Well over a month after the latest bout of Hong Kong street protests erupted, the situation remains tense as ever when more than seven hours after the start of a major march against Hong Kong’s now-suspended extradition bill, riot police in Hong Kong fired rounds of tear gas on protesters along Connaught Road Central, following skirmishes and a tense stand-off.
In an unexpected twist, the SCMP reports that in a darker turn of events on Sunday, a group of men in white suspected to be triad members attacked passengers at Yuen Long MTR station, particularly those wearing black, the color of protesters.
Confirming that China appears to be getting rather jittery, but instead of sending in the army is deploying it less “reputable” elements, a reported noted “absolutely astonishing scenes in Yuen Long, where Triad members clad in white are attacking anyone suspected of being a pro-democracy demonstrator (people wearing black are a target as that’s been the dress code for some marches, hence why triads are all in white).”
Meanwhile, absolutely astonishing scenes in Yuen Long, where Triad members clad in white are attacking anyone suspected of being a pro-democracy demonstrator (people wearing black are a target as that’s been the dress code for some marches, hence why triads are all in white). pic.twitter.com/lo13nRGp0L
The Civil Human Rights Front, the organiser of the march earlier in the day, said 430,000 people attended while police put the figure at 138,000 at its peak.
Crowds then advanced beyond the original police-mandated end point at Wan Chai to Queensway and Central, where they began occupying main thoroughfares of Connaught Road Central and Connaught Road West, blocking vehicles from getting through and putting up wooden barricades. Another group of protesters advanced towards the liaison office.
Demonstrators also gathered outside the Court of Final Appeal, the initial finishing point of the march organizers had pushed for but police disallowed. By 7pm, crowds reached Beijing’s liaison office in Sai Ying Pun. No police were seen guarding the building but a number of security guards were inside.
Meanwhile, back on Hong Kong Island, protesters have mostly left Sheung Wan, where police earlier fired several volleys of tear gas. A protester was using a loudspeaker to warn people against going back to Yuen Long, saying: “They’ll hit you even if you change your clothes.”
Police at the scene look more relaxed, some sitting down on the road behind shields. At last check the situation appeared to be back under control, with occasional bouts of violence breaking out.
For now China has refused to intervene in Hong Kong’s scuffles, although on Sunday, Sunday Times’ notorious Editor in Chief, Hu Xijin, who has taken to trolling Trump in recent weeks, tweeted that “protesters on Sunday besieged building of the Liaison Office of the Central People’s Government in Hong Kong and defaced national emblem of China. This is crime.”
Protesters on Sunday besieged building of the Liaison Office of the Central People’s Government in Hong Kong and defaced national emblem of China. This is crime. Hong Kong is quickly slipping from the Pearl of the Orient to a lawless place. pic.twitter.com/EU1AtyEBjp
His conclusion: “Hong Kong is quickly slipping from the Pearl of the Orient to a lawless place” should probably come as a warning to HK natives: we won’t intervene directly, but we will make sure HK’s star is promptly extinguished.
via ZeroHedge News https://ift.tt/2xXdiF0 Tyler Durden
I’ve had many strange experiences in my decades of covering intelligence affairs. These run from being invited to KGB HQ in Moscow, Chinese intelligence in Beijing, US intelligence in Virginia, Libyan intelligence in Tripoli, South African intelligence, and even Albanian intelligence in Tirana.
But none was odder than the day I was invited to lunch in New York City with the by now notorious figure Jeffrey Epstein. The golden boy of Manhattan and Palm Beach society now sits in a grim jail cell accused of having sex with underage girls. He’s been doing this in plain view since the early 1990’s but, until recently, he seemed bullet-proof.
Soon after I walked into the entrance of Epstein’s mansion on E 71st Street, said to be the city’s largest private home, a butler asked me, “would you like an intimate massage, sir, by a pretty young girl?” This offer seemed so out of place and weird to me that I swiftly declined.
More important than indelicacy, as an old observer of intelligence affairs, to me this offer reeked of ye old honey trap, a tactic to ensnare and blackmail people that was old when Babylon was young. A discreet room with massage table, lubricants and,no doubt, cameras stood ready off the main lobby.
I had arrived with Canada’s leading lady journalist who was then close to Epstein’s sometime girlfriend, Ghislaine Maxwell and, it was said, procuress – something Maxwell denies. Bizarrely, Maxwell believed that I could get KGB Moscow Center to release satellite photos that showed the murder on his yacht of her father, the press baron Robert Maxwell, who was a well-known double agent for Israel and KGB, and a major criminal.
Also present was the self-promoting lawyer, Alan Dershowitz, who had saved the accused murderer Claus von Bulow, as well as a titan of the New York real estate industry (not Trump) and assorted bigwigs of the city’s elite Jewish society. All sang the praises of Israel.
