Month: September 2018

Authored by David Robertson via RealInvestmentAdvice.com,

Here we are, ten years after the bankruptcy of Lehman Brothers, and one would be hard pressed to find evidence of meaningful lessons learned.

“As long as the music is playing, you’ve got to get up and dance,” – Chuck Prince, Citigroup

Chuck’s utterance now sounds more like a quaint remembrance than a stark reminder. Ben Bernanke’s proclamation also sounds more like an “oopsie” than a dangerous misjudgment by a top official.

“We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers …” 

One of the most pernicious aspects of the financial crisis for many investors was that it seemed to come out of nowhere. US housing prices had never declined in a big way and subprime was too small to show up on the radar. Nonetheless, the stage was set by rapid growth in credit and high levels of debt. Today, eerily similar underlying conditions exist in the Chinese residential real estate market. Indeed, a lot of investors might be surprised to hear it called the most important asset class in the world.

China certainly qualifies as important based on rapid credit growth and high levels of debt. The IMF’s Sally Chen and Joong Shik Kang concluded [here],

“China’s credit boom is one of the largest and longest in history. Historical precedents of ‘safe’ credit booms of such magnitude and speed are few and far from comforting.”

The July 27, 2018 edition of Grants Interest Rate Observer assesses,

“Following a decade of credit-fueled stimulus, China’s banking system is the most bloated in the world.”

Jim Chanos, the well-known short seller, adds his own take on RealvisionTV [here], “So comparing Japan [in the late 1980s] to China, I would say Japan was a piker compared to where China is today. China has taken that model and put it on steroids.”

One of the lessons that was laid bare from the financial crisis of 2008 (and from Japan in the 1980s) was the degree to which easily available credit can inflate asset prices. This is especially true of real estate since it is so often financed (at least partially) with debt. The cheaper and easier credit is to attain, the easier it is to buy homes (or any real estate), and the higher prices go.

These excesses provide the foundation for one of the bigger (short) positions of Jim Chanos. He describes:

“China is building 20 million apartment flats a year. It needs about 6 to 8 to cover both urban migration and depreciation of existing stock. So 60% of that 25% is simply being built for speculative purposes, for investment purposes. And that’s 15% of China’s GDP of $12 trillion. Put another way, it’s about $2 trillion. That $2 trillion is 3% of global GDP.”

And so I can’t stress enough of just how important that number is and that activity is to global growth, to commodity demand, and a variety of different things. It [Chinese residential real estate] is the single most important asset class in the world.”

Chanos is not the only one who sees building for “speculative purposes” as an impending problem. Leland Miller, CEO of China Beige Book, describes in another RealvisionTV interview [here],

“The heart of the Chinese model is malinvestment. It’s about building up non-performing loans and figuring out what to do with them.”

The WSJ’s Walter Russell Mead captured the same phenomenon [here],

“Chinese leaders know that their country suffers from massive over-investment in construction and manufacturing, [and] that its real-estate market is a bubble that makes the Dutch tulip frenzy look restrained. Chinese debt is the foundation of the system.”

Increasingly too, household debt is becoming a problem. As the Financial Times reports [here], apparently China’s young consumers have:

“…rejected the thrifty habits of their elders and become used to spending with borrowed money. Outstanding consumer loans — used to buy cars, holidays, household renovations and other household goods — grew nearly 40 per cent last year to Rmb6.8tn, according to the Chinese investment bank CICC. Consumer loans pushed household borrowing to Rmb33tn by the end of 2017, equivalent of 40 per cent of gross domestic product. The ratio has more than doubled since 2011.”

Again, there are striking parallels to the financial crisis in the US. As Atif Mian and Amir Sufi report in their book, House of Debt, “When it comes to the Great Recession, one important fact jumps out: The United States witnessed a dramatic rise in household debt between 2000 and 2007—the total amount doubled in these seven years to $14 trillion, and the household debt-to-income ratio skyrocketed from 1.4 to 2.1.”

The inevitable consequence of unsustainable increases in household debt is that eventually those households will have to cut spending. When they do, “the bottom line is that very serious adjustments in the economy are required … Wages need to fall, and workers need to switch into new industries. Frictions in this reallocation process translate the spending decline into large job losses.”

In addition, just as the composition of consumers of debt affects the ultimate adjustment process, so too does the composition of its providers. For example, debt provided outside of the conventional banking system, such as from shadow banks, is not subject to the same reporting or reserve requirements.

Once again, the landscape of Chinese debt is problematic. Russell Napier states,

“The surge in non-bank lending in China has clearly played a key role in the rise of the country’s debt to GDP ratio and also its asset prices.”

Zerohedge adds [here] that the Chinese central government has become “alarmed at its [shadow banking’s] vast scale, and potential for corruption.”

Further, nebulous practices are not confined to the “shadows” in China. The FT reports [here],

“These [small] banks are quite vague and blurry when it comes to investment receivables … There’s so much massaging of the balance sheet, and they won’t tell you about their internal manoeuvrings.”

As it happens, “Problems at small banks matter because their role in China’s financial system is growing.” While China surpassed the eurozone last year to become the world’s largest banking system, “small and mid-sized banks have more than doubled their share of total Chinese banking assets to 43 per cent in the past decade.”

Nor is the lack of transparency confined to the financial system; it also extends to the entire economy. Millerdescribes,

“We’re constantly asked about how good Chinese data are. Is it all bad? It’s all bad, but it’s bad and different variations.” 

Chanos shared his opinion as well:

“As much as the macro stuff has intrigued me … what’s so interesting about China is the lower down you get, the more micro you get, the worse it looks, in that the companies don’t seem to be profitable, the accounting is a joke.”

Miller makes clear what the challenge is:

“[China] is the second largest economy in the world. This is probably the most mysterious big economy in the world. And people have been so willing to work on it based on guestimates.”

Normally, investors prefer certainty and discount uncertainty. The pervasive lack of discipline and due diligence echoes that of the structured debt products of the financial crisis.

Just as in the financial crisis, all of these excesses and shortcomings are likely to have consequences. Many of them will sound familiar [here]:

“[A] crisis of some kind is likely. The salient characteristics of a system liable to a crisis are high leverage, maturity mismatches, credit risk and opacity. China’s financial system has all these features.”

