Trump Defenders Should Support N.Y. Times Effort to Unseal Secret Surveillance Documents

Carter PageThe New York Times wants the goverment to do more than #ReleaseTheMemo. It’s asking the federal secret surveillance court to spill much more about the information used to justify snooping on a former campaign adviser to Donald Trump.

Today the Times announced that it is asking the Foreign Intelligence Surveillance Court (FISC) to unseal secret documents submitted to the court by the Justice Department. These are the documents the feds used to explain why they wanted permission to wiretap Carter Page, the adviser whose communications with Russian officials were picked up by the government and subsequently leaked.

The “Nunes Memo,” written by staffers for House Intelligence Committee chief Devin Nunes (R-Calif.) claims that the FBI warrants were not in good faith and that the foundation for the surveillance request was a now-infamous dossier put together and paid for as Democratic Party opposition research. The memo, which was released on Friday, says that the potential biases of the report were concealed from the court in order to get authorization to wiretap onPage.

Democratic leaders claim that the Nunes memo gets the facts wrong and that the court was informed that there were political motivations behind the dossier, though they didn’t specifically mention the Democrats or Hillary Clinton’s campaign. Democratic representatives on the House Intelligence Committee have produced their own memo, and now the White House says it will consider whether to release it too.

Both Nunes (who was part of Trump’s transition team) and the Democrats have reasons to spin the analysis, either to suggest the FBI’s investigation was never legitimate or to downplay whether the FBI omitted information that might have caused the court to reject the application. But if we, as Americans, could see the actual underlying warrant application and intelligence, we wouldn’t simply have to accept the word of politicians. And more importantly, we wouldn’t simply have to accept the word of the FBI, with its troubled history.

President Trump famously feuds with the press, including The New York Times. But if Republicans’ claims are true, they should want this information to be released.

The Times notes that wiretapping application contents have never been made public in the history of the surveillance court. There are regular reports from FISC that may discuss (in heavily redacted fashion) these applications and their contents, but the underlying warrant applications are not released.

Read more from the Times here.

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Turmoil: Dow Devastated, Bond Yields Flash-Crash, Bitcoin Bloodbaths

CNBC Pisani: “This has the feel of a textbook pullback”

Only Nasdaq remains green in 2018…

Some headlines…

  • S&P 500 CLOSES DOWN 113.33 POINTS, OR 4.10 PERCENT, AT 2,648.80
  • DOW JONES CLOSES DOWN 1,176.68 POINTS, OR 4.61 PERCENT, AT 24,344.28   
  • NASDAQ UNOFFICIALLY CLOSES DOWN 271.50 POINTS, OR 3.75 PERCENT, AT 6,969.45

Selling continues after the close…

 

Does that look like a ‘textbook’ pullback?

Someone got a major tap on the shoulder…

This is Jay Powell’s first full ‘official’ day on the job!

Before we get started:

Gold is now outpacing stocks and bonds notably on the year…

 

And the biggest 5-day crash in aggregate bond and stock returns since Aug 2015’s China devaluation and US flash-crash…

 

The 410-day record streak without a 5% correction is over.

 

And late last week saw a Hindenburg Omen strike…

 

Putting last week into context – stocks and bonds losses were outliers…

 

US Equities broke critical technical support levels today.

 

 

The Dow, Small Caps, and Trannies erased all of 2018’s gains today…

 

 

The Dow ripped through its 50DMA but found support at its 100DMA…

 

 

 

VIX exploded today…

 

As Morgan Stanley notes, VIX futures traded 897k total across the curve so far today.   Previous FULL DAY record was 850k  (aug 10 2017). Liquidity in the top of the S&P futures book 50% worse than Friday. Avg available size is 111 contracts since 3PM today on the top of the S&P book.   Friday avg. size was 209 (for the entire day   Beginning  of Jan this was 800.  End of Jan it was 300.

