rise as sentiment in the complex is underpinned amid late-Friday reports that the IRGC seized a UK tanker in the Strait of Hormuz due to an alleged violation of maritime law. Meanwhile, UK Chancellor Hammond noted that the UK has been working closely with US and EU partners regarding a response to Iran’s actions. Energy markets are particularly sensitive to developments in the Strait of Hormuz, given that a fifth of the world’s oil exports passes through the corridor everyday whilst  geopolitical tensions intensifies in the area. WTI and Brent futures have tested 57/bbl and 64/bbl to the upside as a result, albeit failed to convincingly breach the levels. Also of note; on Friday Libya’s NOC announced a force majeure at its El-Sharara (300k BPD) oilfield, although this has now been lifted, according to a statement. Elsewhere, spot gold remains within a narrow range amid an uneventful USD and heading into a key meeting for the ECB, in which markets are pricing in a 50% chance of a 10bps cut to its Deposit rate. Meanwhile, copper prices are marginally softer amid the overall cautious risk tone whilst Dalian iron ore prices declined as port inventory across China rose to over 1-month highs.

US Event Calendar

  • 8:30am: Chicago Fed Nat Activity Index, est. 0.1, prior 0
  • 11am: BoJ’s Kuroda Speaks at IMF in Washington

DB's Jim Reid concludes the overnight wrap

Happy Monday. I hope you had a good weekend. Mine was slightly ruined by a late cancellation for a round of golf by a friend who pulled a hamstring on Friday in a Father’s race at a school sports day. That’s the type of middle age thing that now happens to my circle of friends. He was a very good runner in his day and I can imagine him being very competitive about it and overdoing things. The good news for me as I approach such events in the years ahead is that I was always absolutely dreadful at running with no turn of speed so I have no ambition in such events and will gladly sit them out. However if they start a Father’s cycle race, golf tournament or cricket game I’m bound to overdo it, try to prove I’m the best dad and get an injury! Thank goodness this is unlikely.

The race to be the most dovish central bank hots up this week with the much anticipated ECB meeting on Thursday. The Fed is now in a public appearance blackout period and after a jumbled messaging on rate cuts from them towards the end of last week (more later) markets will continue to speculate in the background on the 25bps vs 50bps debate for the FOMC in 9 days time. 25bps remains the overwhelming favourite but the market stubbornly refuses to minimise the probability of 50bps. Before we preview the ECB, this week is also important for Wednesday’s flash global PMIs, Q2 US GDP (Friday), a new UK PM announced (Tuesday), and 145 S&P 500 companies reporting as earnings season hits its first peak week.

At Sintra last month Draghi laid the foundations to make further policy easing feel less conditional. Our economists, in their preview note last week ( link ), believe that September is the natural occasion for the big decisions and details however some preparation is anticipated this week. They expect the "or lower" easing bias to be reintroduced into rates guidance and that this will be the prelude to a 10bp deposit rate cut and tiering in September. They also expect a further 10bp cut in December. They also believe we will see upgraded forward guidance used to underline the ECB's "absolute commitment" to the price stability mandate. If the Council is unable to strengthen forward guidance sufficiently, a new wave of net asset purchases may be required. If so, the team would not be surprised by new QE of EUR30bn per month for a minimum 9-12 months split equally between public and private assets and with a commitment to relax the limits if necessary.

Before this, the July global flash PMIs come out on Wednesday with most of the attention on Europe. The last few months have seen some stabilisation in the data with the manufacturing PMI for the Euro Area hitting 47.6 in June (vs. 47.7, 47.9 and 47.5 in the three months prior). The consensus expects a 47.8 reading for July. As for the services reading the consensus expects a 53.5 print which compares to 53.6 last month. We should note that we'll also get country level PMI data for Germany, France and also Japan and the US.

Meanwhile, earnings season continues to rev up this week with 145 S&P 500 companies due to report. The highlights include Harley Davidson, Coca-Cola, United Technologies and Visa tomorrow, Boeing, Caterpillar, Ford, Facebook and AT&T on Wednesday, Amazon, Google and Intel on Thursday, and McDonalds and Twitter on Friday. With 15% of the S&P 500 having reported results, earnings are coming in around +4.9% better than consensus forecasts, which is above the historical average of 3.5%. US bank results have been mostly strong so far, though they did note pressure on their NIMs as rates fall. Outside of the Netflix subscriber numbers shock (stock -15.58% on the week), another negative release came from CSX, the shipping firm (-10.52% on the week), who reported soft guidance amid expectations for stagnant revenue this year.

As for the rest of the data this week, the advance Q2 GDP reading in the US on Friday will be in the spotlight with the consensus expecting a +1.8% reading following +3.1% in Q1. In Europe the only other data worth flagging is the July IFO survey in Germany on Thursday and perhaps the CBI survey data for July in the UK tomorrow and Thursday. This will be the latest check on Brexit Britain’s recent data reversal. The new UK PM this week will have a lot of political headwinds to face with Chancellor Hammond saying over the weekend that he will immediate resign if the overwhelming favourite Boris Johnson gets the job. The weekend press in the UK was also full of further speculation that Tory remainers will do all they can to limit the chances of Mr Johnson leaving the EU without a deal. A fascinating three and a bit months ahead for the UK.

Elsewhere the IMF’s latest World Economic Outlook update on Tuesday will get a lot of headlines as will former Special Counsel Mueller testifying before the House Judiciary and Intelligence committees on Russian election interference on Wednesday. The full day by day week ahead is at the end today as usual.

Asian markets have started the week on a cautious note with the Nikkei (-0.30%), Hang Seng (-0.77%), Shanghai Comp (-0.57%) and Kospi (-0.17%) all down. However, most indices are off their intraday lows. In terms of news flow there is a story that Chinese companies have asked US exporters about buying agricultural products and also applying for exemptions from China’s retaliatory tariffs on the goods (per state-run Xinhua News Agency). This perhaps shows that China is trying to buy more US goods in the negotiation period. Elsewhere, in a separate commentary from Taoran Notes, a blog run by the state-owned Economic Daily newspaper, it was suggested that the US and China have been “cautiously showing each other sincerity and goodwill” recently and may meet for discussions soon. Meanwhile, Hu Xijin, the editor-in-chief of the Chinese state newspaper Global Times also tweeted that “Based on what I know, Chinese importers have started arrangement of purchasing US agricultural products. This is a prominent part from Chinese side as the two countries have signalled goodwill to each other recently. It also indicates China-US trade consultations will restart soon.”

Elsewhere, futures on the S&P 500 are trading flattish while WTI oil prices are up another +0.84% as tensions in the Persian Gulf remain elevated after Iran seized a British tanker, and Libyan production fell after an unidentified group reportedly shut the country’s largest field.

In other news, China’s commerce ministry said in a statement that it will conduct an anti-dumping probe into stainless steel billet and hot-rolled stainless steel plate (coil) imports from the EU, Japan and Indonesia while adding that it will collect anti-dumping duties (duty rate to be between 18.1%-103.1%) on stainless steel products imports from EU, Japan, South Korea and Indonesia for five years starting from July 23.

Before the week ahead a quick recap of the last week. Attention continued to focus on the Fed, as investors weighed the odds of a 25 versus 50 basis point rate cut at the upcoming 31 July meeting. Last week, a few hawkish members of the committee, Kansas City’s George and Dallas’s Kaplan, both signalled that they may support a rate cut. At the same time, some of the committee’s more dovish members signalled support for a cut, but not an immediate 50bps move, i.e. Chicago’s Evans and St. Louis’s Bullard. The Fed’s leadership, Chair Powell and Vice Chair Clarida, both spoke but neither gave a firm policy signal either way. Markets gyrated after NY Fed President Williams spoke on Thursday, where he argued in favour of quick and aggressive action to pre-empt a downturn. Markets moved to price in around a 72% chance of a 50bps move this month in the aftermath. However, there were major signs that the Fed was uncomfortable with this pricing, as the NY Fed walked back William’s comments, saying they were not about policy. A WSJ article on Friday, similarly emphasized support for a 25bps move but not 50bps. Meanwhile the Fed’s Rosengern (a voter this year) said in an interview with CNBC on Friday that no interest rate cut is warranted at this stage, given the positive data that’s rolled in since mid-June. He said, “The economy’s doing actually quite well. We’re not really having an economic slowdown,” while adding, “as long as the economy’s doing well, if that continues we don’t need accommodation.” Markets ended the week pricing in around a 24% chance of a larger 50bps rate cut.

The Fed news drove action in markets all last week, with 10-year treasuries rallying -6.7bps (+3.1bps Friday) and two-year yields down -2.9bps (+6.2bps Friday). Rates rallied early in the week on dovishly-perceived Fedspeak, but subsequently rebounded higher when the Fed walked back its signal. This caused the 2y10y curve to flatten -4.2bps (-3.6bps Friday) to 23.1bps. The moves were similar in Europe, where German yields fell -11.4bps (-1.4bps Friday). The euro weakened -0.43% versus the dollar (-0.50% Friday), as US macro data outperformed, highlighted by a very strong retail sales report. In contrast, European data was soft, with the ZEW survey deteriorating.

European equities outperformed a touch, with the Stoxx 600 rising +0.10% (+0.12% Friday). The S&P 500 retreated -1.23% (-0.62% Friday), with the NASDAQ performing similarly down -1.41% (-0.50% Friday). So a softer week for risk ahead of a big fortnight for central banks on both sides of the Atlantic.

Published:7/22/2019 6:44:42 AM
[Markets] Millions Of Barrels Of Iranian Crude Are Piling Up At Chinese Ports

In what appears to be a gesture of contempt for Washington, Chinese companies have continued to import Iranian crude, but instead of reporting the crude imports, which would violate US sanctions, they're storing the oil in bonded storage tanks situated at Chinese ports.

The phenomenon began when Washington reimposed sanctions back in May. And two months later, Iranian crude is still being shipped to China, only to end up in the tanks. Possibly the strangest aspect of this whole arrangement is that the oil sits in the tanks, unused. So far, none of it has been cleared through Chinese customs, so the oil is still technically "in transit."


So far, Washington hasn't commented on how it views this stash of oil looming over global markets. If Chinese companies were to ever tap this store of oil, it could dampen demand in the world's second-largest economy, which could rattle global markets.

The arrangement clearly benefits Iran, which has retained at least one major buyer of its crude.

"Iranian oil shipments have been flowing into Chinese bonded storage for some months now, and continue to do so despite increased scrutiny," said Rachel Yew, an analyst at industry consultant FGE in Singapore. "We can see why the producer would want to do so, as a build-up of supplies near key buyers is clearly beneficial for a seller, especially if sanctions are eased at some point."

Bloomberg ship-tracking data show there could be more Iranian oil headed for these massive tanks. At least ten very-large crude carriers and two smaller tankers owned by the state-run National Iranian Oil Company and its shipping arm are currently sailing toward China or idling off its coast. Combine, the vessels can carry some 20 million barrels. Most of this oil is still owned by Tehran, which creates a grey area in terms of whether China is violating US sanctions. It's widely believed that most of the oil is payment in an oil-for-investment deal, which are fairly common in China.

The bulk of Iranian oil in China’s bonded tanks is still owned by Tehran and therefore not in breach of sanctions, according to the people. The oil hasn’t crossed Chinese customs so it is theoretically in transit. Some of the crude, though, is owned by Chinese entities that may have received it as part of oil-for-investment schemes. For example, a Chinese oil company could have helped fund a production project in Iran under an agreement to be repaid in kind. Whether this sort of transaction is in breach of sanctions isn’t clear, and so the Chinese companies are keeping it in bonded storage to avoid the official scrutiny it would get once it is registered with customs, according to the people.

Bloomberg has been tracking the discrepancy between the volume of Iranian crude shipped to China and the volume cleared by Chinese customs for months. China received about 12 million tons of Iranian crude from January through May, according to ship-tracking data, versus about 10 million that cleared customs over the period.

And the White House's refusal to address the flow of Iranian crude has created confusion, Bloomberg said.

The White House cancelled all waivers allowing certain countries to keep importing Iranian crude on May 2. Any nation "caught" importing Iranian crude would, presumably, be in violation of Iranian sanctions.

More oil arrives almost every day.

Several other Iranian-owned tankers offloaded in China or were heading there, according to ship tracking data. VLCC Stream discharged at Tianjin on June 19, while Amber, Salina and C. Infinity offloaded crude at the ports of Huangdao, Jinzhou and Ningbo. Tankers Snow, Sevin and Maria III were last seen sailing in the direction of China.

At some point, Washington will need to clarify whether this constitutes a violation of US sanctions.

"The US will now need to define how it quantifies the infringement of sanctions," said Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies. There’s a lack of clarity on whether it would look at "financial transactions or the loading and discharge of cargoes by company or entity," she said.

Aside from providing a steady income, the arrangement will free up Iranian tankers, instead of pressing them into service as storage hubs. Then again, addressing this now might seem like Washington is deliberately picking a fight to sabotage trade talks.

Or maybe the Iranian oil will factor into a final agreement?

Published:7/22/2019 6:18:17 AM
[Markets] London markets lift as escalating Middle East tensions boost oil prices London markets climbed on Monday as escalating tensions in the Gulf lifted crude prices and the FTSE 100’s oil majors.
Published:7/22/2019 6:18:17 AM
[Markets] Trump’s stock market still lags Obama’s, but that could be about to change Donald Trump loves telling us all about how great the stock market has done under his leadership. And why not? Despite a few hiccups, it’s been a great run. Published:7/22/2019 5:44:09 AM
[Markets] Upgrade: These retirees ditched their pricey life in Santa Cruz — and now live on a lake in Mexico on $1,750 a month Want to retire early? This FIRE couple — they retired at 38 in 1991 — share their secrets
Published:7/22/2019 5:44:09 AM
[Markets] "There Is No Excuse For What Happened" - 50,000 Con Ed Customers Lose Power During Deadly Heatwave

This weekend's record-setting heatwave roasted 200 million Americans inhabiting the eastern two-thirds of the country, but some had it worse than others.

While most of those affected had the option of beating the heat by staying indoors, power outages in Brooklyn and Queens left more than 50,000 people temporarily without power - and thus, no AC - subjecting them to the punishing heat, which was blamed for at least six deaths.

New York Daily News

Now, New York Gov. Andrew Cuomo is expanding a probe into the recent power failures, as some 20,000 customers remained without power early Monday morning. Cuomo said he had directed the State Department of Public Service to expand its investigation into ConEd outages, which it opened after a failure last weekend left 72,000 customers in Manhattan’s West Side without power for hours.


Con Edison said its crews are responding to power outages and will continue working throughout the day to restore power to as many customers as possible.

Cuomo also declared the heatwave "a natural disaster" and insisted that ConEd should have been better prepared.

"We have been through this situation with ConEd time and again, and they should have been better prepared," Cuomo said in a statement. "This was not a natural disaster; there is no excuse for what has happened in Brooklyn."

While it didn't respond to Cuomo, the company has said that it took some customers in southeast Brooklyn out of service to protect sensitive equipment, and said it would restore power as quickly as possible. Brooklyn neighborhoods impacted include Canarsie, Flatlands, Mill Basin, Old Mill Basin, Bergen Beach and Georgetown. Another 27,000 lost power on Long Island.

The exact number of people impacted was difficult to tally, since an individual ConEd customer could be a single-family home or a large apartment building, according to Bloomberg.

As usual, Mayor de Blasio was no help, though at least this time he was present at his office, and not out campaigning in Iowa, during the outage. He provided regular updates on his twitter feed.

Several NYC public schools will be closed on Monday due to the outages.

The outages created dangerous conditions on the road, leading to many near-accidents like this one at certain particularly dangerous intersections.

ConEd has asked customers to try and conserve power while it works to repair equipment.

But whether ConEd turns the AC back on or not, everybody will feel some relief on Monday as the heat wave is expected to pass and heat advisories are expected to be lifted for a large swath of the US. The heatwave initially stretched from Oklahoma to Ohio toward the middle of the country, and along the East Coast from Maine to South Carolina.

Published:7/22/2019 5:11:50 AM
[Markets] Peter Morici: Breaking up big tech would be a big mistake Busting up the big tech companies won’t resolve a lot that really troubles us.
Published:7/22/2019 5:11:49 AM
[Markets] Beat the System: Yep: Wall Street is now chasing the market Fascinating new data from Bank of America shows how terrified money managers are chasing the stocks that have already gone up, in the hope of not getting fired for missing the latest rally.
Published:7/22/2019 4:42:08 AM
[Markets] Time For Europe To Get Over The "Worst Deal Ever"

Authored by Con Coughlin via The Gatestone Institute,

With tensions rising in the Gulf by the day as a result of Iran's increasingly provocative conduct, the refusal of the major European powers to back the Trump administration's determination to confront Iran is looking increasingly untenable.

In the past few months Iran has been blamed for a series of attacks on oil tankers operating in the Gulf, and forced a British Royal Navy warship to intervene when a number of fast patrol boats operated by the naval division of the Islamic Revolutionary Guard Corps (IRGC) attempted to harass a British-owned tanker sailing through the Strait of Hormuz, the main shipping route into the oil-rich Gulf.

Additionally, US military officials at Central Command (CentCom) are currently investigating claims that Iran was behind the mysterious disappearance of the oil tanker Riah while sailing in Iranian waters at the weekend.

Also, Iranian-backed Houthi rebels have been blamed for carrying out a number of attacks against targets in neighbouring Saudi Arabia, including a missile attack on a Saudi civilian airport and a drone attack on a key Saudi pipeline.

Iran's most audacious act so far has been to shoot down an American naval drone conducting a reconnaissance mission in the Strait of Hormuz last month. The strike came within hours of provoking a military response from the Trump administration.

Meanwhile, as all this has been going on, the ayatollahs have announced that they have resumed work on enriching uranium, a blatant breach of the controversial nuclear accord Tehran signed with the world's leading powers in 2015.

Yet, while Iran shows no sign of scaling down its aggressive stance towards the US and its allies in the region, Europe continues to cling to the wreckage of the Joint Comprehensive Plan of Action (JCPOA), to give the nuclear deal its proper name, in the misguided belief that the deal remains the best means of preventing Iran from developing nuclear weapons.

Europe's insistence on adopting a different approach to the White House in its dealings with Iran dates back to US President Donald Trump's original decision last year to withdraw from the JCPOA, after arguing it was the "worst deal ever."

That, however, is not a viewpoint supported by the European signatories to the deal -- Britain, France and Germany. They still wrongly cling to the illusion that the agreement is a triumph of diplomacy, and has severely limited Iran's ability to pursue its ambition of becoming a nuclear-armed power. Under the JCPOA deal, upon its sunset, a mere ten years away, in 2030, "Iran will be permitted to build an industrial-size nuclear industry" with the ability to build and potentially deliver as many nuclear weapons as it liked.

To this end the Europeans have actively sought to undermine the Trump administration's new sanctions regime against Tehran by trying to find ways to continue trading with Iran. The Europeans have even come up with their own trading framework -- the so-called Special Purpose Vehicle -- which is supposed to enable European companies to continue trading with Iran without attracting punitive measures from the US.

In fact the measure has become an exercise in futility, as major European business conglomerates such as Airbus have shown that they are far more interested in protecting their lucrative business ties with the US than dealing with an economic basket case like Iran.

But not even this setback has deterred the Europeans from pursuing their policy of appeasement towards the ayatollahs. The determination of the Europeans to stick with the nuclear deal at all costs was very much in evidence earlier this week during a meeting of European Union foreign ministers in Brussels at which they came up with the decidedly bogus notion that Iran's breaches of the 2015 nuclear deal were not significant and therefore did not require the Europeans to withdraw from the JCPOA.

"Technically all the steps that have been taken, and that we regret have been taken, are reversible," Federica Mogherini, the EU's foreign policy chief, told EU foreign ministers.

As none of the signatories to the deal considered the breaches to be significant, they were not prepared to trigger the dispute mechanism which could lead to further sanctions.

"We invite Iran to reverse the steps and go back to full compliance," were her final words on the matter.

Pictured: Mogherini (left) stands with Iranian Foreign Minister Javad Zarif, during her August 2017 visit to Iran. (Image source: European External Action Service/Flickr)

Europe's insistence on sticking with the nuclear deal, and its refusal to support Washington's attempts to provide naval protection for international shipping through the Strait of Hormuz, could ultimately prove self-defeating.

Europe is far more dependent on energy supplies from the Gulf than the US, and any further attempts by Iran to disrupt oil and gas supplies from the Gulf would have catastrophic consequences for Europe's economy.

Published:7/22/2019 4:14:26 AM
[Markets] Livability: These 10 small cities are great for gamers Fast internet. Gaming communities. Esports leagues. Tech jobs. These cities have it all.
Published:7/22/2019 4:14:25 AM
[Markets] 6 Charts That Show How Africa's Workforce Will Surpass Asia's By 2100

As both countries struggle with demographic and economic challenges, Africa's potential work force is set to surpass Asia's by the end of the 21st-century, according to Bloomberg.

15 to 64 year old Africans today represent just a quarter of the size of Asia's working age population, but the story could be different by the year 2100. Africa will then surpass Asia, as Asia will be confronted by an aging population and Africa will become flush with youth looking for employment.

However, it isn’t clear that economies on the African continent will expand enough to accommodate a robust and growing working age population. Additionally, potential employees may not have the skills that these jobs require.

Nigeria's potential labor force should spike by almost 350%, or 375 million people, by the end of the century to more than 485 million. The IMF, however, recently noted substantial inequality in access to education by gender in between the rich and poor in Nigeria. A recent study found that a girl born into a family in the poorest 20% of society spends only about one year in school.

William Lee, chief economist at the Milken Institute said:

“As global supply chains reduce labor inputs with better technology and machines for even lower value-added production, it will be difficult for young workers in Africa to find unskilled manufacturing jobs in the future similar to those now employing Asian youth.”

The number of available employees worldwide will rise 29% to 6.5 billion from 5 billion by the end of the century. Of this, Africa's share will rise to more than 33% around 2100 from almost 15%. The working age population of the continent will grow by 2 billion to 2.75 billion over the next 80 years and Asias is set to decline by 415 million, or 13%.

“Most people overlook the fact that the Chinese dependency ratio -- the working-age to over-65 population -- is deteriorating rapidly and is already showing signs of straining,” Lee continued.

The total number of people aged 15 to 64 globally will peak at 6.5 billion around 2090. This marks an increase of 1.5 billion from today. About 80% of this gain is expected to come from low income countries and the remainder from middle income nations. High income countries will see their potential labor force shrink as birth rates remain low.

These large shifts will take place in a very short period of time. For instance, in 2020, everyone over 65 will be supported by an estimated seven workers. By 2050, this ratio will drop to about four workers per person.

These shifts will create challenges for governments in a number of countries, according to Bloomberg:

  • Taxation, assets prices and the use of resources will come under pressure while innovations in artificial intelligence, machine learning, engineering and computing power may cause trepidation about employment within many industries.

  • A recent Oxford Economics report estimates that 20 million manufacturing positions will be lost by 2030 with lower-skilled regions hit the hardest. Oxford’s econometric model found that, on average, each newly installed robot displaces 1.6 manufacturing workers. About 1.7 million factory jobs already have gone to robots since 2000, including 400,000 in Europe, 260,000 in the U.S. and 550,000 in China, the report found.

  • The labor force in North America and Oceana will increase by close to 38 million and 17 million, respectively, while Europe will experience a decline of 137 million or 28%. The working-age population in Latin America and the Caribbean will shrink by 15% or 66 million.

  • While birth rates have fallen sharply in much of the developed world, migration has enabled the population in North America to continue growing. The number of working-age men and women in the U.S. will rise 1.2% to 243 million by 2030 and then climb 14% to 278 million by 2100. The number of people in North America living longer 100 years will soar to almost 1.9 million from about 1 million today.

The two most populous nations in the world are also aging quickly.

China and India will account for 31% of total population and 39% of the world's seniors by the year 2050. Both are also slated to see their share of the global labor force shrink.

The working age population in India is projected to peak around 2050, but 40 years later there will be fewer 15 to 64 year olds than there are today. In China, the shift will happen even quicker. The working age population of the country is already shrinking and will contract by 27.5 million by 2030. India's working age population is expected to overtake China’s in 2027 and potential labor forces in Russia, Japan, Germany and South Korea will also be reduced due to slow birth rates and migration.

Published:7/22/2019 3:41:50 AM
[Markets] 67 Labour Party Members Attack Corbyn's Anti-Jewish Leadership In Newspaper Ad

Authored by Mike Shedlock via MishTalk,

Labour leader Jeremy Corbyn is reeling from an ad by members of his own party accusing him of being anti-Jewish.

The Telegraph reports Labour peers take out newspaper advert to tell Corbyn he is 'failing the test of leadership'.

The full page advert, published in The Guardian on Wednesday, criticises Mr Corbyn for a "toxic culture you have allowed to divide our movement", saying it has prompted the resignation of "thousands" of members.

The party, it says, is no longer a "safe place" for its members and supporters.

"We are saying you are accountable as Leader for allowing antisemitism to grow in our party and presiding over the most shaming period in Labour's history," it adds.

The advert is supported by a total of 67 Labour members of the House of Lords, including Peter Hain, Peter Mandelson and Robert Winston, and comes after a damning report by BBC's Panorama programme into the party's handling of allegations of anti-Semitism.

The peers also accuse Mr Corbyn of not having "opened (his) eyes" or "accepted responsibility" for the row which has engulfed the party.

More Labour Splintering

The timing of this attack could not come at a worse time for Corbyn or a better time for Johnson.

Corbyn was already reeling from wishy-washy policy that simultaneously supported Brexit, a referendum, Remain, and a customs union.

Obviously, that's impossible.

'Inevitable' Labour MPs Will Try To Oust Corbyn Over Anti-Semitism

The Huffington Post reports 'Inevitable' Labour MPs Will Try To Oust Corbyn Over Anti-Semitism

“If he doesn’t resign, there will be a clamour for a vote of no-confidence.”

A vote of no-confidence by MPs would be largely symbolic because Labour’s leader is elected by members and not parliamentarians.

