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Speaker Nancy Pelosi (D-CA) is facing new pressure from House Democrats to open impeachment proceedings against President Trump, as the White House continues to resist Democratic Congressional investigators who are in the 11th inning of their battle to unseat Trump from office. 

On Wednesday, Pelosi met with her party behind closed doors to discuss the latest avenue for impeachment, telling the press that House Democrats believe Trump is engaged in a cover-up in regards to the administration’s efforts to prevent former White House Counsel Don McGahn from testifying Tuesday before the House Judiciary Committee. 

JUST IN: Speaker Pelosi says “we believe the president of the United States is engaged in a cover up” by stonewalling testimony for ongoing congressional investigations. pic.twitter.com/7ILMb95vZM

— NBC News (@NBCNews) May 22, 2019

Pelosi, meanwhile, has long considered impeachment a political trap which could blow up in Democrats’ faces – alienating swing voters and ensuring another victory for Trump in 2020. She and her top lieutenants were also on Capitol Hill in 1998, when Republican efforts to impeach former President Clinton without bipartisan support resulted in a backlash at the polls. 

Everything the Democrats are asking me for is based on an illegally started investigation that failed for them, especially when the Mueller Report came back with a NO COLLUSION finding. Now they say Impeach President Trump, even though he did nothin wrong, while they “fish!”

— Donald J. Trump (@realDonaldTrump) May 22, 2019

Last month’s release of the Mueller report, however, has caused a split among Democrats – as a small pack of rank-and-file members have broken away to endorse impeachment proceedings. 

In at least two private meetings this week, Pelosi was pressed by Democrats to consider moving more quickly toward impeachment. In one of the meetings, Judiciary Chairman Jerrold Nadler conveyed that some of his panel’s Democrats now want to pursue that option, according to a House official. His committee would likely oversee the early stages of such an inquiry.

A vocal minority, including Financial Services Chairman Maxine Waters and Alexandria Ocasio-Cortez, has long been calling for Trump’s impeachment, with even more urgency since Special Counsel Robert Mueller’s report was released. But until this week, that talk had been relatively isolated. And Pelosi retains many influential supporters who firmly back her go-slow approach, including No. 3 House Democrat James Clyburn and long-time ally Rosa DeLauro. –Bloomberg

After McGahn skipped out on the House Judiciary panel on Tuesday, Democrats appeared to be unsure about how to proceed. The Democrats on Nadler’s panel scrapped a post-hearing press conference because they couldn’t agree on what to say, according to Bloomberg, citing a person familiar with the matter. 

Sounding a lot like Maxine Waters, Karen Bass (D-CA) – chairwoman of the Congressional Black Caucus, told reporters after the hearing that when it comes to impeachment “I think that we are probably going to wind up there,” adding “I don’t know if that is today; I don’t know if we might be forced to act very soon.” 

“Obviously, all of us respect [Pelosi’s] perspective and her opinion,” said Rep. Joaquin Castro (D-TX) who sits on the Intelligence Committee. “But I think, individually, each of us have a perspective of our own. And I think it’s time to start [impeachment].“

Rep. Jamie Raskin (D-MD), who also sits on the Judiciary Committee and has recently changed his mind in favor of launching an inquiry, said “I would say that there are arguments for doing it, but we have to agree collectively.” 

Kentucky Democrat John Yarmuth, the House Budget Committee chairman, said lawmakers need to pursue impeachment investigations even if the Republican majority in the Senate won’t support removing Trump. “We need in this Congress not necessarily to expel the president but to call attention to the threat he poses to our way of life,” Yarmuth told CNN Wednesday. –Bloomberg

Slow down…

Democrat Sheila Jackson Lee of Texas – a senior member of the Judiciary panel, is taking a more measured approach, telling reporters that she will introduce a resolution over the next two days to authorize the Judiciary Committee to investigate whether there are sufficient grounds to launch impeachment proceedings in the first place. 

“We believe and continue to believe that we are doing the right thing by investigating, and that our task is to educate before we activate, and that is what we will do,” said Jackson Lee. 

