As someone who has been warning heavily about dangerous bubbles in U.S. corporate bonds and stocks, people often ask me how and when I foresee these bubbles bursting. Here’s what I wrote a few months ago:
To put it simply, the U.S. corporate debt bubble will likely burst due to tightening monetary conditions, including rising interest rates. Loose monetary conditions are what created the corporate debt bubble in the first place, so the ending of those conditions will end the corporate debt bubble. Falling corporate bond prices and higher corporate bond yields will cause stock buybacks to come to a screeching halt, which will also pop the stock market bubble, creating a downward spiral. There are extreme consequences from central bank market-meddling and we are about to learn this lesson once again.
Interestingly, Zero Hedge tweeted a chart today of the LQD iShares Investment Grade Corporate Bond ETF saying that it was “about to break 7 year support: below it, the buybacks end.” That chart resonated with me, because it echos my warnings from a few months ago. I decided to recreate this chart with my own commentary on it. The 110 to 115 support zone is the key line in the sand to watch. If LQD closes below this zone in a convincing manner, it would likely foreshadow an even more powerful bond and stock market bust ahead.
Thanks to ultra-low corporate bond yields, U.S. corporations have engaged in a borrowing binge since the Global Financial Crisis. Total outstanding non-financial U.S. corporate debt is up by an incredible $2.5 trillion or 40 percent since its 2008 peak, which was already a precariously high level to begin with.
U.S. corporate debt is now at an all-time high of over 45% of GDP, which is even worse than the levels reached during the dot-com bubble and U.S. housing and credit bubble:
Please watch my presentations about the U.S. corporate debt bubble and stock market bubble to learn more:
Billionaire fund manager Jeff Gundlach shares similar concerns as me, saying “The corporate bond market is going to get much worse when the next recession comes. It’s not worth trying to wait for that last ounce of return, or extra yield from the corporate bond market.” Another billionaire investor, Paul Tudor Jones, put out a warning this week, saying “it is in the corporate bond market where the first signs of trouble will emerge.” GE’s terrifying recent credit meltdown may be the initial pinprick for the corporate debt bubble, but make no mistake – it is not an isolated incident. GE may be the equivalent to Bear Stearns in 2007 and 2008 – just one of the first of many casualties.
Anyone who thinks that the Fed can distort the credit markets for so long without terrible consequences is extremely naive and will be taught a lesson in the days to come.
Facing a “critical week” that will include a meeting with EU bureaucrats in Brussels and culminate with a weekend summit to iron out the final details of May’s draft Brexit plan, as well as an accompanying political statement, Theresa May is resorting to threats and scare tactics to drum up support for her supremely unpopular draft Brexit plan, which she insists is the “best deal possible” and “in the national interest” despite many salient criticisms expressed by Brexiteers and remainers alike.
In an interview with Sky News on Sunday that featured May facing off with Labour leader Jeremy Corbyn, the prime minister claimed that some of the concerns raised by opponents of the deal could be addressed with alternations to the accompanying political statement, a nonbinding agreement that is intended to create a ‘framework’ for the future trading relationship between the two sides.
And if this isn’t enough, well, MPs would be better off if they swallowed their doubts and trusted the process – at least, if they want Brexit to succeed. Because provoking a leadership change at this point would likely jeopardize the UK’s ability to reach any deal with the EU. And faced with the possibility of a “no-deal” Brexit, it’s likely that MPs would vote for a second referendum to would raise the possibility of Brexit being scrapped altogether.
“These next seven days are going to be critical, they are about the future of this country,” May told Sky News. “I am not going to be distracted from the important job.”
“A change of leadership at this point isn’t going to make the negotiations any easier…what it will do is mean that there is a risk that actually we delay the negotiations and that is a risk that Brexit gets delayed or frustrated.”
May’s suggestion that Brexit could still be cancelled comes as Scottish leader Nicola Sturgeon said her MPs would vote against the draft plan, while a poll of 505 Tory MPs found that more were against the deal than for it. This would add to the unanimous opposition from the DUP (the Northern Irish party propping up May’s government) and almost guarantee that the deal would lose by a staggering margin, given that most Labour MPs would also be expected to vote against.
Meanwhile, in an interview on the Andrew Marr show, May’s former Brexit Secretary Dominic Raab offered his most detailed explanation yet about why he decided to resign this week. As Raab explained, with “two or three points” being changed, Raab said he would be able to support the deal. But instead of pushing for these changes, Raab said May is “being bullied, I do think we are being subjected to what is pretty close to blackmail frankly.”
