Month: February 2018

A Washington judge has set a trial date of Sept. 17 for Paul Manafort, just weeks before the 2018 midterm elections.

On Wednesday, Trump’s former campaign manager Paul Manafort pleaded not guilty to a new indictment brought against him in the investigation into alleged Russian meddling in the 2016 election and will face trial in September.

Manafort’s trial is expected to last for several weeks, and could stretch on through November’s midterm elections – making headlines at a time when Republicans are fighting to maintain their majority in the U.S. House of Representatives and Senate, according to Reuters.

U.S. District Court Judge Amy Berman Jackson also reprimanded the former Trump campaign manager for issuing a statement on former co-worker Richard Gates’ recent guilty plea.

Prosecutors allege that Manafort, with Gates’ assistance, laundered more than $30 million and duped banks into lending money. They say the pair used funds from secret offshore accounts to enjoy a life of luxury.

None of the charges against the pair make reference to alleged Russian interference in the 2016 election nor accusations of collusion between Moscow and Trump’s campaign.

Just last week, Mueller doubled down with new charges against Manafort and his business associate Richard Gates, who also worked on the Trump campaign.

The superseding indictment charged Manafort and Gates on 32 counts related to income from their work in Ukraine and accused them of engaging in a “scheme” to hide money from U.S. authorities.

Gates made a plea deal last week to charges that he lied to investigators and conspired against the United States. The move added to pressure on Manafort to cut a deal himself but he has maintained his innocence. Manafort responded to Gates’s guilty plea, saying he had hoped Gates would have had “the strength” to fight the charges and  that he would maintain his innocence.

As Reuters adds, Manafort is facing two separate indictments – one filed in the federal court in Washington, D.C., and a second in a federal court in Alexandria, Virginia. The Washington one charges him with conspiracy to launder money, conspiracy against the United States, making false statements, and charges in connection with failing to register as a foreign agent for Ukraine.

The Virginia indictment charges him with bank fraud, filing false tax returns and failing to report foreign bank accounts to the U.S. government.

Manafort is expected to appear for a second hearing in the Alexandria court on Friday, where he will also plead not guilty to the charges.

The two separate indictments against him in the District of Columbia and Virginia are seen as unusual. Normally such charges would be consolidated in one court, but Manafort has refused to allow this, which might be a legal tactic meant to make Mueller’s case more difficult.

The two parallel cases could complicate matters for both sides, since each indictment to a large extent relies on the same underlying evidence. Judge Jackson on Wednesday fretted about this, saying dueling cases could lead to a “duplicative” amount of work, particularly for the defense, and potentially “inconsistent rulings” by the two judges.

* * *

If found guilty, Manafort will face a lengthy prison sentence, however he has so far refused to join Gates in changing his plea, and becoming a cooperating witness in the Mueller probe.

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As we previously detailed, in a press release issued late Saturday night, the lawless sanctuary Mayor Schaaf tipped off illegal aliens in the region, that ICE is preparing to conduct extensive operations across the Bay Area.

Since she did this, she and her family have received death threats from disgruntled Oaklandians who feel increasingly unsafe but, as The Daily Caller’s Saagar Enjeti reports, the harhest criticism yet has come from Acting ICE Director Thomas Homan:

“What she did is no better than a gang lookout yelling police when a police cruiser comes to the neighborhood except she did it to entire community of the this is beyond the pale,” Homan declared in a Fox News interview.

“This is a whole new low to intentionally warn criminals that law enforcement is coming. I can’t believe it happened.”

“She intentionally put law enforcement officers at risk. Being a law enforcement officer is dangerous enough. But to give criminals a head’s up we’re coming next 24 hours, increases the risk.”

He continued that “there are 800 we were unable to locate because of that warning. That community is a lot less safe than it would have been.”

Schaaf warned Bay Area residents Sunday night that she had been tipped off to a forthcoming immigration enforcement raid targeting illegal immigrants who have committed crimes.

The mayor is unapologetic telling the Washington Post Tuesday “I think it’s my responsibility as a person in power and privilege to share the information I have access to, to make sure people know what their rights are.”

via Zero Hedge http://ift.tt/2EZ2yMn Tyler Durden

When it comes to his recent forecasting track record, BofA’s Michael Hartnett is – as of this moment – a force to be reckoned with. Exactly one month ago, the bank’s Chief Investment Strategist warned clients that the bank’s “Biggest sell signal in 5 years was just triggered” and warned of a correction as much as 12% in the coming 3 months. Just a few days later, he was proven right as the S&P tumbled 10% the very next week.