Rep. Steve Cohen (D-Tenn.) is also backing Trump’s impeachment, but he cautioned that no such effort will go anywhere before Pelosi and Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) jump on board.

“I think he’s committed impeachable offenses and he ought to be impeached,” said Cohen, who chairs the Judiciary Committee’s subpanel on the Constitution. “[But] if Speaker Pelosi and Chairman Nadler don’t change their mind it’s not going to happen.”

“There’s more people in favor of an impeachment inquiry; there’s more people in favor of impeachment, yes. So I guess that’s momentum,” Cohen added. “But as far as momentum going to a level of a majority or action, then we’re not anywhere near that.” –The Hill

“We have to have the American people behind us,” said Rep. Judy Chu (D-CA). “Even if we are successful in the impeachment vote on the House side, my concern is that if that vote is not successful on the Senate side — which in fact would be unlikely — then would that be considered a victory for Trump?“

via ZeroHedge News http://bit.ly/2M2NrFw Tyler Durden

While stocks are modestly lower overnight as “risk-off” returns, pushing yields and commodities lower and the VIX and gold higher, on one or more of the following catalysts – take your pick – listed by Nomura’s Charlie McElligott:

• More trade war noise / rhetoric—Xi’s “New Long March” commentary, but particularly Mnuchin “no plans to go to Beijing yet” headline—which makes tariff imposition likely
• US consumer concerns around outlook cuts from Nordstrom and Lowe’s
• QCOM blow-up -12.5% on anti-trust ruling from FTC (crowded / favorite HF name)
• Brexit again devolving with May “toast”
• The DoJ recommending to block the Sprint / T-Mobile deal

… the question remains why do markets continue to stubbornly selloff and reprice lower even as the probability of a drawn out, lengthy trade war with China, as neither Trump nor Xi will be willing to de-escalate absent a major market (or economic) shock lower, is now effectively 100%.

One possible explanation for this recurring refusal to drop suggested by McElligott (besides the now daily ramp in stocks at the open of trading) is a number of flow catalysts for “rolling squeezes” in Equities despite what the Nomura strategist calls “the deteriorating macro & trade — where despite the now very ‘neutral’ current options-implied Gamma & Delta profile of the market we see”…

1. the recent bulking-up of Shorts and reduction of Nets (1Y + lows) from Leveraged Funds act as potential “upside risk” demand catalysts—especially with
2. Nomura’s CTA models across Global Equities “well within” reach of COVERING levels in Russell, Eurostoxx, Nikkei, DAX, FTSE, CAC, Hang Seng / Hang Seng CH and KOSPI (while also near re-leveraging in critical SPX and Nasdaq, as well as Bovespa)—and while
3. the bank’s Risk Parity model estimates exposure to US Equities futures at 26m lows—meaning there is plenty of room to add from systematic / vol-sensitive buyers—all at a time where
4. VIX roll-down strategies are again in position to sell vol with the term structure back neatly in contango, while we are also seeing
5. the gradual return of systematic vol sellers (i.e. put underwriters)—which not only means pressure on vol, but also then creates dealer Delta to “buy”

Digging into the technical and positional reasons for the continued levitation despite deteriorating sentiment, Nomura charts the latest market “Greeks” (see below) and highlights that “the SPX / SPY combined $Delta is now effectively “Neutral” at just -$13.4B (27th %ile since 2014) and with the SPX / SPY options Delta position vs Spot near “flip” level at 2866; for QQQ the $Delta position too is just -$4.4B (12th %ile since ’14)”

At the same time, “the profile for SPX/SPY- and QQQ-options Gamma has changed meaningfully over the past week+ as well, with 1) the total notional $Gamma sum dropping significantly to VERY low historic %iles while also 2) the current spot location sees the overall Dealer Gamma profile at effectively “Neutral” (vs its recent “Negative Gamma” location)”,

• SPX / SPY $Gamma just 20.8th %ile since 2014; QQQ just 17.5th %ile since 2014
• SPX / SPY combined Gamma per 1% move vs Spot at “Neutral” position, with Spot essentially “at” the flip zone (@ 2871 including this week’s expiry; 2876 without this week’s expiry)

Finally, McElligott calculates that the two largest notional Gamma strikes in SPX/SPY consolidated options have spot “surrounded”, with the lower 2800 strike has $4.2B of Gamma, while the upper 2900 strike has $4.6B, serving as yet another source of “gamma gravity” around 2,850.

