“Grab Some Red Bull & Code”: Israel’s Bizarre Appeal For A ‘Worldwide Hackathon’ To Free Iran
“This is going to sound insane,” Israeli Defense Minister Naftali Bennett introduces during a social media message on Iran published Saturday. He explains that Iran blocked internet access after mass anti-government and economic grievance-driven protests spread to some 100 cities over the past weeks.
“Most social media sites in Iran are still banned as we speak,” he notes, while also describing a typical young Iranian’s frustration at being prevented from logging in. He then calls for a all programmers and techies to unite for a “worldwide hackathon” to free the Iranians from their regime-imposed internet ban.
“So, here is a crazy idea. How about every techie in the world — Israelis, Arabs, Iranians, Americans, Europeans and everyone else unite for one purpose: to help the long-suffering Iranian people gain open access to all social media. A worldwide hackathon for freedom,” Bennet says.
It’s among the more bizarre tactics over the years involving Israeli attempts to make a ‘hip’ appeal to the Iranian public to rise up against their government, which has also lately included the Israeli Embassy in the US using “Frozen 2” movie images to “remind people that the Iranian regime has frozen 80 million Iranians from the internet for a whole week.”
“Elsa has a message for the regime in Teheran – Let It Go!” the unusual appeal posted to Titter reads.
Thus it appears Tel Aviv is hoping some kind of home-grown revolution can topple the power of the Ayatollahs using crude Disney movie themed propaganda.
Defense Minister Bennett’s social media video also has a youthful and progressive sounding ‘rise up for regime change’ vibe to it. Making a global appeal, he says everyone “has a role to play” whether a senior IT engineer at an AI startup or merely someone “tinkering” in their own garage.
“Call up your most brilliant friends, grab some Red Bull and code through the night to do the impossible,” he urges, with his words also appearing in Farsi on the screen.
So far the social media reaction appears to be one of widespread mockery at the comic appearance and strangeness of the appeals. Likely few if any actual young Iranians believe that Tehran’s arch-enemy Israel is on the side of ‘the people’ and cares about their fate and future prospects for democracy.
The Jerusalem Post in a new report has also noted that inside Iran, Israel’s new Defense Minister Naftali Bennett is openly mocked on TV and social media as the “Zionist minister of war”.
For decades, New York City enforced uniquely onerous regulations that effectively prohibited licensed pistol and revolver owners from taking their weapons outside their homes, even when they were unloaded and stored in a locked container, unless they were traveling to or from one of seven gun ranges in the five boroughs. When several gun owners challenged those regulations, the city successfully defended their constitutionality for five years, obtaining favorable rulings from a federal judge and the U.S. Court of Appeals for the 2nd Circuit. But after the U.S. Supreme Court agreed to hear an appeal of that decision, the city rewrote its rules, backed a state law that eased restrictions on transporting guns, and urged the Court to drop the case, arguing that the regulatory and statutory changes made it moot. During oral arguments today in New York State Rifle & Pistol Association v. City of New York, several justices seemed skeptical of that claim, which is transparently aimed at avoiding a Supreme Court decision that could clarify the contours of the Second Amendment.
Chief Justice John Roberts asked Richard Dearing, the attorney representing New York City, whether a prior violation of the old transportation regulations might be held against a gun owner when he tries to renew his license. “It absolutely will not,” Dearing said, although the discretion to deny licenses for “good cause” seems to make that a real risk.
Justice Neil Gorsuch suggested that the possibility of obtaining compensation for economic damages related to the old regulations, although it was not specifically sought by the plaintiffs, might be enough to keep the case alive, as Principal Deputy Solicitor General Jeffrey Wall argued. “This litigation, I think, has taken five-plus years, and that [issue] has become relevant only at this late stage, after the city and the state have enacted a new law,” Gorsuch observed. “Why isn’t the prospect of allowing damages to be added to the complaint enough?”
Gorsuch also noted that it’s unclear whether the new rules allow gun owners to make stops while en route to ranges, competitions, or second homes outside the city. The city says such trips have to be “continuous and uninterrupted,” while the state law says gun owners have to be traveling “directly” to their destinations. If those restrictions might be read to preclude stops for coffee, gas, or bathroom breaks, Gorsuch wondered, “why isn’t there a live controversy remaining?” He suggested that “despite herculean, late-breaking efforts to moot the case,” there is still relief the plaintiffs could obtain only through a decision on the merits.
Dearing assured the justices that the NYPD would not look askance at “reasonably necessary” stops for coffee, gas, or bladder relief, prompting Gorsuch to wonder, “Is coffee reasonably necessary?” While that remark prompted laughter, Gorsuch emphasized his point: “What’s going to qualify? I’m just a little unclear about that.”