Fast forward to today, one day the Jerome Powell “hawk shock” which resulted in yet another broad market plunge, when in a note titled aptly “Throwing in the Powell”…

… Hartnett takes us back in time 2 years, and writes that the 2nd day of Yellen’s Humphrey-Hawkins testimony on Feb 11th 2016 marked the last great “entry point” into the credit & equity bull market.

At the time the meltdown in China/EM/oil/HY induced extremely bearish Positioning (the BofAML Bull & Bear Indicator was 0), tumbling global Profit estimates (-7% YoY), and a big Policy stimulus (Chinese/ECB credit easing)…all of which swiftly followed Yellen’s defense of the Fed’s decision not to resort to a Negative Interest Rate Policy in the winter of 2016.

And what an entry point it was: little more than two years later on the 1st day of incoming Fed Chair Powell’s testimony, global stock markets are up 58% (a remarkable $30 trillion in market cap), CCC-rated US high yield bonds 69%, bank stocks 68%, Emerging Market equities 81%, tech stocks 92%, oil prices 139%. Only two asset classes have been in bear markets since Feb’2016: the US dollar (-8%), and volatility (both the MOVE & VIX indices recently hit 50-year lows).

* * *

However, this time around “Positioning, Profits, & Policy drivers are now the mirror image of Feb’16.” Specifically, according to the BofA CIO, the Fed is signaling the “Powell put” has a much lower strike price, “and as the Fed accelerates and leads the end of the global QE era, the bullish consensus is likely to capitulate to a more defensive posture through 2018.”

So what should traders worry about as the market starts digging to uncover what the Fed’s new – and reduced – Powell Put is?

Well, according to Hartnett, 2018 year-to-date global asset returns have thus far been more prosaic: stocks 3.3%, bonds 0.4%, US dollar -2.5%.

In the absence of a stock market bubble (which remains a big risk given a dormant $10tn of negatively-yielding debt that can be reallocated to equities), muted and more volatile returns seem likely this year.

Still, for now at least the general direction of risk assets remains higher. But for how much longer? The answer for traders – according to Hartnett – lies in the magic number which is…. 3

Between bullish Positioning, peaking Profits (in the absence of Productivity gains), & Policy tightening, the likely cocktail in coming months of:

• real GDP forecasts >3%,
• wage inflation >3%,
• 10-year Treasury yields >3%,
• and the S&P500 >3000

… will mark a big top in equity & credit prices, the BofA CIO predicts.

* * *

Here’s how this endgame to the biggest asset bubble in history will play out according to Hartnett in terms of Positioning, Profits and Policy.

On Positioning

• Positioning is extremely bullish: the BofAML Bull & Bear Indicator is 8.1, in stark contrast to the “0” level of early-2016 (Chart 2).
• The Icarus trade of 2017 has fueled “greed”: BofAML GWIM private client equity allocations are close to all-time highs (61.3%), global equity funds saw $103bn of inflows in Jan, and tech, financials, Emerging Markets & Japan funds have all seen record inflows in recent months.
• And market structure concerns continue to grow: short equity volatility AUM ($66bn) + volatility-based & risk parity equity leverage ($200bn) + CTA AUM ($250bn) + risk premium/factor allocation ($300bn; link) = $816bn of “market structure” that could make the recent VIX ETF/ETN implosion a dress rehearsal for a major market correction if volatility becomes contagious next time (our equity derivatives team estimates that in the Feb’18 correction, quant funds had to unwind $200bn in 2 days).

On Policy

• The central bank “liquidity supernova”, the primary driver of credit & equity prices in the past 9 years, will peak in 2018; central bank purchases of $4tn in the past 2 years will shrink to $0.4tn in 2018; assets such as tech stocks & high yield bonds, which have been the biggest winners under QE.
  
• “Don’t Fear the Fed” has been central to the BTD (Buy-The-Dip), FOMO (Fear-Of-Missing-Out) & TINA (There Is No Alternative to stocks) trades of recent years; yet Powell signaled in his Humphrey-Hawkins testimony that US “headwinds” have turned into “tailwinds”. The Fed is signaling the “Powell put” has a much lower strike price and as the Fed accelerates and leads the end of the global QE era, the bullish consensus is likely to capitulate to a more defensive posture through 2018.
• And note the central bank establishment (see Borio’s recent Bank for International Settlements link) has started to make the case that low policy rates have created “zombie companies” (estimated to now represent more than 10% of all OECD nonfinancial firms), leading to a misallocation of resources and low productivity…i.e. the “central bank of central banks” is making a positive case for a regime shift to higher rates

