Worst Is First! What goes down, must go back up, right? Perhaps it’s better not to play…
Chinese stocks were weak overnight, led to the downside by the tech-heavy Shenzhen Composite…
And Europe is doing the exact opposite again – soaring for the second day in a row…
Nasdaq managed to get back to even, erasing yesterday’s tech wreck…Trannies soared over 3.5% today, Small Caps up almost 3%!! And the late-day melt-up sent S&P back above 2800. The Dow ended the day up 511 points!
This doesn’t feel sustainable…
And just like that the S&P 500 retakes 2800…
Nasdaq was the most oversold before the open since the Dec lows…
S&P pushed back above the 200DMA…
This is the best day for stocks in 5 months, on the back of the biggest short-squeeze since the first week of 2019…
Volume was below average.
FANG Stocks bounced today but only recovered 50% of their last few day’s losses…
Semis soared (2nd best day of year) filling the gap back to May 23rd…
Financials spiked most in 5 months, but struggled to break resistance from last week…
While equity vol is elevated, FX vol is deadstick as bond vol explodes…
Treasury yields surged on the day, with 30Y notably underperforming and running higher (in yield) on the week
Note we started the day aggressively oversold in yields…
With a steepening in the curve, 3m10Y erasing yesterday’s flattening (but remains inverted)
Note, at the longer-end, 2s30s now at 14-month highs…
The Dollar index tumbled to 3-week lows – down 4 days in a row – erasing all gains since the May FOMC meeting…
The Mexican peso rallied today but only retraced 50% of the Trump tariff drop…
Rather oddly, the dollar was weak as market-implied rate-change expectations shifted more hawkishly, despite all the chatter from various Fed heads…
But rate-cut expectations for September have soared to 89%!!! (NOTE: in early November, the market was 89% sure that The Fed would be hiking rates in September)
Bitcoin was beaten like a rented mule again…
As all cryptos extended overnight losses…
Commodities were all higher today as the dollar dropped…
Gold managed to hold on to gains (in USD and CNY) amid all the chaos today…
Oil also gained on the day amid the dollar dump (ahead of tonight’s inventory data)…
Finally – one word – fun-durr-mentals…
via ZeroHedge News http://bit.ly/2wC8Dru Tyler Durden
The Trump administration has indicated that it may declare a second national emergency in order to implement new tariffs announced on Mexico, according to Senate Republicans, who announced the potential plan following a closed-door lunch with White House deputy counsel Pat Philbin and DOJ officials.
There was no word on the likelihood of this happening, however on Sunday, acting White House chief of staff Mick Mulvaney said that President Trump “is absolutely, deadly serious” about the tariffs, adding “I fully expect these tariffs to go on to at least the 5% level on June 10. The president is deadly serious about fixing the situation at the southern border.“
The White House announced Thursday that the import tax will increase by 5 percentage points every month through October, topping out at 25%, unless Mexico takes significant action to stem the flow of migrants, mostly from Central America, who have surged to the U.S. border in recent months. –LA Times
As far as declaring a national emergency to enact the tariffs, “I think that was somewhat up in the air. …I think that’s a distinct possibility but I don’t think there’s any definitive answer,” said Sen. Ron Johnson (R-WI) following the lunch.
Sen. Mike Rounds (R-SD) said that the administration is still “working through” whether it would even need to declare the national emergency in the first place, a move which would set up yet another clash with Congressional Democrats and Republicans opposed to the idea.
“Tariffs are not real popular in the Republican conference,” said Johnson.
“The way they put it was is they’re still working through all the details on it and they have not decided what their approach is going to be yet with regard to that, that was my understanding,” said Rounds.
Trump says he will impose the tariffs on Mexico under the 1977 International Emergency Economic Powers Act as soon as next week unless Mexico cracks down on the flow of migrants from Central America across the southern border.
But declaring a second national emergency, after Trump used the tool earlier this year to sidestep Congress on border funding, would pave the way for a significant fight with Senate Republicans, who have publicly and privately voiced opposition to the tariffs.
A new national emergency declaration, GOP senators say, would set up a new resolution of disapproval vote in an attempt to block the tariffs from going into effect. –The Hill
“Within our own groups I think we recognize that we may very well have another vote coming up,” Rounds added.
Earlier this year, the Senate passed a resolution disapproving of Trump’s emergency declaration along the US-Mexico border. Trump vetoed the measure and Congress could not override him. Senate GOP are mulling a similar resolution of disapproval if Trump once again declares a national emergency to implement the tariffs.
According to Senate Majority Leader Mitch McConnell (R-KY), there was “not much support” for the tariffs within the caucus.
Trump administration officials received an earful from senators during the closed-door GOP lunch, according to senators who attended the lunch.
