Month: August 2018

Nasdaq Surges To Best August Since 2000, Bonds Bid As EM Collapses

The US stock market seems distracted from bonds, FX, the yield curve, macro data, and geopolitics… so here is a distraction for the distraction watchers…

It seems August was “buy all the things” month as bonds and stocks both rallied notably… and once again it was all about China…

 

Especially buy US stocks – because US data has been so awesome!! (US Macro Surprize index is down 6 of the 8 months of this year)

 

Chinese Stocks did not have a great August…

 

European Stocks were lower but only Italy was really ugly…

 

US Stocks just went upper-er and upper-er…

 

This was the Nasdaq’s best August since the peak of the DotCom bubble… (Dow/S&P best August since 2014)

 

Tech stocks led the way, massively outperforming financials…

 

FANG Stocks soared in August – second best month since January’s meltup…

 

Some context here from CLSA – FANG stocks have doubled on average in 23 months and tripled in 43 months

 

It’s even more concentrated than that. AAPL (the biggest market cap company in the world) is  up a shocking 20% in August, and AMZN is up 13% –  Combined they account for 25% of the entire Nasdaq gain in August.


 

Treasury yields tumbled across the entire curve in August, with the long-end outperforming…

 

Biggest drop in 10Y yields this month since March 2018 (and dropped to the lowest monthly close since March 2018)…

 

The yield curve tumbled in August – flattening for the 6th month in a row (with a small rebound today)…

 

The Dollar managed modest gains on the month – but was only bid early and late in August (highest monthly close since June 2017) with a big roundtrip in the middle triggered by China…

 

Despite China’s intervention, the Yuan ended lower on the month… the 5th month of Yuan devaluation in a row

 

The biggest headlines were from the emerging market space where currencies collapsed…

While The Rand, Real, and Ruble were rough; Argentina and Turkey Collapsed…

 

Emerging Market FX is now at its weakest on record…

 

In fact, EM FX volatility is now at a record high relative to G7 volatility…

 

Cryptos had another ugly month with Ethereum down almost 35%. Bitcoin was best… only down 8.5%!

 

WTI Crude managed modest gains on the month but across the board commodities were weaker – from PMs to Softs…

 

Gold managed to stay above $1200 but completed August with its fifth straight month of declines as the record run in U.S. stocks and rising rates boost demand for the dollar.

As Bloomberg note, throw in trade-war fears and the greenback’s quasi-haven status, and it just doesn’t look good for the yellow metal. In fact, it’s looking like a fool’s errand to try to call a bottom in gold. It basically boils down to the Fed and rates. Advocates of rate hikes cite preventing asset bubbles and controlling the money flow into the financial. For the doves, wages may be stagnant, but that does nothing to overshadow the more important number, the unemployment rate, which says keep hiking. The Fed is going to keep chasing its vision of what the economy should be, and gold’s going to keep getting crushed under the wheels.

Finally, we note that VIX was unchanged on the month despite stocks soaring…

 

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California Bill Requires All Corporate Boards to Have a Token Woman

California might become the first state in the nation to force publicly traded companies to put women on their boards of directors.

After passing in the Assembly on Wednesday, SB-826 breezed easily through the Senate yesterday. Now it heads to the governor’s desk, where Jerry Brown has until the end of September to sign it into law.

Here are the legislation’s specific requirements, according to the Los Angeles Times:

The bill would require that publicly held corporations headquartered in the state include at least one woman on boards of directors by the end of 2019, and at least two by July 2021. Corporate boards with six or more members would be required to have at least three women on the panels by the middle of 2021.

Companies found to be in violation of the law would face a fine.

State Sen. Hannah-Beth Jackson (D–Santa Barbara), who co-authored the bill, says it’s necessary because women are underrepresented on California’s corporate boards.

“One-fourth of California’s publicly traded companies still do not have a single woman on their board, despite numerous independent studies that show companies with women on their board are more profitable and productive,” she said in a statement. “With women comprising over half the population and making over 70 percent of purchasing decisions, their insight is critical to discussions and decisions that affect corporate culture, actions and profitability.”

A coalition of business groups, including the California Chamber of Commerce, say in a joint statement that they’re all for gender equality but this isn’t the way to go about it. The legislation “requires publicly traded corporations to satisfy quotas regarding the number of women on its board or face significant penalties, which is likely unconstitutional, a violation of California’s Civil Rights statute, and a violation of the internal affairs doctrine for publicly held corporations,” the statement says.

