Month: February 2017

"It's T-Day" as one trader put it this morning. President Trump will address a joint session of Congress Tuesday night for the first time as president in a much anticipated speech with a lot of hyped-up hope hanging on it.

As The Hill notes, the speech isn’t an official State of the Union – that will come next year – but it’s a chance for Trump to set out his legislative priorities after a tumultuous first month that has at times rattled congressional Republicans.

Here are five things to watch for in Trump’s speech…

Will Trump stay dark or go light?

The president’s first major address to the American people offered a grim view of the country he was elected to lead. At his inauguration, Trump painted a picture of a nation in decline, marked by “American carnage” such as “rusted-out factories scattered like tombstones across the landscape” and marauding criminal gangs plaguing major cities. Stephen Miller, the influential White House aide who wrote that speech, has been tasked with authoring this one, too. But White House officials say the address to Congress will present “an optimistic vision” aimed at how his administration will help Americans of all races, parties and economic status. He will also stress how his early actions, while controversial, have fulfilled campaign promises. Offering a positive message that appeals to people outside his base could help bring together a country that remains deeply divided over a presidential election in which Trump lost the popular vote. It would also break with the style that got Trump elected. And previous “pivots” telegraphed by his team have not panned out. Before the inaugural address, White House press secretary Sean Spicer, then a spokesman for the Trump transition effort, told reporters it would focus on “areas where he can unite the country.”

Will there be specifics?

After spending his first month handing down a flurry of executive orders, Trump looks ready to get down to business with Congress. Trump is not a policy wonk, and the White House says he’ll reaffirm his desire to work on broad goals such as tax reform and repealing and replacing ­ObamaCare .  But Trump will eventually need to take a side in specific policy debates if he wants to get his agenda passed. For example, he’s been grappling with what to do about Medicaid if the Affordable Care Act is repealed. Millions of Americans gained coverage under the healthcare law’s Medicaid expansion. Figuring out if or how to provide coverage to those people if federal funds supporting the expansion are eliminated is a difficult question for the GOP. The White House has largely left the specifics to congressional Republicans. “Nobody knew that healthcare could be so complicated,” Trump said during a meeting Monday with a group of governors.

Will Trump challenge the congressional GOP?

Trump’s relationship with the Republican Congress has been far from perfect, from the rocky rollout of his travel ban to simmering disagreements over tax policy, infrastructure and trade. Lawmakers have publicly and privately complained about Trump’s bombastic style and penchant to go it alone. And members are taking some heat themselves from the right. “Republican party should be sued for fraud,” Matt Drudge, founder of the conservative Drudge Report, tweeted earlier this month. “NO discussion of tax cuts now. Just lots of crazy. Back to basics, guys!” It’s unlikely that Trump will voice those same frustrations with the lawmakers he needs to pass his agenda. But they might not like what the president has to say on some issues. For example, Trump has been reluctant to throw his support behind the border-adjustment tax that’s at the center of Speaker Paul Ryan’s (R-Wis.) tax reform plan. Trump also hinted Monday that he would make a “big” announcement on infrastructure spending during his speech, something that could give heartburn to fiscal conservatives. Separately, GOP defense hawks said Trump’s plan to boost military spending in his 2018 budget didn’t go far enough. Despite those disagreements, GOP leaders emerged from a meeting with Trump Monday afternoon insisting they are on the same page. “We’re looking forward to a positive, upbeat presentation tomorrow night and then proceeding with our agenda, which is exactly the same as the Trump agenda,” Senate Majority Leader Mitch McConnell (R-Ky.) told reporters.

Will Trump break with protocol?

Trump has shown a penchant for shaking up staid Washington traditions, but it’s unclear whether he will veer from the usual format for State of the Union-style speeches. The joint-address format has remained relatively unchanged for years. The president makes a dramatic entrance into the House chamber and then delivers his speech from the Speaker’s rostrum to members of both chambers, Supreme Court justices, military brass and handpicked guests, with tens of millions of people watching live on television. Some past presidents have tinkered around the edges. Former President Obama released the entire text of his 2015 State of the Union on the online publishing platform Medium ahead of its delivery. The White House has not yet indicated what, if any, changes it will make, but it wouldn’t be a surprise if the former reality television star did something different. “The Trump address won’t be boring, because Donald Trump’s not boring,” counselor Kellyanne Conway said last week on Fox News.

