Month: August 2018

Trump Lashes Out At “Nasty” Omerosa After New Recording Released

Omarosa Manigault-Newman on Monday released another secretly recorded conversation, this time with President Trump following her firing from the White House by John Kelly. 

In the new tape, President Trump says he didn’t know that the former Apprentice contestant and White House aide had been fired, and suggested he was disappointed. 

“Omarosa, what’s going on?” Trump asks on the short clip which aired for the first time Monday on NBC’s Today show. 

“I just saw on the news that you’re thinking about leaving. What happened?” Trump asks. 

“General Kelly came to me and said that you guys wanted me to leave,” Manigault-Newman replied. 

“No,” Trump said. “Nobody even told me about it. You know, they run a big operation but I didn’t know it. I didn’t know that. Damnit.” 

I don’t love you leaving at all,” Trump added. 

Following the release of the recording – Mannigault-Newman’s second, President Trump tweeted: “Wacky Omarosa, who got fired 3 times on the Apprentice, now got fired for the last time. She never made it, never will. She begged me for a job, tears in her eyes, I said Ok,” adding “People in the White House hated her. She was vicious, but not smart.”

“Nasty to people & would constantly miss meetings & work. When Gen. Kelly came on board he told me she was a loser & nothing but problems. I told him to try working it out, if possible, because she only said GREAT things about me – until she got fired!”

On Sunday, Omarosa appeared on NBC’s Meet the Press with Chuck Todd on Sunday while peddling her new book, Unhinged, where she released a secret recording of White House Chief of Staff John Kelly firing her, citing “integrity issues.” 

Manigault-Newman was abruptly canned from the White House in December, with the Wall Street Journal reporting that she had to be “physically dragged and escorted off the campus.” 

“I think it’s important to understand that if we make this a friendly departure, we can all be, you know you can look at your time here in the White House as a year of service to the nation,” Kelly says on the recording. “And then you can go on without any type of difficulty in the future, relative to your reputation.”

Omarosa says this was a threat, and she “had to protect myself and I had no regret about it,” she told Todd. 

“The very idea a staff member would sneak a recording device into the White House Situation Room, shows a blatant disregard for our national security – and then to brag about it on national television further proves the lack of character and integrity of this disgruntled former White House employee,” said White House press secretary Sarah Sanders in an emailed statement on Sunday.

Manigault-Newman may also have some legal issues to contend with, as she recorded Kelly in the situation room, which is a SCIF (Sensitive Compartmented Information Facility), a room in which all personnel are supposed to surrender all recording, photographic and other electronic media devices. 

The most famous SCIF is probably the White House situation room, where presidents have deliberated the country’s most important military and foreign policy decisions. –NBC News

Former White House press secretary Sean Spicer called Manigault-Newman’s taping “a massive violation of every security protocol.” 

Omarosa was caught in a lie about whether she heard President Trump use the N-word – claiming in her new book that someone told her pollster Frank Luntz heard Trump say it, which Luntz denied. 

She then told NPR that she personally heard Trump use the word, saying “Hearing it changed everything for me.” 

Speaking with a crowd on Saturday, President Trump called Manigault-Newman a “lowlife” when asked if he felt betrayed by the former aide. White House staff, meanwhile, have slammed Omarosa as a “disgruntled former White House employee” trying to “profit off these false attacks.” 

Despite Omarosa discrediting herself, the latest tape begs the question; what else was she recording, was it sensitive information, and did any foreign actors obtain access to it?

 

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Turkey Bans Stock Short-Selling To “Protect Against Market Abuse”

If at first you don’t succeed (with central bank intervention), blame speculators and ban short-selling of stocks…

Turkey is following the global central planning textbook. Having tried to stabilize the lira, blamed Trump (and the rest of the world for its economic crisis), Turkish authorities have just extended the newly-implemented ‘uptick rule’ to the broad BIST-100 index of companies.

