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There was a notable press release from Boeing this morning for two reasons: first, the aerospace giant in announcing that Polish Enter Air had ordered two 2 737 Max aircraft, the first order for the infamous airplane this year; the second reason was perhaps more notable: as Jon Ostrower notes, for the first time Boeing officially dropped the “Max” moniker from the jet’s branding. While the aircraft family is still the Max, Boeing called the model the 737-8 for the first time in a deal an announcement.

It appears that Boeing has finally realized that nobody would voluntarily fly in a 737 MAX. As to whether anyone will fly in a “737-8” despite Boeing’s own admission that “This Plane Was Designed By Clowns, Who Are Supervised By Monkeys”, it remains to be seen.

Here is the Boeing press release in question:

: Enter Air to Purchase up to Four Boeing 737-8 Jets

WARSAW, Poland, Aug. 19, 2020 – Boeing and Enter Air today announced the Polish airline is expanding its commitment to the 737 family with a new order for two 737-8 airplanes plus options for two more jets.

An all-Boeing operator and Poland’s biggest charter carrier, Enter Air began operations in 2010 with a single 737 airplane. Today, the airline’s fleet includes 22 Next-Generation 737s and two 737 MAX airplanes. When the new purchase agreement is fully exercised, Enter Air’s 737 MAX fleet will rise to 10 aircraft.

‘Despite the current crisis, it is important to think about the future. To that end, we have agreed to order additional 737-8 aircraft. Following the rigorous checks that the 737 MAX is undergoing, I am convinced it will be the best aircraft in the world for many years to come,’ said Grzegorz Polaniecki, general director and board member, Enter Air.

Enter Air and Boeing have also finalized a settlement to address the commercial impacts stemming from the grounding of the 737 MAX fleet. While the details of the agreement are confidential, the compensation will be provided in a number of forms and staggered over a period of time.

‘In the settlement with Boeing, we agreed to revise the delivery schedule for the previously-ordered airplanes in response to current market conditions. The specific terms of the settlement are strictly confidential, but we are pleased with the way Boeing has treated us as its customer,’ added Polaniecki.

‘We are humbled by Enter Air’s commitment to the Boeing 737 family. Their order for additional 737-8s underscores their confidence in the airplane and the men and women of Boeing,’ said Ihssane Mounir, senior vice president of Commercial Sales and Marketing, The Boeing Company. ‘We look forward to building on our decade-long partnership with Enter Air and working with the airline to safely return their full 737 fleet to commercial service.’

Was President Trump right again?

What do I know about branding, maybe nothing (but I did become President!), but if I were Boeing, I would FIX the Boeing 737 MAX, add some additional great features, & REBRAND the plane with a new name.
No product has suffered like this one. But again, what the hell do I know?

— Donald J. Trump (@realDonaldTrump) April 15, 2019

Authored by Charles Hugh Smith via OfTwoMinds blog,

Triffin’s Paradox demands painful trade-offs to issue a reserve currency, and it demands the issuing central bank serve two competing audiences and markets.

Judging by the headlines and pundit chatter, the U.S. dollar is about to slide directly to zero. This sense of certitude is interesting, given that no empire prospered by devaluing its currency. Rather, devaluing the currency is a sure path to dissolution and collapse of the empire. This dynamic–devaluation leads to decline and collapse–is not exactly a secret.

So what all those proclaiming the death of the USD are saying is the Imperial Project is consciously choosing suicide, all to boost the U.S. stock market which is now little more than a signaling mechanism and a means of accelerating wealth inequality, as the billionaire class and the billionaire wannabe’s in the top .01% are the primary winners as stocks reach new highs.

(Recall that the U.S. economy is best described as anything goes and winners take most.)

Taking it one step further, those predicting the collapse of the U.S. dollar are predicting that not only will the Empire choose suicide, so will the billionaires because what will their fortunes be worth if the USD goes to zero?

