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The ongoing impasse over the next COVID-19 relief is likely to drag into September, as lawmakers have mostly fled to their home states, the next jobs report is weeks away, and the spotlight has shifted to the upcoming GOP and Democratic conventions, according to The Hill.

As it stands, Democrats have offered to drop $1 trillion off their $3.5 trillion proposed package if Republicans will add roughly the same to their $1.1 trillion plan. The White House, however, is insisting on keeping the final price tag closer to $1 trillion according to Secretary Treasury Steven Mnuchin in a recent interview with Fox Business.

“Democrats have no interest in negotiating,” said Mnuchin. “If the Democrats are willing to be reasonable, there’s a compromise. If the Democrats are focused on politics and don’t want to do anything that’s going to succeed for the president, there won’t be a deal.”

And while President Trump upstaged Congress on Saturday with a series of Executive Orders, including extending a federal stimulus boost by $400 per week as well as a moratorium on evictions, businesses (and if Democrats get their way, states and cities), will be cut off from federal assistance for weeks.

When asked about whether a deal would be delayed until September, House Speaker Nancy Pelosi (D-CA) replied “I hope not, no. People will die.:

Several GOP Senators echoed Pelosi’s sentiment, but also blamed Democrats for causing the stalemate.

“I’m concerned we’re not getting a deal right now,” aid Sen. John Boozman (R-AK), adding that while he says GOP negotiators want a deal, “you’ve got to have a willing partner.”

“Sen. Roy Blunt (R-MO) said he hopes that talks don’t drag into September, adding “We’ll see,” according to The Hill.

While technically not on August recess yet, the Senate is running on a skeleton crew. 

Only a handful of senators have been spotted around the chamber during daily sessions that last less than two hours. The Senate could leave after Thursday, though Majority Leader Mitch McConnell (R-Ky.) has been tight-lipped about his plans. Meanwhile, the House is extending its August break, moving their return date from Sept. 7 to Sept. 14. 

McConnell, during an interview this week with Fox News, argued that it was time to restart the negotiations, saying “it doesn’t make any difference who says let’s get together again, but we ought to get together again.” –The Hill

By all outward appearances, there’s nothing indicating the impasse will be broken anytime soon.

On Wednesday, Treasury Secretary Steven Mnuchin spoke with Pelosi via telephone, which only resulted in a joint statement between the Speaker and Senate Minority Leader Chuck Schumer (D-NY) accusing the White House of “not budging,” according to the report.

“We have again made clear to the Administration that we are willing to resume negotiations once they start to take this process seriously. The lives and livelihoods of the American people as well as the life of our democracy are at stake,” read the statement.

Meanwhile, lawmakers have yet to agree on the level of weekly unemployment benefits once Trump’s executive order runs out. At present, $300 of the $400 per week will come from the federal government, while states will be expected to pay the remaining 25%.

Mnuchin and White House chief of staff Mark Meadows, the other lead negotiator for the administration, have held daily calls with Senate Republicans this week but given them little indication they see a quick breakthrough in the works. 

“I think I can say the call wasn’t very long. … Basically, not much new movement,” Blunt said. –The Hill

When asked about the negotiations, Sen. Chuck Grassley (R-IA) said the two sides were “pessimistic about getting back into negotiations.”

By Ben Unglesbee of RetailDive,

• Mall operators have put numbers to the stresses of COVID-19 on the second quarter, with the ensuing mass closures, negotiations over rent and accelerating retail bankruptcies.

• Simon Property Group CEO David Simon said his company took a $215 million hit during the quarter from rent abatements and write-offs on bankrupt retailers, according to a Seeking Alpha transcript.

• For Q2 Taubman Centers logged $32.6 million in uncollectible rent it attributed to tenant bankruptcies and nonpayment during mall closures. Another mall landlord, Washington Prime Group, said that it collected just 44% of owed rent during the quarter while more than 25% of Q2 rent it deemed uncollectible because of bankruptcies or pandemic-related lease modifications.