On Profits

• Profits remain the last visible bull catalyst, and thus the biggest risk to consensus in 2018 is weaker growth & lower interest rates (few predict Treasury yields below 2.5% and S&P500 below 2500 by end-year).
• We believe EPS growth is very close to a peak. A reversion to the mean in US manufacturing business confidence (i.e. ISM back to 54), payrolls (NFP back to 150K), and Asian exports (proxy for global trade) implies US EPS growth falling from 20% YoY% to 8% through 2018 (Chart 3). And Asian exports are now weakening: growth peaked last September at 21%, while the Feb China export PMI was below 50 for 2nd consecutive month signaling China exports stalling and weaker CNY once again ahead of us.

The gloom and doom from Hartnett continues as the strategist then warns that “the magnitude and duration of the bull market makes stocks more vulnerable to the peaking 3Ps in 2018”:

• S&P500 bull market became 2nd largest of all time on Friday Jan 26th (@ 2873).
• S&P500 bull market will become longest ever on August 22nd, 2018.
• Should equities outperform bonds for a 7th consecutive year in 2018 it would be the longest winning streak since 1928 (equities most certainly underperformed in 1929).

Put differently, BofA can see only two catalysts to make this the greatest bull market of all time (3498 on the S&P500):

• An unanticipated surge in productivity growth.
• A speculative bubble from a Great Rotation out of negatively yielding debt into stock markets.

* * *

So what should traders watch to decide when it’s time to bail? Well, if three is the magic number for the market, the decision when to get out of it depends – appropriately – on three letters: ABC. Here’s why”

Volatility set to increase in coming weeks with macro, policy & political events: US ISM March 1st, Italy elections/German coalition vote 4th, ECB 8th, BoJ & US non-farm payroll 9th, Pennsylvania special congressional election 13th, FOMC 21st. Key to watch: “ABC”: Average Hourly Earnings, Bond Sensitives & Chips (the
semiconductors)…

• A for Average Hourly Earnings: further wage growth acceleration is negative for bonds & equities, deceleration is positive for bonds & equities; in Feb payroll data AHE>0.3% is thus negative, AHE<0.3% would be positive.
• B is for Bond Sensitives: assets hyper-sensitive to interest rates such as utilities (UTIL), REITs (BBREIT), homebuilders (XHB), preferred shares (PFF) need to rally to confirm “bond shock” is over; in addition corporate bond spreads remain the “glue” that holds the bull market together…fresh weakness would be negative for all risk assets (watch European High Yield bonds, HE00, where yields have backed up 75bps since Oct 30th).
• C is for “Chips” aka the semiconductors; if semiconductor (SMH) & tech stocks (XLK) cannot make new highs in the next week or two, particularly at a time of soaring consumer confidence, then market highs could be seen in for the next couple of months.

Finally, here is Hartnett’s pair trade as we enter a period of extreme volatility: “Our favorite 2018 long remains volatility, our favorite short is credit, and the last move up in stocks should be led by a tech-banks barbell.“

via Zero Hedge http://ift.tt/2t6RV4C Tyler Durden

S&P 500 is testing back to its 50DMA as WTI prices and breakevens plunge to the lows of the day…

As Breakevens plunge in an ugly echo of early Feb’s chaos…

And WTI/RBOB prices are plunging…

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In the latest chilling report about the Parkland, Fla. high school shooting that claimed the lives of 17 people (14 of them teenage students), CNN reports that shooter Nikolas Cruz had at least 150 rounds of ammunition left in his AR-15 when he stopped shooting and fled Marjory Stoneman Douglas High School. His gun had reportedly jammed, forcing him to end the assault.

If the gun hadn’t jammed, the death toll could’ve been much, much higher, CBS said.

Cruz had also reportedly etched swastikas into the sides of the magazines that contained the left over ammunition.

It’s still not clear why Cruz stopped firing when he did (though we imagine it’s possible that the firearm jammed). The news follows reports that Cruz attempted to shatter a hurricane window on the third floor in the school’s teacher’s lounge during the shooting. Had he been able to penetrate the window, it’s probable that he could’ve killed many more people, who likely wouldn’t have been able to ascertain where the bullets were coming from. Police have speculated that he might’ve used this stairwell vantage point to kill first responders who arrived on scene.

Meanwhile, CNN also disclosed that one of Cruz’s former neighbors, a woman named Joelle Guarino, said she tried to warn authorities about Cruz seven years ago, and that he began displaying troubling behavior as early as age 12.