“This is a manageable problem,” Raab said.
While Raab said he would support May should a leadership challenge arise, he played down speculation about his own leadership ambitions, which is exactly something that somebody with leadership ambitions would do.
Even more discouraging is the latest Ipsos poll, which showed that May’s unpopular deal has bolstered Labour’s popularity, as its leader, Jeremy Corbyn, has been steadfastly critical of May’s deal (voices many of the same concerns as the ERG), insisting that Labour could win a better deal in time for Brexit and hinting that, if the current deal isn’t modified, a second Brexit referendum (what conservative and labour MPs have referred to as a “People’s Vote) might be necessary at some point.
Compared with a month ago, the Conservatives have dropped five points to 36% while Labour has gained three to stand on 39%. The proportion of Leavers backing the Tories has dropped by 10 points in one month.
And as if the domestic opposition wasn’t enough of an obstacle, Brussels on Sunday deepened May’s predicament by declaring in a seemingly arbitrary way that any extension to the Brexit transition period last at least a year, and be accompanied by an additional 10 billion euro payout (in addition to the 39 billion euros the UK would be expected to pay under May’s plan, according to the Guardian.
If there was one silver lining in the weekend onslaught of Brexit-related news, it was that Graham Brady, the leader of the conservatives’ 1922 committee, confirmed that he has not received the 48 no confidence letters necessary to trigger a leadership challenge against May.
But the European Research Group, the umbrella group of Brexiteer Torys who have ferociously opposed May’s deal, released on Sunday a concise accounting of its criticisms of May’s plan. After a close reading, the arguments would seem to undercut May’s insistence that her deal is a “good deal” that was negotiated on the “UK’s terms.” In essence, the ERG is accusing May of abandoning her promise, made in January 2017, that she would avoid any deal that would leave the UK “half in, half out” of the EU. But by allowing for the possibility that the UK could be bound by EU rules set by the ECJ, as well as customs union rules over which the UK would have no say, May is setting up the UK to become a “vassal state” beholden to the EU’s rules, with no say in deciding them.
With investment banks like Deutsche Bank seeing a renegotiation of May’s deal as a base case (while also allowing for the possibility that another Brexit referendum could follow if May is ousted), and May’s own top cabinet ministers reportedly planning to pressure her to approach Brussels about renegotiating the deal, UK traders should be bracing for more turmoil in markets because – regardless of what happens – it looks like this fraught back-and-forth could continue right up until the March 29 “Brexit Day” deadline.
When was the last time a monopoly or quasi-monopoly was broken up? A generation ago, or was it two generations ago?
The Ruling Class that wants us to love our servitude incites us to seek divisions: between red and blue, left and right, progressive and conservative, and so on. The Ruling Class in the mainstream media, in Washington D.C. and in Silicon Valley are experts at manipulating language and terminology to divide and conquer.
But beneath the superficial red-blue divide they are hawking, a broad-based political rebellion against the Oligarchy and their Ruling Class nomenklatura is gathering momentum. People left, right and center are awakening to two painfully obvious realities:
1. the political-social-economic system no longer works for the bottom 95%
2. the system is intrinsically unfair–rigged to benefit the few at the expense of the many.
The bottom 95% lack the political influence of the Oligarchy, and so their only means of expressing their disapproval is at the ballot box, by rejecting the approved mainstream candidates in favor of candidates who might move the needle in a rigged system.
What are the core economic issues that people are trying to solve at the ballot box?
1. The systemic lack of fairness: the growing sense that opportunities are not being distributed as widely or fairly as they once were; ruling elites now have advantages the “rest of us” don’t.
This advantage is very basic: capital has accrued most of the gains of the past decade’s growth and asset appreciation, labor’s share of the GDP continues to slide.
Much of the wealth is controlled by corporate-state cartels operating rentier skims: prices rise while quality and quantity of goods and services remains the same or decline. This is more akin to extortion than a free-market competitive market.
The pathway to middle-class security that was viewed as a birthright no longer works: go to college, get a secure job, buy a house, etc. A university diploma now saddles students with the equivalent of a mortgage in many cases, while housing in strong job markets has soared out of reach of all but the top 5%.