While California would be the first state in the nation to adopt such a measure, other countries, including Norway and Germany, have similar policies.

The measure would affect 377 of California’s largest publicly traded companies, plus many smaller businesses.

If the bill becomes law, some of Silicon Valley’s biggest corporations might have to make changes. Facebook, Apple, and Alphabet (Google’s parent company) each currently have two women apiece on their boards. Each company would likely have to appoint an additional woman by 2021 in order to meet the quota.

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Brazilian Real Soars On Speculation Lula Will Be Barred From Running For President

After tumbling just shy of all time lows on Thursday, dropping as low as 4.21 against the dollar, the Brazilian real and local assets have surged on hopes jailed leftist presidential candidate Lula, who is the undisputed leader in the polls ahead of Brazil’s presidential election, will be barred by Brazil’s highest electoral court from attempting a comeback to the nation’s top job despite a lengthy prison sentence.

The court, known as the TSE, is set to rule on the legality of Lula’s presidential candidacy at a special session in Brasilia. They may also rule on whether or not he can partake in free television and radio campaigns. According to Bloomberg, deliberations started at 2.30 pm Brasilia time, and an announcement is imminent.

Lula, who had a 20 point lead ahead of his closest challenger far-right candidate Jair Bolsonaro, and is the most influential political figure in Brazil’s recent history, has been in jail since April after an appeals court confirmed a sentence for corruption and money laundering. The TSE will consider the country’s “clean slate” law, which determines that people with criminal convictions upheld on appeal cannot run for elected office.

So far, the court has received 17 legal challenges to Lula’s bid, as well as at least two requests for an injunction demanding that he be banned from campaigning. In the event of a negative ruling on Friday, Lula’s lawyers can appeal both at the TSE and at the Supreme Court.

The real jumped as traders speculated Friday’s ruling would keep Lula out of the TV and radio ads, lowering his ability to give a boost to whomever he endorses to replace him in the ticket, although as a Bloomberg commentator suggested, “even if Lula gets blocked from running, former Sao Paulo mayor Fernando Haddad of Lula’s Workers’ Party will likely run in his stead and polls show he could make it into a second round run-off.”

The BRL strengthened 2.1% as of 3:15 p.m. EDT erasing losses for the week. The Ibovespa stock index rose 0.4 percent, trimming a monthly slide.

While the former head of state remains hugely popular among the millions of Brazilians who saw their quality of life improve during his administration, Lula is also loathed by many for a sweeping corruption scandal and a devastating recession they say was triggered by the populist economic measures pursued by his Workers’ Party.

Beyond election concerns, the fiscal picture remains very weak, and won’t reach a surplus before 2022, Alberto Ramos at Goldman Sachs wrote. Public debt dynamics remain a source of concern with gross general government debt at 77% of GDP.

Meanwhile, as FX traders were delighted to frontrun today’s “favorable” decision, Bloomberg notes that ETF traders remain skeptical as the iShares’s EWZ fund was on track for the biggest monthly outflow ever.

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State Dept Refutes WaPo ‘Fake News’: Passports To Citizens Denied More Under Obama Than Trump

The Washington Post reported a terrifying immigration-related trend developing on the Mexico–United States border: the U.S. State Department denied passports to US citizens of Hispanic descent, leaving them in a state of confusion, as their rights as a citizen were revoked, including the ability to travel abroad.

The Post said that hundreds – if not thousands – of people with US birth certificates delivered by midwives on US border states have recently found themselves trapped on the Mexican border or stuck in the US, as their passports were suddenly, without much notice, revoked or their applications denied.

Sounds terrifying…

However, as The Daily Caller’s Mike Brest reports, the State Department is pushing back on the WaPo article, denying their claims that the number of American citizens living near the southern border area being denied renewal passports is rising under Trump.

Midwives and physicians located near the border in Mexico have given families fraudulent birth certificates to prove American citizenship for decades in exchange for money. WaPo’s article focused on the people in America who applied for renewed passports but were denied because the government believed their birth certificates were from one of these midwives.

The Post’s piece claimed that “The Trump administration is accusing hundreds, and possibly thousands of Hispanics along the border of using fraudulent birth certificates since they were babies, and it is undertaking a widespread crackdown.”

However, that is not true, according to the State Department. In fact, the number of domestic passport denials at the southern border is at a six-year low and the number of midwife cases has gone down under the current administration.