As Bloomberg reports, the uptick rule initiated in May, which was applied on short selling of shares except BIST-100 shares and investment fund participation certificates, will also be applied on short selling of BIST-100 shares starting Aug. 14, Borsa Istanbul says.

From 14/08/2018, all sales in the BIST 100 Index, including all open sellable shares, can be carried out at a higher price than the most recent transaction price of the capital market instrument subject to open sales. However, if the most recent price of the capital market vehicle which is subject to sale is higher than the previous price, the sale can be made at the latest price level.

Borsa Istanbul says it will take all measures “against market abuse.”

Borsa İstanbul A.Ş. we will make every effort to ensure that our markets operate in an effective, reliable and transparent environment and that we will take all necessary measures against market interventions on time and with determination, and will carry out the necessary examination and audit activities within the scope of the legislation.

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Too Much ‘Cybersecurity’ Is the Real Menace to the Internet: Reason Roundup

Too many cybercooks. The federal government can’t stop creating new task forces to tackle the same problems. Right now, the hot issue is “cybersecurity” and social-media control. “Federal agencies have launched several offices and programs since the 2016 election that are intended to secure cyberspace, but some are warning that this is only creating more confusion among the private sector,” reports the Washington Examiner. The result has been “a dozen independent cybersecurity operations with overlapping agendas” and “only sporadic information-sharing between agencies.”

Last week, the Department of Homeland Security announced a new National Risk Management Center initiative. This comes in addition to the Justice Department’s recently launched Cyber-Digital Task Force, the Commerce Department Cybersecurity Office, the Department of Health and Human Services Cybersecurity Collaboration and Education Center, the Director of National Intelligence’s Cyber Threat Framework, and the FBI’s Foreign Influence Task Force, National Crime Information Center, Internet Crimes Against Children Task Force, and National Cyber Investigative Joint Task Force, among others.

April Doss, chair of the cybersecurity and privacy practice at the law firm Saul Ewing Arnstein and Lehr, told the paper it’s overwhelming for anyone trying to actually keep up with and report threats. “I think there is a need for somebody whose job it is to look across the government,” said Doss. “We don’t seem to have that position existing anywhere in the administration.”

But while no one is watching the watchers, folks in Congress want to give just about everyone more power (and mandates) to watch us. Two weeks ago, a leaked draft paper from Warner’s office showed Warner—vice chair of the Senate Intelligence Committee—was at least mulling over a massive range of incredibly invasive tech regulations.

The paper described these plans as a response to Russian propaganda campaigns, online harassment, and the overall entrenched and secretive nature of Facebook, Google, and other major technology companies. But as Andy Kessler notes in the The Wall Street Journal, “most of his proposals would end up locking the big guys in place while freezing innovation.” Surely, folks could see the danger? Nope:

The shallow-analysis pundit class jubilated. Mr. Warner and Democrats could “crack down on Big Tech,” “tame social media,” and “knock Silicon Valley into shape.” Woo-hoo. The cheerleaders’ only complaint is the lack of a 21st proposal: breaking up the tech giants. Still, Mr. Warner wants to show that techland has gotten too big for its breeches and that the center of power radiates from the Hill—not the Valley. But he forgets that there’s one market to rule them all. […] If even a handful of these proposals become law, faceless bureaucrats would control the internet instead of energetic entrepreneurs. No one would win under this new internet. And compliance costs would be so massive that no new startups would emerge.

Kessler takes particular issue with Warner’s suggestion of (further) meddling with Section 230 of the Communications Decency Act and his reverence for the European Union’s disastrous General Data Protection Regulation.

An American GDPR would turn the U.S. into Europe, making America’s technology industry french toast. But that’s one of Mr. Warner’s goals.

Consider the sop to lawyers. One of the magical characteristics of the online world is that anyone can post anything. Section 230 of the Communications Decency Act provides immunity to the Facebooks, Googles and Twitter s of the world with one simple sentence: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” This allows platforms to host almost anything, as well as block content based on community standards, without being sued.