2. In response, people seek a political solution to systemic unfairness. In general, there are two solutions being offered:
A. Establish political limits on globalization, which is viewed as rewarding the few at the expense of the many. Opponents of deglobalization label this “nationalism” to tar it with unsavory connotations but this misses the point: globalization can indeed be exploitive and benefit the few at the top. The notion that “a rising tide raises all boats” overlooks the asymmetric distribution of globalization’s gains.
B. Establish QE for the People policies, which broadly speaking are political policies designed to more fairly redistribute the nation’s wealth and income that’s increasingly concentrated in the hands of the top few.
QE for the People policies include higher infrastructure spending (as that creates jobs and benefits all of society), tax credits for the working poor, Universal Basic Income (UBI), and ideas such as publicly owned banks.
To pay for QE for the People policies, proponents seek higher taxes on the wealthy and higher public spending, even if it is funded by debt (selling bonds).
Political solutions to embedded unfairness / inequality / rigged systems / diminished opportunities (i.e. asymmetric gains and unfair advantages) may be politically sound but economically unsound, that is, these policies might have unintended consequences: for example, borrowing large sums to pay for UBI and other costly programs might create inflation, raising the government’s borrowing costs and squeezing social spending while reducing the purchasing power of household earnings.
If we conclude that asymmetric gains, unfair advantages and rising inequality are systemic, then political policies should address the fundamental structural problems: for example, anti-trust enforcement that breaks up the stranglehold of cartels and rentier arrangements in healthcare, higher education, media, Silicon Valley, national defense, etc.
When was the last time a monopoly or quasi-monopoly was broken up? A generation ago, or was it two generations ago? The Oligarchy now has such a tight grip on the centers of power, the traditional limits on concentrated wealth and power have been fatally enfeebled.
In response, the bottom 95% are rebelling.Loving your servitude sounds wonderful if you’re in the top 5% reaping the gains of aiding and abetting the Oligarchy’s tightening stranglehold on power, but the bottom 95% are sick and tired of a rigged, dysfunctional system that’s destroying the social contract to further enrich the few and their technocrat enablers.
In other words, policies that limit the exploitation/predation of the Oligarchy and their enforcers do more than redistribute income: they rebalance the tilted playing field and widen competition and opportunity rather than merely distribute “free money.”
Gordon Long and I discuss these topics in a new video program:
President Trump sat down with Fox News‘s Chris Wallace on Friday for a wide-ranging interview which aired Sunday, in which he discussed a variety of topics from border security, to acting Attorney General Whitaker and the Mueller probe, to renewed rumors of discontent within the White House, and of course – his thoughts on CNN‘s Jim Acosta whose press pass was pulled and then restored after a contentious altercation over the Central American migrant caravan making its way north.
While a Trump-appointed judge ruled that the White House had to restore Acosta’s credentials on Fifth Amendment grounds – noting that Trump could just ignore Acosta, Trump had another idea:
“I think one of the things we’ll do is maybe turn the camera off that faces them because then they don’t have any air time, although I’ll probably be sued for that and maybe, you know, win or lose it, who knows,” said Trump. “I mean, with this stuff you never know what’s going to happen.”
Calling Acosta “unbelievably rude to [White House press secretary] Sarah Huckabee, who’s a wonderful woman,” Trump said his administration is currently formulating “rules and regulations” for White House reporters. “And if he misbehaves, we’ll throw him out or we’ll stop the news conference,” the president added. –Fox News
Addressing calls for Acting Attorney General Matthew Whitaker to recuse himself from the Mueller probe over past comments which were critical of its scope and legality, Trump said “I did not know he took views on the Mueller investigation as such,” adding that he “would not get involved” in whether Whitaker curtails the special counsel.
“Look he — it’s going to be up to him,” Trump said. “I think he’s very well aware politically. I think he’s astute politically. He’s a very smart person. A very respected person. He’s going to do what’s right. I really believe he’s going to do what’s right.“
The President added that he had answered several questions from Mueller’s team, and that they would be submitted “very soon.” Trump added that his lawyers are “writing what I tell them to write” in response to the questions.
Midterms
Trump then appeared to gloat a little over the fact that some of the top candidates Obama had backed during the midterm elections had lost.
“I won against President Obama and Oprah Winfrey and Michelle Obama in a great state called Georgia for the governor,” said Trump – discussing defeated Democratic candidate Stacey Abrams (who has refused to technically concede to Republican Brian Kemp, though admits that he will be the next governor). “And it was all stacked against Brian [Kemp], and I was the one that went for Brian, and Brian won,” said Trump.