Further, the 2015 calendar year had more renewal denials at the border than any year in that timeframe with approximately 1,500. That year also had the highest percentage of denials at 35.9 percent in respect to the number of birth certificates that were deemed “potentially fraudulent” over the same time period.

Conversely, less than 750 people had passports not renewed this year so far and that is 25.8 percent of the total in question. Should this percentage stay the same through the end of the year, it’d be the lowest in the aforementioned timeframe.

In the Post’s article Wednesday, the opposite claim was made — that “passport denials and revocation appear to be surging” under President Trump.

When it comes to the midwives issuing fraudulent birth certificates, the Post has reported on it in the past. Back in 2008, the Post published a piece saying, “The federal government won convictions against dozens of South Texas midwives from 1967 through 1997 for fraudulently registering births that they did not deliver, a U.S. official said, with most convictions coming after 1980.”

The article also says that up to that point, at least 65 midwives have been convicted of fraud.

Much of the information the government has on this practice comes from the Castelano v. Clinton, 2009. In the lawsuit, midwives admitted to issuing fake birth certificates.

When asked about the Post’s reporting, Heather Nauert, a State Department spokesperson said:

“This is an irresponsible attempt to create division and stoke fear among American citizens while attempting to inflame tensions over immigration.

The facts don’t back up the Washington Post’s reporting.

Under the Trump Administration, domestic passport denials for so called ‘midwife cases’ are at a 6-year low. The reporting is a political cheap shot.”

More fake news!! We look forward to President Trump’s tweet reaction.

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The Purge Brings Its Nightmare Dystopia to Television: New at Reason

'The Purge'Television critic Glenn Garvin finds the movies invading his chosen entertainment medium. If only it was something better than The Purge:

The Purge movies—there have been, God help us, four of them in five years—are all based on the premise that America has fallen under control of a bizarrely authoritarian government that, once a year, allows (encourages might be a better word) everybody in the country to go out and kill, rape, rob, and loot anything or anybody they want. I have given this idea some thought, and if it should ever be adapted in real life, I have identified the first person I would disembowel. That would be Variety film critic Owen Gleiberman, who earlier this summer in his review of Purge No. 4 (The First Purge), labeled the whole series of films “Clockwork Orange-meets-Roger Corman grade-Z nihilism,” a phrase that I swear to God I would have thought of first if I hadn’t had to wait for the TV show to start.

The TV version (written and produced by James DeMonaco, the auteur all four Purge films) finally arrives next week, and I’m afraid I don’t have much to add to Gleiberman’s pungent wisdom. There’s a little less Clockwork Orange than some of the movies—even liberated cable TV still can’t match up with the body count of a dedicated grindhouse director—and a little more nihilism (“On Purge Night, America lives up to its promise!” exhorts one nut-job talk radio host).

There’s even a slight nod to character development, which The Purge is going to need in a format that stretches 10 hours over nearly three months instead of 90 frenzied minutes of shopping-mall mayhem.

View this article.

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Nafta Talks Conclude, Canada’s Freeland To Hold Press Conference At 4:30PM

After several days of negotiations, and just hours before the deadline, Reuters reports the the Nafta trade talks between the US and Canada have concluded.

  • U.S.-CANADIAN TRADE TALKS HAVE CONCLUDED -CANADIAN OFFICIAL: RTRS
  • CANADA’S FREELAND HAS LEFT USTR AFTER TALKS WITH LIGHTHIZER

Reuters adds that Canada’s Freeland will hold a press conference at 4:30pm (after the close).

It was unclear if a deal has been reached, although some speculate that if there was a deal, the press conference would include the US, and not just Canada, which “usually means bad news.”

Others have suggested that a deal may not have been reached and the talks will continue into the weekend.

The CAD is generally unchanged on the news.

More at 4:30pm when Freeland speaks.

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San Francisco Continues to Give Middle Finger to E-Scooters, Rejects Permit Applications for Lime, Bird, Others

San Francisco regulators have found a new way to signal their disdain for dockless e-scooters. Though its new permitting program can give up to five companies permission to operate in the city, the San Francisco Metropolitan Transportation Authority (SFMTA) issued just two permits yesterday. Ten other companies, including major players Bird and Lime, were rejected.