That said, the “flavor” of China’s crisis will depend on uniquely Chinese characteristics. Miller identifies an important one:

“I think the problem is that people didn’t understand that this is not a commercial financial system. That’s one of the major takeaways we stress all the time. This [China’s] is not a commercial financial system. What that means is when the Chinese are threatened, they can squash capital from one side of the economy to the other.”

In other words, China has substantial capability to manage liquidity and contagion risks.

As a result, according to Miller,

“We don’t spend a lot of time worrying about an acute crisis. If China falls and China does have the hard landing that a lot of people predicted, it’s not going to look like it did in the United States or in Europe. You have a state system, a state-led system in which almost all the counter-parties are either state banks or state companies. They’re not going to have the same freeze-up of credit that you did in some of these other Western economies.”

That said, there are still likely to be severe consequences. Miller reports,

“China has gotten themselves into a real difficult situation, because you have an enormous economy awash in credit that is leading to lesser and less productivity based on that capital. And that is why, rather than some sort of implosion, which could happen, or any type of miraculous continued prosperity indefinitely — we think that China’s economy is, for the most part, headed towards stasis.” More specifically he says, “So I think that we’re heading towards a Chinese economy which is going to slow down quite dramatically when we’re talking about 10, 15 years time.”

Indeed, it appears that process has started. As noted [here],

“Housing sales in China will peak this year and then begin a long-term decline, an inflection point that will drag on growth in the construction-heavy economy and hit global commodity demand, say economists.”

Throughout the process, Miller expects China to pursue a policy agenda designed to get the country “on a more sustainable track.” In particular, “that means cracking down on some of these bad debt problems, cracking down on shadow lending, becoming more transparent, injecting risk and failure into the system, and trying to build a stronger economy from that.” He is careful to note, however, “But it’s not easy.”

Neither will it be easy for investors to judge the puts and takes of various policy measures in a dynamic and opaque system. Henny Sender at the FT warns international investors [here]

“To take heed as Beijing continues a war against non-bank lenders and fintech companies that is tightening liquidity and spooking investors in mainland China.”

The FT also notes [here],

“New rules for recognising bad loans in China are set to obliterate regulatory capital at several banks” which will disproportionately affect small and mid-sized banks. Further, as reported [here], “the paring back of a state subsidy programme that provided Rmb2tn ($300bn) in cash support to homebuyers since 2014 is adding to structural factors weighing on the market.”

The good news is that investors can take several lessons from China and its residential real estate market. The first is that, like the US subprime market was, the Chinese real estate market is understated and under-appreciated. Perhaps it is because the numbers don’t seem that big. Perhaps it is because so few people have much clarity at all on what the numbers really are. Or perhaps it is just that people are making enough money that they don’t really care to look too hard. Regardless, just like with subprime in the US a decade ago, there are real problems.

Second, those problems will have consequences; investors should expect spillovers. As excesses in the country are unwound, the slowdown in Chinese economic growth will be felt around the world. China has driven global growth for at least a couple of decades. Further, residential real estate, with its strong economic multiplier and high degree of speculation, has been the rocket fuel for that growth. Reversal of those trends will feel like a substantial headwind. Further, lest US investors feel smug at the prospect of Chinese troubles, David Rosenberg warns [here],

“There is not a snowball’s chance in hell [the Chinese weakness] will not flow through to the US stock market.”

Where does all of this leave Chanos?

“Interestingly, we’re less short China now than we have been in eight years in our global portfolio. Because the rest of the world’s catching up. Although China’s been on a tear recently, Chinese stocks over the eight years are basically flat. And I’ve noticed that some of the other stocks have sort have tripled.”

Fundamentals are important, but so are prices paid.

A major complication of figuring out China will be determining the degree to which it’s domestic policy agenda influences actions on tariffs and trade and currency. Almost Daily Grants reported the findings of Anne Stevenson-Yang, co-founder of J Capital Research, on July 27, 2018:

“China’s credit-saturated economy … is the primary force behind the recent gyrations in FX. The reality is that China’s currency is most intimately connected, as with any currency, to the domestic economy – debt, asset prices, real estate prices, and efficiency gains and losses rather than just trade.”

In other words, don’t get distracted by the smaller stuff.

Despite all of these challenges, investors are not without tools to monitor the situation, however. Russell Napier reports [here],

“In general the copper price provides a good lead indicator to the market’s assumptions in relation to global growth. When it [the copper price] weighs the negative impact from an RMB devaluation and the positive impact from a Chinese reflation … the current indications are more negative for global growth than positive.”

The FT goes even further [here]:

“The metal [copper] is giving western investors a clear signal to sell risk assets or at least reduce their portfolio weighting.”

Perhaps the biggest lesson of all is that increasingly we live in a world of debt-fueled growth that shapes the investment proposition of financial assets. That means business cycles are increasingly overwhelmed by credit cycles. It means wider swings in financial assets — from euphoric highs to catastrophic lows. When the debt spigot turns off, it means the only “safe” assets are cash and precious metals. When the sparks fly, it’s hard to tell where they might land. And it means that whichever market has the highest debt and the fastest credit growth will be the “most important asset class in the world”.

Right now, that is Chinese residential real estate.

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

With the Trump administration about to slap tariffs of up to 25% on an additional $200 billion in Chinese goods, new data suggests that the global slowdown has already begun. Confirming our observations from two weeks ago, in which we showed that the latest freight data indicated global trade volumes are slowing…

…on Friday Bloomberg highlighted that the world trade monitor compiled by the CPB Netherlands Bureau for Economic Policy Analysis showed the rolling three-month trade volumes are not only in decline but have entered into negative territory, an ominous harbinger of economic trouble.

As Bloomberg notes, “the drop is particularly striking given that commodities, one of the largest and most volatile subsets of globally traded goods, have been doing quite well – the CPB’s indexes of fuels and non-fuel commodities both reached the highest levels since 2014 in May.”

Instead, confirming the ominous recent developments in Brazil, where a clustering of supply-chain linked problems has resulted in a near paralysis in the country’s shipping industry, Bloomberg notes that “the weakness is coming not from materials but from manufactured goods, as global supply chains seize up.“

With the CPB index printing negative throughout the second quarter of the year, that echoes the numerous reports of a slowdown in the US. Manufactures “reported higher prices and supply disruptions that they attributed to the new trade policies,” according to the Federal Reserve’s July Beige Book, in addition to “higher input prices and shrinking margins.”