 

 

And for now remains alone at the extremes across asset-classes…

 

 

 

And ironically, having been blamed for the collapse in stocks, bond yields flash-crashed (30Y back below 3.00%) as equities got slammed…

 

 

The entire bond yield complex is down around 6 to 10bps…

 

 

Great News ‘Murica! The Dollar rallied today – all it took was panic liquidity needs…

 

Gold and Silver ended the day positive, copper unchanged after a strong start and crude notably lower…

 

 

Bitcoin was a total bloodbath today – making for one of its biggest crashes ever…

 

But the entire crypto space was utter carnage…NOTE – as stocks collapsed so cryptos saw a bid which bounced ETH back to unchanged on the year…

 

 

And finally, amid a ‘modest’ pullback in stocks, investors have slashed their expectations of the number of rate-hikes in 2018…

From an 80% chance of a 3rd rate hike to a 50% chance in two days. For those hoping for Powell to rescue them.. here’s what he said in 2012!!

 

We started with CNBC so we’ll end with someone who perhaps gets it:

CNBC Santelli: “This is about Central Bank religion gone bad”

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The Dow Is Down. The Dow Is Up. Either Way, It’s Not Because of the President.

President Donald Trump has been bragging pretty hard about how much the stock market is up under his presidency. Today is a good demonstration of why that’s a bad idea. Because, while it’s not quite true that what goes up must come down, markets don’t tend to have four-year or eight-year uninterrupted booms. The Dow was down 1,500 points today. It popped back up a bit, but is still down about 1,000 points at the close of the market. And this probably isn’t the end of the volatility.

The president has a bad habit of taking credit for things outside of his control—low airline fatalities and the incidence of Christmas wishes are among the things he’s claimed just recently—and the stock market falls into that category.

During last week’s State of the Union, the president grabbed big applause for this line: “The stock market has smashed one record after another, gaining $8 trillion in value.”

But with the market down, suddenly it’s: “We’re always concerned when the market loses any value, but we’re also confident in the economy’s fundamentals,” from unnamed spokesmen.

If the afternoon’s rally continue, expect the POTUS to return to crowing. He shouldn’t.

It’s always tempting to see shifts in the market as evidence that our own pre-existing beliefs are being corroborated. But the markets do seem to be reacting to two big pieces of news out of Washington today: New debt figures, fueled by the tax cuts, which are going into effect now without any offsetting cuts in spending. That decision will push the deficit even higher and has pushed up that date at which Congress must once again grapple with the debt ceiling. Add to that concerns that the Federal Reserve will adjust interest rates in reaction to signs that the economy is heating up, including new wage data out Friday, and investors are freaking out a bit.

Presidents don’t control markets. This isn’t to say that markets don’t respond to politics; of course they do. But when you try to take (misplaced) credit for the ups, you have to grapple with the downs, too. And that’s something Trump’s not willing or able to do.

P.S. Black unemployment, which was previously at a low that had the president boasting all over the place, has spiked back up as well. Same deal: the president neither gets all the credit nor all the blame.

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Cryptos Are Suddenly Soaring

Just as the S&P plummeted into the abyss, tumbling to a low of 24,022 or over 1,500 points…

… cryptos found a bid, and after plunging all day in what until this afternoon was one of the worst days for bitcoin and the crypto space in history, cryptos suddenly blasted off and soared at precisely 3pm just as stocks were crashing, in the process undoing much of today’s staggering losses.

 

The move prompted some to ask if the new “great rotation” is out of crashing equities and into post-crash cryptos?

The good news: the 3pm is still here. The bad news, if only for stocks, is that it now appears to target cryptocurrencies.

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Goldman Explains Today’s Crash: Quants Have $190Bn To Puke

Remember when last week JPM’s head quant Marko Kolanovic said there is little risk of the quants puking?

Well, he was wrong.

Here are some critical thoughts from Goldman’s strats team on levels and size of flow from the Passive community which gives an idea as to what has driven the sharp lower in the US over the past hour.

SYSTEMATIC FLOW UPDATE…

*our (GS systematic strategist) work suggest that the 2,735 level in the S&P is where trends could start to change, driving more aggressive selling from the CTA community. We estimate this community to be long approximately $70bn of US equities and $190bn globally coming into today. If negative price action continued or worsened, we think getting flat (i.e. $190bn of global sales) in a month is reasonable
 
The difference between Risk Parity and CTAs:

