Month: June 2020

Following Trump’s Friday announcement of watered-down measures against China and Hong Kong, which included stripping Hong Kong of some of its privileged trade status as a result of Beijing’s crackdown on the island and threatening to kick out select Chinese students but falling well short of a “nuclear option” including sanctions on individuals and institutions and the expulsion of Chinese banks from SWIFT, Hong Kong’s government said actions threatened by President Donald Trump are “unjustified” and repeated that China is within its “legitimate rights” to pursue new national security laws that Beijing says will help quell months of unrest.

The People’s Daily, the official mouthpiece of China’s Communist Party, wrote that the plans outlined by Trump at the White House on Friday were “gross interference” in Beijing’s affairs and were “doomed to fail.” In a second commentary published Sunday on its front page, the newspaper accused the U.S. and Western politicians of “double standards” and “shameless hegemony” for their criticism of the legislation. Meanwhile, China’s ambassador to the U.S. wrote in a Bloomberg Opinion editorial that the central government has the ultimate responsibility for upholding national security in Hong Kong, and that the proposed legislation “will protect law-abiding citizens.”

And while Trump was widely seen as conserving ammo for future potential escalations, the market stormed higher on Friday amid optimism that the US president does not intend to pursue a more aggressive response over China’s de facto take over of Hong Kong. In fact, officials from Hong Kong wrote in a 949-word statement that they’re “not unduly worried” about the sanctions and trade restrictions proposed by Trump.

Hong Kong will continue to rely on rule of law, judicial independence, and a free and open trade policy, according to a statement issued Saturday evening local time.

The proposed legislation “does not give rise to fears of the loss of liberties by its people that will warrant international debate or interference by another country” and such fears are “simply fallacious,” the Hong Kong government said in its statement.

“We note with deep regret that President Trump and his administration continue to smear and demonize the legitimate rights and duty of our sovereign to safeguard national security in the Hong Kong Special Administrative Region which in turn is aimed at restoring stability to Hong Kong society,” the statement said.

Cui Tiankai, China’s U.S. ambassador, wrote on Saturday that Hong Kong was “a romantic fusion of the East and the West.”

“To our regret, such romance is evaporating,” the envoy wrote. The violent actions of protesters against police, citizens and property there there had crossed “a red line” for Beijing, he said. “Hong Kong is in disarray. China’s national security is at risk. That is why the central government has chosen to act.”

China’s rubber-stamp legislature on Thursday approved a proposal for sweeping new national security laws for Hong Kong, but it could take Chinese officials months to sort out details of laws banning subversion, secession, terrorism and foreign interference.

Meanwhile, the People’s Daily again underscored that China would be firm in responding to any U.S. moves, without specifying what actions Beijing might take. In Sunday’s commentary it said the proposed legislation is a rightful move to defend China’s sovereignty and compatible with international practice.

* * *

So what actions might Chinese policymakers take to deter these shifts in US policy, or in response to them?

According to Goldman’s economist Alec Philips, Chinese policymakers will take a somewhat reactive stance to US criticisms and demands on trade and other issues, at least publicly, in an effort not to escalate tensions. However, the forcefulness of the response could vary depending on how closely US actions strike at China’s strategic interests, and whether practical retaliation options exist that appear proportional and do not escalate frictions. For trade issues, the 2018-19 playbook of imposing retaliation only after the US has actually changed policy, and even then responding proportionately or slightly less than proportionately, will likely remain in force. Some possible retaliatory actions from Chinese policymakers in trade and other areas could include:

1. Trade sanctions or tariffs on US exports. This particular Chinese response seems most likely in the event of a phase 1 deal breakdown. This was China’s response of choice during the trade war, although the scale of the response was typically less-than-proportional, reflecting both a desire to limit escalation and the smaller amount of US exports to China. If the trade deal were to break down and the Trump administration increased tariffs on China, expect to see a Chinese response of this type. (In theory, China also could conceivably impose formal or informal constraints on Chinese buying of US goods or “service exports” e.g. limit tourism or the flow of students studying in the US, as we have seen occur with some other regional trading partners in the context of political frictions–e.g. Chinese group tourism fell off sharply in Korea in 2017. However, such a response would have little impact at present given that tourism and international education have collapsed amid COVID-19.) It is doubtful that tariffs would be used as a response to other US actions beyond trade.
2. Actions against US companies operating in China. US sanctions on Huawei recently expanded to include foreign companies selling a “direct product” of US technology, e.g. semiconductor chips made using US equipment. In response, Chinese policymakers might take actions unfavorable to US firms in China. These could include regulatory measures that complicate or prevent operation of a business. Chinese policymakers originally mooted the concept of an “unreliable entities list” about a year ago in the context of sanctions on Huawei and other Chinese companies; though it is unclear precisely what the consequences of being labeled “unreliable” would imply, presumably it would be very detrimental for sales within China. Retaliating in this way is not without cost: it could undermine policymakers’ efforts to present China as an attractive investment destination. It would also be outside WTO norms and could undermine China’s case for relief in that body.
3. Export restrictions. Another possible response to US sanctions on particular companies, or other US actions constraining supplies to China, could be restrictions of Chinese exports to the United States. Rare earth minerals have been frequently cited in this context. China is a dominant supplier and substitution using other materials is difficult, so if China were to decide to restrict exports of rare earths to the US the effect could be significant. Indeed, Chinese state media threatened supply restrictions on rare earths following the initial round of sanctions on Huawei last year. That threat has prompted the US government to take measures to develop rare earth production and refining capacity in the United States. Another very sensitive area could be medical equipment and supplies, which are in great demand around the world given the coronavirus crisis, and where the US sources significant amounts from China. But the perception issues around curtailing supplies in this area would be significant, and third countries could potentially re-route such goods to the United States.
4. Exchange rate depreciation. Chinese policymakers could choose to more readily accept currency depreciation, or even take active steps (such as weaker USDCNY fixings) to encourage it. Currently, the CNY is trading near multi-year lows against the USD but at more moderate levels against the CFETS currency basket…
   

   … reflecting broad USD strength. In recent days, policymakers have signaled moderate resistance to further depreciation by setting the daily USDCNY fixing stronger than other factors would imply.
   