So was Dearing. Justice Samuel Alito, who like Gorsuch remarked upon “the quite extraordinary step of trying to moot the case after we granted review,” wondered about a gun owner who drives to a range in New Jersey and stops to “visit his mother for a couple of hours to take care of a few things for her.” Dearing was unsure whether that would be allowed. “I think that would have to be a question now to be litigated under the state law,” he said. “I hadn’t considered the mother or mother-in-law example before.”
Speaking for the plaintiffs, Paul Clement said Dearing’s assurances are not good enough to make the case moot. “The city took it on itself in Section 7 of the new regs to tell you what they, at least at that point, thought was sufficiently direct, which is ‘continuous and uninterrupted,'” he said. “They’re now making representations that the reg doesn’t mean what it seems to mean….My client[s] shouldn’t have to rely on those representations. They should get that in writing in an injunction that would be enforceable. That would be effectual relief.”
Perhaps the most telling exchange involved not the mootness issue but the constitutionality of the original rules:
Alito: Mr. Dearing, are the people in New York less safe now as a result of the enactment of the new city and state laws than they were before?
Dearing: No, I don’t think so. We made a judgment, expressed by our police commissioner, that it was consistent with public safety to repeal the prior rule and to move forward without it.
Alito: Well, if they’re not less safe, then what possible justification could there have been for the old rule, which you have abandoned?
Dearing did not have a very good answer, except to say that the city’s arbitrary restrictions on transporting firearms may have made its other rules a bit easier to enforce. As the petitioners note, “The only ‘evidence’ the City has ever mustered to support the tailoring of its policy is an affidavit from a former commander of the state licensing division hypothesizing, with no evidentiary support whatsoever, that the mere presence of a handgun—even unloaded, secured in a pistol case, separated from its ammunition, and stowed in the trunk of the car—might pose a public-safety risk in ‘road rage’ or other ‘stressful’ situations.” The city will have to do better than that if it wants to demonstrate that its rules were consistent with the constitutional right to keep and bear arms, which is why it is so desperate to stop the Supreme Court from considering that question.
from Latest – Reason.com https://ift.tt/2P4X0St
via IFTTT
For decades, New York City enforced uniquely onerous regulations that effectively prohibited licensed pistol and revolver owners from taking their weapons outside their homes, even when they were unloaded and stored in a locked container, unless they were traveling to or from one of seven gun ranges in the five boroughs. When several gun owners challenged those regulations, the city successfully defended their constitutionality for five years, obtaining favorable rulings from a federal judge and the U.S. Court of Appeals for the 2nd Circuit. But after the U.S. Supreme Court agreed to hear an appeal of that decision, the city rewrote its rules, backed a state law that eased restrictions on transporting guns, and urged the Court to drop the case, arguing that the regulatory and statutory changes made it moot. During oral arguments today in New York State Rifle & Pistol Association v. City of New York, several justices seemed skeptical of that claim, which is transparently aimed at avoiding a Supreme Court decision that could clarify the contours of the Second Amendment.
Chief Justice John Roberts asked Richard Dearing, the attorney representing New York City, whether a prior violation of the old transportation regulations might be held against a gun owner when he tries to renew his license. “It absolutely will not,” Dearing said, although the discretion to deny licenses for “good cause” seems to make that a real risk.
Justice Neil Gorsuch suggested that the possibility of obtaining compensation for economic damages related to the old regulations, although it was not specifically sought by the plaintiffs, might be enough to keep the case alive, as Principal Deputy Solicitor General Jeffrey Wall argued. “This litigation, I think, has taken five-plus years, and that [issue] has become relevant only at this late stage, after the city and the state have enacted a new law,” Gorsuch observed. “Why isn’t the prospect of allowing damages to be added to the complaint enough?”
Gorsuch also noted that it’s unclear whether the new rules allow gun owners to make stops while en route to ranges, competitions, or second homes outside the city. The city says such trips have to be “continuous and uninterrupted,” while the state law says gun owners have to be traveling “directly” to their destinations. If those restrictions might be read to preclude stops for coffee, gas, or bathroom breaks, Gorsuch wondered, “why isn’t there a live controversy remaining?” He suggested that “despite herculean, late-breaking efforts to moot the case,” there is still relief the plaintiffs could obtain only through a decision on the merits.
Dearing assured the justices that the NYPD would not look askance at “reasonably necessary” stops for coffee, gas, or bladder relief, prompting Gorsuch to wonder, “Is coffee reasonably necessary?” While that remark prompted laughter, Gorsuch emphasized his point: “What’s going to qualify? I’m just a little unclear about that.”
So was Dearing. Justice Samuel Alito, who like Gorsuch remarked upon “the quite extraordinary step of trying to moot the case after we granted review,” wondered about a gun owner who drives to a range in New Jersey and stops to “visit his mother for a couple of hours to take care of a few things for her.” Dearing was unsure whether that would be allowed. “I think that would have to be a question now to be litigated under the state law,” he said. “I hadn’t considered the mother or mother-in-law example before.”