Mr. Warner proposes to change all that and “make platforms liable for state-law torts.” Specifically, “a revision to Section 230 could provide the ability for users who have successfully proved that sharing of particular content by another user constitutes a dignitary tort.” I can imagine campaign contribution manna and

Mr. Warner proposes to change all that and “make platforms liable for state-law torts.” Specifically, “a revision to Section 230 could provide the ability for users who have successfully proved that sharing of particular content by another user constitutes a dignitary tort.” I can imagine campaign contribution manna and long lines to file class-action suits in the plaintiff paradise known as the Eastern District of Texas. But no one would ever create an online platform again.

Of course, maybe the internet is about to wash into the sea in 15 years anyway. But until then, we’ve got a lot of things to sort out, and it would help if we could keep a little perspective.

Pushing back on Adrienne LaFrance’s recent condemnation of Twitter, journalism professor Jeff Jarvis writes: “We are often doomed to see the future as the analog of the past. Journalists see screens that contain familiar text and images, and that serve what used to be their ads—and they call that media. Such a mediacentric and egocentric worldview brings too many presumptions and misses too many opportunities.”

“To call these platforms publishers,” as LaFrance did, “is to presume that their task is merely to produce content,” suggests Jarvis.

It is to presume, then, that the internet should be produced, packaged, and polished, and that when someone says something bad anywhere on it then the entire internet is beschmutzed. In Europe, it also means that the internet should be regulated, and in a growing list of authoritarian nations—China, Russia, Iran, Turkey—it means that the internet and the public’s speech on it should be controlled.

The larger question, of course, is what the internet is and how it fits into society and society into it. We are just beginning to see what it can be. The essential value of the internet is conversation, not content. The larger question, of course, is what the internet is and how it fits into society and society into it. We are just beginning to see what it can be. The essential value of the internet is conversation, not content. The internet connects more than 3 billion people and enables a grand diversity among them to speak, if not yet to be heard. “Republics,” said the late Columbia University professor James Carey, “require conversation, often cacophonous conversation, for they should be noisy places.” That sound you hear, which sometimes grates, is the racket of society negotiating its norms and standards, its future. It is the messy sound of democracy.

Jarvis does not think the mass banning of Infowars from the platforms was a bad thing—quite the opposite. “The banning of Infowars from most major platforms is a sign of that process beginning to work,” he writes. But he also warns that “it is prudent that we ban what we see rather than everything we might fear…. [W]e need to understand the problem we are trying to address: not technology, but human behavior using technology, the bad acts of some small—yes, small—number of propagandists, trolls, misogynists, bigots, thieves, and jerks.”

FREE MINDS

Kavanaugh doc dump presages September hearings. Over the weekend, the Senate Judiciary Committee “released more than 87,000 records from Brett Kavanaugh’s tenure in the George W. Bush White House,” notes USA Today.

To date, more than 103,000 pages of materials from the Supreme Court nominee’s past work have been made public. They are part of a record million-plus pages of legal opinions and emails from his career as a federal judge, White House lawyer and assistant to the prosecutor who investigated President Bill Clinton.

The Kavanaugh confirmation hearings are now scheduled to start September 4.

FREE MARKETS

Island territory could become first legislative OK for legal weed. The Commonwealth of the Northern Mariana Islands (CNMI), a U.S. territory of about 54,000 people, is preparing to legalize recreational marijuana. “In May, CNMI’s Senate voted in favor…of drafted legislation that would end the prohibition of cannabis and allow adults over age of 21 to grow, possess, and use marijuana,” as well as for stores to sell it, reports the Motley Fool.