Sen. Ted Cruz (R-Texas) said that there was “deep concern” within the meeting about the prospects of new tariffs against Mexico.
A GOP senator who attended the meeting said that roughly a half dozen senators spoke during the closed-door lunch, none of whom were supportive of new tariffs against Mexico.
The senator added that administration officials were warned during the lunch that they needed to count the votes on a potential resolution of disapproval because Trump could fall short. –The Hill
“I think it’s fair to say … that every senator who spoke, and there were probably a half dozen, generally had the same point of view,” said the GOP senator cited by The Hill. “Nobody was supportive, who spoke.”
via ZeroHedge News http://bit.ly/31chJt5 Tyler Durden
Step aside AOC: with her latest economic policy proposal dubbed simply “economic patriotism”, Elizabeth Warren has blown past embracing Modern Monetary Theory in favor of a highly centralized, Soviet-style economy.
Eager to catch up with such budget-busting proposals as the “Green New Deal” pitched by her Democratic presidential competitor, Alexandra-Ocasio Cortez, on Tuesday Elizabeth Warren proposed spending $2 trillion on a new “green manufacturing” program that would invest in research and exporting American clean energy technology.
The spending blitz is part of Warren’s wide-ranging proposal for aggressive, socialist-style government intervention in U.S. markets, meant to create jobs and pursue “fundamental” and “structural” economic changes. Among the various proposals incorporated in Warren’s “patriotic” plan, her administration would:
Actively manage the value of the U.S. dollar to boost exports
Create a new government agency that will produce four-year jobs plans and oversee trade policy
Increase annual investments in apprenticeship programs by 10 times
Require nearly all products made with government-funded research to be produced in the United States
Substantially increase spending on research and development and export promotion
In an accompanying proposal, Warren wrote that her administration would invest $2 trillion over 10 years in climate-related research, manufacturing and exporting. Not coincidentally, the plan will help achieve the targets set out in the Green New Deal proposed earlier this year by Rep. Alexandria Ocasio-Cortez, even if that particular plan was calculated by some as costing north of $100 trillion, so surely something was lost in transaction.
The plan is the first of several that will outline Warren’s vision for what she calls “economic patriotism.” Her vision is a government-centered approach to economic planning, one could call its central-planning of the type that did not quite live up to its hype in the USSR, that contains seeds of President Trump’s “America First” policies while targeting the Washington corruption that has served as the chief antagonist for Warren’s Senate career and 2020 presidential bid.
One of the plan specifics that will attract the most attention is Warren’s pledge to more “actively manage” the U.S. dollar. And in what appears to be a de facto takeover of the central bank by the Executive branch, Warren calls for “actively managing” the dollar, effectively obviating the US central bank, and cited currency management by other countries while blaming foreign investors and central banks for having “driven up the value of our currency for their own benefit.” The U.S. should work with other countries “harmed by currency misalignment,” according to the proposal.
“If we can aggressively intervene in markets to protect the interests of the wealthy and well-connected — as we have for decades with bailouts and subsidies — then we can damn well use all the tools at our disposal to protect the interests of American workers,” Warren said in the proposal that could have been cribbed straight from any five year plan developed by the USSR.
Ironically, Warren’s “dollar micromanagement” plan and Trump’s big picture monetary perspectives are virtually identical.
Trump, who is detested by Warren, has expressed concern about the dollar’s appreciation and Treasury Secretary Steven Mnuchin said in 2017 that an “excessively strong dollar” could have negative effects on the U.S. economy. Since Trump took office, the gauge has given back some of its gains, although dollar strength has resumed once again this year and recently traded near 2 year highs against its peers.
Which is why, as Bloomberg notes, Warren’s export-boosting policy can certainly be seen as an approach favoring a weak dollar and it would shake-up previous commitments on currency policies across G-20 nations, according to Mark Sobel, a former Treasury Department official.
“One could just as easily see it as targeting exchange rates for competitive gains, and that is certainly how everybody else in the world would likely see it,” said Sobel, who is now U.S. chairman for the Official Monetary and Financial Institutions Forum.
But wait, there’s more.
Warren also vowed to scrap the Commerce Department and put a Department of Economic Development, Moscow would call it the Central Committee, in its place that will oversee trade policy and produce a National Jobs Strategy every four years (at least not every five years – the similarities with Soviet planning would have been simply too grotesque). It would also subsume the Small Business Administration, Patent and Trademark Office and take on export and trade powers like the Office of the U.S. Trade Representative. It would also be tasked with research and development initiatives.
By centralizing trade policy, Warren wrote, her administration will fix a corruption problem that has existed across multiple administrations and which she said has promoted “deep ideological opposition to anything that might put the interests of American workers above the interests of multinational corporations or Wall Street.”
“The new Department will have a single goal: creating and defending good American jobs,” said the proposal, which is the latest of many policy blueprints she has released.
