Britain Furious Iran Tanker Broke ‘Promise’ Not To Sell Its Oil To Syria
Britain has slammed Iran for what it says is a breach in assurances regarding the previously detained Grace 1/Adrian Darya 1 tanker. Specifically a condition of the vessel’s release from UK/Gibraltar captivity last month was that it would not offload its 2.1 million barrels of Iranian oil to Syria in violation of EU sanctions.
But the UK can do little beyond merely issuing a formal complaint to the United Nations, which it plans to do next month, according to Reuters. London was also reported to have summoned Iran’s ambassador on Tuesday to condemn the move.
Image via EPA-EFE
“Iran has shown complete disregard for its own assurances over Adrian Darya 1,” foreign minister Dominic Raab said in a statement. “This sale of oil to (Syrian President Bashar al-Assad’s) brutal regime is part of a pattern of behavior by the Government of Iran designed to disrupt regional security.”
The diplomatic row comes days after over the weekend Iran’s foreign ministry confirmed the tanker had unloaded its valuable cargo, estimated at $130 million in crude, “on the Mediterranean coast,” according to state media. Just prior the Iranian tanker was observed within a few nautical miles of Syria’s coast via satellite images.
“Iran’s actions represent an unacceptable violation of international norms,” the UK statement said.
However, we should point out it’s also not within “international norms” – indeed it’s unprecedented – for Royal Marines to raid a foreign vessel in international waters at the bidding of Washington, which is precisely what happen when the tanker was detained in the first place.
Currently, Tehran is rumored to be preparing the release the British-flagged Stena Impero, captured in the Strait of Hormuz on July 19 in retaliation for Britain’s prior capture of the Grace 1 off Gibraltar on July 4.
British-flagged Stena Impero, via Mizan News Agency/ Reuters
Iranian officials were quoted early this week on state TV as saying the British vessel is “undergoing the last legal procedures” and will hopefully be released “in the near future.”
It remains that though the UK will make its fury known through diplomatic channels, it doesn’t have any chips to play, and the reality is its initial military seizure of the Grace 1 has clearly backfired.
In a new and not shocking poll, Americans said they hate the government almost as much as they hate big pharma. Considering both are in each other’s back pocket, that makes complete sense and no one should be surprised by this.
America hates big pharma and the government. No surprise there. But the pharmaceutical industry is hated slightly more. It ranked last in favorability among Americans, according to a new poll conducted byGallup. This year marked the lowest net positivity rating (the difference between people who say they like the industry and those who dislike the industry) that the pharmaceutical industry has had since Gallup started polling in 2001.
America’s distaste for the scandal-plagued pharmaceutical industry isn’t without reason. Earlier this year, Congress grilled pharma leaders for the high cost of prescription drugs. An Oklahoma judge recently ordered Johnson & Johnson pay $572 million for its role in the opioid epidemic. Novartis and other major pharma companies stopped developing life-saving medicine for lack of profit. –Middle Town Press
The federal government had been last or tied last on Gallup’s poll since 2011. This year, it ranks as the second least favorable industry. They were close to as hated as Big Pharma with a net positivity rating of -27. With the increasing levels of authoritarian controls and demands for people to give up their liberty and freedom in exchange for a police state, it really shouldn’t come as a surprise. Humans were not meant to be slaves and those in the United States may slowly be waking up to the reality they’ve found themselves in.
Hopefully, the government and industries that it protects, such as Big Pharma will never recover and only see their rating drop. It’s easier to enslave people when they are addicted to drugs and that addiction fuels Big Pharma’s profits. It’s a neverending circle of profits for Big Pharma and death and enslavement for everyone else.
As it has become increasingly obvious that the costs of the trade war are falling on American consumers and businesses, President Donald Trump and his supporters have taken to arguing that even if Americans are being hurt, China is being hurt worse.
Usually, this takes the form of a claim that businesses are fleeing China to avoid the costs of the tariffs.
China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs, they must stem the flow. At the same time China may be hoping for a Democrat to win so they could continue the great ripoff of America, & the theft of hundreds of Billions of $’s!