How will Democrats react?

Democrats have vocally opposed nearly everything Trump has done in his first weeks as president. And the president has responded in kind by lobbing personal insults at top Senate Democrats. Many are wondering whether that feud will boil over in his Tuesday night address. If it does, it would certainly break with the typically civil tone during presidential joint addresses. Some Democrats are planning quiet forms of protests by filling the gallery with immigrants, ethnic minorities and LGBT individuals. In 2009, Rep. Joe Wilson (R-S.C.) shouted “You lie!” at Obama during an address on healthcare reform, a shocking moment at the time that earned him an official admonishment from the House. Trump has shown no qualms about verbally confronting critics and protesters at his campaign rallies, so such a disruption could cause him to break from his prepared remarks and respond. A typical speech to a joint session includes passages that win standing ovations from both parties, but it seems possible that some Democrats will sit for the entirety of Trump’s speech. “I hope a very robust and applause-filled reception,” Spicer said Monday when asked how Trump hopes he will be received by Democrats.

We suspect it will look a little more like this…

Finally, here are ten specific questions to pay attention to (via Axios)

1. The real state of our Union is unsettled – on edge. Does the president acknowledge that, and do anything to alleviate it?
2. If he tries to break the ice with humor about himself, what trait does he choose?
3. What will Trump say that's tailored directly to lawmakers, to balance the bulk of his speech, which'll be aimed beyond the chamber?
4. Can Trump convince Republicans that there's a clear path to success on his big-ticket agenda items: health care, taxes, infrastructure?
5. Will Democrats have a "You lie!" moment?
6. How will Trump handle it?
7. What will he say about Russia?
8. What will he say about the media?
9. How closely does he stick to the prompter?
10. Does he deliver on aides' promise of a sunny speech?

The bond market is beginning to lose faith, will stocks?

via http://ift.tt/2mB5IJ1 Tyler Durden

Just days after former Uber engineer Susan Fowler alleged in a viral blogpost that that management and HR dismissed her complaints about documented sexual harassment and sexism, protected a repeat offender because he was a “high performer” and suggested that women in the company were not as skilled as men, another female engineer – this time at Tesla – has accused Elon Musk’s car company of ignoring her complaints of “pervasive harassment”, paying her a lower salary than men doing the same work, promoting less qualified men over her and retaliating against her for raising concerns.

The reason why first the Uber, and now the Tesla allegations will likely shake Silicon Valley to the core, is that if confirmed, this bastion of liberal tolerance may end up being yet another hypocritical myth, with corporate prerogatives and the bottom line driving everything.

The allegations of AJ Vandermeyden, who voiced her complaints to the Guardian, and who still works at the celebrated electric car manufacturer, “paint a picture of a hostile work environment dominated by men where inappropriate sexual behavior is tolerated and women face numerous barriers to advance their careers.”

Offering a rare public account of discrimination from a tech worker who remains employed at her company, Vandermeyden said her dedication to Tesla motivated her to advocate for fair treatment and reforms – despite the serious risks she knows she faces for going public.

 

“Until somebody stands up, nothing is going to change,” she said in a recent interview, her first comments about a discrimination lawsuit she filed last year. “I’m an advocate of Tesla. I really do believe they are doing great things. That said, I can’t turn a blind eye if there’s something fundamentally wrong going on.”

 

Vandermeyden began at Tesla in 2013 and was eventually promoted to a manufacturing engineering position in the general assembly department, which consisted mostly of men and where she was paid less than male engineers whose work she directly took over, according to her complaint. It was common for her to be the only woman in meetings with 40 to 50 men, she said on a recent morning, seated in the living room of her family’s house in San Carlos, the city where Tesla was founded, located across the bay from its current factory in Fremont.

Another example: Vandermeyden recounted to the Guardian an incident in 2015 when she said a group of roughly 20 men standing on a platform above her and a female colleague began taunting as they walked past. “They all started hooting and hollering and whistling,” she said. “That can’t happen without somebody noticing … It’s disturbing.”

