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Authored by Charles Hugh Smith via OfTwoMinds blog,

The world’s worst negotiating strategy is to make a crazy tulip-bubble stock market rally dependent on a trade deal that harms the interests of the U.S.

The world’s worst negotiating tactics, the equivalent of handing the other side a loaded gun while waving a squirt gun around, are:

1. Declare a de facto political deadline for a deal. Constantly tweet that a deal is imminent. This gives the other side unparalleled leverage: having backed yourself into a deadline corner, where any delay will be viewed as a political defeat, the other side knows it doesn’t have to concede anything to get a deal out of you. You’ll cave in to every one of their demands due to the fatal stupidity of creating an arbitrary deadline.

2. Hinge the entire advance in U.S. stock markets on a trade deal being signed.President Trump and the corporate media have goosed U.S. stock markets higher for three long months with rumors of an impending trade deal with China.

This reliance on a trade deal to goose stocks ever higher gives the other side enormous leverage, as they can now say: give us everything we want or we walk, and your stock market crashes.

Making matters even worse, the entire U.S. status quo has made the stock market the one signifier of the economy: if the trade deal evaporates and the market crashes, that calls into question the entire (bogus) narrative of endless growth.

Thus it is easy to predict that 1) there will be no U.S.-China Trade Deal signed in the next few weeks or months (i.e. U.S. negotiators realize no deal is better than a bad deal) or 2) any Trade Deal that’s signed will be either worthless (i.e. a meaningless PR gesture) or worse, actively harmful to U.S. interests because it gave the Chinese everything and got nothing for the U.S. except a bunch of empty unenforceable promises.

No wonder the Chinese leadership is extremely confident they can pressure President Trump and his team into a phony “deal” that leaves all of China’s advantages intact and gives the U.S. nothing.

As noted above, they know President Trump has constantly been touting U.S. stock market gains, and that these gains are largely based on the promise of a “trade deal” being signed soon. Every tweet that President Trump has issued promising a deal in the next few days has strengthened the leverage of China’s negotiators, as it’s obvious to all that it’s impossible for the U.S. to back out of the deal without crushing the U.S. stock rally.

The Chinese leadership is also extremely confident that they can “play” President Trump’s impatience to “close a deal” even if it is disastrous to U.S. interests. Once again, all the psychological leverage is in the Chinese team’s hands while the U.S. has been backed into an absurd corner by the constant touting of a trade deal to boost stocks to insane levels of over-valuation.

The Chinese leadership is also confident that their economy has weathered the worst of the slowdown and is now on the mend, and so they no longer need a trade deal with the U.S. (It’s difficult to imagine the Chinese leadership believing their own bogus public statistics, but perhaps they have confidential data that supports their claim.)

The only way the U.S. can re-establish any measure of leverage is to walk away from the empty-gesture agreement China is pushing. In other words, the only way to get a deal that’s in the interests of the U.S. is to call China’s bluff, break off negotiations, take the hit to the bloated U.S. stock market and then see whose economy is in better shape six months from now.

If the U.S. economy is in better shape than China’s in six months, then China will have incentives to sign an agreement that meets the minimum interests of the U.S.

If China’s economy is in better shape than America’s in six months, then the U.S. can sign the same worthless agreement that it rejected in April: no harm, no foul.

Who is more dependent on the other? Commentators have argued for a decade that China’s purchase of U.S. Treasury bonds gives it immense leverage. Given that the Federal Reserve can create $1 trillion in a few seconds and buy China’s entire Treasury holdings, this is zero leverage.

Export-dependent manufacturing nations need customers for their excess production. No customers, no sales; no sales, no jobs; no jobs, hello Cultural Revolution #2, never mind the millions of security cameras being installed to impose a Chinese Big Brother Police State.

The world’s worst negotiating strategy is to make a crazy tulip-bubble stock market rally dependent on a trade deal that harms the interests of the U.S. Yet that’s just what the U.S. has done, over-promising on a daily basis to goose an overvalued stock market a few points higher.

The only way to protect the interests of the U.S. is to walk away from the negotiations and renounce the deal. Anything less is an empty PR gesture that harms the interests of the American economy and people.

The only way to avoid a bad deal is to walk away and await a better opportunity down the road.