But like many other claims made by the Trump White House regarding the trade war, this one appears to be false—or at least way overstated. Foreign investment in China has not declined since the start of the trade war, according to Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics (PIIE), a trade-focused think tank. In fact, the growth of foreign investment in China has increased by about 3 percent on an annualized basis—about the same rate as in the years before the trade war started—since mid-2018 when Trump put the first round of tariffs on Chinese imports.
“Despite U.S. tariffs on China’s exports to the United States, it appears, at least so far, that multinational firms, including those based in the United States, continue to find China an attractive environment for new investment,” writes Lardy in a post published Tuesday on the PIIE blog. “Thus, Trump’s claim that an exodus of foreign firms will force China to capitulate to US demands to settle the trade war is wishful thinking at best.”
Lardy’s findings track with what the U.S.-China Business Council, an industry group that represents companies doing business in both countries, reported in August. In a survey of its members, the group found that 87 percent had not moved out of China and did not have any plans to do so. That was down from 90 percent in a similar survey conducted a year earlier, but that slight decrease is a far cry from the Trump administration’s claims that China is hemorrhaging businesses.
To the extent that businesses are trying to relocate supply chains outside of China, the main beneficiaries are countries like Vietnam and Mexico—not the United States. And such relocations were already ongoing before the trade war, according to A.T. Kearney, a manufacturing and trade consulting firm whose annual “Reshoring Index” measures domestic manufacturing of consumer goods against imports of the same products from 14 lower-cost countries in Asia. Vietnam’s exports to the United States have doubled since 2013, for example, but the rate of growth skyrocketed during the first quarter of 2019.
Relocating out of China is a costly and complicated process—one that many businesses may be hesitant to undertake when there is so little certainty about trade policy. For American companies doing business in China, it probably makes more sense to just absorb (or pass along to consumers) the costs of the tariffs and hope things get better soon.
“If a manufacturer has to source different parts from different countries, that’s not just as simple as picking up the phone and saying ‘do you have this part and can you send me 500 of them,'” John Kirchner, executive director of congressional and public affairs for the U.S. Chamber of Commerce, explained last month. “It’s a long, expensive process for employers and businesses to change up their supply chains.”
And it’s a process that makes even less sense for American businesses that are actively engaged in making products for Chinese consumers. As Lardy has pointed out, “a large share of foreign firms in China, especially U.S. firms, are there primarily to produce goods to sell on China’s still rapidly growing domestic market.”
Once again, it turns out that international economics are more complicated—and more difficult to design—than the president seems to think.
Then again, Trump does appear to understand that on some level. After all, if the tariffs were having their desired impact, he wouldn’t have to “hereby order” American companies to stop doing business with China.
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Jamie Dimon On The End Of Trading: “The Battle Is More In The Tech World Than In Having Brilliant Traders”
The world of trading, as generations of traders knew it, is over, and it took a timestamp from Jamie Dimon to make it official: “The battle is more in the tech world at this point than in having brilliant traders.”
And so, in a world in which being a better trader – i.e. outsmarting everyone else – no longer matters as the market is now hopelessly broken by central banks, and instead just speed and the ability to frontrun orderflow is relevant, it is no surprise that JPMorgan was reserved in its Q3 revenue outlook, which while set to rise 10% in Q3 – only due to a base effect – will continue the recent trend of disappointing trading revenue
“We’re not jumping for joy,” JPM CEO Jamie Dimon said Tuesday during an investor conference in New York, quoted by Bloomberg. The 10% gain is only possible because Q3 2018 was very weak; on a sequential basis, the Q3 2019 revenue will be a decline of about 10% versus the already disappointing second quarter, Dimon said.
Other banks are set to be even worse: Citi’s trading revenue is set to drop this quarter amid the brief bout of volatility that gripped markets in August, CFO Mark Mason said Monday; Bank of America’s fixed-income trading revenue will likely be down “a little bit,” while equities trading has done well, COO Tom Montag said.