As part of this proposal, Warren would also require companies selling to the federal government pay their employees at least $15 an hour, that employees receive 12 weeks paid family and medical leave and be able to form unions. Labor practices were included in Green New Deal proposals.
But wait, there’s even more.
Warren plans to combine centralized planning with climate change, and according to a second policy blueprint released Tuesday called the “Green Manufacturing Plan,” Warren seeks to invest $2 trillion over the next decade in clean-energy research, manufacturing and exports as part of meeting the targets of the Green New Deal, which Warren supports. It would be split into three parts:
$1.5 trillion in federal spending to purchase clean energy technology made in the United States
$400 billion in a so-called “Green Apollo Program” to develop new clean energy technology
$100 billion for a “Green Marshall Plan” that will assist other countries in purchasing such technology.
Warren said the United States currently spends $1.5 trillion on defense procurement, which she called “bloated”, and argued that an equal amount should be spent on clean energy.
According to CNBC, “Warren may find a model for her Green Marshall Plan in an unlikely place: China, the world’s biggest emitter of greenhouse gases.”
“We need other countries to slash their emissions, and that means we need to supply the world with clean energy products (at low enough prices to displace dirty alternatives) to put us on the right path,” Warren wrote.
And even more.
Finally, Warren called for creating a new federal office responsible for trying to get foreign countries to purchase U.S. clean energy technology.
* * *
Warren’s plan will draw criticism from opponents who will argue that not only is it something that could have been written by Nikita Khruschev, but that the price tag is too high and that trying to quickly overhaul the U.S. energy sector would have crippling economic effects.
Amusingly, Warren also released an evaluation of her three-part proposal conducted by former Obama lackey, Moody’s “economist” Mark Zandi, who argued the plan would help the economy on a large scale.
“There is no free lunch, and big businesses, oil and gas companies, and multinationals pay for the cost of this plan,” Zandi wrote. “The economy benefits, although it would take more than a decade for this benefit to be fully realized.”
So where will money for the plan come from, besides eventually just printing it of course as MMT so helpfully suggests?
Warren would fund the investment nearly entirely with her proposed 7% tax on corporate profits above $100 million, Warren wrote, citing an analysis by Moody’s. The analysis also found that Warren’s plan would add a quarter of a million jobs in 2020, and more than 1 million by 2029.
The Massachusetts senator released her economic proposals ahead of campaign trips to Michigan, a Midwestern state with a large manufacturing sector that shocked political observers in 2016 when voters backed Trump and helped propel him to the White House, and Indiana where she’s expected to discuss her vision of “economic patriotism” in a part of the country that’s home to the U.S. industrial sector and may be pivotal in deciding whether Trump is re-elected next year.
* * *
While Warren’s challengers, Joe Biden and Kamala Harris have called for more government action to address climate change or provide pay raises to teachers — Biden unveiled his climate plan Tuesday — they have not pushed for as much federal intervention as Warren or Sanders. Warren’s plan also takes a shot at Trump, who pledged to revive American manufacturing as he won Rust Belt states such as Pennsylvania, Michigan and Wisconsin in 2016.
“In my administration, we will stop making excuses. We will pursue aggressive new government policies to support American workers.” So aggressive in fact, one has to look all the way back at the formative years of the USSR to find just how successful they will be.
via ZeroHedge News http://bit.ly/2Wmml0J Tyler Durden
The saga surrounding the San Francisco police department’s raid on journalist Bryan Carmody’s home took another twist last week when it was revealed that local law enforcement also obtained a warrant to monitor his phone.
Carmody attracted national attention when police officers, armed with sledgehammers, smashed their way into his apartment, handcuffed him, and confiscated his electronic devices after he declined to name the source of a leaked police report. A freelance journalist, Carmody sold the police report surrounding the death of Jeff Adachi, the city’s public defender, to three of San Francisco’s news stations in late February. Carmody’s company, North Bay News, follows stories overnight and peddles the corresponding information and video footage to local television outlets.
The police raid likely violated the state’s Shield Law, which protects journalists from having to name a source. That law also excludes certain items from being subject to search and seizure, meaning that the warrant obtained to monitor Carmody’s phone was probably illegal too.
Signed by Judge Rochelle East of the San Francisco County Superior Court, it allowed law enforcement to retrieve all of Carmody’s “subscriber information, call detail records, SMS usage, mobile data usage and cell tower data” from February 22 until February 23, the pivotal period surrounding the death of Adachi. It also permitted further “remote monitoring” on the phone “day or night.” The warrant does not mention the fact that Carmody is a journalist.