MPs can, however, trigger a leadership contest if 20% of MPs - or 49 of them nominate an alternative challenger.

MPs have stepped up criticism of the leader in the wake of a BBC Panorama probe which detailed shocking complaints of anti-Semitism, interviewed former staff members turned whistleblowers and alleged political interference from Corbyn’s communications chief Seumas Milne.

Boris Johnson the Primary Beneficiary

Boris Johnson, the UK's next Prime Minister is the primary beneficiary.

The Liberal Democrats are the secondary beneficiary

Meanwhile, how long can Corbyn hang on as Labour leader?

This looms as a key question in the next election.

Published:7/22/2019 2:40:47 AM
[Markets] Europe Faces "Looming Syphilis Epidemic" As 'Hookup' Apps Go Viral

The rise of dating apps and falling rates of HIV in the developed world have led to the reemergence of an STD that was, until recently, confined to literary novels from the 19th century.

The spread of syphilis in Europe is intensifying, said Andrew Amato-Gauci, the head of the HIV/AIDS, sexually transmitted infections and viral hepatitis program at the European Centre for Disease Prevention and Control (ECDC). He told RT that various factors play into the outbreak, such as "people having sex without condoms, multiple sexual partners and a reduced fear of acquiring HIV from condomless sex."


A new report by the ECDC shows that the number of confirmed cases of syphilis across the EU soared by 70% between 2010 and 2017.

The biggest innovation in the dating world during that period is the rise of "hookup" apps like Tinder, Grindr and Bumble - aka bringing the "sharing economy" to the dating world.

Rates of HIV/AIDS deaths have been declining across the world after peaking in the early 2000s.

Infographic: HIV/AIDS Deaths Continue To Decline | Statista You will find more infographics at Statista

Oddly enough, the leader in Europe in Iceland, a country where the 300,000 inhabitants are all, at the very least, distant cousins. The syphilis rate in Iceland has climbed by 876%. In Ireland, syphilis rates have climbed 224%, while Germany and Britain have seen rates double.

According to the ECDC, homosexual sex - specifically "men having sex with men" - is responsible for two-thirds of the cases reported between 2007 and 2017. Heterosexual men constitute 23% of the cases, and women 15%.

Amato-Gauci said growing rates of unprotected sex is only part of the problem. Lack of testing and sex education are also issues. Gauci has a few ideas for policies that could lower rates.

"These include: more testing for syphilis in some groups, such as men who have sex with men, lack of or insufficient sex education, poor access to condoms for teenagers and young adults, sex under the influence of alcohol or drugs, including the use of psychoactive 'party drugs.'"

Amato-Gauci said dating apps "may facilitate more sexual encounters, and with that transmission of STI [sexually-transmitted infections] like syphilis."

Lorenzo Giacani, associate professor in the Departments of Medicine and Global Health at the University of Washington, said a "robust response" will be needed to lower syphilis rates.

"The ECDC data clearly shows that syphilis is not a disease of the past but very present among us," he said.

There is no vaccine for syphilis, and while penicillin can cure syphilis in its early stages, once it becomes late stage, there's no cure.

Published:7/22/2019 2:11:39 AM
[Markets] What The Latest Secret Government File Tells Us About The West's Middle East Policy

Authored by Mark Curtis via,

The British government is refusing to release a 1941 file on Palestine, as it might “undermine the security” of Britain and its citizens. Why would a 78-year-old document be seen as so sensitive in 2019?

One plausible reason is that it could embarrass the British government in its relations with Israel and Iraq, and may concern a long but hidden theme in British foreign policy: creating false pretexts for military intervention.

The Colonial Office document, at the National Archives in London, was uncovered by journalist Tom Suarez and concerns the “activities of the Grand Mufti [Haj Amin al-Husseini] of Jerusalem” in 1940-41.

After the assassination of Lewis Andrews, British district commissioner for Galilee, in September 1937, the British Government dismissed al-Husseini from his post as president of the Supreme Muslim Council and decided to arrest all members of the Arab Higher Committee, including Husseini.

He took refuge in the Noble Sanctuary (al-Haram al-Sharif), fled to Jaffa and then Lebanon, and ended up in Iraq, where he played a role in the Iraqi national anti-British movement.

He spent the Second World War moving between Berlin and Rome and took part in the propaganda war against Britain and France through Arabic radio broadcasts.

A plan ‘to clip the mufti’s wings’

In April 1941, nationalist army officers known as the Golden Square staged a coup in Iraq, overthrowing the pro-British regime, and signalled they were prepared to work with German and Italian intelligence. In response, the British embarked on a military campaign and eventually crushed the coup leaders two months later.

But Suarez discovered in the files that the British were already wanting such a “military occupation of Iraq” by November 1940 – well before the Golden Square coup gave them a pretext for doing so.

The reason was that Britain wanted to end “the mufti’s intrigues with the Italians”. One file notes: “We may be able to clip the mufti’s wings when we can get a new government in Iraq. FO [Foreign Office] are working on this.” Suarez notes that a prominent thread in the British archive is: “How to effect a British coup without further alienating ‘the Arab world’ in the midst of the war, beyond what the empowering of Zionism had already done.”

As British troops closed in on Baghdad, a violent anti-Jewish pogrom rocked the city, killing more than 180 Jewish Iraqis and destroying the homes of hundreds of members of the Jewish community who had lived in Iraq for centuries. The Farhud (violent dispossession) has been described as the Iraqi Jews’ Kristallnacht, the brutal pogrom against Jews carried out in Nazi Germany three years earlier.

There have long been claims that these riots were condoned or even orchestrated by the British to blacken the nationalist regime and justify Britain’s return to power in Baghdad and ongoing military occupation of Iraq.

Historian Tony Rocca noted:

“To Britain’s shame, the army was stood down. Sir Kinahan Cornwallis, Britain’s ambassador in Baghdad, for reasons of his own, held our forces at bay in direct insubordination to express orders from Winston Churchill that they should take the city and secure its safety. Instead, Sir Kinahan went back to his residence, had a candlelight dinner and played a game of bridge.”

1953 coup in Iran

Could this be the reason that UK government censors want the file to remain secret after all these years? It would neither be the first, nor the last time that British planners used or created pretexts to justify their military interventions.

In 1953, the covert British and US campaign to overthrow the elected nationalist government of Mohammad Mosaddegh in Iran included a “false flag” element. Agents working for the British posed as supporters of the communist Tudeh party, engaging in activities such as throwing rocks at mosques and priests, in order to portray the demonstrating mobs as communists. The aim was to provide a pretext for the coup and the Shah of Iran’s taking control in the name of anti-communism.

Three years later, in 1956, Britain also secretly connived to create a pretext for its military intervention in Egypt. After Egyptian President Gamal Abdel Nasser nationalised the Suez Canal and Britain sought to overthrow him, the British and French governments secretly agreedwith Israel that the latter would first attack Egypt. Then, London and Paris would despatch military forces on the pretext of separating the warring parties, and seize the canal. The plan went ahead but failed, largely owing to US opposition.

Five years later, in 1961, it was a similar story in Kuwait. This little-known British intervention was publicly justified on the basis of an alleged threat from Iraq, but the declassified files that I have examined suggest that this “threat” was concocted by British planners. When Kuwait secured independence in June 1961, Britain was desperate to protect its oil interests and to solidify its commercial and military relations with the Kuwaiti regime. The files suggest that the British therefore needed to get the Kuwaitis to “ask” Britain for “protection”.

Kuwait intervention

On 25 June 1961, Iraqi ruler Abdul Karim Qasim publicly claimed Kuwait as part of Iraq. Five days later, Kuwait’s emir formally requested British military intervention, and on 1 July, British forces landed, eventually numbering around 7,000.

But the alleged Iraqi threat to Kuwait never materialised. David Lee, who commanded the British air force in the Middle East in 1961, later wrote that the British government “did not contemplate aggression by Iraq very seriously”.

Indeed, the evidence suggests that the emir was duped into “requesting” intervention by the British, and his information on a possible Iraq move on Kuwait came almost exclusively from British sources. The files show that the “threat” to Kuwait was being pushed by the British embassy in Baghdad but contradicted by Britain’s consulate in Basra, near the Kuwaiti border, which reported no unusual troop movements.

British intervention was intended to reassure Kuwait and other friendly Middle Eastern regimes that were key to maintaining the British position in the world’s most important region. The prime minister’s foreign policy adviser said that letting go of Kuwait would have meant that “the other oil sheikhdoms (which are getting richer) will not rely on us any longer”.

By the time we reached the invasion of Iraq in 2003, creating false pretexts for interventions had become a familiar theme in British foreign policy.

A matter of routine

To return to the 1941 document, British authorities have had a policy of either censoring, “losing” or destroying historical files that could undermine relations with current governments.

In 2012, an official review concluded that “thousands of documents detailing some of the most shameful acts and crimes committed during the final years of the British empire were systematically destroyed to prevent them falling into the hands of post-independence governments”, according to a report in The Guardian.

The files covered policies such as the abuse and torture of insurgents in Kenya in the 1950s, the alleged massacre of 24 unarmed villagers in Malaya in 1948, and the army’s secret torture centre in Aden in the 1960s.

Other papers have been hidden for decades in secret foreign office archives, beyond the reach of historians and members of the public, and in breach of legal obligations for them to be transferred into the public domain.

Whatever is in the 1941 document, if the British government is withholding its release for fear of upsetting relations with key allies, this would be less than surprising and more a matter of routine.

Published:7/22/2019 1:14:18 AM
[Markets] Key Words: Ocasio-Cortez deserves to be shot, Louisiana officer suggests on Facebook Charlie Rispoli, a 14-year veteran of the Gretna Police Department in Louisiana, could face disciplinary actions.
Published:7/22/2019 12:14:51 AM
[Markets] War Profiteers And The Demise Of The US Military-Industrial Complex

Authored by Dmitry Orlov via Club Orlov blog,

Within the vast bureaucratic sprawl of the Pentagon there is a group in charge of monitoring the general state of the military-industrial complex and its continued ability to fulfill the requirements of the national defense strategy. Office for acquisition and sustainment and office for industrial policy spends some $100,000 a year producing an Annual Report to Congress. It is available to the general public. It is even available to the general public in Russia, and Russian experts had a really good time poring over it.

In fact, it filled them with optimism. You see, Russia wants peace but the US seems to want war and keeps making threatening gestures against a longish list of countries that refuse to do its bidding or simply don’t share its “universal values.” But now it turns out that threats (and the increasingly toothless economic sanctions) are pretty much all that the US is still capable of dishing out—this in spite of absolutely astronomical levels of defense spending.

Let’s see what the US military-industrial complex looks like through a Russian lens.

It is important to note that the report’s authors were not aiming to force legislators to finance some specific project. This makes it more valuable than numerous other sources, whose authors’ main objective was to belly up to the federal feeding trough, and which therefore tend to be light on facts and heavy on hype. No doubt, politics still played a part in how various details are portrayed, but there seems to be a limit to the number of problems its authors can airbrush out of the picture and still do a reasonable job in analyzing the situation and in formulating their recommendations.

What knocked Russian analysis over with a feather is the fact that these INDPOL experts (who, like the rest of the US DOD, love acronyms) evaluate the US military-industrial complex from a… market-based perspective! You see, the Russian military-industrial complex is fully owned by the Russian government and works exclusively in its interests; anything else would be considered treason. But the US military-industrial complex is evaluated based on its… profitability! According to INDPOL, it must not only produce products for the military but also acquire market share in the global weapons trade and, perhaps most importantly, maximize profitability for private investors. By this standard, it is doing well: for 2017 the gross margin (EBITDA) for US defense contractors ranged from 15 to 17%, and some subcontractors - Transdigm, for example - managed to deliver no less than 42-45%. “Ah!” cry the Russian experts, “We’ve found the problem! The Americans have legalized war profiteering!” (This, by the way, is but one of many instances of something called systemic corruption, which is rife in the US.)

It would be one thing if each defense contractor simply took its cut off the top, but instead there is an entire food chain of defense contractors, all of which are legally required, no less, to maximize profits for their shareholders. More than 28,000 companies are involved, but the actual first-tier defense contractors with which the Pentagon places 2/3 of all defense contracts are just the Big Six: Lockheed Martin, Northrop Grumman, Raytheon, General Dynmics, BAE Systems and Boeing. All the other companies are organized into a pyramid of subcontractors with five levels of hierarchy, and at each level they do their best to milk the tier above them.

The insistence on market-based methods and the requirement of maximizing profitability turns out to be incompatible with defense spending on a very basic level: defense spending is intermittent and cyclical, with long fallow intervals between major orders. This has forced even the Big Six to make cuts to their defense-directed departments in favor of expanding civilian production. Also, in spite of the huge size of the US defense budget, it is of finite size (there being just one planet to blow up), as is the global weapons market. Since, in a market economy, every company faces the choice of grow or get bought out, this has precipitated scores of mergers and acquisitions, resulting in a highly consolidated marketplace with a few major players in each space.

As a result, in most spaces, of which the report’s authors discuss 17, including the Navy, land forces, air force, electronics, nuclear weapons, space technology and so on, at least a third of the time the Pentagon has a choice of exactly one contractor for any given contract, causing quality and timeliness to suffer and driving up prices.

In a number of cases, in spite of its industrial and financial might, the Pentagon has encountered insoluble problems. Specifically, it turns out that the US has only one shipyard left that is capable of building nuclear aircraft carriers (at all, that is; the USS Gerald Ford is not exactly a success). That is Northrop Grumman Newport News Shipbuilding in Newport, Virginia. In theory, it could work on three ships in parallel, but two of the slips are permanently occupied by existing aircraft carriers that require maintenance. This is not a unique case: the number of shipyards capable of building nuclear submarines, destroyers and other types of vessels is also exactly one. Thus, in case of a protracted conflict with a serious adversary in which a significant portion of the US Navy has been sunk, ships will be impossible to replace within any reasonable amount of time.

The situation is somewhat better with regard to aircraft manufacturing. The plants that exist can produce 40 planes a month and could produce 130 a month if pressed. On the other hand, the situation with tanks and artillery is absolutely dismal. According to this report, the US has completely lost the competency for building the new generation of tanks. It is no longer even a question of missing plant and equipment; in the US, a second generation of engineers who have never designed a tank is currently going into retirement. Their replacements have no one to learn from and only know about modern tanks from movies and video games. As far as artillery, there is just one remaining production line in the US that can produce barrels larger than 40mm; it is fully booked up and would be unable to ramp up production in case of war. The contractor is unwilling to expand production without the Pentagon guaranteeing at least 45% utilization, since that would be unprofitable.

The situation is similar for the entire list of areas; it is better for dual-use technologies that can be sourced from civilian companies and significantly worse for highly specialized ones. Unit cost for every type of military equipment goes up year after year while the volumes being acquired continuously trend lower—sometimes all the way to zero. Over the past 15 years the US hasn’t acquired a single new tank. They keep modernizing the old ones, but at a rate that’s no higher than 100 a year.

Because of all these tendencies and trends, the defense industry continues to lose not only qualified personnel but also the very ability to perform the work. INDPOL experts estimate that the deficit in machine tools has reached 27%. Over the past quarter-century the US has stopped manufacturing a wide variety of manufacturing equipment. Only half of these tools can be imported from allies or friendly nations; for the rest, there is just one source: China. They analyzed the supply chains for 600 of the most important types of weapons and found that a third of them have breaks in them while another third have completely broken down. In the Pentagon’s five-tier subcontractor pyramid, component manufacturers are almost always relegated to the bottommost tier, and the notices they issue when they terminate production or shut down completely tend to drown in the Pentagon’s bureaucratic swamp.

The end result of all this is that theoretically the Pentagon is still capable of doing small production runs of weapons to compensate for ongoing losses in localized, low-intensity conflicts during a general time of peace, but even today this is at the extreme end of its capabilities. In case of a serious conflict with any well-armed nation, all it will be able to rely on is the existing stockpile of ordnance and spare parts, which will be quickly depleted.

A similar situation prevails in the area of rare earth elements and other materials for producing electronics. At the moment, the accumulated stockpile of these supplies needed for producing missiles and space technology—most importantly, satellites—is sufficient for five years at the current rate of use.

The report specifically calls out the dire situation in the area of strategic nuclear weapons. Almost all the technology for communications, targeting, trajectory calculations and arming of the ICBM warheads was developed in the 1960s and 70s. To this day, data is loaded from 5-inch floppy diskettes, which were last mass-produced 15 years ago. There are no replacements for them and the people who designed them are busy pushing up daisies. The choice is between buying tiny production runs of all the consumables at an extravagant expense and developing from scratch the entire land-based strategic triad component at the cost of three annual Pentagon budgets.

There are lots of specific problems in each area described in the report, but the main one is loss of competence among technical and engineering staff caused by a low level of orders for replacements or for new product development. The situation is such that promising new theoretical developments coming out of research centers such as DARPA cannot be realized given the present set of technical competencies. For a number of key specializations there are fewer than three dozen trained, experienced specialists.

This situation is expected to continue to deteriorate, with the number of personnel employed in the defense sector declining 11-16% over the next decade, mainly due to a shortage of young candidates qualified to replace those who are retiring. A specific example: development work on the F-35 is nearing completion and there won’t be a need to develop a new jet fighter until 2035-2040; in the meantime, the personnel who were involved in its development will be idled and their level of competence will deteriorate.

Although at the moment the US still leads the world in defense spending ($610 billion of $1.7 trillion in 2017, which is roughly 36% of all the military spending on the planet) the US economy is no longer able to support the entire technology pyramid even in a time of relative peace and prosperity. On paper the US still looks like a leader in military technology, but the foundations of its military supremacy have eroded. Results of this are plainly visible:

  • The US threatened North Korea with military action but was then forced to back off because it has no ability to fight a war against it.

  • The US threatened Iran with military action but was then forced to back off because it has no ability to fight a war against it.

  • The US lost the war in Afghanistan to the Taliban, and once the longest military conflict in US history is finally over the political situation there will return to status quo ante with the Taliban in charge and Islamic terrorist training camps back in operation.

  • US proxies (Saudi Arabia, mostly) fighting in Yemen have produced a humanitarian disaster but have been unable to prevail militarily.

  • US actions in Syria have led to a consolidation of power and territory by the Syrian government and newly dominant regional position for Russia, Iran and Turkey.

  • The second-largest NATO power Turkey has purchased Russian S-400 air defense systems. The US alternative is the Patriot system, which is twice as expensive and doesn’t really work.

All of this points to the fact that the US is no longer much a military power at all. This is good news for at least the following four reasons.

First, the US is by far the most belligerent country on Earth, having invaded scores of nations and continuing to occupy many of them. The fact that it can’t fight any more means that opportunities for peace are bound to increase.

Second, once the news sinks in that the Pentagon is nothing more than a flush toilet for public funds its funding will be cut off and the population of the US might see the money that is currently fattening up war profiteers being spent on some roads and bridges, although it’s looking far more likely that it will all go into paying interest expense on federal debt (while supplies last).

Third, US politicians will lose the ability to keep the populace in a state of permanent anxiety about “national security.” In fact, the US has “natural security”—two oceans—and doesn’t need much national defense at all (provided it keeps to itself and doesn’t try to make trouble for others). The Canadians aren’t going to invade, and while the southern border does need some guarding, that can be taken care of at the state/county level by some good ol’ boys using weapons and ammo they already happen to have on hand. Once this $1.7 trillion “national defense” monkey is off their backs, ordinary American citizens will be able to work less, play more and feel less aggressive, anxious, depressed and paranoid.

Last but not least, it will be wonderful to see the war profiteers reduced to scraping under sofa cushions for loose change. All that the US military has been able to produce for a long time now is misery, the technical term for which is “humanitarian disaster.” Look at the aftermath of US military involvement in Serbia/Kosovo, Afghanistan, Iraq, Libya, Syria and Yemen, and what do you see? You see misery—both for the locals and for US citizens who lost their family members, had their limbs blown off, or are now suffering from PTSD or brain injury. It would be only fair if that misery were to circle back to those who had profited from it.

Published:7/21/2019 11:40:12 PM
[Markets] How Fukushima Changed Japan's Energy Mix

The 2011 Fukushima nuclear incident in Japan made international headlines for months, but it also changed Japanese attitudes towards nuclear energy. After a devastating tsunami hit Japan on March 11, 2011, emergency generators cooling the Fukushima nuclear power plant gave out and caused a total of three nuclear meltdowns, explosions and the release of radioactive material into the surrounding areas.

Before the incident, the Japanese had been known as steadfast supporters of nuclear energy, taking previous nuclear catastrophes at Three Mile Island (USA) or Chernobyl (Ukraine) in stride. But a meltdown on their own soil changed the minds of many citizens and kicked the anti-nuclear power movement into gear.

After mass protests, the Japanese government under then Prime Minister Yoshihiko announced plans to make Japan nuclear free by 2030 and not to rebuild any of the damaged reactors. New Prime Minister Shinzo Abe has since tried to change the nation’s mind about nuclear energy by highlighting that the technology is indeed carbon neutral and well suited to reach emission goals.

As Statista's Katharina Buchholz notes, despite one reactor restart at Sendai power plant in Southern Japan in 2015, nuclear energy has almost vanished from Japanese electricity generation. 

Infographic: How Fukushima Changed Japan's Energy Mix | Statista

You will find more infographics at Statista

In 2016 (latest available), only 2 percent of energy generated in Japan came from nuclear power plants.

Coal and natural gas picked up most of the slack, but renewable sources, mainly solar energy, also grew after 2011.

Published:7/21/2019 11:10:31 PM
[Markets] Asian shares mostly fall as new stock market debuts in Shanghai Asian shares were mostly lower Monday after Wall Street ended last week lower as investors continue to watch for what may be in store for U.S. interest rates. Published:7/21/2019 10:41:41 PM
[Markets] Asia Markets: Asian shares mostly fall as new stock market debuts in Shanghai Asian shares were mostly lower Monday after Wall Street ended last week lower as investors continue to watch for what may be in store for U.S. interest rates.
Published:7/21/2019 10:41:41 PM
[Markets] The Missing Three-Letter Word In The Iran Crisis

Authored by Michael Klare via,

It’s always the oil. While President Donald Trump was hobnobbing with Saudi Crown Prince Mohammed bin Salman at the G-20 summit in Japan, brushing off a recent UN report about the prince’s role in the murder of Washington Post columnist Jamal Khashoggi, Secretary of State Mike Pompeo was in Asia and the Middle East, pleading with foreign leaders to support “Sentinel.” The aim of that administration plan: to protect shipping in the Strait of Hormuz and the Persian Gulf. Both Trump and Pompeo insisted that their efforts were driven by concern over Iranian misbehavior in the region and the need to ensure the safety of maritime commerce. Neither, however, mentioned one inconvenient three-letter word - O-I-L - that lay behind their Iranian maneuvering (as it has impelled every other American incursion in the Middle East since World War II).

Now, it’s true that the United States no longer relies on imported petroleum for a large share of its energy needs. Thanks to the fracking revolution, the country now gets the bulk of its oil — approximately 75 percent - from domestic sources. (In 2008, that share had been closer to 35 percent.)  Key allies in NATO and rivals like China, however, continue to depend on Middle Eastern oil for a significant proportion of their energy needs. As it happens, the world economy - of which the U.S. is the leading beneficiary (despite Trump’s self-destructive trade wars) - relies on an uninterrupted flow of oil from the Persian Gulf to keep energy prices low. By continuing to serve as the principal overseer of that flow, Washington enjoys striking geopolitical advantages that its foreign policy elites would no more abandon than they would their country’s nuclear supremacy.

Pompeo arriving in Abu Dhabi, June 24, 2019. (State Department/ Ron Przysucha)

This logic was spelled out clearly by President Barack Obama in a September 2013 address to the UN General Assembly in which he declared that “the United States of America is prepared to use all elements of our power, including military force, to secure our core interests” in the Middle East. He then pointed out that, while the U.S. was steadily reducing its reliance on imported oil, “the world still depends on the region’s energy supply and a severe disruption could destabilize the entire global economy.” Accordingly, he concluded, “We will ensure the free flow of energy from the region to the world.”

To some Americans, that dictum — and its continued embrace by Trump and Pompeo — may seem anachronistic. True, Washington fought wars in the Middle East when the American economy was still deeply vulnerable to any disruption in the flow of imported oil. In 1990, this was the key reason President George H.W. Bush gave for his decision to evict Iraqi troops from Kuwait after Saddam Hussein’s invasion of that land. “Our country now imports nearly half the oil it consumes and could face a major threat to its economic independence,” he told a nationwide TV audience. But talk of oil soon disappeared from his comments about what became Washington’s first (but hardly last) Gulf War after his statement provoked widespread public outrage. (“No Blood for Oil” became a widely used protest sign then.) His son, the second President Bush, never even mentioned that three-letter word when announcing his 2003 invasion of Iraq. Yet, as Obama’s UN speech made clear, oil remained, and still remains, at the center of U.S. foreign policy. A quick review of global energy trends helps explain why this has continued to be so.

The World’s Undiminished Reliance on Petroleum

Despite all that’s been said about climate change and oil’s role in causing it — and about the enormous progress being made in bringing solar and wind power online — we remain trapped in a remarkably oil-dependent world. To grasp this reality, all you have to do is read the most recent edition of oil giant BP’s “Statistical Review of World Energy,” published this June. In 2018, according to that report, oil still accounted for by far the largest share of world energy consumption, as it has every year for decades. All told, 33.6 percent of world energy consumption last year was made up of oil, 27.2 percent of coal (itself a global disgrace), 23.9 percent of natural gas, 6.8 percent of hydro-electricity, 4.4 percent of nuclear power, and a mere 4 percent of renewables.

Most energy analysts believe that the global reliance on petroleum as a share of world energy use will decline in the coming decades, as more governments impose restrictions on carbon emissions and as consumers, especially in the developed world, switch from oil-powered to electric vehicles. But such declines are unlikely to prevail in every region of the globe and total oil consumption may not even decline. According to projections from the International Energy Agency (IEA) in its “New Policies Scenario” (which assumes significant but not drastic government efforts to curb carbon emissions globally), Asia, Africa, and the Middle East are likely to experience a substantially increased demand for petroleum in the years to come, which, grimly enough, means global oil consumption will continue to rise.