The shooting has sparked a national debate over the role of military-style semi-automatic weapons and whether more restrictions should be placed on their availability.

Earlier today, Dick’s Sporting Goods announced that it was “going to take a stand” and announced it would permanently ban sales of AR-15s and other assault-style rifles from its stores – a move that could benefit rivals like Cabela’s.

Cruz exhibited many warning signs that were reported to both local, state and federal authorities, but in each instance, were promptly ignored.

The Florida Department of Children and Families investigated Cruz in 2016, and police records show deputies were called to his home more than three dozen times over a seven-year period.

Cruz had begun refusing mental health treatment about a year before the shooting. Jordan Jereb, the leader of white nationalist group Republic of Florida, had initially claimed Cruz was a member of his group but later walked back the claim and local law enforcement said there was no proof that Cruz and Jereb ever met.

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WTI was higher and RBOB lower after last night’s API (even as the USD rises) but both tumbled after bigger than expected crude and gasoline builds (and a new record high for US crude production).

Bloomberg Intelligence Senior Energy Analyst Vince Piazza explained that the crude market is in a holding pattern with oil vacillating around $60 a barrel as E&Ps continue to imply higher output this year. U.S. production is poised to grow about 13% to 10.6 million barrels. Distillate demand remains robust, while summer driving season will be the next catalyst for gasoline use. Rising petroleum exports limit inventory bloat. Inventories are just 2% above the five-year norm.

API

• Crude +933k (+3mm exp)

• Cushing -1.277mm (-1.2mm exp)

• Gasoline +1.914mm

• Distillates -1.473mm

DOE

• Crude +3.02mm (+3mm exp)

• Cushing  (-1.2mm exp)

• Gasoline +2.48mm (+600k exp)

• Distillates  (-950k exp)

This is the 10th weekly drop in Cushing stocks in a row and 4th crude build in the last 5 weeks (seemingly signaling last week’s draw as an outlier)…

Total US oil inventory is now its highest since 2017…

Gasoline exports dropped by nearly half last week to 536,000 barrels a day. Looks like the fog-related closures on the Houston Ship Channel could’ve had more of an impact than expected. Exports fell to the lowest level since early October.

Once again all eyes were on US crude production (which dropped by a miniscule amount last week due to Alaska, while Lower 48 rose), and total US crude production rose to a new record this week…

WTI prices had recovered their API loss but once the DOE data hit, both WTI/RBOB tumbled…

Total crude and product stocks grew 3.73 million barrels, and the main products — crude, gasoline, distillate — are 23 million barrels above the December low. The question is, as Bloomberg’s David Marino asks, is this the start of a seasonal increase, or just a pause in a longer-term decline?

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Former Clinton campaign manager John Podesta raised some eyebrows in a Tuesday tweet directed at Presidential son-in-law Jared Kushner, who reportedly just lost his access to top secret information amid accusations that “officials in at least four countries” had discussed ways to manipulate the 37-year-old real estate magnate. 

“Jared better start wearing his kevlar on his back,” Podesta tweeted after suggesting that Kushner’s troubles had just begun – referencing a widely mocked picture taken Iraq of Jared awkwardly wearing a bulletproof vest over a blazer. 

Seems like those “unnamed sources peddling second-hand hearsay with rank speculation that continue to leak inaccurate information,” came straight from 1600 Penn. Jared better start wearing his kevlar on his back. https://t.co/Aps6BEkJDd

— John Podesta (@johnpodesta) February 27, 2018

Wearing a blazer in Iraq is the most Jared Kushner thing Jared Kushner has ever done. pic.twitter.com/0QXE1OXmk6

— David Q (@DavidQ09) April 6, 2017

As we reported yesterday, all White House aides working on the highest-level interim security clearance were informed on Friday that they will have their clearance downgraded from “Top Secret/SCI-level” to “secret” – walling them off from the most sensitive information – including Kushner. 

Many had expected that Trump would grant Kushner a waiver, even though Trump himself said Friday that he would let Chief of Staff John Kelly decide if such an exception should be granted. In a statement issued last week, Kelly said that any changes to Kushner’s security clearance wouldn’t impact his ability to do his job:

“As I told Jared days ago, I have full confidence in his ability to continue performing his duties in his foreign policy portfolio including overseeing our Israeli-Palestinian peace effort and serving as an integral part of our relationship with Mexico,” Kelly said in the statement.