Epstein reportedly had ties to Donald Trump, Bill Clinton, Britain’s Prince Andrew and repeatedly flew them about in his private jet, aka “the Lolita Express.” All guests deny any sexual activity. I turned down dinner with Prince Andrew.
Epstein’s residence in Manhattan and Palm Beach, both of which I visited, were stocked with young female “masseuses.” All were working class girls making big money in their spare time. I did not see any interactions between these girls and the guests.
Epstein and Maxwell became too big for their britches. They flaunted their sexual adventures and laughed at New York society. Everyone wondered about the source of Epstein’s lavish income but no one knew its origins. He claimed to be an exclusive money manager for a group of secretive millionaires. But the only one identified was billionaire Leslie Wexner, the owner of L Brands and Victoria’s Secret. Wexner denied any knowledge of Epstein’s alleged crimes.
Besides sexual frolics, Epstein and Maxwell were up to many odd things. The FBI found diamonds, cash and a fake passport when raiding his mansion and documents showing his net worth at $559,120,954.00. The IRS tax people will be eager to review the sources of this income.
It seems likely that political influence was brought to bear on then US attorney Alexander Acosta (he just resigned under fire last week) to make a sweetheart deal with Epstein, who had been charged by Florida with child molestation. Epstein got off with a token, 13-month jail sentence that allowed him to work from his office much of the day.
Were Trump or Clinton involved? How much did they “party” with Epstein and revel in his fleshmart? There was talk of some sort of “intelligence” angle to the affaire Epstein that spared him a harsh sentence.
A respected former CIA official, Phil Giraldi has come right out and accused Epstein of being an Israeli agent of influence. Epstein was let off with a slap on the wrist on his first child abuse charge, says Giraldi, because of his powerful Israel connections.
To Giraldi and this writer, the Epstein “massage” operation was a classic intelligence operation designed to blackmail men of influence into doing Israel’s bidding. Clinton had reportedly already fallen into this trap years earlier while still president.
Now watch this stinking pile of corruption be hurriedly covered up. Talk about draining the swamp.
via ZeroHedge News https://ift.tt/2JFXWeB Tyler Durden
After a whirlwind of press furore – extending the drive against President Trump’s recent remarks aimed at the ‘squad’ – following Georgia Rep. Erica Thomas’ claims she was a victim of a racist attack when a man confronted her in a grocery line telling her to “go back to her own country,” it appears she is rapidly backtracking on her original story.
The story began Saturday when the black representative, who is 9 months pregnant, shared a tearful video saying what she said happened.
“This white man comes up to me and says, ‘You lazy son of [expletive]. You need to go back where you came from,’” she said.
“I’m at the grocery and I’m in… the aisle that says ’10 Items or Less.’ Yes, I have 15 items, but I’m nine months pregnant and I can’t stand up for long,” Rep. Erica Thomas said.
“This white man comes up and says, ‘You lazy son of a b***h.’ He says, ‘You lazy son of a b***h, you need to go back where you came from,’” she said.
“It hurt me so bad — I’m sorry y’all — because everything in me just wanted to tell him who I am… but I couldn’t, I couldn’t get anything out,” she said. “I couldn’t even explain to her why he has so much hate in his heart.”
Of course, these claims were immediately met by a torrent of virtue signaling from various leftists…
These are the consequences of a president who foments hate every day—and sees our diversity not as a strength but as a weakness. Erica, thank you for serving your state and thanks to your husband for serving our country. We are better than this, and together, we will prove it. https://t.co/eCrdZFgAPl
… and confronted her as she stood in front of media making her claims…
Media machine has been blowing up story of @itsericathomas, who claims a racist white man told her to “go back where you came from.” Well, he returns during her presser to deny allegation. He says he’s a Democrat & she’s embellishing story for attention. pic.twitter.com/wh4uds2IKC
Eric Sparkes absolutely denies claim that he told politician @itsericathomas to “go back where you came from.” He says the argument started over her using the express lane while having too many items. pic.twitter.com/ZikyJc81vf
And while we are on the topic of lies, The Federalist Papers reports that a gay Democrat former candidate for the Florida House of Representatives admitted that she lied about saving victims of the Pulse Nightclub shooting.
She made the claims that she had tended to those who were shot at two events organized by Democrats in her state:
“It’s probably one of the hardest things of my career to work through,” she said. “I personally removed 77 bullets from 32 victims … It was like an assembly line.”
Turns out she made the whole thing up!
“I lied,” she said in the affidavit to DoH Medical Quality Assurance Investigator Rafael B. Aponte “It is a false statement. I just made it up.”
“I wanted to be somebody in the community, and I’m sorry. I’m sorry that I gave any impersonation. I knew it was wrong and I should have stopped — by no means did I ever mean to put anybody in jeopardy,” she said.
“You know who is not grateful enough? Rural white Americans,” he said. “They are heavily subsidized, drowning in federal largesse, blessed with political affirmative action & overrepresentation, have all their bills paid by cities and blue states, but they whine and yell constantly.”