   Currency weakness might help exports on the margin, but could also intensify capital outflow pressures; although policymakers appear to have quite good control of the capital account following the chastening experience of volatility in 2015-16, their appetite for experimentation in this area is likely limited. We think the chance of an engineered depreciation is very small, though policymakers would likely accept some modest depreciation if tensions continue to intensify, especially if there were a breakdown in the trade deal or a major increase in capital outflow pressures.

5. Large-scale sales of US asset holdings. At times of friction, the notion that China might sell its large holdings in US government securities as retaliation for trade actions surfaces in media commentary. (The latest Treasury International Capital data show Chinese holdings of $1.08 trn in US Treasuries as of the end of March, which are almost entirely from the official sector as China holds roughly $3 trn in FX reserves; in addition, agency holdings are on the order of $200bn and there could be additional assets held via custodians in other countries). For their part, US policymakers seem to have briefly entertained, but quickly discarded, the idea of trying to extract payment for damages related to the coronavirus from China’s holdings of Treasury debt. Here Goldman views disruptive actions by either the US or China in this area as unlikely. Abrupt large sales of Treasury securities or other US assets could tighten financial conditions well beyond the United States, so would appear an unattractive approach for Chinese policymakers for both political and economic reasons. However, a gradual reduction of US securities in the portfolios of SAFE and CIC is certainly a possibility-as overall reserve assets have been essentially flat, and the portfolio appears overweight US assets relative to trade weights. In fact, Chinese holdings of US debt have been unchanged for years, and while China is not dumping its TSY holdings, it certainly isn’t adding to them. Chinese policymakers might also choose to reduce the duration of their government securities holdings, which at least on the margin would push up long-term interest rates. Having said that, even a meaningful re-weighting of Chinese official assets out of US securities (say 5% of China’s total reserve assets per year or $150bn) would be small in comparison to the recent ramp-up in asset purchases by the Federal Reserve.
6. Change in stance on geopolitical issues of concern to the United States. President Trump has in the past linked trade policy to foreign policy in his comments, for example in the case of China’s cooperation in managing North Korea’s nuclear ambitions. For example, in December 2018 he explained “I have been soft on China because the only thing more important to me than trade is war…If they’re helping me with North Korea, I can look at trade a little bit differently, at least for a period of time. And that’s what I’ve been doing. ” More generally, Chinese policymakers could choose to be more, or less, helpful in regard to geopolitical issues of interest to the United States as US policies towards China change. This sort of cooperation would presumably be evident to the intelligence community and senior US policymakers, but not necessarily to markets or the general public.

Authored by Bloomberg macro commentator Garfield Reynolds

Complexity is causing global investors to underprice the danger from U.S.-China confrontations over Hong Kong. Far from being just a regional issue, the world’s two largest economies are sliding toward a more markets-negative showdown than anything we saw in the first three years of Donald Trump’s presidency.

Global stocks are trading as though this round of tensions will be resolved in a similar fashion to the 2018-19 trade conflict. Even though that caused plenty of damage to the world economy, there were limits to the field of battle. And as the phase-one trade accord showed, a fudged resolution was possible. The market reactions were obvious despite the confusing ebb and flow of the underlying story – more tariffs meant lower stocks and yields, fewer tariffs the reverse. The yuan predictably weakened sharply when the tariff threat escalated in May/June 2018 and again in the summer of 2019.

This year’s geopolitical cage-match has the potential to develop into a winner-takes-all affair, as the superpowers spiral into a Thucydides trap.

The always-difficult task of pricing in the risk of an extreme outcome is further complicated by the backdrop of extraordinary stimulus and Covid-19. That may explain why, beyond H.K. assets, it’s only the yuan which seems to be showing a sustained reaction.

Trump’s mild China comments on Friday spurred a rebound in risk assets, but the longer-term outlook remains skewed to the downside, as witnessed by fresh rhetoric over the weekend.

There’s a real threat of the global economy splitting into competing camps, raising costs and cutting productivity across industries as companies are forced to diversify and duplicate supply chains while they balance politics and profits.

China accounted for almost a quarter of world economic growth this century and is central to sustained global rebound from the pandemic. Australia, Vietnam and South Korea stand out as Asian stock markets whose outperformance in May only makes them all the more vulnerable to a U.S.-China fallout.

• AUD/USD and the S&P/ASX 200 are surging now as Australia flattens its Covid-19 curve, but their longer-term outlook is clouded by disputes with the nation’s biggest trading partner.
• The Kospi is almost 40% above its March low, even as South Korean data remain dire. The U.S. and China account for ~40% of the country’s trade, and many of its semiconductor shipments to China go via Hong Kong.