There is another reason for the lack of a selloff: the recent increase in shorts (at least according to Nomura, other sellside sources fail to find such a development) by leveraged funds has prompted fears of a short squeeze. Here are Nomura’s observations:

• Leveraged Funds actually ADDED to their US Equities futures shorts last week with -$9.6B of incremental notional selling WoW across SPX -$6.4B, NDX -$3.1B and RTY -$100mm
• Our intraday implied price distribution for SPX saw “real” shifts towards higher strikes yday, particularly for this Friday’s expiry:

It’s not just leveraged/hedge funds who have turned short: according to the Nomura QIS CTA model, there has been a “powerful blast of CTA deleveraging over the course of May, with Russell, Eurostoxx, Nikkei, DAX, FTSE, CAC, Hang Seng, Hang Seng Ch and KOSPI all flipping outright -100% Short—while SPX and NDX have reduced the size of their ‘long positions’ (although SPX and NDX are still the remaining ‘long’ holdouts along with ASX and Bovespa)”

The danger to McElligott, is this: the majority of the Equities futures we follow are well-within range of their “trigger” levels to COVER shorts or re-leverage longs (PARTICULARLY in global risk appetite indicators SPX and NDX).

Putting all this together, McElligott – who one should note has been predicting that a squeeze-driven melt up in stocks is likely – doubles down on his narrative, noting that the factors listed above “are at risk of providing new “mechanical” sources of covering / buying demand for stocks in coming weeks, despite the clear degradation of the US / China trade situation.”

His conclusion, “expect the sideways chop to continue despite this macro deterioration”, which of course is without a sharp drop in equities, the probability of a push to compromise in the trade war is nil. Meanwhile, the longer trade war continues – without the market noticing – the more the imbalances will build up, eventually leading to a far more painful collapse in risk, once markets can no longer ignore what is happening to the global economy.

 

 

 

via ZeroHedge News http://bit.ly/2JvL781 Tyler Durden

In a harbinger of what’s to come as the US-China trade war gets worse by the day, a Chinese company has told all of its employees to boycott American products and halt international travels to the U.S., reported The Epoch Times.

Jinggang Motor Vehicle Inspection Station notified all employees last Thursday, May 16 that the use of iPhones, driving in American automobiles, eating at American fast food restaurants, using American household products, and even traveling to the U.S. was forbidden by a new company policy; any employee who violated the new rules would be fired. Here are some excerpts from the notice:

“Employees are prohibited from purchasing or using iPhones; instead, they are recommended to use Chinese domestic brands of cell phones, such as Huawei.

“Employees are not allowed to purchase vehicles made by China-U.S. joint venture automakers. They are recommended to purchase 100 percent Chinese-made vehicles.

“Employees are forbidden to eat at McDonald’s or Kentucky Fried Chicken. They are not allowed to purchase P&G [Proctor and Gamble, a U.S. maker of household products], Amway [U.S. maker of health and beauty products], or any other American brands. Employees must not go to the United States as a tourist.”

The company’s memo was emailed to employees several days after state-run newspaper Global Times published an editorial piece that called on the Chinese public to “fight a people’s war” against the U.S.

As a result of a prolonged trade war with the U.S., the company said: “To help our country win this war, company authorities have decided that all employees must immediately stop purchasing and using American products.”

The Times said the notice went viral on Chinese social media platforms: “Computers should be banned as well, because it is a U.S. invention,” one Chinese internet user said. Another said: “Stop using the Windows operating system, everyone.”

However, some Chinese internet users thought it was ridiculous to ban American products.

Earlier this week, people across China called for an immediate boycott of Apple products after the Trump administration targeted Huawei. Trump signed an executive order last week that prevented U.S. firms from buying Chinese telecommunication equipment. Then in a separate announcement, the administration banned Huawei from buying U.S. chips without government approval.