At a glance, this map shows both the size and distribution of world religions.
See how religions mix at both national and regional level.
There’s one country in the Americas without a Christian majority – which?
China and India are huge religious outliers
A picture says more than a thousand words, and that goes for this world map as well. This map conveys not just the size but also the distribution of world religions, at both a global and national level.
Strictly speaking it’s an infographic rather than a map, but you get the idea. The circles represent countries, their varying sizes reflect population sizes, and the slices in each circle indicate religious affiliation.
The result is both panoramic and detailed. In other words, this is the best, simplest map of world religions ever. Some quick takeaways:
Christianity (blue) dominates in the Americas, Europe and the southern half of Africa.
Islam (green) is the top religion in a string of countries from northern Africa through the Middle East to Indonesia.
India stands out as a huge Hindu bloc (dark orange).
Buddhism (light orange) is the majority religion in South East Asia and Japan.
China is the country with the world’s largest ‘atheist/agnostic’ population (grey) as well as worshippers of ‘other’ religions (yellow).
The Americas are (mostly) solidly Christian
Which is the least Christian country in the Americas? The answer may surprise you.
But the map – based on figures from the World Religion Database (behind a paywall) – also allows for some more detailed observations.
Yes, the United States is majority Christian, but the atheist/agnostic share of its population alone is bigger than the total population of most other countries, in the Americas and elsewhere. Uruguay has the highest share of atheists/agnostics in the Americas. Other countries with a lot of ‘grey’ in their pies include Canada, Cuba, Argentina and Chile.
All belief systems represented on the scale below are present in the US and Canada. Most other countries in the Americas are more mono-religiously Christian, with ‘other’ (often syncretic folk religions such as Candomblé in Brazil or Santería in Cuba) the only main alternative.
Guyana, Suriname and Trinidad & Tobago are the only American nations with significant shares of Hindus, as well as the largest share of Muslim populations – and consequently have the lowest share of Christians in the Americas (just under half in the case of Suriname).
Lots of grey area in Europe
The second-biggest religious affiliation in Europe isn’t Islam, but ‘none’.
Christianity is still the biggest belief system in most European countries, but the atheist/agnostic share is strong in many places, mainly in Western Europe, but especially in the Czech Republic, where it is close to half the total.
Islam represents a significant slice (and a large absolute number) in France, Germany and the UK, and is stronger in the Balkans: The majority in Albania, almost half in Bosnia and around a quarter in Serbia (although that probably indicates the de facto independent province of Kosovo).
Islam in the north, Christianity in the south
The map of Africa and is dominated by the world’s two largest religions
Israel is the world’s only majority-Jewish state (75%, with 18% Muslim). The West Bank, shown separate, also has a significant Jewish presence (20%, with 80% Muslim). Counted as one country, the Jewish majority would drop to around 55%.
Strictly Islamic Saudi Arabia, but also some of its neighbors in the Gulf, have significant non-Muslim populations – virtually all guest workers and ex-pats.
Nigeria, due to its large population and even split between Islam and Christianity, has more Muslims and more Christians than most other African nations.
Different majorities across Asia
Close neighbors India, Bangladesh and Myanmar each have a different majority religion.
Because countries are sized for population rather than area, some are much bigger or smaller than you’d expect – with some interesting results: There are more Christians in Muslim-majority Indonesia than there are in mainly Christian Australia, for example.
Hindus are a minority everywhere outside India, except in Nepal.
North Korea is shown as three-quarters atheist/agnostic, but this is debatable, on two counts. In what is often referred to as the last Stalinist state on Earth, religious adherence is probably underreported. And the state-sponsored ideology of ‘Juche’, although in essence based on materialism, makes some supernatural claims. For instance: despite having died in 1994, Kim Il-sung was declared ‘president for eternity’ in 1998.
Of course, clarity comes at the cost of detail. The map bands together various Christian and Islamic schools of thought that don’t necessarily accept each other as ‘true believers’. It includes Judaism (only 15 million adherents, but the older sibling of the two largest religious groups) yet groups Sikhism (27 million) and various other more numerous faiths in with ‘others’. And it doesn’t make the distinction between atheism (“There is no god”) with agnosticism (“There may or may not be a god, we just don’t know”).
And then there’s the whole minefield of nuance between those who practice a religion (but may do so out of social coercion rather than personally held belief), and those who believe in something (but don’t participate in the rituals of any particular faith). To be fair, that requires more nuance than even a great map like this can probably provide.
via ZeroHedge News https://ift.tt/2O6CPGA Tyler Durden
Twitter briefly suspended the twitter account of “Angel Mom” Mary Ann Mendoza” over a tweet she sent attacking presidential candidate Kamala Harris, then reinstated it after President Trump tweeted that he would “help” with the situation.