The USD-is-dead crowd (and it is a crowd) present the demise as ordained by some mysterious force, as if the Empire has no will or power to resist the inevitable slide to zero. The helpless giant can only watch as the Federal Reserve debauches the dollar to boost stocks and float the mountains of debt required to keep the U.S. economy from imploding.

The USD-is-dead crowd also seems to overlook the inconvenient fact that all the other issuers of fiat currency are busy debauching their currencies, too by the same mechanisms: the endless digital printing of new currency, distributed to already-insanely-wealthy financiers and corporations. (Debt-serfs can “save themselves” by borrowing more, heh.)

We get it: digitally printing trillions in excess of actual productivity eventually destroys the purchasing power of the over-issued currency. We also get the need to keep interest rates at near-zero so governments can fund endless trillions in stimulus and other giveaways–billions to the billionaires and a trickle of bread-and-circuses to the debt-serfs.

But this isn’t the full list of dynamics in play. The demand for currency is based on a number of factors: yield (the interest rate paid by the issuing central bank) being one, the amount of global debt denominated in the currency being another and the demands of global trade being a third.

Ultimately, every currency is a derivative contract on the resilience, adaptability and innovative capacity of its economy. Every currency is a social construct that reflects the security of social contracts within the issuing economy, and the perceived security of the currency in the global marketplace.

The two are related, of course; but they also conflict. This is Triffin’s Paradox, which I’ve discussed for years. In a nutshell, the paradox is every central bank with a global role as well as a domestic role serves two competing audiences: the domestic economy and the global economy.

There is no way to serve both. The domestic exporters want a weaker currency, while foreign owners want a stronger currency.

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

The Federal Reserve, Interest Rates and Triffin’s Paradox (November 19, 2015)

The dollar rises for the same reason anything else goes up: scarcity and demand. If the Fed over-issues USD, scarcity value falls. If non-domestic borrowers take loans denominated in USD, demand rises as this debt must be serviced and eventually paid off in USD.

The Fed’s mandates that are constantly repeated are all about the domestic economy: maintaining control of inflation (Goldilocks: not too hot, not too cold) and domestic employment (if unemployment skyrockets and wages plummet, the debt-serfs might revolt).

But the Fed’s one controlling mandate is to maintain USD global supremacy. Unbelievable as it is to the unwashed masses and the clueless punditry, the domestic economy (and the stock market) are sideshows compared to the primacy of the mandate to maintain USD supremacy as the one and only essential reserve currency.

To maintain global supremacy as the one essential reserve currency, the Fed must balance scarcity and demand. The pandemic illustrated the Fed’s dual role and the conflicting demands of being America’s central bank and the central bank of the global reserve currency.

To keep the domestic economy and stock market from imploding, the Fed digitally printed $3 trillion and unleashed it as flood waters, raising all boats to some degree.

As the global central bank, it opened stupendous lines of credit, repo’s and currency swaps with other central banks to exceed global demand for USD, lest a soaring USD snuff the global stock market rally, a rally the Fed saw as the one essential signaling mechanism that the global economy was recovering.

This over-supply of USD was calculated to suppress the dollar’s value by eliminating scarcity–it didn’t affect demand which continues unabated.

Now that this one-off emergency response has done its job, the Fed has to switch back to defending the dollar’s value. The clueless punditry is absolutely certain that the Fed is going to drive bond yields to zero or even below. The reason why this is clueless is the punditry are only looking at the secondary mandates of the Fed and ignoring its Prime Directive: maintain USD supremacy.

Pushing rates negative and flooding the global economy with USD is a sure way to reduce scarcity and demand, so those are not going to happen.

Rather, U.S. yields will start rising–maybe in fits and starts, but they will start moving up longer term. And the Fed isn’t going to over-supply the global economy with dollars; they’re going to start limiting the excess issuance, not publicly but behind closed doors.

Scarcity and demand will both rise, dragging the dollar higher. Don’t bother asking why or how, just watch the yields click higher despite every financial pundit pounding the table for zero or even negative yields. Yields may dip and weave from month to month, but watch the trend.