On Weibo, users reacted to the deepening trade war and pressure on Huawei by denouncing iPhones. “The functions in Huawei are comparable to Apple iPhones or even better. We have such a good smartphone alternative; why are we still using Apple?” wrote one user.

“I feel guilty watching the trade war. Once I have money I will change my smartphone,” said another user.

“I think Huawei’s branding is amazing, it chops an apple into eight pieces,” said another post.

Some Weibo users called for a boycott of U.S. chips. “Trump doesn’t allow companies to use Huawei, then let’s not use Apple. We shouldn’t buy any phone that uses Qualcomm as well,” one angry user said.

The ban against Huawei comes days after the Trump administration increased tariffs to 25% on $200 billion of Chinese products. In a tit-for-tat effort, China slapped a 25% tariff on $60 billion worth of American products that go into effect June 1.

Another report showed a restaurant in China was charging a tariff to only American customers. An English translation of the sign read: “From now on, our store will charge 25% service fee (tariff) to American customers. If you don’t understand, please consult the American Embassy!”

Earlier this week, we reported that CCTV 6, the movie channel of China’s leading state television broadcaster, recently aired three anti-American movies.

The three movies are Korean war films: Heroic Sons and Daughters (1964), Battle on Shangganling Mountain (1954), and Surprise Attack (1960).

CCTV 6 has gone trending on Chinese social media today for changing its schedule and playing three anti-American movies for three days in a row, sending out a clear anti-US message while the trade war is heating up. Read: https://t.co/w5aju3vMDs pic.twitter.com/21mEfC5Ha5

— What’s on Weibo (@WhatsOnWeibo) May 18, 2019

All last week, anti-American propaganda flourished across the country, with the slogan “Wanna talk? Let’s talk. Wanna fight? Let’s do it. Wanna bully us? Dream on!” going viral on Chinese social

Another report from Tuesday showed how a song titled “Trade War,” has gone viral on one the largest Chinese social media platforms. The song begins with a chorus singing “Trade war! Trade war! Not afraid of the outrageous challenge! Not afraid of the outrageous challenge! A trade war is happening over the Pacific Ocean!”

As has been the case during previous trade feuds, nationalist sentiment is spreading throughout China, which with foreign markets closing off, may be the only Trump – no pun intended – card left for China’s economy, where even a modest hiccup could lead to recession. Meanwhile, while it is debatable if anyone wins a trade war, the escalating collapse in existing supply chains will only get much worse before it gets better, and will likely lead to a global trade recession or even a depression, which as we showed last week…

… may have already started.

via ZeroHedge News http://bit.ly/2WqfSkQ Tyler Durden

Blain’s Morning Porridge, submitted by Bill Blain of Shard Capital

Have you ever watched a house of cards collapse? Sometimes a corner or a side comes down, and it can be sort of fixed… Sometimes the whole thing just gets blown away.  My Spidey Senses are all a-tingle this morning, triggered by 2 factors:

1. Telsa: The spike in negative commentary on Tesla suggests THE moment is coming: a downgrade by a previous bull to $10 target price, doubts on the trajectory of sales, the realisation the Solar Tiles project is complete tosh (and a bail out of Musk’s cousins), the crash in its debt and recent convertible price, and loads more, has led to the rather obvious conclusion Tesla will struggle to fund ongoing capital burn. Peak-Musk was some time ago. Many now think the orchestra is about to strike up Gotterdammerung. A loss of confidence in Tesla and Musk triggers all kinds of consequences.
2. Europe: If you think UK politicians have embarrassed themselves trying to agree on how to exit Europe, wait till next week and ponder how such a disparate, populist hodge-podge of populist well-intentioned Euro-philes and Euro-phobes are going to agree on how to reform and continue European integration. I see two big market threats: i) The bond market, ii) and especially the bond market. (And Brussels!)