U.S. equities will also be in the firing line. Some of the Chinese companies targeted by listing rules were key drivers for the Nasdaq’s recent surge. Wall Street banks may miss out on billions, while companies like Apple, Intel, Nvidia have strong China exposure. Nvidia gets more than half its revenue from Greater China; Apple’s supply chain is dependent on suppliers based in China, South Korea and Taiwan.

On a positive note, European assets will gain extra allure. The potentially game- changing moves toward fiscal unity on the continent are an attractive contrast to Washington and Beijing’s shift toward geopolitical confrontation.

Perhaps recent moves by both sides are just posturing and the story will fade away soon but the signs aren’t good. In just the past two weeks, China has shown an increased willingness to challenge the U.S., Australia, India and others on a diverse array of issues. On the U.S. side, China-bashing has bipartisan support in the context of November’s election.

The market impact to the latest iteration of U.S-China tensions is far more complex to analyze than the damage from the trade war. Investors are wrong to mistake that for meaning it will be less damaging.

Submitted by Simon Black of Sovereign Man

New book explores NSA’s “contact chaining” tool

What happened:

We all know Edward Snowden revealed that the NSA collects and stores massive databases of information on Americans’ phone call and text metadata.

But then what? Most people think it sits on ice until and unless an alphabet agency like the FBI, CIA, or DHS wants to dig through it.

In reality, it is processed into a detailed map of your social contacts, constantly updating with new data.

Everytime you make a phone call or send a text, a new piece of data enters the government’s hands, and they update the map of your social contacts.

A new book explores the “contact chaining” tool, which is an essential second piece of the collection and storage of mass metadata.

What this means:

This tool allows the NSA to play “six degrees of separation” to connect you to almost anyone.

They call it “contact chaining,” as in, determining who you are linked to. They know better than us who is in our inner circle, who are our casual contacts, and who is a friend of a friend.

This is so much broader than the government seeing when you sent a text. They can map out your entire social life.

And as coronavirus “contact tracing” comes into effect, it would be wise to remember just how dangerous it is for the government to have such detailed information on all Americans.

Everyone is being investigated, before they are ever suspected of committing a crime. We’re all suspects now.

* * *

Ohio judge blocks state from enforcing lockdowns against gyms

What happened:

A week before the Ohio lockdown order was lifted, two dozen gyms that sued the state won the first round of the lawsuit.

A judge placed a preliminary injunction against the state, saying police and officials cannot enforce the lockdown orders against the gyms. Gyms could reopen, without threat of legal consequences.

The judge said government officials relied on faulty legal reasoning to say they had the authority to close down every gym in the state for two months.

The government’s powers to quarantine and isolate applies to individual instances. It cannot be used as a wide net to encompass every business and individual across the state, regardless of their coronavirus status.

What this means:

The governor said he didn’t “think it’s a big deal” since gyms were set to reopen less than a week after the ruling anyway.

That is tone deaf, as many politicians are at this point.

They have destroyed countless businesses with their authoritarian orders. So it is a big deal when courts strike them down.

Maybe governments won’t be able to overreach so far next time.

* * *

Judge rules FBI can’t even look at your phone’s lock screen without a warrant

What happened:

When police arrest a suspect, they inventory personal items like a cell phone.

During the process of powering down a phone, it is reasonable for law enforcement to see the phone’s screen.

That had already happened in this case.

But then an FBI agent went to the evidence locker, took out the suspect’s phone, and powered it on. The specific purpose was to gather evidence from the phone’s lock screen– the display that shows up before entering a passcode to access the phone.

But the FBI agent did not bother asking a judge for a warrant. And that made it an illegal search under the Fourth Amendment protections against unreasonable search and seizure, according to a judge.

The evidence was thrown out.

What this means:

When we are so used to the government doing whatever it wants, and not facing any consequences, little victories like these are encouraging.

There is a reason the Constitution attempted to restrict law enforcement and government powers when it came to the rights of the accused.

Otherwise, it is far too easy for the government to go digging around for a crime, without ever suspecting one in the first place.

And with the number of petty laws and victimless crimes out there, we are all guilty of something

One month ago, Goldman triggered a selloff in growth and momentum stocks, when it pointed out that  the five largest S&P 500 stocks, the FAAMGS (or MSFT, AAPL, AMZN, GOOGL, FB) have risen to account for 20% of index market cap, representing the highest concentration on record…

… resulting in the lowest market breadth since the tech bubble…

… and warning that “narrow market breadth is always resolved the same way” as “narrow rallies lead to large drawdowns as the handful of market leaders ultimately fail to generate enough fundamental earnings strength to justify elevated valuations and investor crowding. In these cases, the market leaders “catch down” to weaker peers.”

In short, as we wrote – somewhat jokingly – in April that “The Market Is Now Just 5 Stocks“, that’s precisely what has happened, with investors flooding into the buyback-funded momentum of the largest tech names …

… and creating the biggest “hedge fund/mutual fund/retail/momentum hotel” ever assembled in the FAAMGs. And here is an update to one of the most amazing statistics of 2020 from Goldman: YTD the 5 biggest stocks are up 15% while the remaining 495 S&P500 companies are lower by a collective 8%, with the overall S&P400 index is down 5% YTD (compare to four weeks ago here).