What makes this legalization even more unique is that it’s being done entirely through the legislative process. In other words, residents of the CNMI aren’t voting on whether they want recreational weed to be legal—it’s being done entirely by lawmakers in the House and Senate. If you recall, Vermont became the first U.S. state to OK the use of recreational pot in January through the legislative process. The previous eight states to green light adult-use weed had their measures approved by voters via state ballot. However, Vermont doesn’t allow the retail sale of marijuana. That means the CNMI’s legislative approval of recreational marijuana would represent the first of any U.S. state or territory to allow the retail sale of adult-use cannabis.

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V.S. Naipaul: ‘Terrorists Can Fly a Plane, But What They Can’t Do Is Build a Plane’

V.S. Naipaul, winner of the 2001 Nobel Prize for Literature, has died at the age of 85. He was born and raised in Trinidad and set many of his early novels there. South Asian Indian by ethnicity and a longtime resident of England, his novels and non-fiction works engage colonialism and typically level biting criticism at both the lordly and liberated classes. Raised as a Hindu who was a non-believer in his adult life, he was an early and vociferous critic of radical Islam.

His 1981 book, Among the Believers: An Islamic Journey, was controversial for its argument that radical Islam was merely the latest iteration of demonstrably failed revolutionary Third-World ideology and a potential source of global violence. Reason‘s reviewer, Paul Hornak, found Naipaul’s book

a relentlessly pro-Western account of the delusion prevalent in four countries of the East: Pakistan, Malaysia, Indonesia, and Khomeini’s Iran. Iran, despite its monumental failures, is taken as a guiding light by the other three. The author, V.S. Naipaul, talks to an eccentric selection of Muslims. A few of them sound like they’ve got a mean streak, but the “hanging judge,” Khalkhali, comes across as genuinely dangerous. He boasts that he killed the Shah’s prime minister. Another Iranian, a communist, calls Khomeini a petty bourgeois….

Naipaul concludes that the impoverished are swelling the ranks of Islam because it validates their preconceptions. They like its message—basically, that poor is beautiful. They like its authority. It organizes the affairs of a believer down to the level of small matters of personal hygiene. It is tough on infidels, who coincidentally are the believers’ enemies in the secular realm. The Western businessmen, the successful immigrants, the native rich: all will perish in the purifying flame of Allah.

“Millions will have to die,” says an otherwise placid Pakistani predicting the Islamic future. Naipaul thinks so too. In calling for “a society cleansed and purified,” he says, the Islamic Jeremiahs seem to long for ruin.

Read the whole piece here.

Less than a year after 9/11 Naipaul said something about Islamic terrorists that was wise, accurate, and mostly ignored:

The idea of [the terrorists’] strength is an illusion….The terrorists can fly a plane, but what they can’t do is build a plane. What they can’t do is build those towers.

The point, of course, isn’t that terrorists such as the ones behind the 9/11 attacks couldn’t be dangerous and deadly, or even take over countries. It’s that it’s a mistake to equate them with existential foes against whom all aspects of modern society must be hardened and regimented. Donald Rumsfeld and other Bush administration officials and supporters called for exactly that sort of permanent soft-war footing, even calling the war on terrorism a “new Cold War.” That fundamental mistake gave them a fiscal and moral blank check when it came to funding operations that were as morally sketchy as they were militarily ineffective (we’re still in Afghanistan, aren’t we?). On the domestic front, the overreaction Naipaul warned against had a similar, mostly unchecked impact. The 9/11 attacks, I wrote in 2002,

restructur[ed] American life in myriad ways, ranging from the innocuous (continued strong sales and displays of U.S. flags) to the bizarre (airport security guards forcing nursing mothers to drink their own milk as a condition of boarding a plane).

While 9/11 hardly killed libertarianism, as Francis Fukuyama dreamed a while back in the Wall Street Journal, it has sanctioned expansive government spending (even new and improved farm subsidies managed to hitch a ride on the Homeland Security gravy train) and even more expansive government action when it comes to denying due process (hey, what’s up with “dirty bomber” Jose Padilla anyway?), spying on citizens, and stonewalling various sorts of open-government protections (a John Ashcroft specialty that had even the conservative mag Insight on the News yelling, “Bush Team Thumbs Its Nose at FOIA“).