But her objections about sexual harassment and unequal pay only caused her more trouble, according to her complaint. The lawsuit alleges that after she raised concerns in the fall of 2015, management told her that in order to advance her position, she needed to achieve a performance standard in the factory that was unattainable and not expected of male engineers.

There is much more in the full article, but the jist is clear: while there has been a mounting pressure in the Valley to address allegations latent sexism, so far it has been mostly ignored and instead was projected externally, with the idealistic denizens of the rich enclave focusing on “social evils” far away from the California, ideally slamming Trump. Should more such accusers emerge – and they are virtually assured now that the seal has been broken – Silicon Valley may have no choice but to forget the evils of the outside worlds, look inside, and change what some have said is a very hyporcritical corporate culture.

via http://ift.tt/2mB69U2 Tyler Durden

By EconMatters

We discuss the flaws of Soft Data Economic Reports which basic come down to surveys based largely on psychology, and the fudge factor is off the charts. Investors should just ignore the survey based soft data economic reports. These economic reports are largely backward looking and too much sentiment based on behalf of the respondents in far to small a sample size to be indicative and scientific in regards to forecasting future economic trends in the economy.

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle   

via http://ift.tt/2mHcMmD EconMatters

Let me be clear about this, the trend over the last year in Crude Oil is up as it has created a series of higher lows and higher highs.

In 2015, Crude kissed the underside of falling resistance line (1) for weeks and weeks, not making much progress up or down (very narrow range). While it continued to kiss the underside of resistance, the Crude Oil fear index continued to fall. After weeks of not being able to break above falling resistance  line (1), sellers came in and Crude fell hard, while the fear ratio rallied nearly 50%.

Currently Crude Oil has been kissing the underside of line (1) for weeks and weeks, trading again in a very narrow range, similar to what it did in 2015. At the same time it has been kissing the underside of line (1) for weeks and weeks, the fear index has continued to fall.

The patterns of today (kissing the underside of falling resistance), looks very similar to what took place in 2015. In times like this, one of my favorites quotes comes to mind; “Its not the odds of an event happening that is important, its the impact if it does.”

The odds are low that Crude Oil repeats again. The impact if it does, could be large, as Crude Oil and the broad have been fairly correlated since 2015.

via http://ift.tt/2mH6uUa kimblecharting

After previously announcing plans to withdraw at least $15 billion to fund 2017 budget deficits, the $860 billion Norwegian sovereign wealth fund announced last December that it would change it’s portfolio allocations to try to make up for the withdrawals.  The change would eventually result in 75% of the fund’s capital being allocated to global equities, up from the previous 60% allocation…you know, because equities never go down so more is always better.

Now it seems that, at least for now, that bet has paid off to the tune of about $53 billion or 6.9% of the fund’s AUM.  Meanwhile, the fund’s CEO, Yngve Slyngstad, attributed the gain to the Trump rally saying that “after the presidential election in the U.S., markets priced in higher growth and inflation in the global economy.”  Per Bloomberg:

The $900 billion Government Pension Fund Global returned 6.9 percent in 2016, after rising 2.7 percent the previous year, the Oslo-based investor said on Tuesday. Stocks gained 8.7 percent, bonds rose 4.3 percent, and real estate investment grew 0.8 percent.

 

“The fund returned 6.9 percent after a year of political events and uncertainty,” Chief Executive Officer Yngve Slyngstad said in the statement. “All of the fund’s asset classes generated positive returns, but it was the strong equity return in the second half of the year that drove the fund’s results.”

 

“After the presidential election in the U.S., markets priced in higher growth and inflation in the global economy,” Slyngstad said.

Of course, the gains came after the Norwegian government was forced to withdraw capital over the past two years to fund budget deficits that are expected to reach over 8% of GDP.

The withdrawals accelerated just as the heavily oil-dependent economy of Norway started to absorb the impact of lower oil prices.

In a previous interview with Bloomberg, Egil Matsen, the Deputy Governor at Norway’s Central Bank, said the withdrawals were starting to impact the manner in which the fund manages its risk profile.   

“Relevant for how we think about the risk-bearing capacity of the fund.  Say you have a decline in the equity market, and these returns have been partly funding the government, do you want variations in international financial markets to have a direct impact on fiscal policy?”