Speaking for the plaintiffs, Paul Clement said Dearing’s assurances are not good enough to make the case moot. “The city took it on itself in Section 7 of the new regs to tell you what they, at least at that point, thought was sufficiently direct, which is ‘continuous and uninterrupted,'” he said. “They’re now making representations that the reg doesn’t mean what it seems to mean….My client[s] shouldn’t have to rely on those representations. They should get that in writing in an injunction that would be enforceable. That would be effectual relief.”
Perhaps the most telling exchange involved not the mootness issue but the constitutionality of the original rules:
Alito: Mr. Dearing, are the people in New York less safe now as a result of the enactment of the new city and state laws than they were before?
Dearing: No, I don’t think so. We made a judgment, expressed by our police commissioner, that it was consistent with public safety to repeal the prior rule and to move forward without it.
Alito: Well, if they’re not less safe, then what possible justification could there have been for the old rule, which you have abandoned?
Dearing did not have a very good answer, except to say that the city’s arbitrary restrictions on transporting firearms may have made its other rules a bit easier to enforce. As the petitioners note, “The only ‘evidence’ the City has ever mustered to support the tailoring of its policy is an affidavit from a former commander of the state licensing division hypothesizing, with no evidentiary support whatsoever, that the mere presence of a handgun—even unloaded, secured in a pistol case, separated from its ammunition, and stowed in the trunk of the car—might pose a public-safety risk in ‘road rage’ or other ‘stressful’ situations.” The city will have to do better than that if it wants to demonstrate that its rules were consistent with the constitutional right to keep and bear arms, which is why it is so desperate to stop the Supreme Court from considering that question.
from Latest – Reason.com https://ift.tt/2P4X0St
via IFTTT
We are facing a corporate debt bomb that is far, far greater than what we faced in 2008, and we are being warned that this “unexploded bomb” will “amplify everything” once the financial system starts melting down.
Thanks to exceedingly low interest rates, over the last decade U.S. corporations have been able to go on the greatest corporate debt binge in history. It has been a tremendous “boom”, but it has also set the stage for a tremendous “bust”. Large corporations all over the country are now really struggling to deal with their colossal debt burdens, and defaults on the riskiest class of corporate debt are on pace to hit their highest level since 2008. Everyone can see that a major corporate debt disaster is looming, but nobody seems to know how to stop it.
At this point, companies listed on our stock exchanges have accumulated a total of almost 10 trillion dollars of debt. That is equivalent to approximately 47 percent of U.S. GDP…
A decade of historically low interest rates has allowed companies to sell record amounts of bonds to investors, sending total U.S. corporate debt to nearly $10 trillion, or a record 47% of the overall economy.
In recent weeks, the Federal Reserve, the International Monetary Fund and major institutional investors such as BlackRock and American Funds all have sounded the alarm about the mounting corporate obligations.
We have never witnessed a corporate debt crisis of this magnitude.
Corporate debt is up a whopping 52 percent since 2008, and this bubble is continually growing.
And actually the 10 trillion dollar figure is the most conservative number out there. Because if you add in all other forms of corporate debt, the grand total comes to 15.5 trillion dollars. The following comes from Forbes…
Total corporate debt is actually much higher. Adding the debt of small medium sized enterprises, family businesses, and other business which are not listed in stock exchanges ads another $5.5 trillion. In other words, total US corporate debt is $15.5 trillion, 74% of US GDP.
Needless to say, this mountain of corporate debt is definitely not sustainable, and I have already noted that defaults are rising. One expert recently explained that all of this debt is “an exploded bomb” and that at some point something will come along to “trigger the explosion”…
“We are sitting on the top of an unexploded bomb, and we really don’t know what will trigger the explosion,” said Emre Tiftik, a debt specialist at the Institute of International Finance, an industry association.
Right now a lot of large corporations are so maxed out that they can barely service their debts. So when things start getting really bad for the economy, we could be facing a wave of defaults unlike anything we have ever seen before.
When asked about what this will mean during the next recession, a finance professor at the University of Pennsylvania warned that it will “make everything happen faster, larger, worse”…
“It’s going to amplify everything,” said Krista Schwarz, a finance professor at the University of Pennsylvania’s Wharton School. “It’s going to make everything happen faster, larger, worse. The recession would just be that much deeper.”
Of course I am being a bit silly, but the truth is that there is nothing silly about the giant mountain of debt that our society is facing.
In addition to our looming corporate debt crisis, U.S. consumers are 14 trillion dollars in debt, state and local government debt levels are at record highs, and the U.S. national debt just hit the 23 trillion dollar mark.