Will such policies remain in place after the current crisis plays out? If the past is any guide, it’s likely that they will, as citizens forget what things used to be like (who remembers, for instance, exactly when you had to start showing photo I.D. to board domestic flights?). Given all that, we can look forward to a future filled with more headlines such as this chilling one from today’s Washington Post: “Secret Court Rebuffs Ashcroft: Justice Dept. Chided on Misinformation.”

More here.

I’ll leave it to others more versed in his novels and essays to evaluate his place as a world author. But Naipaul was perfectly on target when it came to identifying the brilliant truth about Islamic terrorists’ lack of real power and strength to bring down a world that continues to move, however imperfectly, toward the mix of markets, civil rights, representative rule, material progress, and general modernity that was once proclaimed as the “end of history.”

As a society, we ignored Naipual’s insight at seemingly endless costs that continue to sanction indefensible military actions abroad and mass surveillance and fear of immigrants at home. We are now well into a second decade of perpetuating a political, cultural, and strategic blunder that equates flying planes into buildings with the ability to destroy our way of life. If the latter is happening at all, it’s not because of Osama bin Laden or his terrorist descendants.

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Gartman: “We Are Fearful Of Turning Too Bearish Of Equities At This Point”

At this point it is virtually impossible to know if Gartman is bullish or bearish or something inbetween, so here is his latest commentary which we leave up to readers to make their own conclusions:

STOCKS, GLOBALLY, ARE FALLING PRECIPITOUSLY as all ten of the markets comprising our International Index have fallen and as six of the ten have fallen by more than 1%, with the German market having fallen 1.99% and leading the way lower. We’ve not see this sort of severe, universal weakness in the equity market since February of this year and we do believe that this is the most severe one-day bout of weakness of the year-todate [Ed. Note: Because we write TGL “on-the-fly” each morning and because we’ve no staff on hand to check these sorts of things, we will do the checking later today when we’ve the time to do this sort of thing, but certainly this is one of the five worst days to the downside of the year and one of the ten worst in the past several years.].

On Thursday of last week, we wrote the following regarding an inevitable bearish move by the equity markets:

There may come a time when we watch as the Dow Industrials open 500 or more lower upon the day following some unforeseen geopolitical circumstance that weighs heavily upon equities, and when the Dow remains archly lower through noon. That the shall be the signal to be short of equities.

On Friday, the Dow opened nearly 200 lower rather than the aforementioned 500, but stocks failed to rally intra-day other than ever-so-slightly from time-to-time and the Indices closed hard upon their lows. Equities in Europe did the same; the markets opened lower; stabilized for a short while and then closed hard upon their lows also. It was then, and it still is now, a rout to the downside with markets “gapping” lower.

Further, we note that the CNN Fear & Greed Index made its way to 75 and has turned sharply lower… an ominous sign for equities here in the US. Given that downward spike in CNN’s index, and given what happened Friday as noted above, and given the material weakness in Asian shares, and given the flight to safety taking place in Europe as the EUR/CHf cross has collapsed… and is collapsing… all we can say is that weakness is not to be bought and that any sort of inter-day strength is to be sold into.

We have viewed the stock market with a sense of fear and very real concern for months. We have erred in having done so all the while for this was a bull market and those who traded resolutely bullishly were paid handsomely for their trades. For that reason, we are fearful of turning too bearish of equities at this point for fear of making the same mistake again. But we know one thing and we know it well: when we are reticent to act that is precisely the time we are to act. The market is a harsh mistress.

GLTA.

 

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Netflix Dips As CFO Departs

Netflix shares down 1.5% in the pre-market after news that CFO David Wells will be leaving the firm “to pursue philanthropy” as the firm faces growing competition and cash burn.