Over the past decade, Wall Street trading desks have transformed into deserted ghost towns, struggling to keep up with their electronic peers amid an unprecedented shift to cheaper, more efficient passive investing; at the same time struggles among hedge funds and moves to cheaper electronic trading have made banks’ securities units less profitable. According to Bloomberg, the five biggest U.S. banks saw a collective $5 billion drop in trading revenue in the first half of the year after an 8% slide in the second quarter and a 14% decline in the first three months of the year.
This is just the start: according to Dimon, margins will continue to drop across the financial sector as more trades move to electronic platforms, and as “trading” as we once knew it, is no more.
WTI Rebounds From Bolton-Drop After API Reports Big Crude/Gasoline Draw
WTI tumbled today thanks to neocon warmonger John Bolton being fired (and removing some hawkish premium from the market):
“The Bolton news is bearish as Bolton is a known hawk on Iran and the market is assuming that opens the door for talks with Iran,” said Phil Flynn, senior market analyst at Price Futures Group Inc.
But all eyes are likely to pivot back to fundamentals and supply tonight and tomorrow.
API
Crude -7.23mm (-2.8mm exp)
Cushing -1.4mm (-980k exp)
Gasoline -4.5mm (-800k exp) – largest draw since April
Distillates +600k (+100k exp)
Another week, another larger than expected crude draw reported by API (and big gasoline inventory drop)
Source: Bloomberg
WTI tumbled on the Bolton headlines early on but bounced very modestly on the bigger-than-expected API-reported crude draw
Finally, while hope remains high for more OPEC action, Bloomberg reports that oil prices would have to fall to $40-$45 a barrel for OPEC to make deeper production cuts, Equatorial Guinea’s Minister of Mines and Hydrocarbons Gabriel Mbaga Obiang Lima said in an interview, while attending the World Energy Congress in Abu Dhabi.
It’s happening again. Just like last time around, the head of the Federal Reserve is telling us that there won’t be a recession even though all of the evidence suggests otherwise.
Just before the recession of 2008, Federal Reserve Chair Ben Bernanke told the country that “the Federal Reserve is not currently forecasting a recession”, and shortly thereafter we plunged into the worst economic downturn since the Great Depression of the 1930s. This time, it is Federal Reserve Chair Jerome Powell that is attempting to prop things up by making positive statements that are not backed up by reality. Speaking to a group at the University of Zurich, Powell insisted that the Fed is “not at all” anticipating that there will be a recession…
Federal Reserve Chairman Jerome Powell said Friday that he doesn’t “at all” expect the U.S. to enter a recession, though he hinted the central bank will likely cut interest rates as expected this month.
“Our main expectation is not at all that there will be a recession,” Powell said in a panel discussion at the University of Zurich.
Meanwhile, things are literally falling apart all around us. Just a few days ago, I put together a list of 28 data points that clearly indicate that a recession is imminent, and since then we have gotten even more bad news.
At this point, U.S. retailers have announced the closing of more than 8,200 stores in 2019, and we are going to break the old record for store closings in a single year by so much that the term “retail apocalypse” just doesn’t seem sufficient to describe the scale of what we are witnessing any longer.
Many are blaming “the Internet” for this colossal wave of store closings, but is “the Internet” also responsible for the transportation recession that has already started?
According to Zero Hedge, on a year over year basis heavy-duty truck orders were down 69 percent in June and 80 percent in July…
According to ACT Research, heavy-duty truck orders from the four largest truck makers in North America (Daimler Trucks North America, Paccar, Volvo Trucks USA, and Navistar International) collapsed 80% in July YoY. Orders in June plunged 69% from a year earlier.
As heavy-duty truck orders collapse, suppliers, such as ones who produce transmissions have predicted that the outlook for sales this year will be horrible.
And as global trade continues to plummet, one of the biggest shipping companies in the entire world has “temporarily suspended” one of their main routes…
Growth in the world continues to collapse into late summer, so much so that Maersk and Mediterranean Shipping Company (MSC) had to “temporarily suspend” their AE2/Swan Asia to North Europe loop until mid-November, removing 20,000 twenty-foot equivalent unit (TEU) a week from trade, reported The Loadstar.
None of this would be happening if economic conditions were good.
So let’s stop with the nonsense. Fed Chair Jerome Powell can deny reality all that he wants, but that isn’t going to change anything.