The leaked police report in question caused quite the stir when it first made its way into the hands of local reporters, culminating in the frenzied police raid on Carmody as the cops sought to pinpoint his source. As I wrote back in May:
The police report about the death of Adachi—whose reputation was defined by his penchant for criticizing the police—provided gossipy fodder for San Francisco’s local news in late February. Laden with a string of scandal-ridden details about his final moments, it said he had been with a woman who wasn’t his wife in an apartment that had “cannabis gummies,” “empty bottles of alcohol,” as well as an “unmade bed”—the latter of which was widely publicized with photographs. The salacious and often irrelevant specifics, later leaked to several journalists, sparked speculation that the police department was looking for the last laugh against the city’s top public defender, who wasn’t exactly known for making their jobs any easier.
Police Chief William Scott first doubled down on the raid, but later apologized, suggesting that his staff failed to identify Carmody as a journalist on warrant applications. That accusation set off a new round of he-said-she-said allegations, with the San Francisco Police Officers’ Association claiming it was Scott who concealed Carmody’s profession. The police union has since called for the police chief’s resignation.
from Latest – Reason.com http://bit.ly/2QJYaTN
via IFTTT
The saga surrounding the San Francisco police department’s raid on journalist Bryan Carmody’s home took another twist last week when it was revealed that local law enforcement also obtained a warrant to monitor his phone.
Carmody attracted national attention when police officers, armed with sledgehammers, smashed their way into his apartment, handcuffed him, and confiscated his electronic devices after he declined to name the source of a leaked police report. A freelance journalist, Carmody sold the police report surrounding the death of Jeff Adachi, the city’s public defender, to three of San Francisco’s news stations in late February. Carmody’s company, North Bay News, follows stories overnight and peddles the corresponding information and video footage to local television outlets.
The police raid likely violated the state’s Shield Law, which protects journalists from having to name a source. That law also excludes certain items from being subject to search and seizure, meaning that the warrant obtained to monitor Carmody’s phone was probably illegal too.
Signed by Judge Rochelle East of the San Francisco County Superior Court, it allowed law enforcement to retrieve all of Carmody’s “subscriber information, call detail records, SMS usage, mobile data usage and cell tower data” from February 22 until February 23, the pivotal period surrounding the death of Adachi. It also permitted further “remote monitoring” on the phone “day or night.” The warrant does not mention the fact that Carmody is a journalist.
The leaked police report in question caused quite the stir when it first made its way into the hands of local reporters, culminating in the frenzied police raid on Carmody as the cops sought to pinpoint his source. As I wrote back in May:
The police report about the death of Adachi—whose reputation was defined by his penchant for criticizing the police—provided gossipy fodder for San Francisco’s local news in late February. Laden with a string of scandal-ridden details about his final moments, it said he had been with a woman who wasn’t his wife in an apartment that had “cannabis gummies,” “empty bottles of alcohol,” as well as an “unmade bed”—the latter of which was widely publicized with photographs. The salacious and often irrelevant specifics, later leaked to several journalists, sparked speculation that the police department was looking for the last laugh against the city’s top public defender, who wasn’t exactly known for making their jobs any easier.
Police Chief William Scott first doubled down on the raid, but later apologized, suggesting that his staff failed to identify Carmody as a journalist on warrant applications. That accusation set off a new round of he-said-she-said allegations, with the San Francisco Police Officers’ Association claiming it was Scott who concealed Carmody’s profession. The police union has since called for the police chief’s resignation.
from Latest – Reason.com http://bit.ly/2QJYaTN
via IFTTT
As we observe the 30th anniversary of the massacre by the Chinese government of as many as 10,000 peaceful protestors in Tiananmen Square, the exact meaning of the event, which most Chinese residents know nothing about, remains unclear.
Thus it has always been. Writing for Reason in our 35th anniversary issue (December 2003), Charles Paul Freund observed that the iconic image of the still-unidentified “Tank Man” supported multiple interpretations:
One picture can tell many stories, and this one’s told three so far: of defiance against the state, of “restraint” by the state, and of the state’s vengeance. Perhaps it has one more meaning that will become clear in the course of the next 35 years: a foreshadowing of the end of another totalist state.
That same issue featured a list of “35 Heroes of Freedom,” one of whom was Tank Man:
The Tiananmen Square martyr. By putting his life on the line in front of his government’s tanks, he provided not only one of the most memorable images of the last 35 years but one of the most inspiring too. The free China of the future owes him a statue or two.
Suffice it to say that China is not only not free yet, but it’s less free than it was just a decade ago. President Xi Jinping, who came to power in 2012, has eliminated term limits, strengthened the standing of the Communist Party, purged his enemies, thrown millions into prison camps, tightened state control of the economy, and increased surveillance of citizens through a controversial “social credit system” that, among other things, stopped people from buying airplane tickets almost 18 million times last year alone. Despite recent slowdowns in the rate of economic growth, Xi Jinping and his predecessors’ authoritarian model of state capitalism has delivered an increasing standard of living for most Chinese, which doubtless helps the Communist Party maintain power. In the 21st century, China is not only increasingly “totalist,” but it’s the most-viable rival to Western-style, limited-government democracies that defend some version of “free minds and free markets.”