Concluding that the increased demand for oil in Asia, in particular, will outweigh reduced demand elsewhere, the IEA calculated in its 2017 “World Energy Outlook” that oil will remain the world’s dominant source of energy in 2040, accounting for an estimated 27.5 percent of total global energy consumption. That will indeed be a smaller share than in 2018, but because global energy consumption as a whole is expected to grow substantially during those decades, net oil production could still rise — from an estimated 100 million barrels a day in 2018 to about 105 million barrels in 2040.

Of course, no one, including the IEA’s experts, can be sure how future extreme manifestations of global warming like the severe heat waves recently tormenting Europe and South Asia could change such projections. It’s possible that growing public outrage could lead to far tougher restrictions on carbon emissions between now and 2040. Unexpected developments in the field of alternative energy production could also play a role in changing those projections. In other words, oil’s continuing dominance could still be curbed in ways that are now unpredictable.

In the meantime, from a geopolitical perspective, a profound shift is taking place in the worldwide demand for petroleum. In 2000, according to the IEA, older industrialized nations — most of them members of the Organization for Economic Cooperation and Development (OECD) — accounted for about two-thirds of global oil consumption; only about a third went to countries in the developing world. By 2040, the IEA’s experts believe that ratio will be reversed, with the OECD consuming about one-third of the world’s oil and non-OECD nations the rest. More dramatic yet is the growing centrality of the Asia-Pacific region to the global flow of petroleum. In 2000, that region accounted for only 28 — of world consumption; in 2040, its share is expected to stand at 44 —, thanks to the growth of China, India, and other Asian countries, whose newly affluent consumers are already buying cars, trucks, motorcycles, and other oil-powered products.

Where will Asia get its oil? Among energy experts, there is little doubt on this matter. Lacking significant reserves of their own, the major Asian consumers will turn to the one place with sufficient capacity to satisfy their rising needs: the Persian Gulf. According to BP, in 2018, Japan already obtained 87 percent of its oil imports from the Middle East, India 64 percent, and China 44 percent. Most analysts assume these percentages will only grow in the years to come, as production in other areas declines.

This will, in turn, lend even greater strategic importance to the Persian Gulf region, which now possesses more than 60 percent of the world’s untapped petroleum reserves, and to the Strait of Hormuz, the narrow passageway through which approximately one-third of the world’s seaborne oil passes daily. Bordered by Iran, Oman, and the United Arab Emirates, the Strait is perhaps the most significant — and contested — geostrategic location on the planet today.

One of hundreds of Kuwaiti oil fires set by retreating Iraqi forces in 1991. (Jonas Jordan, U.S. Army Corps of Engineers via Wikimedia Commons)

Controlling the Spigot

When the Soviet Union invaded Afghanistan in 1979, the same year that militant Shiite fundamentalists overthrew the U.S.-backed Shah of Iran, U.S. policymakers concluded that America’s access to Gulf oil supplies was at risk and a U.S. military presence was needed to guarantee such access. As President Jimmy Carter would say in his State of the Union Address on Jan. 23, 1980:

The region which is now threatened by Soviet troops in Afghanistan is of great strategic importance: It contains more than two thirds of the world’s exportable oil… The Soviet effort to dominate Afghanistan has brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Strait of Hormuz, a waterway through which most of the world’s oil must flow… Let our position be absolutely clear: an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

To lend muscle to what would soon be dubbed the “Carter Doctrine,” the president created a new U.S. military organization, the Rapid Deployment Joint Task Force (RDJTF), and obtained basing facilities for it in the Gulf region. Ronald Reagan, who succeeded Carter as president in 1981, made the RDJTF into a full-scale “geographic combatant command,” dubbed Central Command, or CENTCOM, which continues to be tasked with ensuring American access to the Gulf today (as well as overseeing the country’s never-ending wars in the Greater Middle East). Reagan was the first president to activate the Carter Doctrine in 1987 when he ordered Navy warships to escort Kuwaiti tankers, “reflagged” with the stars and stripes, as they traveled through the Strait of Hormuz. From time to time, such vessels had been coming under fire from Iranian gunboats, part of an ongoing “Tanker War,” itself part of the Iran-Iraq War of those years. The Iranian attacks on those tankers were meant to punish Sunni Arab countries for backing Iraqi autocrat Saddam Hussein in that conflict.  The American response, dubbed Operation Earnest Will, offered an early model of what Pompeo is seeking to establish today with his Sentinel program.

Operation Earnest Will was followed two years later by a massive implementation of the Carter Doctrine in Bush’s 1990 decision to push Iraqi forces out of Kuwait. Although he spoke of the need to protect U.S. access to Persian Gulf oil fields, it was evident that ensuring a safe flow of oil imports wasn’t the only motive for such military involvement. Equally important then (and far more so now): the geopolitical advantage controlling the world’s major oil spigot gave Washington.

When ordering U.S. forces into combat in the Gulf, American presidents have always insisted that they were acting in the interests of the entire West. In advocating for the “reflagging” mission of 1987, for instance, Secretary of Defense Caspar Weinberger argued (as he would later recall in his memoir “Fighting for Peace”), “The main thing was for us to protect the right of innocent, nonbelligerent and extremely important commerce to move freely in international open waters — and, by our offering protection, to avoid conceding the mission to the Soviets.” Though rarely so openly acknowledged, the same principle has undergirded Washington’s strategy in the region ever since: the United States alone must be the ultimate guarantor of unimpeded oil commerce in the Persian Gulf.

Look closely and you can find this principle lurking in every fundamental statement of U.S. policy related to that region and among the Washington elite more generally. My own personal favorite, when it comes to pithiness, is a sentence in a report on the geopolitics of energy issued in 2000 by the Center for Strategic and International Studies, a Washington-based think tank well-populated with former government officials (several of whom contributed to the report): “As the world’s only superpower, [the United States] must accept its special responsibilities for preserving access to [the] worldwide energy supply.” You can’t get much more explicit than that.

Of course, along with this “special responsibility” comes a geopolitical advantage: by providing this service, the United States cements its status as the world’s sole superpower and places every other oil-importing nation — and the world at large — in a condition of dependence on its continued performance of this vital function.

Originally, the key dependents in this strategic equation were Europe and Japan, which, in return for assured access to Middle Eastern oil, were expected to subordinate themselves to Washington. Remember, for example, how they helped pay for Bush the elder’s Iraq War (dubbed Operation Desert Storm). Today, however, many of those countries, deeply concerned with the effects of climate change, are seeking to lessen oil’s role in their national fuel mixes. As a result, in 2019, the countries potentially most at the mercy of Washington when it comes to access to Gulf oil are economically fast-expanding China and India, whose oil needs are only likely to grow. That, in turn, will further enhance the geopolitical advantage Washington enjoyed as long as it remains the principal guardian of the flow of oil from the Persian Gulf. How it may seek to exploit this advantage remains to be seen, but there is no doubt that all parties involved, including the Chinese, are well aware of this asymmetric equation, which could give the phrase “trade war” a far deeper and more ominous meaning.

The Iranian Challenge and the Specter of War

From Washington’s perspective, the principal challenger to America’s privileged status in the Gulf is Iran. By reason of geography, that country possesses a potentially commanding position along the northern Gulf and the Strait of Hormuz, as the Reagan administration learned in 1987-1988 when it threatened American oil dominance there. About this reality President Reagan couldn’t have been clearer. “Mark this point well: the use of the sea lanes of the Persian Gulf will not be dictated by the Iranians,” he declared in 1987 — and Washington’s approach to the situation has never changed.

Guided-missile destroyer USS Porter transits Strait of Hormuz, May 2012. (U.S. Navy/Alex R. Forster)

In more recent times, in response to U.S. and Israeli threats to bomb their nuclear facilities or, as the Trump administration has done, impose economic sanctions on their country, the Iranians have threatened on numerous occasions to block the Strait of Hormuz to oil traffic, squeeze global energy supplies, and precipitate an international crisis. In 2011, for example, Iranian Vice President Mohammad Reza Rahimi warned that, should the West impose sanctions on Iranian oil, “not even one drop of oil can flow through the Strait of Hormuz.” In response, U.S. officials have vowed ever since to let no such thing happen, just as Secretary of Defense Leon Panetta did in response to Rahimi at that time. “We have made very clear,” he said, “that the United States will not tolerate blocking of the Strait of Hormuz.” That, he added, was a “red line for us.”

It remains so today. Hence, the present ongoing crisis in the Gulf, with fierce U.S. sanctions on Iranian oil sales and threatening Iranian gestures toward the regional oil flow in response. “We will make the enemy understand that either everyone can use the Strait of Hormuz or no one,” said Mohammad Ali Jafari, commander of Iran’s elite Revolutionary Guards, in July 2018. And attacks on two oil tankers in the Gulf of Oman near the entrance to the Strait of Hormuz on June 13th could conceivably have been an expression of just that policy, if —as claimed by the U.S. — they were indeed carried out by members of the Revolutionary Guards. Any future attacks are only likely to spur U.S. military action against Iran in accordance with the Carter Doctrine. As Pentagon spokesperson Bill Urban put it in response to Jafari’s statement, “We stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows.”

As things stand today, any Iranian move in the Strait of Hormuz that can be portrayed as a threat to the “free flow of commerce” (that is, the oil trade) represents the most likely trigger for direct U.S. military action. Yes, Tehran’s pursuit of nuclear weapons and its support for radical Shiite movements throughout the Middle East will be cited as evidence of its leadership’s malevolence, but its true threat will be to American dominance of the oil lanes, a danger Washington will treat as the offense of all offenses to be overcome at any cost.

If the United States goes to war with Iran, you are unlikely to hear the word “oil” uttered by top Trump administration officials, but make no mistake: that three-letter word lies at the root of the present crisis, not to speak of the world’s long-term fate.

Published:7/21/2019 10:41:41 PM
[Markets] Watch Live Demonstration Of Cleaning Robots That Will Displace Thousands Of Jobs

As we've said in many articles, a new wave of investments in automation is already underway, could eliminate 20% to 25% of the current American workforce by 2030, or about 40 million jobs.

In the latest installment of robots plotting a takeover, we set our eyes on a Singapore-based firm called LionsBot International - who has developed an autonomous robot that can sing, rap, wink and even tell jokes while scrubbing floors, reported Yahoo.

The company debuted the robot at a live demonstration ceremony on July 17 at the Gardens by the Bay, a resort located in the Central Region of Singapore, adjacent to the Marina Reservoir.

About 300 of these robots will be produced by March 2020, will allow the company to be the first in the world to offer cleaning robots on a subscription model to clients.

Prospective and current clients can rent the robots at a rate of $1,350 to $2,150 per month.

As of last week, two of the robots have been deployed at National Gallery Singapore and Jewel Changi Airport in April, with more expected at other commercial facilities in the coming months.

LionsBot said at least six of its clients would deploy the robots early next year.

According to LionsBot, the cleaning robot is more efficient than a human and can work longer hours.

"Multiple cleaning robots are able to coordinate and clean a given area simultaneously, without the need for human programming," the company said in a statement.

Besides regional demand, LionsBot has also received orders from companies based in Australia and Japan, said a company spokesperson, with the possible introduction to the US by 2021 to 2022.

LionsBot's clients will be able to choose from 13 different types of robots including ones that scrub, mop, vacuum, and sweep across various terrains, effectively eliminating low wage cleaning jobs. Another version of the robot can also transport up to 1,000 pounds of equipment.

At the launch event at Gardens by the Bay, Senior Minister of State for the Ministry of Trade and Industry Koh Poh Koon said cleaning robots could raise productivity, adding that the government will continue to promote the proliferation of automation.

However, the trade minister made zero mention of the upcoming labor force shift due to automation, how hundreds of thousands of people across the region will be displaced because of robots in the years ahead.

More importantly, once these robots wash ashore in the US (maybe in the next few years), and most likely on the West Coast first, a tidal wave of job losses due to automation will be seen as corporate America continues to streamline their operations with technology to curb margin compression.

Published:7/21/2019 10:10:09 PM
[Markets] California Launches Creepy "Cradle-To-Career" Data System To Track Everything About Children

Authored by Daisy Luther via The Organic Prepper blog,

Just in case we haven’t provided you with enough creepy dystopian news lately, the nation’s leader in Creepy Dystopia, California, has a brand new program. The “Cradle to Career Data System” will study and document everything about a child born in the state.

But don’t worry, it’s for your children’s own good.

What the heck is the “Cradle to Career Data System”?

Beginning at birth and stalking the child until he or she joins the workforce, California wants to keep on eye on all sorts of demographics and variables. They’ll do this by collecting information from “partner entities.” They’ll use this information, according to the Pasadena Star, to “provide appropriate interventions and supports to address disparities in opportunities and improve outcomes for all students.”

Who are these partner entities, you ask?

The “partner entities” include (but are not limited to) “state entities responsible for elementary and secondary education data, entities responsible for early learning data, segments of public higher education, private colleges and universities, state entities responsible for student financial aid, childcare providers, state labor and workforce development agencies, and state departments administering health and human services programs.” (source)

So, your kid’s teachers, principles, professors, babysitters, and the purveyors of any state services you happen to use will all cough up every detail of your child’s life.

Of course, California just wants to help.

This to me has hints of communist countries who pluck the brightest students from their home and educate them to work for the state. However, the admitted goal is data collection for the folks who make the rules.

Easily the creepiest thing to come out of California since “The Silence of the Lambs” was released into theaters, the “Cradle to Career Data System” aims to collect the ethnic, economic and educational records of every child in the state, track their grades and their progress into early adulthood, and make some form of the data available to policy makers, analysts and activists. (source)

This isn’t a maybe. It’s already passed as a trailer bill (so it didn’t go through the usual legislative process) and has been funded with a budget of $10 million.

The governor’s Office of Planning and Research is now authorized to enter into contracts with “planning facilitators” who will convene advisory groups “comprised of representatives of students, parents, labor, business and industry, equity and social justice organizations, researchers, privacy experts, early education experts, school districts, charter schools, and county offices of education.” (source)

Californians, your children’s privacy is at stake here. They are going to become part of a pile of data that will be used to enact future laws to assure “equity.” But at any time, these records will be there, the life of your child, every time they got sent to the principal’s office, who stands up to authority, who has special skills or talents, what the child’s parents are like. That person’s entire life in one handy file. And pardon me if I don’t believe the data collection will stop once they get a job. Data is king right now, so why give up on a good thing?

We’re already tracked everywhere we go once we’re old enough to have a cellphone or use the internet. But this starts right, as the title of the program points out, at the cradle.

Why are they doing this?

It’s all about “social justice.” Think quotas on steroids.

“Advocates have been demanding data for the people in the Golden State for years,” the Equity Alert explains, to “answer key questions about whether and how our state schools, colleges, universities, and workforce systems are closing racial equity gaps and serving Californians.”

It sounds as if the goal is to go beyond laws that ban discrimination and beyond affirmative action into a brave new world, one in which government bureaucrats tally the economic success of each racial and ethnic group and sub-group and award government funding in an effort to reach “equity.” (source)

Of course, we all know that things like this are actually not equitable, at least not to kids from groups who are not considered to be “at risk.”

There’s no word yet on whether or not parents will be able to opt out on behalf of their offspring.

This certainly normalizes being surveilled.

We’ve written a great deal on this site about the social credit system and the surveillance state in which we live. To me, a program like this seems like just another nail in the coffin of privacy. Don’t think that this will stop at the border of California.

These kids will, from their first moment of awareness, be concerned about their permanent record. That’s an awfully big burden to put on someone who still eats with his fingers and wears pull-ups to bed. These children will spend their entire lives under a microscope, for better or for worse, while some data entry person types their every action of note into their record.

If you want to have a social credit system like the one in China, I guess you’ve got to start early.

Published:7/21/2019 9:40:34 PM
[Markets] Hilarious Hypocrisy: Sanders Campaign Workers Demand $15 Minimum Hourly Wage

In the Senate, Bernie Sanders is battling to raise the national minimum wage to $15 an hour (a decision that would almost certainly lead to the destruction of millions of low-skill, low-pay jobs, but we digress). But some of his own campaign workers say they're being forced to survive on less - some calculate their pay at $13 an hour for a 60-hour workweek - and now they're demanding more.

Sanders' unionized campaign organizers have leaked a story to the Washington Post where they complain about how their pay doesn't meet the standards that Sanders supposedly believes should be applied to all Americans.


The embarrassing story, Sanders' campaign field organizers, who occupy the lowest rung on the campaign staff ladder, complain that they're being forced to depend on payday loans to survive and that, in one state, four people have quit in the past month because of their financial struggles (though, if one is struggling financially, giving up one's only source of income would seem to make little sense).

One field organizer complained in the Sanders' campaign internal Slack that he needed more money "because I need to be able to feed myself."

Another utilized the rhetorical concept of irony by quoting a Sanders speech: "As you know, real change never takes place from the top on down, it always takes place from the bottom on up."

Furthermore, the demands for higher salaries come just months after the Sanders campaign workers union and the campaign leadership reached a collective bargaining agreement that was effective as of May 2.

The agreement established wage classifications for national and state staff, ranging from $15 an hour for interns and canvassers to $100,000 annual salaries for bargaining unit deputies.

Field organizers, who are on the front lines of the campaign’s crucial voter contact efforts, were to be paid not by hours worked but via an annual salary set at $36,000. Regional field directors were to be paid $48,000 annually, and statewide department directors were allocated $90,000 per year.

But shortly after the agreement was reached, the complaints started pouring in. Sanders' campaign manager Faiz Shakir swiftly called an all-staff meeting where he proposed a modified agreement with modestly higher pay. But in a vote, Shakir's deal was rejected.

The messages caught Shakir’s attention, and later that day he sent an email to the staff thanking them for their comments. "I do believe you are owed an explanation for the situation we find ourselves in," he wrote in an email obtained by The Post.

In his email, Shakir recapped his thinking from May 17 and expressed regret with the outcome.

"I have no idea what debates and conversations were had, but candidly, it was a disappointing vote from my perspective," he wrote of the union’s decision to reject his proposal. “But the campaign leadership respected the union process and the will of the membership.”

Shakir said that it would be damaging to the campaign’s budget to implement a pay hike after expanding field staff based on previously planned salary figures. In conclusion, he said, he would negotiate the matter only through the channels established by the union arrangement.

Now, the union is preparing to send Shakir and the rest of the campaign leadership a new (presumably budget busting) proposal.

Here are some of their demands:

  • That field organizers receive a salary of $46,800, while regional field directors be paid $62,400.
  • That the campaign cover 100% of the health-care costs for employees making $60,000 or less a year (currently, the campaign pays all premiums for salaried employees making $36,000 or less, while those making more are covered at a rate of 85%).
  • That campaign staff be reimbursed for automobile transportation at $0.58 per mile while they're traveling around canvassing for Sanders.

In a draft letter to Sanders' campaign manager obtained by the Washington Post, the campaign workers said they "cannot be expected to build the largest grassroots organizing program in American history while making poverty wages Given our campaign's commitment to fighting for a living wage of at least $15 an hour, we believe it is only fair that the campaign would carry through this commitment to its own field team."

Their union issued a nebulous statement about the workers' demands on Thursday night.

In a statement issued earlier Thursday night, the union representing the campaign workers, United Food & Commercial Workers Local 400, said it could not comment "on specific, ongoing internal processes between our members and their employer."

"As union members, the Bernie 2020 campaign staff have access to myriad protections and benefits secured by their one-of-a-kind union contract, including many internal avenues to democratically address any number of ongoing workplace issues, including changes to pay, benefits, and other working conditions," the statement said.

"We look forward to continuing to work closely with our members and the management of the Bernie 2020 campaign to ensure all workers have dignity and respect in the workplace."

While some of Sanders' campaign workers insist they won't be able to build a primary-winning machine without being paid "a living wage" the sad reality - for Bernie - is that raising the pay of the campaign's lowest-paid workers by 50% will force the campaign to shed personnel and ultimately have fewer people in the field out there canvassing.

We wonder: What kind of impact do they think that will have on Bernie's chances?

Published:7/21/2019 9:10:54 PM
[Markets] Free Trade, Not Foreign Aid, Will Reduce The Incentive To Flee Central America

Authored by Ryan McMaken via The Mises Institute,

Former Secretary of State George Schultz has an idea for dealing with increased immigration from the Northern Triangle region of Central America, which includes of El Salvador, Guatemala and Honduras: he wants to spend more money on foreign aid.

In yesterday's Wall Street Journal, Schultz writes that the countries of the Northern Triangle could "increase the 'supply' of good governance by us[ing] foreign aid to fund better policing, transparency and higher-quality services—and apply international pressure to root out corruption and encourage political reform."

And who could supply this foreign aid?

According top Schultz, "the U.S. is the only nation with the economic, technological and political authority to lead," and "[t]he Inter-American Development Bank could do so by redirecting existing funds without new U.S. expenditures, and could get started with a phone call in Washington."

Schultz wisely doesn't mention any dollar amounts. How could he? His proposal is clearly meant to be a sort of trial balloon: demand more government spending now, and work out all the details in the back rooms later.

But we know how this sort of thing works.

There is no real expectation that foreign aid would actually remake the economies of the Northern Triangle.

In reality, it will be yet another foreign aid boondoggle: friends of the US regime will receive funds. There will be little follow-up as to how the money is spent. The money may even go to fund despots who will use the funds to murder their enemies. George Schultz's personal friends and colleagues will no doubt get their cut. This is how the US foreign aid game is played.

It is interesting that Schultz doesn't mention something that does have the potential for revolutionizing the region's access to capital and its standard of living. It will do this while greatly lessening the incentive to emigrate from the region to the US: unrestricted trade with the United States.

To accomplish this, the US need not collect any new taxes. It need not impose any new regulations. It need not form any international "coalitions."

Instead, it only has to make the Northern Triangle a true Free Trade Zone with full access to US markets.

At this point, some observers may claims "the US already has a free trade agreement with Central America! In fact, the region is largely duty free!" But this objection helps to illustrate just how much the term "free trade" has been corrupted in the phrase "free trade agreement." In practice, only qualifying goodscan be imported to the US from Central America duty free. In order to qualify, goods must meet a variety of bureaucratic requirements stemming from "rule of origin" requirements. These rules exist to prevent "trade diversion" and other types of trade in which a Central American country might import parts from outside the free trade zone, add only small amounts of value, and then export the finished product to the US. Thus, trade between Central America and the US is not really free, and the trade agreements specifically prevent Central American countries from becoming trade and shipping centers where goods and services can be freely imported and exported globally.

If Central America had a true free trade agreement with the US, however, both US and foreign manufacturers would have an enormous incentive to set up shop in the region and produce goods there for the US market.

Over time, capital would flood into the region, greatly increasing the standard of living for Central Americans while providing new sources of goods and services for American entrepreneurs and consumers.

The success of such a plan, of course, is not guaranteed. The regimes of El Salvador, Guatemala, and Honduras could squander the opportunity. They could insist on high domestic taxes or an insecure legal environment in which private business owners would have reason to fear expropriation by the regime.

But when facing the possibility of true free trade with the US, the stakes would become very high indeed, and the regime could choose between guaranteed moderate levels of tax revenue, or the disastrous policies of expropriation.

But no matter how it turns out, the US taxpayer is not on the hook for anything. There is no risk of foreign aid flushed down the toilet. Instead, the upside is substantial: access to low-cost goods and services from American, Asian, and European firms all hungry to take advantage of this new "free trade zone" in the western hemisphere. American entrepreneurs would be able to provides goods and services at lower prices. They could hire more workers. They could invest more of their profits.

Moreover, the geo-political benefits would be substantial. The regimes of the Northern Triangle would become committed to maintaining friendly relations with the US, and the pressures of high levels of migration from the region would be lessened.

In his essay " The Case for Free Trade and Restricted Immigration ," Hans-Hermann Hoppe recognized the benefits of free trade in immigration policy:

The relationship between trade and migration is one of elastic substitutibility (rather than rigid exclusivity): the more (or less) you have of one, the less (or more) you need of the other . [Emphasis added.] Other things being equal, businesses move to low wage areas, and labor moves to high wage areas, thus effecting a tendency toward the equalization of wage rates (for the same kind of labor) as well as the optimal localization of capital. With political borders separating high- from low-wage areas, and with national (nation-wide) trade and immigration policies in effect, these normal tendencies—of immigration and capital export—are weakened with free trade and strengthened with protectionism. As long as Mexican products—the products of a low-wage area—can freely enter a high-wage area such as the U.S., the incentive for Mexican people to move to the U.S. is reduced. In contrast, if Mexican products are prevented from entering the American market, the attraction for Mexican workers to move to the U.S. is increased. Similarly, when U.S. producers are free to buy from and sell to Mexican producers and consumers, capital exports from the U.S. to Mexico will be reduced; however, when U.S. producers are prevented from doing so, the attraction of moving production from the U.S. to Mexico is increased.

Bizarrely, protectionists take the opposite self-defeating approach: they want to cut off trade with other nations, thus reducing the standard of living. This then increases the incentive for foreigners to emigrate to the United States. The protectionists then complain there's too much immigration and the government must intervene even more to control both trade and migration.

Not surprisingly, Ludwig von Mises saw the ridiculouslness of this position. As I noted in my article " If You Don't Like Immigration, You Should Love Free Trade ":

Opponents and proponents of immigration may argue endlessly about the potential downsides and upsides of immigration. (For an especially nuanced and insightful view of the downsides, see Ludwig von Mises's work on nationalism and immigration .)

With free trade, though, there is no downside, which is why Mises, who allowed for a number of caveats on immigration, made no exceptions for free trade.

For many modern protectionists, though, the desire to close off trade stems not just from economic ignorance, but from an emotional desire to actually harm other countries on nationalistic grounds. The economic implications of these policies then become secondary to other ideological agendas. Mises understood this well, and in Human Action concluded :

We may, for the sake of argument, disregard the fact that protectionism also hurts the interests of the nations which resort to it. But there can be no doubt that protectionism aims at damaging the interests of foreign peoples and really does damage them. ... The philosophy of protectionism is a philosophy of war.