On Saturday, Twitter suspended Mendoza’s account after she sent the following tweet:
The company said Mendoza had violated its policy on hate speech by using the term “illegal” to describe “undocumented” migrants, and said it wouldn’t reinstate Mendoza’s account until she agreed to delete several tweets with this hateful language. She refused.
Mendoza’s son, 32-year-old police officer Brandon Mendoza, was killed in May 2014 by a drunk illegal immigrant who was driving drunk down the wrong lane on the high way.
Several conservative media outlets reported on the story, though it was largely ignored by the mainstream press, and early on Sunday morning, President Trump tweeted that he would intercede on Mendoza’s behalf and insisted that she “should never be silenced.”
I will help Angel Mom (and great woman) Mary Ann Mendoza with Twitter. I know Mary Ann from the beginning, and she should never be silenced. She is a winner who has lost so much, her child. Twitter, if you’re watching, please do what you have to do, NOW! @foxandfriends
“I’m disgusted and disappointed that Twitter is trying to silence me,” Mendoza told Breitbart News. “I had my world ripped out from under me the day my son was killed by a repeat illegal alien criminal. I am the ‘other’ side of this crisis and the end result of open borders and the careless release of illegal aliens at our borders because of time restraints.”
“I will not be silenced in my warning calls of what could happen to any American citizen in the blink of an eye as it did to me,” Mendoza said. “As an American citizen whose beautiful son was collateral damage to the ineptness if our elected officials, I will continue to bring my words to them in whatever platform I can. They owe it to me and every other Angel Family to have a hearing for our voices. Their fellow American citizens and our loved ones killed by their inactions. My voice is my son’s voice, never to be silenced by anyone.”
As of noon ET on Sunday, Mendoza’s twitter account was active, but the offending tweets had been deleted.
via ZeroHedge News https://ift.tt/30HIT9O Tyler Durden
Markets are engaged in a clear battle for control:An active Fed eager to extend the business cycle using asset price inflation as its primary means to generate further debt financed growth on the one hand and deteriorating fundamentals and technicals gnawing at an artificial market construct on the other.
Let’s call a spade a spade: Markets would not be anywhere near new highs were it not for a Fed flip flopping and racing from dovish media event to dovish media event. I’ve been very vocal in my criticisms of their efforts and sense they are playing a dangerous gamehere. Hence I don’t want to belabor the point here today. But as a follow up: Friday’s desperate efforts on the side of the Fed to backtrack market expectations for a 50bp rate cut at the coming July meeting, which they themselves caused on Thursday with multiple Fed speakers, has revealed again the Fed’s singular role it has to devolved into: The market’s primary price discovery mechanism. As markets dropped below $SPX 3,000 this week dovish Fed speakers caused a renewed rally above 3,000 and as soon as they tried to walk it back with a conspicuous WSJ Journal article on Friday markets again soon rolled over.
That’s the circus atmosphere they have created and appear to be supportive of. The Fed is very aware of its role in all of this and it’s shameful. Like Alan Greenspan or not, but at least he was a cryptic speaker that left markets guessing and played his cards close to the vest. But over the years the Fed has devolved itself into this clown show we have now, a day to day manager of markets. And markets have learned to react to every single pronouncement and utterance.
Seriously, just stop. It’s embarrassing and it’s not your charter to manage markets. Nobody elected you to do that. Well, then nobody elected you in the first place. You’re appointed. By politicians. And now we have politicians that overtly want to dictate policy to the Fed. A toxic mix as the Fed’s independence is risking utter bankruptcy and is already lost in the eyes of many.
But as with cheap money, once you go down that road of daily massaging markets it’s hard to extract yourself from that mess. Now markets expect daily soothing and when they don’t get it they react, as did futures Friday following close when Rosengren uttered slightly less dovish words. “I think we should wait”.
Yes, this is what our markets have devolved into. A giant Fed gaming operation and it’s safe to say that the entire month price action will be greatly influenced by what the Fed does on July 31, the last day of the month.
But by setting expectations they have cornered themselves into a position where they constantly need to feed the appetite of the beast they themselves have created: A Fed dependent market that needs and wants more stimulus.
And now here we are, at some of the highest valuations:
With come key stocks massively technically extended (see also: To the stars):
Yet earnings growth having ground to a halt:
While profit margins have started shrinking:
Not the recipe for multiple expansion. But nevertheless here we are near all time highs once again, thanks to the Fed’s, so far, successful efforts.
But this is where the technicals come in and they put a at least temporary red line in the bull sand.
I am probably one of the few out there that has outlined the potential for a larger sell case on equities at this stage. The vast majority of analysts are looking for a massive expansion in prices primarily due to the Fed. From what I’ve seen earnings growth is really no longer part of the calculus. Easy money is. Fine. It may happen, I can’t deny that possibility and I’ve outlined in my weekly briefs when the sell case would be void.