Since anyone can read all the Tesla stories and draw their own conclusions as to what happens next, lets stick to the consequences. The obvious one is what does it do to confidence in the Modern Disruptive Tech (“MDT”) price model: “We don’t have to pay dividends or make profits because we are a disruptive company that’s triggered a paradigm in demand and made ourselves a monopoly – therefore it’s all in our stock price” ?

Tesla’s current stock crash shreds that MDT model. (Down 46% since Dec high, 30% from April.)

Why? a) Because Tesla did not have anything like a monopoly. Its failing to deliver. It’s not selling enough cars in China, and others are selling more in Europe. Competitors are eating its lunch – customers are nervous. Other secondary Tesla wins like capacitance, autonomy etc are irrelevant if the main light goes out. b) The MDT Model requires the stock to retain the confidence of the capital markets to keep it capitalised – Tesla has now lost that confidence. c) It needs to demonstrate continued ability to disrupt, deliver and reap the windfall stock gains – but confidence in Musk’s abilities and focus has crashed: witness the failure in solar tiles, his tweeting, the other businesses from tunnels to rockets.

It’s all so embarrassing.

Tesla doesn’t matter. They are simply the DeLorean’s of the modern age. If you own one, stick in a garage and wait. Plenty of other Electric choices… Tesla was good while it lasted. (For disclosure’s sake I still hold a small Tesla position, but sold out most in June last year.)

But the consequences of a collapse in the MDT model will be massive. Consider the pain. Consider firms like Softbank which have funded themselves from everywhere and anywhere on the basis they are oh-so-clever at Tech investing. And suddenly they find they own a whole bunch of stocks that have never paid, and never will pay a dividend or repay debt, and yet they have promised Mrs Watanabe (the archetypal Japanese retail investor) their bonds are great value (Junk as far as Moodys and S&P are concerned, investment grade according to local rating agencies). The Saudi’s might be a little miffed at their equity investments…

If Tech shrugs, the whole US stock market will wobble – and that’s when this will get very interesting: look to buy the tech winners with either real monopolies, real revenues and real funding, and sell those likely to fall as a result of competition, liquidity traps, and ennui. (Great word that… I should use it more often..)

Meanwhile, back in Yoorp…

A number of issues struck me yesterday – wondering about the widening divide between Merkel and Macron, this week’s elections and how its going to work politically. How does Europe agree on growth initiatives when it will be fighting in Brussels about who gets what job, and who can do whatever they want on debt, immigration and policy. It’s going to make Brexit look tidy.

And I then I realised that doesn’t matter anyway. The ECB will sort it out. They always do. Then doubt set in. A question from one client about renewed Italian debt threats, another asking about prospects for European zombie companies. Then an article on Bloomberg pointing out French issuers make up a disproportionate amount of the Euro 177 bln BBB/Junk Corporate bond portfolio held by the ECB, a quick glance at that portfolio of 1200 bonds and concluding it’s a bit risky…. And then a look at the leading European corporate bond ETF – and the volume that’s been piling into a bond fund that yields very little. Asking around the reason for investment holders putting dosh into the fund is that anything is better than paying banks for the privilege of holding your cash.

It struck me all as bit silly. France, that well know bastion of social equality, industrial peace, sensibility, stability, benevolent banks and companies accounts for over 25% of Euro corporate debt issuance. Italy, the problem child, accounts for less than 4%. You could say that’s because France is the home of such great world class large companies, and Italy is a collective of small family firms.

We worry about the Italians’ debt because they want to spend money to rebuild and reform their economy by borrowing more? (Yes, I know the real reason we worry about Italy borrowing more is because we expect them to waste/nick it, while we turn a blind eye to France breaching its sov debt limits, and corporates owing 125% of GDP because we trust them to spend it sagely?)

Or should we worry about the consequences of the ECB holding Euro 177 BN of corporate debt – and won’t like the mark-to-market if European rates were to rise? Or what happens if rising rates trigger a wave of unemployment driving defaults – meaning the ECB would have to trigger lower rates to avoid them. Yet another consequence of QE – Europe trapped in activity-numbing low rates for eternity.. Check out the ECB numbers here.

via ZeroHedge News http://bit.ly/2MciLlo Tyler Durden

Some 500 Nusra-front militants, accompanied by seven tanks and about 30 pickup trucks armed with mounted heavy machine guns launched three major offensives against government troops in Idlib province on Wednesday, the Russian Defense Ministry said.