Bird and Lime, along with smaller outfit Spin, were the first companies to roll out their vehicles in San Francisco, debuting without official sanction in April. The city government responded by impounding the scooters and ordering the companies to cease operations until a regulatory framework could be established.

The new regulations required scooter companies to pay hefty application fees, meet various standards (such as enabling cash payments and making their apps multilingual), and craft detailed plans for how they were going to address such issues as sustainability, transportation equity, and labor relations.

The only enterprises whose applications met the city’s approval are Scoot and Skip.

“Both companies submitted strong proposals with detailed, unique and innovative approaches that demonstrated the highest level of commitment to solving known challenges and concerns,” reads SFMTA’s statement on its decision. It adds that “no other applications substantially exceeded the agency’s standards for operating a shared scooter pilot program.”

Scoot impressed SFMTA with its requirement that riders watch mandatory training videos on how to use a scooter, as well as its proposal to swap out a depleted vehicle’s batteries without taking the vehicle off the street. (Other companies planned on taking them in to recharge them overnight, a method SFMTA says will cause more greenhouse gas emissions and traffic congestion.) Skip won praise for agreeing to establish a community advisory board and to deploy 20 percent of its vehicles in the underserved southeastern portion of the city.

The total number of scooters will be limited to 1,250 scooters (625 apiece) when start up operations in October. This cap could be raised to 2,500 total scooters for all approved companies—if officials think things are going sufficiently well.

The rejected applicants have expressed a range reactions.

Lime says it will appeal. Bird is accepting the decision for the time being, saying it’s disappointed but hopes to be allowed back into San Francisco when the pilot program is done.

Bird spokesman Kenneth Baer notes that playing keepaway with permits and imposing strict vehicle caps undermine the city’s stated goals of increasing transportation options for low-income communities and cutting back on car travel.

“If you cap it, you’ll never meet demand,” he tells Reason. “Supply never meets demand. That means it’s not reliable. That means people don’t use it. That means it doesn’t go to neighborhoods that need it most. Caps doom e-scooters to the fate of the Segway. It becomes a curiosity.” E-scooters, he says, have to become normal before they become popular.

The rest of the country has been more welcoming of e-scooters. Despite headlines about these vehicles being thrown into the sea or smeared with feces, support for scooter services hovers around the 70 percent mark in most cities, according to a July 2018 survey. The one outlier was San Francisco, where only a slim majority (52 percent) approve of these scooters.

These friendly attitudes are increasingly reflected in cities’ policies toward e-scooters. In the Bay Area, places like Santa Monica and Oakland are allowing more operators and adopting more flexible “utilization caps” on scooters that can rise with demand. Further north, Portland is allowing up to 2,500 scooters on its streets—a damn sight more generous than San Francisco when you consider how much larger San Francisco’s population is—and has allowed three operators to set up shop so far. Dallas and Atlanta have adopted looser regulations still.

None of these cities has adopted a truly libertarian approach of allowing anyone who wants to launch a scooter service, but they have at least been willing to treat these companies as welcome innovators, not aggressive invaders. San Francisco’s regulators should take note.

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Trump Erupts At Bloomberg For “Blatantly Violating” Off The Record Agreement Over Canada Comments

An angry president Trump erupted at Bloomberg on Twitter for “blatantly violating” an off the record agreement involving his comments about Canada during an extensive Oval Office interview conducted on Thursday afternoon, in the process admitting he had indeed made the “insulting” remarks, published earlier by the Toronto Star, and which have allegedly jeopardized the Nafta negotiations.

“Wow, I made OFF THE RECORD COMMENTS to Bloomberg concerning Canada, and this powerful understanding was BLATANTLY VIOLATED. Oh well, just more dishonest reporting. I am used to it,” Trump tweeted.

Trump ended by noting that “at least Canada knows where I stand!”

It does indeed. As a reminder, earlier we noted that according to the Toronto Star, which first published Trump’s “off the record” commentary, that the negotiations between Canada and the U.S. “were dramatically upended on Friday morning by inflammatory secret remarks from President Donald Trump, after the remarks were obtained by the Toronto Star.”

In remarks Trump wanted to be “off the record,” Trump told Bloomberg News reporters on Thursday, according to a source, that he is not making any compromises at all in the talks with Canada — but that he cannot say this publicly because “it’s going to be so insulting they’re not going to be able to make a deal.”

“Here’s the problem. If I say no — the answer’s no. If I say no, then you’re going to put that, and it’s going to be so insulting they’re not going to be able to make a deal…I can’t kill these people,” he said of the Canadian government.