Here are Goldman’s comments on this bifurcation in the market:

The return of the S&P 500 index overstates the performance of the typical stock. The equity capitalization-weighted S&P 500 index has rebounded by 35% from its low and now trades just 11% below its all-time high. The index return since the start of the year is -6%.

The average stock has returned -13% YTD. The equal-weighted S&P 500 index trades 15% below the record high and has lagged the cap-weighted index by 650 bp this year.

The stellar return of the five largest stocks in the S&P 500 — MSFT, AMZN, AAPL, GOOGL, and FB — is the primary explanation for the large difference between the cap-weighted index and the average stock.

While the FAAMGs may grow further, there is a hard limit on just how much bigger they can get:

At 20%, the current aggregate index weight of the five stocks with the largest market caps is the highest in history, exceeding the previous peak of 18% at the apex of the Tech Bubble in March 2000. However, we are approaching the practical maximum concentration of 25% given most long-only portfolio managers have diversification requirements and individual stock position limitations of roughly 5%.

Incidentally, this historic bifurcation of the “market” into two sets of stocks is also why Goldman is skeptical about further upside:

Broader participation in the rally will be needed in order for the aggregate S&P 500 index to climb meaningfully higher. Goldman Sachs equity research analysts currently forecast just 1% upside for the cap-weighted group of the five stocks. The modest upside for the largest stocks means the remaining 495 constituents will need to rally to lift the aggregate index.

Luckily, there is nothing like a weekend of nationwide looting and violence to spark a broad-based market rally and push the policy tool formerly known as the S&P500 back to all time highs to convince everyone that nothing is fucked here.

Overnight, China’s NBS reported that in May, manufacturing PMI signaled a continued recovery in factory activity, albeit at a slower pace than in April and below expectations (50.6, exp.51.0, down from 50.8). Sub-indexes in the manufacturing surveys suggest export order sub-index remained weak and employment deteriorated further.

Of note, the manufacturing employment sub-index weakened to 49.4 from 50.2, implying continued deterioration in the labor market. On the other hand, inventory indicators suggested a destocking trend, with raw material inventories declining to 47.3 from 48.2, and the finished goods inventory sub-index declined to 47.3 from 49.3 in April.

Yet even as China’s factories are starting to hum again, a new problem is emerging as executives are now worried that the rebound could falter on weak demand both at home but especially abroad, something we warned about some time ago when we warned that China’s push to produce at all costs will eventually backfire.

Justin Yu, a sales manager at Zhejiang-based Pinghu Mijia Child Product that makes toy scooters sold for American retailers, is among those seeing their order book improve from the depths of the coronavirus lockdown, but remain well below normal.

Quoted by Bloomberg, Yu said that “we are seeing more orders coming in this month as we get closer to our normal peak season,” Yu said. “But our orders are still 40-50% lower than last year.” The factory’s production capacity is running at about 70% to 80%, and Yu is making to order to avoid any build up in stock.

The disconnect between China’s recovering production and still dormant demand had shown up in data revealing a rise in inventories and once again contradicting the official PMI numbers which as noted above, show that to be easing. China’s fake data aside, the worry remains that sustained overproduction will lead China’s factories to keep cutting prices, compounding global deflationary headwinds and worsening trade tensions, before they eventually cut back on production and therefore even more jobs.

“The supply normalization has already outpaced demand recovery,” said Yao Wei, China economist at Societe Generale SA. “In other words, the recovery so far is a deflationary recovery.”

Which is another way of saying it is not a recovery at all, and the US, whose economy remains largely shut is not helping.

So given the weak export outlook, manufacturers such as Fujian Strait Textile Technology are switching their business models to target the home market, according to Bloomberg. It used to sell 60% of its products to Europe and the U.S. before the coronavirus crisis wiped out those sales. Now, Dong Liu, the company’s vice president, is looking for opportunities at home.

“Our company executives have started to visit the local market to make more potential clients know about us,” he said. “Since May 26, we have been producing 24 hours everyday at full capacity. All the inventory has already been sold and we’re rushing to make goods.”

Alas, the domestic-focused strategy also has numerous drawbacks: while China’s consumers are largely free to resume their regular lives as fresh virus cases slow to a trickle, they too aren’t spending like they used to (almost as if they also don’t believe Beijing’s solemn vows that everything is back to normal): retail sales slid 7.5% in April, more than the projected 6% drop. Restaurant and catering receipts slumped by 31.1% from a year earlier, after a 46.8% collapse in March.

“Although demand conditions are improving on the margin, they will still take a long time to recover to where they were before the virus crisis. Investment is picking up, domestic consumption improving and external demand is less bad than it was” said Chang Shu, analyst at Bloomberg Economics. The question, of course, is how much time.

In Zhenjiang, Jiangsu province, Melissa Shu, an export manager for an LED car lighting factory, said although orders are steadily improving, there’s no sense of urgency from her clients and the outlook remains uncertain. “We’re just making goods slowly,” Shu said. “We are worried about the coming months.”

* * *

As Bloomberg speculates, some producers may be hoping for a real-life enactment of Say’s law, a part of economic theory which suggests that ultimately supply will create its own demand, as long as prices and wages are flexible, although in China where every datapoint is manipulated and fake, nobody really knows what the current state of the economy is.  Various real-time indicators continue to pain a mixed picture.

Another scenario proposed by UBS is that industry self-corrects adversely. The bank’s chief China Economist Wang Tao points to strong steel production during the depths of the coronavirus lockdown, even when demand was weak. Higher inventories means that even as demand recovers, steel production won’t show much of a pick up. And once producers know that orders are falling, they will adjust output.