  1. Risk parity and CTAs (managed futures funds) are not synonymous: Risk parity is a long-only strategy with negatively correlated assets that is sensitive to volatility spikes in the market and positive bond/equity correlation; managed futures funds (CTAs) are long/short strategy funds aimed at capturing trends in the market (in either direction)
  2. The conditions that could lead to forced-model selling impact CTA behavior only such that wide spread selling will generate a downward trend  
  3. Since CTAs look to capture trends in the market, they are likely to apply additional downward pressure on markets if forced-model selling occurs
  4. Additional pressure from CTAs may further exacerbate the sell-off from risk parity funds

 
More details from Goldman’s systematic strategist Paul Leyzerovich below…
 
Our baseline expectations are more firmly in sell mode for CTA trend followers

Coming into today, in a flat mkts scenario, we expect >$40bn (or >2x std dev in our work) of global eq sales from this community for the next 1w and >$80bn for the next 1m

  • This is due to negative short-term trend in many markets, medium-trend changes in a few (particularly Europe and Canada) and some VaR de-risking from the higher volatility

We estimate this community to be long approximately $70bn of US equities and $190bn globally coming into today

  • If negative price action continued or worsened, we think getting flat (i.e. $190bn of global sales) in a month is reasonable
  • Conversely, if price action improved and bounced higher, the 1w sales would be smaller* and overall 1m activity could be net neutral, representing selling earlier and buying later in the month

The points above are encapsulated in the updated chart below

  • Most of the expected sales represented by the baseline (dark) line are driven by non-US, though US smallcap is contributing with the Russell short-term area breached, and S&P is very close to its latest short-term area of 2,747 in our work**      

Based on the starting point and moves so far, we expect CTA trend has been more relevant to flows than risk parity or insurance vol-control, though those communities are long as well (as are others and non-systematic)

* less than $30bn, depending on the size and speed of the bounce; generally still towards net sales of varying size in most 1w market scenarios
** pursuant to trend, the levels adjust with more time and mkt movements  

 

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Trump Attorneys Approve Second Special Counsel To Probe FBI and DOJ

The war between the White House and the FBI/DOJ complex may be turning nuclear.

While speaking to reported aboard Air Force 1, Deputy Press Secretary Raj Shah said that President Trump’s attorneys have already approved the idea of appointing a second special counsel to investigate the FBI and Justice Department’s actions during the 2016 presidential campaign, according to White House pool reports.

Deputy Press Secretary Raj Shah. Photo: Chip Somodevilla 

The excerpt from the pool in question:

*FISA warrant should it be released? and what about a second special counsel?*

**

Presidents attorneys have addressed this and said yes to a second special counsel.

FISA: That document along with any other that the House Intelligence Committee chooses to vote out of its committee through its process and all the House procedures, we would entertain like anything else.

As Axios adds, Shah also said that the White House will approach further memos, including the one created by Democrats, in the same way they handled the memo authored by Devin Nunes:

“Which is to allow for a legal review, national security review led by the White House Counsel’s Office, and then within five days the president will make a decision about declassifying it,” said Shah.

And another highlight from the gaggle summarized by Axios:

Trump’s tweet calling Rep. Adam Schiff a leaker: “We don’t really see any reason why anybody else would leak his information other than partisan political stunts by Adam Schiff and other members of the minority.”

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The Financial Markets Are Spooked by Debt, So Why Aren’t We?: Podcast

Reality bites ||| ReasonAs you slept last night, yields on U.S. Treasury 10-year bond notes hit their highest level (2.885 percent) since January 2014. Coming on the heels of Friday’s 666-point plunge in the Dow Jones Industrial Average, this spike in the cost of federal borrowing has the financial markets all herky-jerky today. “Economists and money managers fear that the increase to the $20 trillion U.S. national debt could carry major blowback to markets,” Yahoo Finance reported. And for good reason: In a bit of news last week that escaped political attention but hit Wall Street like a sack of wet rats, “The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It’s the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.”

So on today’s Reason Podcast, which features Nick Gillespie, Katherine Mangu-Ward, Peter Suderman, and Matt Welch discussing news of the week, we start speculating on how to begin the long political road back to a fiscal sanity both major political parties have recklessly abandoned. What, Gillespie asked, will be the symbolic equivalent for debt realists of feminists burning their bras?

Other topics include (of course) The Memo, the hysteria, the weird FBI-love, right-to-try, deregulation, and how Howard the Duck is holding up after all these years.