Just as all currency is a social construct, trust in the liquidity and transparency of the currency’s market value is the essential ingredient in a currency’s valuation. The only way to establish a trustworthy measure of liquidity and transparency is to allow the currency to float freely on the global FX exchange. Issuing nations who want to control the value are intrinsically untrustworthy as no holder of the currency can be sure the value won’t be manipulated to serve the issuer’s political agenda.

You can’t control the global value of your currency and have a reserve currency. This is where the punditry are again clueless. China does not seem particularly keen to relinquish control of its currency (RMB) to market forces. Thus it maintains a peg to the USD to retain control of the RMB’s value on global exchanges.

The demand for RMB is thus limited. The RMB has about a 2% share of global trade and an equally minimal role in global debt denominated in RMB. To increase the global role of the RMB, China will have to end the USD peg and let the RMB and its sovereign bonds float freely and be priced by the market.

In other words, they’ll have to relinquish the direct control they currently have over the RMB’s valuation.

Triffin’s Paradox demands painful trade-offs to issue a reserve currency, and it demands the issuing central bank serve two competing audiences and markets. This is why some economists believe the U.S. would be better served by giving up the reserve currency and thus be free to serve only the domestic economy.

This makes very good sense, but it overlooks one little thing: America’s global empire. The Imperial Project requires USD supremacy, period. Nothing less will do, and so that is the Fed’s single Prime Directive.

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“So when America goes and steals diamonds and oils, who’s calling us terrorists? When the American government goes and pillages different countries, who’s calling us terrorists?,” exclaimed Hawk Newsome, the head of the New York branch of BLM, refusing to condemn looting as an ethically questionable activity during a very testy interview with on Fox News Channel’s Martha MacCallum.

It is not the first time Newsome has sparked controversy. In June,  Newsome made incendiary remarks during a cable news that:

“If this country doesn’t give us what we want, then we will burn down this system and replace it.”

Which was condemned by President Trump as ” Treason, Sedition, Insurrection!”

And resulted in The Black Lives Matter Global Network distancing itself from the NYC ‘Organizer’:

“Hawk Newsome has no relation to the Black Lives Matter Global Network,” the network’s managing director Kailee Scales told the Associated Press.

Newsome began the interview with MacCallum by firing back at former New York City Mayor Rudy Guiliani, who had criticized Black Lives Matter as a “domestic terrorist organization,” but quickly went off the rails when MacCallum played a clip of Chicago BLM organizer Ariel Atkins condoning looting as “reparations.”

“I don’t care if somebody decides to loot a Gucci or a Macy’s or a Nike because that makes sure that that person eats,” Atkins said last week.

“That makes sure that that person has clothes. That’s reparations. That is reparations.”

“Do you agree with Ariel Atkins on that?” MacCallum asked.

“Well, so we are moving on past Rudy Giuliani and we’re moving into looting and a form of reparation,” Newsome responded.

“Let’s be very careful and I’d appreciate if you let me speak. Let’s be very careful. The problem with oppression and white supremacy is, white supremacy will have you criticizing the oppressed and worshiping the oppressors.

Now, if you want to talk to me about reparations, nothing falls short of a solution other than people cutting a check.

If you want to do something about reparations, cut the check. And we’re not talking about going in every day Americans’ pockets, we are talking about banks … who benefited from slavery. Other insurance companies that sold insurance policies on…

We’re talking about the American government that was founded on the backs of slaves.”

The ‘conversation’ got louder as Newsome refused to answer MacCallum’s questions, deflecting and distracting and repeating the same messages without decrying the public looting that has occurred in the name of BLM across many cities in the nation.

MacCallum tried one more time to ask him if he agreed that it was “ethically OK” to loot stores, to which he deflected once more…

“OK. Before I answer that, I want to ask you this,” Newsome responded.

“Do you think it’s OK that our government kills people in their homes like Breonna Taylor?”

It is well worth watching for a sense of just what is behind this farce…

Because while, of course black lives matter (just like all lives matter), Black Lives Matter has a very different agenda.