Among the numbers reported by REITs this week, for perhaps the most tumultuous quarter the industry has experienced in modern memory, here’s a stunner: 10,500. That’s how many total shopping days Simon lost across its portfolio during Q2. 

And yet the company managed to post positive income (to the tune of $254.2 million) in Q2, which is more than a lot of the retailers forced to shut down during the COVID-19 closures can say. Nor did every REIT eek out a profit. Taubman reported a net loss of $41.8 million, down from positive net income of $16.9 million last year. Washington Prime, Macerich and PREIT all also either swung to a loss or expanded their loss in Q2 compared to last year. 

None of this comes as a surprise given the upheaval of the quarter. As Jefferies analysts put it in an emailed note, “Unpaid rents, abatements and retailer [bankruptcies] hurt 2Q earnings predictably.” The analysts estimated that average base rent per square foot has dropped 5.9% while leased space has declined by 100 basis points to 93.8% as major retailers close hundreds of stores either or out of bankruptcy. 

As with retailers, the blow to mall landlords has hit the weaker players hardest. Mall operators, of course, have their own bills to pay, from facility staff to mortgage payments. CBL Properties teetered on the brink of bankruptcy this summer after missing debt payments on its bonds. However, the company ultimately made the payments and its CEO has said it’s been having “constructive discussions with our lenders.” 

Much of the trouble across the market stems directly from the spring store and mall closures. With the largest sales channel closed off to legacy retailers, they did everything they could to raise and preserve cash. Which means they spread the pain around — to their employees, vendors, investors and landlords. Many of the negotiations over rent took place behind closed doors, though some have been made public, in lawsuits and bankruptcy filings. 

Nor is the jockeying over rent over. “Well, as you might imagine we’re in active negotiations with all of our retailers,” Simon told analysts this week. He added that the company has amended more than 9,000 leases. 

The health of retailers is key to landlords performance going forward. To that end, Simon said that by June, sales volumes of its tenants had reached 80% of their volumes of the year-ago period, while the vast majority — 91% — of all of its tenants were currently open and operating. Taubman CEO Robert Taubman said rent collection has steadily improved as retailers have reopened their stores.

Ten days after Google decided to signal its corporate virtue with the largest ever ESG bond issue to “fight racial inequality”, which was just another way of saying funding buybacks which will make the company’s ultra rich shareholders even richer, Apple – which at last check had just under $200 billion in cash (most of which however is still offshore) – announced it would also join the recent borrowing boom with its second major bond deal of the year.

Apple, which according to Bloomberg hasn’t borrowed in dollars more than once in a calendar year since 2017, is tapping the investment-grade market for the second time since May to take advantage of the record low rates it will have to pay as it prefund the next several billion in buybacls. Other tech giants such as Amazon.com and Google recently got in on the action, outdoing each other to set a new floor for yields.

As per the filed prospectus, the Cupertino company is selling bonds in four parts, of which the longest maturity, a 40-year security, may yield around 135 bps above Treasuries. The other tranches include a 5, 10 and 20 years bond.

According to Bloomberg, that debt will almost certainly come cheaper for Apple than it did for Amazon, which priced at 130 basis points over Treasuries, and could possibly rival Google’s spread of 108 basis points. Outside of tech, Visa and Chevron set record low rates on new issues earlier this week, but for bonds that mature sooner.

Like all of Apple’s prior bond sales, the company will use the proceeds almost exclusively to buy back stock and to a lesser extent, pay dividends, similar to its tech peers who lead the market in bond buybacks in the past three months; Apple will use Goldman, Barclays and JPMorgan as underwriters.

And yes, for those curious why 10Y rates are blowing out again today even as stocks fail to catch a bid, the answer is simple: rate locks as dealers short Treasurys ahead of the Apple offering to hedge rate risk.