George Schultz is correct in the sense that a prosperous Central America is a Central America with less incentive to send its workers and families to North America. But the real solution does not lie in throwing a few extra bucks at the central American regimes in hope they might build a couple of new highways. The real solution lies in expansion of trade, capital investment, and . Only then can a sustainable solution to the region's poverty be found.

Published:7/21/2019 8:41:08 PM
[Markets] Putin Comes Clean On 2016 'Meddling': "Perfectly Clear Ukrainian Oligarchs Gave Money To Trump's Opponents"

Authored by Robert Wenzel via,

Russian President Vladimir Putin sat down on June 19, 2019, in the Kremlin, for an on the record interview with Oliver Stone. The Russian government has released a transcript of the interview.

Below is Putin's discussion with Stone about the 2016 presidential election.

Oliver Stone: Yes. So recently, you know Russia has been obviously accused and accused over and over again of interference in the 2016 election. As far as I know there is no proof, it has not turned up. But now in the US there has been an investigation going on about Ukraine’s interference in the election. It seems that it was a very confusing situation, and Poroshenko seems to have been very strongly pro-Clinton, anti-Trump.

Vladimir Putin: Yes, this is no secret.

Oliver Stone: Do you think there was interference?

Vladimir Putin: I do not think that this could be interpreted as interference by Ukraine. But it is perfectly obvious that Ukrainian oligarchs gave money to Trump’s opponents. I do not know whether they did this by themselves or with the knowledge of the authorities.

Oliver Stone: Where they giving information to the Clinton campaign?

Vladimir Putin: I do not know. I am being honest. I will not speak about what I do not know. I have enough problems of my own. They assumed Mrs Clinton would win and did everything to show loyalty to the future US administration. That is nothing special. They wanted the future President to have a good opinion of them. This is why they allowed themselves to make unflattering statements about Trump and supported the Democrats in every possible way. This is no secret at all. They acted almost in public.

Oliver Stone: You do not want to go any further on that because you do not have any information?

Vladimir Putin: You know, this would be inappropriate on my part. If I said something more specific, I would have to put some documents, some papers on the table.

Oliver Stone: You understand that it has huge implications because Mr Trump would be very grateful?

Vladimir Putin: I did not interfere then, I do not want to interfere now, and I am not going to interfere in the future.

Oliver Stone: But that is a noble motive. Unfortunately, the world has degenerated in these two years, with all this backbiting and accusations, dirty fighting. Anyway…

Vladimir Putin: There are no rules at all. It is no holds barred.

Oliver Stone: Well, you have rules. You say no interference.

Vladimir Putin: I have principles.

Oliver Stone: Ok. But you seem to have rules based on those principles.

Vladimir Putin: Well, yes.

Oliver Stone: Ok. Well, you are fighting with one hand tied behind your back.

Vladimir Putin: Why? You mean, because of these principles?

Oliver Stone: Yes. If you knew something about the election, it would tilt the balance in a very weird way.

Vladimir Putin: I think this is simply unrealistic. I have said so many times.

Oliver Stone: What is unrealistic?

Vladimir Putin: To change anything. If you want to return to US elections again – look, it is a huge country, a huge nation with its own problems, with its own views on what is good and what is bad, and with an understanding that in the past few years, say ten years, nothing has changed for the better for the middle class despite the enormous growth of prosperity for the ruling class and the wealthy. This is a fact that Trump’s election team understood. He understood this himself and made the most of it.

No matter what our bloggers – or whoever’s job it is to comment on the internet – might say about the situation in the US, this could not have played a decisive role. It is sheer nonsense. But our sympathies were with him because he said he wanted to restore normal relations with Russia. What is bad about that? Of course, we can only welcome this position.

Oliver Stone: Apparently, it excited the Clinton people a lot. The Clinton campaign accumulated the “Steele dossier.” They paid for it. It came from strange sources, the whole “Steele dossier” issue. Some of it comes from Ukraine. They also went out of their way, it seems to me, with the CIA, with Mr Brennan, John Brennan, and with Clapper, James Clapper, and Comey of the FBI. They all seem to have gotten involved, all intelligence agencies, in an anti-Trump way.

Vladimir Putin: They had levers inside the government, but there is nothing like that here. They applied administrative pressure. It always gives an advantage in countries such as the USA, some countries of Western Europe, about 2 percent on average, at a minimum.

Oliver Stone: Two percent? What are you talking about?

Vladimir Putin: Yes. According to experts, those with administrative pressure they can apply always have a 2 percent edge. You can look at it differently. Some experts believe that in different countries, it can vary, but in countries such as the United States, some European countries, the advantage is 2 percent. This is what experts say, they can be wrong.

Oliver Stone: I do not know. I heard of the one percent, but it seems to get more like 12 percent.

Vladimir Putin: That is possible, depending on how it is used.

Oliver Stone: Well, you are not disagreeing. You are saying that it was quite possible that there was an attempt to prevent Donald Trump from coming into office with a soft, I will call it a soft coup d’état?

Vladimir Putin: In the USA?

Oliver Stone: Yes.

Vladimir Putin: It is still going on.

Oliver Stone: A coup d’état is planned by people who have power inside.

Vladimir Putin: No, I do not mean that. I mean lack of respect for the will of the voters. I think it was unprecedented in the history of the United States.

Oliver Stone: What was unprecedented?

Vladimir Putin: It was the first time the losing side does not want to admit defeat and does not respect the will of the voters.

*  *  *

[RW  note: Putin is the most level headed guy around. Here he is on the inconsistent moves of Trump]:

Oliver Stone: Ok, but beyond Poroshenko, the United States has a shadow here. The United States knows what he is doing, and supported it.

Vladimir Putin: Absolutely.

Oliver Stone: It is the creation of a strategy of tension that worries me enormously. I have seen this happen in so many places now. I think I read on Monday, the Russian bombers, the Russian SU-57 escorted, what was it, the B-52 bomber, a nuclear bomber, US bomber, close to the Russian borders.

Vladimir Putin: The Su-57 aircraft are just entering service. This is a fifth-generation jet fighter. It was the Su-27 that was mentioned.

Oliver Stone: Do you think that is normal?

Vladimir Putin: Actually, it is sad, probably, but this is common practice. US aircraft did not enter our airspace, and our aircraft did not conduct any high-risk maneuvers. But generally speaking, this is not great. Just look where the Baltic or Black seas are located, and where the USA is. It was not us who approached US borders, but US aircraft that approached ours. Such practices had better stop.

Oliver Stone: In this continuing strategy of tension, there was a report in The New York Times last week that the Obama Administration, before they left office, put in what they call a cyber warfare device. It was inserted in Russian infrastructure in January 2017.

Vladimir Putin: This is being discussed almost openly. It was said Russia would be punished for interfering in the election campaign. We do not see anything extraordinary or unexpected here. This should be followed closely. That is the first thing. The second is I believe that we only need to negotiate how we are to live in this high-tech world and develop uniform rules and means of monitoring each other’s actions. We have repeatedly proposed holding talks on this subject to come to some binding agreement.

Oliver Stone: Continuing that theme of strategy of tension, how is Russia affected by the US-Iranian confrontation?

Vladimir Putin: This worries us because this is happening near our borders. This may destabilize the situation around Iran, affect some countries with which we have very close relations, causing additional refugee flows on a large scale plus substantially damage the world economy as well as the global energy sector. All this is extremely disturbing. Therefore we would welcome any improvement when it comes to relations between the US and Iran. A simple escalation of tension will not be advantageous for anyone. It seems to me that this is also the case with the US. One might think that there are only benefits here, but there will be setbacks as well. The positive and negative factors have to be calculated.

Oliver Stone: Yeah. Scary.

Vladimir Putin: No, this is not scary.

Oliver Stone: You sound very depressed, much more depressed than last time.

Vladimir Putin: Last time the situation concerning Iran was not like this. Last time nobody said anything about getting into our energy and other networks. Last time the developments were more positive.

Oliver Stone: The situation is worse now?

Vladimir Putin: Take North Korea, they have also rolled back a bit. Trade wars are unfolding. 

Oliver Stone: Venezuela.

Vladimir Putin: Venezuela as well. In other words, regrettably, the situation has not improved, so there is nothing special to be happy about. On the other hand, we feel confident. We have no problems.

Oliver Stone: Well, you are an optimist, and always have been?

Vladimir Putin: Exactly.

Oliver Stone: You are a peacemaker.

Vladimir Putin: Absolutely spot on.

Oliver Stone: So obviously, you have to get together with the Americans, and the Chinese, and the Iranians. I know.

Vladimir Putin: Just do not put the blame on us. Lately no matter what is happening, we always get the blame.

Oliver Stone: Well, the irony is that Mr Trump came to office promising that he was not going to interfere in other countries. He made this overall strategy, he was against the wars that we have started, and ever since he has been in office, it has got worse. Why, one wonders? Is he in charge, or are other people pushing these agendas?

Vladimir Putin: I think he is against this now, too. But life is complicated and diverse. To make the right decision it is necessary to fight for what you believe in.

Published:7/21/2019 8:10:50 PM
[Markets] UFC President: Justin Bieber Versus Tom Cruise Fight "Could Happen"

In a bizarre tweet last week that nobody really understood, singer Justin Bieber challenged Tom Cruise to a fight "in the octagon" - for reasons unbeknownst to anybody. Now, it looks as though the one person that could possibly make it happen, UFC President Dana White, is alluding to the fact that it could actually take place. 

“I wanna challenge Tom Cruise to fight in the octagon. Tom if you dont take this fight your [sic] scared and you will never live it down. Who is willing to put on the fight? @danawhite ?” Bieber said.

Though nobody is really sure what has started the beef between the two celebrities, UFC president Dana White told TMZ last week that he’s "already taken phone calls from people who claim both stars are interested in the bout."

White said:

"I’m gonna tell you something interesting... Lots of people will talk about fighting somebody in the UFC or something like that. Whether it’s NFL players or celebrities, it happens a lot. I saw it like everybody else did and didn’t pay too much attention to it.”

He continued:

“I’m not going to say any names, but I’m going to tell you that I got a phone call from a couple of real guys who said that they really do want to do this fight and they believe Tom Cruise would do the fight. I told them, ‘I’ll tell you this, if that’s true... If that’s true, and everybody involved in this thing wants to do it, we can talk.” 

Tom Cruise hasn’t publicly responded to the viral tweet since it went out and now, it seems like Justin Bieber is already trying to make excuses to back out of his challenge.

Bieber told TMZ: “It was just a random tweet. I do that stuff sometimes. I think he would probably whoop my ass in a fight. He’s got that dad strength.”

But still, Dana White hasn’t given up on trying to make the fight happen.

Published:7/21/2019 7:39:46 PM
[Markets] Trump's Next Trade War Target: Vietnam

Authored by David Hutt via The Asia Times,

Southeast Asian nation has dramatically whipsawed between US-China trade war winner to potential next big tariffed loser

The popular consensus is that Vietnam has been one of the world’s biggest US-China trade war winners, as global supply chains shift production away from tariff-hit China and towards the low-cost Southeast Asian nation.

That upshot, one that may have added as much as 8% to Vietnam’s gross domestic product (GDP) according to one bank’s research, has apparently already run its full course as US President Donald Trump slaps new punitive tariffs on Hanoi’s exports.

In May, Vietnam was added to the US Treasury Department’s list of possible currency manipulators, a designation that could result in punitive measures if proved. That threat presaged this month’s imposition of a whopping new 400% US duty on Vietnamese steel imports that originate from South Korea and Taiwan.

The US could next slap punitive tariffs on certain Vietnamese imports based on allegations Hanoi is allowing Chinese-made products to be rebranded as Vietnamese goods before export to the US to circumvent tariffs on China, a process officials refer to as “transshipment.”

Some economists predict that, for instance, if the US moves to impose a 25% tariff on Vietnam’s exports, as it has done with China for reasons of national security, the move would cause Hanoi’s exports to fall by a quarter and shave off more than 1% from GDP.

That could be in the offing, analysts reckon, in light of Trump’s scathing comment last month that Hanoi was “almost the single worst abuser of everybody” in regard to trade and that “Vietnam takes advantage of us even worse than China.”

That critique was aimed at Vietnam’s high and rising trade surplus with the US, which hit a record US$40 billion last year, up slightly from 2017 and in spite of a concerted Vietnamese effort to buy more from the US.

In the first five months of this year, Vietnam’s trade surplus with the US hit $21.6 billion, double the amount compared with the same period in 2018.

Beyond the rhetoric, America’s new tariffs on Vietnam represent a drastic course shift, one that has caught Vietnamese officials off guard amid what was a strong bilateral warming trend under the Trump administration.

In February, when Hanoi staged a second historic round of US-North Korea peace talks, Trump lavished praise on his Vietnamese hosts.

“You’ve made tremendous progress and it’s a great thing for the world to see,” he told Vietnamese Prime Minister Nguyen Xuan Phuc while referring to the one-time battlefield adversaries as “friends.”

Soon after Trump took office in January 2016, Vietnam was one of the first targets of his complaints that certain nations maintained big, unequal trade surpluses with the US.

Those complaints were mollified somewhat after Phuc visited Trump at the White House later that year with a multi-billion dollar purchase order for several Boeing-made commercial aircraft.

Communist Party sources, who spoke on condition of anonymity, say they are perplexed by Trump’s volte face. For the last two years, Trump has acted as though Vietnam and the US were “best friends”, one Vietnamese official told Asia Times.

The officials say it is unclear whether the Trump administration is genuine about its threat of possible future sanctions on Vietnamese imports, or whether it is a dramatic negotiating tactic to extract more concessions.

Sources say that Vietnam has made the kind of trade-related commitments that they think Washington supports, and that Trump’s latest comments could merely aim to accelerate their implementation.

For instance, a planned law to create three new special economic zones, which sparked rare nationwide protests last year as many thought they would allow Chinese firms to purchase large swathes of Vietnamese land, has now been indefinitely postponed.

Meanwhile, National Assembly delegates recently called on Communist Party functionaries to curb Chinese investment in Vietnam, with lawmakers arguing that Hanoi should be more particular about which foreign-invested projects it accepts.

Vietnamese authorities have also stiffened a crackdown on Chinese products being re-routed through Vietnam on their way to the US, a circumvention of tariffs that has greatly peeved the Trump administration.

To some extent, Vietnam has mitigated the costs of possible US sanctions by signing trade deals with other partners. Earlier this year, it formally became part of the reformed Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a multilateral trade pact which Trump took the US out of in one of his first acts as president.

Moreover, on June 30, Vietnam finally signed a free-trade agreement with the European Union after several years of protracted negotiations.

The deal, which will remove import duties from 99% of Vietnam’s exports within seven years, up from 71% when the deal was signed, could boost Vietnam’s exports to the EU by 20% in 2020, according to official estimates.

Last year, the EU purchased $42.5 billion worth of Vietnam’s exports.

Still, the US is Vietnam’s most important trading partner, a fact that is not likely to change any time soon. Last year, the US imported $49 billion worth of Vietnamese goods, while exporting just $9.6 billion to Vietnam.

In the first five months of this year, US imports of Vietnamese goods have jumped to $25.8 billion, compared to $18.9 billion over the same period last year, evidence that Vietnam is benefitting immensely from the trade war.

In June, Japanese investment bank Nomura estimated that Vietnam had gained the equivalent of 7.9% of its GDP from trade diversion and supply chain shifts caused by the US-China spat. (The second largest beneficiary was Taiwan, which has gained about 2.1% of its GDP, the research shows.)

Some analysts believe Washington’s reaction to Vietnam’s trade practices is perfectly normal, particularly in light of allowing Chinese companies to use it as a base to disguise their exports to the US.

Vietnam, now one of the world’s 50 largest economies, is simply being asked to abide by the same rules the US expects from other trading partners – the same rationale that led to the US-China trade spat.

“Every fast-industrializing Asian nation has been at first indulged by the US and other major Western trading partners and then, as its market power became formidable, pressed to play by the rules of international trade,” wrote David Brown, an expert on Vietnam, in World Politics Review this month.

“Japan, Taiwan, South Korea, Singapore and Taiwan all cleared that hurdle years ago, none without considerable turmoil. Vietnam is still on probation, and must find the self-discipline to prioritize its larger interests,” the ex-US diplomat added.

Geopolitics, however, are confusing matters. Hanoi has enjoyed US preferential treatment for years because of its strategic importance to American interests, including vis-à-vis China in the South China Sea.

When former US president Barack Obama launched his “pivot to Asia” policy earlier this decade, Vietnam was considered an important new ally because it was one of the few claimants that strongly opposed Chinese expansionism in the maritime area.

Overlooking Vietnam’s many faults – namely it’s abysmal human rights record – has been the price Western nations paid to secure cordial relations with a government that agrees on the need to contain China’s regional rise.

Vietnam has willingly flaunted this position to extract concessions from the West while often playing the US and China off one another to maximize diplomatic benefits from both.

Trump’s recent moves have certainly and unexpectedly put Hanoi on the back foot. Sources say its bureaucracy is working overtime to reform its system on export permits, while also mulling new ways of to reduce its trade surplus.

It is no secret that the US wants Vietnam to purchase more American-made military equipment, and move away from its traditional arms supplier, Russia.

Buying a big-ticket cache of new US military hardware would certainly be looked upon kindly in Washington, a move that would help to narrow Hanoi’s trade surplus while further cementing US-Vietnam defense ties.

Published:7/21/2019 7:09:13 PM
[Markets] World's Biggest Hedge Fund Hammered In First Half Due To Ray Dalio's Bearish Bets

When Ray Dalio issued a public warning last week that in the coming "new paradigm" investors will be forced to buy gold while selling stocks, which "are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold", many accused the manager of the world's largest hedge fund of hypocrisy at worst, and talking his book at best, namely that he was pitching gold even as he was going ever longer stocks.

It turns out he wasn't, and in fact Dalio appears to have been putting his money where his skeptical mouth was; 4.9% less money than he had at the start of the year to be precise, because according to the FT, Bridgewater’s flagship (non risk-parity) "Pure Alpha" fund suffered one of its worst first-half performances in two decades this year after being whipsawed and wrong-footed by rebounding markets.

The $150 billion Bridgewater saw its Pure Alpha fund, which is the discretionary fund whose returns are linked to macroeconomic forecasts and trades, lost a whopping 4.9% in the six months to June even as global equity and bond markets soared on hopes of looser monetary policy, with the S&P posting one of its best first half returns in history; Bridgewater not only underperformed the FTSE All-World index, which up 15% by the end of June, but also its peer group, as the average macro hedge fund returned 5.2% over the same period according to HFR.

The startling underperformance followed a strong year for Pure Alpha in 2018, when the clearly bearish biased fund delivered a net 14.6% return, even as most other hedge funds lost money.

Still, as the FT notes citing a source, Bridgewater has reportedly pared some of its earlier losses, and was down 1.45% cent in the year to mid-July, implying a solid rebound in the first two weeks of the month.

While it is unclear which trades hit Bridgewater, the FT notes the fund's particularly poor performance in January when Pure Alpha declined by 4.5%, suggesting it went into the new year expecting further turbulence and instead suffered as the market recovered on the back of a shocking reversal by central banks.

Some have also suggested that Bridgewater was one of the whales hit by the stunning reversal in the Eurodollar market in recent months, as rate cut odds soared in the past two months.

Meanwhile, offsetting much of the Pure Alpha losses, Bridgewater’s passively managed All-Weather fund, which unlike Pure Alpha is immune from macro-economic shifts and is instead a risk-parity, "balanced" fund, returned 13% through June, which was to be expected in a year where both stocks and bonds have soared, resulting in the best returns for risk parity funds in over two decades.

As the FT reminds us, Pure Alpha also had a difficult start to the year in 2009 and in 2016, according to data seen by the FT, but managed to claw back its losses in the second halves of those years. It was unclear if the Pure Alpha fund was still positioned bearishly as of this moment.

Published:7/21/2019 6:39:23 PM
[Markets] Bank of America: "Enjoy It While It Lasts"

Last August, several of Bank of America's more skeptical analysts including Michael Hartnett and chief economist Ethan Harris wrote a piece on the law of large numbers, arguing that an ever-expanding list of uncertainties would likely undercut the markets going into year-end. At the time, the main concerns were the trade war, a hawkish Fed, Brexit, Quitaly and Iran oil sanctions. And now, Bank of America once again warns that this fall, a similar set of concerns could come to a head and halt the current rally in global equity markets.

As always, the trade war is at the top of the list.

While BofA's economists are hopeful for a partial de-escalation between the US and China in the next few months, they are are becoming increasingly concerned that the current tariffs are permanent. With the US and China facing off across a demilitarized zone, a number of other battle fronts could emerge. The deadline for avoiding auto tariffs is mid-November. Additionally, there is a steady drift toward some kind of currency war: in the form of either countervailing duties or outright intervention. Countries that benefit from production shifting out of China, including Vietnam and other ASEAN countries, could face at least a serious threat of US tariffs. Meanwhile, the list of foreign firms facing unfair trade investigations by the US Commerce Department continues to grow. Elsewhere, Brexit, Middle East tensions, fraying Japan and Korea relations, and Washington DC policy missteps all loom as risk factors.

However, the list of global risks doesn't end with trade. The next deadline for Brexit is 31 October, and there is a significant risk of a "no deal" exit either then or after another election. The oil market seems able to handle Iran oil sanctions, but it may face a bigger challenge if military conflict emerges in the Middle East. On the other side of the world, relations between Japan and Korea have frayed and there is a risk of a regional tech trade war in the coming months.

Finally, dysfunctional US politics are increasingly becoming a focal point.

Not to be outdone, the US Congress and the Trump Administration have created a massive to-do list this fall. Here they are, in order of priority.

  1. Debt limit: The most urgent issue facing Congress right now is the debt limit. Breaching the debt limit and running out of cash is much worse than a government shutdown. The latter closes a limited range of activities; the former means immediately balancing the budget on a daily basis and a high risk of defaulting on a debt payment. Last week, Treasury Secretary Mnuchin sent a letter to House Leader Pelosi that the Treasury could run out of extraordinary measures by early-September, meaning that there is less than two months until the "x-date".

    With Congress scheduled to be on break until 9th September, consensus expects Congress to raise the debt limit before going on break. There is bipartisan support to tie the debt limit to a new budget deal but if talks stall, a short-term increase could be in the works. Ultimately, the final agreement will likely lift the debt ceiling beyond the 2020 presidential election.
  2. Budget deal: The previous two-year budget deal is set to expire at the end of September and a new deal will be needed to avoid across-the-board spending cuts. Press reports early Thursday suggest that Congress and the Trump administration have a tentative deal to increase the spending caps and raise the debt limit. Details remain scant but higher spending caps would translate into a modest tailwind for growth and wider budget deficits in 2020 and 2021.
  3. USMCA: The passage of USMCA remains in limbo in the US with the Democrat-led House looking for stricter enforcement provisions on labor laws and environmental protections as well as other changes in the trade agreement. Negotiations are ongoing between USTR Lighthizer and House Democrats. We think USMCA will ultimately be ratified by the US later in the year (the fall at the earliest).
  4. Fed nominations: President Trump announced that he will nominate Judy Shelton and Chris Waller to the Federal Reserve Board. Chris Waller is a relatively conventional choice for the Board. Judy Shelton is not: in 2009, she argued that easy monetary and fiscal policy would create "ruinous inflation"; today, with the economy fully recovered from the Great Recession, she favors quickly cutting rates. Given that the nominations are not official yet and other pressing matters remain, we think the confirmation process is likely to bleed into late-fall/early-winter. If they are confirmed to the Fed, the two nominees will fill seats expiring in 2024 and 2030 (Table 1). Note that only the Senate will need to confirm their nominations with a simple majority.

  5. Bipartisan wish list: Other policy proposals (eg, middle-income tax cuts, infrastructure and immigration reform) remain on the backburner. Given the political climate and split Congress, these policies are unlikely to get a look until after the 2020 elections.

That said, there are two important silver linings in these dark clouds according to BofA.

First, the Trump Administration is very reluctant to impose broad-based consumer tariffs. This makes across-the-board China, autos and Vietnamese tariffs less likely.

Second, since last fall, the Fed has done a 180-degree turn from steady tightening to pre-emptive easing. This not only helps cushion the trade shock in the US, but has also created space for many emerging market central banks to ease as well. The problem is that the market is already pricing in more rate cuts than many banks - certainly Bank of America - believe the Fed is likely to deliver. The markets expect about 110bp in cuts by the end of next year, while BofA has penciled in only 75bp, while Goldman goes so far as to expect the Fed to resume rate hikes in 2020. At some point, the Fed has to disappoint very high expectations.

The bottom line is that, according to Bank of America's top economists, for now investors can continue to bask in the glow of Fed-fueled financial markets. However, "once that burns out and the rains arrive, the picture could look a lot different."

Published:7/21/2019 6:09:10 PM
[Markets] As Trump Backs Down, The Pips Squeak

Authored by Tom Luongo,

Last week it was all fire and brimstone. The US was threatening more sanctions on Iran, the Brits were seizing oil tankers and Iran was violating the JCPOA.

This week things look different all of a sudden. An oil tanker goes dark while passing through the Strait of Hormuz, the story fails to get any real traction and the US allows Iranian Foreign Minister, recently sanctioned, to do his job at the United Nations.

Trump then holds a cabinet meeting where he reiterates that “We’re not looking for regime change. We want them out of Yemen.”

I thought National Security Advisor John Bolton said the US would apply pressure until “the pips squeak.”

Where the pips are squeaking is on the Arabian Peninsula, not across the Persian Gulf in Bandar Abbas. Specifically, I’m talking about the United Arab Emirates. The UAE sent a delegation to Tehran recently that coincided with its partial withdrawal of troops from Yemen.

That meeting, according to Elijah Magnier, focused on Emirates realizing they are in the middle of this conflict, up to their skyscrapers.