And let’s be clear: Putting out technical setups in public is not an easy task. Especially on the sell side. Technical setups are about risk/reward and they are not guaranteed, they can be invalidated and if they don’t work out one gets hammered with ridicule and hate. And I’ve been wrong before. But I’ve also been right plenty of time.
Last year it was Lying Highs, a sell call which culminated in a 20% sell-off. But the call came out in September and markets didn’t top until early October. Sells are processes, bottoms are events. Like the one in December. I talked about Imbalance on December 23rd and called for a major technical rally into MA reconnects, worked nicely. Did I expect new highs on deteriorating fundamentals? No, but then this is where the Fed comes in, jawboning things higher. Yet again Lying Highs II informed us of another sell set-up coming and indeed we saw a larger sell-off into May before the Fed once again came to the rescue at the beginning of June.
No, sell calls are much harder than buy calls. After all you have an entire market machine designed to levitate asset prices higher and most people are bullish all the time, so a sell call is what the majority doesn’t want to hear. Indeed you can even make a great technical sell call, be right and still get hate, as I saw with Boeing when I called for a sell at $441. It dropped 6% in the week after the call, but then the plane crash happened and I got accused of taking joy in people dying. What nonsense, but still there it is. The stock was massively technically extended and the fundamentals took over (for the worst reason) and the stock plummeted 25% from the sell call. But it wasn’t the crash that was the problem, it was the underpinning design flaws that were the trigger and the technicals said that the long side was dangerous. And it was.
In some cases technicals are cleaner, like Gold when we called for a big rally when Gold was trading at 1270 in May, it hit 1450 on Friday a 14% rally from that bullish call.
I’m pointing all these things out to highlight how complex sell calls are, yet technicals matter and they mattered again big time this week.
Since June and into early July I presented a potential major sell case on $SPX. In June (It’s different this time, Sell Zone, Distortion) and again last week in The ChoiceI’ve pointed to the chart below allowing for the possibility of an upper trend line tag on a megaphone pattern that could lead to a major sell-off. This is the chart shown in June:
Indeed we saw this tag on Monday this last week which then reversed:
In fact I pointed to it first thing on Monday morning:
A 41-year-old man arrested on suspicion of Japan’s worst mass killing in nearly 20 years told police that the Kyoto Animation studio had plagiarized his work, according to CNN.
Police identified the man as Shinji Aoba during a Friday press conference, however Kyoto Fushimi Police spokesperson Ryoji Nishiyama said that they had not yet established a link with the studio in Kyoto’s Fushimi-ku district.
34 people were killed after the suspect began pouring gasoline on the first floor of the studio before setting it on fire, shouting “You die” as he spilled the liquid, according to a witness.
The three-story building quickly became engulfed in flames, killing 20 men, 20 women and another individual of ‘unknown gender.’ 35 people were injured in the blaze.
After dousing flames, firefighters entered the building and found 20 bodies lying on the staircase leading to the roof exit. Another team found 11 bodies on the second floor of the building and two on the ground floor.
Police said that 74 people were inside the building at the time of the blaze.
The fire spread so rapidly that many inside did not have time to escape, Kyoto Prefectural police told CNN. Several people jumped out of the second and third floor windows and suffered bone fractures. –CNN
Aoba was arrested and is currently heavily sedated as physicians treat him for severe burns sustained during the attack. Police added that he has unspecified mental health issues.
As CNN notes, the arson marks Japan’s deadlies mass murder since a 2001 arson attack on a building in Tokyo’s Kabukicho district which killed 44 people.
via ZeroHedge News https://ift.tt/2JZkqGv Tyler Durden
Last week, we laid out the bull and bear case for the market:
The Bull Case For 3300
Fed Rate Cuts
Stoppage of QT
The Bear Case Against 3300
No Trade Deal/Higher Tariffs
Credit-Related Event (Junk Bonds)
Volatility / Loss Of Confidence
We laid out the case for a near-term mean reversion because of the massive extension above the long-term mean. To wit:
“There is also just the simple issue that markets are very extended above their long-term trends, as shown in the chart below. A geopolitical event, a shift in expectations, or an acceleration in economic weakness in the U.S. could spark a mean-reverting event which would be quite the norm of what we have seen in recent years.”
This analysis led us to take action for our RIAPRO subscribers last week (30-Day Free Trial), as we added a 2x-short S&P 500 index fund to Equity Long-Short Account to hedge our longs against a potential mean reversion.(on Friday that portfolio was UP .03% while the market FELL by 0.62%)
“This morning, we are adding a small 2x S&P 500 short position to the trading portfolio to hedge our core long positions against a retracement over the next few weeks. We will remove the short if the market can regain its footing and move higher, or the market sells off and reaches oversold conditions.”
This is the purpose of hedging, as it reduces volatility over time, which inherently reduces the risk of emotionally based trading mistakes.