The Fed Minutes’ message was clear: “Y.C.C., Nay!”

And that did not go down well in bond-land…

Source: Bloomberg

Erasing much of the last two day’s gains…

Source: Bloomberg

And steepened the yield curve…

Source: Bloomberg

Which knocked stocks lower… (at the cash open, small caps were bid with Nasdaq dumped but then the machines kicked in and went to new highs before The Fed’s YCC-dismissing Fed Minutes)…  Nasdaq was the day’s biggest loser…

The S&P 500 lost its old highs..

Sparked the best day in the USDollar in two months…

Source: Bloomberg

Sending precious metals lower with gold back below $2000…

And silver back below $28…

As real yields spiked…

Source: Bloomberg

Cryptos slipped a little more today…

Source: Bloomberg

Oil prices whipsawed in a tight range after inventories data to end almost unch with QTI at $43…

Copper ended higher but tumbled after The Fed Minutes (with futures back below 3.00)…

 

Finally, making all the headlines, Apple reached the stunning level of a $2 trillion market capitalization…

 

Because, fun-durr-mentals…

Source: Bloomberg

It seems that the swamp isn’t quite done with Steve Bannon and friends.

According to the Wall Street Journal, the FBI and SEC have launched an investigation into Bannon-linked GTV Media Group, which raised over $300 million this spring in a private placement. At issue is whether any securities laws may have been violated during the placement, which was restricted to accredited investors – thus avoiding SEC registration requirements. Smaller investors were able to participate in the GTV Media offering through an entity called Voice of Guo Media, Inc – which raised nearly $120 million according to the report.

GTV Media holds itself out as “the only uncensored and independent bridge between China and the Western World,” telling potential investors that “it would be a platform for news, social media and e-commerce,” while stating a pre-investment valuation of $1.8 billion.

The fundraising documents reviewed by the Journal say GTV Media aimed to sell a 10% stake in the company for as much as $200 million, with the rest held by another company affiliated with Mr. Guo. -WSJ

Company directors include Bannon and John A. Morgan – son of Morgan Stanley’s co-founder, while exiled Chinese businessman Guo Wengui is listed as an adviser to the endeavor. Investor Kyle Bass is listed by the company as a director, however he tweeted in July that he no longer serves on GTV Media’s board, and a person familiar with the company confirmed that he had resigned.

Guo, a wealthy Chinese businessman who fled the country in 2014 now lives in the United States, launched an aggressive campaign in 2017 to expose corruption by China’s business and political elites. As one might suspect, this triggered Beijing, which has attempted to have Guo extradited on charges which include bribery, kidnapping, fraud, money laundering and rape. Guo calls the charges part of a ‘misinformation campaign’ against him by CCP officials.

Yet, after throwing the kitchen sink at him to no avail, it now appears that the FBI (which unsuccessfully tried to recruit Gao as an informant in 2017) has taken up the case against him.

According to the report, JPMorgan Chase and Wells Fargo have frozen accounts linked to GTV, while Bank of America has closed an account for GTV’s parent company shortly after it was opened. The Journal claims that some investors began to push for refunds – claiming they never received official documentation verifying their investment in GTV Media. The SEC is reportedly reaching out to conduct interviews with investors who want refunds, some of whom have lodged complaints against Guo and his associates, according to the report.

GTV Media said in a statement that it carried out the private placement using legal guidance, and that “all of the raised funds are intact.” Moreover, they stand fully prepared to cooperate with any US agency that has questions about the private placement.

Guo, meanwhile, said in an online video earlier this month that he had been subpoenaed, and welcomed the investigations.

 

Authored by Mike Shedlock via MishTalk,

Apartment building is down 12% in 2020. 13 of 20 top metro area are in decline.

Five-Year Low Nationally

Apartment Construction in 2020 is at a five-year low nationally, Down 12% From 2019. 