The only question is whether the Fed, which has been on a record Apple bond buying spree buying no less than 8 CUSIPS in the past two months…

… will buy even more Apple bonds, in its ongoing crusade to fight inequality by making the rich richer.

Apple shares are riding high right now, after reporting blockbuster Q2 earnings with revenue from device sales beating expectations, and the company announced a stock split that has helped push its market capitalization even further into record territory.

However, as we noted at the time, there were a few blemishes on what was otherwise a sterling report, most prominent among them being a rare sequential decline in service revenue, which dipped to $13.156BN from $13.348BN last quarter.

Although investors didn’t seem to care when Apple announced the results last month, CEO Tim Cook has increasingly pushed growth in the company’s services segment as the key driver of future growth. And although Apple didn’t release forecasts for the year ahead. Clearly, Apple CEO Tim Cook is acutely aware of this, and the company is already planning a new initiative to try and maximize revenue from its subscription services at a time when most Americans are using these types of services more than they ever have before.

According to Bloomberg, Apple is reportedly planning to launch a subscription bundle akin to Amazon’s popular “Prime” service, that will combine everything from health and wellness, to streaming of TV shows, movies and music, to video games.

The decline in services revenue reported a few weeks back isn’t the only motivator for Apple to switch to a bundle, instead of offering all of these services a-la-cart. Last month, the New York Times announced that it would part ways with Apple’s “News+” service, a sign that the tech giant has struggled to strike deals with publishers like the NYT, LAT and other papers, even as WSJ and its owner, the News Corp.-owned Dow Jones, insisted that they would stick with Apple News as the platform has brought in “a significantly new audience.”

However, a bundle package with News+ included would boost revenue, and leverage, for a service that the company hopes will entice at least a majority of its customers in the US. Apple has already hinted at this possibility as its agreements with publishers have included a warning that services could be offered as part of a bundle.

The “Apple One” package, as it is known inside the company, will featured tiered subscription models, which also fits with Apple’s decision to offer some “cheaper” phone models as it struggles to grow its handset market share.

Here’s more from BBG:

Apple Inc. is readying a series of bundles that will let customers subscribe to several of the company’s digital services at a lower monthly price, according to people with knowledge of the effort.

The bundles, dubbed “Apple One” inside the Cupertino, California-based technology giant, are planned to launch as early as October alongside the next iPhone line, the people said. The bundles are designed to encourage customers to subscribe to more Apple services, which will generate more recurring revenue.

There will be different tiers, according to the people, who asked not to be identified discussing private plans. A basic package will include Apple Music and Apple TV+, while a more expensive variation will have those two services and the Apple Arcade gaming service. The next tier will add Apple News+, followed by a pricier bundle with extra iCloud storage for files and photos.

Apple plans to leverage its deep trove of user data to allow devices to “suggest” different bundle packages to their owners, based on their previous app usage. Here’s a rundown of other salient details from the BBG report.

• The new bundles will also be built on the company’s “family sharing” system, which provides access to up to 6 people for each service.

• Apple’s plans, and the structure of the bundles, may change. But the goal is to offer groups of services at lower prices than would be charged if consumers subscribed to each offering individually. An Apple spokesman declined to comment.

• The iPhone and iPad will suggest different packages to users based on which Apple apps and services they already use. This feature will come later this year as part of iOS 14, the next software update for Apple’s devices.

• The new bundles will be geared toward families, meaning they will work with Apple’s Family Sharing system that provides access to as many as six people for each service. 

• Bundles will save consumers between $2 and $5 a month, depending on the package chosen. For example, if a family subscribes today to all of Apple’s major services, plus the highest iCloud storage tier, that would cost about $45 a month, but a bundle would presumably knock about $5 off of that price (will this jolt of tech-induced deflation help offset rising food prices? That’s probably a problem for another day).

• The “Apple One” project is being spearheaded internally by Peter Stern, who reports to Apple’s longtime services chief Eddy Cue.