“The UAE would like to avoid seeing their country transformed into a battlefield between the US and Iran in case of war, particularly if Trump is re-elected. The Emirates officials noted that the US did not respond to Iran’s retaliation in the Gulf and in particularly when the US drone was downed. This indicates that Iran is prepared for confrontation and will implement its explicit menace, to hit any country from which the US carries out their attacks on Iran. We want to be out of all this”, an Emirates official told his Iranian counterpart in Tehran.

Iran promised to talk to the Yemeni officials to avoid hitting targets in Dubai and Abu Dhabi as long as the UAE pulls out its forces from the Yemen and stops this useless war. Saudi Crown Prime Mohammad Bin Salman is finding himself without his main Emirates ally, caught in a war that is unwinnable for the Saudi regime. The Yemeni Houthis have taken the initiative, hitting several Saudi strategic targets. Saudi Arabia has no realistic objectives and seems to have lost the appetite to continue the war in Yemen.

So, with the Houthis successfully striking major targets inside Saudi Arabia and the UAE abruptly pulling forces out, the war in Yemen has reached a critical juncture. Remember, the Republican-controlled Senate approved a bill withdrawing support for the war back in March, which the White House had to veto in support of its fading hopes for its Israeli/Palestinian deal pushed by Jared Kushner.

But things have changed significantly since then as that deal has been indefinitely postponed with Israeli Prime Minister Benjamin Netanyahu facing a second election this fall after he failed to secure a stable coalition.

After that there was the failed economic conference in Bahrain in June where Kushner revealed the economic part of the plan to a half-empty room where only the backers of the plan showed any real support.

And that’s the important part of this story, because it was Kushner’s plan which was the impetus for all of this insane anti-Iran belligerence in the first place. Uniting the Gulf states around a security pact leveraging the U.S/Israeli/Saudi alliance was part of what was supposed to pressure the Palestinians to the bargaining table.

By placing maximum economic sanctions on both Hezbollah in Lebanon and Iran while continuing to foment chaos in Syria was supposed to force Israel’s enemies to fold under the pressure which would, in turn, see the Palestinians surrender to the will of Kushner and Bibi.

The problem is, it didn’t work. And now Trump is left holding the bag on this idiotic policy which culminated in an obvious provocation when Iran shot down a $220 million Global Hawk surveillance drone, nearly sparking a wider war.

But what it did was expose the US and not Iran as the cause of the current problems.

Since then Trump finally had to stand up and be the grown-up in the room, such as he is, and put an end to this madness.

The UAE understood the potential for Iran’s asymmetric response to US belligerence. The Saudis cannot win the war in Yemen that Crown Prince Mohammed bin Salman began. The fallout from this war has been to push Qatar out of the orbit of the rest of the Gulf Cooperation Council, cutting deals with Iran over developing the massive North Pars gas field and pipelines to Europe.

And now the UAE has realized it is facing an existential threat to its future in any confrontation between Iran and the US

What’s telling is that Trump is making Yemen the issue to negotiate down rather than Iran’s nuclear ambitions. Because it was never about the nuclear program. It was always about Iran’s ballistic missile program.

And Secretary of State Mike Pompeo would have us believe that for the first time Iran’s missile program is on the negotiating table. I have no idea if that’s actually true, but it’s a dead giveaway that it’s what the US is after.

The main reason why Trump and Netanyahu are so angry about the JCPOA is the mutual outsourcing of the nuclear ballistic missile program by Iran and North Korea. North Korea was working on the warhead while Iran worked on the ballistic missile.

Trump tweeted about this nearly two years ago, confirming this link. I wrote about it when he did this.  Nearly everything I said about North Korea in the blog post is now applicable to Iran. This was why he hated the JCPOA, it didn’t actually stop the development of Iran and North Korea into nuclear states.

But tearing up the deal was the wrong approach to solving the problem. Stop pouring hundreds of billions of dollars in weapons to the region, as Iran’s Foreign Minister Javad Zarif pointed out recently, is the problem. By doing this he took both Russian President Vladimir Putin and Chinese Premier Xi Jinping off his side of the table.

Now he stands isolated with only the provocateurs – Israel, the U.K., Saudi Arabia – trying to goad him forward into doing something he doesn’t want to do. And all of those provocations that have occurred in the past month have failed to move either Trump or the Iranians. They’ve learned patience, possibly from Putin. Call it geopolitical rope-a-dope, if you will.

I said last month that the key to solving Iran’s nuclear ambitions was solving the relationship with North Korea. Trump, smartly, went there, doing what only he could do, talk with DPRK Chairman Kim Jong-Un and reiterate his sincere desire to end proliferation of nuclear weapons.

He can get Iran to the table but he’s going to have to give up something. So, now framing the negotiations with Iran around their demands we stop arming the Saudis is politically feasible.

Trump can’t, at this point, back down directly with Iran. Yemen is deeply unpopular here and ending our support of it would be a boon to Trump politically. Trading that for some sanctions relief would be a good first step to solving the mess he’s in and build some trust.

Firing John Bolton, which looks more likely every day, would be another.

He’s already turning a blind eye to Iranian exports to China, and presumably, other places. I think the Brits are acting independently trying to create havoc and burnish Foreign Secretary Jeremy Hunt’s resume as Prime Minister against Boris Johnson. That’s why they hijacked the oil tanker.

But all the little distractions are nothing but poison pills to keep from discussing the real issues. Trump just cut through all that. So did Iran. Let’s hope they stay focused.

Published:7/21/2019 5:38:45 PM
[Markets] Dow Jones Futures: For Stock Market, Amazon, Facebook, ServiceNow, Zscaler, Keep Both Eyes Open Stock futures: After the stock market reversed Friday, Amazon, Facebook, ServiceNow are back to buy points ahead of earnings this week. What should you do? Published:7/21/2019 5:38:45 PM
[Markets] Despite Plenty Of Improvements, Trump Hasn't Built A Single Mile Of New Border Fencing

After more than two years fighting with Democrats over border security, the Trump administration has replaced plenty of dilapidated barriers - yet hasn't built a single mile of border fencing in open, unprotected sections of the southern US border, according to the Washington Examiner's Anna Giaritelli. 

In a statement last week, U.S. Customs and Border Protection, the federal agency overseeing border barrier construction, confirmed that all the fencing completed since Trump took office is "in place of dilapidated designs" because the existing fence was in need of replacement. -Washington Examiner

CBP said that 51 miles of steel bollard fence had been replaced using funds set aside during FY2017 and 2018, however construction of new barriers where there aren't any is 'in the works' according to the report. 

The 50 miles of completed replacement barrier is a 10-mile gain since early April. In Trump’s two and a half years in office, his administration has installed an average 1.7 miles of barrier per month, and none of it in areas that did not previously have some sort of barrier. A total 205 miles of new and replacement barrier has been funded in the two and a half years since Trump took office. -Washington Examiner

Red tape?

One reason given to the Examiner for the lack of fencing in open-border regions is due to a difficult approval process for environmental zoning permits, according to a senior administration official. Another senior official blamed Democrats for blocking wall projects that the administration wants to complete.

"The wall projects are moving along as quickly as practicably possible given the unprecedented obstruction from Democrat lawmakers to protect and prolong open borders," wrote the official, adding "These same obstructionists, including many who once supported border barriers, are the same people who would abolish ICE and DHS, let criminals run free across our borders, and turned a blind eye to the scourge human trafficking and child sex slavery enabled by their policies."

Despite the slow (or no) progress in safeguarding unsecured portions of the border, Trump is applauding his administration for the progress made in reinforcing the current barriers

Trump's 2020 campaign debuted the slogan "Finish the Wall" at his first rally of 2019 in El Paso, Texas. At one point during his speech, the crowd began cheering "build that wall." Trump responded, "Now, you really mean 'finish that wall,' because we've built a lot of it,” though he did not share numbers with the thousands of people in attendance. -Washington Examiner

In 2017, Congress approved $341 million for 40 miles of replacement wall in San Diego, California; Santa Teresa, North Mexico; Calexico, California; and El Paso, Texas. 

"To this date, CBP has completed the construction of approximately 99 percent of the 40 miles funded in fiscal year 2017. Additionally, construction of 35 gates to close gaps in current border infrastructure in the Rio Grande Valley sector continues," according to a DHS statement

Approximately 400 miles is steel fencing comparable to the planned new wall, only shorter. The other 300 miles of barrier is Normandy style, or a handful of steel beams fastened together to prevent vehicular traffic from getting by. However, the four-foot-tall fence does not prevent people from crossing. -Washington Examiner

The Trump administration was sued earlier this year after reallocating $6.6 billion from the Pentagon and elsewhere to fund border wall construction. The move was blocked by the 9th Circuit Court of Appeals - which the Supreme Court is expected to weigh in on over the next few weeks following a request from the Justice Department. 

Published:7/21/2019 5:10:18 PM
[Markets] Why Powell Fears A Gold Standard

Authored by Mike Gleason via The Mises Institute,

Chairman Powell’s testimony last week was closely scrutinized not just for its economic implications but also for its political overtones. Powell cited “trade tensions” as cause for concern about the strength of the global economy. He clearly seemed to be blaming President Trump’s tariffs.

But if the tariffs are what ultimately move the Fed to cut rates, Trump will have finally gotten what he wants out of Powell. In recent weeks, Trump has stepped up his attacks on the central bank, calling it the biggest problem facing the economy, floating the idea of firing Powell, and suggesting his administration would match China’s and Europe’s "currency manipulation game."

Although many presidents before have pursued currency interventions and quibbled with Fed chairmen over interest rate policy, none have ever done it as openly and directly as the current one. Fed apologists in the media and in Congress view the central bank’s “independence” as being under assault.

The notion that the Fed ever was or could be independent of politics is a fanciful one. When a small group of people — appointed and confirmed by politicians — are empowered to make decisions that can make or break markets, economies, and elections, politics will inevitably intrude.

Fed chairman Jerome Powell may sincerely want to make monetary policy without regard to politics. But when political forces exert themselves on the Fed, he finds himself in an impossible catch-22. If he fails to cut rates, then the central bank risks becoming seen as the enemy of half the country as President Trump makes it his foil at campaign rallies. If Powell does what the President wants, then Democrats will accuse him of succumbing to political pressure from the White House.

Democrats used Powell’s Congressional testimony as an opportunity to get him on record in opposition to agold standard.

Although Trump himself is not calling for a gold-pegged dollar, one of his nominees to the Fed Board of Governors is - or at least has in the past. Potential Fed policymaker Judy Shelton has written and spoken extensively about the gold standard.

Apparently seeking to discredit Shelton’s views, Democrat Jennifer Wexton prodded Fed Chairman Powell into weighing in on the gold standard.

Ms. Wexton: Chairman Powell, do you think that the US should go back to the Gold Standard for our currency?

Chairman Powell: Let me say I wouldn't... This could feasibly be considered commenting on a particular nominee who has recommended that, and of course, I will not do that. I will answer your question, but I want to make sure that this isn't interpreted in that way. So, no, I don't think that would be a good idea. The idea would be... Congress would have to pass a law and that law would say that our job with monetary policy is to manage the level of the dollar, stabilize the dollar price of gold, and we would then not be looking at maximum employment or stable prices. There have been plenty of times in the fairly recent history where the price of gold has sent signals that would be quite negative for either of those goals.

Ms. Wexton: Much better mission for the Fed is what you're doing right now.

Chairman Powell: Well, this is why every country in the world abandoned the Gold Standard some decades ago.

Ms. Wexton: Okay. Well, that reluctance or that desire not to go back to the Gold Standard is something that you have in common with the CEO's of seven of the world's globally systemic important banks.

It’s no surprise that “too big to fail” bankers who depend on special privileges from the Fed and other central banks don’t like gold. It’s hard to orchestrate multi-trillion dollar bailouts of the financial system when the currency supply is limited by gold .

Some see that as a disadvantage. Others see it as a distinct advantage because it discourages banks from getting too big to fail to begin with.

Chairman Powell claims that gold-backed money would prevent the Fed from pursuing full employment - as if all workers have monetary planners to thank for their jobs - and stable prices. Of course, by “stable prices” he means prices that rise at his target rate of two-percent inflation. He means a dollar that steadily loses purchasing power.

Sound money, on the other hand, is market-based money and can be based on gold, silver, or anything else the market values. If the dollar were defined simply in terms of grains of silver, for example, then monetary policy and the politics surrounding it would recede into the background. No longer would markets swing wildly based on the particular phraseology contained in Fed policy statements.

No longer would every incumbent administration push for easy money policies. Instead of counting on the Fed to devalue existing debt and pave the way to pile on more of it, hard choices would have to be made by members of Congress about paying down debt and embarking on a fiscally sustainable path.

The fact that politicians, central bankers, and “too big to fail” bankers all oppose a gold standard is a tacit admission that hard money would serve as an effective constraint on their activities.

Published:7/21/2019 4:39:02 PM
[Markets] NewsWatch: At Tesla, another quarterly loss is likely, but Wall Street is hoping demand remained intact Tesla Inc. is expected to report second-quarter results after the bell Wednesday amid a rally for its battered stock fueled by better-than-expected quarterly sales.
Published:7/21/2019 4:08:39 PM
[Markets] Mexico City "Extensively Under-Reported" Crime", New Government Alleges

Mexico City's government is under attack by critics since a left-leaning administration took over in 2018, with critics claiming that violence has "spun out of control." In response, the city now claims that the previous administration "extensively under-reported crime" and, as a result, the crime rate appears to have shot up in 2019, but it has really fallen. 

Tens of thousands of criminal files from 2018 were reviewed and show that the city's homicides have not risen by a third this year, as previously reported. Instead the number is only up about 12%, according to Ernestina Godoy, Mexico City’s chief prosecutor. In addition, violent crimes as a whole have dropped by 8% this year, she said.

The new figures are slated to be released as part of Federal data on and will certainly raise questions about the trustworthiness of crime statistics in Mexico. President Andres Manuel Lopez Obrador won his election on promises of curbing crime, corruption and violence. Mexico City's mayor, Claudia Sheinbaum, is a close ally of his. 

Godoy said: “The registry was distorted. In cases of rape they were classified as sexual harassment or abuse, or just injuries.”

More than 24,000 of 214,000 reviewed files on criminal cases were said to be doctored. Rapes in the prior year were actually double the number reported by former mayor Miguel Angel Mancera's administration. Mancera had no comment. 

Data shows that murders in Mexico's capital city were up 36% from January to May versus the year prior. Godoy says homicides will formally now show a rise of about 12%. 

Godoy concluded: "That’s still far too many. This is not being done to justify our government. We won’t deny the situation we are in."

Published:7/21/2019 4:08:39 PM
[Markets] Morgan Stanley: "A 25bps Cut Won't Be Seen As Aggressive, And Will Disappoint The Market"

Authored by Matthew Hornbach, head of interest rate strategy at Morgan Stanley

The Fed won’t be enjoying a lazy summer this year. Chair Powell has teed up monetary policy easing at the conclusion of the FOMC meeting on July 31. The consensus expectation among economists calls for a 25bp cut in the target interest rate, while we expect the Fed to deliver 50bp. The market is pricing an outcome somewhere in between, with fed funds futures implying around 30bp.

The debate over the size/cost of an insurance cut remains active, thanks to a spate of strong data (nonfarm payrolls, inflation, retail sales) that have been perceived, at least at the margin, as increasing the risk that the Fed under-delivers at its July meeting relative to our expectation. For those FOMC participants who are less inclined to act aggressively against downside risks, these data points could also argue against delivering more than 25bp.

The minutes from the June FOMC meeting revealed that 14 of the 17 participants saw downside risks to the growth and inflation outlooks. What's more, in their assessment of downside risks to the economic outlook, participants noted factors including “recent weak indicators for business confidence, business spending and manufacturing activity; trade developments; and signs of slowing global economic growth”. Thus, the case for concern does not hinge on the labor market or the consumer, but more on external conditions, trade policy, and manufacturing.

Chair Powell also underscored this point in his most recent remarks in Paris on Tuesday, expressing concern about "trade developments and global growth". It's important to note that our US public policy strategists, led by Mike Zezas, have characterized the post-G20 environment for trade escalation as an 'uncertain pause', while our global economists, led by Chetan Ahya, see global growth slowing through 4Q19 with risks to the downside.

In June, FOMC participants were also increasingly concerned about the inflation outlook, based on recent low inflation readings, downside growth risks, and lower inflation expectations. The June CPI print then surprised to the upside, with positive implications for core PCE (where we expect an increase in the year-over-year reading to 1.66% from 1.60%). So inflation has moved higher, but does the June data point alter the fact that inflation has fallen short of the Fed's 2%Y goal for two decades, let alone put a measurable dent in that shortfall – or even the decline over the past four months? Recall that the Fed's goal is to create enough inflationary pressure that inflation stays above its 2%Y goal for a sustained period. That means running the economy hot.

While these factors easily support a rate cut at the July meeting, they don't necessarily justify the magnitude we expect. We'd point out that in June seven FOMC participants suggested the need for 50bp of accommodation this year, even before the FOMC judged that global uncertainty had persisted beyond the G20 meeting. Based on recent comments from policy-makers, we believe this number has grown. As such, we think the FOMC will be debating when to deliver 50bp of accommodation, as opposed to whether circumstances call for only 25bp.

Will the Committee cut by 50bp all at once, or in a gradual fashion reminiscent of the recent tightening cycle? In this regard, we note a deeply held view among monetary policy-makers that near the zero lower bound the Fed must act aggressively when low inflation or a downturn threatens. The message to policy-makers today? Don't keep your powder dry. In addition, our own simulations have shown that, in terms of a positive impact on the economy, 25bp in cuts is a rounding error, while 50bp might be enough to mitigate the downside risks we face today.

Putting to one side their desire for aggressive action, current market pricing indicates that market participants won't see a 25bp cut as aggressive. And that could result in tighter financial conditions than those in place today. To date, such conditions have helped to "sustain the economic expansion, with a strong job market and stable prices, for the benefit of the American people". The recent labor market and inflation reports and retail sales data confirm this. Would policy-makers want to put those accommodative financial conditions at risk by delivering the 50bp they deem appropriate gradually? We doubt it.

Published:7/21/2019 3:39:17 PM
[Markets] Why Are Billionaires Like Bezos So Obsessed With Space?

Authored by Marshall Auerback via,

The 50th anniversary of the Apollo 11 lunar landing is this year, and it’s worth recalling the memo that then-Vice President Lyndon Johnson wrote to President John F. Kennedy:

“If we do not make the strong effort now, the time will soon be reached when the margin of control over space and over men’s minds through space accomplishments will have swung so far on the Russian side that we will not be able to catch up, let alone assume leadership.”

That sense of urgency has shifted over the decades from government to the private sector, where billionaires like Elon Musk, Richard Branson and Jeff Bezos, among others, are displaying profound enthusiasm in regard to the notion of exploiting space. Their interest appears to go well beyond space tourism for the thrill-seeking one-percenters, even though that’s what gets most of the media attention. As Cathal O’Connell reports for Cosmos Magazine, “Already companies are sending up 3D printers to produce replacement tools in space. Next we could see orbiting factories making products for sale on Earth or automated robots constructing satellites the size of a football field.”

If this all seems as exotic as those old 1930s “Flash Gordon” films did to the audiences of the day, recall that the experience of the Apollo 11 moon landing showed that reality has a way of catching up quickly to Hollywood fantasy (it also shows that when sufficient government resources are harnessed to a higher common purpose, good results can happen surprisingly quickly and efficiently). Once the likes of Bezos, Branson, Musk, and others find a way to economically hoist heavy machinery into space (and it is becoming more economic), permanent “off-Earth” manufacturing could become a reality.

But this raises an interesting issue: who chooses the technological alternatives that set out our future? Should this decision solely be left in the domain of the private sector? Should space be privatized in this matter? What about NASA? Consider the future: Forget about the threat of moving a Midwestern plant from, say, Ohio, to Mexico or China. Next time, it could be a robot-filled factory in space that takes your job.

To be clear, nobody is suggesting a return to medieval-style craft guilds. At the same time, it is worth noting certain salient aspects about technology: rather than acting in the service of mankind, technology has often been used in a way that creates a momentum of its own that establishes limits or controls what becomes socially possible. It is wrapped in an aura of linear progress and scientific inevitability, conveniently ignoring that its benefits are often skewed most heavily to the power brokers who initiate and champion its use. This is a principle danger of subcontracting space to billionaire plutocrats, whose ambitions and interests might be inconsistent with society’s broader public purpose. This is to say nothing of the increasing de-skilling of labor that could follow, if they are not integrated into this process somehow.

As the Wall Street Journal’s Greg Ip notes, the government-sponsored race to the moon spurred considerable “advances in computers, miniaturization and software, and found its way into scratch-resistant lenses, heat-reflective emergency blankets and cordless appliances,” all of which had tremendous benefits for society as a whole. But today, the government has largely lost its “moonshot mindset” and space, in turn, has increasingly become the focus of the oligarch class, seeking to enhance profit opportunities as well as exploiting the increasing trend of displacing human labor with machines. This is despite the fact that Professor Seymour Melman’s own research illustrated that if you give workers decision-making power on the shop floor, productivity tends to increase substantially.

Without a doubt, there are many benefits to be derived from the work being done in the cosmos. For example, the microgravity conditions pertaining in space are considered ideal for developing materials, such as protein and virus crystals, observes Sarah Lewin, in a piece discussing the incipient development of “off-Earth manufacturing.” The insights developed by these crystals could enhance drug research and provide useful new therapies and medical treatments for infections and diseases (such as heart disease and organ transplants). Space also enhances the scope for producing high-tech materials, whose production is otherwise adversely affected by the Earth’s gravity, one example being a “fiber-optic cable called ZBLAN, … [which, w]hen manufactured in microgravity… is less likely to develop tiny crystals that increase signal loss. When built without those flaws, the cable can be orders of magnitude better at transmitting light over long distances, such as for telecommunications, lasers and high-speed internet,” according to Lewin.

We shouldn’t be oblivious to the considerable human costs associated with work in the government’s space program - “Microgravity sets our fluids wandering and weakens muscles, radiation tears through DNA and the harsh vacuum outside is an ever-present threat” (to quote Lewin), to say nothing of the risk of death itself—which are mitigated considerably when you can do things with machines alone. At the same time, left unchallenged or unmonitored, these billionaires could use space to quietly initiate further radical changes to our social structures.

It starts with ownership models. There’s an interesting paradox of futuristic 24th-century economic visions in space being built on the 12-to-13th–century ownership models that make up Silicon Valley. Wealth sharing ownership models should be conceived as part of the futuristic vision if we don’t want to be saddled with human wealth disparities reaching factors of 12 or 15 zeros. Ideally, NASA (or some other space agency) should take a leading national developmental role in the production of goods in space, and then subcontract to manufacturers to do the actual production processes, rather than the other way around.

Of course, if the government does ultimately decide that space privatization is not a great thing, no doubt Silicon Valley and its market fundamentalist champions will trot out the line about the inefficient government fighting “technological inevitability” - a typical playbook from the Silicon Valley oligarchs (i.e., you can’t fight technological progress, so let’s just set up something like a Universal Basic Income - UBI - that acts like a painkiller, but masks the symptoms of economic injustice and fails to address the underlying causes of exploitation and inequality). That’s one major risk of “off-Earth” production when it becomes a plaything of the rich alone. That’s to say nothing of the fact that the billionaire class is already benefiting from a long series of government-funded innovations undertaken in the past, as Professor Marianna Mazzucato has illustrated in her work, “The Entrepreneurial State.”

One of which was the government-led (and funded) space program: at its funding peak, the lunar space program employed over 400,000 Americans. The management, national commitment and personal motivation of the participants were just as important as the technology itself in terms of ensuring the program’s success. It’s hard to see that sort of coalescing of interests in the absence of an overriding government stake when it comes to the production of manufactured goods in an environment outside a planetary atmosphere.

There is another unhealthy aspect to uncritically acceding to a paradigm in which supposedly superhuman entrepreneurs are selflessly taking up the baton from a tapped-out public sector. It becomes self-serving for the billionaires, and implicitly justifies and entrenches the economic status quo. As journalist Amanda Schaffer has argued:

“If tech leaders are seen primarily as singular, lone achievers, it is easier for them to extract disproportionate wealth. It is also harder to get their companies to accept that they should return some of their profits to agencies like NASA and the National Science Foundation through higher taxes or simply less tax dodging.”

That self-entitlement also manifests itself in other ways. Just look at the way that Elon Musk treats his own employees to get a better sense of this. Or Jeff Bezos’s labor practices at

It’s undoubted that orbital manufacturing will yield innovations in technology, medicine and material science in the next few decades. But we should recall that technology doesn’t simply have an autonomous momentum and direction that inexorably leads to social progress. Likewise, it bears recalling (as Professor Seymour Melman once observed) that technology “is applied in accordance with specific social criteria wielded by those with economic decision power in the society.” Melman’s implicit argument is that technology can be used to enhance worker control or to create more yet alienation. The government, therefore, shouldn’t be reduced to the role of passive minority shareholder collecting dividends or royalties from a privately run space enterprise.

That’s the old market fundamentalist model that has failed pretty badly on this planet, let alone replicating it in space. So before we get too wrapped up in all of the exciting new goodies that Jeff Bezos and his fellow space enthusiasts can create for us, let’s also ensure that this move to “the final frontier” doesn’t simply become a new form of technological control and enslavement, in which the benefits continue to be distributed in a profoundly illiberal direction as they are here on planet Earth.

Published:7/21/2019 3:09:11 PM
[Markets] Iran Urges UK To Rein In 'Deep State'; Germany Warns Of "Uncontrollable" Escalation

Iran’s ambassador in London warned on Sunday that the UK government must get its "domestic political forces" pushing for regime change under control or else the two countries will face dangerous escalation. The public statement came two days after the British-flagged Stena Impero was boarded and captured by IRGC commandos, and over two weeks after the tanker Grace 1 was seized by UK Royal Marines off Gibraltar.

Iranian Ambassador Hamid Baeidinejad urged via his personal Twitter account that continued pressure on Iran would be "unwise" given that Tehran stands “firm and ready for different scenarios”.