Next Wednesday, another Beige Book is due, and it is likely to show more evidence of slowing trade as a result of escalating trade wars.

While the stimulative effect of debt-fueled tax cuts and favorable fiscal policy have created a “Goldilocks economy” in the US, resulting in near record freight volumes in US ports, that temporary sugar high is most likely coming to an end, as a substantial portion of the increased volumes were related to businesses pulling forward consumption from future quarters to beat the tariffs, according to the National Retail Federation, an industry group.

Another shipping market index that tends to be an economic bellwether is the Baltic Dry Index (BDI), a composite of the Capesize, Panamax and Supramax Timecharter Averages rates. The index surged mid-summer thanks to companies getting ahead of tariffs, but following a late-July peak, the index has been steadily declining.

The fact that previous trade slumps have often coincided with a slowdown in domestic economic activity does not bode well for either the Trump administration and or republicans, with just two months left until the midterm elections.

via RSS https://ift.tt/2wW3pHA Tyler Durden

Authored by Patrick Buchanan via Buchanan.org,

The campaign to overturn the 2016 election and bring down President Trump shifted into high gear this week.

Inspiration came Saturday morning from the altar of the National Cathedral where our establishment came to pay homage to John McCain.

Gathered there were all the presidents from 1993 to 2017, Bill Clinton, George W. Bush and Barack Obama, Vice Presidents Al Gore and Dick Cheney, Secretaries of State Hillary Clinton, John Kerry and Henry Kissinger, the leaders of both houses of Congress, and too many generals and admirals to list.

Striding into the pulpit, Obama delivered a searing indictment of the man undoing his legacy:

“So much of our politics, our public life, our public discourse can seem small and mean and petty, trafficking in bombast and insult and phony controversies and manufactured outrage. … It’s a politics that pretends to be brave and tough but in fact is born of fear.”

Speakers praised McCain’s willingness to cross party lines, but Democrats took away a new determination: From here on out, confrontation!

Tuesday morning, as Senate Judiciary Committee hearings on Judge Brett Kavanaugh’s nomination to the Supreme Court began, Democrats disrupted the proceedings and demanded immediate adjournment, as scores of protesters shouted and screamed to halt the hearings.

Taking credit for orchestrating the disruption, Sen. Dick Durbin boasted, “What we’ve heard is the noise of democracy.”

But if mob action to shut down a Senate hearing is the noise of democracy, this may explain why many countries are taking a new look at the authoritarian rulers who can at least deliver a semblance of order.

Wednesday came leaks in The Washington Post from Bob Woodward’s new book, attributing to Chief of Staff John Kelly and Gen. James Mattis crude remarks on the president’s intelligence, character and maturity, and describing the Trump White House as a “crazytown” led by a fifth- or sixth-grader.

Kelly and Mattis both denied making the comments.

Thursday came an op-ed in The New York Times by an anonymous “senior official” claiming to be a member of the “resistance … working diligently from within to frustrate parts of his (Trump’s) agenda.”

A pedestrian piece of prose containing nothing about Trump one cannot read or hear daily in the media, the op-ed caused a sensation, but only because Times editors decided to give the disloyal and seditious Trump aide who wrote it immunity and cover to betray his or her president.

The transaction served the political objectives of both parties.

While the Woodward book may debut at the top of The New York Times best-seller list, and “Anonymous,” once ferreted out and fired, will have his or her 15 minutes of fame, what this portends is not good.

For what is afoot here is something America specializes in — regime change. Only the regime our establishment and media mean to change is the government of the United States. What is afoot is the overthrow of America’s democratically elected head of state.

The methodology is familiar. After a years-long assault on the White House and president by a special prosecutor’s office, the House takes up impeachment, while a collaborationist press plays its traditional supporting role.

Presidents are wounded, disabled or overthrown, and Pulitzers all around.

No one suggests Richard Nixon was without sin in trying to cover up the Watergate break-in. But no one should delude himself into believing that the overthrow of that president, not two years after he won the greatest landslide in U.S. history, was not an act of vengeance by a hate-filled city that ran a sword through Nixon for offenses it had covered up or brushed under the rug in the Roosevelt, Kennedy and Johnson years.

So, where are we headed?

If November’s elections produce, as many predict, a Democratic House, there will be more investigations of President Trump than any man charged with running the U.S. government may be able to manage.

There is the Mueller investigation into “Russiagate” that began before Trump was inaugurated. There is the investigation of his business and private life before he became president in the Southern District of New York. There is the investigation into the Trump Foundation by New York State.

There will be investigations by House committees into alleged violations of the Emoluments Clause. And ever present will be platoons of journalists ready to report the leaks from all of these investigations.

Then, if media coverage can drive Trump’s polls low enough, will come the impeachment investigation and the regurgitation of all that went before.

If Trump has the stamina to hold on, and the Senate remains Republican, he may survive, even as Democrats divide between a rising militant socialist left and the Democrats’ septuagenarian caucus led by Hillary Clinton, Joe Biden, John Kerry, Bernie Sanders and Nancy Pelosi.

2019 looks to be the year of bellum omnium contra omnes, the war of all against all. Entertaining, for sure, but how many more of these coups d’etat can the Republic sustain before a new generation says enough of all this?

via RSS https://ift.tt/2MccOj2 Tyler Durden

After publishing a highly controversial anonymous Op-Ed Wednesday purportedly written by a senior White House official who claims to be part of an internal “resistance” that is actively undermining the President, the New York Times has taken heat from all sides. 

The author has been generally deemed a coward – the right knocking them for their pre-midterm “hit-job,” while many on the left have suggested that the author should have published the piece under their real name in order to attach more credibility to a series of anonymous complaints about the President that the New York Times just doesn’t have the journalistic credibility to pull off anymore.

Indeed, the piece appears to have backfired – while President Trump has demanded that the Justice Department launch an investigation into the article for the sake of national security. 

Speaking at a Thursday night campaign rally in Billings, Montana, Trump said: 

for the sake of our national security, the New York Times should publish his name at once. I think their reporters should go and investigate who it is. That would actually be a good scoop. 