The press release signals a business as usual exit of the CFO – who has been with Netflix since 2004 (and has served as CFO since 2010) – confirming he intends to stay until his successor takes the role to ensure a smooth transition.

“It’s been 14 wonderful years at Netflix, and I’m very proud of everything we’ve accomplished,” Wells said. “After discussing my desire to make a change with Reed, we agreed that with Netflix’s strong financial position and exciting growth plans, this is the right time for us to help identify the next financial leader for the company.  Personally, I intend my next chapter to focus more on philanthropy and I like big challenges but I’m not sure yet what that looks like.”

But shareholders are perhaps a little concerned at the timing of his departure…

As Bloomberg reports, Netflix, more than any other streaming service so far, has aggressively pumped billions of dollars into original content as it seeks to take on traditional studios. That’s helped Netflix boost its subscribers numbers globally, but has also raised concerns about the company’s financial health.

Wells’s successor will have to contend with keeping the cash burn in check going forward, as Netflix also faces stiffer competition from the likes of Amazon.com Inc. and Walt Disney Co.’s new streaming service.

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Musk: I Said “Funding Secured” After Meeting With Saudi Fund

Following a weekend of conflicting news between Reuters and Bloomberg, with the former saying the Saudis were not interested in taking Tesla private, while the latter said there were negotiations between Tesla and the Saudi Sovereign Wealth Fund, while some investors sued Tesla for fraud and market manipulation even as the SEC has been sniffing to find out if Musk’s “funding secured” tweet was true, moments ago Elon Musk published an update on the Tesla going private transaction.

In the report Musk says that “on August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20% premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st). My proposal was based on using a structure where any existing shareholder who wished to remain as a shareholder in a private Tesla could do so, with the $420 per share buyout used only for shareholders that preferred that option.”

Musk first explains why he made a public announcement on Twitter:

The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time. As a result, it was clear to me that the right thing to do was announce my intentions publicly. To be clear, when I made the public announcement, just as with this blog post and all other discussions I have had on this topic, I am speaking for myself as a potential bidder for Tesla.

He also touched on whether there had been any discussions with the Saudi fund:

“going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private. They first met with me at the beginning of 2017 to express this interest because of the important need to diversify away from oil. They then held several additional meetings with me over the next year to reiterate this interest and to try to move forward with a going private transaction. Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.“

“Obviously” maybe, but did they guarantee that any of this capital would be allocated toward an MBO? He explains:

Recently, after the Saudi fund bought almost 5% of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. During the meeting, the Managing Director of the fund expressed regret that I had not moved forward previously on a going private transaction with them, and he strongly expressed his support for funding a going private transaction for Tesla at this time. I understood from him that no other decision makers were needed and that they were eager to proceed.

And here is where the “funding secured” statement came from:

I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement.

But was it really secured? Well not really, because in the very next paragraph Musk writes that “following the August 7th announcement, I have continued to communicate with the Managing Director of the Saudi fund. He has expressed support for proceeding subject to financial and other due diligence and their internal review process for obtaining approvals. He has also asked for additional details on how the company would be taken private, including any required percentages and any regulatory requirements.”

In other words secured… subject to due diligence and further review. And now it is up to the SEC to determine just how “secured” funding was when it was in fact not secured, and subject to much more analysis.

Musk also hedges by saying that “most of the capital required for going private would be funded by equity rather than debt, meaning that this would not be like a standard leveraged buyout structure commonly used when companies are taken private. I do not think it would be wise to burden Tesla with significantly increased debt.”

Therefore, reports that more than $70B would be needed to take Tesla private dramatically overstate the actual capital raise needed. The $420 buyout price would only be used for Tesla shareholders who do not remain with our company if it is private. My best estimate right now is that approximately two-thirds of shares owned by all current investors would roll over into a private Tesla.