The counterattack focused on the town of Kafr Nabudah, which was recently captured by the Syrian government.

Militants also launched a missile attack on Russia’s Hmeymim air base on Wednesday, but nine of the missiles were shot down, and another 8 didn’t reach their target, the ministry added.

Northwest Syria, which runs along Syria’s border with Turkey, is home to the last remaining rebel strongholds, including a swath of land dominated by the Al Qaeda-linekd Nusra Front, which has adopted a new name, Tahrir al-Sham, Haaretz reports.

The increase in shelling in the region has led to the displacement of 180,000 people, while the increase in shelling marked the most intense period of fighting between Bashar al-Assad and the rebels

According to RT, more than 150 rebels were killed during the morning offensive. Three tanks were destroyed, while 24 trucks mounted with heavy guns were also destroyed in the fighting.

via ZeroHedge News http://bit.ly/2HwFowk Tyler Durden

Cable has plunged almost 2 full handles from the post-May-‘New Deal’ hope of yesterday afternoon as it’s increasingly clear her latest and last gambit is dead on arrival…

Bloomberg reports that Theresa May is facing pressure to abandon her Brexit deal and quit as British prime minister within days, according to people familiar with the matter. Several senior government officials said they were shocked that the premier’s new offer intended to win votes in Parliament for her European Union divorce agreement had been so badly received so quickly.

Which just goes to show how disconnected from reality they are. FX traders, however, were not surprised…

Dragging sterling to its weakest level of 2019…

Early year hopes of avoiding a hard Brexit are dashed by the combination of May’s failure and the rising euroskeptic sentiment across Britain (and Europe).

As Mike Shedlock notes, Nigel Farage’s Brexit Party is on a stunning roll. That’s what happens when you take a firm position the public favors.

The final YouGov poll on the European Parliament elections for the UK is in.

UK, YouGov poll:

European Election

BREX-EFDD: 37% (+3)
LDEM-ALDE: 19% (+2)
LAB-S&D: 13% (-2)
GREENS-G/EFA: 12% (+1)
CON-ECR: 7% (-2)

+/- 8-17 May 2019

Field work: N/A
Sample size: N/A#EP2019 #Brexit pic.twitter.com/7fgqGszsjX

— Europe Elects (@EuropeElects) May 21, 2019

Some will be shocked. I am not.

Beyond Embarrassment

Theresa May truly embarrassed herself today.

Her Meaningful Vote 4 Speech Flopped Splendidly.

She tried to reach out to everyone at the same, offending everyone. May has changed her tune so many times, who the hell even knows what she wants?

The best summation I can come up with is “Any deal is better than no deal“.

Labour

Please be serious.

Jeremy Corbyn is just like Theresa May. He wants to “honor” Brexit, by not doing it.

Two Peas in a Pod

Corbyn is simultaneously for and against another referendum, just like Theresa May!

Despite how they pretend, they are in bed with each other.

Another Poll Needed

YouGov needs another poll: Who is more pathetic? Theresa May or Jeremy Corbyn?

From where I sit, it’s a close call.

*  *  *

Finally, as Human Events reports, Farage has pledged to field a “full 650 candidates” when Britain has its next general election. The talk behind the scenes at Brexit Party gatherings, is of what a government might look like if Farage and his band of brothers (and sisters) held the balance of power after an election.

Long-term euroskeptic and former President of the Czech Republic, Vaclav Klaus, sums things up well:

“As I look at it from Prague, the British main political parties totally failed, and betrayed and abandoned the British citizens, their own voters. It had, however, one positive side effect: by behaving in this way, they probably and unwillingly created the Brexit Party…

…Dear Brexit friends, you should in the forthcoming elections give the whole rest of Europe a good example. Many Europeans need it, and many are waiting for it. Don’t disappoint them.”

Read more here…

via ZeroHedge News http://bit.ly/30yMat7 Tyler Durden