(APPLAUSE)

That would be a good scoop. Unelected deep state operatives who defy the voters to push their own secret agendas are truly a threat to democracy itself. And I was so heartened when I looked

And as The Intercept co-founder Glenn Greenwald points out: “The irony in the op-ed from the NYT’s anonymous WH coward is glaring and massive: s/he accuses Trump of being “anti-democratic” while boasting of membership in an unelected cabal that covertly imposes their own ideology with zero democratic accountability, mandate or transparency” 

Perhaps to try and win some points in the court of public opinion (and other possible courtrooms down the road), The Times has published answers to questions from nine readers out of 23,000 who submitted questions about the essay. 

Via the New York Times

Why did you publish this piece?

Why publish this? What purpose does it serve, other than to enrage its target and assuage the guilt of a collaborator? We have a mad king and a shadow government. This is a coup, not a heroic attempt to save democracy.

— Henry Matthews, New York

Henry:

In our view, this Op-Ed offered a significant first-person perspective we haven’t presented to our readers before: that of a conservative explaining why they felt that even if working for the Trump administration meant compromising some principles, it ultimately served the country if they could achieve some of the president’s policy objectives while helping resist some of his worst impulses.

We’ve certainly read excellent news stories that quoted anonymous officials making similar points and criticizing the president’s temperament and chaotic style. What distinguished this essay from those news articles was that it conveyed this point of view in a fleshed-out, personal way, and we felt strongly that the public should have a chance to evaluate it for themselves.

The only way that could happen was for us to publish the essay without a byline. That was an extraordinary step for us, but the piece touched off what we believe to be an important national debate about whether the writer, and similarly situated Trump administration officials, are making the right choice (many of our readers clearly think they are not).

— Jim Dao

***

How did you find this writer?

Did The New York Times seek out the author of this piece, or did the author seek out The New York Times?

— Norma Buchanan, Billings, Mont.

Norma:

The writer was introduced to us by an intermediary whom we know and trust.

— Jim Dao

***

How do you vet a piece like this?

How are you certain of the author’s identity?

— Martin Trott, Jackson Hole, Wyo.

Through direct communication with the author, some background checking and the testimony of the trusted intermediary.

— Jim Dao

***

What does ‘senior administration official’ really mean?

Who qualifies as a “senior administration official” for The New York Times? How many individuals are there in the administration who fit the bill?

— Daniel Burns, Hyattsville, Md.

Daniel:

I understand readers’ frustration that we didn’t provide a more precise description of the official. But we felt strongly that a broader categorization was necessary to protect the author from reprisal, and that concern has been borne out by the president’s reaction to the essay. The term we chose, senior administration official, is used in Washington by both journalists and government officials to describe positions in the upper echelon of an administration, such as the one held by this writer.

— Jim Dao

***

Would you ever reveal your source?

Under what conditions would The New York Times be forced to disclose the source of the Op-Ed?

— Stephanie Genkin, Brooklyn, N.Y.

Stephanie:

It is difficult to imagine a situation where The Times could be forced to disclose the author’s identity. The First Amendment clearly protects the author’s right to publish an essay criticizing the president, and absolutely nothing in the Op-Ed involves criminal behavior. We intend to do everything in our power to protect the identity of the writer and have great confidence that the government cannot legally force us to reveal it.

— Jim Dao

***

Were the writer’s motives considered?

Were the motives of the author considered when deciding whether to publish the Op-Ed?

— Samantha Combs, Pensacola, Fla.

Samantha:

Our first step in evaluating any submission is to look at the background of the writer and the quality and significance of the piece itself. But we do also take into consideration a writer’s motives as part of the vetting process.

It can of course be difficult to discern what those motives are, and in this case a combination of motives were undoubtedly in play, including the writer’s desire to defend the integrity of the president’s internal critics.

But we concluded that the author’s principal motivation was to describe, as faithfully as possible, the internal workings of a chaotic and divided administration and to defend the choice to nevertheless work within it. The resulting essay, we believe, is an important piece of opinion journalism.

— Jim Dao

***

Why now?

Why did you publish it now? At a time when the country should be focused on the Kavanaugh hearings, the outcome of which will affect us for the next 30 years or more, you totally distracted everyone with a guessing game. This administration is placing our democracy in enough danger. Do you really need to play along?

— Paul Birkeland, Seattle

Paul:

The simple answer is that we published when we did because the piece was ready to go and we saw no reason to wait. It certainly was not our intention to start a guessing game or draw the nation’s attention away from the Kavanaugh hearings.

The Op-Ed section considers the Supreme Court nomination to be of the utmost importance and, for that reason, has published numerous Op-Eds and columns about Judge Kavanaugh since he was nominated (including several just this week).

It was always our expectation that even if the Op-Ed created a splash, that the Kavanaugh hearings would remain a focus of media attention. And indeed, though the Op-Ed was the big news on Wednesday and Thursday, the hearings remained front-page news in The Times throughout the week. I should also point out that the actual vote on Judge Kavanaugh’s nomination could be more than a week away, leaving plenty of time for additional coverage.

— Jim Dao

***

Has this happened before?

You said publishing an anonymous Op-Ed essay is a “rare step.” So does it mean that it was not unprecedented? Then what were other times when you made a call to run anonymous Op-Eds? What were your rationales back then?

— Dien Luong, Vietnam

Dien:

It has happened before. Earlier this year, we published an anonymous essay by an asylum seeker whose name we withheld because she was concerned about gang violence against her family in El Salvador. In 2016, we published this Op-Ed by a Syrian refugee in Greece, using her first name only because her family in Syria faced threats. We also published in 2016 an account of the Syrian civil war by a writer in Raqqa using a pen name to protect him from being targeted by the Islamic State.

— Jim Dao

Did you consider the effect this piece might have?

To what extent did The Times consider the effect that publication of the piece would have in bolstering conspiracy theories about the “deep state” or QAnon, etc.?

— James Apps, Berlin

James:

We did not take that into consideration. It is difficult to ever know what reportage might feed into a conspiracy theory. But the essay included a passage that indicates the author suspected the piece might be viewed as part of a “deep state” theory: “This isn’t the work of the so-called deep state. It’s the work of the steady state.”