The biggest impact of the 1989 Tiananmen Square protests was in Europe. Footage of the crackdown was immediately banned in China but it was replayed endlessly in Western Europe and widely viewed in Eastern bloc nations. In May 1989, China’s Deng Xiaoping welcomed the Soviet leader Mikhail Gorbachev for high-level discussions about quelling unrest in Communist countries, all of which were facing protest movements. Many in the press stayed around to cover the student protests and thus bore witness to the brutal repression that took place just four days after the Deng-Gorbachev summit, the first such meeting between top Chinese and Soviet leaders in 30 years. From a 2009 account in Foreign Policy:
On June 4, People’s Liberation Army (PLA) soldiers fought their way into Tiananmen Square, leading to an unknown number of civilian deaths….
The effects of the Tiananmen tragedy ricocheted throughout the entire communist bloc, especially in the Soviet Union and the Soviet bloc countries of Eastern Europe…. In almost every East European country, the pro-democracy movements grew rapidly in the following summer and fall of 1989. These opposition movements took the opportunity of international Communism’s deepened legitimacy crisis to wage new offensives against the Communist authorities in their own countries. The Communist leaderships were all facing difficult dilemmas—they could neither afford to take a totally defensive attitude toward the pro-democracy movements nor dare resort to violent means.
During the following summer and fall, Eastern Europe experienced great unrest, eroding the political foundation and undermining legitimacy of every Communist regime there, culminating on Nov. 9 and 10, 1989. In Germany, the uprising masses brought down the Berlin Wall and with it the symbolic divide between the East and the West. By December—with the execution of Romania’s Communist dictator Nicolae Ceausescu—the communist bloc in East Europe had virtually collapsed.
Ironically, the Tiananmen Square protests, which were part of a country-wide wave of protests, were partly the result of Deng’s economic and political liberalization. Indeed, the script playing out in China in the late-1980s seemed to have been written by libertarian economist Milton Friedman, who long argued that economic freedom typically precedes political freedom. In a quest to stave off unrest, authoritarians often liberalize the economy. Once people get even a little richer, Friedman theorized, they begin to push for political freedom. What good is money, after all, if you are brutally circumscribed in what you can buy, think, or dream about?
Contemporary China is a rebuke to any easy formulation of the relationship between economic and political freedom. Xi’s authoritarian model—lauded at times by pundits such as The New York Times‘ Thomas Friedman, who praised China’s “one-party autocracy” in 2009—has delivered increases in the standard of living for enough people while unapologetically repressing dissent of religious, ethnic, and political minorities. The government apologizes for nothing. A decade ago, for instance, it felt no compunction about jailing Nobel Peace Prize winner Liu Xiaobo, whose calls for freedom of expression will be familiar and inspiring to anyone familiar with Thoreau, Gandhi, Martin Luther King, and Nelson Mandela:
I have no enemies, and no hatred. None of the police who monitored, arrested and interrogated me, the prosecutors who prosecuted me, or the judges who sentence me, are my enemies. While I’m unable to accept your surveillance, arrest, prosecution or sentencing, I respect your professions and personalities…..
I firmly believe that China’s political progress will never stop, and I’m full of optimistic expectations of freedom coming to China in the future, because no force can block the human desire for freedom. China will eventually become a country of the rule of law in which human rights are supreme.
I hope to be the last victim of China’s endless literary inquisition, and that after this no one else will ever be jailed for their speech.
Freedom of expression is the basis of human rights, the source of humanity and the mother of truth. To block freedom of speech is to trample on human rights, to strangle humanity and to suppress the truth.
Liu remained in prison from 2008 until 2017, when he was granted a medical parole upon a diagnosis of the liver cancer that killed him that year.
He was, of course, far from the last victim of China’s state repression, which seemingly has no endpoint in sight. Yet his individual example, like that of the Tank Man, stands as a powerful, inspiring model of what individuals can do in the face of overwhelming force.
Both the identity and the exact fate of Tank Man are unknown and, despite his standing alone in front of armored vehicles, he embodied an entire movement’s willingness to sacrifice life in pursuit of freedom. As many as 10,000 protesters were eventually executed by the Chinese government.
Without the Tank Man’s bold, individualistic action in 1989, who knows what would have happened in Eastern Europe later that year? Soviet-style Communism was almost certain to collapse due to its inability to generate a decent standard of living and allow for human flourishing, but the timing of collapse matters tremendously, with sooner always being preferable to later. Had the Tank Man not emerged as an iconic rallying point, it might have been years rather than months before East Germans pulled down the Berlin Wall or Romanians strung up their dictator.