If you can believe it, we have actually added another 1.3 trillion dollars to the national debt just since last Thanksgiving…
That is the largest Thanksgiving-to-Thanksgiving increase in the debt in nine years. The last time the debt increased more from Thanksgiving to Thanksgiving was in 2010, when it increased by $1,785,995,360,978.10.
It also equals approximately $10,137.48 per household in the United States.
Adding 1.3 trillion dollars to the national debt in 12 months while things are still relatively stable is utter insanity, and what we are doing to future generations of Americans is beyond criminal.
Sen. Rand Paul is continuing to expose the rampant waste of tax dollars by our government agencies. In a special Fall edition of his Waste Report, the Kentucky senator highlights some of the most wasteful expenditures of our federal government, including a half-a-million-dollar toilet nobody could use and a $22 million project to bring Serbian cheeses up to international standards.
“Once again, The Waste Report takes a closer look at just some of what the federal government is doing with the American people’s hard-earned money, this time including stories of it continuing to turn over so many taxpayer dollars to the Washington Metropolitan Area Transit Authority, funding research that involves hooking Zebrafish on nicotine, buying textbooks for Afghan students that are subpar or sitting in warehouses, and more in a list that totals over $230 million,” states a press release from Sen. Paul’s office.
Of course it isn’t just the United States that is drowning under an ocean of red ink. As Bloomberg has detailed, when you total up all forms of debt in the world it comes to a grand total of 250 trillion dollars…
Zombie companies in China. Crippling student bills in America. Sky-high mortgages in Australia. Another default scare in Argentina.
A decade of easy money has left the world with a record $250 trillion of government, corporate and household debt. That’s almost three times global economic output and equates to about $32,500 for every man, woman and child on earth.
So if you have a household of four, your share comes to $130,000.
Are you ready to pay up?
In the end, all of this debt will never be paid off. Instead, the bubble will just keep ballooning until it inevitably bursts.
And when it finally bursts, many are warning of a complete and total meltdown. In fact, Rick Ackerman believes that “a Mad Max scenario” is likely…
Ackerman contends, “I am a little more bearish than that. I see a Mad Max scenario as inevitable. . . . I try not to think about it because we’ve all got lives to live and kids to raise. . . . When you go back to the calculous of deflation and that every penny of every debt must be paid, if not by the borrower then by the lender, we have already put ourselves into a condition where Social Security is going to fail. Medicare is going to fail. All the ‘just-in-time’ deliveries are going to be in jeopardy. Food from the grocery stores, one day shipping from Amazon, I don’t see how all these things can continue to operate in a condition other than in the false prosperity that we have now. We are at the pinnacle of affluence.”
I haven’t been able to find anyone that can logically argue that the road that we are currently on has a positive ending.
The truth is that we are headed for complete and total disaster, and the only real debate is about how long it will take for us to get there.
So enjoy these moments of relative stability while you still can, because it is only a matter of time before we go over the precipice.
PA County Election Turned Into “Nightmare” After Voting Machines Malfunctioned
A couple of minutes after polls closed in Easton, Pennsylvania on Election Day, the chairwoman of the county Republicans, Lee Snover, realized something had gone horribly wrong.
When vote totals began to come in for the Northampton County judge’s race, it was obvious there was a problem. The Democratic candidate, Abe Kassis, only had 164 votes out of 55,000 ballots across 100 precincts. In an area where you can vote for a straight party ticket, it was near a “statistical impossibility”, according to the New York Times.
When paper backup ballots were recounted, they showed Kassis winning narrowly, 26,142 to 25,137, over his opponent, the Republican Victor Scomillio. Snover said at about 9:30PM on November 5, her “anxiety began to pick up”.
“I’m coming down there and you better let me in,” she told someone at the election office after eventually getting through to them on the phone.
Matthew Munsey, the chairman of the Northampton County Democrats who helped with the paper ballot recount said: “People were questioning, and even I questioned, that if some of the numbers are wrong, how do we know that there aren’t mistakes with anything else?”
The issue in Northampton County continues to highlight fears and mistrust over election security that the nation is feeling on a broader scale heading into 2020. The machines used in Northampton County were also used in Philadelphia and surrounding suburbs, crucial areas for next year’s Presidential election.
Calibration of the voting ecosystem is often invoked by those who lose by a small margin.
Snover echoed voter concerns: “There are concerns for 2020. Nothing went right on Election Day. Everything went wrong. That’s a problem.”
Voters around the country say that machines exacerbate an already grueling voting process that is replete with long lines and frustrated poll workers.
Michelle Broadhecke of Easton, like many others who watched their Democratic candidate go down in flames in 2016, said her anxiety about elections began after Trump won.
She said: “It made me sad because with everything that’s going on, you kind of worry about: Was something tampered with, or was it just a mistake. There’s just too much going on that you worry about those things. And you don’t want the wrong people in the wrong places.”