• Last year, BBG reported that “bundles” would launch before the end of 2020. The company is reportedly planning to unveil the service during its upcoming product event.

• Note: Apple doesn’t plan to integrate the bundles with services such as AppleCare support or monthly payment plans for new iPhones and iPads.

• In addition to the services bundles, Apple is planning new software and hardware bundles, including giving buyers of the Apple TV set-top box a free year of Apple Arcade.

Apple tested the waters last year by offering students free access to Apple TV+ combined with a subscription to Apple Music.

Furthermore, just as Facebook often mimics the most successful features of rival platforms, Apple is building a subscription service for workout classes, a direct challenge to Peloton, which has soared during the pandemic after a lackluster trading debut last year.

The company is also developing a new subscription for virtual fitness classes that can be used via an app for the iPhone, iPad and Apple TV, the people said. That service will be offered in a higher-end bundle with the rest of Apple’s services. Codenamed “Seymour,” the workout package would rival virtual classes offered by companies including Peloton Interactive Inc. and Nike Inc., according to the people.

The news clearly blindsided investors, as Peloton shares slumped nearly 5% in response.

Apple’s services segment is one of the company’s fastest growth areas and has become a $50 billion-a-year business. While services like those for advertising and AppleCare were down in recent quarters due to the impact of Covid-19, digital offerings like the App Store, iCloud and video products set records.

So, to sum up, Apple shares are spiking to new record highs after confirming with their ‘Apple One’ bundle that services revenue is slowing…

Authored by William Suberg via CoinTelegraph.com,

The CEO of the company that just bought 21,454 BTC calls it “digital gold,” and the tide will cause the business world to admit the same, say supporters.

image courtesy of CoinTelegraph

MicroStrategy has adopted Bitcoin (BTC) as its reserve currency – and stunned commentators by purchasing over 21,000 BTC on Aug. 11.

The world’s largest publicly-traded business intelligence company has swapped fiat for Bitcoin as its treasury reserve asset, but the reasons behind it suggest that more big businesses will have no choice but to do the same.

Why did MicroStrategy choose Bitcoin, and will others follow?

Digital gold

In a press release issued on Aug. 11, CEO Michael Saylor went further than most by calling Bitcoin “digital gold.”

With no “ifs” or “buts,” Saylor unreservedly plugged the largest cryptocurrency over both fiat and other traditional safe-haven assets such as gold.

“Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it,” he commented. 

That angle closely mimics some of Bitcoin’s foremost proponents, notably Saifedean Ammous, who in his book, “The Bitcoin Standard,” repeatedly explains that so-called “digital scarcity” puts Bitcoin in a separate league to any other form of money which has ever existed.

Like Ammous, Saylor also believes that Bitcoin’s very structure will ensure that its value will only increase with time.

He added: 

“We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”

Doubts over fiat’s future

Bitcoiners were particularly excited about MicroStrategy because it unashamedly replaced fiat currency for cryptocurrency.

Its purchase of 21,454 BTC for an aggregate price of $250 million late last month may not only be symbolic (given the total 21M BTC) but it also means that the company controls 0.1% of the total Bitcoin supply — something competitors will find increasingly expensive to replicate.

“MicroStrategy bought 0.1% of the Bitcoin supply. Very few companies will be able to copy this strategy,” What Bitcoin Did podcast host Peter McCormack tweeted in response.

For Saylor, there were multiple red flags that swayed him to turn to Bitcoin.

These were “among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty,” he said.

Continuing, he argued that what began as a result of Covid-19 would only cause further problems later on:

“We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”

Cointelegraph has often reported on the detrimental impact of practices such as quantitative easing, and the voices urging consumers to abandon the fiat system en masse to protect their prosperity in the long term.

For Jason Yanowitz, founder of financial media network BlockWorks Group, Saylor’s reservations will ultimately spark trailblazing from the entire business sphere.

“MicroStrategy’s CEO said they bought Bitcoin to avoid inflation,” he summarized.