— Jim Dao

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Johnny Bobbitt Jr., a homeless veteran who has been fighting for nearly a year to win the balance of roughly $400,000 in charitable donations made out to him, will soon receive the roughly $325,000 that he is still owed by the New Jersey couple who raised the money, according to his lawyer, Chris Fallon.

In an interview with CNN, Fallon said that GoFundMe had promised to cover the rest of the money raised for Bobbitt via their platform if Kate McClure and Mark D’Amico, the couple in question, failed to pay up.

The couple recently saw their home raided by Burlington County police after lawyers working on Bobbitt’s behalf sued the couple and filed a complaint saying McClure and D’Amico had refused to turn over the money – which the couple raised for Bobbitt via a GoFundMe campaign that went viral – which the lawyers argued rightfully belonged to Bobbitt.

GoFundMe said that it would launch an investigation into what happened with the funds based on whatever evidence was seized from the couple’s home by Burlington County police. But regardless of what happened, the donations are backed by GoFundMe’s “GoFundMe guarantee,” which protects donors and recipients.

Here’s more from Fallon, who broke the news to CNN.

“We reached an agreement today with GoFundMe and they have agreed to make sure he will be made whole,” Fallon says.

In a statement, the company said it would back the money raised:

“…Our platform is backed by the GoFundMe Guarantee, which means that in the rare case that GoFundMe, law enforcement or a user finds campaigns are misused, donors and beneficiaries are protected.”

McClure and her boyfriend set up the GoFundMe page after Bobbitt, a homeless vet who has struggled with susbstance-abuse problems, used his last $20 to buy gas for McClure after her car ran out of fuel, leaving her stranded on the side of I-95 in a dangerous neighborhood of Philadelphia. The couple started the page, which was titled “Paying it Forward” to help repay Bobbitt for his generous act of altruism, and it quickly went viral: 14,347 people donated $402,706 over the course of 10 months. However, they quickly reneged on their promise to turn the money over, and instead parceled it out to Bobbitt in installments, eventually giving him a total of $75,000. To justify their actions, D’Amico told the press that giving the whole sum to an addict would be like giving him a loaded gun. However, their shady actions have raised speculation that they may have spent the money.

Following the complaint, the couple hired a lawyer and repeatedly refused to produce an accounting of the funds. D’Amico later admitted that he “borrowed” $500 from Bobbitt’s pot and spent it on online poker – but insisted that he had paid the money back with his winnings. The couple has repeatedly denied any wrong doing, but they have also refused to abide by a court order to hand over the money.

On Thursday, the couple agreed to let a forensic accountant examine their books. They’ve also been ordered to appear in person at a deposition on Monday by Judge Paula Dow, who has said she’s “no longer comfortable” hearing only from the couple’s attorney.

Meanwhile, Bobbitt has been enrolled in a 28-day detox program and given $20,000 to cover his living expenses until he recovers the balance of the money.
 

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The noose around the neck of the anonymous author of the infamous NYT op-ed is growing tighter…or at least that’s what the Trump administration wants us to think.

After all the furor over Rand Paul’s suggestion that everybody in the West Wing with a security clearance should be made to take a lie-detector test, the White House may not need to go to the trouble, if recent stories in CNN and the New York Times are to be believed (which…we’ll get to that later). According to these stories, the hunt to expose the anonymous author saboteur behind the NYT op-ed detailing the internal “resistance” to President Trump is closing in on a suspect. In just two days, the administration has narrowed down the list of suspects from a list of 18 names to just “a few individuals.”

By his own admission, Trump is still “obsessed” with smoking out the author of the op-ed and has mostly ignored pleas from Chief of Staff John Kelly and others to abandon it (Kelly allegedly believes that any more headlines about the op-ed will do little good and only remind the public of its contents). According to CNN, senior administration figures including Kellyanne Conway believe the author handles duties pertaining to national security.

So far, more than 25 senior administration officials, including Vice President Mike Pence (who was one of the earliest suspects) , have publicly denied being the author. Still, suspicions persist that either Pence, or a member of his staff, was the source. During comments to reporters aboard Air Force One on Thursday, and later during a rally in Montana, Trump has made it clear that he’s determined to uncover the source and considers the issue a matter of national security (or possibly an act of treason).

For what it’s worth, CNN has said it doesn’t know the identity of the report’s author.

CNN is not aware of the identity of the individuals White House aides have zeroed in on. In an interview with CNN’s Christiane Amanpour, White House counselor Kellyanne Conway said Trump believes the individual is someone from the national security sector of the government.

The op-ed published Wednesday afternoon, just a day after excerpts from veteran journalist Bob Woodward’s new book, “Fear: Trump in the White House,” were published. The book passages published in The Washington Post and by CNN showed a White House consumed by chaos and disarray, including stories of aides insulting Trump behind his back and going so far as to steal documents off his desk in order to keep him from signing them.

The anonymous writer of the op-ed said the resistance inside Trump’s administration is not the same as the resistance from the political left. The author wrote that the resistance inside the government wants “the administration to succeed … But we believe our first duty is to this country, and the president continues to act in a manner that is detrimental to the health of our republic.”

“That is why many Trump appointees have vowed to do what we can to preserve our democratic institutions while thwarting Mr. Trump’s more misguided impulses until he is out of office.”

While these reports could be genuine, it’s interesting that Conway and others had initially suggested that the author’s “senior” status might’ve been an exaggeration, and that the author may instead be a relatively high-ranking staffer from inside one of the federal agencies. If that were the case, the author could be one of potentially hundreds of individuals, Conway had said. This begs the question: Are these leaks merely a preamble for the administration setting up a patsy, perhaps Attorney General Jeff Sessions, who will be made to take the fall for the op-ed as an excuse to clean house during one of the most sensitive periods of the Trump presidency?

Whatever the reason, we imagine the White House will produce the “culprit” in short order.

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Just weeks after federal authorities accused Super Bowl LII champion Mychal Kendricks with insider trading stemming from a scheme where he allegedly bribed a (now former) Goldman Sachs analyst in exchange for nonpublic tips about some of the investment bank’s upcoming deals (the analyst, Damilare Sonoiki, was also charged in the scheme), the former Philadelphia Eagles linebacker has decided to throw in the towel.

Mychal Kendricks (AP)

Despite the fact that he’s still facing a sentence of up to 25 years in prison, Kendricks pleaded guilty on Thursday, according to the New York Post.