“Look at Florida,” Trump then said. “I went down to Florida. [GOP Senate candidate] Rick Scott won, and he won by a lot. I don’t know what happened to all those votes that disappeared at the very end. And if I didn’t put a spotlight on that election before it got down to the 12,500 votes, he would have lost that election, OK? In my opinion he would have lost. They would have taken that election away from him. Rick Scott won Florida.”
The results of a manual recount in the Florida Senate will be reported on Sunday, and Scott is expected to prevail over Democratic incumbent Sen. Bill Nelson, following a series of lawsuits and snafus that exposed long-running issues with ballot counting in the state. In the gubernatorial race, Democrat Andrew Gillum conceded this weekend in his close fight with Republican Ron DeSantis. –Fox News
Obama’s advice
Trump told Fox’s Chris Wallace that former President Obama offered him some important guidance shortly after the 2016 election.
“I think North Korea’s been very tough because you know we were very close. When I took that over — President Obama right in those two chairs, we sat and talked and he said that’s by far the biggest problem that this country has,” said Trump. “And I think we had real decision as to which way to go on North Korea and certainly at least so far I’m very happy with the way we went.”
Khashoggi
Turning to the apparent murder of journalist Jamal Khashoggi in the Saudi consulate in Turkey, Trump said that he has been briefed on an audio recording of the slaying, but that he was advised not to listen to the “suffering tape.”
“Because it’s a suffering tape, it’s a terrible tape. I’ve been fully briefed on it, there’s no reason for me to hear it,” adding “I know everything that went on in the tape without having to hear it.“
“You saw we put on very heavy sanctions, massive sanctions on a large group of people from Saudi Arabia,” Trump said. “But at the same time we do have an ally and I want to stick with an ally that in many ways has been very good.” Trump added that it “takes two to tango” to resolve the conflict in Yemen between Iranian-backed insurgents and Saudi-backed forces, stating “I want Saudi to stop, but I want Iran to stop also.“
As Trump toured fire damage in California on Saturday, reporters asked about Khashoggi’s death – to which the President replied: “We’ll be having a very full report over the next two days, probably Monday or Tuesday,” adding that it will include “who did it.”
President Trump answers the question “Did MBS lie to you?”
Watch the full interview on Fox News Channel at 2P/7P. #POTUSonFNSpic.twitter.com/nNI0HAhTRa
Trump then defended his administration’s decision to rescind hundreds of millions of dollars in military aid to Pakistan, which doesn’t “do a damn thing for us,” and helped to hide Osama Bin Lade, according to Trump.
“You know, living – think of this – living in Pakistan, beautifully in Pakistan in what I guess they considered a nice mansion, I don’t know, I’ve seen nicer,” said Trump, referring to Bin Laden’s compound.
But living in Pakistan right next to the military academy, everybody in Pakistan knew he was there… And we give Pakistan $1.3 billion a year . … [bin Laden] lived in Pakistan, we’re supporting Pakistan, we’re giving them $1.3 billion a year –which we don’t give them anymore, by the way, I ended it because they don’t do anything for us, they don’t do a damn thing for us. -Donald Trump
Bad weather
Trump told Wallace that he regretted not visiting Arlington National Cemetery in Washington D.C. on Veterans Day, something President Obama did every year while in office.
“I should have done that,” said Trump. “I was extremely busy on calls for the country, we did a lot of calling, as you know. … I probably, you know, in retrospect I should have and I did last year and I will virtually every year. But we had come in very late at night and I had just left, literally, the American cemetery in Paris and I really probably assumed that was fine and I was extremely busy because of affairs of state doing other things.”
Explaining why he canceled a trip to visit a World War I memorial in Paris – a move widely criticized in the media, Trump said that the MSM was making a “big deal” out of the situation.
“They said, ‘Sir,’ the Secret Service said, ‘Sir, you cannot go. We are not prepared. You cannot go,’” Trump said. “Because it was supposed to be helicopter, but the helicopter couldn’t fly because of zero visibility.”
Kirstjen Nielsen
The President had some measured words for Homeland Security head Kirstjen Nielsen – suggesting that he would like to see improvement on border security.
“Well, I like her a lot. I respect her a lot,” Trump said. “She’s very smart. I want her to get much tougher and we’ll see what happens there. But I want to be extremely tough. … I like her very much, I respect her very much, I’d like her to be much tougher on the border — much tougher, period.” Trump added that there’s a “chance” she will continue in her role.
