Month: September 2024

Authored by Peter Tchir via Academy Securities,

The “big” news on the week, at least the news that seemed to move markets the most, was China’s stimulus plans. It started with some monetary policy, which didn’t do much, but China followed up with fiscal stimulus, and the perception that there is more to come permeated the market thinking. We highlighted in Thursday’s The “Other” Chinese Bazooka that this time, the benefits would accrue much more to China and its companies, than to the U.S. and its companies.

Before delving into our take on how things will play out, let’s highlight just a couple of things from Academy’s Geopolitical Intelligence Group:

• From Saturday, Israel Kills Hezbollah Leader.

• And from Tuesday, September’s Around the World where we analyze the:

  • The Middle East and ceasefire discussions.

  • Iran sending ballistic missiles to Russia.

  • The U.S. potentially lifting restrictions on Ukraine’s use of some weapons in Russia.

  • The friction between China and the Philippines (which seems to take a back seat to Taiwan in our meetings, but we aren’t sure that it should).

• Also, this seems like a good place to remind people about Academy’s Credit Focused Geopolitical Roundtable on October 10th, from 5:30 pm to 7:30 pm at Bobby Van’s near Grand Central, led by General (Ret.) Spider Marks. Please register here as space is limited.

• Finally, while not as geopolitical-focused as the prior Thursday’s discussion on Bloomberg TV (from the 5 to 15 minute mark, with even more focus on geopolitics than usual), we had a lively discussion with Rick Santelli on CNBC live from the floor of the CBOT – which is always a treat. We focused on “bumpy landings” and China.

Maybe I Was Mean

But I really don’t think so.

After an overnight session that initially had U.S. indices rising with Chinese stocks (the Shanghai 300 did even better than the Hang Seng – 16% versus 13%), the performance sagged. Yes, U.S. shares eked out gains of less than 1%. That was nothing like we saw in Asia or even Europe (where the Stoxx 50 rose 4% on the week).

Also, following up on last weekend’s Starting a New Cycle? report, it was noticeable how much of the strength in the U.S. appears to occur overnight, or at the open.

Given that we should have seen some performance chasing on Friday, that seems concerning. September, which started out weak, just like August, managed to fight the “seasonals,” and the major U.S. indices are up around 2% with one trading day remaining. However, there is this lingering concern, for me, that the post-FOMC surge was “strange” and isn’t getting any material follow through.

It seems highly unlikely to occur 3 times in a row, but let’s not forget First Friday’s which have not been kind to markets. While it seems unlikely to occur again, there is nothing about recent trading that makes me believe that we aren’t susceptible to another bout of weakness at the start of October.

You Asked if I’m Scared

And I said so.

We had some great meetings last week in Minneapolis and Chicago. Somehow, with anything geopolitical, it seems that many people want to know “what scares you the most?”

In a world where:

• Russia is threatening to use nuclear weapons.

• China fired an ICBM into the Pacific, and there are ongoing risks with the Philippines and with Taiwan.

• There is escalation in the Middle East (at least Isreal is increasing their attacks, and as discussed in The “Other” Bazooka, I’m in the camp that Iran just doesn’t have the firepower to retaliate effectively).

I answered that my biggest fear, right now, is that the U.S. will grab at a “carrot” offered by China, reducing the pressure on China’s economy and giving them the opportunity to buy a couple of more years to “properly” prepare for the competition with us.

While Sinead O’Connor sang “Through their own words, they will be exposed,” I think General Spider Marks puts it more eloquently – China has a history of “marching in plain sight.” Basically China tells us what they want to do (in this case, to become the economic powerhouse of the world) and we ignore that at our own risk.

Nothing about the new stimulus plan does anything to derail my view that The Threat of Made By China is one of the biggest threats facing American (and European) companies. The threat to sales in China has already occurred. The threat to sales in Emerging Markets is occurring and we are seeing increasing amounts of competition from Chinese brands in Europe and even the U.S.

You Asked for the Truth and I Told You

I keep trying to come up with a “positive” spin for the global economy on China’s stimulus efforts. But here is what I keep coming up with: 

• Chinese stocks should continue to rally as many investors have been caught underweight the stocks.

• Chinese stocks will continue to rally because when you look at some of their big names, they trade at a fraction of the multiples of our big names. They probably should, but in a market where many people have spent the last two years trying to catch rotations (including myself, with some modicum of success), the narrative behind “Chinese Stocks are Cheap” seems pretty powerful.

• You should see Chinese spending increase and it will be heavily allocated to their own brands.

• This influx of spending and capital will buy the Chinese companies time (and money and scale) to make further inroads regarding their foreign aspirations – which again, should help Chinese stocks.

• Will their phones get better and cheaper? Will more and more people, including foreigners, fly on Chinese airplanes? Will their chip industry continue to grow and improve?

  • What is the risk that China is able to shift to using more and more Chinese made chips for items requiring mid-to-high level (but not state-of-the-art) tech?

All of this is occurring while the U.S. is:

• Starting another round of theater on the debt ceiling (highly unlikely that we don’t pay anything on time, but highly likely that both sides get to spend a bunch of $$$ on their priorities as part of the “kick the can” negotiations).