“I do not think supply will outstrip demand for long – once inventories build up, or producers know orders are falling, production will come down as well,” she said.

Should unemployment continue rising, that could trigger a very messy feedback loop. Premier Li Keqiang in a press conference on Thursday highlighted job creation as a critical priority for the government. The urgency to create jobs may mean there’s even less likelihood of a shake up of state owned companies in the heavy industrial sectors that have historically fueled excess production. It also means that even more ghost cities may be coming.

The disconnect is already clear in data points that show, for example, stronger coal consumption by power plants and rising blast furnace operating rates by steel mills, while at the same time gauges for property and car sales are improving more slowly. That combination, according to Bloomberg, will drag on China’s growth over the coming months, according to economists at Citigroup.

The problem for China’s industrial sector is that it really needs both local and global demand to be strong. If both are weak, and only the government is “injecting” support, it’s a dire outlook. But if local demand recovers and global demand doesn’t, there are still problems.

The best summary of China’s “big problem” came from Viktor Shvets, head of Asian strategy at Macquarie Commodities and Global Markets: “At the end of the day, China’s economy is driven by demand and right now there is no demand,”

A scenario where manufacturers capacity originally dedicated to the export market is retooled to produce for the home market instead would still lead to overproduction. Then the supply-demand mismatch would end up adding to deflationary pressures and a pose fresh headwinds to economic growth, according to Bo Zhuang, chief China economist at research firm TS Lombard.

For now, China’s factory owners are hoping that won’t happen but their optimism is waning fast.

Grace Gao, an export manager at Shandong Pangu Industrial that makes tools like hammers and axes – around 60% of their goods go to Europe – is seeing orders come in as her clients get up and running again. But even as things pick up, Gao remains hesitant to call a full recovery. “Our clients are facing unprecedented problems,” she said. “It’s still hard to estimate when we’ll get back on our feet.”

Authored by Gabrielle Bruney via Esquire.com,

Jeffrey Epstein is dead, but the accused pedophile financier is still surrounded by multiple mysteries. The source of his vast wealth still isn’t entirely known, nor have rumors that he may have trafficked women and girls to some of the world’s most powerful men been resolved. But one of the biggest lingering unknowns in the story is the status of Ghislaine Maxwell, Epstein’s longtime companion, who’s been alleged by Epstein survivors to have recruited young women and girls into the multimillionaire’s circle and participated in their abuse.

Maxwell has denied all accusations of being involved in abuse, and she’s never faced criminal charges. But it’s hard to know much more than that when it comes to her recent years, because no one knows exactly where she is.

“I’ve heard she’s in Brazil, I’ve heard she’s in France, I’ve heard she’s in California,” Lisa Bryant, director of the Netflix docuseries Jeffrey Epstein: Filthy Rich, told Esquire.

“Who knows where she is, really?”

Who is Ghislaine Maxwell?

Maxwell is the youngest of Elisabeth and Robert Maxwell’s nine children, and was born in France in 1961. The family lived in an English mansion, and her father was the founder of a media empire and served in Parliament. Maxwell attended one of the UK’s most exclusive boarding schools and then Oxford University. As members of British high society, Maxwell mingled with some of the nation’s most celebrated families, and became friends with Prince Andrew.

Her father died in 1991, after falling off his yacht and drowning. It’s been speculated that his death may have been a suicide, as on the day he died he was due to meet with the Bank of England over the matter of his being in default on millions in loans. After his death, the British media dubbed him the “crook of the century,” when it was revealed that he’d taken hundreds of millions of pounds from his employees pension funds. Maxwell told one news outlet after her father’s death that she felt he was murdered.

She moved to the United States the year of her father’s death, and soon met Jeffrey Epstein. The relationship marked a second reversal of fortunes for Maxwell, whose family lost much of its wealth after her father’s death. In 2000, she moved into a $4.95 million Manhattan townhouse purchased “by an anonymous limited liability company, with an address that matches the office of J. Epstein & Co. Representing the buyer was Darren Indyke, Mr. Epstein’s longtime lawyer.” She was his companion for years, managing his households and introducing him to her society friends

Maxwell and her father in 1984.

According to a lawsuit she filed this year in hopes of winning funds from the late financier’s estate, “While under Epstein’s employ, Maxwell was responsible for managing Epstein’s properties located in New York, Paris, Florida, New Mexico, and the U.S. Virgin Islands.”

“During the course of their relationship, including while Maxwell was in Epstein’s employ,” the lawsuit reads, “Epstein promised Maxwell that he would support her financially. Epstein made these promises to Maxwell repeatedly, both in writing and in conversation.”

However, a 2003 Vanity Fair profile of Epstein denied that Maxwell was an employee.

After Epstein’s 2008 conviction for soliciting prostitution from an underage girl, the two appeared to end their public association. In 2009, accuser Virginia Roberts Giuffre filed a civil suit against Epstein accusing him and Maxwell of grooming her into their alleged sex trafficking ring. However, Maxwell remained a fixture in New York society until around 2015. In 2012, she founded an environmental nonprofit called The TerraMar project, which folded in late 2019.

Epstein with Maxwell in 1995

Has she been charged with any crimes?