No study has been conducted to determine why the machines malfunctioned in Northampton County. The machines stay locked away for 20 days after the election, per state law. The prevailing theory has been a bug in the software and there have been no visible signs of outside meddling, according to a senior intelligence official.
Or as Democrats call it, “Russian interference”.
County officials say the machines worked as they should have, with the paper ballot backup process working as advertised.
Munsey and Snover
Katina Granger, a spokeswoman for Election Systems & Software, the manufacturer of the machines said: “We also need to focus on the outcome, which is that voter-verified paper ballots provided fair, accurate and legal election results, as indicated by the county’s official results reporting and successful postelection risk-limiting audit. The election was legal and fair.”
The automatic tests in Northampton proved to be problematic in that they didn’t even cast votes for every candidate.
Should just being “employed” make people/workers happy?
On one level, any job is better than no job. But we also derive much of our identities and self-esteem from our work.
If you aren’t happy with it, you’re probably not happy generally.
Unhappy people can still vote and are often easy marks for shameless politicians to manipulate. Their spending patterns change, too.
So it ends up affecting everyone and everything.
Unhappy Employment
There’s this plight of people who, while not necessarily poor, aren’t where they think they should be—and perhaps once were.
This disappointment isn’t just in their minds; the economy really has changed. Yes, you can probably get a job if you are physically able, but the odds it will support you and a family, if you have one, are lower than they once were.
The US Private Sector Job Quality Index aims to give data on this… distinguishing between low-wage, often part-time service jobs and higher-wage career positions.
What they have found so far isn’t encouraging.
Looking at “Production & Non-Supervisory” positions (essentially middle-class jobs), the inflation-adjusted wage gap between low-wage/low-hours jobs and high-wage/high-hours jobs widened almost fourfold between 1990 and 2018.
This also helps explain why so many relatively well-off people feel like they are always working and have no free time. They aren’t imagining it. Their employers really do keep them busy.
So we really have two generally unhappy groups: people who want to work more and raise their income, and people who want to work less but keep their income.
What’s the answer? We need to find one, and to do so we must talk about it. And that is possibly an even bigger problem.
Broken Politics
The national anxiety level got where it is for many different reasons. Some are largely outside our control, like the technological advances that have replaced some human jobs.
Hence political decisions need to be made.
The problem is that the ideological gap between the median Democrat and the median Republican has widened into a huge chasm in this century.
What as recently as 2004 was a mountain-shaped distribution with a small dip in between now looks more like a volcanic crater.
The simple fact is that the “center” is shrinking. It is hard to consider compromises when positions are so hardened that no compromise is allowable.
Whatever the reason for this (which is another debate), it prevents our political system from addressing important issues. This leaves an anxious population to feel either completely abandoned, or thinking it must align with one side or the other just to survive.
* * *
I predict an unprecedented crisis that will lead to the biggest wipeout of wealth in history. And most investors are completely unaware of the pressure building right now. Learn more here.
460 Billion Reasons Why Bond Yields May Jump Next Year
One week ago, we discussed the ongoing conundrum which has stumped Wall Street strategists, namely the record outflows from equity funds, surpassing even the year of the global financial crisis…
… as stocks hit all time highs, not on earnings growth but entirely due to PE multiple expansion…
… which Goldman summarized by saying that “with S&P 500 earnings on track for roughly zero growth from this time last year, solid returns likely would not have been possible without central bank support.”
We also discussed what JPMorgan thought would finally resolve this conundrum: in his weekly Flows and Liquidity report, JPMorgan quant Nikolas Panigirtzoglou wrote that as a result of the tremendous market performance in 2019 which would finally sucker retail investors in, he expects a “Great Rotation II” as investors finally flee bonds funds and rush to allocate money to equities:
If this view proves correct and the overall cyclical picture looks better over the coming months and quarters, retail investors are more likely to shift from a risk-off mode to a risk-on mode next year, by reversing this year’s equity fund selling and by reducing drastically this year’s extreme bond fund buying. Such a dramatic flow shift would be equivalent to another Great Rotation, i.e. a repeat of the abrupt shift away from retail investors accumulating bond funds to buying equity funds seen previously in 2013. In other words, 2020 would be the year of Great Rotation II, in a repeat of 2013 the year of Great Rotation I. – JPMorgan
Whether or not JPM’s thesis for a great flow of funds from bonds to stocks will finally come true – recall, this is the base case assumption at the start of every year, and so far it has proven wrong for 6 years in a row – remains to be seen, it led to an interesting tangent: if investors dump bonds in a year when the US budget deficit is expected to be well over $1 trillion and when foreign buyers have been increasingly shrinking their purchases of US bonds…
… just who will buy all those Treasurys the US plans to sell in 2020 if retail says no?