• Political leaders on all sides are more focused on the election than on governing (at least it seems that way to me).

• About to enter, what many other political systems seem to find awkward, a period of time where we will have a new president, who won’t assume control for almost 3 months after the election. An election that could be mired in controversy – even if it shouldn’t be (there is some small tail risk, I don’t think it is big, but it is there).

At some level, even I’m forced to acknowledge that much of this “doesn’t sound like tomorrow’s problem,” but I fear it is and the markets will continue to price it in, like I think we saw most of Thursday and Friday.

A Big Week on the Economic Data Front

Lots of information coming out, and I’m continuing to lean towards the potential that the jobs data comes in “better” than expected. One thing that would really rattle markets (I think) would be an upward revision in Non-Farm Payrolls. Even writing that seems weird, but since consensus is now so fully on board the “jobs data has been inflated” boat, it is getting very crowded. If I’m correct on the problems with seasonals (too many additions to start the year, too many subtractions in the summer) and if the BLS has “corrected” some of their modelling assumptions around the birth/death model, it wouldn’t surprise me to see a beat on the headline number AND upward revisions. Not sure I want to bet on that, but…

Finally, the discussion is clearly headed towards the “Neutral Rate.” The good thing about that is we all know it is a number somewhere between 0% and 5%.

Seriously, I think we will find that the market is pricing in a terminal rate of sub 3% by the end of the July 2025 meeting and this number is “too low, too quick” (thinking more like 3.5% being the terminal rate and not getting there until the end of the year, unless we go from “bumpy” to “clunky” landing).

Bottom Line

If you want to play the China stimulus (and I do), do it direct via Chinese stocks (I use FXI and KWEB) and don’t assume U.S. “proxies” will do well.

I think oil is the biggest beneficiary of geopolitical risk, but I’m leaning towards “escalation to deescalate” in the Middle East and even, though more hesitantly, between Russia and Ukraine.

On the rates side of the equation, I think 10s and 30s are susceptible to moves higher on steepening, deficit concerns, debt ceiling negotiations, and auctions – call it 4% on 10s.

I continue to like credit as I think that investors should be heavily overweight credit, especially at the front end (2-years and in) and think that the competition from private credit funds and even some big banks to get money out to customers will help support credit spreads from the bottom (lower rated entities) on up.

Now that I’ve actually listened to (I cannot get the song out of my head) and read the lyrics to “Emperor’s New Clothes,” I cannot tell if the song is uplifting, or really depressing. And while I think China might be exposed as “being naked,” I think they are in the process of buying themselves (and their companies) time and that we will aid and abet them in their efforts to spur their economy forward, and we are not seeing the danger to ourselves.

Maybe too heavy, maybe too melodramatic, but it is the path that keeps jumping out at me.

In any case, let’s hope the first week of October starts better than the first weeks of August and September, but I’m starting to believe that we may see a three-peat!

All the surveys show that the immigration crisis is the dominant social concern for Americans in how they will vote in the 2024 presidential election.  It only falls to second place behind the economic crisis in terms of overall importance.  Abortion, healthcare, racial inequality, climate change?  Nobody cares – At least not enough people to shift enough votes one way or the other. 

Any candidate that wants to be taken seriously during this election cycle will have to address the open border problems created by the Biden Administration, and Democrats just decided they care about a month before the public goes to the ballot box.  The same people that created the problem now want you to believe they can be trusted to fix it.

As your president, I will protect our nation’s sovereignty, secure our border, and work to fix our broken system of immigration.

And I will partner with Democrats, Republicans, and Independents to do it.

— Kamala Harris (@KamalaHarris) September 28, 2024

Kamala Harris and many Democrat candidates have suddenly pulled a 180 degree spin on their open border cheerleading.  Not long ago they were gaslighting the American public on the crisis, denying that the danger existed and calling anyone who mentioned it a “racist.”  In September of 2021 Harris argued:

“The border is secure, but we also have a broken immigration system, in particular over the last four years before we came in, and it needs to be fixed.” 

This was a lie. Border crossings surged in 2021.  It has also now been reported that ICE was forced to release over 435,000 illegal immigrants with prior criminal convictions into the US due to Biden and Harris policies.  Over 13,000 of those convicts are murderers.  

To clarify any confusion created by media denials, Kamala Harris was in fact placed in charge of the immigration and border problems by Joe Biden.  This is not debatable.  Harris then went on to do nothing, and even refused for many months to visit the border.  She preferred to take vacations in various Central American countries, offering them cash in exchange for discouraging people from migrating during the pandemic.

When confronted on the surge in illegal immigration, Democrats conjured up a blackmail bill – They would cap illegal migrant entry at around 1.5 million people per year (or 5000 per day), with most of these people allowed to continue staying in the US after passing an “asylum review.”  Their cases would then be in stasis for months.  The bill did not address the fact that the immigration courts already had a backlog of over 3 million asylum cases. 

In exchange for this gracious offer, Republicans would have to accept an “easy path to citizenship” for millions of migrants already in the country.  No mention of deportation of illegals already in the US.  No mention of building a wall.  No mention of ending welfare subsidies that are enticing illegals to come to the US in the first place.  It’s the complete opposite of border security, but Democrats desperately want those third-world voters familiar with life under socialism.