U.S. District Judge Gene E.K. Pratter asked Kendricks why he was pleading guilty.

“I’m making the decision because it’s the right thing to do,” he said, according to The Philadelphia Inquirer. “I know that I made the decision to accept information, secret information, and it wasn’t the right thing to do.”

As we’ve previously noted, Kendricks, who signed with the Cleveland Browns this year after winning a Superbowl with the Philadelphia Eagles, used the insider tips to earn about $1.2 million in illegal profits on four trades. Kendricks paid Sonoiki  $10,000 in cash and perks like Eagles tickets. The illegal activity allegedly took place between 2013 and 2015. Kendricks was let go from his contract with the Browns last month after news of the charges broke. Sonoiki, meanwhile, had left his junior analyst position at Goldman to take a job in TV writing.

Sonoiki’s lawyer told the Philadelphia Inquirer that his client would also plead guilty, but no date has been set. Kendricks will be sentenced on Dec. 18.

For all those would be white-collar criminals out there, let this be a lesson: Maybe just stick your money in SPY. Or if you’re feeling saucy, maybe give a game of darts a try.

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A key player at the very beginning of the Obama administration’s counterintelligence operation on the Trump campaign “is missing and may be deceased,” according to Bloomberg, citing a late Friday court filing by Democratic National Committee (DNC) lawyers in their case against Russia over hacking during the 2016 election. 

Maltese professor Joseph Mifsud – who bragged last November that he was a member of the European Council on Foreign Relations and the Clinton Foundation, told Trump campaign aide George Papadopoulos on April 26, 2016 that Russia had “dirt” on Hillary Clinton weeks before Papadopoulos would drunkenly repeat the same rumor to Australian diplomat Alexander Downer on May 10. 

Downer’s subsequent report to “five eyes” authorities resulted in the launch of Operation Crossfire Hurricane – the FBI/DOJ’s counterintelligence investigation into the Trump campaign. Recall that former FBI agent Peter Strzok flew to London to meet with Downer in the summer of 2016. 

Mifsud has been missing since October, 2017 – while Papadopoulos was just sentenced to a grand two week stint in prison for lying to the FBI about his contacts with the Maltese professor. 

The DNC stood by its claim in a statement to The Hill on Friday. The committee indicated that an investigator had been used to find Mifsud, who has been missing for months, and was told the Maltese professor may be dead.

“The DNC’s counsel has attempted to serve Mifsud for months and has been unable to locate or contact him. In addition, public reports have said he has disappeared and hasn’t been seen for months,” DNC spokeswoman Adrienne Watson said. –The Hill

Meanwhile, a close associate of Mifsud, Gianni Pittella, has been described by EU parliament as a “reliable ally” to George Soros. 

However, according to internal documents from George Soros Open Society Foundation leaked in 2016, Pittella is considered to be a close ally of George Soros. The 127-page document by the Open Society European Policy Institute, titled “Reliable allies in the European Parliament (2014 – 2019),” lists the names of 226 EU MEPs that are likely to support the Open Society Foundation and its many initiatives. Included among the names of 226 MEPs is that of Gianni Pittella. –Disobedient Media

Mifsud was also the link between Papadopoulos and his wife of six months, attorney Simona Mangiante – bolstering theories by some that he purposefully seeded the Russia-Clinton “dirt” rumor in order to lure the Trump campaign into a trap. 

1. Fiction is truly anemic compared to the rich tapestry of the bizarre that we are privy to in daily life: consider this:
Simona Mangiante first connected with Papadopoulos on LinkedIn after Papadopoulos noticed they shared a mutual connection.

— Rising serpent (@rising_serpent) June 6, 2018

Expanding this Twitter thread by user @rising_serpent, we find: 

2. That connection was Joseph Mifsud, a most mysterious former Maltese government official who ran an institute called the London Centre of International Law Practice in Britain. THE Joseph Mifsud now made infamous by her husbands indictment by Robert Muller.

3. Mangiante, started working at the organization after meeting Mifsud while she was employed at European Parliament in Brussels. Papadopoulos, who had worked for Mifsud’s organization as well, reached out to say he liked her profile picture.

(article: George Papadopoulos, his bride-to-be, and the Russia-linked ‘professor’ who brought them together)

4. Mangiante left the London Centre of International law after three months, after concluding the law office was “a facade for something else.” But the two continued to talk over the Internet, before meeting in person for the first time in New York in spring 2017.

5. Mangiante was introduced to Mifsud in 2012 by Gianni Pittella, a well-known Italian MEP who in 2014 became president of the Socialists and Progressive Democrats group. “I always saw Mifsud with Pittella,” So, Mangiante knew Mifsud for many years before she did Papadopoulos

6. Mangiante worked for 2 European parliament officials, Mairead McGuinness, a vice-president & McGuinness’s Italian predecessor Roberta Angelilli. She was also admin to home affairs committee under Martin Schulz, then a German MEP & now leader of Germany’s Social Democrats

7. So Mangiante moved within the corridors of power within Europe’s Italian Democrats & German social democrats. When her contract expired, Pittella suggested she go work for Mifsud in London who offered her a job in 2016 at the London Centre of International Law Practice

8. in September 2016, Mangiante received a message on the LinkedIn social network from George Papadopoulos. Papadopoulos had worked at the same London Center of International law centre briefly before joining Trump’s campaign. That was the beginning of their acquaintance.

9. It appears that Mangiante started her job around September 2016, the same time as she started corresponding with Papadopoulos. Mangiante was not happy with her work in London.

(article: The boss, the boyfriend and the FBI: the Italian woman in the eye of the Trump-Russia inquiry)

10. The entire institution seemed “fake”, “artificial”, with Mifsud interested solely in organising political meetings. “I didn’t smell a culture of academia” Mifsud’s diplomatic activity, Mangiante now believes, was a facade. “I never met any Russians there”

11. Mangiante quit her post there after three months, in November 2016. In the meantime, Mangiante’s romance with George began. After several unsuccessful efforts to get together in London, they met in March 2017 in New York. They hit it off, began dating and fell in love

12. Prior to meeting Mangiante, FBI had interviewed Papadopoulos Jan 2017 in connection with the collusion investigation. Papadopoulos gave federal agents a false account of his meetings with Mifsud. So he deleted his Facebook account and changed his cellphone number.