With the Covid-19 pandemic further complicating an already visible slowdown in apartment construction since its 2018 peak, new completions across the country are starting to mirror the downward trend following the 2008 crisis. According to Yardi Matrix, 283,114 new apartments are expected to be completed this year, a significant drop of 12% compared to 2019. The data refers to rental apartments in large-scale buildings of 50 units or more.

New Construction 2008-2020

Top Metro Areas

Miami Bust

Boom and Bust Highlights

• With 283,000 new units expected to hit the market this year, apartment construction dropped a significant 12% compared to 2019. The pandemic further complicates an already visible slowdown in apartment construction, bringing the supply of new apartments at a 5-year low in 2020.

• Overshadowing New York metro for the third consecutive year, the Dallas-Fort Worth area is first in the nation in terms of apartment construction, set to complete 19,300 new units by the end of 2020.

• 13 of the 20 most active large metros are expected to complete fewer units compared to last year. Miami metro is experiencing the biggest drop, 53%, down from a whopping 12,500 deliveries in 2019. 

• The San Jose metro area leads the only 7 large metros projected to build more this year, with a 100% increase in new apartments. Despite doubling its apartment construction, Silicon Valley is adding a relatively low number for a giant tech hub, 5,800 units. 

• At the city level, Austin is leading nationwide with the most apartment completions in H1, 3,800 apartments, followed by San Antonio, Denver, and Charlotte. Brooklyn rounds up the top 5, having delivered around 2,100 units, on par with Chicago. 

In those areas where construction is artificially low rental prices will soar. 

But in those areas subject to human flight, prices could crash. Illinois, NYC, and San Francisco are leading candidates of the latter.

As we noted earlier, treasuries erased gains and fell to session lows after minutes of the FOMC’s July 29 meeting for several reasons: first, the Fed’s assessment of the economy was more downbeat than many had expected; second, the fact that the Fed appeared to cool substantially on any imminent (or even medium-term) implementation of yield curve control; third, the FOMC was silent on the prospect of changes to the size or composition of the central bank’s purchases of Treasury securities. As Bank of America’s Marc Cabana pointed out, “Notable that the minutes had no discussion of extending the duration of asset purchases, ie “twist”. This narrative had built considerably via media & Dudley speech leading into the meeting.”

Cabana is referring to the fact that in news conference that followed the July 29 meeting, Fed Chair Powell said the Fed’s asset purchases – running at an $80 billion a month pace in Treasuries – can be adjusted to increase support for the economy, leading to speculation that an increase in size or duration was discussed.

Tom Roth, head of rates trading at SMBC Nikko Securities echoed Cabana’s reservnations, saying that market reaction to the minutes is to “what is not there,” adding that the minutes also revealed widespread reservations among officials about the use of yield caps and targets.

Following the disappointment from the lack of commitment to more QE, YCC or Twist, yields across the curve reached session highs, led by the long end, steepening the curve; 10-year yield erased what remained of an earlier decline of as much as 2.4bp and climbed as much as 1.8bp on the day to reach 0.687% before stabilizing.

 

The disappointment also propped up the dollar, which extended gains as the minutes revealed that the FOMC saw only a modest benefit from yield caps and plans to keep securities purchases at their current rate.

Putting it all together, here are the five chief takeaways from the FOMC courtesy of Bloomberg:

• On the whole, the minutes from the Fed’s July meeting painted a dovish picture of the economy. Officials expressed concern about the path of the recovery, and reiterated that the virus is in charge right now.
• There were some hints that we could see revisions to the Fed’s economic forecasts next month, when the central bank releases fresh estimates, especially as a Covid-19 resurgence this summer has muted the recovery.
• We likely won’t see more forward guidance at the September meeting, as some market participants had hoped for. A number of Fed officials have publicly said it isn’t necessary at this point, and the minutes seemed to echo that.
• There is support among policy makers for wrapping up the highly anticipated framework review. Perhaps we’ll see that at next month’s meeting.
• Although the Fed has been clear that it’s not raising rates any time soon, participants continued to discuss how they should assess when it would be appropriate to do so, and how they would communicate that to markets