The ambassador said the UK government must “contain those domestic political forces who want to escalate existing tension between Iran and the UK well beyond the issue of ships” — in what appears a reference to the UK defense establishment and its allies at think tanks like the neoconservative the Henry Jackson Society and others, and powerful oil and weapons gulf allies like Saudi Arabia. 

Iranian Ambassador to the UK Hamid Baeidinejad, via Iran News Daily

His statement implied that British 'deep state' elements were using the tit-for-tat tanker seizures as a convenient raison d'etre for pushing conflict with Iran. 

On Friday Britain had issued its own warnings, with Foreign Minister Jeremy Hunt telling the Iranians they face "robust" and “serious consequences,” but he stopped short of discussing military options, instead his statements emphasized diplomacy. The UK has condemned it as "a hostile act" - and German Foreign Minister Heiko Maas has indicated European leaders are desperately trying to prevent "uncontrollable military escalation."

Meanwhile, more details of Iran's seizure of the still detained Stena Impero tanker have emerged.  IRGC spokesman Brig. Gen. Ramezan Sharif was cited by Iran's Fars News Agency over the weekend as claiming a Royal Navy warship had attempted to put up “resistance and interference” to prevent Iran's navy from detaining the vessel. 

State media released new footage showing the tanker impounded with Iran's flag raised above.

According to Sharif, Iran's military had warned the tanker several times to change course before intervening. This followed Iranian state media claiming the Stena Impero was making unsafe and dangerous maneuvers which led it to collide with an Iranian fishing boat; however, neither the UK nor any independent source has backed this interpretation. 

The IRGC spokesman further alleged that UK Royal Navy helicopters tried to stop Iran's naval commandos from boarding the ship. Iran previously released dramatic video showing special forces operatives fast-roping to the tanker's deck, but there was no evidence of UK aircraft overhead. 

Published:7/21/2019 2:41:13 PM
[Markets] It's Mueller Time, Again: The Hill Has 10 Questions Ahead Of Wednesday's Testimony

With Special Counsel Robert Mueller slated to testify before the House Judiciary and Intelligence committees on Wednesday, lawmakers on both sides of the aisle will have an opportunity to question him about his two-year probe into Russian interference in the 2016 US election - as well as his decision not to render an opinion on whether Trump obstructed the investigation. 

Mueller has made clear that he won't say anything beyond what's in his 448-page report, and that he won't answer hypotheticals. 

While Democrats will likely focus on questions that might provide fodder for Trump's long-promised impeachment, Republicans will likely highlight that the 22-month probe failed to find a conspiracy between the Trump campaign and the Kremlin to interfere with the election. The GOP is also likely to probe Mueller for answers regarding allegations of FBI misconduct - which House Judiciary Chairman Jerrold Nadler (D-NY) says would be a waste of time. 

"Very clear the Trump investigation was not predicated on the so-called dossier, there was nothing wrong with the FISA application, all the things that they’re talking about have been gone through," Nadler told Fox News Sunday. "If they want to debate or discuss this irrelevancy, let them waste their time. What’s before the American people is the conduct of this president." 

Meanwhile, The Hill has 10 questions they'd like to see Mueller answer


Would you have charged Trump if it weren’t for the OLC opinion? 

Democrats want to know if Mueller would have charged Trump with obstruction of justice in the absence of an Office of Legal Counsel (OLC) opinion from the Justice Department that says a sitting president can’t be indicted.

Judiciary Committee aides said Thursday that Democrats would respect Mueller’s desire to stay within the confines of his report. But members are still likely to ask this question, which can be phrased a number of ways.

Mueller is unlikely to answer the question, given his insistence in May that he would not comment on “hypotheticals about the president.” 

In his May 29 remarks, Mueller said charging Trump “was not an option we could consider” because of the Justice Department policy. Mueller didn’t say that he would have charged Trump if it weren’t for the policy, but he also declined to clear the president of allegations of wrongdoing.

“If we had had confidence that the president clearly did not commit a crime, we would have said so,” Mueller said. 

Attorney General William Barr and then-Deputy Attorney General Rod Rosenstein reviewed the evidence laid out in Mueller’s report and found it to be insufficient to accuse Trump of a crime.

Why did your office write a letter to Barr objecting to his March 24 memo? 

Mueller wrote to Barr on May 27 objecting to the attorney general’s four-page memo from a few days earlier outlining the Russia report’s principal conclusions, a revelation that sparked a firestorm in Washington on the eve of Barr’s public testimony before the Senate.

Mueller is likely to be asked about the letter — why his office wrote it, who authored it, how it was leaked — and whether he was satisfied with Barr’s decision not to ultimately release summaries from the report despite the special counsel’s overtures.

Did you blame the media on your call with Barr? 

Lawmakers are sure to inquire about Mueller’s interactions with Barr following the March 27 letter, when he asserted that the attorney general’s March 24 memo “did not fully capture the context, nature, and substance” of his work and conclusions.

Barr told Congress in April that, during a later phone call, Mueller told him he was upset by the media coverage of the memo and that he did not take issue with the accuracy of the memo.

“My understanding was his concern was not the accuracy of the statement of the findings in my letter but that he wanted more out there to provide additional context to explain his reasoning and why he didn’t reach a decision on obstruction,” Barr told the Senate Judiciary Committee.

Did any Trump campaign contacts with Russia put national security at risk? 

House Intelligence Committee Democrats are particularly interested in the counterintelligence implications of Mueller’s report and whether any contacts between the Trump campaign and Moscow posed national security risks, even if they didn’t amount to criminal conduct.

Mueller’s report briefly notes that the investigation generated “foreign intelligence and counterintelligence information” that was sent to the FBI but acknowledged that not all of it was included in the final report.

Intelligence Committee Chairman Adam Schiff (D-Calif.) and other Democrats on the panel have said they want to focus on the dozens of contacts between Trump campaign associates and Kremlin-linked figures.

Did your investigation exonerate Trump of ‘collusion’ and obstruction allegations?

Trump has cheered the Mueller report as vindicating him of allegations of “collusion” and obstruction of justice. 

But Democrats and other critics of the president note that Mueller’s report explicitly states that there was no evaluation of alleged “collusion” — a term often used by the press, Trump administration officials and lawmakers to describe accusations of coordination or conspiracy between the Trump campaign and the Kremlin. 

Instead, Mueller investigated whether the Trump campaign conspired with Russia to interfere in the election, finding insufficient evidence to charge anyone associated with the campaign with criminal conspiracy. 

Mueller also did not reach a judgment on obstruction of justice. Barr said that left it up to him to make the call.

Should Congress initiate an impeachment inquiry? 

Some Democrats took Mueller’s statement on May 29 as a green light to start impeachment proceedings against Trump.

In his terse nine-minute remarks, Mueller did not mention impeachment but said the Constitution “requires a process other than the criminal justice system to formally accuse a sitting president of wrongdoing” while explaining his decision not to reach a judgment on obstruction. He’s likely to be asked what he meant by that.

More than half of the Democrats on the House Judiciary Committee publicly back an impeachment inquiry, and the topic is sure to hang over Mueller’s testimony.

Still, Speaker Nancy Pelosi (D-Calif.) is opposed to impeachment at this time, saying House Democrats are doing plenty to investigate and hold accountable both Trump and his administration.

At what point did you know the investigation was not going to establish conspiracy between the campaign and Russia? 

Rep. Jim Jordan (R-Ohio), a Trump ally and Judiciary Committee member, previewed this question in an appearance on Fox News.

“I think the one question all Americans have is, when did you first learn there was no collusion, no coordination, no conspiracy? And if you learned that early, why didn’t you tell us that?” Jordan said on Fox.

Many Republicans are skeptical of Mueller and his team and are likely to use the hearing to question the former special counsel’s credibility, his team and his decisions.

What role did the Steele dossier play in the investigation? 

Republicans have focused on the early stages of the Russia investigation before Mueller took it over in May 2017. Of particular interest to them is the FBI’s use of information from the controversial Steele dossier in an application to surveil onetime Trump campaign adviser Carter Page.

The dossier is fleetingly referenced in Mueller’s report in the context of Trump’s reactions to media reports about its allegations and his interactions with then-FBI Director James Comey.

The dossier is described as a collection of “unverified allegations” compiled by ex-British intelligence agent Christopher Steele, a former FBI source who was terminated by the bureau in fall 2016.

Republicans have long scrutinized the dossier following revelations it was paid for by Democrats.

Congressional Republicans opened their own investigations into the origins of the Russia probe when they were in control of the House. Barr has since opened an inquiry into whether intelligence collection targeting the Trump campaign was adequately predicated, and the of Justice inspector general is said to have nearly completed his own review of the FBI’s actions in applying for the Page warrant.

Why did you select people for your team who mostly donated to Democrats? 

Another point of contention for GOP lawmakers has been the makeup of Mueller’s team of prosecutors, many of whom are registered Democrats.

Republicans have also seized on anti-Trump text messages exchanged by FBI officials working on the Russia probe before Election Day 2016 as evidence the investigation was initiated by agents biased against Trump. One of the agents, Peter Strzok, was removed from the investigation after the messages became known.

Mueller is a registered Republican, and he was appointed special counsel by Rod Rosenstein, Trump’s hand-picked deputy attorney general.

Why didn’t you compel Trump to be interviewed? 

Some legal experts have criticized Mueller’s decision not to issue a subpoena to compel Trump to testify under oath — a move that undoubtedly would have provoked a prolonged court fight.

While Trump submitted written answers to Mueller on the topic of Russian interference, he declined to sit for a voluntary interview with the special counsel’s team or answer questions related to obstruction.

Mueller wrote in his report that he decided not to issue a subpoena because of the “substantial delay” it would have caused, though his team believed they had the “authority and legal justification” to do so. The report also states that Mueller told the president’s legal team that an interview with Trump was “vital” to the investigation.

Published:7/21/2019 2:08:11 PM
[Markets] Earnings Watch: Big Tech’s antitrust suspects enter earnings spotlight, along with Boeing and Tesla Amid all the talk of antitrust, government regulation and cryptocurrency plans, it might be nice for Big Tech just to focus on earnings this week — unless they are bad, of course.
Published:7/21/2019 2:08:11 PM
[Markets] Mutual Funds Weekly: How you can run with the bulls who’ve beaten the market These investing and retirement stories hit home with MarketWatch readers this past week.
Published:7/21/2019 1:40:12 PM
[Markets] Watch: Tesla-Hater Harasses "Tesla Fag" Driving A Model 3

A pickup truck driver has been charged for harassing a Tesla owner thanks to the Model 3's eight cameras that provide 360 degrees of video coverage around the vehicle, reported Electrek.

Youtuber Arti999, recently published the video titled Truck driver gets charges after harrasing Tesla Model 3 onto YouTube showing the incident.

He said, "The gentleman in this white truck decided to tailgate, pull into the shoulder to intimidate, give me the finger, call me a "Tesla fag," and run a red without stopping."

Arti999 said that he submitted the video to the Royal Canadian Mounted Police (RCMP), which according to him, RCMP charged the truck driver late last week for "tailgating, crossing a solid line and running a red. $800 lesson for this gem of a driver."

Electrek said there have been other reports of pickup truck drivers lashing out towards Tesla owners, usually resulting in some form of road-rage.

Last year, a bunch of hillbillies in Hickory, North Carolina, staged a protest with their lifted-trucks blocking a Supercharger station.

Tesla owner and Reddit user Leicina captured the incident and said:

"I've never had a supercharging experience like this one. These trucks blocked all the chargers, chanted "F" Tesla, and were kicked out by a Sheetz employee."

Electrek reported last month that truck drivers who modify their exhaust have been "rolling coal" on Teslas across the US, which basically means black sooty exhaust fumes pour out of the truck's modified exhaust system onto the electric car.

The EV transportation magazine said people who target electric cars with their diesel exhaust are "reaching a whole new level of redneck douchebaggery."

Leilani Münter, a race car driver and Tesla owner, tweeted last December about how she periodically gets targeted by truck drivers trying to roll coal on her Tesla.

Truck drivers rolling coal on electric or hybrid cars started back in the early 2000s with the Toyota Prius.

It seems that diehard diesel truck drivers have lots of hatred towards electric vehicles. Thanks to Tesla's eight cameras - more of these incidents will be caught on camera and uploaded onto YouTube.

Published:7/21/2019 1:40:12 PM
[Markets] Swedish PM Pushes Back Against Trump, Says A$AP Rocky "Won't Get Any Special Treatment"

In a statement published on Sunday, the Prime Minister of Sweden Stefan Lofven said that he had told President Trump in a phone call that A$AP Rocky, an American rapper who is being detained in a Swedish jail on assault charges and has been denied bail because he's a "flight risk," would not be allowed any special treatment.

Citing Sweden's official statement, the New York Times reports that the phone call lasted about 20 minutes, and that the Swedish characterized it as "friendly and respectful."

The prime minister "underlined that in Sweden everyone is equal before the law and that the government cannot and will not attempt to influence the legal proceedings," the statement said.

The PM's statement appears to undercut President Trump's account of the call. The president said the PM had assured him that Rocky would be "treated fairly," though Trump said he had personally offered to guarantee Rocky's bail, and that the two leaders had agreed to speak about the issue again on Monday.


Prime Minister Stefan Lofven

The Swedish government, according to NYT, has faced accusations of human rights abuses and racism as rumors about the rapper's treatment spread. Some said he was sleeping on a yoga mat spread over a concrete floor, and that he was eating one apple a day.

Whether those rumors are exaggerated or accurate, a groundswell of celebrity support for Rocky has brought the issue to the White House's attention. First, senior aide and Trump son-in-law Jared Kushner tried to intercede on Rocky's behalf (he reportedly helped secure better accommodations for Rocky), then, after conversations with Kim Kardashian and Kanye West, Trump tweeted that he would call the Swedish PM.

On Saturday morning, Trump said the Swedish PM had assured him that Rocky would be treated fairly, and that Trump had offered to personally guarantee Rocky's bail. Trump said the two had planned to discuss the issue again on Monday.

Video footage of the incident appears to show Rocky acting in self-defense:


A post shared by PRETTY FLACKO (@asaprocky) on


Published:7/21/2019 1:07:25 PM
[Markets] "Astonishing Scenes" In Hong Kong Where Triad Members Attack Pro-Democracy Protesters As Violent Clashes Return

Well over a month after the latest bout of Hong Kong street protests erupted, the situation remains tense as ever when more than seven hours after the start of a major march against Hong Kong's now-suspended extradition bill, riot police in Hong Kong fired rounds of tear gas on protesters along Connaught Road Central, following skirmishes and a tense stand-off.

In an unexpected twist, the SCMP reports that in a darker turn of events on Sunday, a group of men in white suspected to be triad members attacked passengers at Yuen Long MTR station, particularly those wearing black, the color of protesters.

Confirming that China appears to be getting rather jittery, but instead of sending in the army is deploying it less "reputable" elements, a reported noted "absolutely astonishing scenes in Yuen Long, where Triad members clad in white are attacking anyone suspected of being a pro-democracy demonstrator (people wearing black are a target as that’s been the dress code for some marches, hence why triads are all in white)."

And yes, there will be blood.

The Civil Human Rights Front, the organiser of the march earlier in the day, said 430,000 people attended while police put the figure at 138,000 at its peak.

Crowds then advanced beyond the original police-mandated end point at Wan Chai to Queensway and Central, where they began occupying main thoroughfares of Connaught Road Central and Connaught Road West, blocking vehicles from getting through and putting up wooden barricades. Another group of protesters advanced towards the liaison office.

Demonstrators also gathered outside the Court of Final Appeal, the initial finishing point of the march organizers had pushed for but police disallowed. By 7pm, crowds reached Beijing's liaison office in Sai Ying Pun. No police were seen guarding the building but a number of security guards were inside.

Meanwhile, back on Hong Kong Island, protesters have mostly left Sheung Wan, where police earlier fired several volleys of tear gas. A protester was using a loudspeaker to warn people against going back to Yuen Long, saying: “They'll hit you even if you change your clothes.”

Police at the scene look more relaxed, some sitting down on the road behind shields. At last check the situation appeared to be back under control, with occasional bouts of violence breaking out.

For now China has refused to intervene in Hong Kong's scuffles, although on Sunday, Sunday Times' notorious Editor in Chief, Hu Xijin, who has taken to trolling Trump in recent weeks, tweeted that "protesters on Sunday besieged building of the Liaison Office of the Central People's Government in Hong Kong and defaced national emblem of China. This is crime."

His conclusion: "Hong Kong is quickly slipping from the Pearl of the Orient to a lawless place" should probably come as a warning to HK natives: we won't intervene directly, but we will make sure HK's star is promptly extinguished.

Published:7/21/2019 12:37:25 PM
[Markets] Therese Poletti's Tech Tales: From a fake George Soros fund to cloud-controlled robots, Chinese IPOs are getting even scarier A new batch of Chinese companies hope to raise about $1.8 billion by going public in U.S. markets in the next few weeks, after a hiatus caused by trade war jitters.
Published:7/21/2019 12:09:08 PM
[Markets] "I've Had Many Strange Experiences In My Life" - Inside Epstein's 'Honey Trap' On E 71st Street

Authored by Eric Margolis via

I’ve had many strange experiences in my decades of covering intelligence affairs. These run from being invited to KGB HQ in Moscow, Chinese intelligence in Beijing, US intelligence in Virginia, Libyan intelligence in Tripoli, South African intelligence, and even Albanian intelligence in Tirana.

But none was odder than the day I was invited to lunch in New York City with the by now notorious figure Jeffrey Epstein. The golden boy of Manhattan and Palm Beach society now sits in a grim jail cell accused of having sex with underage girls. He’s been doing this in plain view since the early 1990’s but, until recently, he seemed bullet-proof.


Soon after I walked into the entrance of Epstein’s mansion on E 71st Street, said to be the city’s largest private home, a butler asked me, “would you like an intimate massage, sir, by a pretty young girl?” This offer seemed so out of place and weird to me that I swiftly declined.

Image source: Getty

More important than indelicacy, as an old observer of intelligence affairs, to me this offer reeked of ye old honey trap, a tactic to ensnare and blackmail people that was old when Babylon was young. A discreet room with massage table, lubricants and, no doubt, cameras stood ready off the main lobby.

I had arrived with Canada’s leading lady journalist who was then close to Epstein’s sometime girlfriend, Ghislaine Maxwell and, it was said, procuress – something Maxwell denies. Bizarrely, Maxwell believed that I could get KGB Moscow Center to release satellite photos that showed the murder on his yacht of her father, the press baron Robert Maxwell, who was a well-known double agent for Israel and KGB, and a major criminal.

Also present was the self-promoting lawyer, Alan Dershowitz, who had saved the accused murderer Claus von Bulow, as well as a titan of the New York real estate industry (not Trump) and assorted bigwigs of the city’s elite Jewish society. All sang the praises of Israel.

Epstein reportedly had ties to Donald Trump, Bill Clinton, Britain’s Prince Andrew and repeatedly flew them about in his private jet, aka “the Lolita Express.” All guests deny any sexual activity. I turned down dinner with Prince Andrew.

Epstein’s residence in Manhattan and Palm Beach, both of which I visited, were stocked with young female “masseuses.” All were working class girls making big money in their spare time. I did not see any interactions between these girls and the guests.

Epstein and Maxwell became too big for their britches. They flaunted their sexual adventures and laughed at New York society. Everyone wondered about the source of Epstein’s lavish income but no one knew its origins. He claimed to be an exclusive money manager for a group of secretive millionaires. But the only one identified was billionaire Leslie Wexner, the owner of L Brands and Victoria’s Secret. Wexner denied any knowledge of Epstein’s alleged crimes.

Besides sexual frolics, Epstein and Maxwell were up to many odd things. The FBI found diamonds, cash and a fake passport when raiding his mansion and documents showing his net worth at $559,120,954.00. The IRS tax people will be eager to review the sources of this income.

It seems likely that political influence was brought to bear on then US attorney Alexander Acosta (he just resigned under fire last week) to make a sweetheart deal with Epstein, who had been charged by Florida with child molestation. Epstein got off with a token, 13-month jail sentence that allowed him to work from his office much of the day.

Were Trump or Clinton involved? How much did they “party” with Epstein and revel in his fleshmart? There was talk of some sort of “intelligence” angle to the affaire Epstein that spared him a harsh sentence.

A respected former CIA official, Phil Giraldi has come right out and accused Epstein of being an Israeli agent of influence. Epstein was let off with a slap on the wrist on his first child abuse charge, says Giraldi, because of his powerful Israel connections.

To Giraldi and this writer, the Epstein “massage” operation was a classic intelligence operation designed to blackmail men of influence into doing Israel’s bidding. Clinton had reportedly already fallen into this trap years earlier while still president.

Now watch this stinking pile of corruption be hurriedly covered up. Talk about draining the swamp.

Published:7/21/2019 12:09:08 PM
[Markets] All The World's Religions In One Map

Authored by Frank Jacobs via,

  • At a glance, this map shows both the size and distribution of world religions.

  • See how religions mix at both national and regional level.

  • There's one country in the Americas without a Christian majority – which?

China and India are huge religious outliers

A picture says more than a thousand words, and that goes for this world map as well. This map conveys not just the size but also the distribution of world religions, at both a global and national level.

Image: Carrie Osgood

Strictly speaking it's an infographic rather than a map, but you get the idea. The circles represent countries, their varying sizes reflect population sizes, and the slices in each circle indicate religious affiliation.

The result is both panoramic and detailed. In other words, this is the best, simplest map of world religions ever. Some quick takeaways:

  • Christianity (blue) dominates in the Americas, Europe and the southern half of Africa.

  • Islam (green) is the top religion in a string of countries from northern Africa through the Middle East to Indonesia.

  • India stands out as a huge Hindu bloc (dark orange).

  • Buddhism (light orange) is the majority religion in South East Asia and Japan.

  • China is the country with the world's largest 'atheist/agnostic' population (grey) as well as worshippers of 'other' religions (yellow).

The Americas are (mostly) solidly Christian

Which is the least Christian country in the Americas? The answer may surprise you.

Image: Carrie Osgood

But the map – based on figures from the World Religion Database (behind a paywall) – also allows for some more detailed observations.

  • Yes, the United States is majority Christian, but the atheist/agnostic share of its population alone is bigger than the total population of most other countries, in the Americas and elsewhere. Uruguay has the highest share of atheists/agnostics in the Americas. Other countries with a lot of 'grey' in their pies include Canada, Cuba, Argentina and Chile.

  • All belief systems represented on the scale below are present in the US and Canada. Most other countries in the Americas are more mono-religiously Christian, with 'other' (often syncretic folk religions such as Candomblé in Brazil or Santería in Cuba) the only main alternative.

  • Guyana, Suriname and Trinidad & Tobago are the only American nations with significant shares of Hindus, as well as the largest share of Muslim populations – and consequently have the lowest share of Christians in the Americas (just under half in the case of Suriname).

Lots of grey area in Europe

The second-biggest religious affiliation in Europe isn't Islam, but 'none'.

Image: Carrie Osgood

  • Christianity is still the biggest belief system in most European countries, but the atheist/agnostic share is strong in many places, mainly in Western Europe, but especially in the Czech Republic, where it is close to half the total.

  • Islam represents a significant slice (and a large absolute number) in France, Germany and the UK, and is stronger in the Balkans: The majority in Albania, almost half in Bosnia and around a quarter in Serbia (although that probably indicates the de facto independent province of Kosovo).

Islam in the north, Christianity in the south

The map of Africa and is dominated by the world's two largest religions

Image: Carrie Osgood

  • Israel is the world's only majority-Jewish state (75%, with 18% Muslim). The West Bank, shown separate, also has a significant Jewish presence (20%, with 80% Muslim). Counted as one country, the Jewish majority would drop to around 55%.

  • Strictly Islamic Saudi Arabia, but also some of its neighbors in the Gulf, have significant non-Muslim populations – virtually all guest workers and ex-pats.

  • Nigeria, due to its large population and even split between Islam and Christianity, has more Muslims and more Christians than most other African nations.

Different majorities across Asia

Close neighbors India, Bangladesh and Myanmar each have a different majority religion.

Image: Carrie Osgood

  • Because countries are sized for population rather than area, some are much bigger or smaller than you'd expect – with some interesting results: There are more Christians in Muslim-majority Indonesia than there are in mainly Christian Australia, for example.

  • Hindus are a minority everywhere outside India, except in Nepal.

  • North Korea is shown as three-quarters atheist/agnostic, but this is debatable, on two counts. In what is often referred to as the last Stalinist state on Earth, religious adherence is probably underreported. And the state-sponsored ideology of 'Juche', although in essence based on materialism, makes some supernatural claims. For instance: despite having died in 1994, Kim Il-sung was declared 'president for eternity' in 1998.

Of course, clarity comes at the cost of detail. The map bands together various Christian and Islamic schools of thought that don't necessarily accept each other as 'true believers'. It includes Judaism (only 15 million adherents, but the older sibling of the two largest religious groups) yet groups Sikhism (27 million) and various other more numerous faiths in with 'others'. And it doesn't make the distinction between atheism ("There is no god") with agnosticism ("There may or may not be a god, we just don't know").

And then there's the whole minefield of nuance between those who practice a religion (but may do so out of social coercion rather than personally held belief), and those who believe in something (but don't participate in the rituals of any particular faith). To be fair, that requires more nuance than even a great map like this can probably provide.

Published:7/21/2019 11:40:57 AM
[Markets] Twitter Reactivates "Angel Mom" Account After Trump Intervenes

Twitter briefly suspended the twitter account of "Angel Mom" Mary Ann Mendoza" over a tweet she sent attacking presidential candidate Kamala Harris, then reinstated it after President Trump tweeted that he would "help" with the situation.

On Saturday, Twitter suspended Mendoza's account after she sent the following tweet:





The company said Mendoza had violated its policy on hate speech by using the term "illegal" to describe "undocumented" migrants, and said it wouldn't reinstate Mendoza's account until she agreed to delete several tweets with this hateful language. She refused.

Mendoza's son, 32-year-old police officer Brandon Mendoza, was killed in May 2014 by a drunk illegal immigrant who was driving drunk down the wrong lane on the high way.