Audio production by Ian Keyser.

Relevant links from the show:

Trump’s Critics Worry That He’s Undermining Trust in the FBI, As If That’s a Bad Thing,” by Jacob Sullum

If You Think The Nunes Memo Will ‘Discredit’ FBI and DOJ, You Haven’t Been Paying Attention For the Past 50 Years,” by Nick Gillespie

Right To Try Laws Are a Fine Start. Comprehensive Reform of the FDA’s Drug Trials Would Be Better,” by Ronald Bailey

What About the Debt? Trump’s SOTU Ignores a $20 Trillion Time Bomb,” by Eric Boehm

Why Libertarians Should Want More Trust in Government,” by Nick Gillespie and Todd Krainin

Subscribe, rate, and review the Reason Podcast at iTunes. Listen at SoundCloud below:

Don’t miss a single Reason podcast! (Archive here.)

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The Market Is Crashing: Is the Bogeyman Risk Parity or CTAs?

Submitted by Peter Tchir of Academy Securities

In our family, it was Baba Yaga who was going to “get you” if you weren’t well behaved.  Whether it was the boogeyman, or some other fear that kept you awake at nights, it is time to consider what the next ‘pain trade’ might be.  While the focus has been on Risk Parity or Risk Parity Lite (my personal favorite), what is the next big strategy at risk? Could it be Commodity Trading Advisors (or CTAs)?

 

Salient Risk Parity Index versus Soc Gen CTA Trend Index Since July 2017

These two asset classes were moving somewhat in lock-step for much of the second half of 2017.  They started to separate a little bit in December and accelerated at the start of this year.

Simplest Explanation of the Chart?

The simplest explanation is that both were long stocks but one was long bonds and the other was short bonds (if you are looking for who holds all those short future future position shorts in bonds – probably think CTA). 

Commodity positioning probably had something to do with the performance as well, but I would argue that CTAs are very long equities and very short bonds – and have benefitted from that.

Simplest Explanation CTAs

At the risk of annoying the CTAs on my distribution list, I don’t think we lose too much by simplifying CTAs to

  • Largely systemic, or model driven
  • Largely trend following, or momentum

Which Strategy Is More at Risk of Position Changing?

I think CTAs might be more at risk of having to stop out.  On the Risk Parity side, I am not seeing evidence of outflows, if anything I am hearing some anecdotal evidence that the strategy is more interesting here – instead of your ‘hedge’ paying 2.4% it is paying 2.85% (depending where on the treasury curve you put on the hedges).

CTAs are always at risk of changing position – they are systematic, and momentum driven and by their nature constantly ‘looking’ for reasons to change position or direction (they tend to be remorseless when they do – though remorseless confers human emotions to what would be an algo driven policy).

CTAs are exposed to bonds doing ok and stocks doing poorly (which is my current view of the world). 

With 10-year yields breaking my 2.8% initial target (I still think 3% could be in play) much of the move to higher yields may be over, which would not be good for CTA positioning.

Any classic ‘risk-off’ move would be problematic, and while we haven’t seen a true ‘risk-off’ move, we did see the flight to safety trade directed to the 2-year treasury on Friday.

I for one am leaning towards the real boogeyman being CTAs.

* * *

Where Have All the Vol Sellers Gone?

If anything, while seeing which strategy might be most at risk, I am waiting to see sustained selling pressure on VIX.  Vix has sold off this morning from overnight highs, but I think is far from signaling the all-clear sign, especially after the recent surge in buying.

The real clue to exposing the boogeyman might be seeing what triggers real fear in the volatility markets.  On Friday we saw some signs, but it seems like today, retail is coming back to sell VIX (I will admit that I too am hoping to time a nice short volatility trade in my personal account) although that has since reversed sharply with the VIX surging above 24…

 

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Want to Make an Untraceable Handgun at Home? Cody Wilson Can Help: New at Reason

“Gun control is not dead, gun control is undead,” explains Cody Wilson, the director of Defense Distributed. “We just keep killing it but it keeps coming back.”

Wilson, a crypto-anarchist and serial “troublemaker,” helped launch the age of the digital gun when he published files showing how to make the Liberator, a 3D-printed pistol, in 2013. It set off a panic in the media and in anti-gun political circles, and the State Department demanded Defense Distributed remove the files from their website.