If the final meaning of the images surrounding his protest are unclear, the debt we owe him is not and is best repaid by always and everywhere pushing for maximum freedom of thought, conscience, expression, and action, both in China and where we live. History has no clear direction or endpoint other than the one we insist it have. In moments when our own country and society seems ready to backslide on commitments to life, liberty, and the pursuit of happiness, we can look to the Tank Man not only for inspiration but for a sense of responsibility to those who have sacrificed.
from Latest – Reason.com http://bit.ly/31arF6g
via IFTTT
The fact that the mainstream isn’t taking this all very seriously isn’t anything new. But how serious are things really? That’s pretty much the only question anyone should be asking. What are the curves telling us about what’s now just over the horizon?
I hesitate to use 2008 comparisons too often because many people immediately jump to extrapolations, especially in these more esoteric market indications. If you say something is like 2007 or 2008, people think you are saying we are on the road to repeating 2007 and 2008.
What we are trying to do in making these relative assessments is only to gauge just how serious this trouble might turn out to be. Things like eurodollar futures in 2007 were warning that some very substantial downside was showing up in the real monetary system, and therefore major risks to the real economy.
If we see something similar today, it doesn’t necessarily mean there’s another Bear Stearns or Lehman Brothers lurking underneath. It would only propose substantial risks that should not be so cavalier in factoring. It’s way too easy to dismiss something simply because Economists don’t understand it, and therefore it doesn’t come out in the mainstream media.
But as in the summer of 2007, officials were similarly dismissive. They were overly sanguine about monetary and economic prospects because they hadn’t yet been shown how central banks weren’t central (Economists and central bankers still haven’t conceded to this reality, which is why we are right back here again for a fourth time in a decade plus).
Bernanke said “subprime was contained” in March 2007. Bill Dudley did him one better, telling the FOMC “there was nothing imminent” just two days before the whole damn thing broke apart.
The day he said that, August 7, 2007, the June 2008 eurodollar futures contract was trading at a price of 95.19. The front month September 2007 contract closed at 94.705. In other words, two days before the system fell apart the curve from the front to June the following year was inverted by a substantial number, 48.5 basis points.
It wouldn’t jump to 75 bps inverted until the end of August 2007, mere weeks before the first rate cut (50 bps) “unexpectedly” followed.
Taken literally, it would’ve said the market was expecting about two rate cuts (or one at fifty) by the middle of 2008. But that’s not what it really meant.
The inverted curve was and is a probability distribution which was thinking first about whether rate cuts would happen before discounting how many and when they would start. The curve inversion after August 2007 quickly moved to propose a series of them lasting well into 2008.
And that’s just how it unfolded.
Right now, using June 2019’s contract as our front month measure, the inversion out to June of next year (EDM 2020) is up to a startling 76 bps already. That’s more than 20 bps upside down (toward future rate cuts series) than it was in early August 2007.
Again, this doesn’t mean we are already into a 2008-style meltdown. This curve does, however, suggest that the downside risks now right in front of us are very, very serious.
The probability distribution, like in the summer of 2007, anticipates first a rate cut to start sooner than the mainstream admits is possible followed by a series of them reaching down maybe to the nominal floor. And remember, in 2007 the nominal money rate began its descent from around 5.25%. That’s how far it had to drop before reaching ZIRP.
Today, the RRP starts three hundred basis points lower, currently 2.25%.
It’s not that the probability of a rate cut is in question, it no longer is, we are now wondering what the chances of renewed ZIRP might be. This historical comparison tells us they are far higher than maybe you think. There’s real trouble here. Certainly way, way above what central bankers and Economists are forecasting, those unserious people still holding fast to a second half rebound (also like 2007) and misunderstanding the very clear messages and warnings of the bond market (it’s a damn roadmap).
These are extremely serious current risks where ZIRP is already back on the table today, the only way the 2008 comparison is helpful. Ask yourself, what has to happen for that to happen?
It’s the beginning of June 2019 and the eurodollar curve has already sailed well past where it was August 9, 2007. Do you hear the alarm bells yet? If you haven’t, thank Economics where almost everything is backward and upside down.
via ZeroHedge News http://bit.ly/2WF1JQR Tyler Durden
As we observe the 30th anniversary of the massacre by the Chinese government of as many as 10,000 peaceful protestors in Tiananmen Square, the exact meaning of the event, which most Chinese residents know nothing about, remains unclear.
Thus it has always been. Writing for Reason in our 35th anniversary issue (December 2003), Charles Paul Freund observed that the iconic image of the still-unidentified “Tank Man” supported multiple interpretations:
One picture can tell many stories, and this one’s told three so far: of defiance against the state, of “restraint” by the state, and of the state’s vengeance. Perhaps it has one more meaning that will become clear in the course of the next 35 years: a foreshadowing of the end of another totalist state.