Finally, he lays out the next steps:

As mentioned earlier, I made the announcement last Tuesday because I felt it was the right and fair thing to do so that all investors had the same information at the same time. I will now continue to talk with investors, and I have engaged advisors to investigate a range of potential structures and options. Among other things, this will allow me to obtain a more precise understanding of how many of Tesla’s existing public shareholders would remain shareholders if we became private.

If and when a final proposal is presented, an appropriate evaluation process will be undertaken by a special committee of Tesla’s board, which I understand is already in the process of being set up, together with the legal counsel it has selected. If the board process results in an approved plan, any required regulatory approvals will need to be obtained and the plan will be presented to Tesla shareholders for a vote.

And now let the debate resume about whether what Musk did was legal, whether the Saudis are in fact prepared to take the company private, and whether the funding was indeed “secured.”

Full letter here.

 

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Saudi Crackdown On Canada Could Backfire

Authored by Tsvetana Paraskova via Oilprice.com,

Like many spats these days, the Saudi Arabia/Canada one started with a tweet. Canada’s Foreign Minister Chrystia Freeland called for the release of Samar Badawi, a women’s rights activist who is the sister of jailed blogger Raif Badawi, whose wife is a Canadian citizen.

The arrests had taken place in OPEC’s largest producer and leading exporter Saudi Arabia, which has amassed its wealth from oil and now looks to attract foreign investors as it seeks to diversify its economy away from too much reliance of crude oil sales.

Canada’s foreign ministry’s global affairs office urged “the Saudi authorities to immediately release” civil society and women’s rights activists.

Saudi Arabia – often criticized for its far from perfect human rights and women’s rights record – didn’t take the Canadian urge lightly. Saudi Arabia expelled the Canadian ambassador, stopped direct Saudi flights to Canada, stopped buying Canadian wheat, ordered Saudi students and patients to leave Canada, froze all new trade and investment transactions, and ordered its wealth funds to sell their Canadian stock and bond holdings in a sweeping move that surprised with its harshness many analysts, Canada itself, and reportedly, even the U.S.

The Saudi reaction shows, on the one hand, the sensitivity of the Kingdom to criticism for its human rights record. On the other hand, it sent a message to Canada and to everyone else that Saudi Arabia won’t stand any country meddling in its domestic affairs, or as its foreign ministry put it “an overt and blatant interference in the internal affairs of the Kingdom.”

The Saudi reaction is also evidence of Crown Prince Mohammed Bin Salman’s harsher international diplomacy compared to the previous, ‘softer’ diplomacy, analysts say. Saudi Arabia is also emboldened by its very good relations with the current U.S. Administration, and picking a fight with Canada wouldn’t have happened if “Trump wasn’t at the White House,” Haizam Amirah-Fernández, an analyst at Madrid-based think tank Elcano Royal Institute, told Bloomberg.

The United States hadn’t been warned in advance of the Saudi reaction to Canada and is now trying to persuade Riyadh not to escalate the row further, a senior official involved in talks to mediate the dispute told Bloomberg.

The row, however, will not affect crude oil exports from the Kingdom, Saudi Energy Minister Khalid al-Falih has said, adding that Riyadh’s policy has always been to keep politics and energy exports separate.

Canada imports around 75,000-80,000 bpd of Saudi oil, and these barrels can easily be replaced, CBC quoted analyst Judith Dwarkin as saying earlier this week. The chief economist of RS Energy Group referred to this amount as “a drop in the bucket” at less than a tenth of Canadian crude imports compared with imports from the United States, which amount to about 66 percent of the total. The United States could easily replace Saudi crude thanks to its growing production, Dwarkin said.

Still, the strong Saudi message to Canada (and to the world) is not entirely reassuring for the investor climate in Saudi Arabia, which is looking to attract funds for its economic overhaul and mega infrastructure projects worth hundreds of billions of dollars each.

“The Saudi leadership wants to drive home a message that it’s fine to invest in Saudi Arabia and bring your money to Saudi Arabia, but that there are red lines that should not be crossed,” Riccardo Fabiani, a geopolitical analyst at Energy Aspects, told Bloomberg, but warned that such strategy could backfire.