When Trump and Republicans opposed this ridiculous bill, Democrats accused them of refusing to fix the border problem because they “wanted to use it as an election issue.”  In other words, Democrats tried to deflect the crisis they created back onto conservatives.  But Donald Trump showed that no new bills were necessary.

It’s a simple enough problem to deal with and Trump deserves credit for proving that.  Trump created the lowest rate of border crossings the US has seen in decades and he didn’t even need to “build the wall”, all he had to do was take away the incentives for migrants to show up.    

Title 42 was a federal health order based on concerns over the covid pandemic, but the fundamentals of it could be applied without the threat of a health emergency.  In tandem with Trump’s ‘Remain in Mexico’ policy, the order called for the immediate expulsion of migrants trying to cross the border without regard for amnesty, asylum or refugee claims. 

The progressive model of immigration allows any illegal alien to declare that they come from an oppressive or dangerous nation without evidence, and they can stay in the US for years while their cases are reviewed by immigration courts.  During this time illegals have access to a multitude of welfare programs and handouts.  Some states are even offering home loans to non-citizens.  The vast majority of illegals take advantage of these programs while also working under the table.  Even if they are eventually removed from the US, they have already squeezed US taxpayers for thousands of dollars in goodies.   

Democrats have widely supported this model and their motives are obvious, they intend to eventually offer these people mass citizenship in the hopes of buying off tens-of-millions of future voters.  Fact checkers continue to lie about the number of illegals entering the US; they claim that border encounters and apprehensions are not the same as border entries.  However, current Biden policies allow for the majority of these immigrants to enter the US under unconfirmed amnesty claims – They are not shipping the migrants back. 

Biden has also been offering backdoor legal status for migrants from third world countries like Venezuela and Haiti, which explains the sudden surge of such nationals in towns across America.  Harris now claims she wants to stem illegal immigration, but her policy sounds a lot like the fraudulent immigration bill that conservatives and the majority of Americans have already rejected.

The new Democrat immigration strategy is to copy Donald Trump’s immigration strategy (at least in rhetoric if not in action), while at the same time still trying to turn the millions of illegal migrants already in the US into votes so they can dominate American government for decades. 

The bottom line?  There’s absolutely no reason to trust that Harris will do anything about the border.  Beyond that, political parties should not be allowed to import foreigners and use citizenship as a carrot to buy them off as voters.  And every foreigner in the US illegally should be deported.  This is not rocket science. 

By Stuart Chris of FreightWaves

“The sweetest words are, ‘Here is your end’ (of the bargain),” so a time-honored saying goes.

That’s never more true than in union negotiations where just about every player has a piece of the action, and particularly in the current bargaining between port employers and union dockworkers at three dozen ports on the U.S. East and Gulf coasts, a public-private kerfuffle that’s already gone all the way to the White House. 

Unlike contract talks between, say, baseball team owners and the players union, which take place under a glare of 24-hour media, bargaining on longshore contracts is notoriously confidential, shrouded in secrecy save for occasional dueling news releases that only succeed in flattening the actual drama that threatens to hold hostage a good chunk of a U.S. (and global) goods economy that’s bigger in value than all the professional sports leagues put together. The rare leak of actual contract details is promptly disavowed as stakeholders wait anxiously for the next announcement.

That’s about how it’s gone during the current round of bargaining between port employers represented by the United States Maritime Alliance and the International Longshoremen’s Association, which count 25,000 workers in container and ro-ro services at ports from Maine to Texas. Whatever talks were taking place came to an abrupt halt in June when the union refused to buy what the employers were selling. The ILA, led by President Harold Daggett and his son, Executive Vice President Dennis Daggett, has since refused to return to negotiations, ratcheting up the rhetoric by calling for “war” against employers and insisting that “the docks belong to us.”

Now, it’s traditional for unions to “get paid” when times are good, and most indicators are on an upward trend. GDP grew at an annual rate of 3% in the third quarter of this year, up from 1.6% the previous two quarters while lower energy, food and transportation costs helped inflation cool to 2.5% in August, the smallest one-year increase since pandemic-influenced March 2021.

Throw in a tight jobs market, and that’s why a number of high-profile companies from UPS to railroads, airlines and automakers settled with their unions. Yes, machinists are on strike at beleaguered Boeing and thousands of hotel workers have walked off the job seeking higher wages and better working conditions, but mostly there is labor peace. 

Containerized imports through U.S. gateways continue to surge to near-record levels, an indication that however people feel about the price of eggs, consumer sentiment to buy stuff remains resilient, a good sign leading up to the retail holiday season. Which brings us back to the East Coast longshore labor dispute.

As everyone discovered during the COVID-19 pandemic, container ports are a choke point in a supply chain as essential to daily life in the United States as water, electricity and telecommunications. Disruptions have a ripple effect throughout the economy and are exponentially compounded as goods pile up at ports, terminals, warehouses and other distribution points. So it takes longer to restart the flow of goods than it does to stop it. Considerably longer.