Eventually every public company will do the same.”

This week, Cointelegraph noted that Bitcoin’s value appeared to be tracking central banks’ inflating balance sheets in 2020.

Bitcoin’s “Schelling point”

Finally, Saylor was highly complimentary about Bitcoin in particular — and did not mention that the company even considered any other cryptocurrencies.

“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value,” he said.

Bitcoin’s eleven-year lifespan has seen it both remain the largest cryptocurrency and fend off multiple concerted efforts to undermine it.

As Ammous and various others often explain, Bitcoin has proven itself via this method — and alternative cryptocurrencies have failed to demonstrate that they can gain Bitcoin’s status and popularity.

Miners’ preference for BTC supports the theory that in the long term, security and market prowess will only increase — Bitcoin’s technical fundamentals remain in a broad uptrend, a result of miners dedicating more and more resources to the network.

Following yesterday’s “berserk” price action in Credit Suisse’s 3x Inverse Natural Gas ETN, the Swiss banking giant has been forced to do something about it.

In recent years the price hadn’t risen above $600, but it advanced in each of the past five sessions with percentage increases of 35%, 34%, 29%, 223% and 400%, and closed on Wednesday at $15,000.

That compares with the note’s net asset value of $124.01. The market cap is $4.58 billion, versus total assets of $37.9 million.

The note had already seen securities issuance suspended on June 22 and been delisted from the NYSE Arca exchange on July 12, but after the last few days, Credit Suisse has been forced to liquidate the note as soon as possible.

Investors in the ETN will receive a cash payment per note equal to the average of the closing indicative value during a period of five consecutive business days expected to be Aug. 14-20.

And given the stock is halted, this means because Credit Suisse was completely lazy, greedy and incompetent, some traders are about to eat a 99% loss if they bought in the last few days.

Here is Credit Suisse’s full press release explaining their actions:

Credit Suisse AG (“Credit Suisse”) announced today that it will accelerate at its option its VelocityShares™ 3x Inverse Natural Gas ETNs (the “ETNs”), which were previously delisted from the NYSE Arca.

The ETNs were originally listed on the NYSE Arca, but were delisted from the NYSE Arca as of July 12, 2020. On June 22, 2020, Credit Suisse suspended further issuances of the ETNs. Following the delisting from the NYSE Arca, the ETNs traded on an over-the-counter basis.

As described in the related pricing supplement for the ETNs (the “Pricing Supplement”), Credit Suisse, as the issuer of the ETNs, may, at its option, accelerate all issued and outstanding ETNs on any business day after the inception date. Credit Suisse expects to deliver notice of the acceleration of the ETNs via the Depository Trust Company on August 12, 2020.

As described in the Pricing Supplement, investors will receive a cash payment per ETN equal to the arithmetic average of the closing indicative values of the ETNs during the accelerated valuation period. The accelerated valuation period will be a period of five consecutive index business days, which is expected to be from August 14, 2020 to August 20, 2020. The acceleration date is expected to be August 25, 2020, three business days after the last day of the accelerated valuation period. If you have questions regarding the impact of the acceleration of the ETNs on your position, please contact your broker.

Credit Suisse ends by noting specifically that “none of the other ETNs offered by Credit Suisse are affected by this announcement,” but it is quite clear that between illiquidity, leverage, and mechanics, something is very broken in any number of ETFs/ETNs across the world.

As Bloomberg Intelligence’s ETF Analysts, James Seyffart details, Credit Suisse’s decision to liquidate an exchange-traded note with outsized premiums leaves eight of the bank’s other ETNs still trading over the counter while creating no new shares — posing similar risks to investors.

The ETNs hold $1.7 billion in assets, and we believe their inability to adjust to demand opens the door to price manipulation.

” Delisted active products that lack the ability to create shares should be closed, in our view, since they put investors at risk and could hurt the industry’s reputation by fueling outsized pricing gaps.  “

And given that ETFs now dominate price action, that is hardly a good sign for financial stability going forward. Will The Fed start buying commodity ETFs if they crash? Who will protect the retail investor?