Several conservative media outlets reported on the story, though it was largely ignored by the mainstream press, and early on Sunday morning, President Trump tweeted that he would intercede on Mendoza's behalf and insisted that she "should never be silenced."

Trump first met Mendoza during a campaign stop in Arizona during 2016. She was later invited to the White House.


Mendoza delivered a lengthy statement to Brietbart News.

"I’m disgusted and disappointed that Twitter is trying to silence me," Mendoza told Breitbart News. "I had my world ripped out from under me the day my son was killed by a repeat illegal alien criminal. I am the ‘other’ side of this crisis and the end result of open borders and the careless release of illegal aliens at our borders because of time restraints."


"I will not be silenced in my warning calls of what could happen to any American citizen in the blink of an eye as it did to me," Mendoza said. "As an American citizen whose beautiful son was collateral damage to the ineptness if our elected officials, I will continue to bring my words to them in whatever platform I can. They owe it to me and every other Angel Family to have a hearing for our voices. Their fellow American citizens and our loved ones killed by their inactions. My voice is my son’s voice, never to be silenced by anyone."

As of noon ET on Sunday, Mendoza's twitter account was active, but the offending tweets had been deleted.

Published:7/21/2019 11:07:18 AM
[Markets] NewsWatch: The filthy mistake you’re likely making in the kitchen — and its simple $14 solution Wood, bamboo or plastic? We show you the best cutting board for your money.
Published:7/21/2019 11:07:18 AM
[Markets] Fed Flip-Flops & The Battle For Control

Authored by Sven Henrich via,

Markets are engaged in a clear battle for control: An active Fed eager to extend the business cycle using asset price inflation as its primary means to generate further debt financed growth on the one hand and deteriorating fundamentals and technicals gnawing at an artificial market construct on the other.

Let’s call a spade a spade: Markets would not be anywhere near new highs were it not for a Fed flip flopping and racing from dovish media event to dovish media event. I’ve been very vocal in my criticisms of their efforts and sense they are playing a dangerous gamehere. Hence I don’t want to belabor the point here today. But as a follow up: Friday’s desperate efforts on the side of the Fed to backtrack market expectations for a 50bp rate cut at the coming July meeting, which they themselves caused on Thursday with multiple Fed speakers, has revealed again the Fed’s singular role it has to devolved into: The market’s primary price discovery mechanism. As markets dropped below $SPX 3,000 this week dovish Fed speakers caused a renewed rally above 3,000 and as soon as they tried to walk it back with a conspicuous WSJ Journal article on Friday markets again soon rolled over.

That’s the circus atmosphere they have created and appear to be supportive of. The Fed is very aware of its role in all of this and it’s shameful. Like Alan Greenspan or not, but at least he was a cryptic speaker that left markets guessing and played his cards close to the vest. But over the years the Fed has devolved itself into this clown show we have now, a day to day manager of markets. And markets have learned to react to every single pronouncement and utterance.

Just stop:

Seriously, just stop. It’s embarrassing and it’s not your charter to manage markets. Nobody elected you to do that. Well, then nobody elected you in the first place. You’re appointed. By politicians. And now we have politicians that overtly want to dictate policy to the Fed. A toxic mix as the Fed’s independence is risking utter bankruptcy and is already lost in the eyes of many.

But as with cheap money, once you go down that road of daily massaging markets it’s hard to extract yourself from that mess. Now markets expect daily soothing and when they don’t get it they react, as did futures Friday following close when Rosengren uttered slightly less dovish words. “I think we should wait”.

Yes, this is what our markets have devolved into. A giant Fed gaming operation and it’s safe to say that the entire month price action will be greatly influenced by what the Fed does on July 31, the last day of the month.

But by setting expectations they have cornered themselves into a position where they constantly need to feed the appetite of the beast they themselves have created: A Fed dependent market that needs and wants more stimulus.

And now here we are, at some of the highest valuations:

With come key stocks massively technically extended (see also: To the stars):

Yet earnings growth having ground to a halt:

While profit margins have started shrinking:

Not the recipe for multiple expansion. But nevertheless here we are near all time highs once again, thanks to the Fed’s, so far, successful efforts.

But this is where the technicals come in and they put a at least temporary red line in the bull sand.

I am probably one of the few out there that has outlined the potential for a larger sell case on equities at this stage. The vast majority of analysts are looking for a massive expansion in prices primarily due to the Fed. From what I’ve seen earnings growth is really no longer part of the calculus. Easy money is. Fine. It may happen, I can’t deny that possibility and I’ve outlined in my weekly briefs when the sell case would be void.

And let’s be clear: Putting out technical setups in public is not an easy task. Especially on the sell side. Technical setups are about risk/reward and they are not guaranteed, they can be invalidated and if they don’t work out one gets hammered with ridicule and hate. And I’ve been wrong before. But I’ve also been right plenty of time.

Last year it was Lying Highs, a sell call which culminated in a 20% sell-off. But the call came out in September and markets didn’t top until early October. Sells are processes, bottoms are events. Like the one in December. I talked about Imbalance on December 23rd and called for a major technical rally into MA reconnects, worked nicely. Did I expect new highs on deteriorating fundamentals? No, but then this is where the Fed comes in, jawboning things higher. Yet again Lying Highs II informed us of another sell set-up coming and indeed we saw a larger sell-off into May before the Fed once again came to the rescue at the beginning of June.

No, sell calls are much harder than buy calls. After all you have an entire market machine designed to levitate asset prices higher and most people are bullish all the time, so a sell call is what the majority doesn’t want to hear. Indeed you can even make a great technical sell call, be right and still get hate, as I saw with Boeing when I called for a sell at $441. It dropped 6% in the week after the call, but then the plane crash happened and I got accused of taking joy in people dying. What nonsense, but still there it is. The stock was massively technically extended and the fundamentals took over (for the worst reason) and the stock plummeted 25% from the sell call. But it wasn’t the crash that was the problem, it was the underpinning design flaws that were the trigger and the technicals said that the long side was dangerous. And it was.

In some cases technicals are cleaner, like Gold when we called for a big rally when Gold was trading at 1270 in May, it hit 1450 on Friday a 14% rally from that bullish call.

I’m pointing all these things out to highlight how complex sell calls are, yet technicals matter and they mattered again big time this week.

Since June and into early July I presented a potential major sell case on $SPX. In June (It’s different this timeSell ZoneDistortionand again last week in The ChoiceI’ve pointed to the chart below allowing for the possibility of an upper trend line tag on a megaphone pattern that could lead to a major sell-off. This is the chart shown in June:

Indeed we saw this tag on Monday this last week which then reversed:

In fact I pointed to it first thing on Monday morning:

Here’s the updated chart:

This does not mean the larger sell case is validated yet, it’s not, but the 2990-3050 sell zone case I had outlined in my writings and on CNBC has so far produced a result.

But as it is a battle for control between the Fed and a still needed technical confirmation the jury is still out.

For a run down of the technicals please see the video below:

*  *  *

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Published:7/21/2019 10:36:48 AM
[Markets] The Ratings Game: Netflix stock slammed by subscriber miss, but analysts are unfazed Netflix Inc.’s weaker-than-expected second-quarter subscriber numbers sent its stock sharply lower in premarket trade Thursday, but analysts were unfazed by the miss and said they’re sticking with their full-year forecasts.
Published:7/21/2019 10:06:38 AM
[Markets] Suspect In Deadly Japan Arson Said Studio Plagiarized His Work

A 41-year-old man arrested on suspicion of Japan's worst mass killing in nearly 20 years told police that the Kyoto Animation studio had plagiarized his work, according to CNN.

Police identified the man as Shinji Aoba during a Friday press conference, however Kyoto Fushimi Police spokesperson Ryoji Nishiyama said that they had not yet established a link with the studio in Kyoto's Fushimi-ku district. 

34 people were killed after the suspect began pouring gasoline on the first floor of the studio before setting it on fire, shouting "You die" as he spilled the liquid, according to a witness. 

The three-story building quickly became engulfed in flames, killing 20 men, 20 women and another individual of 'unknown gender.' 35 people were injured in the blaze. 

After dousing flames, firefighters entered the building and found 20 bodies lying on the staircase leading to the roof exit. Another team found 11 bodies on the second floor of the building and two on the ground floor.

Police said that 74 people were inside the building at the time of the blaze.

The fire spread so rapidly that many inside did not have time to escape, Kyoto Prefectural police told CNN. Several people jumped out of the second and third floor windows and suffered bone fractures. -CNN

Aoba was arrested and is currently heavily sedated as physicians treat him for severe burns sustained during the attack. Police added that he has unspecified mental health issues. 

As CNN notes, the arson marks Japan's deadlies mass murder since a 2001 arson attack on a building in Tokyo's Kabukicho district which killed 44 people. 

Published:7/21/2019 10:06:38 AM
[Markets] Tech Stocks: Judge told Tesla to release evidence in short seller trial, so Tesla dropped the case Tesla dropped the suit Friday after the judge ordered the company to turn over video and audio evidence to prove its case. The company said it chose not to release the evidence to protect the privacy of its employees,
Published:7/21/2019 9:40:14 AM
[Markets] Why The Fed Could Cut By 50bps & Why It Won't Matter

Authored by Lance Roberts via,

Last week, we laid out the bull and bear case for the market:

The Bull Case For 3300

  • Momentum
  • Stock Buybacks
  • Fed Rate Cuts
  • Stoppage of QT
  • Trade Deal

The Bear Case Against 3300

  • Earnings Deterioration
  • Recession
  • No Trade Deal/Higher Tariffs
  • Credit-Related Event (Junk Bonds)
  • Mean Reversion
  • Volatility / Loss Of Confidence

We laid out the case for a near-term mean reversion because of the massive extension above the long-term mean. To wit:

“There is also just the simple issue that markets are very extended above their long-term trends, as shown in the chart below. A geopolitical event, a shift in expectations, or an acceleration in economic weakness in the U.S. could spark a mean-reverting event which would be quite the norm of what we have seen in recent years.”

This analysis led us to take action for our RIAPRO subscribers last week (30-Day Free Trial), as we added a 2x-short S&P 500 index fund to Equity Long-Short Account to hedge our longs against a potential mean reversion. (on Friday that portfolio was UP .03% while the market FELL by 0.62%)

“This morning, we are adding a small 2x S&P 500 short position to the trading portfolio to hedge our core long positions against a retracement over the next few weeks. We will remove the short if the market can regain its footing and move higher, or the market sells off and reaches oversold conditions.”

This is the purpose of hedging, as it reduces volatility over time, which inherently reduces the risk of emotionally based trading mistakes.

The correction this past week was not surprising as we wrote previously:

“With a majority of short-term technical indicators extremely overbought, look for a correction next week. What will be important is that any correction does not fall below the early May highs.”

While the market is still hanging above the May highs, further corrective actions are likely next week as the short-term oversold conditions have not been resolved as of yet. The deviation above the long-term mean is also only starting to reverse as well.

Importantly, once we get past the end of the month, and assuming the Fed does indeed cut rates and no “trade deal” with China, the markets will return their focus to economics and earnings. As we stated previously:

“Such continues to suggest the August/September time frame for a larger corrective cycle is still in play.”

More importantly, as Chris Kimble noted on Friday, the market is continuing to ignore the economic warnings being sent by bonds and commodities.

Moreover, the “Dumb Money” is now all the way back in.

These last two charts confirm the old Wall Street axiom:

“Individuals buy  the most at the top, and the least at the bottom.” 

This is why we are hedging our risk, carrying a higher level of cash, and holding onto our bonds as if they were the last lifeboat on the Titanic.

Why The Fed Will Cut By 50bps

It is now widely expected the Fed will cut rates at the end of the month following comments by Fed officials last week. Per the WSJ:

New York Fed President John Williams on Thursday stoked expectations for a hefty cut. Already-low interest rates are a big reason to cut aggressively at the first sign of economic distress, he said. ‘Don’t keep your powder dry—that is, move more quickly to add monetary stimulus than you otherwise might.’ But a bank spokesman later walked that back, saying Mr. Williams didn’t intend to suggest the central bank might make a large cut this month.”

Interestingly, that statement was quickly walked back by the NY Fed:

“However, in an unprecedented move, the NY Fed subsequently released a statement stating that President Williams’s speech on Thursday afternoon was not intended to send a signal that the Fed might make a large interest rate cut this month but rather it was “an academic speech on 20 years of research.”

Why did the NY Fed do this?

Simple: as BofA explains, ‘the FOMC was uncomfortable with the market moving toward a 50bp cut and wanted to push the market back to a 25bp baseline.’ In other words, as Meyer puts it, ‘Williams unintentionally misguided the markets.'”

With the markets pushing record highs, recent employment and regional manufacturing surveys showing improvement, and retail sales rebounding, it certainly suggests the Fed should remain patient on hiking rates for now at least until more data becomes available. Patience would also seem logical given very limited room to lower rates before returning to the “zero bound.”

However, there is also support for rate cuts. This is the point we will discuss today.

It’s Beige

Let’s begin with the Fed’s Beige Book report.

  • Labor markets remained tight, with contacts across the country experiencing difficulties filling open positions. The reports noted continued worker shortages across most sectors, especially in construction, information technology, and health care. (Tighter job market leads to higher costs, which impacts profitability.)

  • Compensation grew at a modest-to-moderate pace, although some contacts emphasized significant increases in entry-level wages. Most District reports also noted that employers expanded benefits packages in response to the tight labor market conditions. (Note: cost of labor is rising, which will impede corporate profit margins. Increases in labor costs ALWAYS precede the onset of a recession.)

  • Tariffs were mentioned 49 times in the report.

  • Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs. However,  firms’ ability to pass on cost increases to final prices was restrained by brisk competition. (Note: higher input costs without the ability to pass it on impacts profitability.)

Click to Enlarge

Recession Probabilities 

The Fed’s own recession probabilities index has spiked to levels historically coincident with the onset of a recession. (Yes, this time could be different, but probably not a bet the Fed is willing to take.)

Yield Curve Inversions

Interest rates are a direct reflection of economic growth. As I wrote in December 2018  in “Why Gundlach Is Still Wrong About Higher Rates:”

“Given the structural backdrops to the economy, there is an inability to increase rates of productivity substantially, output, wage growth, savings, or consumption, which would lead to stronger rates of economic growth. In fact, we are currently running some of the weakest rates of economic growth, productivity, and wages on record.”

Currently, 50% of the 10-yield curves we track are inverted and have remained so for more than 3-months. Historically, when inversions last for one-quarter or more in duration, recessions have not been too far behind.

However, one of the biggest reasons the Fed is about to cut rates by up to one-half point is to un-invert the Fed Funds to the 10-year Treasury rate. The inversion between the ultra-short and long-end of the curve is impairing loan activity. The Fed clearly understands that if they don’t resolve this inversion, the probability of a recession grows rapidly.

Cass Freight Index

There is also substantial “hard data” evidence the economy in under severe pressure. While “sentiment-based” surveys, or “soft data,” has rebounded recently, data like the “Cass Freight Index” is ringing alarm bells.

Leading Economic Indicators Drop

However, it is the Leading Economic Indicator (LEI) index, which has our attention currently.

As Mish Shedlock noted on Thursday:

“The Conference Board’s LEI index turned negative in June. The yield curve finally made a negative contribution. The conference board provides this press release on Leading Economic Indicators for June.

The US LEI fell in June, the first decline since last December, primarily driven by weaknesses in new orders for manufacturing, housing permits, and unemployment insurance claims. For the first time since late 2007, the yield spread made a small negative contribution.” – Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board

The consensus estimate was for LEI of +0.1, the read was a -0.3

This decline is not surprising to us. In July of 2018, as noted in the chart below, we laid out a predicted path of reversion in the LEI index. As you can see, the reversion has been even sharper than we originally estimated.

What is more concerning, and a reason the Fed is likely acting now, is there is a high correlation between the LEI and GDP, economic activity, and corporate profits. When compared to nominal GDP, the LEI index is suggesting a sharp slowdown is just ahead.

The Chicago Fed National Activity Index (CFNAI) is one of the broadest measures (80-sub components) of economic activity. The LEI and CFNAI, not surprisingly, also have a high correlation, which suggests further weakness is ahead.

Of course, if GDP, and underlying economic activity, is slowing down, it should not be surprising that corporate profits also decline.

The LEI is certainly not a perfect indicator for recessionary activity and has provided many false signals since the 2009 lows. However, the recessionary correlation is the highest when the LEI is signaling a recessionary warning at the same time the Fed Funds/10-Year yield inversion in place.

I think the Fed is beginning to panic as they were never able to get yields up to high enough levels to be effective in the next recession. Of course, this is exactly what we said would happen numerous times previously:

“The Fed surely understands that economic cycles do not last forever, and after eight years of a ‘pull forward expansion,’ it is highly likely we are closer to the next recession than not. While raising rates would likely accelerate a potential recession, and a significant market correction, from the Fed’s perspective, it might be the ‘lesser of two evils.’ Being caught at the ‘zero bound’ at the onset of a recession leaves few options for the Federal Reserve to stabilize an economic decline.”

Janet Yellen was smart enough to “exit” and stick Jerome Powell with the “tab.”

While the market rallied back from its 20% decline last year on “hopes” of an end to the “trade war” and “rate cuts,” the market is missing an important part of the picture.

Rate cuts may not work.

Why It Won’t Matter

My friend Patrick Watson recently penned the problem for the Fed:

“This used to be pretty simple. When the economy slowed, the Fed would cut rates. This encouraged borrowing and investment. People bought houses. Businesses expanded and hired people. The economy would recover.

Now, it doesn’t seem to work that way. Peter Boockvar succinctly explained why in one of his recent letters. The problem is that ‘easy money’ stops working when it becomes normal, as it now is.

Lower rates don’t encourage borrowing unless potential borrowers think it’s a limited-time opportunity. Which they don’t anymore, and shouldn’t, since the Fed shows no sign of ever going back to what was once normal.”

Exactly correct.

Also, “stimulus” works best when the “patient” is in the worse possible condition, not when the patient is healthy. As I wrote in “QE – Then, Now, & Why It May Not Work:

If the market fell into a recession tomorrow, the Fed would be starting with roughly a $4 Trillion balance sheet with interest rates 2% lower than they were in 2009. In other words, the ability of the Fed to ‘bailout’ the markets today, is much more limited than it was in 2008.

However, there is more to the story than just the Fed’s balance sheet and funds rate. The entire backdrop is completely reversed. The table below compares a variety of financial and economic factors from 2009 to the present.”

“The critical point here is that QE and rate reductions have the MOST effect when the economy, markets, and investors have been ‘blown out,’ deviations from the ‘norm’ are negatively extended, confidence is hugely negative.

In other words, there is nowhere to go but up.”

Let me be clear; it is certainly possible that asset prices could rise in the short-term given the “training”investors have received over the last decade to “Buy The F***ing Dip.” However, given the economic and fundamental backdrop, rate cuts will not change the onset, duration, or intensity of the coming recession.

Yes, participate with the “rate cut rally.” 

We will be.

Just make sure you have a strategy to “leave the party before the cops arrive.”

Published:7/21/2019 9:40:14 AM
[Markets] Bids For $260 Million Harlem Apartment Ensemble Disappear Overnight Thanks To New NY Legislation

About 12 investors made offers on a collection of rent stabilized Harlem apartment buildings that listed in April for $260 million, according to Bloomberg. But then, the NY legislature re-wrote the rules of stabilized rents, which capped property values and slashed the potential for increases in rent overnight. 

The bids for the 28 building "Harlem Ensemble" apartments that were on the sale block instantly disappeared

David Chase, partner at B6 Real Estate Advisors said: “They called us every day -- and then we couldn’t reach them.”

The listing will expire at the end of the month. 

Many other multifamily deals also collapsed due to investors fearing that the new legislation, which governs about 1 million apartments in the city, takes direct aim at landlords' income and investment returns. It makes it nearly impossible to raise rents, remove units from state regulation or recoup the costs of capital improvements. 

NYC apartment building sales fell 48% in the first half of 2019 from the year prior - the biggest decline for any 6 month period going back to 2009. In northern Manhattan, including Harlem, the drop led to a 61% fall in all commercial property transactions. 

The total of all commercial deals citywide is on pace to fall below 2,000 for the first time since 2011.

Adrian Mercado, chief information officer at B6 said: “Right now, it’s a shot in the dark on the multifamily side. People are speculating as to what buildings should be trading at.”

Published:7/21/2019 9:07:20 AM
[Markets] 3 Things to Watch in the Stock Market This Week Keep an eye on iRobot, Coca-Cola, and Tesla stocks for big moves over the next few trading days. Published:7/21/2019 8:36:58 AM
[Markets] The 2nd Cyprus Partition: American Promises vs Turkish Arms vs Russian Money & Missiles

Authored by John Helmer via,

This week a group of US senators has proposed to leave Turkey in control of the northern part of Cyprus, and force the Greek Cypriots to choose between the US and Russia for the economic and political future of the south of the island.

The Senate Foreign Relations Committee agreed by a large bipartisan majority on June 25 to put into law a new Eastern Mediterranean strategy. If the bill is enacted, Cyprus will be required to decide that in exchange for American protection from Turkish military threats, including Russian-made S-400 missiles to be based in southwestern Turkey,  the Cyprus  Government must not allow Russian naval vessels to dock at Cypriot ports,  and should block all Russian money and investments on the island.  At the same time, Greece has been told the US military intends to expand its occupation of Crete around the Souda Bay base; at Larissa Air Force Base, midway between Athens and Thessaloniki; and at other Greek locations.

The proposed new law is the most comprehensive plan for American military occupation of Cyprus and Greece since the Greek civil war of the 1950s.  The US plan also establishes State Department censorship of the Greek-language media in Cyprus and Greece, and threatens US sanctions against the Orthodox Church bishops of the two countries.

Senator Bob Menendez, Democrat of New Jersey, initiated the new policy as an amendment to Senate Bill No. 1102, “to promote security and energy partnerships in the Eastern Mediterranean, and for other purposes.” Menendez chaired the Foreign Relations Committee until the Republicans won control of the Senate last November. He has made a long record of legislating sanctions against Russia, while he himself has been under FBI investigation for corruption.    Read the Menendez indictment here and the dismissal of the case a year ago,  after a federal court jury could not agree on a verdict. 

The text of S-1102, which now goes to the full Senate for a vote, can be read here.  The new policy, as Menendez has agreed with the Republican majority of the Committee, can be read in full here

In the preamble, Russia is identified as a “malign influence” in the Mediterranean:


US policy in the region should be aimed, the Bill declares, at backing the development of the Cyprus offshore gas deposits, as well as future regional pipelines and liquefaction plants, in order to compete against Russian gas supplies to southern Europe:


Without naming Turkey, which is currently threatening Cypriot gas exploration at sea with drilling vessels of its own,   the Bill claims that  Cypriot seabed exploration “must be safeguarded against threats posed by terrorist and extremist groups, including Hezbollah and any other actor in the region.”

The Bill promises to supply US weapons to Cyprus, ending the arms embargo introduced by Henry Kissinger after he backed the Turkish invasion of the island in mid-1974.    But there is no parallel US promise in the Menendez bill to halt US arms from being deployed by the Turkish military command in northern Cyprus. Nor does the new US policy alter US acceptance of Turkey’s occupation of  northern Cyprus.   

There are two explicit pre-conditions for the supply of US arms to Cyprus; one is aimed at Russian investment in Cyprus – referred to in S-1102 as money-laundering — and the other at Russian Navy port calls in Cyprus.


The Senate is also promising US scholarships to “future leaders” of Cyprus,  plus $1.5 million in US training for Cypriot military officers over the next three years.

With a requirement for a report by the State Department on “Russian Federation malign influence in the  Republic of Cyprus, Greece, and Israel”, the Senate bill launches an attack on the Cypriot and Greek media and the Orthodox Church in both countries. The Greek-language media are to be targeted if the   State Department report judges them to “promote pro-Kremlin views”.


Ranking churchmen in Cyprus and Greece are threatened with investigation and sanctions to deter them from siding with the Russian Orthodox Church against the breakaway Ukrainian church in the autocephaly controversy; for details of that, click to read.

During the Obama Administration, the US strategy for combating Russia’s relationships with Cyprus was to create a NATO base in the occupied Turkish zone, and to pressure the Cyprus President Nikos Anastasiades into accepting the Turkish partition as a NATO protectorate of the island. This was the plan of then Assistant Secretary of State Victoria Nuland (right); for that plan and its outcome,  read the archive.  

Nuland’s ambassador to the Ukraine at the time, Geoffrey Pyatt,  is now US Ambassador to Greece. “Pyatt’s scheming in Athens,” comments a veteran Greek political observer, “may turn out to be longer lasting than his scheming in Kiev.  Whether his new success will be as destructive as the old one remains to be seen.” 


Left: Endy Zemenides, Executive Director of the Hellenic American Leadership Council (HALC). Right: Tasos Zambas, Chairman of the Justice for Cyprus Committee for the Federation of Cypriot-American Associations.  

The new Senate plan is to isolate Russia and Turkey simultaneously, pushing them closer together and pressuring the Cypriots and Greeks to position themselves against both.

The Greek-American lobby in Washington has declared its support for the Menendez bill to make “the region more stable and prosperous and… advance both American interests and values.”    The Federation of Cyprus-American Associations has added:

“the East Med Act is a huge leap forward in U.S. relations with both Greece and Cyprus.  It places Greece in the centre of a new American strategy for the Eastern Mediterranean, and it stops the treatment of Cyprus as merely a problem but positions it as a solution.  The Greek-American community thanks Senator Menendez for his decades of unparalleled leadership on these issues and to Senator Rubio for championing this new Eastern Mediterranean strategy.” 

Published:7/21/2019 8:36:58 AM
[Markets] The Week Ahead: A New British PM, Earnings, Iran, Stats and Trade in Focus It’s a big week ahead for the markets. Earnings, economic data, Iran, trade war chatter, and the ECB are all in focus. Published:7/21/2019 8:06:42 AM
[Markets] Trump Slams London Mayor After Hackers Post Offensive Messages On Met Police Website

In an epic example of hackers using their abilities to cause mischief, somebody hacked into the Twitter, email and website of the Metropolitan Police Department, and started posting a series of bizarre messages, some with anti-police themes or homophobic slurs, according to a series of reports in the UK press.