President Trump on DHS Secretary Kirstjen Nielsen “Well, I like her a lot. I respect her a lot. She’s very smart. I want her to get much tougher and we’ll see what happens there. But I want to be extremely tough.“ #POTUSonFNSpic.twitter.com/vLRLgqiWEh
Trump seemed to acknowledge reports that he and his Chief of Staff John Kelly don’t get along, adding that Kelly will “move on” at some point.
“There are certain things I love what he does,” the president said. “And there are certain things that I don’t like that he does — that aren’t his strength. It’s not that he doesn’t do — you know he works so hard. He’s doing an excellent job in many ways. There are a couple of things where it’s just not his strength. It’s not his fault, it’s not his strength. … But John, at some point, is going to want to move on. John will move on.”
President Trump on Chief of Staff Gen John Kelly: We get along well. There are certain things I love what he does. And there are certain things that I don’t like that he does — that aren’t his strength. #POTUSonFNSpic.twitter.com/7Gu6qhgp6P
Finally, Trump gave himself high marks on his progress as president two years in.
“I think I’m doing a great job. We have the best economy we’ve ever had,” said Trump. We’re doing really well. We would have been at war with North Korea if, let’s say, that administration continued forward.”
“I would give myself, I would – look, I hate to do it, but I will do it, I would give myself an A+, is that enough?” said Trump. “Can I go higher than that?”
President Trump rates his job performance compared to past presidents. He tells Chris, “I would give myself an A+.” #POTUSonFNSpic.twitter.com/9OPrTpqs60
Taken literally, Nietzsche’s famous aphorism—”What doesn’t kill me makes me stronger”—is not entirely correct. Some things that don’t kill you can still leave you permanently damaged and diminished.
Yet in recent years, far too many parents, teachers, school administrators, and students themselves have become taken with the opposite idea—that what doesn’t kill you makes you weaker. They have bought into a myth that students and children are inherently fragile. For the most part, this represents an understandable desire to protect children from emotional trauma. But overwhelming evidence suggests that this approach makes kids less psychologically stable. By over-sheltering kids, we end up exposing them to more serious harm, write Greg Lukianoff and Jonathan Haidt.
James Madison once said that the job of the U.S. Supreme Court was to act as “an impenetrable bulwark against every assumption of power in the legislative or executive.” Unfortunately, the justices have not always seen their role in the same light. Here are five cases from the past five decades in which a majority of the Court fell down on the job, writes Damon Root.
One day after vice president Mike Pence and China’s president Xi Jinping exchanged sharply worded barbs in a showdown between the two superpowers, on Sunday the annual Asia-Pacific Economic Cooperation summit ended in unprecedented chaos and disarray, without agreement on a joint communique for the first time in its history as the escalating rivalry between the United States and China dominated proceedings and reflected escalating trade tensions.
Sunday’s dramatic conclusion was foreshadowed by accusations that Chinese officials had attempted to strong-arm officials in Papua New Guinea, which was hosting the event, into issuing a statement that fitted what Beijing wanted. The Chinese vigorously denied the claims. When asked about the impasse, Papua New Guinea’s Prime Minister Peter O’Neill was quoted by the SCMP saying: “You know the two big giants in the room, so what can I say?”
Instead of issuing a document that all 21 participants could agree O’Neill, said he would issue a “chair’s statement” reflecting the issues the participants did agree upon. The prime minister said the main area of disagreement was the insistence by one country — believed to be the US — that the communique would reflect the need for reform at the World Trade Organization.
O’Neill also said there had been disagreement on the bloc’s so called “Bogor Goals”, which require it to achieve free and open trade among its developing economies by 2020. And while O’Neill said the differences on that issue had been ironed out, there was no such luck when it came to the topic of WTO reforms.
President Trump has previously threatened to pull out of the organisation, claiming that its rules unfairly favoured China.
O’Neill did not say which country objected to WTO reforms but added: “Apec has got no charter over World Trade Organisation. That is a fact. That matter can be raised at the World Trade Organisation.”
China has said it broadly supports the WTO, while European Union proposals to reform the institution are expected to be tabled at the G20 summit in Argentina, where Trump and Xi are planning to meet in an effort to resolve their differences.