That just also happens to be the topic of Panigirtzoglou’s latest note, in which he looks at the consequences of his prior Great Rotation call, and concludes that if he is right, that would be particularly bad news for US Treasurys, which could find themselves with a supply/demand shortfall as high as $460 billion in 2020, a sharp reversal to this year’s $400 billion improvement.
Starting with the supply picture, JPM observes that on bond supply, 2019 saw the fourth consecutive year of increases in bond supply, rising to $3.13tr, the highest level since 2009.
Some more details: over the past four years, annual global bond supply has gone up by almost $1tr driven by both government bond and spread product supply. This $1tr increase over the past four years reflects both an increase in government deficits led by the US, but also an increase in corporate bond supply as companies took advantage of lower bond yields globally to pre-finance their needs and increase their leverage.
The good news here is that JPMorgan forecasts that 2020 will see a significant reversal in recent years’ bond supply trend with a $375bn decrease, bringing the global annual bond supply to $2.76tr in 2020, its lowest level since 2016. This forecast of a $375bn decline in global bond supply next year is driven by an expected reduction in both government (-$211bn) and spread product (-$164bn) supply.
The expected reduction in government bond supply reflects a decline in net supply in the US as the Fed is no longer contracting its balance sheet and as maturing MBS are re-invested into USTs (up to a monthly cap of $20bn), which is only partially offset by a higher government deficit in the UK and Eurozone. The expected reduction in spread bond supply next year is driven by lower corporate bond issuance across the US, Europe and EM, as corporates globally appear to have pre-financed some of their needs in previous years and as they try to rein in their leverage globally. The decline in corporate bond supply globally is only partially offset by higher supply in US mortgages (MBS) next year as the Fed reinvests a portion of MBS prepayments and maturities into Treasuries and the US economy improves, and by higher supply in US Munis, leaving our total spread product supply estimate for 2020 lower by $164bn relative to 2019.
What about notable demand changes?
Here, the two biggest surprises of this year have been in bond fund demand by retail investors and in bond purchases by G4 (US, Eurozone, Japan, UK) commercial banks. The former saw close to a record high annualized pace of $850bn this year, while the latter at $640bn saw its highest level since 2009 (this surge in bond purchases may also be behind the September repo market fireworks as banks found themselves holding on to too much TSYs at the expense of cash).
For JPM both of these levels are unsustainable and the bank expects some normalization in 2020. In terms of the arguments for an expected normalization in the bond fund flow next year, JPM reminds us of the three reasons listed in last week’s publication, based on the historical pattern following extreme bond fund flows in a calendar year, based on the response of bond fund flows to previous year’s returns and based on our expectation that retail investors will adopt more of a risk-on behavior next year in response to an improvement in the cyclical picture. As a result, the biggest US bank pencils in a deterioration in bond demand of around $600bn next year.
In listing its arguments for a “normalization” in bond purchases by G4 commercial banks in 2020, Panigirtzoglou sees three reasons:
1) Bond purchases by G4 commercial banks in 2019 were around $300bn higher than the level that would be justified by the reduction in the QE impulse between 2018 and 2019. This QE impulse was reduced by close to $760bn between 2018 and 2019, and applying a historical beta of around -0.5 would justify an increase in bond purchases by around $380bn, i.e. from -$30bn in 2018 to $350bn in 2019. Instead, we got $640bn for 2019 which is almost $300bn higher.
2) One reason for this $300bn of “excess “ bond purchases has been a bigger than in previous years expansion of G4 commercial bank balance sheets, by $4tr this year i.e. from a total size of $85tr in 2018 to $89tr to 2019. This $4tr balance sheet expansion is more than double the average pace of the previous five years. A potential normalization in commercial bank balance sheet expansion pace from $4tr this year to $1.5tr-$2tr next year should be accompanied by a normalization in bond purchases also. This implies that much of this $300bn of “excess” bond purchases should be unwound next year.
3) Commercial banks were also caught up with short duration stance at the end of last year relative to historical averages, and since then they have been struggling to move back to average by raising their bond purchases. This short duration stance is indicated by Figure 3, which measures the sensitivity of US banks’ weekly changes in net unrealized gains in their available-for-sale portfolios to changes in UST yields.
When this metric is very negative or below average it implies a long duration stance by US commercial banks and when this metric is above its historical average it implies a short duration stance. As can be seen in Figure 3 US banks appear to have shifted to short duration stance during 2018 and as a result they were caught wrong-footed this year. This short duration stance has yet to normalize according to Figure 3, something that creates upside risk to commercial bank bond purchases in 2020.
So what does this all mean for next year?