The domestic intermodal supply chain begins at the nation’s ports, and with some exceptions, it’s union employees who see to the efficient handling of incoming containers through these ports. Here’s where we see the players sitting in on a game where there’s more than one winning hand and a pot that only grows larger. But union contract negotiations aren’t like a winner-takes-all game of Texas Hold ’em. The optimal outcome of any negotiation is that all sides are rewarded as part of a compromise outcome.

But wait, it’s an election year. That’s like a doubling down for each container move! President Joe Biden courted union support in his abortive reelection campaign, going so far as to walk with auto plant employees on their picket line. The United Auto Workers, flush with new contracts, rewarded Biden with its endorsement (since inherited by Vice President Kamala Harris, the Democratic nominee since Biden dropped out in June). 

So it was probably with more than a little trepidation that a cabal of importers, manufacturers, trade groups and House Republicans tried to pressure Biden to block an Oct. 1 strike by the ILA, for the good of the country, they said.

There’s a remedy for just such a move. The Taft-Hartley Act gives the president powers to intervene in a labor dispute if it might compromise the country’s essential services, and orders a cooling-off period while the sides resume contract negotiations under federal facilitation. Taft-Hartley was last invoked in 2002 by President George W. Bush to resolve a West Coast dock strike that threatened to imperil his first-term agenda.

So how to thread the needle? Biden told businesses he would not block a strike, but he might be playing semantics and still come back later and intervene, like Bush. Or, Biden can give the union some rope and let the work stoppage drag on just long enough to bake in 65,000 union votes ahead of an election where swing state polling is razor-thin, get employers to cave on a new longshore contract and — ta-da! — save Christmas!

That’s the view from on high. But there are other state and federal bodies waiting for their turns.

A container comes in from abroad, right away U.S. Customs and Border Protection claims its share of duties, taxes and tariffs. Ports are mostly public entities and extensions of local governments that rent space to private terminal operators, so the port is going to take its cut in order to continue to operate, and the local and state governments are going to collect taxes on goods as well as on port employees’ paychecks.

The past 20 years have seen an infrastructure arms race as port authorities of all sizes vie to outspend one another in a breathtaking bid to expand their container handling capacity while ocean carriers build ever-larger ships. And if a port can pave another hundred acres to expand ro-ro, well, vehicles are lucrative sources of import duties — up to 25% for a truck based on value.

So it’s always been in the interest of public entities not only to have thousands of union members on the ground, but to have that  number actually increase, if at all possible. And while we’re at it, don’t forget the thousands more truck drivers who provide drayage services hauling containers in and out of the ports. The states and federal government collect taxes on their wages, too.

But a union isn’t a union without dues-paying members, so preserving jobs by keeping automation technology out of U.S. ports is always a high priority for ILA leadership even as, observers say, it compromises the efficiency of operations. Ports in Asia and Europe deploy advanced automation to make operations as efficient as possible, and U.S. ports struggle to keep pace. In 2023 the Port of Los Angeles-Long Beach complex, largest in the U.S., only ranked ninth for volume among the world’s container ports, and New York-New Jersey didn’t crack the top 20.

But who cares?!

The U.S. is the largest market for everything from cellphones to furniture to model trains made in China, the world’s largest exporter. China rightly has to worry about moving its stuff out as quickly as possible. While some automation has found its way into U.S. ports — always under the auspices of union contracts — governments and ports and, yes, unions are caught in the aforementioned Möbius strip of wants and needs that isn’t likely to substantially change the structure of U.S. port operations in the near term. And it doesn’t matter if getting containers through those ports is like trying to push an elephant through a keyhole. Let us worry about that!

Or more accurately, let consumers worry about it. They’re the ones buying all that imported merchandise, and they’ll be the ones paying for disruptions, delays and other assorted supply-chain snarls that will be baked into the price of whatever shiny object hits store shelves.

Eventually, the ILA will get its contract, containers will flow again and there will be labor peace — for six years at least.

Authored by Charles Hugh Smith via OfTwoMinds blog,

If we want social / economic renewal, we have to make it straightforward for anyone willing to adopt the values and habits of “thrift, prudence, negotiation, and hard work” to climb the ladder to middle class security.

How easy is it to climb the social mobility ladder into the middle class? It’s a key question because the middle class is the ultimate source of social stability, innovation and democracy.

To answer this question, we must start with the rise of the middle class in Europe and the market economy which enabled that rise.

This article explores the specific cultural adaptations which set the stage for Europe’s adoption of a market economy as the primary social-economic force, supplanting family and feudal ties.

When did Europe pull ahead? And why?

The author notes that Northern European economic expansion began in the 1300s, before the Protestant Reformation, the discovery of the Americas and before the printing press–all factors others have identified as key to Europe’s rise to dominance.

He identifies the assimilation by Catholic Europe of two Northern European cultural traits–individualism and the ban on cousin marriages, which led to social trust extending beyond the immediate family– as critical preconditions for the acceptance of a market economy.

He then adds a third condition: the suppression / elimination of violent males from the social order via harsh secular and religious punishment of evil-doers. Murder rates declined as the most violent were executed or imprisoned in large numbers.

Here are some key excerpts from the article:

“Those three causes–individualism, impersonal sociality, and a pacified environment–allowed the market economy to grow beyond its former limits.