“With a majority of short-term technical indicators extremely overbought, look for a correction next week. What will be important is that any correction does not fall below the early May highs.”
While the market is still hanging above the May highs, further corrective actions are likely next week as the short-term oversold conditions have not been resolved as of yet. The deviation above the long-term mean is also only starting to reverse as well.
Importantly, once we get past the end of the month, and assuming the Fed does indeed cut rates and no “trade deal” with China, the markets will return their focus to economics and earnings. As we stated previously:
“Such continues to suggest the August/September time frame for a larger corrective cycle is still in play.”
More importantly, as Chris Kimble noted on Friday, the market is continuing to ignore the economic warnings being sent by bonds and commodities.
Moreover, the “Dumb Money” is now all the way back in.
These last two charts confirm the old Wall Street axiom:
“Individuals buy the most at the top, and the least at the bottom.”
This is why we are hedging our risk, carrying a higher level of cash, and holding onto our bonds as if they were the last lifeboat on the Titanic.
Why The Fed Will Cut By 50bps
It is now widely expected the Fed will cut rates at the end of the month following comments by Fed officials last week. Per the WSJ:
“New York Fed President John Williams on Thursday stoked expectations for a hefty cut. Already-low interest rates are a big reason to cut aggressively at the first sign of economic distress, he said. ‘Don’t keep your powder dry—that is, move more quickly to add monetary stimulus than you otherwise might.’ But a bank spokesman later walked that back, saying Mr. Williams didn’t intend to suggest the central bank might make a large cut this month.”
“However, in an unprecedented move, the NY Fed subsequently released a statement stating that President Williams’s speech on Thursday afternoon was not intended to send a signal that the Fed might make a large interest rate cut this month but rather it was “an academic speech on 20 years of research.”
Why did the NY Fed do this?
Simple: as BofA explains, ‘the FOMC was uncomfortable with the market moving toward a 50bp cut and wanted to push the market back to a 25bp baseline.’ In other words, as Meyer puts it, ‘Williams unintentionally misguided the markets.’”
With the markets pushing record highs, recent employment and regional manufacturing surveys showing improvement, and retail sales rebounding, it certainly suggests the Fed should remain patient on hiking rates for now at least until more data becomes available. Patience would also seem logical given very limited room to lower rates before returning to the “zero bound.”
However, there is also support for rate cuts. This is the point we will discuss today.
Labor markets remained tight, with contacts across the country experiencing difficulties filling open positions. The reports noted continued worker shortages across most sectors, especially in construction, information technology, and health care. (Tighter job market leads to higher costs, which impacts profitability.)
Compensation grew at a modest-to-moderate pace, although some contacts emphasized significant increases in entry-level wages. Most District reports also noted that employers expanded benefits packages in response to the tight labor market conditions. (Note: cost of labor is rising, which will impede corporate profit margins. Increases in labor costs ALWAYS precede the onset of a recession.)
Tariffs were mentioned 49 times in the report.
Districts generally saw some increases in input costs, stemming from higher tariffs and rising labor costs. However, firms’ ability to pass on cost increases to final prices was restrained by brisk competition. (Note: higher input costs without the ability to pass it on impacts profitability.)
Click to Enlarge
The Fed’s own recession probabilities index has spiked to levels historically coincident with the onset of a recession. (Yes, this time could be different, but probably not a bet the Fed is willing to take.)
“Given the structural backdrops to the economy, there is an inability to increase rates of productivity substantially, output, wage growth, savings, or consumption, which would lead to stronger rates of economic growth. In fact, we are currently running some of the weakest rates of economic growth, productivity, and wages on record.”
Currently, 50% of the 10-yield curves we track are inverted and have remained so for more than 3-months. Historically, when inversions last for one-quarter or more in duration, recessions have not been too far behind.
However, one of the biggest reasons the Fed is about to cut rates by up to one-half point is to un-invert the Fed Funds to the 10-year Treasury rate. The inversion between the ultra-short and long-end of the curve is impairing loan activity. The Fed clearly understands that if they don’t resolve this inversion, the probability of a recession grows rapidly.
Cass Freight Index
There is also substantial “hard data” evidence the economy in under severe pressure. While “sentiment-based” surveys, or “soft data,” has rebounded recently, data like the “Cass Freight Index” is ringing alarm bells.
Leading Economic Indicators Drop
However, it is the Leading Economic Indicator (LEI) index, which has our attention currently.
“The Conference Board’s LEI index turned negative in June. The yield curve finally made a negative contribution. The conference board provides this press release on Leading Economic Indicators for June.
‘The US LEI fell in June, the first decline since last December, primarily driven by weaknesses in new orders for manufacturing, housing permits, and unemployment insurance claims. For the first time since late 2007, the yield spread made a small negative contribution.” – Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board
The consensus estimate was for LEI of +0.1, the read was a -0.3
This decline is not surprising to us. In July of 2018, as noted in the chart below, we laid out a predicted path of reversion in the LEI index. As you can see, the reversion has been even sharper than we originally estimated.