That same issue featured a list of “35 Heroes of Freedom,” one of whom was Tank Man:
The Tiananmen Square martyr. By putting his life on the line in front of his government’s tanks, he provided not only one of the most memorable images of the last 35 years but one of the most inspiring too. The free China of the future owes him a statue or two.
Suffice it to say that China is not only not free yet, but it’s less free than it was just a decade ago. President Xi Jinping, who came to power in 2012, has eliminated term limits, strengthened the standing of the Communist Party, purged his enemies, thrown millions into prison camps, tightened state control of the economy, and increased surveillance of citizens through a controversial “social credit system” that, among other things, stopped people from buying airplane tickets almost 18 million times last year alone. Despite recent slowdowns in the rate of economic growth, Xi Jinping and his predecessors’ authoritarian model of state capitalism has delivered an increasing standard of living for most Chinese, which doubtless helps the Communist Party maintain power. In the 21st century, China is not only increasingly “totalist,” but it’s the most-viable rival to Western-style, limited-government democracies that defend some version of “free minds and free markets.”
The biggest impact of the 1989 Tiananmen Square protests was in Europe. Footage of the crackdown was immediately banned in China but it was replayed endlessly in Western Europe and widely viewed in Eastern bloc nations. In May 1989, China’s Deng Xiaoping welcomed the Soviet leader Mikhail Gorbachev for high-level discussions about quelling unrest in Communist countries, all of which were facing protest movements. Many in the press stayed around to cover the student protests and thus bore witness to the brutal repression that took place just four days after the Deng-Gorbachev summit, the first such meeting between top Chinese and Soviet leaders in 30 years. From a 2009 account in Foreign Policy:
On June 4, People’s Liberation Army (PLA) soldiers fought their way into Tiananmen Square, leading to an unknown number of civilian deaths….
The effects of the Tiananmen tragedy ricocheted throughout the entire communist bloc, especially in the Soviet Union and the Soviet bloc countries of Eastern Europe…. In almost every East European country, the pro-democracy movements grew rapidly in the following summer and fall of 1989. These opposition movements took the opportunity of international Communism’s deepened legitimacy crisis to wage new offensives against the Communist authorities in their own countries. The Communist leaderships were all facing difficult dilemmas—they could neither afford to take a totally defensive attitude toward the pro-democracy movements nor dare resort to violent means.
During the following summer and fall, Eastern Europe experienced great unrest, eroding the political foundation and undermining legitimacy of every Communist regime there, culminating on Nov. 9 and 10, 1989. In Germany, the uprising masses brought down the Berlin Wall and with it the symbolic divide between the East and the West. By December—with the execution of Romania’s Communist dictator Nicolae Ceausescu—the communist bloc in East Europe had virtually collapsed.
Ironically, the Tiananmen Square protests, which were part of a country-wide wave of protests, were partly the result of Deng’s economic and political liberalization. Indeed, the script playing out in China in the late-1980s seemed to have been written by libertarian economist Milton Friedman, who long argued that economic freedom typically precedes political freedom. In a quest to stave off unrest, authoritarians often liberalize the economy. Once people get even a little richer, Friedman theorized, they begin to push for political freedom. What good is money, after all, if you are brutally circumscribed in what you can buy, think, or dream about?
Contemporary China is a rebuke to any easy formulation of the relationship between economic and political freedom. Xi’s authoritarian model—lauded at times by pundits such as The New York Times‘ Thomas Friedman, who praised China’s “one-party autocracy” in 2009—has delivered increases in the standard of living for enough people while unapologetically repressing dissent of religious, ethnic, and political minorities. The government apologizes for nothing. A decade ago, for instance, it felt no compunction about jailing Nobel Peace Prize winner Liu Xiaobo, whose calls for freedom of expression will be familiar and inspiring to anyone familiar with Thoreau, Gandhi, Martin Luther King, and Nelson Mandela:
I have no enemies, and no hatred. None of the police who monitored, arrested and interrogated me, the prosecutors who prosecuted me, or the judges who sentence me, are my enemies. While I’m unable to accept your surveillance, arrest, prosecution or sentencing, I respect your professions and personalities…..
I firmly believe that China’s political progress will never stop, and I’m full of optimistic expectations of freedom coming to China in the future, because no force can block the human desire for freedom. China will eventually become a country of the rule of law in which human rights are supreme.
I hope to be the last victim of China’s endless literary inquisition, and that after this no one else will ever be jailed for their speech.
Freedom of expression is the basis of human rights, the source of humanity and the mother of truth. To block freedom of speech is to trample on human rights, to strangle humanity and to suppress the truth.