‘The Market’ could thus spread farther and farther beyond the marketplace, replacing older forms of exchange and ultimately replacing kinship as the main organizing principle of society.

The English as a whole became more and more middle-class in their mindset: ‘Thrift, prudence, negotiation, and hard work were becoming values for communities that previously had been spendthrift, impulsive, violent, and leisure loving.’

The Western world thus embarked on a trajectory of sustained economic growth. This is in contrast to what we see in other times and places, where economic growth tended to stall after a while and give way to stagnation or even contraction.

Western Christianity (which assimilated pagan characteristics of northern Europe) enabled ‘the peace, order, and stability that allowed the middle class to expand and become dominant.'” (end of excerpt)

I am wary of relying on any limited set of reasons for Europe’s rise, but the social willingness to trust strangers is a largely overlooked factor in stable, prosperous societies.

Modern-day surveys find that Scandinavian people tend to have high levels of trust in strangers, and this correlates to high levels of general prosperity and individual happiness.

Clearly, economies in which business is only conducted with family members or equally narrow circles is far more limiting than economies in which business is conducted with strangers and impersonal corporations.

As people acquired means, they could afford more education, and they had a stake in the system that needed to be defended / advocated. This advocacy nurtured democratic / legal institutions and a free press. These institutional forms of social capital act as social technologies, enabling and nurturing the rise of markets, ownership of land and enterprises and the middle class.

Some of these critical social technologies stretch back to the Roman Era. These forms of social capital were lost to feudalism, and their restoration in the 1300s and 1400s enabled the rise of a middle class that was neither nobility nor serf.

As the book The Inheritance of Rome: Illuminating the Dark Ages 400-1000 detailed, the egalitarian aspects of Roman rule continued to influence everyday life for hundreds of years. It took centuries for feudalism to eradicate these holdovers from Roman rule (for example, peasant ownership of land).

The rise of the middle class broke the stranglehold of feudalism by encouraging free movement of labor and capital, and strengthening weak central governments to the point that feudal fiefdoms answered to the central government again, as in the Roman and Carolingian eras.

In my view, the key factor that determines the rise of a middle class is the relative ease of laborers achieving middle class ownership, security and stability.

In the classical Roman era, freed slaves often ended up doing very well for themselves and becoming middle class, as the class boundaries were porous enough to enable craftworkers and small merchants to improve their lot in life.

In the context of this article, are “thrift, prudence, negotiation, and hard work” enough to transform a family from penury to middle class? If the answer is “yes,” then the ladder to middle class security is open to anyone who adopts these values / habits.

If the answer is “no,” then the ladder to middle class security is not open to everyone, and the economy stagnates.

Broadly speaking, virtually anyone who rigorously adopted “thrift, prudence, negotiation, and hard work” in the fifty years from 1946 to 1995 could (once they married and gained a two-income household) eventually afford a family and a stake in the system–a house and/or small business, a pension, etc.

Once financialization and globalization rose to dominance and distorted the economy with increasing wealth and income inequality (“winner take most”), this was no longer the case.

Workers of average skill, motivation and wages who adopt “thrift, prudence, negotiation, and hard work” can no longer afford a family or a stake in the system–at least in high-cost, enormously unequal locales.

This is true not just of the U.S. but globally.

This reality has fueled two trends of decay: 1) a dependence on speculation as the only means to “get ahead” and 2) “laying flat” / “let it rot”–giving up on marrying, having a family and acquiring a stake in the system.

Once these aspirations are only available to those with the right connections or extraordinary drive / talent, society and the economy decay and collapse under the weight of inequality–an inequality defended by those who made it to the top and want to preserve the status quo as it is.

This is the pattern of stagnation and collapse: once the elites devote themselves to suppressing adaptations and defending extremes of the wealth-income-power inequality that benefits them, the system decays and collapses.

The top 10% want the status quo to continue as is, even as the bottom 90% fall behind. When enough of the bottom 90% decide to “let it rot,” the entire rotten structure collapses under its own weight.

If we want social / economic renewal, we have to make it straightforward for anyone willing to adopt the values and habits of “thrift, prudence, negotiation, and hard work” to climb the ladder to middle class security.

Trust matters, too. A middle class can only thrive if the institutions enabling social technologies are trustworthy, and others in the markets of labor, capital, goods, services and risk are trustworthy. Once social trust is lost, the foundations of society and the economy crumble.

*  *  *

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Nearly 33,000 unionized Boeing factory workers are entering the third week of strikes after negotiations between the union and the aerospace giant collapsed over the weekend.

On X, the International Association of Machinists and Aerospace Workers (IAM) wrote in a post late Friday that zero progress has been made on a new labor contract with Boeing.

“While conversations were direct, we did not make progress on the pension issue. The company remains adamant that it will not unfreeze the defined benefit plan. The company also would not engage substantively about other issues that the membership has made clear remain top priorities, like higher pay, quicker wage progression, and more PTO,” IAM District 751 said. 

The union said more bluntly, “Talks broke off, and we have no further dates scheduled at this time.” Federal mediators led the talks on late Friday.

Day 15 – Strike Update
September 27, 2024

Even the pups are Holding the Line!