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via ZeroHedge News http://bit.ly/2I8qfmm Tyler Durden

…and just like that, it was gone…

All the majors are down…

 

 

via ZeroHedge News http://bit.ly/2Vy13Jb Tyler Durden

Step aside Boeing, it’s Lockheed Martin’s turn to bask in the spotlight for at least a few hours.

Earlier today, a Japanese F-35 stealth fighter jet with one pilot on board unexpectedly disappeared from radar while on a training mission over the Pacific on Tuesday night, Kyodo reported citing the defense ministry. The fighter jet went missing at around 7:27 p.m. (1027 GMT) as it was flying 135 km (84 miles) east of Misawa in northeastern Japan, a ministry spokeswoman said.

It was not immediately clear if it had crashed, the spokesperson said, adding: “We are still trying to search for the aircraft.”

The fate of the pilot was also not immediately clear.

According to Japan’s NHK, the plane lost contact about 30 minutes after taking off from Misawa Air Base, and added that the Self-Defence Forces and coastguard dispatched vessels to carry out rescue operations, NHK added.

What is embarrassing, is that according to the Defense Report, Japan’s first F-35A fighter squadron based at Misawa became operational on March 29.

As a result of the unexplained, and first ever, disappearance of the stealth fighter, Kyodo also reports that Japan will ground its entire fleet of F-35s until there is more clarity on what happened today.

via ZeroHedge News http://bit.ly/2D7yBGI Tyler Durden

Attorney General William Barr will appear before the House of Representatives appropriations subcommittee on Tuesday for the first time since special counsel Robert Mueller submitted his Russia report surrounding the 2016 US election, reports Reuters. 

While the session is intended to explore the Trump administration’s $29 billion Justice Department fiscal 2020 budget request, Barr will undoubtedly face questions about the Mueller report and when Congress might expect to see a redacted version.

Barr has been working with Mueller to redact sensitive portions of the report, including grand-jury information following a ruling last week at the US Court of Appeals for the DC Circuit. He has indicated that it will be ready by mid-April, in just a few days. 

Mueller turned his confidential report over to Barr on March 22 following a 22-month-long probe into whether Donald Trump may have colluded with Russia during his 2016 presidential campaign and whether Trump later obstructed inquiries into the matter.

On March 24, Barr released a four-page letter to Congress laying out what he said were Mueller’s main findings. Barr is expected to submit a redacted copy of the full report to the public and Congress by mid-April, or even sooner. –Reuters

Democrats are using the redactions to suggest that Barr and the Trump administration are holding back vital information which they hope might deliver the impeachment they’ve sought for more than two years, despite Mueller’s findings of no collusion – and AG Barr and Deputy AG Rod Rosenstein determining that Trump did not obstruct the probe.

On Monday, Rep. Doug Collins – the top Republican on the Democrat-controlled House Judiciary Committee, wrote a scathing letter to the panel’s chairman, Rep. Jerry Nadler (D-NY) accusing him of putting Attorney General William Barr in an “untenable but politically convenient situation.” Barr would be forced to “break the law” if he provides an unredacted report – and he doesn’t, Nadler will “label him as part of a cover-up.” 

According to Barr’s written testimony, the Attorney General will focus Tuesday’s discussion on issues including immigration enforcement, the opioid epidemic and combating violent crime. 

He is scheduled for a Wednesday appearance in front of a Senate appropriations panel.

via ZeroHedge News http://bit.ly/2UpLw1j Tyler Durden

Following Christine Lagarde’s warnings last week, The IMF has officially cut its outlook for global growth to the lowest since the financial crisis amid a worsening outlook in most major advanced economies and signs that higher tariffs are weighing on trade.

“Following a broad-based upswing in cyclical growth that lasted nearly two years, the global economic expansion decelerated in the second half of 2018,” the International Monetary Fund says in its latest World Economic Outlook.

“Activity softened amid an increase in trade tensions and tariff hikes between the United States and China, a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies”

In its latest World Economic Outlook, the IMF forecasts that the world economy will grow 3.3% this year, down from the 3.5% the IMF had forecast for 2019 in January:

This is the third time the IMF has downgraded its outlook in six months.