In another remark he did not want published, Trump said, according to the source, that the possible deal with Canada would be “totally on our terms.” He suggested he was scaring the Canadians into submission by repeatedly threatening to impose tariffs.

“Off the record, Canada’s working their ass off. And every time we have a problem with a point, I just put up a picture of a Chevrolet Impala,” Trump said, according to the source. The Impala is produced at the General Motors plant in Oshawa, Ontario.

It was not clear why Bloomberg would disclose the off the record comment, or if indeed it was indeed Bloomberg; some have suggested that it was the White House itself that leaked the inflammatory commentary with hopes of scuttling the last minute Nafta negotiations. That said, it is not clear if Trump’s comment will indeed be a dealbreaker, although with just a few hours left until today’s deadline to get a deal done, every passing hour makes an agreement increasingly unlikely.

 

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Steele To Ohr In Secret 2016 Meeting: Russia Has Trump “Over A Barrel” With “Explosive Information” 

Former UK spy Christopher Steele told then-DOJ #4 Bruce Ohr at a 2016 breakfast that the Kremlin had Donald Trump “over a barrel” thanks to “potentially explosive information” in the possession of Russian intelligence, reports AP, citing “multiple people” familar with the encounter. 

Ohr also learned that Trump campaign aide Carter Page had met with “higher-level” Russian officials than the aide had previously acknowledged, said the sources. 

The previously unreported details of the July 30, 2016, breakfast with Christopher Steele, which Ohr described to lawmakers this week in a private interview, reveal an exchange of potentially explosive information about Trump between two men the president has relentlessly sought to discredit.

…

Among the things Ohr said he learned from Steele during the breakfast was that an unnamed former Russian intelligence official had said that Russian intelligence believed “they had Trump over a barrel,” according to people familiar with the meeting. It was not clear from Ohr’s interview whether Steele had been directly told that or had picked that up through his contacts, but the broader sentiment is echoed in Steele’s research dossier. –AP

Page responded to the AP report, tweeting: “BREAKING NEWS (a.k.a. what most sane reporters and other observers realized long ago): The Corrupt DOJ, co-conspirators in the DNC and their high-priced consultants correctly believed they had American democracy and the FISA Court over a barrel in 2016.” 

Developing… 

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First Delivery Through China’s ‘Petroyuan’ Oil Futures Set For September

Authored by Tsvetana Paraskova via Oilprice.com,

In the first physical settlement of the Chinese yuan-denominated oil futures contract, five companies will deliver a total of 600,000 barrels of Middle Eastern crude grades to buyers of the September futures contract that began trading in Shanghai in March, Reutersreported on Wednesday, citing five people with knowledge of the plans.

China’s crude oil futures launched in March, with crude set for delivery in September, the first month which the Shanghai International Energy Exchange (INE) designated for deliveries in order to allow the contract to develop and accumulate volumes for physical delivery.

The deliverability, the volume, and smooth process will be key to China fulfilling its ambition to have the yuan-priced oil futures contract become a major crude benchmark on a global scale like the Brent and WTI benchmarks, analysts say.

The first such test will be next month, during which Chinese companies, including state-held majors, will deliver oil against the Chinese oil futures contract to storage facilities that are among the eight sites that the Shanghai exchange has approved for cargo delivery in the futures contract, according to Reuters’ sources.

Unipec, the trading unit of Asia’s biggest refiner Sinopec, plans to deliver some 200,000 barrels of Iraqi grade Basra Light to Sinopec-held storage tanks at an island off the eastern province of Zhejiang. Each of CNPC Fuel Oil, Zhenhua Oil, and unidentified private firm will deliver 100,000 barrels of Basra Light into CNPC Fuel Oil-operated storage farm in the southern port of Zhanjiang, while CNPC’s trading arm Chinaoil will deliver 100,000 barrels of Oman crude to storage tanks in the northeastern city of Dalian, the sources told Reuters.

It is not immediately known who will be taking the oil that the companies will deliver against the yuan-denominated oil futures contract.

Analysts have flagged storage costs in China as one of the problems that traders could face in the delivery mechanism of the Chinese oil futures contract. Storage costs in China are much higher than elsewhere. The reason for the higher cost is limited storage capacity availability and the requirement that the cargo be stored at a specific storage facility rather than at any available.

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