But Finance Minister Siv Jensen dismissed criticism of the withdrawals saying that the administration is using the fund as was intended noting that withdrawals remain below the fund’s annual return target of 4%.   

“Now that we are in an extraordinary situation, hit by the biggest oil price shock in 30 years, it would be crazy if we didn’t have an expansionary fiscal policy,” she told Bloomberg. Jensen rejected suggestions that the fund was “vulnerable.” She described it as “rock solid.”

 

The fund’s managers have warned it’s getting harder to live up to a real return target of 4 percent. It has returned 3.44 percent over the past 10 years. For now, planned withdrawals aren’t big enough to force the fund to sell assets. It estimates income from dividends, real estate and bonds will reach 207.5 billion kroner next year, almost double the amount the government plans to withdraw.

But there is no risk in equity investing, right?  In fact, we just found another $40 billion that will be pumped into the global equity bubble promptly.

via http://ift.tt/2mHiAN2 Tyler Durden

In a note by Evercore ISI‘s Terry Haines and Ernie Tedeschi, the analyst duo pours cold water on Trumps’ budget proposal before it has been even formalized and confidently predicts that “Trump budget not happening” adding that the most likely outcome is that “Congress will modestly hike defense and non-defense spending.”

Below is a summary of their thinking:

President Trump’s budget will not be submitted to Congress for a couple of weeks but already the speculation about it has begun with press stories about deep cuts to domestic spending used to fund increases in defense spending. Investors should understand that any president’s budget submission is inherently a political document; that Congress is not bound to follow it; and that this Congress will not follow it. We continue to see the likely result of the federal budget process as a continuation of the modest increases in both defense and nondefense discretionary spending agreed to on a bipartisan basis over the past four years. Any increase in defense spending is likely to be small and matched by similar small increases in nondefense spending.

 

Presidents are bound by law to submit an annual budget request. This is supposed to come in early February but new presidents always are given leeway. The Trump budget will come in a couple of weeks: the current and usual step in the process is to provide draft budget numbers to federal departments and agencies for views and pushback. When the budget is submitted, Congress holds hearings, develops its own budget numbers, and ultimately agrees on a budget by approving a budget resolution. This budget resolution guides Congress in its appropriations process and in the reconciling of changes in law to the budget (in the FY 2018 case, tax reform). Importantly, the president does not sign the budget resolution as it is not a law.

 

Moreover, what we know about the president’s proposal is merely a 30,000 foot target: an increase in defense funding of $54 billion this year (about 10 per cent), entirely offset by an equivalent cut to nondefense discretionary (that is, non-entitlement) funding. From a macro perspective, that means there will be no net stimulus from this defense hike. There is little to no detail about how either the defense hike or the nondefense cuts would be distributed across departments and programs because very likely those decisions have not been finalized yet. Over the next couple weeks, the details will be fleshed out internally at the White House before the budget’s release. Administration officials have pointed to foreign aid and the EPA as the targets of cuts, but neither spends enough money to shoulder the entire burden of the proposal.

And some follow up thoughts on the substance, what little there is, of the proposal:

• The president’s budget is a couple of weeks away from being finalized and submitted; during that time, department heads will have an opportunity to respond internally to the budget ideas and develop specific ideas for meeting the targets.
• The proposed $54 billion increase in defense spending in FY2018 is equivalent to a 10 per cent hike in the cap on defense spending that current applies. This would be only slightly higher on a per-year basis than the defense hikes that resulted from the last two-year budget deals in 2013 and 2015 (the Ryan – Murray-style deals) but not dramatically. Some congressional Republicans such as Sen. McCain (R-AZ) are pushing for even larger increases in defense spending.
• Since the $54 billion is a topline goal, there is no detail yet about how within the DoD the president is proposing distributing the funding (e.g., between procurement, operations & maintenance, etc.)
• The $54 billion surge in FY2018 defense spending is to “budget authority” (funding). This translates to “outlays” (money spent out) on a lag; generally, only about half of an increase in defense funding is actually spent out the first year.
• Because of this lag in actual spending, and because it is offset by countervailing cuts, this proposal would likely have negligible macroeconomic impact.
• The White House has promised not to touch entitlements such as Social Security and Medicare, so the defense hike is being paid for entirely by cuts to nondefense discretionary spending. The $54 billion is equivalent to a 10.5 per cent across-the-board reduction in nondefense discretionary spending, though it is not likely being applied evenly across the board.
• The White House has mentioned two specific targets of cuts: foreign assistance and the EPA. Note that all foreign aid spending, including military aid and including to allies like Israel, only comes to $42.4 billion. EPA’s funding in FY2017 is expected to be about $8.3 billion.