If one excludes the Fed’s T-bill purchases which – for now – do not entail duration (although they will in 2020), the increase in the QE impulse between 2019 and 2020 is $460bn. Applying a historical beta of around -0.5 would justify a decrease in G4 commercial bank bond purchases by around $230bn, i.e. from $640bn in 2019 to $410bn in 2020. Point 2) suggests that $300bn of “excess” bond purchases by commercial banks should be largely unwound next year as the pace of commercial bank balance sheet expansion normalizes. But the point on current short duration stance provides an offset as it creates upside risk to commercial bank bond purchases into 2020. As a result, JPM assumes that half of this $300bn of “excess” bond purchases by commercial banks should be unwound next year. In turn this implies a forecast of G4 commercial bank bond purchases for 2020 of $410-$150bn=$260bn, or a deterioration in bond demand of around $380bn.
Then there are the G4 central banks which saw a second year of significant downshifting in bond demand in 2019, with the 2018 reduction in bond demand of $1.1tr relative to 2017 followed by a further $750bn reduction in 2019, largely on the back of the BOJ slowdown in QE. This year’s negative impulse came as a result of the Fed continuing its balance sheet contraction up to 1 August, which saw around a $300bn decline in Treasury and MBS holdings, as well as the BoJ continuing its stealth taper and the ECB having ended its net purchases in end-2018 before re-starting purchases in November. A year ago JPM had expected around a $550bn reduction, and the majority of this year’s negative surprise came from the BoJ’s more aggressive slowing of net purchases. Moreover, when the Fed shifted back to balance sheet expansion to accommodate for the greater demand for its liabilities, it chose to do so via T-bills which is excluded for now from JPM’s supply and demand analysis.
For next year, the Fed is set to continue reinvesting maturing MBS securities up to a monthly cap of $20bn into Treasuries, which represents a re-allocation rather than a net change in aggregate bond demand. And while T-bills are excluded from a net coupon analysis, the fact that JPM’s rates researchers expect T-bill supply to be negative next year means we see a portion of the Fed’s balance sheet expansion next year likely to be conducted via Treasury purchases. For the ECB, we expect it to continue buying bonds at a €20bn/m pace for the course of 2020. Finally, the BoJ’s stealth taper process is expected to continue, with the net purchase amounts likely approaching zero. With the BoE on hold in terms of balance sheet policy, overall for the G4 central banks JPMorgan expect an improvement in bond demand of around $460bn.
Other sources of demand include official demand, such as EM reserve managers, whose net bond purchases in 2019 amount to only $20bn, which is weaker than JPM’s projection from a year ago of $130bn. For next year, JPM see essentially flat bond demand from reserve managers, as the modestly positive current account balances for EM economies have offsets from depreciation pressures on EM currencies over the balance of the year and the prospect of weaker oil price.
Then there are pension funds and insurance companies. For these buyers of bonds, JPM estimates that net bond demand for 2020 will remain at an above average pace consistent with this year’s pace of around $620bn.
Putting it all together, the combination of a $840bn deterioration in bond demand and a $375bn decrease in bond supply results in a net deterioration in the bond supply/demand balance of around $460bn in 2020, reversing this year’s $400bn improvement
In turn this implies potentially substantial upward pressure on bond yields next year particularly if JPM’s bond fund and G4 commercial bank bond purchases estimates for 2020 prove correct; this is because of all the different components of demand or supply, these two are the ones that have exhibited the highest correlation with annual bond yield changes.
Man Arrested After Car Plows Into Children Outside English School, Killing 12-Year-Old Boy
Three days after the latest terrorist attack in England on the capital’s London Bridge, a man, 51, was arrested on suspicion of murder and attempted murder after a car he allegedly drove plowed into pedestrians outside Debden Park High School in Essex, killing a 12-year-old boy and injuring five others before the driver fled the scene.
The incident took place near Debden High School, on Willingale Road.
The police said two 15-year-old boys, a 13-year-old boy, a girl of 16 and a 53-year-old woman were either treated at the scene or rushed to hospital following the ordeal.
The incident happened at about 3:20 p.m. on Monday when police were called to reports that a number of pedestrians had been struck by a silver Ford KA near Debden Park High School in Loughton, a town about 21 kilometers (13 miles) northeast of London.
#BREAKING: major story developing:
A car drove in a number of children killing 1 and injuring many others outside a school in #Essex England.
Driver drove off, police are searching for the vehicle. pic.twitter.com/hWv6syxUfA
“A 12-year-old local boy was taken to hospital, where he sadly died,” Essex Police said in a statement. Five others suffered non-life threatening injuries: two 15-year-old boys, one 13-year-old boy, one 16-year-old girl, and a 53-year-old woman.
“We believe that the collision was deliberate and as such we have launched a murder investigation,” Police Chief Superintendent Tracey Harman said on late Monday night.
“We are investigating whether or not this incident may be connected to another incident nearby.”
Police also revealed checks are being made to see if there is a connection to a similar incident, reported to be at Roding Valley High School, earlier in the day.