There are some people out there that are still finding solace in the fact that the official unemployment number in the U.S. is still so low. At just “3.7 percent”, it is the lowest that it has supposedly been in decades, but most people don’t realize that it has also been highly manipulated. It doesn’t include tens of millions of people that are working part-time for economic reasons, that are working temporary jobs or that are part of “the missing labor force”.
John Williams of shadowstats.com compares the official employment numbers to what they would look like if honest numbers were being used, and his figures tell an entirely different story.
According to Williams, the “real” rate of unemployment in the U.S. was hovering around 12 or 13 percent prior to the last recession, and then it shot up above 20 percent and has stayed there ever since. In fact, the alternate unemployment rate on shadowstats.com is currently sitting at 21.2 percent.
So that would suggest that we have never even come close to recovering from the last recession.
But of course “3.7 percent” sounds so much better than “21.2 percent”, and millions of Americans have completely bought into the false narrative that unemployment has been steadily falling since the early days of the Obama administration.
Unfortunately, we live at a time when a lot of people don’t want to hear the truth, and “reality” is defined by whoever has the biggest spin machine. Americans are more deeply divided than ever, and there is very little agreement on the direction that our country should go. Meanwhile, economic conditions are deteriorating a little bit more with each passing day and it has become exceedingly clear that a new crisis is upon us. And this new crisis has arrived at a time when our debt bubble is larger than it has ever been before. In fact, one expert has calculated that our total debt burden is now “running close to 2,000% of GDP”…
Total potential debt for the U.S. by one all-encompassing measure is running close to 2,000% of GDP, according to an analysis that suggests danger but also cautions against reading too much into the level.
AB Bernstein came up with the calculation — 1,832%, to be exact — by including not only traditional levels of public debt like bonds but also financial debt and all its complexities as well as future obligations for so-called entitlement programs like Social Security, Medicare and public pensions.
There is no way that this is going to end well.
The two major political parties will continue to relentlessly fight with one another, and it will mostly be about really silly stuff. But as they fight, our nation is literally steamrolling into oblivion, and there appears to be very little hope of avoiding our fate at this point.
And showed no signs of stopping in today’s trading session…
Source: Bloomberg
In fact the momentum factor has now crashed into the red for the year (after being up over 13% last week)…
Source: Bloomberg
It seems like the momentum factor reached a serious level of resistance once again…
Source: Bloomberg
This is now the biggest collapse in the momentum factor since the dot-com era and the financial crisis quant crash…
Source: Bloomberg
How long before this weighs more directly in the broad index?
Source: Bloomberg
And as momo collapses, Treasury yields are soaring as CTAs are forced to dump bonds…
Source: Bloomberg
And may mean that bonds have a long way to fall before this is over…
Source: Bloomberg
The impact of this factor unwind has sent cyclicals higher and defensives lower as Bob Pisani exclaimed “I think this is a good thing.” Except it appears ol’ Bob doesn’t see the driver of this shift as problematic at all…
Source: Bloomberg
On the day, Trannies and Small Caps surged (see short-squeeze below) as Nasdaq tumbled, only to be panic-bid back near unchanged on the day.
NOTE – stocks melted up in the last few minutes as bond yields really spiked into the close.
Most-Shorted Stocks have soared this week too…(NOTE – this is the biggest 5-day short-squeeze since the start of the year)
Source: Bloomberg
Energy stocks were best today, despite oil prices plunging…
Source: Bloomberg
Bank stocks continue to outperform the broad market (as the beneficiaries of the factor unwind) and track the yioeld curve steeper…
Source: Bloomberg
It’s been a bond bloodbath the last 5 days…with the entire curve shifting higher by 22-25bps (and really getting hammered into the close today…
Source: Bloomberg
10Y Yields are up 5 days in a row – up a stunning 24bps – the biggest jump since Trump’s election in Nov 2016…
Source: Bloomberg
30Y Yields are at a key resistance level…hitting 2.20% today
Source: Bloomberg
The late-day carnage in bonds was focused more on the short-en, sparking a bear flattener…
Source: Bloomberg
Are rates set to soar even further given the positive surprise macro data?