via http://ift.tt/2lSZqVh Tyler Durden

The floats at Karneval parades across southern and western Germany are known for their biting satire. As The Local reports, this year the main target of their derision was only ever going to be one man.

Via TheLocal.de,

One float in Düsseldorf appeared to show Trump raping the Statue of Liberty, while a neighbouring sculpture inverted a controversial recent Spiegel cover by having the Statue of Liberty behead the US President.

In Düsseldorf one of the central floats on Rosenmontag (Rose Monday) showed US President Donald Trump standing next to French presidential hopeful Marine Le Pen, Dutch far-right leader Geert Wilders and Adolf Hitler – all of them sporting carefully coiffed blond manes.

The four populist leaders of past and present held a banner reading “Blond is the new brown”.

The US leader's relationship to the the Green Goddess was also brought up in Cologne, where has was depicted groping the statue while pulling his election rival Hillary Clinton by the hair on his first day at school. Awaiting him as his classroom buddy was Vladimir Putin.

In Mainz, the US president was depicted as an elephant crashing through crockery. The sign on the float read Trumpel-tier, a pun on the word for a two-humped camel Trampeltier. The word (literally: lumbering animal) is also an insult meaning klotz or clumsy person.

Trump was portrayed, along with Vladimir Putin, Recep Tayyip Erdogan and the leaders of Poland and Hungary, as a caterpillar munching away at the leaf of democracy.

But Trump was not alone – the German satirists had something special for UK PM Theresa May…

Pretty clear just what the Germans think of the anti-establishment types.

via http://ift.tt/2m3h9M5 Tyler Durden

For the latest glimpse of the euphoria in the equity market, look no further than the Snap(chat) IPO, whose order book closes at noon today and is expected to price tomorrow, March 1, after the close. While the initial price range was presented as $14-16, according to Bloomberg orders for the public offering are concentrating in the $17-18 range, well above the high end of the range.

Yet while broad interest in the biggest IPO of the past few years is hardly surprising at a time when the S&P is trading at all time highs, what is more notable is that according to Reuters, Snap disclosed yesterday that it expected buyers of up to a quarter of the offered shares in the $3.2 billion initial public offering to agree not to sell them for a year. While Snap cautioned it had no binding commitments yet from investors accepting such a lock-up period, the disclosure is a sign of confidence from the company in what is expected to be the biggest U.S. IPO since Facebook.

In its updated IPO registration document with the U.S. Securities and Exchange Commission on Monday, Snap said it expected approximately 50 million shares of its Class A common stock purchased by investors in the offering to be subject to a separate one-year lock-up agreement. The roughly 50 million shares are designated for new Snap IPO investors who do not currently have a stake in the company, the sources said.

While lock-up periods help companies avoid stock volatility by preventing company insiders from selling within an allotted time, a year-long lock-up period for non-insiders is not only unusual, it is atypically long, potentially signifying strong demand for the IPO. Alternatively, since Snap is requesting it, the company may be worried about selling pressure out of the fate.

Lock-up periods can buoy companies at risk of a stock selloff in the months following their IPO. This risk is particularly strong for companies in the technology sector. Eight of the 10 biggest technology IPOs fell by between 25 percent and 71 percent in their first 12 months on the public market, according to a Reuters analysis of market performance.

Snap is targeting a valuation of between $19.5 billion and $22.3 billion from listing on the New York Stock Exchange on Thursday. While the company was initially looking to price 200 million shares on Wednesday night at a range of $14 to $16 dollars a share, the revised price talk may also lead to more shares being sold, effectively bumping up the valuation in the latest “hot”, if money losing, social network.

via http://ift.tt/2l8adO8 Tyler Durden