Analysts are currently not sure how the feud will unfold, but Aurel Braun, a professor of political science and international relations at the University of Toronto, told Canada’s Global News that Saudi Arabia is unlikely to back down and reverse all its retaliatory measures without getting something back from Canada.

Canadian Prime Minister Justin Trudeau is not apologizing for his country’s call that the Saudis release human rights activists.

“We have respect for their importance in the world and recognize that they have made progress on a number of important issues, but we will, at the same time, continue to speak clearly and firmly on issues of human rights, at home and abroad, wherever we see the need,” Trudeau told a news conference this week.

The economic impact of the Saudi retaliation on Canada is unlikely to be large, but the fact that Saudi Arabia is whipping the oil wealth stick to punish economically what it sees as “blatant” interference with its affairs is sending a message to other countries, and a not-so-positive message to foreign investors.

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Commerzbank Warns Turkey Facing Hyperinflation As CDS Explodes

The sheer pandemonium in Turkey continues.

It’s not just Turkey’s currency and sovereign bonds that have resumed their plunge today: Turkish stocks are all sharply lower, with the Borsa Istanbul down over 4% after being sharply lower earlier. However, that’s in local currency terms: in dollar terms, Turkish stocks are now at their lowest level since March 2009.

So far in 2018, the local stock market has lost a fifth of its value in lira terms, but a whopping 55% in USD terms, while banks – which Goldman recently warned would see their excess capital wiped out if the lira hits 7.1 – have fared especially bad with the BIST 100 bank sector down 7.4% on Monday, 40.7% in local currency terms for the year to date, and down a whopping 70% YTD.

“Within the current backdrop, we view banks as being vulnerable to Turkish Lira depreciation given that it impacts,” Goldman warned last week.

However, another even more troubling move has been seen in Turkey’s credit default swaps which are “shooting through the roof” because the economy is heavily indebted and there is “widespread fear that a good part of these claims will have to be cancelled,” wrote Commerzbank analyst Ulrich Leuchtmann.

As shown in the chart below, five-year Turkish CDS soared over 125bps to more than 550 today, the highest since 2008, and surpassing the similar maturity CDS for Greece.

Leuchtmann continued his dire outlook on Turkey, and warned that USDTRY would “strive towards infinity” on the currency market, noting that “exchange rates can then no longer be reasonably projected.”

The commerzbank punchline:

“if confidence disappears as radically as in Turkey at present, money loses its value totally. This effect is domestically called hyperinflation.”

Meanwhile, since a state receives most of its revenue in its domestic currency, it must either adjust its tax rates as quickly as hyperinflation gallops – which is hardly practicable or the government cannot service its FX-denominated debt any more.

His advice: impose capital controls immediately, as they would at least temporarily curb capital flight “would perhaps be the best solution from today’s point of view.” However, the bigger problem is that for Turkey, which desperately needs capital inflows…

… capital controls would also be a death sentence, if only a somewhat delayed one, as the economy would implode and it would become impossible to roll over or refi any USD-denominated debt, resulting in a wave of corporate defaults, once again sending the lira into the Venezuelan stratosphere.

via RSS https://ift.tt/2MjpU20 Tyler Durden

The Truth Behind Chicago’s Violence: New at Reason

Contrary to popular myth, cynically promoted by Donald Trump and other outside critics, Chicago is not an exceptionally dangerous city, writes Steve Chapman. In terms of violent crime, it is less afflicted than a number of large cities, including St. Louis, Baltimore, and New Orleans.

Republicans blame unbroken Democratic control of Chicago for its mayhem. But partisan coloration is an unreliable indicator of crime patterns. Of the 10 states with the highest rates of violence, seven voted for Trump. Los Angeles, whose homicide rate is enviably low, has had only Democratic mayors since 2001.

View this article.

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