Source: Bloomberg
WeWork bonds crashed today, erasing the post-IPO filing gains and falling back below par…
Source: Bloomberg
The Dollar trod water for the 2nd day in a row (hovering around the lows of Trump’s tariff tantrum)…
Source: Bloomberg
Cryptos continued to slide lower today…
Source: Bloomberg
Silver was best, managing to end unchanged as oil and gold underperformed…
Source: Bloomberg
Gold continues to trade in sync with global negative yield aggregate volume…
Source: Bloomberg
Meanwhile, the firing of neocon NSA John Bolton took war premium out of crude very suddenly (and tumbled into NYMEX close)…
Source: Bloomberg
Finally, while policy uncertainty has hit record highs, equity market uncertainty remains delusionally low…
Gold has been on a three-day skid, but as Fox Business anchor Liz Claman put it, “So what? It’s been a breakout summer for bullion.”
Over the last three months, gold is up about 12% and has hit six-and-a-half year highs in recent weeks.
Peter Schiff joined Claman, along with, Frank Holmes and Imaru Cassanova on The Claman Countdown to talk about the yellow metal.
Holmes started out the segment saying that recession fears are driving central bank easy monetary policy and that’s good for gold.
Each month we’re seeing more and more governments offering you a negative real rate of return on your money and that automatically makes gold much more attractive. And I don’t think it’s ending yet.”
Cassanova said gold has come back in favor after being range-bound for nearly six years.
In June, it broke out… The driver there was the Fed. What is the Fed signaling when they are shifting, when they are going from tightening to cutting? They’re saying we too are worried about the US economy. And investors responded to that — to the higher risk of a recession in the US.”
Claman noted China has added about 100 tons of gold to its reserves over the last nine months. She asked Peter if China’s stockpiling of gold plays into the picture. He said he expects China to keep adding gold, along with other central banks because they recognize the weakness of the US dollar.
The dollar is actually very weak. People have been looking at the dollar versus other fiat currencies. But if you look at the dollar’s decline against gold, that really tells you that we have a weak dollar, not a strong dollar, and I think it’s going to get a lot weaker. And I think foreign central banks are starting to position for the dollar losing its reserve currency status. And it’s going to lose that status not to another currency, but to real money, to gold. And that’s why central banks are buying. They’re going to keep buying, and individuals should be buying as well.”
Holmes pointed out that even if the trade war ends, there are still a lot of negatives in the economy and it will take a while for it to turn. Meanwhile, central banks are cutting rates in an expanding economy.
Cassanova said she sees a lot of risks in the financial system that should elevate gold to higher levels.
We’re talking setting new all-time highs.”
Peter said we’re going into recession regardless of what happens with the trade talks.
The Fed is taking rates down to zero, so that’s what’s going to happen.”
Peter pointed out that gold was under $300 in 2001. It moved up to $1,900 in 2011 when people were rightly concerned about the monetary mistakes that the Fed was making.
Well, then people believed the Fed, that everything was going to work out, that they could unwind their balance sheet and normalize interest rates, and gold pulled back to just over $1,000. It’s now risen 50% off those lows because people are just starting to figure out that none of these problems were solved. In fact, the Fed has screwed up to a greater degree than even I imagined back in 2011. They’ve done a lot of damage to the economy and the gold price is headed a lot higher. The initial reaction was correct. The QE and zero percent interest rates were a big mistake and the only winner there is going to be the people who bought gold and silver.”
Apple’s Biggest Problem: Its “Buzz” Peaked Back In 2012
Apple just concluded its latest – and quite forgettable – iPhone launch presentation, where the company made the following “major” announcements (via BBG):
Cameras, cameras, cameras: big camera updates coming the iPhone 11 and iPhone 11 Pro lines.
Pricing: The iPhone 11 is $50 cheaper than the iPhone XR, coming in at $700. The iPhone 11 Pro prices are the same $1,000 and $1,100 as the iPhone XS and XS Max.
The big Apple Watch updates came last year. The new models look the same, but have always-on screens.
The iPad isn’t going to move the needle — a slightly bigger screen, but not much else.