What is more concerning, and a reason the Fed is likely acting now, is there is a high correlation between the LEI and GDP, economic activity, and corporate profits. When compared to nominal GDP, the LEI index is suggesting a sharp slowdown is just ahead.
The Chicago Fed National Activity Index (CFNAI) is one of the broadest measures (80-sub components) of economic activity. The LEI and CFNAI, not surprisingly, also have a high correlation, which suggests further weakness is ahead.
Of course, if GDP, and underlying economic activity, is slowing down, it should not be surprising that corporate profits also decline.
The LEI is certainly not a perfect indicator for recessionary activity and has provided many false signals since the 2009 lows. However, the recessionary correlation is the highest when the LEI is signaling a recessionary warning at the same time the Fed Funds/10-Year yield inversion in place.
I think the Fed is beginning to panic as they were never able to get yields up to high enough levels to be effective in the next recession. Of course, this is exactly what we said would happen numerous times previously:
“The Fed surely understands that economic cycles do not last forever, and after eight years of a ‘pull forward expansion,’ it is highly likely we are closer to the next recession than not. While raising rates would likely accelerate a potential recession, and a significant market correction, from the Fed’s perspective, it might be the ‘lesser of two evils.’ Being caught at the ‘zero bound’ at the onset of a recession leaves few options for the Federal Reserve to stabilize an economic decline.”
Janet Yellen was smart enough to “exit” and stick Jerome Powell with the “tab.”
While the market rallied back from its 20% decline last year on “hopes” of an end to the “trade war” and “rate cuts,” the market is missing an important part of the picture.
Now, it doesn’t seem to work that way. Peter Boockvar succinctly explained why in one of his recent letters. The problem is that ‘easy money’ stops working when it becomes normal, as it now is.
Lower rates don’t encourage borrowing unless potential borrowers think it’s a limited-time opportunity. Which they don’t anymore, and shouldn’t, since the Fed shows no sign of ever going back to what was once normal.”
If the market fell into a recession tomorrow, the Fed would be starting with roughly a $4 Trillion balance sheet with interest rates 2% lower than they were in 2009. In other words, the ability of the Fed to ‘bailout’ the markets today, is much more limited than it was in 2008.
However, there is more to the story than just the Fed’s balance sheet and funds rate. The entire backdrop is completely reversed. The table below compares a variety of financial and economic factors from 2009 to the present.”
“The critical point here is that QE and rate reductions have the MOST effect when the economy, markets, and investors have been ‘blown out,’ deviations from the ‘norm’ are negatively extended, confidence is hugely negative.
In other words, there is nowhere to go but up.”
Let me be clear; it is certainly possible that asset prices could rise in the short-term given the “training”investors have received over the last decade to “Buy The F***ing Dip.” However, given the economic and fundamental backdrop, rate cuts will not change the onset, duration, or intensity of the coming recession.
Yes, participate with the “rate cut rally.”
We will be.
Just make sure you have a strategy to “leave the party before the cops arrive.”
via ZeroHedge News https://ift.tt/2Z7hL3O Notypist
About 12 investors made offers on a collection of rent stabilized Harlem apartment buildings that listed in April for $260 million, according to Bloomberg. But then, the NY legislature re-wrote the rules of stabilized rents, which capped property values and slashed the potential for increases in rent overnight.
The bids for the 28 building “Harlem Ensemble” apartments that were on the sale block instantly disappeared.
David Chase, partner at B6 Real Estate Advisors said: “They called us every day — and then we couldn’t reach them.”
The listing will expire at the end of the month.
Many other multifamily deals also collapsed due to investors fearing that the new legislation, which governs about 1 million apartments in the city, takes direct aim at landlords’ income and investment returns. It makes it nearly impossible to raise rents, remove units from state regulation or recoup the costs of capital improvements.
NYC apartment building sales fell 48% in the first half of 2019 from the year prior – the biggest decline for any 6 month period going back to 2009. In northern Manhattan, including Harlem, the drop led to a 61% fall in all commercial property transactions.
The total of all commercial deals citywide is on pace to fall below 2,000 for the first time since 2011.
Adrian Mercado, chief information officer at B6 said: “Right now, it’s a shot in the dark on the multifamily side. People are speculating as to what buildings should be trading at.”
via ZeroHedge News https://ift.tt/2JR3DFs Tyler Durden
This week a group of US senators has proposed to leave Turkey in control of the northern part of Cyprus, and force the Greek Cypriots to choose between the US and Russia for the economic and political future of the south of the island.