Today, your Union Bargaining Committee went back to mediated talks with Boeing. With the support of Federal Mediation and Conciliation Services (FMCS), we had frank discussions about the needs of our… pic.twitter.com/J7gJQuYbZC

— IAM Union District 751 (@IAM751) September 28, 2024

On Saturday morning, Boeing told AP News that it was “prepared to meet at any time” with IAM negotiators to bargain in good faith and reach a labor deal as soon as possible.

Early last week, Boeing submitted its “best and final offer” for a new labor contract with IAM.

The offer included:

• A general pay bump of 30% over four years.

• Reinstatement of the performance bonus.

• Enhancement of retirement benefits.

• Doublement of the ratification bonus to $6,000. 

However, IAM leaders rejected the offer, explaining that “it missed the mark on many of the things our members said were important to them.” The union’s original demand is a 40% pay increase over three years. 

Bloomberg notes, “Each day of strike has cost Boeing about $100 million by some estimates, forcing the company to embark on a broad savings push that includes worker furloughs, a hiring freeze and cutting back on corporate travel.” 

Multiple credit rating agencies, including Fitch and Moody’s, warned in recent weeks that Boeing’s credit rating was at risk of being downgraded from investment grade to junk bond status. Standard & Poor’s had already warned that a downgrade would likely occur after the strike materialized.

The last time Boeing machinists went on strike was September 7, 2008. At the time, the strike was over job security, outsourcing, pay, and benefits. This caused a $1.2 billion hit to the company’s net income. This time, it’s likely the labor action will be more costly.

Let’s not forget Boeing’s supplier network is at risk of turmoil… 

• Boeing Strike May Spark Chaos Across Supplier Network As “Significant Spending Reductions” Imminent

Boeing’s top suppliers via Bloomberg data. 

According to risk management firm Sayari Labs, the latest Boeing shipments primarily come from India, Turkey, South Korea, Mexico, and China. Suppliers in these regions are likely to be the most impacted.

In markets, Boeing shares in New York are down 40% on the year (as of Friday’s close). Since peaking at $440 a share in 2019 (around the Max crashes), shares are 65% off the high, oscillating between $250 and $100 since the early 2020 crash. 

What a mess.

Brace for mass layoffs on Wall Street.

It’s becoming evident that ING’s new AI model, which uses “reinforcement learning”, is doing a better job at pricing currencies than humans, according to a new report from Bloomberg.

The AI process “mimics the trial-and-error process humans use to make pricing decisions to keep up with market volatility,” according to global head of electronic trading Simon Bevan. 

He continued: “It makes sense to take what we’ve done and see how we can use it in different asset classes. Working on more AI models will be a big focus for us going into next year.”

In an interview with Bloomberg, he said: “It’s a full-time job monitoring the market, adjusting spreads and managing the risk, so it’s freed up basically a whole person. This model completely takes care of that and has performed way beyond our expectations, it has definitely outperformed a human.”

Bloomberg writes that banks are racing to deploy advanced technology in the $7.5 trillion-a-day global currency market to cut costs and stay competitive. The focus has shifted to AI, which could streamline operations and reduce the need for human traders.

ING recently hired James Robinson, a machine learning expert from UBS’s electronic FX trading team, to spearhead this effort. After a three-month build and six weeks of testing, Robinson is now developing additional AI solutions. 

The role of traders is evolving as AI becomes more prominent, but complete automation remains uncertain. At a recent conference, dealers expressed doubts about eliminating human oversight and raised concerns about accountability if issues arise.

Despite these worries, ING’s Bevan emphasized that traders will still be responsible for monitoring and halting any AI malfunctions. The bank’s model approval process has been smooth so far, the report says. 

“The speed of change within the FX landscape makes accurately measuring and reacting to these changes with traditional algorithmic models challenging. This sort of new AI-based algorithm “has vast applications across financial markets,” Kimiya Minoukadeh, global head of quant trading, concluded. 

By Thomas Brooke of Remix News

Tensions are rising in Vienna’s 10th district, Favoriten, as local residents express anger over a project to house refugees in 110 newly built, luxury apartments.

The apartments, equipped with air conditioning, balconies, and modern kitchens, have stirred controversy as local citizens and political figures question the decision to allocate such accommodations to refugees while many Viennese struggle with substandard housing.

The joint initiative between the city government and the Protestant charitable organization Diakonie is designed to house recognized refugees and their families and prepare them for the labor market. However, the decision to offer such modern accommodations to asylum seekers has triggered outrage, particularly after revelations of the case of a Syrian family receiving €4,600 in social assistance in Vienna. Many feel that the city’s resources are being unfairly allocated to non-citizens.

Around 30 local residents staged a spontaneous protest on Wednesday morning in front of the apartment building, holding signs with slogans like, “Rental madness for Viennese, luxury building for asylum seekers!”

Alongside the protest, a signature campaign has gathered around 200 supporters.

One protester said, “Why should people who haven’t contributed to this country get luxury apartments while many of us are stuck in old, moldy housing?”

The district of Favoriten, already a hotspot for migrant communities, has seen heightened concerns about the integration of new residents. Some locals fear that the project could further strain the area’s resources and social cohesion.