$4.99 is Apple’s new services price: TV+ and Apple Arcade could be worthwhile.
And while Apple’s stocks was largely unchanged following the event, it did spark a question, first addressed by DataTrek’s Nicholas Colas: how much do global consumers actually care about Apple’s product suite? This isn’t just a question of how many Apple fanboys/girls there. After all:
AAPL is 3.8% of the S&P 500, a larger weighting than Utilities (3.4%), Real Estate (3.2%) or Materials (2.7%). Apple’s performance this week could either get the S&P closer to its all time highs (just 1.5% from here), or effectively cap US large cap returns in September.
AAPL is 16.9% of the S&P Tech sector, second only to Microsoft (19.4%). AAPL has been a drag on sector performance since the 2018 highs; MSFT has been the real source of the group’s strong 1-year performance.
To answer this question, Colas looked at the global volume of Google searches for 4 key Apple products: “iphone”, “apple watch”, “macbook” and “homepod”:
#1: Google searches for “iphone” peaked in September 2012 with the launch of the 5th model. Google searches for “iphone” last September for the XS model launch were 43% lower than that high water mark. Current search volume is at a new low back to 2010.
#2: Google searches for “apple watch” show a better trend, even if product updates have not created more buzz than the initial rollout. Searches through the year since the watch’s March 2015 introduction continue to grow, and peak interest often occurs during Holiday shopping seasons.
#3: Searches for “macbook”, which captures Google queries for both the Pro and Air models, peaked in June 2012. August 2019 searches were 24% below those levels.
#4: Searches for “homepod” are much lower than those for “amazon echo” over the last 12 months. Holiday 2018 saw the Amazon home automation/speaker product register 5x the number of searches and the gap was 2:1 last month.
DataTrek had the following takeaways from these charts:
Apple’s pivot to services in the music streaming, gaming and TV spaces is a necessary shift now that virtually all its hardware products are fully mature. The failure of the Homepod to best Amazon’s Echo offering is a remarkable miss in an important space.
Since the payoff from these initiatives is uncertain, both in terms of required investment and payoff, Apple’s valuation is likely to remain below peer group averages. That is the case just now, with AAPL trading at 16.9x forward earnings versus the Tech sector at 28.6x.
The most important catalyst for AAPL, and given its S&P weighting in US large caps as a whole, remains US-China trade negotiations. The charts show that Apple is no longer a new hardware story. Services will take time to grow. What’s left is a hope that upcoming trade talks will prove productive rather than further disrupt Apple’s China business and its global supply chain.
Colas’ bottom line: this one-time disruptor has matured and needs to transition into a company that leverages its billion-user iPhone platform to sell services. Yes, it certainly has the financial resources to do so. But it will have to go back to the disruption playbook of affordable products for a mass audience to be successful. Remember that iPhones 3-5 retailed for $199… That also means that going forward, the only announcements worth watching have to do with Services, as the hardware updates are increasingly trivial.
Netanyahu Rushed Off Campaign Stage In Southern Israel As Hamas Rockets Rain Down
Prime Minister Benjamin Netanyahu was at a campaign event in the southern Israeli city of Ashdod Tuesday when Hamas rockets were fired on the city.
Early reports said at least 5 Hamas rockets triggered inbound warning sirens in Ashkelon and Ashdod just as the prime minister was on a campaign tour through the region.
Image via The Times of Israel
There are reports that at least two interceptions were made by the Iron Dome anti-air defense system.
Former Defense Minister Avigdor Liberman was also reported to be in the south at the time of the attack, which was possibly timed as both campaigned ahead of a key September 17 election to form a new government.
At the time of the rocket attack, dramatic video captured Netanyahu being rushed out of a building in Ashdod by his security staff.
#IDF says two rockets were fired towards the cities of Ashkelon and Ashdod, both were intercepted by the Iron Dome. Here’s a video of Netanyahu being evacuated during the rocket sirens. pic.twitter.com/9XIDb9wRux
It’s expected that Israel’s Air Force will retaliate on Gaza significantly tonight, with reports that Hamas has already evacuated their posts in anticipation.