By Michael Every of Rabobank

What’s Your Favourite Bond Theme?

We live in a world where all can agree on very little – but one thing that should be clear is that it’s all very James Bond. Charismatic billionaires; Cold War; secret agents; skulduggery; poisonings; spy apps in innocuous devices; military build-ups and warnings of hot war; police crack-downs; and, of course, a killer virus. Ironically, Bond himself is absent because the latest movie iteration, “No Time To Die”, has been delayed because of Covid-19: when it eventually comes out, is it going to be a wilder ride than what we already see in real life? And could Hollywood ever tell a story that contains any elements of real life developments given how it is now financed? That’s what US Republicans are asking anyway. (Personally, I feel Bond lost his mojo with the internet. Who wants to see a man licensed to double-click to save the day?)

Anyway, a British poll of ‘Who was the best Bond?’, the kind of thing Brits ask themselves all the time for some reason, unsurprisingly had Sean Connery as the top 007, but with Timothy Dalton as #2, followed by Pierce Brosnan, then Roger Moore, current Bond Daniel Craig, and finally and naturally, George Lazenby. Besides being rather unkind to Roger Moore, the king of eyebrow-raising and cheesy puns, this got me thinking: what’s your favorite Bond theme to describe what we see around us at the moment?

Perhaps “All Time High”? Which suits both US equities, shortly, and virus infection numbers. “Tomorrow Never Dies” perhaps suits equities more though.

There’s “Skyfall” for those who look at bond yields (as well as Bond) instead, because despite the recent upside surprise in US inflation, it’s surely still a deflationary, lower-yield world out there (as the RBNZ are showing us). Indeed, don’t forget “The Writing’s On the Wall” for those who listened to the Fed yesterday saying there won’t be a V-shaped recovery, but rather a W-shaped one. Plus “You Only Live Twice” for those getting a nice Fed bailout anyway.

Maybe “Die Another Day” or “Another Way to Die” for those –just chastised by the Fed– who say the virus isn’t a real threat? Or “No Time to Die” for those who won’t take the vaccine if it ever arrives (which is as high as one in two in some surveys).

Could it be “Goldeneye” or “The Man With the Golden Gun” as we see reports that even Chinese state banks are complying with US sanctions against key figures in Hong Kong? What a goldeneye the SWIFT system is and what a golden gun the USD still proves.

Maybe “Goldfinger” for those who think the USD isn’t and that it’s time to plan to live in a secret lair under the sea or up in space and give up on life on earth? “Diamonds are Forever”, they seem to also be humming. In which case there’s “Moonraker” for those billionaires dreaming of colonizing space – once they have sorted out downtown LA traffic.

Closer to home, there’s “You Know My Name” regarding the US Vice-Presidential candidacy; or “Nobody Does it Better” for supporters of either presidential candidate. Plus, how about “From Russia with Love” for those still wrapped up in the #Russiagate scandal, which seems about to take a new twist ahead as possible indictments are made against the original accusers (not accused)? Or “The Living Daylights” for those on the wrong side of this scandal in the end, whichever way it blows, now that “For Your Eyes Only” is no longer true for the evidence?

“The World is Not Enough”, “Licensed to Kill”, “A View to a Kill” and “Live and Let Die” certainly sum up current geopolitics nicely, even as “We Have All the Time in the World” is still the EU’s theme song when it comes to joint foreign policy action.

And there’s always “Thunderball” for the lottery that is the key Aussie jobs data, which today ostensibly show 115K employment gains in a country with 1/13 of the US population, and a drop in unemployment to 7.5% from 7.8% at a time when the economy is flat-lining and large parts are once again on hard lockdown (after the survey period, admittedly).

“Do you expect me fall, Mr Aussie Bonds?”

“No, I expect you to rise!”