The poll-topping Freedom Party’s (FPÖ) local branch in the Austrian capital strongly criticized the decision, with leader Dominik Nepp accusing the socialist mayor Michael Ludwig of prioritizing refugees over local Austrians.

While countless Viennese have to live in moldy municipal apartments and don’t even get new windows, asylum seekers who have never worked a day here are given brand new luxury apartments with air conditioning,” Nepp said.

“There’s no money for renovations of dilapidated municipal buildings, but there are luxury apartments with attics and private gardens for refugees,” he added.

The minority FPÖ cohort on the city council has moved for a motion of no confidence against Ludwig, which is not expected to pass given the political arithmetic.

The incident has sparked a wider debate about housing inequality in Vienna. Many residents point out that minimum pensioners and low-income families often live in substandard municipal apartments, waiting years for improvements like new windows or mold remediation.

However, this isn’t a situation unique to Austria. Governments in multiple European nations are being accused by citizens of prioritizing newcomers over the locals.

Continue reading at Remix News

Out of the 25 world leaders included in a release by Morning Consult, only eight can currently claim positive net approval ratings – meaning that more people in their country approve of them than disapprove.

You will find more infographics at Statista

As Statista’s Katharina Buchholz notes, the exceptions are Prime Ministers Narendra Modi, Anthony Albanese, Dick Schoof, Simon Harris and Donald Tusk of India, Australia, the Netherlands, Ireland and Poland, respectively, as well as the presidents of Mexico, Argentina and Switzerland, Andrés Manuel López Obrador, Javier Milei and Viola Amherd.

During the COVID-19 crisis in 2020 and 2021, world leaders’ approval ratings mostly decreased or stagnated at low levels. As global crises deepened with Russia’s invasion of Ukraine in 2022, they have not yet recovered for most countries.

French President Emmanuel Macron’s score was among the worst in the ranking at a net approval of -48 percent.

Other politicians faring very poorly were Czech Prime Minister Petr Fiala, Japanese Prime Minister Fumio Kishida, South Korean President Yoon Seok-youl and German Chancellor Olaf Scholz, who has the lowest approval rating of the bunch at -53 percent.

Authored by Kyle Anzalone via The Libertarian Institute,

As the North Atlantic alliance ramps up preparations for war with Russia, Brussels is considering how it might remove a large number of wounded NATO soldiers from the frontlines should conflict with Moscow breakout. 

Lieutenant-General Alexander Sollfrank, the head of NATO’s logistics command, discussed the plans with Reuters. “The challenge will be to swiftly ensure high-quality care for, in the worst case, a great number of wounded,” he said.

Sollfrank believes that NATO will be unable to have air superiority over the frontlines in a conflict with Russia. He said the bloc is considering using hospital trains and buses to move the wounded soldiers.

Sollfrank explained, “For planning reasons, all options to take a great number of wounded to medical installations need to be considered, which includes trains but potentially also buses.”

At the end of the Cold War, with the dissolution of the Soviet Union, war between Russia and NATO was unthinkable. However, over the past three decades, the North Atlantic alliance has expanded up to Russia’s borders. 

At the start of the Joe Biden administration, Washington and Brussels began treating Kiev as a de facto member of the alliance. The ties between Ukraine and NATO provoked the Russian invasion of Ukraine. 

Throughout the war in Ukraine, the West has steadily escalated its support for Ukraine. The Kremlin has increasingly viewed itself in a direct conflict with the West. 

President Biden is considering giving Ukraine the green light to conduct long-range missile attacks inside of Russia with American weapons.

Imagined NATO war planning map via Daily Mail:

Russian President Vladimir Putin has warned that if the White House approves the attack, it would mean direct war with NATO. “This would in a significant way change the very nature of the conflict,” Putin told a Russian TV reporter earlier this month, according to AFP.

“It would mean that NATO countries, the US, European countries, are at war with Russia. If that’s the case, then taking into account the change of nature of the conflict, we will take the appropriate decisions based on the threats that we will face.”

Authored by Thaddeus McCotter via American Greatness,

As many a Gen Xer will do these days, I dusted off an old compact disc: REM’s album Murmur, which was released in 1983. As I listened to the first track, “Radio Free Europe,” I looked at the CD’s cover. It was an eerie photo of thick vegetation.

As I later learned, when the REM album was released, this plant was well on its way to enveloping large swaths of the southeastern United States, including Georgia (which was REM’s original base). The name of the all-consuming plant? Kudzu (Pueraria montana).

Immediately, I thought of the left’s “Green Economy.” Bear with me.

Per a 2019 article in The Nature Conservancy entitled “Kudzu: The Invasive Vine that Ate the South”: “Kudzu looks innocent enough yet the invasive plant easily overtakes trees, abandoned homes and telephone poles.”

Kudzu is an invasive species. “Kudzu—or kuzu (クズ) – is native to Japan and southeast China. It was first introduced to the United States during the Philadelphia Centennial Exposition in 1876 where it was touted as a great ornamental plant for its sweet-smelling blooms and sturdy vines.”