The Senate Foreign Relations Committee agreed by a large bipartisan majority on June 25 to put into law a new Eastern Mediterranean strategy. If the bill is enacted, Cyprus will be required to decide that in exchange for American protection from Turkish military threats, including Russian-made S-400 missiles to be based in southwestern Turkey, the Cyprus Government must not allow Russian naval vessels to dock at Cypriot ports, and should block all Russian money and investments on the island. At the same time, Greece has been told the US military intends to expand its occupation of Crete around the Souda Bay base; at Larissa Air Force Base, midway between Athens and Thessaloniki; and at other Greek locations.
The proposed new law is the most comprehensive plan for American military occupation of Cyprus and Greece since the Greek civil war of the 1950s. The US plan also establishes State Department censorship of the Greek-language media in Cyprus and Greece, and threatens US sanctions against the Orthodox Church bishops of the two countries.
Senator Bob Menendez, Democrat of New Jersey, initiated the new policy as an amendment to Senate Bill No. 1102, “to promote security and energy partnerships in the Eastern Mediterranean, and for other purposes.” Menendez chaired the Foreign Relations Committee until the Republicans won control of the Senate last November. He has made a long record of legislating sanctions against Russia, while he himself has been under FBI investigation for corruption. Read the Menendez indictment here and the dismissal of the case a year ago, after a federal court jury could not agree on a verdict.
The text of S-1102, which now goes to the full Senate for a vote, can be read here. The new policy, as Menendez has agreed with the Republican majority of the Committee, can be read in full here.
In the preamble, Russia is identified as a “malign influence” in the Mediterranean:
US policy in the region should be aimed, the Bill declares, at backing the development of the Cyprus offshore gas deposits, as well as future regional pipelines and liquefaction plants, in order to compete against Russian gas supplies to southern Europe:
Without naming Turkey, which is currently threatening Cypriot gas exploration at sea with drilling vessels of its own, the Bill claims that Cypriot seabed exploration “must be safeguarded against threats posed by terrorist and extremist groups, including Hezbollah and any other actor in the region.”
The Bill promises to supply US weapons to Cyprus, ending the arms embargo introduced by Henry Kissinger after he backed the Turkish invasion of the island in mid-1974. But there is no parallel US promise in the Menendez bill to halt US arms from being deployed by the Turkish military command in northern Cyprus. Nor does the new US policy alter US acceptance of Turkey’s occupation of northern Cyprus.
There are two explicit pre-conditions for the supply of US arms to Cyprus; one is aimed at Russian investment in Cyprus – referred to in S-1102 as money-laundering — and the other at Russian Navy port calls in Cyprus.
The Senate is also promising US scholarships to “future leaders” of Cyprus, plus $1.5 million in US training for Cypriot military officers over the next three years.
With a requirement for a report by the State Department on “Russian Federation malign influence in the Republic of Cyprus, Greece, and Israel”, the Senate bill launches an attack on the Cypriot and Greek media and the Orthodox Church in both countries. The Greek-language media are to be targeted if the State Department report judges them to “promote pro-Kremlin views”.
Ranking churchmen in Cyprus and Greece are threatened with investigation and sanctions to deter them from siding with the Russian Orthodox Church against the breakaway Ukrainian church in the autocephaly controversy; for details of that, click to read.
During the Obama Administration, the US strategy for combating Russia’s relationships with Cyprus was to create a NATO base in the occupied Turkish zone, and to pressure the Cyprus President Nikos Anastasiades into accepting the Turkish partition as a NATO protectorate of the island. This was the plan of then Assistant Secretary of State Victoria Nuland (right); for that plan and its outcome, read the archive.
Nuland’s ambassador to the Ukraine at the time, Geoffrey Pyatt, is now US Ambassador to Greece. “Pyatt’s scheming in Athens,” comments a veteran Greek political observer, “may turn out to be longer lasting than his scheming in Kiev. Whether his new success will be as destructive as the old one remains to be seen.”
GREEK AND CYPRIOT BRANCH OF THE ANTI-RUSSIA LOBBY IN WASHINGTON
Left: Endy Zemenides, Executive Director of the Hellenic American Leadership Council (HALC). Right: Tasos Zambas, Chairman of the Justice for Cyprus Committee for the Federation of Cypriot-American Associations.
The new Senate plan is to isolate Russia and Turkey simultaneously, pushing them closer together and pressuring the Cypriots and Greeks to position themselves against both.
The Greek-American lobby in Washington has declared its support for the Menendez bill to make “the region more stable and prosperous and… advance both American interests and values.” The Federation of Cyprus-American Associations has added:
“the East Med Act is a huge leap forward in U.S. relations with both Greece and Cyprus. It places Greece in the centre of a new American strategy for the Eastern Mediterranean, and it stops the treatment of Cyprus as merely a problem but positions it as a solution. The Greek-American community thanks Senator Menendez for his decades of unparalleled leadership on these issues and to Senator Rubio for championing this new Eastern Mediterranean strategy.”
via ZeroHedge News https://ift.tt/2GmC7Pf Tyler Durden