Additionally, Sunday’s developments also came with a side plot, with China pushing back against accusations that its officials had tried to “barge” their way into the office of New Guinea’s Foreign Minister Rimbink Pato in an attempt to influence the communique. Citing three sources, a report by Agence France-Presse claimed that police had been called to turn the Chinese away.
But in a press conference on Sunday afternoon, senior foreign ministry official Wang Xiaolong said the reports were “simply not true”, adding: “We are having close interactions with Papua New Guinea colleagues … we are mostly on the same page both on the process as well as the substance of the agenda.”
Pato told Reuters the Chinese officials who had come to see him had been refused a meeting because they had not made the “necessary arrangements”.
Separately, Wang said that leaders had “made considerable progress” at the summit and “reaffirmed their common commitment to keep the momentum going. We will leave it now to hands of the host nation to capture the consensus that emerged during discussion” although according to media reports there was virtually none.
A senior government source from a Southeast Asian country told the South China Morning Post the last-minute talks had been “very tense”.
“Try as we did, we couldn’t come to an agreement on certain trade issues. The gulf was too big. The US and China could not see eye to eye… I am not too surprised at the outcome,” the source said.
Underscoring the dramatic tension between the two superpowers, another source told SCMP that while Asian countries had expected some disagreement over WTO reform, they did not expect the US and China to hold out to the extent of blocking a final communique.
The source said the failure of the bloc’s foreign ministers to issue a statement ahead of the summit, something that is usually a formality, was also down to their differences over the issue. A source from Taiwan said delegates had been working to reach a consensus until the small hours of Sunday.
They were then told on Sunday morning that some delegations wanted to make “some comments” on the proposed communique as leaders met for a retreat and a working lunch.
Finally, O’Neill told reporters his chair’s statement would be issued later on Sunday, but it had been not released by the secretariat at 8pm local time (10am universal standard time).
Pence, who left Papua New Guinea on Sunday afternoon along with Xi, said there had been major differences between his country and China.
“They begin with trade practices, with tariffs and quotas, forced technology transfers, the theft of intellectual property. It goes beyond that to freedom of navigation in the seas [and] concerns about human rights,” he said.
As Bloomberg summarizes and as discussed yesterday, Pence sharpened U.S. attacks on China during a week of summits that ended Sunday, most notably with a call for nations to avoid loans that would leave them indebted to Beijing. He said the U.S. wasn’t in a rush to end the trade war and would “not change course until China changes its ways” — a worrying prospect for a region heavily reliant on exports.
“The language we heard from Pence is quite concerning because it shows we’re moving toward a zero-sum game geopolitics in the Asia-Pacific,” said Jonathan Pryke, a researcher specializing in the Pacific at the Lowy Institute, a Sydney-based research group. “The great hope of convergence between China and the U.S. is becoming less and less of a likely reality.”
Meanwhile, the brittle geopolitical balance of power in Southeast Asia is emerging as another major point of conflict between the two superpowers. While the U.S. can depend on allies like Japan, Australia and Taiwan, nations such as South Korea and the Philippines that have defense arrangements with the U.S. would try to hedge, according to Minxin Pei, a China scholar and specialist in U.S.-Asia relations.
Southeast Asian countries were “desperate fence sitters” who don’t want to make China an enemy, said Pei, who is a professor of government at Claremont McKenna College in California. “China and the U.S will try very hard in the next few years to charm the countries in the region.”
“As the tension with U.S. has risen, China’s approach to its neighboring countries has changed,” said Shi Yinhong, an international relations professor at Renmin University in Beijing. “China would like to gain as many friends as it can at the moment.”
While in Asia, Pence said the U.S. provides “a better option’’ for nations in the region and announced a plan along with key Pacific allies to build a $1.7 billion electricity grid in Papua New Guinea. The U.S. also joined with Australia to redevelop a naval base, and held a meeting of “the Quad” – a grouping that also includes India and Japan – in a bid to balance China’s rising economic and military strength.
As a result of this rising geopolitical tension even as the US threatens to boost Chinese tariffs and rates as soon as January 1, and underscoring the market’s worst fears, the meetings in Singapore and Papua New Guinea produced little to suggest Trump and Xi would reach a deal when they meet in a few weeks at the Group of 20 summit in Argentina.
To be sure, Pence sought to downplay regional concerns that American actions would lead to economic pain and force countries to choose between the U.S. and China: “Great power competition between the United States and China in this region doesn’t have to mean hostility,” Pence said. “These issues can be resolved, we believe, at the negotiation table.”