The invasive plant’s other ominous nickname is “mile-a-minute,” for its spread of up to “one foot per day.” This makes Kudzu’s spread as lightning quick as it is lethal to indigenous vegetation:

“[Kudzu] outcompetes everything from native grasses to fully mature trees… This loss of native plants harms other plants, insects and animals that adapted alongside them, leading to cascading effects throughout an ecosystem. Over time, these effects of habitat loss can lead to species extinctions and a loss of overall biodiversity.”

So, are we to blame posh 19th-century Americans’ vanity for the introduction of and devastation by Kudzu? The introduction, perhaps. But, like sundry other 21st-century problems, we can point to the 20th Century’s titans of science and the federal government for the vast extent of the devastation. As the Nature Conservancy concedes:

“From the 1930s through the 1950s, the Soil Conservation Service promoted it as a great tool for soil erosion control and was planted in abundance throughout the south. Little did we know that kudzu is quite a killer, overtaking and growing over anything in its path.” [Italics mine.]

Note the article’s use of “we,” to mute the culpability of the government and scientific community at the time. Some things never change, right Dr. Fauci? Nor does the present scientific community’s effort to without the slightest trace of humility or irony push their remunerative climate change narrative—and the more apocalyptic the narrative the better:

“Kudzu thrives in areas with mild winters and hot summers. Climate change may be making it easier for creeping vine to spread, as winters in many areas of the U.S. become milder. Climate change also can lead to more regional drought, an opportunity for this versatile killer.” [Italics mine.]

The weasel words “may” and “can” have been italicized, rather than, say, the words “does” or “will.” Why? It is an attempt to insulate subsequent speculative statements from having to be demonstrably factual—you know, like real science expects (or used to, anyway). This is the tell in apocalyptic climate change rhetoric.

Here is an easy way to remember the climate change cult’s rhetorical conceit: “If I could be any plant in the forest, I would be Kudzu.” Yet, there are no “ifs,” “ands,” nor “buts” about it. You cannot be any plant in the forest; thus, you are not now and can never be a Kudzu. (Don’t shoot the messenger.) Still, such is advice for those who have not been indoctrinated to blindly “trust the science” and the expertise of the governing elite.

Is there any hope of eradicating Kudzu? It is possible, though the size of the “patch” is determinative of how best to do so. “Newer, smaller patches can be controlled with persistent weeding,” as well as through persistent mowing and grazing (by cattle and goats, not people)” will weaken and eventually control the plant.” Bigger patches require cutting the invasive vine and treating it with herbicides. Oh, and here is the most comprehensive remedy 21st-century science provides: “The best way to deal with kudzu or other invasive plants is to prevent them from spreading.”

You don’t say?

On the subject of things best not to spread, ponder the latest collusion between the environmental and political science communities: the Democrats’ Kudzu Economy (a.k.a., the “Green economy”).

Their Kudzu economy perversely denigrates increasing prosperity and promotes scarcity in the name of collective virtue. Reducing energy and product production, spurring inflation, and curtailing employment opportunities and the American Dream, itself, the Democrats’ Kudzu economy seeks to insulate its proven failures behind a veneer of collective “purpose.” Trillion-dollar spending bills combined with executive and administrative diktats are designed to curtail and, in many instances, eliminate consumer choices and smother the entrepreneurial spirit and productive capacity of the American people. Further, Democrats and their cohorts in radical climate change organizations seek to have an omnipotent federal government, as well as state and local governments, substitute their arbitrary and capricious decisions and preferences for those of the sovereign people it purports to—and is supposed to—serve.

Rarely right but never in doubt, this elitist gaggle of climate alarmists, leftist politicians, collusion media, anti-competitive corporatists, and sundry know-it-all billionaires bent upon introducing and spreading within the most prosperous economy in human history their own version of an invasive socialist ideology that will smother and destroy everything in its path.

Imbued with neo-pagan earth worship, including dire prophecies of an apocalypse if its dictates are not obeyed, at its invasive root the Democrats’ Kudzu economy is simply more hoary socialism in earth shoes: another duplicitous attempt to impose a demonstrably failed, inhumane ideology upon an unfortunate populace.

Unlike their 20th-century predecessors in the Soil Conservation Service who acted and erred with inaccurate information but with the best of intentions to improve the lives of Americans, the proponents of the Democrats’ Kudzu economy should know better; however, they have allowed ideology and greed to desensitize them to the consequences of their actions upon their fellow citizens. For the rest of us, the Kudzu economy may be “The End of the World As We Know It,” but its elitist proponents feel fine.

Well, for now, anyway. Kudzu advance is not limited to the largely “red,” southeastern states. It has been increasingly found in “blue” northern climes, including the states of Michigan, New Jersey, Oregon, Illinois, and Delaware. Should a landscaping crew happen upon the invasive vine on a tony estate on Martha’s Vineyard or any of the other retreats of the insulated elites, perhaps the Democrats will learn a painful lesson that blind faith in fallible science has unforeseen and unfortunate consequences. Heck, maybe that could then spur a further self-examination of their radical ideology and, thus, a reconsideration of their zealous promotion of their Kudzu economy.

Is this too much to expect? Probably. But where there is life, there is hope; and, however deep the darkness enveloping it, a thin reed of truth will out to the light.