13. So almost 3 months prior to Papadopoulos actually meeting Mangiante he was already in the crosshairs of FBI, he was deleting facebook, changing phone numbers and like James Bond, was actively romancing a beautiful woman. Plausibility check # 1, what do you think ?

14. On the day Papadopoulos pleaded guilty, Mangiante was at her boyfriend’s family home in Chicago. There was a ring at the door. A casually dressed man informed her that he was a federal agent. He was serving her with a subpoena from Mueller.

15. Mangiante decided not to hire a lawyer after discovering they cost $800 an hour. She turned up alone at Chicago FBI headquarters. the FBI was interested in her relationship with Papadopoulos. Was it genuine? “They asked: “Do you love him?” “Yes”. They replied: ‘He is lucky’”

16. Plausibility check # 2. Do you think about how much lawyers cost when the FBI tells you that your boyfriend is chin deep in legal manure and you may be too? Stormy Daniels gets a lawyer for free, but someone being investigated by the FBI thinks about a lawyers cost?

17. March 2016 Papadopoulous learned he would be Trumps foreign policy advisors, he ended up meeting Mifusud on March 14 2016 while he was traveling in Italy (where Mangiante was, coincidentally). Important: He met Mifsud first in Italy, see indictment (click here)

18. Mifusd’s interest is piqued when he learned that Papadopoulos was going to be involved with the Trump campaign. They meet again subsequently in London on March 24th 2016 when Mifusd was accompanied by the “Putins niece” Olga Vinogradova, who like Mifsud has now disappeared.

19. Papadopoulos met Mifusd again on April 24th 2016 for breakfast at a London hotel. This is the first time that Mifsud tells him he knows the Russians have “dirt” on Hillary. Mind you the DNC leaks weren’t published till June/July 2016. Important point right there.

20. That DNC was hacked by the Russians remains a matter of great contention and those with exquisite expertise in cybersecurity don’t agree with the assertion that Russians hacked it. Remember the only people that conducted the investigation into the hack were CrowdStrike

21. Now we turn the bizarre dial to 11, why did Papadopoulos say to Mangiante when he was looking at her LinkedIn profile that they worked for the same company? Two things wrong with this: I couldn’t find any evidence that Paps worked for the London center of international law

22. and if he did, he would have known Mifsud from his work, so the whole theory of his being introduced to Mifusd falls flat.

23. The BIG question: by the time Papadopoulos began corresponding with Mangiante in Sept 2016, he was a part of the Trump Campaign, what was he looking at LinkedIn profiles of people working at the London center of international law for? What am I missing here? 

24. I have more questions than answers, but the timeline just doesn’t add up, there is a lot missing here apart from my functioning neuronal circuitry. All of this is important in the context of Mangiante’s recent media blitz and her asking for Trump to pardon Papadopoulos.

25. Feel free to add to what I have just outlined. Things are not only a little askew here but seems that we are seeing this whole matter askance and many facts are obscured by layers of hearsay disguised as factual information. -fin.

26. Addendum: anybody else find it most peculiar that Mangiante worked for Italian and German social democrats? Especially now that we know that MI6 (Downer/Steele/Halper) were probably involved with the genesis of the Steele dossier?

27. Mifusud appears to be more aligned with the UK than he is with the Russians, Mangiante herself said so. Also she has since dialed down her touting of her husbands role in the Trump campaign, why?

Fascinating… 

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Recently we discussed how in addition to the widely manipulated Chinese GDP data, new concerns had emerged about official data involving Chinese industrial profits, because while China’s National Bureau of Statistics has traditionally reported positive year-on-year growth rates in percentage terms, growth in absolute yuan terms has been negative. This deviation, which barely happened in the past, has reinforced scepticism over the quality of Chinese “data” and fueled fresh suspicion that the NBS generates data outcomes that match the policy goals of the Chinese government leadership instead of reflecting the true state of the economy.

More recently, similar worries have been noted over China’s consumption data, which have been sending what Goldman politely calls “mixed signals lately”, and which a more cynical take would dub “massaged”, if not outright fabricated. Which, with China’s economy increasingly turning into a consumption-driven model like that of the US, is a problem if economists, analysts and investors are unable to get an accurate grasp on consumption trends in the world’s second largest economy.

The problem in a nutshell: NBS retail sales slowed in Q2 and also in July, while NBS household consumption expenditure and GDP final consumption contribution (quarterly data) rebounded relatively strongly in Q2. Other widely observed consumption data include 100 major retailers’ sales, with the data painting a bearish picture in recent months and showing negative year-over-year growth in July.

This, as Goldman notes in a Saturday report, has led many investors to ask: where does the divergence come from and how has consumption been growing in reality?

Goldman then spills a lot of digital ink to offer various politically correct explanations for why the government’s stronger data may be accurate, although even the bank is not fully able to justify the variation between government data, and private reported data from 100 major retailers, whose sales growth has been a lot weaker than the official NBS goods retail sales report.

Specifically, the bank notes that when plotted against listed department store revenues, the 100 major retailers’ sales move relatively closely with listed companies’ data. In fact, as shown in the chart below, the retail sales reported by China’s 100 major retailers has been flat at best over the past 4 years, and most recently, has sunk into contraction.

One possible explanation for this stark divergence between the “too pessimistic” private vs optimistic public retail sales data is that the the former does not capture the consumers’ shift to online stores for purchases.

Online sales showed much faster goods consumption growth – NBS online goods retail sales data and package delivery data (our proxy for online goods sales) both suggest online goods sales have probably been growing at close to 30% yoy so far this year, in contrast to the negative year-over-year growth recorded in the offline goods sales channel.

Assuming the truth is somewhere in the middle, something which Goldman has attempted to do with its own proprietary Chinese goods consumption tracker, still shows a sharp decline in annual sales growth on a Y/Y basis, hardly encouraging for an economy that hopes to becomes less reliant on fixed asset investment and transition into a consumption driven model.

Which brings us to the core of the report: what is behind the slowdown in China’s goods consumption – this key driver of Chinese GDP – and what is the outlook going forward.