Though multiple survivors have alleged that Maxwell participated in Epstein’s alleged crimes, she’s never been criminally charged. One thing that could stymie potential efforts to level charges against Maxwell is the infamous 2008 plea deal that Epstein struck with the US Attorney for Miami, Alexander Acosta, which found him serving just 13 months in prison after initially facing charges that could have garnered him a life sentence. Jeffrey Epstein: Filthy Rich producer Joe Berlinger described the deal to Esquire as “unprecedented, unheard of sweetheart deal” that “included a non-prosecution agreement for named and unnamed co-conspirators.”

In April, an appeals court upheld the 2007 deal, writing in its opinion that the decision was “not a result we like, but it’s the result we think the law requires.”

Maxwell is currently suing Epstein’s estate for money for her legal fees, and for the price of private security, alleging that her “prior employment relationship” with Epstein has caused to her be subjected to death threats.

Maxwell at a 2016 event.

Where is Ghislaine Maxwell now?

Though once a fixture of the global high-society, Maxwell has been spotted rarely in recent years. Last summer, she was photographed at a Los Angeles In-N-Out Burger, though the authenticity of the photo has been disputed. Her New York townhouse was sold in 2016.

This month, it was reported that lawyers for accusers seeking to file a civil suit against Maxwell have been unable to locate her. According to ABC news, one alleged victim’s “legal team dispatched process servers to five addresses previously connected to Maxwell, including a multi-million dollar brownstone on Manhattan’s Upper East Side, an apartment building in Miami Beach and Epstein’s mansion on Palm Beach Island.”

Maxwell is also contending with other civil lawsuits filed by alleged survivors. Just this month, she won the right to delay her questioning in a suit filed by Annie Farmer, the sister of fellow Epstein accuser Maria Farmer, on the grounds that her testimony could be used against her in a current criminal investigation. But with the FBI allegedly investigating Maxwell, her story could be far from over.

Even before protests over a controversial extradition bill sparked the tumultuous pro-democracy movement that swept across Hong Kong last year, the notion that the city’s freedoms were under threat, and that China would soon move to curtail them, had been gestating since the 2014 Umbrella Movement. Last Spring, before the movement began in earnest, Kyle Bass published a paper entitled “the Quiet Panic” about how Hong Kong was a ticking time bomb. A few months later, it exploded.

Over the past 16 months, expats haven’t been the only ones fleeing Hong Kong. Virtually everyone who can afford to move has at least considered the possibility of selling their once extremely valuable Hong Kong real estate and fleeing elsewhere, perhaps to New Zealand, or Australia, or Malaysia – or Taiwan, which is currently drawing up plans to welcome expats.

As we reported on Friday, as more prepare to move before China tightens its grip, Sing Tao, Hong Kong’s second-largest Chinese-language newspaper observed that Hong Kong residents have been exchanging more of their HKD holdings into foreign currencies at banks and money exchange counters on Thursday.

It got so bad that according to a follow up report from the SCMP on Saturday, the rush for US dollars forced money exchangers in Hong Kong to turn away hundreds of customers after running out of the currency amid fears the United States could end the city’s preferential trading status.

According to money exchange store owners, demand for the US currency surged this week after China’s legislature endorsed a resolution for its top legislative body to craft a tailor-made national security law for Hong Kong which would criminalize acts and activities of secession, subversion, terrorism and foreign interference.

In kneejerk response, HK residents – fearing the Hong Kong dollar could be unpegged from its US counterpart – rushed to convert their local currency into something they view as more stable: the US dollar.

Long lines promptly formed at money changers in a number of Kowloon districts including Tsim Sha Tsui and Sham Shui Po on Friday, as residents waited for shop operators to replenish their US dollar supply. Eric Wong Wai-lam, who runs Rich Bird Currency Exchange in Sham Shui Po, was forced to turn away 600 customers who wanted to convert their local banknotes to the US currency.

“There will be no US dollars for exchange until next Tuesday or Wednesday,” he told customers, adding that his shop could only serve those who had previously placed an order. He explained that demand for the US currency had increased 10-fold this week, with more customers looking to switch large sums – hundreds of thousands or even millions of Hong Kong dollars – at a time.

“The US dollar is out of stock everywhere. We’ve offered every last bit of our supplies to our customers,” Wong said adding that residents also sought alternatives such as the pound, Euro and Australian dollar. “People will take anything you have,” he said.

As the SCMP further details, civil servant Mike Ma had hoped to change HK$35,000 (US$4,514) into US dollars, but had to make do with £1,000 (US$1,237) and NT$20,000 (US$666) instead. The 35-year-old British National (Overseas) passport holder said he had been keeping foreign banknotes since Hong Kong was gripped by anti-government protests last year, but had visited exchange stores more often this week because of uncertainties over the city’s economic future.

Kevin Chan, operator of an online shopping site, bought US$3,000 on Friday, saying he had been doing so from time to time since the social unrest broke out. “It’s like buying insurance,” the 31-year-old said.

Chan said panic buying of the US dollar reflected how Hong Kong had found itself in the middle of a political tug of war between the world’s two superpowers. “[China and the United States] are bluffing now. You don’t know what stakes they will raise next. Hong Kong is in a passive position. It’s just a pawn to both sides,” Chan said.

“I’m not confident about the current situation, same as many others. In case the US dollar peg is reset, buying the US dollar beforehand gives me more confidence.”

The Hong Kong currency has been linked to the US dollar since 1983 and any change in the peg does not require approval from the US government. The Hong Kong government determines which currency the local dollar is pegged to. The currency is kept pegged in the range of HK$7.75 to HK$7.85 to the US dollar.