IMF says risks skewed to downside, citing trade tensions, softness in Europe, no-deal Brexit

• IMF lowers 2019 U.S. growth estimate to 2.3% vs 2.5% estimate in January

• IMF cuts euro-area growth forecast to 1.3% this year from 1.6%

• IMF raises China 2019 economic growth forecast by 0.1 percentage point to 6.3%

• IMF lowers 2019 trade volume growth est. to 3.4% vs 4% in January

Every single country’s growth outlook was cut… except Nigeria!

Of course, it would not be a globalist report without some hope and the fund suggests global economic growth will recover in the second half of this year, before plateauing at 3.6% from next year

However, the IMF is warning that risks are skewed to the downside, with a range of threats menacing the global economy, including the possible collapse of negotiations between the U.S. and China to end their trade war, and the departure of Britain from the European Union without a transition agreement, known as the “no-deal” Brexit scenario.

“Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority,” the IMF said.

IMF Managing Director Christine Lagarde warned the world economy faces a “delicate moment” as finance ministers and central bankers prepare to gather in the U.S. capital this week for the spring meetings of the IMF and World Bank.

via ZeroHedge News http://bit.ly/2D4XSRP Tyler Durden

It begins: unprecedented tit-for-tat formal “terror” designations exchanged between Washington and Tehran on Monday could soon enter a hot war on the ground. A mere hours after President Trump formally designated Iran’s Islamic Revolutionary Guards Corps (IRGC) as a terrorist organization on Monday, Iran’s foreign ministry responded in kind by  immediately putting forward a bill placing the US Central Command (CENTCOM) on a list of organizations designated as terrorists, akin to ISIS. 

This means each side has given its armed forces authorization to target the other as part of “war on terror” operations. And already on Tuesday an IRGC commander has put the US Navy in the Persian Gulf on notice, warning it not to come anywhere near Revolutionary Guards speed boats. Specifically, according to Iran’s ISNA news agency, Tehran has warned that America’s aircraft carrier currently deployed to the gulf, the USS John C. Stennis, should not come anywhere near IRGC boats. 

According to Reuters, citing Iranian state media: 

An Iranian Revolutionary Guard commander warned the U.S. Navy to keep its warships at a distance from Revolutionary Guards speed boats in Gulf waters, a day after the United States designated the Guards as a terrorist organisation.

“Mr Trump, tell your warships not to pass near the Revolutionary Guards boats,” ISNA news agency reported a tweet from Mohsen Rezaei as saying. 

Over the past years there’s been a number of intercept incidents in the Persian Gulf carried out by each side — none of them escalating to the point of serious exchange of fire. 

The last major international incident was the January 2016 crisis wherein two US Navy Riverine Command boats cruising from Kuwait to Bahrain strayed into Iranian territorial waters, resulting in the combined of crew of nine men and one woman being taken into Iranian detention. The crew was released 15 hours later, but to the great embarrassment of Washington, for which four of the sailors were later punished.

In total the IRGC is actually has millions of members, while the more elite “foreign and clandestine” arm, the Quds force, estimated to be at anywhere between 10,000 and 20,000 members.  The Quds Force is known to report directly to the Supreme Leader of Iran, Ayatollah Khamenei.

Further on Tuesday, the IRGC stated that US pressures based on the latest official terror designation will only “increase the Guards’ defense and offensive power,” according to state media. 

All of this turns the Persian Gulf area into a huge potential flash point for a major incident, especially considering Iranian military commanders have over the past year repeatedly threatened to close the vital Strait of Hormuz water way in the gulf, a key strategic oil transit point. 

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

Europe’s Stoxx 600 turned negative on Tuesday after Bloomberg published a document showing the Italian government’s projected budget deficit for 2019 is even larger than the Italian Treasury had suggested last week, putting Italy’s populist leaders on the path to anotheer destabilizing showdown with Brussels.

Italy is now projecting a budget deficit equivalent to 2.5% of GDP, larger than the 2.3%-2.4% from projections released last week, and nearly 50 basis points above the agreed-upon 2.04% target from a peace accord with Brussels reached late last year. The leaked document, cited by Bloomberg, affirmed that the government anticipates GDP growth to slide to just 0.1%, down from 1% in prior forecasts.

Italian bond yields climbed on the headline…

…while Italian stocks dragged the broader European market lower.

We now await a reaction from Brussels, which we imagine will have something to say given that the Italian government has now been exposed for lying to the European Commission.

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