But, as Bloomberg points out, many in the region don’t expect a deal anytime soon, despite periodic optimism from Trump’s camp.
“This is one episode in the hegemonic struggle between the U.S. and China — it will go on for a while,” said Kunihiko Miyake, a former Japanese foreign ministry official who is now a visiting professor at Ritsumeikan University.
“It will be a Cold War, whether we call it that or not.”
During 2000–2016, suicide rates among American workers (aged 16–64 years) jumped 34%, from 12.9 per 100,000 population to 17.3, according to a newly published report by the Centers for Disease Control and Prevention (CDC).
“Increasing suicide rates in the US are a concerning trend that represents a tragedy for families and communities and impact the American workforce,” said Dr. Debra Houry, director of the CDC National Center for Injury Prevention and Control.
“Knowing who is at greater risk for suicide can help save lives through focused prevention efforts,” Houry said.
With the American workforce declining for decades, only now it this disturbing evidence of the catastrophic damage that has already been done being released.
Suicide rates are rapidly expanding in almost every state, as it now becomes the 10th leading cause of death in the US and is one of three leading reasons that are on the rise.
The CDC discovered that in recent years suicide rates were the highest among males in construction jobs and the highest for females working in arts, design, entertainment, sports, and media.
Michael Snyder of The Economic Collapse blog analyzed recent Social Security Administration data of median yearly wages in the US. He discovered 50% of all American workers make less than $30,533 per year, which of course is not enough money to sustain a middle-class lifestyle.
“The American people are working harder than ever, and yet the middle class just continues to erode,” he said.
Snyder said the “deeper we dig into the numbers provided by the Social Security Administration, the more depressing they become.” Here are just a few examples from their official website:
34% of all American workers made less than $20,000 last year.
48% of all American workers made less than $30,000 last year.
59% of all American workers made less than $40,000 last year.
68% of all American workers made less than $50,000 last year.
In retrospect, it all makes sense as the inequality gap between the rich and poor is the largest that it has ever been since right before the 1929 crash, and America’s once-thriving middle class has been systematically eviscerated over the last thirty years.
Although Beijing is Moscow’s largest trading partner, while Russia only ranks in the second ten among China’s importers, the Kremlin is strategically the most important contractor because it supplies the most desirable product – oil – and Chinese demand for this raw material is growing. It appears that an increase in Russian oil exports to China will be at the expense of European consumers.
Chinese oil production has been falling since 2015, and yet enormous infrastructure investments and huge strategic petroleum reserves (SPR) boost the demand for it. No wonder then that in 2017, Beijing became the largest importer of crude oil, overtaking the United States. Currently, China’s consumption of product is approaching 13 million barrels per day. In the March Gefira we predicted that the PRC will have become the largest consumer of this raw material by 2025, accounting for 18-20% of the global consumption.1)And Russia has an important role to play because already in 2016 it became China’s most important oil supplier, replacing Saudi Arabia.
China has been buying more and more Russian oil in the last decade, even though the Kremlin does not increase its export volume, which is around 5 million barrels per day. In 2009, countries such as Poland and the Netherlands imported more Russian crude oil than Beijing, but in 2015 they were overtaken by China, which in 2017 had an over 20% share in the Russian exports of this raw material.
In recent years, an increase in the Sino-Russian trade balance has been noticeable. While a decade ago, the total turnover was less than 45 billion USD, in the last year this result was almost twice as high: 84 billion USD. During the November meeting of the prime ministers of both countries, it was announced that the target would be to reach the level of 200 billion USD, with the energy industry, mainly oil and gas, being the main factor in the balance sheet growth.
In 2007 crude oil accounted for 35.5% of Russian exports to China worth 6.45 billion USD, in 2011 it was 16.2 billion USD(46.6%), while last year it exceeded 23.7 billion USD, which is more than half (57.6%) of all Russian products purchased by China. Observable is also the rapidly growing amount of coal bought by Beijing. In 2007 it reached a mere 0.1% of the total value of Russian exports to this country, but last year it was already over 3.3%. This confirms the thesis about the rising importance of Russian energy for Beijing.
Intensifying energy cooperation3)will enlarge the volume of Russian oil exports to China to the extent that by 2025 20% of China’s oil imports will have come from the Russian Federation. Such tightening of relations between Moscow and Beijing will have significant consequences for European countries buying crude oil from Russia. If Russia’s imports of this raw material to China continues to be upheld, then there are two possible scenarios.