Meanwhile, hours after Politico dropped the news about Kushner’s security downgrade, the Washington Post – where John Podesta now hangs his hat, reported that officials from at least four countries – China, Israel, Mexico and the United Arab Emirates have explored ways to manipulate Kushner by taking advantage of his “complex business arrangements, financial difficulties and lack of foreign policy experience.” The story cited current and former US intelligence officials – and noted that it is unclear on whether the cited countries took any action. 

White House officials, including National Security Advisor HR McMaster were reportedly uncomfortable about some of Kushner’s contacts, and eventually worked out a system where any contacts he had with foreign officials were to be carefully monitored.

Officials in the White House were concerned that Kushner was “naive and being tricked” in conversations with foreign officials, some of whom said they wanted to deal only with Kushner directly and not more experienced personnel, said one former White House official.

Kushner has an unusually complex set of business arrangements and foreign entanglements for a senior White House aide, experts have said. But his behavior while in office has only drawn more scrutiny and raised concerns that he would be unable to obtain a final security clearance, which he needs to perform the many jobs Trump has entrusted to him, from negotiating foreign trade deals to overseeing a Middle East peace process. –WaPo

Kushner’s family business, the Kushner Companies, was famously having money troubles tied to 666 Fifth Avenue, “the most expensive building ever purchased”, in New York City at least. Though earlier today the Wall Street Journal reported that the family business was planning to buy out Vornado Realty’s stake in the building.

Of course – as we also noted yesterday – a key piece of context is buried more than a dozen paragraphs deep: The notion that foreign governments routinely discuss how they can influence senior administration officials – not just Kushner.

Foreign governments routinely discuss ways they can influence senior officials in all administrations.

“Every country will seek to find their point of leverage,” said one person familiar with intelligence intercepts of foreign officials discussing Kushner.

But Kushner came to his position with an unusually complex set of business holdings and a family company facing significant debt issues.

In light of what appears to be yet another nothingburger – perhaps Podesta’s tweet about Jared wearing kevlar was nothing more than hyperbole – unless of course he meant it literally.

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After New- and Existing-Home-Sales have already disappointed, Pending Home-Sales just collapsed too (to the lowest since Oct 2014) to confirm January was a bloodbath for the real estate market.

Pending Home Sales plunged 4.7% in January (massively below the 0.5% expected rise in sales) – this is the biggest drop since May 2010.

Year-over-year Pending home sales are down 1.7%.

Purchases fell 9 percent in the Northeast, 6.6 percent in the Midwest, 3.9 percent in the South and 1.2 percent in the West.

NAR is desperate to convince home-buyers and sellers that this is nothing but an inventory issue, but it is affordability that is the real driver here.

“There’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates,”Lawrence Yun, NAR’s chief economist, said in a statement.

“With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment.”

So, will higher rates break housing market momentum?

The following chart suggest ‘yes’ – that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses…

And Homebuilder stocks are starting to look a lot less invincible…

As Bloomberg notes, economists consider pending sales a leading indicator because they track contract signings; purchases of existing homes are tabulated when a deal closes, typically a month or two later.

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After a months-long detente between President Trump and his attorney general, former Alabama Senator Jeff Sessions, it appears tensions between the two men are flaring up once again.

Trump supplied one of his harshest rebukes of Sessions in a mid-morning tweet, castigating him for asking the Inspector General – an “Obama guy”, according to Trump – to “investigate potentially massive FISA abuse”.

Trump said the investigation will “take forever, has no prosecutorial power and already late with reports on Comey etc. Isn’t the IG an Obama guy? Why not use Justice Department lawyers? DISGRACEFUL!”

Why is A.G. Jeff Sessions asking the Inspector General to investigate potentially massive FISA abuse. Will take forever, has no prosecutorial power and already late with reports on Comey etc. Isn’t the I.G. an Obama guy? Why not use Justice Department lawyers? DISGRACEFUL!

— Donald J. Trump (@realDonaldTrump) February 28, 2018

Sessions announced yesterday afternoon that the DOJ would investigate potential abuses of FISA. At time, it wasn’t clear whether Sessions had signed off on a formal investigation, but he did say that the DOJ’s inspector general would take it up, per the Hill.

Sessions similarly said on Fox News on Sunday that his department would look into the process for obtaining warrants under FISA.

Sessions reportedly offered to resign last Spring amid criticism from the president over Sessions’ decision to recuse himself from overseeing Special Counsel Robert Mueller’s Russia probe. Sessions was famously the first Republican senator to embrace Trump’s then-long-shot campaign.

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