Some of the tweets sent from the Metropolitan Police's official twitter account, which has more than 1 million followers, also called for the release of West London rap artist Digga D, who is reportedly in prison.


A stream of suspicious emails were sent from the force's press bureau at around 11:30 pm BST (about 6:30 pm in New York). Scotland Yard soon confirmed to the press that the emails were the result of "unauthorized access" to the company's servers. They elaborated that the department uses a program called MyNewsDesk to manage its public releases, and implied that the hack had been centered around this system. Scotland Yard said they've begun to make changes to this system.

The tweets, most of which have been deleted, contained offensive language and mentioned the names of several people, including a missing child.

In one strange tweet that also contained homophobic slurs, the hackers appeared to take aim at other individuals. It read: "We are the police... Cal and dylan are gay btw."



Other messages included offensive anti-police slurs including messages like "F**k the police."

Conservative commentators quickly blasted London Mayor Saddiq Khan, saying he had lost control of the city's streets, as well as its internal infrastructure. One of the tweets was even shared by President Trump, who is apparently still sore about his treatment during his recent visit to London.

So, in addition to the spike in knife crime, London's mayor now needs to explain how he's going to track down these cyber vigilantes.

Published:7/21/2019 8:06:29 AM
[Markets] US Stock Market: Direction Hinges Upon Whether Investors Keep 50bps Rate Cut Hopes Alive If there is volatility, then it will likely remain centered around whether the Fed cuts 25 or 50-basis points. Some investors continue to say that the Fed must take the aggressive route because policymakers have to convince Wall Street that they are truly serious about providing the firepower needed to continue the current 10-year economic expansion. Published:7/21/2019 7:36:26 AM
[Markets] A Bank With $49 Trillion In Derivatives Exposure Is Melting Down Before Our Eyes

Authored by Michael Snyder via The Economic Collapse blog,

Could it be possible that we are on the verge of the next “Lehman Brothers moment”? 

Deutsche Bank is the most important bank in all of Europe, it has 49 trillion dollars in exposure to derivatives, and most of the largest “too big to fail banks” in the United States have very deep financial connections to the bank.  In other words, the global financial system simply cannot afford for Deutsche Bank to fail, and right now it is literally melting down right in front of our eyes.  For years I have been warning that this day would come, and even though it has been hit by scandal after scandal, somehow Deutsche Bank was able to survive until now.  But after what we have witnessed in recent days, many now believe that the end is near for Deutsche Bank.  On July 7th, they really shook up investors all over the globe when they laid off 18,000 employees and announced that they would be completely exiting their global equities trading business

It takes a lot to rattle Wall Street.

But Deutsche Bank managed to. The beleaguered German giant announced on July 7 that it is laying off 18,000 employees—roughly one-fifth of its global workforce—and pursuing a vast restructuring plan that most notably includes shutting down its global equities trading business.

Though Deutsche’s Bloody Sunday seemed to come out of the blue, it’s actually the culmination of a years-long—some would say decades-long—descent into unprofitability and scandal for the bank, which in the early 1990s set out to make itself into a universal banking powerhouse to rival the behemoths of Wall Street.

These moves may delay Deutsche Bank’s inexorable march into oblivion, but not by much.

And as Deutsche Bank collapses, it could take a whole lot of others down with it at the same time.  According to Wall Street On Parade, the bank had 49 trillion dollars in exposure to derivatives as of the end of last year…

During 2018, the serially troubled Deutsche Bank – which still has a vast derivatives footprint in the U.S. as counterparty to some of the largest banks on Wall Street – trimmed its exposure to derivatives from a notional €48.266 trillion to a notional €43.459 trillion (49 trillion U.S. dollars) according to its 2018 annual report. A derivatives book of $49 trillion notional puts Deutsche Bank in the same league as the bank holding companies of U.S. juggernauts JPMorgan Chase, Citigroup and Goldman Sachs, which logged in at $48 trillion, $47 trillion and $42 trillion, respectively, at the end of December 2018 according to the Office of the Comptroller of the Currency (OCC). (See Table 2 in the Appendix at this link.)

Yes, the actual credit risk to Deutsche Bank is much, much lower than the notional value of its derivatives contracts, but we are still talking about an obscene amount of exposure.

And this is especially true when we consider the state of Deutsche Bank’s balance sheet.  According to, as of the end of last year the bank had total assets of 1.541 trillion dollars and total liabilities of 1.469 trillion dollars.

In other words, there wasn’t much equity there at the end of December, and things have deteriorated rapidly since that time.  In fact, it is being reported that a billion dollars a day is being pulled out of the bank at this point.

I know that most Americans don’t really care if Deutsche Bank lives or dies, but as the New York Post has pointed out, the failure of Deutsche Bank could quickly become a major crisis for the entire global financial system…

But the important fact to remember is that Deutsche Bank traded these derivatives with other financial firms. So, is this going to be another Lehman Brothers situation whereby one bank’s problems becomes other banks’ problems?

Pay close attention to this.

If the situation gets out of hand, the Federal Reserve and other central banks will have no choice but to cut interest rates even if it’s not the best thing for the world economies.

In particular, some of the largest “too big to fail banks” in the United States are “heavily interconnected financially” to Deutsche Bank.  The following comes from Wall Street On Parade

We know that Deutsche Bank’s derivative tentacles extend into most of the major Wall Street banks. According to a 2016 reportfrom the International Monetary Fund (IMF), Deutsche Bank is heavily interconnected financially to JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America as well as other mega banks in Europe. The IMF concluded that Deutsche Bank posed a greater threat to global financial stability than any other bank as a result of these interconnections – and that was when its market capitalization was tens of billions of dollars larger than it is today.

Until these mega banks are broken up, until the Fed is replaced by a competent and serious regulator of  bank holding companies, and until derivatives are restricted to those that trade on a transparent exchange, the next epic financial crash is just one counterparty blowup away.

As long as I have been doing this, I have been warning my readers to watch the global derivatives market.  It played a starring role during the last financial crisis, and it will play a starring role in the next one too.

The fundamental structural problems that were exposed during 2008 and 2009 were never fixed.  In fact, many would argue that the global financial system is even more vulnerable today than it was back during that time.

And now it appears that the next “Lehman Brothers moment” may be playing out right in front of our eyes.

Now more than ever, keep a close eye on Deutsche Bank, because it appears that they could be the first really big domino to fall.

Published:7/21/2019 7:36:26 AM
[Markets] Turkey Prepared To Reinvade Cyprus If Needed - Erdogan Says Following EU Sanctions

Turkey's military is prepared to reinvade Cyprus “if needed for the lives and security of Turkish Cypriots,” Turkish President Recep Tayyip Erdogan said on Saturday. 

“The entire world is watching our determination. No one should doubt that the heroic Turkish army, which sees [Northern] Cyprus as its homeland, will not hesitate to take the same step it took 45 years ago if needed for the lives and security of the Turkish Cypriots,” state-run Anadolu News Agency quoted Erdogan as saying.

Erdogan issued the statement as the nation marks the 45th anniversary of Turkey's deeply controversial invasion of northern Cyprus in 1974, long condemned by the bulk of UN member countries. 

But the provocative remarks come amidst what EU-member Cyprus has dubbed a "second invasion" involving illegal Turkish oil and gas drilling, accompanied by Turkish warships, F-16s, and drones to ensure "protection" of its drilling vessels. 

The EU agreed on Monday to bring financial and political sanctions against Turkey after repeat warnings of the past weeks over Ankara deploying multiple offshore drilling vessels into international recognized Cypriot waters. 

The European Union announced Monday from Brussels:

"Today, we will adopt a number of measures against Turkey — less money, fewer loans through the European Investment Bank, freeze of aviation agreement talks. Naturally, other sanctions are possible."

The most serious measure will involve a cut of 145.8 million euros ($164 million) in European funds allocated to Turkey for 2020, according to a prior AFP report

Erdogan appeared to directly address the crisis in his Saturday statement:

"Those who think the wealth of the island and the region only belongs to them will face the determination of Turkey and Turkish Cypriots." 

...Indicating an unwillingness to back down on Turkey's oil and gas exploration claims inside Greek Cyprus' exclusive economic zone. 

"Those who dream of changing the fact that Turkish Cypriots are an integral part of the Turkish nation will soon realize that it is in vain," Erdogan added.

Turkey has laid claim to a waters extending a whopping 200 miles from its coast, brazenly asserting ownership over a swathe of the Mediterranean that even cuts into Greece's exclusive economic zone. So far Ankara has responded to EU sanctions by reaffirming its rights to waters of all parts of Cyprus' coast. 

Should the Turkish military attempt to enforce its drilling claims and run up against Cypriot and Greek vessels, it could spark a deadly encounter which would force the EU and NATO to finally weigh in more forcefully. 

And just on the heels of the Russian S-400 standoff with Washington, the next major Turkish showdown with the West looks to be fast heating up in the eastern Mediterranean

Published:7/21/2019 7:07:16 AM
[Markets] Deep Dive: Oil stocks have lagged the S&P 500 in 2019 but Wall Street loves them Seven of the 10 stocks with the highest upside potential over the next 12 months, based on analysts’ price targets, are in the oil business.
Published:7/21/2019 6:35:48 AM
[Markets] How Central Banks Could Benefit From A "Protectionist-Driven" Global Downturn

Authored by Steven Guiness,

From observing the behaviour of ‘leavers‘ and ‘remainers‘ since the EU referendum in 2016, I have seen first hand how partisanship works as an effective tool to cloud judgement. Once a position of bias becomes ingrained, it has proved next to impossible to see beyond it or for the individual concerned to be convinced of an alternative perspective.

The psychological operation of ‘fake news‘ is now entrenched within society, with both sides of the divide claiming one another to be peddlers of false truths. By my reckoning this is all the more reason why positioning yourself as neither one thing or the other is the only logical way in which facts can be objectively scrutinised.

The role of the Bank of England in the Brexit process is an example of how bias is serving to insulate central banks from impartial and informed criticism. On one side are those who depict governor Mark Carney as an ‘enemy‘ of Brexit, whilst on the other are people who consider Carney as a safe pair of hands amidst a whirlwind of political turmoil. Non-partisan analysis of communications and policy decisions emanating from the BOE is rarely given space to evolve.


For instance, last week the bank published its latest Financial Stability Report in conjunction with a press conference delivered by Mark Carney. Whilst much of his interaction with the press on Brexit was of a similar theme to previous events, one aspect in particular stood out.

Asked by Joel Hills of ITV News about the level of preparation in the event of a no deal Brexit, Carney affirmed that the financial system in which the BOE presides over was ‘ready for whatever form Brexit takes.’ Carney’s conviction stems from a series of bank stress tests that the BOE conducted in 2018 in an attempt to gauge how the financial system would stand up to a crisis greater than 2008. The results as published by the BOE showed that the UK’s banking system was fully prepared.

Indeed, Carney’s confidence was such that he went on to say how the system would continue serving both households and businesses, ‘even if a worst case disorderly Brexit occurred at the same time as a global slowdown triggered by a trade war.’

Where it started to get more interesting is when Carney made an unequivocal distinction between financial stability and that of market and economic stability. The area where the BOE possess overarching control – the financial system – is, according to the bank, prepared for any adverse scenario. But this preparation does not extended to currency or equity markets, nor economic fundamentals such as inflation which would likely become volatile should supply chains into and out of the UK be compromised.

To quote Carney exactly, ‘market stability will adjust potentially quite substantially if there is a no deal Brexit. Even with a smooth adjustment this would still be a major economic adjustment and major economic shock – in not just a short period of time but virtually instantaneously.’

The expectation from the BOE is for immediate volatility if and when a no deal exit is confirmed. Not from within the financial system itself, but within the surrounding economic environment. The areas which the bank purport not to have direct jurisdiction over. Those who keep abreast of Brexit led developments will know that the pound would be most susceptible to a dysfunctional exit from the EU.

According to Carney, the preparedness of the UK system, which encompasses the country’s trade infrastructure, had seen ‘some progress‘, but ultimately it was for ‘the government to speak directly to that‘ and not the Bank of England.

Gradually over the last three years, the BOE have been carefully positioning themselves so as not to be held culpable for the economic ramifications of a ‘disorderly‘ Brexit. One mechanism for achieving this has been to re-elevate the importance of their 2% mandate for inflation, when in the years post 2008 it had no direct relevance for how the bank conducted monetary policy.

What we learn from Carney is that a no deal eventuality is a more pressing concern for markets and the economy than it is for the financial sector. Is this true? To a point perhaps, but not entirely as the Financial Stability Report alludes to.

An area of concern that has gestated since the referendum result is with uncleared OTC (Over the Counter) derivative contracts. Derivatives are essentially a contract between two or more parties that derive their value from the performance of an underlying asset, such as a commodity, currency or interest rate. Banks use a high degree of leverage to attain these positions in the market. Derivatives can also be used to speculate (bet) on the future value of assets, without the need to own the asset outright.

When it comes to uncleared contracts between the UK and EU, the Financial Policy Committee specifies these as a medium risk should Britain depart with no withdrawal agreement. As for the scale of contracts affected, the report is forthright. Note that the term ‘lifecycle events‘ includes actions such as settlement, modification and termination of derivative contracts.

Certain ‘lifecycle’ events will not be able to be performed on cross-border derivative contracts after Brexit. This could affect £23 trillion of uncleared derivatives contracts between the EU and UK, of which £16 trillion matures after October 2019. This could compromise the ability of derivatives users to manage risks, and could therefore amplify any stress around the UK’s exit from the EU.

This concern is what Mark Carney refers to as a potential ‘spillover‘. In their communications the Bank of England have routinely called for EU regulators to implement measures to mitigate the risks of a no deal exit. This is something that The European Banking Federation  and The European Banking Authority have also been encouraging.

As well as this, the report states that for derivatives, the government has ‘legislated to ensure that EU banks can continue to perform lifecycle events on contracts they have with UK businesses.’

A possible spillover, however, stems from how The European Commission ‘does not intend to reciprocate for UK-based banks’ contracts with EU businesses.’ In particular, ‘uncertainty remains about the scope of current or proposed legislation in jurisdictions which account for approximately half of the notional value of outstanding contracts.’

A safe assumption is that potential economic fallout from derivatives would impact on financial stability. On the home front the Bank of England’s position is that markets and the economy would suffer from a volatile form of Brexit, but the financial system would remain fully functional and be able to withstand unprecedented stress. The validity of this claim could only be tested if a no deal exit comes to pass.

The caveat here is spillovers originating outside of the UK, which three months before the intended exit date of October 31st remain unresolved. Because the global economic system is interconnected, a banking crisis in one part of the world has the capacity to infect the system as a whole. This was evident over a decade ago when Lehman Brothers was sacrificed.

Derivatives, along with other financial instruments, are an inherent weakness built into the system. But instead of automatically interpreting such weaknesses as a threat to central bank autonomy, it is feasible that they present an opportunity for further far-reaching ‘reforms‘ to the financial system.

To globalists, crises open the gateway for establishing broad consensus for major economic change. Because out of chaos invariably comes consolidation of resources.

The question is, how could substantial financial instability be of benefit to the Bank of England? After the initial phase of the 2008 crisis had played out, the Bank for International Settlements put into motion new regulatory standards called ‘Basel III‘. Conceived on the global stage, the new regulations were designed to be implemented by national jurisdictions over a gradual period of time. Many of the standards are now in place, but the full roll out is not due to be completed until around 2021.

One of the aims of the FPC, as expressed in the Financial Stability Report, is to ‘ensure that systemically important payment systems support financial stability.’ This resonated with me because as I have touched on in previous articles, the Bank of England is targeting the year 2025 for the wholesale reform of the RTGS payments system in the UK. A reformed RTGS would have the capability of connecting to distributed ledger technology (DLT). As explained elsewhere, blockchain is a form of DLT, and works in conjunction with cryprocurrencies such as Bitcoin.

Changes on this scale would represent a major overhaul of the UK’s financial system, and would conveniently coincide with the BIS 2025 initiative. This initiative, as outlined by the BIS, will ‘foster international collaboration on innovative financial technology within the central banking community‘.

Based on the documentation I have read from the BIS, the IMF and the BOE, the introduction of central bank digital currencies (CBDC’s) is very much part of the drive for ‘innovative financial technology.’

The prospect of central banks issuing their own form of digital currencies in the future is, according to BIS general manager Agustin Carstens, something that might come sooner than people realise:

Many central banks are working on it; we are working on it, supporting them. And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.

Whereas attention is directed to the short term actions of central banks, longer term plans provide a clearer perspective on the direction that global institutions want to take the financial system in the medium to longer term. It appears that globalists are targeting the period between 2025 and 2030 as the time when digital currencies would start to be implemented, resulting in the eventual abolition of physical money.

The concerted attention placed on CBDC’s comes as sterling remains highly sensitive to the Brexit process. I continue to think it is probable that a no deal exit will trigger a currency crisis. And given that currency markets have no borders, the danger is that a global trade conflict stemming from Brexit and the trade policies of the Trump administration would jeopardise the fiat currency system. This is a topic I discussed earlier this year when looking at the possibility of sterling no longer being considered a reserve currency post Brexit.

A crisis of this magnitude could quite easily be used by central banks as a rationale for a new approach to how currencies are disseminated and controlled.

Back in the present, the conventional theory pushed throughout alternative media is that protectionism is something that central banks and international institutions like the BIS and the IMF fear. On examination, I am doubtful of this claim. The FPC’s report makes it clear that even in the event of a ‘protectionist-driven slowdown‘ running in parallel to a no deal Brexit, the financial system would ‘absorb, rather than amplify, the resulting economic shocks.’ It remains to be seen whether this rhetoric bares any semblance to reality.

My concern is that rather than fear the breakdown of what globalists call the ‘rules based global order‘, it is in actuality an essential variable for orchestrating reforms of the system.

Published:7/21/2019 6:06:45 AM
[Markets] New US Pentagon Chief – Vested Interest In War & Conflict

Via The Strategic Culture Foundation,

Mark Esper is expected to be confirmed in coming days as the new US Secretary of Defense. His appointment is awaiting final Congressional approval after customary hearings this week before senators. The 55-year-old nominee put forward by President Trump was previously a decorated Lieutenant Colonel and has served in government office during the GW Bush administration.

But what stands out as his most conspicuous past occupation is working for seven years as a senior lobbyist for Raytheon, the US’ third biggest military manufacturing company. The firm specializes in missile-defense systems, including the Patriot, Iron Dome and the Aegis Ashore system (the latter in partnership with Lockheed Martin).

As Defense Secretary, Esper will be the most senior civilian executive member of the US government, next to the president, on overseeing military policy, including decisions about declaring war and deployment of American armed forces around the globe. His military counterpart at the Pentagon is Chairman of the Joint Chiefs of Staff, currently held by Marine General Joseph Dunford who is expected to be replaced soon by General Mark Milley (also in the process of senate hearings).

Esper’s confirmation hearings this week were pretty much a rubber-stamp procedure, receiving lame questioning from senators about his credentials and viewpoints. The only exception was Senator Elizabeth Warren, who slammed the potential “conflict of interest” due to his past lobbying service for Raytheon. She said it “smacks of corruption”. Other than her solitary objection, Esper was treated with kid gloves by other senators and his appointment is expected to be whistled through by next week. During hearings, the former lobbyist even pointedly refused to recuse himself of any matters involving Raytheon if he becomes the defense boss.

As Rolling Stone magazine quipped on Esper’s nomination, “it is as swampy as you’d expect”.

“President Trump’s Cabinet is already rife with corruption, stocked full of former lobbyists and other private industry power players who don’t seem to mind leveraging their government positions to enrich themselves personally. Esper should fit right in,” wrote Rolling Stone.

The linkage between officials in US government, the Pentagon and private manufacturers is a notorious example of “revolving door”. It is not unusual, or even remarkable, that individuals go from one sector to another and vice versa. That crony relationship is fundamental to the functioning of the “military-industrial complex” which dominates the entire American economy and the fiscal budget ($730 billion annually – half the total discretionary public spend by federal government).

Nevertheless, Esper is a particularly brazen embodiment of the revolving-door’s seamless connection.

Raytheon is a $25 billion company whose business is all about selling missile-defense systems. Its products have been deployed in dozens of countries, including in the Middle East, as well as Japan, Romania and, as of next year, Poland. It is in Raytheon’s vital vested interest to capitalize on alleged security threats from Iran, Russia, China and North Korea in order to sell “defense” systems to nations that then perceive a “threat” and need to be “protected”.

It is a certainty that Esper shares the same worldview, not just for engrained ideological reasons, but also because of his own personal motives for self-aggrandizement as a former employee of Raytheon and quite possibly as a future board member when he retires from the Pentagon. The issue is not just merely about corruption and ethics, huge that those concerns are. It is also about how US foreign policy and military decisions are formulated and executed, including decisions on matters of conflict and ultimately war. The insidiousness is almost farcical, if the implications weren’t so disturbing, worthy of satire from the genre of Dr Strangelove or Catch 22.

How is Esper’s advice to the president about tensions with Russia, Iran, China or North Korea, or any other alleged adversary, supposed to be independent, credible or objective? Esper is a de facto lobbyist for the military-industrial complex sitting in the Oval Office and Situation Room. Tensions, conflict and war are meat and potatoes to this person.

During senate hearings this week, Esper openly revealed his dubious quality of thinking and the kind of policies he will pursue as Pentagon chief. He told credulous senators that Russia was to blame for the collapse of the Intermediate-Range Nuclear Forces (INF) Treaty. That equates to more Raytheon profits from selling defense systems in Europe. Also, in a clumsy inadvertent admission he advised that the US needs to get out of the INF in order to develop medium-range missiles to “counter China”. The latter admission explains the cynical purpose for why the Trump administration unilaterally ditched the INF earlier this year. It is not about alleged Russian breaches of the treaty; the real reason is for the US to obtain a freer hand to confront China.

It is ludicrous how blatant a so-called democratic nation (the self-declared “leader of the free world”) is in actuality an oligarchic corporate state whose international relations are conducted on the basis of making obscene profits from conflict and war.

Little wonder then than bilateral relations between the US and Russia are in such dire condition. Trump’s soon-to-be top military advisor Mark Esper is not going to make bilateral relations any better, that’s for sure.

Also at a precarious time of possible war with Iran, the last person Trump should consult is someone whose corporate cronies are craving for more weapons sales.

Published:7/20/2019 10:34:10 PM
[Markets] Has E.T. Gone Home?

UFO sightings have been making headlines again lately, notably with The New York Times running an interesting article about several U.S. Navy fighter pilots encountering mysterious objects near the southeastern coast of the United States.

That high-profile story remains unexplained and so do plenty of other UFO sightings reported by members of the public every year like strange lights crossing the night sky or orange disks hovering in the distance.

However, as Statista's Niall McCarthy notes, according to The National UFO Reporting Center - which is based in the U.S. and maintains statistics - global UFO sightings have declined steadily since 2014.

Infographic: Has E.T. Gone Home? | Statista

You will find more infographics at Statista

There were just over 8,000 reported sightings in 2014 and in 2018, there were 3,343. So far in 2019, 2,371 UFO sightings have been reported. Despite the decline in sightings, interest in UFOs and alien life remains strong judging by an event that went viral on social media this week.

Conspiracy theorists have long maintained that a secret U.S. base in Nevada known as Area 51 harbors alien life or parts of a crashed spacecraft. The event called for people to storm the base and find out and it attracted 1.4 million signatures. Entitled "Storm Area 51, They Can't Stop All Of Us", it also prompted the Air Force to issue a warning to stay well away from the facility.

Published:7/20/2019 10:07:47 PM
[Markets] Circumventing The Straits Of Hormuz - Time To Dust Off The Trans-Arabia Canal Project?

Via Climateer Investing blog,

Far from a perfect solution, in the event of a shooting war, one sunk tanker would be enough to stop traffic for a considerable period of time. But, and that's a big but, anything short of that level of bellicosity, such as current Iranian piracy, would make having an alternative to the Straits of Hormuz a strategic and tactical asset.

The linked piece references the proposed north-south Salman canal but there have also been proposals for longer east-west canals that avoid Iran's beachhead, Yemen and connect the Persian Gulf and the Red Sea.

h/t: Thai Military and Aisia Region,  April 24, 2016.

*  *  *

Saudi Arabia is planning to build a canal that will connect the Persian Gulf and the Arabian Sea bypassing the Strait of Hormuz controlled by the Iranians.

Since the canal would pass the Shia territories in Yemen, Riyadh needs to take the country under full military control.

h/t: Craig Murray, April 21, 2016

*  *  *

Study calls for 950-kilometre canal bypassing Hormuz


According to the project by the Riyadh-based Arab Century Centre for Studies, the canal will be 630 kilometres in Saudi Arabia and 320 kilometres in Yemen and will reduce by half the distance ships are currently taking by passing through the Strait of Hormuz.

“It will be 150-metre wide and 25 metres deep,” Saad Bin Omar, the head of the centre, said.

“The canal will have a main course across Saudi Arabia and Yemen; however, we have thought of Oman as an alternative for Yemen if the country suffers political instability,” he said.

h/t: Gulf News, Sept. 10, 2015

*  *  *

Additionally, as part of their spat with their LNG producing brothers, the Saudis are threatening to build the Salwa canal across the base of the Qatar peninsula and turn Qatar into an island.

As we saw in last month's "Closing the Canal: The 1967 Six Day War’s Impact on Maritime Trade", canals are important.

And then there are pipelines, in fact there used to be one that ran northwest through Jordan.

Either way though, Qatar is screwed, and that's 25% of world LNG.

Just sayin', lots of moving parts here.

Published:7/20/2019 9:38:26 PM
[Markets] 'Noose' Which Sent UMich Dean On Racism Tirade Turns Out To Be Fishing Knot Practice

A 'noose' found last month at the University of Michigan Medical School turns out to have been a practice knot used in fishing after an employee came forward to 'clear the air,' according to MLive