There will be a reduction in oil exports from Russia to OECD countries, and above all to Europe. This means serious problems for the largest European importers of the Russian raw material, i.e. Germany, the Netherlands and Poland. This, on the other hand, will translate into its deficit on the European market, which will raise oil prices, especially as the EU is the world’s largest recipient of oil.
Russia will intensify activities related to oil exploration in the Arctic. However, this is a long-term process and we do not expect a significant increase in crude oil exports from Russian wells in this area during the next five years. We consider the Kremlin will treat Chinese imports of Russian oil as a bargaining chip in tense relations with Europe.
For the first time since Q3 2016, growth in quarterly demand for hotel rooms in the US has dropped; in fact, posting the second largest decline since the 2008 financial crisis, alarm bells are going off across their leisure and hospitality industry.
To be sure, some of the decline in Q3 2018 occupancy can be explained by unfavorable comps to Q3 2017 when hurricanes struck markets in Florida and Texas, according to data from real estate investment firm CBRE.
Houston, which experienced a devastating strike by Hurricane Harvey in 3Q 2017, had the most significant occupancy drop (11%) of any US city, according to CBRE. However, the data revealed that occupancy weakness was not only centered in Texas and Florida, but there were widespread slowdowns in the Midwest and East Coast cities such as Indianapolis, Charleston, Kansas City, and Washington, DC.
CBRE said some hotels had declining traffic as average daily rates for these cities cratered year-over-year. Revenue per available room also dropped in 18 of the 60 markets CBRE monitors, almost doubled from Q2 2018.
In a separate report, top US hotel groups reported weaker than expected 3Q 2018 US growth in revenue per available room (RevPAR), causing some concern that a domestic slowdown is imminent.
Marriott International posted North American RevPAR growth of just 0.6% for 3Q 2018. By comparison, Marriott saw RevPAR grow 1.9% worldwide over the same period.
“The surprise and disappointment for us in the third quarter was purely about U.S. RevPAR performance in September,” which was down 1% for the month, said Marriott president and CEO Arne Sorenson. “It had an impact on third-quarter RevPAR [in North America], and it does affect our expectations for the fourth quarter.”
Hyatt Hotels reported a 1.1% decline in RevPAR in the US for 3Q 2018 but said globally – RevPAR jumped 2.8%.
Patrick Grismer, Hyatt’s then-CFO, told investors on a call in October that the company “did see better performance out of our international owned and leased properties from a RevPAR growth perspective than we did for our U.S.-based owned and leased hotels.”
Grismer, who has since left the company to become CFO at Starbucks, added that Hyatt expects “the U.S. will be a bit softer” in 2019.
Hilton also said 3Q 2018 domestic RevPAR growth is slowing down, as its international markets were doing better. The company reported a relatively modest US rise of 1%, while Hilton’s total RevPAR was up 2% globally in the quarter.
Hilton president and CEO Chris Nassetta said, “while one market is slowing — in this case, the U.S. — all of our international markets continue to pick up.” That pick up, however, won’t last long if China’s economy indeed enter contraction as many expect it will.
If the disappointing hotel data was not enough to suggest a 2019 slowdown is assured, recently the US Travel Association warnedin a new report that US domestic travel is about to “level off” after achieving 105 straight months of overall expansion. The report indicated a “perfect storm” of factors is brewing that is currently suppressing international demand for travel to the US.
The organization noticed a strong dollar had been one of the significant factors in deterring foreigners from visiting. Another issue presented, in the report, is the global slowdown and political uncertainties in Asia, Europe, and Latin America spurred by the trade war.
“We’re seeing something of a perfect storm of factors that could suppress international demand for travel to the U.S.,” said David Huether, U.S. Travel senior vice president for research. “The U.S. dollar has been on another very robust strengthening trend since April of this year, while the global economy has been cooling off considerably overall. That, coupled with political uncertainty in Europe and rising trade tensions, is a bad-news recipe for inbound travel.”
Taken literally, Nietzsche’s famous aphorism—”What doesn’t kill me makes me stronger”—is not entirely correct. Some things that don’t kill you can still leave you permanently damaged and diminished.
James Madison once said that the job of the U.S. Supreme Court was to act as “an impenetrable bulwark against every assumption of power in the legislative or executive.” Unfortunately, the justices have not always seen their role in the same light. Here are five cases from the past five decades in which a majority of the Court fell down on the job, writes Damon Root.