Liu remained in prison from 2008 until 2017, when he was granted a medical parole upon a diagnosis of the liver cancer that killed him that year.
He was, of course, far from the last victim of China’s state repression, which seemingly has no endpoint in sight. Yet his individual example, like that of the Tank Man, stands as a powerful, inspiring model of what individuals can do in the face of overwhelming force.
Both the identity and the exact fate of Tank Man are unknown and, despite his standing alone in front of armored vehicles, he embodied an entire movement’s willingness to sacrifice life in pursuit of freedom. As many as 10,000 protesters were eventually executed by the Chinese government.
Without the Tank Man’s bold, individualistic action in 1989, who knows what would have happened in Eastern Europe later that year? Soviet-style Communism was almost certain to collapse due to its inability to generate a decent standard of living and allow for human flourishing, but the timing of collapse matters tremendously, with sooner always being preferable to later. Had the Tank Man not emerged as an iconic rallying point, it might have been years rather than months before East Germans pulled down the Berlin Wall or Romanians strung up their dictator.
If the final meaning of the images surrounding his protest are unclear, the debt we owe him is not and is best repaid by always and everywhere pushing for maximum freedom of thought, conscience, expression, and action, both in China and where we live. History has no clear direction or endpoint other than the one we insist it have. In moments when our own country and society seems ready to backslide on commitments to life, liberty, and the pursuit of happiness, we can look to the Tank Man not only for inspiration but for a sense of responsibility to those who have sacrificed.
from Latest – Reason.com http://bit.ly/31arF6g
via IFTTT
Though President Trump wasn’t able to meet with the “very talent” Boris Johnson on Tuesday (Johnson turned down the offer of a meeting in what some described as a snub, saying he had leadership campaign events to attend), the leader of the free world did have an opportunity to meet with another British ‘friend’ – Brexit Party leader Nigel Farage.
Ahead of the trip, Trump heaped praise on Farage, recommending that, whoever wins the Tory leadership contest should appoint Farage to lead the next round of Brexit talks with Brussels.
During their meeting Tuesday at Winfield House, the US ambassador’s residence in London, the two discussed what has become Trump’s favorite topic during his visit to the UK: The prospect for a “tremendous” trade deal between the US and UK once the latter throws off the “shackles” of EU membership, which Trump said could double, or even triple, trade between the two countries.
Earlier, Trump said “everything” would be on the table during trade talks with the UK, including the National Health Service.
Farage said during a post-meeting debriefing on LBC that he had a “good” meeting with Trump, and that he was surprised by how prepared Trump was to talk trade.
“The Americans are very, very prepared for their side in the trade negotiations,” Farage said. The Brexit Party leader, whose nascent party won a plurality of the vote during last month’s EU Parliamentary elections, added that Trump “is very interested as to who the next Conservative leader and Prime Minister is,” Farage said. Trump “absolutely believes in Brexit,” Farage said, and “thinks it’s the right thing for the country to do.”
Watch the full interview below:
via ZeroHedge News http://bit.ly/2JYcsj8 Tyler Durden
Newly single Jeff Bezos, the world’s richest man, is finalizing the purchase of three New York apartments in a deal that’s valued at about $80 million, which would make it the priciest ever to close south of 42nd Street. It’ll also be the second largest deal this year in New York, second only to Ken Griffin’s $240 million penthouse purchase at 220 Central Park South.
Bezos will be purchasing a penthouse and the two units directly underneath it at 212 Fifth Avenue, near Madison Square Park. The main penthouse is three floors on its own, inclusive of a private elevator and several large terraces. When Bezos combines the units, they would total more than 17,000 square feet, sporting 12 bedrooms.
The building dates back to 1912 and was originally used for manufacturing. It was converted into condos in 2015 and was developed in a partnership with Madison Equities, Building and Land Technology and Thor Equities. Despite being considered luxury, the building “is not known for its flashiness”, according to the report.
The penthouse was most recently listed at $58 million, but that appears to be a price reduction from the 2017 listing price of $73.8 million. The other two units sold collectively for “ony” $28.45 million.
This deal comes about four months after Amazon decided not to build its headquarters in New York as a result of socialists not understanding the tenets of basic economics a harsh political climate and just months after Bezos’ high profile divorce. Post-divorce, Bezos’ net worth has been pegged at about $106 billion.
Bezos had been looking for a home in New York for months and was previously considering the penthouse at the XI in West Chelsea. Those involved with the search for Bezos’ new home were required to sign nondisclosure agreements.
We’ll eagerly await Alexandria Ocasio-Cortez’s comments trying to oust Bezos from his new home because his $80 million would have been better used to repair the New York subway system and pay teachers.
via ZeroHedge News http://bit.ly/2WkRaD3 Tyler Durden