Eddie Yue Wai-man, chief executive of the local central bank, the Hong Kong Monetary Authority, said earlier this week the peg would remain the bedrock of the city’s financial system, with foreign reserves of more than US$440 billion. And while the city had yet to show any noticeable sign of fund outflows from the Hong Kong dollar or banking system, the market is starting to crack. Though spot HKD has been trading toward the strong end of its band as the Fed slashes rates to zero amid growing speculation the US central bank may soon follow through with negative rates, Kyle Bass’s bet against the currency peg, which critics once slammed as absurd and unlikely to pay off, is becoming increasingly popular as a trade as derivatives markets price in growing expectations for depreciation.

Even Hong Kong’s largest banks, HSBC, saw a small handful of its automated teller machines run out of US dollars, but was working to replenish them. The bank has 39 locations that offer foreign currency, but not all distribute US dollars. Customers can withdraw up to HK$80,000 per day per bank card.

“HSBC has sufficient supply of banknotes and is committed to supporting its customers and the smooth operation of the financial system in Hong Kong,” a HSBC spokeswoman said.

Looking at the Yuan, Bloomberg’s macro commentators Mark Cranfield correctly writes that “any downside extension for USD/CNH after President Trump left the phase one trade deal untouched will be short lived. There is enough uncertainty over the U.S.-China relationship to maintain an underlying bid for the dollar.”

Cranfield is right, if for another reason: while Trump may have left the Phase 1 trade deal in place for now, at this point this is purely theater, for the simple reason that China is woefully behind on its signed contractual commitments to import a set quantity of US agircultural, energy, and manufacturing exports.

As Goldman writes over the weekend, “there is a clear risk—if not a likelihood—that US exports to China will fall short of the Phase 1 deal.” So far, the Administration appears to be taking a wait-and-see approach to this and could continue to do so for a while, since the export targets were intended to be met over a 1-2 year timeframe, and the deal was only signed four months ago. But if Trump decides that China has not met its commitments under the Phase 1 trade deal – which it clearly hasn’t – he would take the initial step of taking the tariff rate on Tranche 4A back to 15%, according to Goldman.

As a result, while ignoring Trump headlines looks to be the right strategy in the short term for traders, Cranfield notes that this “may change when the U.S. election race gets into prime time.” So while record highs for USD/CNH may have been delayed after last week’s all tim ehigh, “they are still the path of least resistance in the weeks ahead”, according to the Bloomberg commentator.

And just to give the yuan selling a kickstart higher, here is Mike Pompeo on Fox News, pouring some more gasoline on the raging dumpster fire that is US-China relations, saying that “this is a Chinese Communist Party that has come to view itself as intent upon the destruction of Western ideas, Western democracies, and Western values. It puts Americans at risk, whether it’s stealing American intellectual property or destroying jobs here in the U.S.”

This is a Chinese Communist Party that has come to view itself as intent upon the destruction of Western ideas, Western democracies, and Western values. It puts Americans at risk, whether it’s stealing American intellectual property or destroying jobs here in the U.S. pic.twitter.com/89JlUuARro

— Secretary Pompeo (@SecPompeo) May 31, 2020

Hardly the stuff one hears if de-escalation is just around the corner.

Authored by Kurt Schlichter, op-ed via Townhall.com,

It’s pretty clear who the commie bastards known for their shoddy lab practices and their weird fetish for gnawing on pangolins badly want to win in November, and it’s not Trump and the Republicans. The Chinese communists want their money’s worth, and they will go all-in for the Democrats who find the chance to hurt Trump at the same time they hurt America too delicious to pass up. Plus, the Dems heartily approve of what Mao’s Pals are doing to freedom-loving Hong Kongers, seeing it as a template for what they would love to do to freedom-loving us. 

We need to understand and accept that a vote for anyone with a “D” is a vote for Xi.

Now, some people who are stupid and/or liars will whine that this is mean and unfair and totally unlike the last four years of accusations about Trump and his folks being the pet of Vladimir Putin whose treason has perpetually had the walls closing in whilst the Grand Marshal of the Supreme Court was poised to frog-march them all to a C-130, next stop Gitmo. And it is totally unlike the Obamagate/Russiagate thing, in that with the Obamagate/Russiagate thing was a manifest lie and the accusation that the CCP is holding the pink slip of the Donkey Party in its bat soup-moistened hands is true.

Let’s look at Joe Biden for a moment, though it will have to be on video since the Geppettos holding his strings are not letting him out of his Delaware dungeon unless a miracle happens and he becomes a real boy.

This is the guy that went publicly incontinent when the Great Wall Gang was shipping Typhoid Mulans over here and Trump cut off that insanity. Travel bans were racist, you know, until they weren’t. And this guy wants to be president, when he remembers he is running for president, though his priority was not saving American lives but not vexing Beijing. This guy is so far in the Red Menace’s pocket that he’s risking lint poisoning.

They channel the digital Dem, asking, “Come on man, is it too much to want a president who takes America’s side?

Well, to the Democrats, the answer is a responding, “Yes, and don’t assume my gender.”