As Goldman explains, there are multiple reasons behind the softer goods consumption trend – unfavorable wealth effects from the property and equity market, income-related drags such as fewer subsidies from shanty town redevelopment plans, but the biggest driver is the slower growth of consumer credit, and higher debt service burdens due to larger mortgages and greater consumer credit.

Of these, the bank estimates that the key catalyst explaining the slowdown in Q2 consumption is the fading credit impulse and higher debt service costs, and that these could further shave goods consumption growth later this year. As for the culprit, the most likely suspect is Beijing’s recent crackdown on Chinese P2P lending: recall that one month ago we reported that as part of China’s crackdown on peer-2-peer online lending which had grown at a blistering pace heading into 2018 only to suffer a waterfall of defaults, social unrest had broken out in some parts of the nation as China scrambled to avoid the bursting of yet another credit bubble.

So where does that leave us? Well, as Goldman writes, the trend of softer goods consumption may continue as loans via P2P platforms are now more than 10% of consumer credit (this includes all loans via P2P in consumer credit, while P2P loans could also be invested in corporate bonds and property markets), and recent P2P defaults have prompted large-scale redemptions by investors (P2P loans outstanding amount shrank from 1.3 trillion RMB in June to around 900bn RMB in August, based on WIND data) as investors perceive higher risks and regulations tightened.

This has resulted in a sharp consumer deleveraging, and loss of purchasing power, as ordinary Chinese found one relatively easy debt channel shuttered.

Factoring in this slowdown and assuming other categories of consumer credit continue to grow at the speed seen in 1H 2018, overall net credit flows (as a share of disposable income) would slow even more in 2H 2018.

How much more?

When combing with the lagged effects from the recent slower consumer credit growth, Goldman estimates that the fading credit impulse and associated debt service costs will shave goods consumption growth by a whopping 3% in 2H 2018, resulting some time in late 2018 and early 2019 in the most negative print since the financial crisis. This, as shown in the chart below, would lead to the fastest slowdown in Chinese consumption this decade.

Needless to say, such a sharp contraction in consumption would lead to broad, adverse spillover effects affecting everything from China’s GDP (which would be severely impacted), to China’s reflationary impulse which has been so critical for the past decade, and which would go into reverse, sparking another global deflationary shockwave and sharply lower interest rates.

What is most concerning is the timing: all of this is set to take place just as Trump’s $1.5 trillion fiscal stimulus reaches its one year anniversary (i.e. the base effect fades), and what until now has been a sugar high for the economy on a Y/Y growth basis, will result in contraction absent another round of fiscal stimulus. It would also impact global asset prices and markets, many of which are already suffering from sharp, “rolling bear market” selloffs as a result of emerging market turmoil which has so far spared the US. 

In short, and as always: keep an eye on China’s collapsing credit impulse for hints on what happens next going into 2019, a year in which many economists and pundits believe the US recession will finally make a repeat appearance.

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Authored by Adam Taggart via PeakProsperity.com,

Perhaps the greatest single trend impacting the next decade

Total debt (public + private) in America is currently at a staggering $67 trillion.

That number has been rising fast over the past 47 years, following the US dollar’s transformation into a fully-fiat currency in August of 1971.

Perhaps this wouldn’t be such a big concern were America’s income, measured by GDP, growing at a similar rate. But it’s not.

Growth in debt has far outpaced GDP, as evidenced by this chart:

In 1971, the US debt-to-GDP ratio was 1.48x. That’s roughly the same multiple it had averaged over the prior century.

But today? That ratio has spiked to to 3.47x, more than doubling over just 4 decades.

There are many troubling conclusions to draw from this, but here’s a simple way to look at it: It’s taking more and more debt to eke out a unit of GDP growth.

Put in other words: the US economic engine is seizing up, requiring increasingly more effort to function.

At some point — quite possibly some point soon — the economy will no longer be able to grow because all of its output must be used to service the ballooning debt load rather than future investment.

Accelerating this point of reckoning are two major recent trends: rising interest rates and the end of global QE.

Why? Because much of the recent explosion in debt has been fueled by central bank policy:

• Interest rates have been on a steady decline since the 1980s, making debt increasingly cheaper to issue and to service.

• Since 2008, central banks have been voracious buyers of debt. Countries/companies have been able to borrow $trillions, enabled (both directly and indirectly) by these “buyers of last resort”.

But both of those trends are ending, fast.

Interest rates have been rising off of their all-time rock-bottom lows over the past two years. While still low by historic standards, the rise is certainly material enough already to make the US’ $70 trillion in total debt more expensive to service, putting an even greater weight on America’s already-burdened economy.

And all indicators point to even higher rates ahead; with the Federal Reserve expected to increase the federal funds rate another 50% by 2020:

These higher rates make the US debt overhang even more expensive to service, while also forcing valuations downwards for major asset classes like bonds, housing and equities (the prices of which are derived in part by interest rates, as explained here).

These higher expected rates also co-incide with the cessation of global quantitative easing (QE). The world’s major central banks have announced that they will cease making purchases by 2020:

Without these indiscriminate buyers-of-last-resort, debt issuers will need to offer higher rates to entice the next marginal buyer. How much higher will rates need to rise as a result? It’s pretty easy to make the argument for “a lot”.

We’ve been talking quite a bit recently about the implications of hitting America’s “Peak Debt” threshold with David Stockman in preparation for our upcoming seminar with him next week. He’s extremely concerned. Here’s what he has to say on the matter (4m:42s):

He also fears that we have the exact wrong expertise in place inside our financial markets to deal with the coming crisis, as there’s an entire generation of Wall Streeters who have never seen rates as high as they are today. More than that, there’s virtually no one left in today’s financial industry with actual experience operating within a rising interest rate environment (2m:09s):

James Howard Kunstler, another co-presenter at next week’s seminar, is similarly worried that the current state of the financial system is so fragile that a “convulsion” (i.e., a painful downdraft that violently reprices assets) is inevitable at this point (5m:46s):

If you’re wondering what warning signs to watch for closely, or what steps to take in advance of the market convulsion predicted by Kunstler and Stockman, we’ll be diving deeply into those at next week’s Peak Prosperity New York City Summit on Sunday, Sep 16, 2018. You’ll have the chance to meet these experts personally, spend the day with them, and ask them your most burning questions.

To learn more about this event, click here.

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