But five years after the Liberator debut, the technological limitations of homemade firearms have started disappearing. The materials are cheaper and better, the machines are more precise, and the software is more advanced. Groups of hobbyist gun printers started gathering in IRC chats and internet forums, and are working together to make their own gun designs. It’s a new reality that hasn’t entirely filtered into public debates over gun control.

Click here for full text, a transcript, and downloadable versions.

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Canada’s Largest Energy Company Is Replacing 400 Truck Drivers With Self-Driving Trucks

Canada’s largest oil company announced last week that it will be cutting about 400 heavy-equipment operator positions over the next six years as they phase in a new fleet of self-driving trucks. Suncor Energy, based in Calgary, Alberta, Canada, announced on Wednesday that it plans to deploy over 150 driver-less trucks, leading to job cuts starting as soon as 2019.

“We have about 500 roles that will get eliminated through this and we’re going to add about 100. So the net change in our workforce is about 400 positions,” COO Mark Little said in an interview Wednesday. Suncor is the first oilsands mining operation to adopt the technology.

At present, Suncor has nine self-driving trucks moving building materials at a job site in Alberta, making it one of the first companies in Canada to use autonomous trucks, according to Reuters.

As CBC reports, the company has been testing the 400-tonne capacity Komatsu trucks for about four years and has nine now. It announced Tuesday it will gradually build a fleet of more than 150 driverless trucks over the next six years, starting with the North Steepbank mine at its Base Camp north of Fort McMurray.

Suncor is testing an autonomous haulage system (AHS), or trucks without real drivers on its Alberta mine site

According to CBC News, each job site will feature its own control center to manage the Komatsu autonomous vehicles, which will be specially programmed for optimum performance in the unique conditions of each job site.

The self-driving trucks can operate 24 hours a day, stopping only for fuel, and their tires even last 40% longer by avoiding the sudden acceleration and abrupt steering caused by human driver error. Because of these statistics, Chief Operating Officer Mark Little believes that the $5 million apiece autonomous vehicles will not only reduce operating costs but increase overall safety at job sites.

To be sure, while the company and shareholders will be delighted by the efficiency improvements, the losers are the company’s employees.

“Often, people hear about how productive these autonomous trucks are,” said Steve Kelly, who is currently a truck driver for Suncor.  “If given the same conditions… that these autonomous units are running in, I’m sure we’d be more productive as well,” he said to CBC Radio.

“It’s two different running conditions… and we’re constantly stressing. Give us [truck drivers] the same conditions and give us some opportunities… We can show how productive our workforce can be.”

Predictably, Suncor’s plan to test the autonomous truck systems was criticized by the Unifor union local because of job losses. But COO Little says Suncor is working with the union to minimize job impacts by retraining workers whose jobs will disappear.

The company has been preparing for the switch by hiring its truck drivers, including those at its just-opened Fort Hills mine, on a temporary basis, he added. Suncor said the earliest there will be a decrease in heavy equipment operator positions at Base Plant operations is 2019.

He said the autonomous trucks are so efficient — because they operate 24 hours a day and stop only for fuel — the company will need fewer trucks in the future than it employs now.

Little added that the company will replace trucks that have reached the end of their useful life with new Komatsu trucks. He said they cost about $5 million each, not including the obstacle detection systems and computer gear needed for autonomy.

Meanwhile, Tokyo-based Komatsu this week celebrated the 10th anniversary of deployment of its first autonomous truck at a Codelco copper mine in Chile, noting that more than 100 trucks now operate at four Rio Tinto Ltd. iron ore mines in Australia, the mine in Chile and at Suncor. Komatsu also said tires on its autonomous trucks last 40 per cent longer because the trucks avoid sudden acceleration and abrupt steering.

Also confirming that the future of industrial trucking is driverless, last week Rio Tinto announced that its autonomous haul trucks had achieved a milestone of moving a total of one billion tonnes of material without being involved in any injury accidents.

In December, the Australian mining giant announced it would expand its fleet of about 80 trucks to 140 by the end of 2019.  Rio Tinto’s trucks are controlled remotely from its operations centre in Perth, about 1,50kms from the mines, but Little said Suncor is initially going to operate the trucks from control rooms at each mine site.

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