Now, Biden always sides with the PRC because, like the elite whose Guccis he slurps, he’s totally comfortable with the Chinese supplanting the USA as the world’s preeminent nation – that’ll show those flag-waving flyover rubes who’s not boss! The totally-not-senile politician opposed Trump’s tariffs and his attempts to level the playing field, and Hi-Bidder Biden would sign agreements to lock in the former Deliverance trade model. His response to the People’s Liberation Army arms build-up that threatens our Pacific Fleet would be, “Hey man, I believe in building-up arms! I work out and I am strong and I can do more push-ups than you, fat!”

Here’s the other thing. Remember all that idiotic babble about the Russki kompromat of Trump? That somewhere, Putin had this video library of Trump water-sporting with Muscovite rent girls? Well, we all know Joe’s pride n’ joy Hoover went to China and did a big-bucks deal, probably because he’s such a super-achiever who got where he is on his own talents and not at all drafting after his daddy. So, what else do you think he did when he was there? Explored the Great Wall? Marveled at the Forbidden City? Cavorted with every skeeze the ChiCom intel guys could throuple him up with on video?

Did it happen? You want to bet it didn’t? We know the guy got booted from the Navy for dope. We know he got zillions from some Ukrainian oligarch. We know he was accused of forgetting his crack pipe in a rental car. We know he impregnated a stripper. We know he was voted “Least Likely to be the Centerfold of Good Judgment Monthly.”

What are the chances the Chinese Gestapo didn’t try to honey-trap the guy who’s the Winnie the Pooh of hookers n’ blow? What do you think they probably caught him doing on Candid Commie Camera? It’d be like a home movie from Memorial Day weekend in Lake Havasu on Bob Crane’s houseboat.

But Biden’s not the only guy in hock to the reds. There’s Diane Feinstein, whose Chinese mole chauffer for the better part of two decades was starring in “Driving Senator Oblivious.” And you got the always accommodating Kamala Harris carrying enough water for the reds to top the Three Gorges Dam. Her latest ploy to please her powerful political patrons is to echo the commie agitprop designed to distract from the country’s criminally negligent (or worse) behavior in connection with the bat biter disease by offering a bill to declare calling it the “Wuhan Flu” to be RACISM!

And there’s Martha McSally’s opponent in the Arizona Senate race who’s a Chinese Communist Party dream come true. Even the media, and you know how it sucks, is reporting that Mark ChiCom Kelly has investments in Chinese tech. He supports Joe Biden and Joe’s policies, which we have seen are Xi’s policies. When Nancy Pelosi tried to pass a $3 trillion “pandemic relief” bill that gave dough to illegals and pot purveyors, did you see him complain that it ignored American defense and contained no spending to put American workers back to work building the equipment we need to oppose his party’s pals? Nah. His focus is on disarming Americans. Not surprisingly, ChiCom Kelly shares the Chinese Communist Party’s position on the Second Amendment – he’s against it.

“But but but but he was in the Navy and he was an astronaaaaaauuuuuutttt!” 

Okay, that does not make it better. It makes it much, much worse.

The fact is that the Democratic Party has a recent hatred of Trump but a long tradition of hating the United States. Its goal for the last half-century has been to supervise the decline of America as a world power, and the fact that the Chinese communists take good care of their friends makes it easier. There is zero doubt that the Chinese government is already all-in on a Biden puppet presidency and that it backs Senate candidates like ChiCom Kelly because it knows it can rely on them to place Xi’s interests ahead of America’s.

They’ll deny it, of course. But here’s the hard and indisputable truth: This November, you can vote for the Republican Party, or you can vote Chinese Communist Party under another name.

*  *  *

Join Townhall VIP  and pre-order my new Regnery book, The 21 Biggest Lies about Donald Trump (and You!), then check out my hit conservative novels People’s Republic, Indian Country, Wildfire and especially Collapse, where the ChiComs side with the libs. Wait, that makes it nonfiction. Also, Townhall VIP members should get my podcast “Unredacted” every Monday and my free podcast “Fighting Words” on Wednesdays to reach peak awesome!

Every rioting liberal muppet has a plan until someone punches them in the face…

…and that bastardization of Mike Tyson’s infamous quote could not apply any better to NBA star JR Smith and the young white dude who decided – for now apparent reason – to damage a truck parked in a residential area in LA.

As TMZ Sports reports, the 6’6″, 225-pounder unleashed a barrage of violent kicks on the man – landing several times in the head.  When the guy finally stands up on his feet, Smith delivered a final punishing overhand right to the guy’s noggin.

NBA player JR Smith just smashed and beat up a rioter who broke his car window #protests2020 #SantaMonica #JRSmith

pic.twitter.com/7BSnMRFLFC

— Sheeraz Raza (@SheerazRaza) May 31, 2020

After the event, Smith explained the attack in an emotionally charged video – saying:

“One of these motherfu**king white boys didn’t know where he was going and broke my f**king window in my truck.”

“I chased him down and whooped his ass,” Smith said.

“He didn’t know whose window he broke and he got his ass whooped.”

JR Smith’s response to the video out there of him beating someone up bc they broke his car window (via @TNHTalk) pic.twitter.com/LIiyTzO7Fr

— Alex B. (@KnicksCentral) May 31, 2020

Notably, Smith says the incident was not fueled by race or hatred – it was simply revenge for messing with his truck.

We have one awkward question – as much right as Mr. Smith had to punish this mindlessly-violent idiot for damaging his property… we wonder what the reaction among the media and intelligentsia on Twitter would have been if a 6’6″, 225lb white guy was kicking the crap out of skinny young black dude who damaged his car (or store?).