Before the arrest, Harman said police had launched a search for a local man, 51-year-old Terry Glover, in connection with the attack. “We’ve searched a number of addresses this evening in an attempt to find him and the searches for him [and the vehicle] are continuing,” she said. A possible motive was not immediately known.
Helen Gascoyne, the school’s head, said the community is ‘devastated’ by the death of one of its students.
Tesla Sells More Products It Doesn’t (Yet) Make, Than Products It Does
Submitted by Gordon Johnson of GLJ Research
A few things we think are worth considering when it comes to TSLA – out of the 9 products they’ve announced and sell, they only actively make 3 of them (and demand for those three products appear to have peaked) while the other 6 products they sell are vaporware, i.e., products that do not exist – yes, you heard that right:
TSLA’s current cars in production include:
Model 3 (ASPs and units are in severe decline, and sales were down -49% y/y in Oct. in its biggest market, the USA)
Model X (sales have collapsed in both the US and globally)
Model S (same as Model X)
Meanwhile, here are TSLA’s current cars/products not in production:
Roadster (unveil was 2yrs ago)
Semi (unveil was 2yrs ago)
Model Y (TSLA refuses to mention how many pre-orders they’ve received here)
Cybertruck ($100 fully-refundable deposits on a car that will likely cost $60K, or 0.167%, is the equivalent of someone putting $1.67 toward an $1,000 i-Phone & apple calling it an order)
ATV
FSD (to be FSD, TSLA would have had to achieve level 5 autonomy… they’re at level 2)
So… TSLA has more vaporware products (i.e., stuff that doesn’t exist) than real products for sale; and, it’s real products are seeing large negative y/y growth currently.
Oh… and what about E. Musk’s promise that:
TSLA would have flying cars (he made this claim 322 days ago),
TSLA would create break pads that never need to be replaced (he made this claim 336 days ago),
TSLA would have a base on Mars in 2028 (he made this claim 432 days ago),
TSLA would have a one hour body shop (this claim happened 437 days ago),
he would fix the water in all Flint houses above FDA levels (he made this claim 504 days ago),
there would be no more mass layoffs (533 days, and multiple layoffs, ago), etc.?
The point is… each claim he makes is picked up by every media site and taken as “gospel”; so, maybe the media should go to this website (link) and start holding him to some of these claims?
China Bans US Military Visits To Hong Kong, Sanctions US NGOs Over Support For Protests
China’s Foreign Ministry said Monday that it had suspended all US warships and military aircraft from visiting Hong Kong, and also declared sanctions against several US non-government organizations (NGOs) for their support of pro-democracy protesters, reported Bloomberg.
“In response to the unreasonable behaviors of the US side, the Chinese government decides to suspend the review of requests by US military ships and aircraft to visit Hong Kong as of today,” Chinese Foreign Ministry spokeswoman Hua Chunying said.
Beijing has suspended requests by US military ships and aircraft to visit #HongKong. MOFA Spokeswoman Hua Chunying said that a number of US-based non-governmental organizations, including NED, will be subjected to sanctions from China, in today’s press briefing. pic.twitter.com/LvknrixIrD
China last week announced that it would make firm countermeasures to President Trump’s signed Hong Kong Human Rights and Democracy Act that went into law.
The new law permits Washington to impose new sanctions or revoke Hong Kong’s special trading status over China’s human rights violations.
The Foreign Ministry’s response to the signing of the bill last week accused Washington of “bullying behavior,” “disregarding the facts,” and “publicly supporting violent criminals.”
Chunying said that “we urge the US to correct the mistakes and stop interfering in our internal affairs. China will take further steps if necessary to uphold Hong Kong’s stability and prosperity and China’s sovereignty.”
About a year ago, on positive signs that a deal was likely at the 2018 G20 Buenos Aires summit, China allowed the USS Ronald Reagan and other ships in its strike group to dock in Hong kong. Now it seems that China will force Hong Kong to deny port calls attempted by the US.
Chunying also said the sanctioned NGOs include the National Endowment for Democracy, the National Democratic Institute for International Affairs, the International Republican Institute, Human Rights Watch, and Freedom House.
“They shoulder some responsibility for the chaos in Hong Kong, and they should be sanctioned and pay the price,” said added.
China’s yuan weakened to 7.04 per dollar, the lowest level in at least a week, following the statement from the Foreign Ministry on Monday morning.
China Central Television reported that Beijing could take further actions on the US if there’s more interference.
Global Times editor noted that Beijing would come up with additional sanctions against the US if the Trump administration continues to interfere in Hong Kong.
These measures will have actual impact on related organizations and departments of the US side. It shows China will not allow the US to wantonly make waves on Hong Kong issue. If the US side continues to provoke over Hong Kong, China will come up with follow-up action. pic.twitter.com/e8H946fVL9
