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After the ‘mid-level’ talks between US and Chinese delegations in Beijing were extended for a third day on Wednesday, the negotiations have reportedly wrapped up, with both sides touting that they are “serious” about coming to an agreement, and that significant progress has been made, according to CNBC.

With the US delegation on its way back to Washington, China’s Foreign Ministry hinted that the talks had been a success and said it would soon release a statement on the outcome.

The Editor-in-Chief of China’s Global Times said that “though arduous” the trade talks were productive and that both sides were waiting for the US delegation to arrive back in Washington before delivering official statements on the outlook for a deal.

China-US trade talks have ended. Based on what I know, the situation is quite positive. The two sides are still in consultation on the wording of the message, so the two versions can be coordinated.

— Hu Xijin 胡锡进 (@HuXijin_GT) January 9, 2019

From what I know, the trade talks, though arduous, were conducted in a pleasant and candid atmosphere. Neither side has made the briefing, because the US delegation is on the plane now. The two sides will release message at the same time on Thursday morning Beijing time.

— Hu Xijin 胡锡进 (@HuXijin_GT) January 9, 2019

Meanwhile, US Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Ted McKinney told a group of reporter’s at the delegation’s hotel that he thought negotiations “went just fine.”

“It’s been a good one for us,” he said.

US markets climbed on Tuesday even as traders priced in a slightly more hawkish Fed as many apparently bought in to the narrative that both sides are doing everything in their power to come to an agreement (with equities moving higher after Bloomberg reported that Trump is desperate for a deal because he hopes it might send stocks back toward ATHs).

Though there were some reports that the two sides were further apart than some of the headlines let on.

However, people familiar with the talks told Reuters on Tuesday that the two sides were further apart on Chinese structural reforms that the Trump administration is demanding in order to stop alleged theft and forced transfer of U.S. technology, and on how Beijing will be held to its promises.

In another sign of confidence, China has approved another large order of US soybeans while also approving five GMO crops for import – its latest effort to boost imports from the US in accordance with one of Trump’s key demands.

In what is widely seen as a goodwill gesture, China on Tuesday issued long-awaited approvals for the import of five genetically modified crops, which could boost its purchases of U.S. grains as farmers decide which crops to plant in the spring.

On Monday, Chinese importers made another large purchase of U.S. soybeans, their third in the past month.

Trump and other White House officials have insisted that the US has leverage because of China’s rapidly cooling economic growth and the fact that its market dropped 25% last year (though Chinese stocks have slightly outperformed the US since the US imposed its first round of China-specific tariffs in July) . However, China has insisted that the trade strife harms both countries equally, and that it would not yield to any “unreasonable concessions.”

China is keen to put an end to its trade dispute with the United States but will not make any “unreasonable concessions” and any agreement must involve compromise on both sides, state newspaper the China Daily said on Wednesday.

The paper said in an editorial that Beijing’s stance remains firm that the dispute harms both countries and disrupts the international trade order and supply chains.

Setting the meeting off to an auspicious start, Liu He, China’s top economic official, dropped in and greeted the US trade delegation – led by Deputy U.S. Trade Representative Jeffrey Gerrish – on Monday. We now await confirmation that Liu and a delegation of more-senior officials will travel to Washington next week for the next round of talks.

The US and China have agreed to a “hard” deadline for an agreement of March 2.

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Authored by Global Risk Insights via OilPrice.com,

The EastMed gas pipeline between Cyprus, Greece and Israel will revolutionise the economies and geo-politics of the region. The project comes from an emerging alliance between the three countries who must move forward cautiously in the face of neighbouring States’ opposition.

Eastern Mediterranean: the Bigger Picture

On December 20th, the Prime Ministers of Cyprus, Greece and Israel converged on the southern Israeli city of Beersheba. All three parties publicly committed to signing a high-level agreement in the near future. Such an agreement would solidify one of the longest and deepest underwater gas pipeline in the world.

It is expected to deliver approximately 10 billion cubic meters (BCM) of natural gas to the European Union (EU) through Greece and Italy. The EU is keen to support the project and diversify its natural gas imports away from the heavily sanctioned Russian Federation and declining North Sea gas production. The EastMed project would fulfil roughly 10-15% the EU’s projected natural gas needs. The United States is also supporting the project as it sees the growing trilateral alliance as a bulwark of democracy and stability in a largely authoritarian and war-torn region.

A New Regional Alliance

This development is also the culmination of an alliance that has been years in the making. The last decade has seen growing cooperation between Cyprus, Greece and Israel as all three countries have been supporting one another in various strategic areas. This includes deepening military ties in the face of an increasingly unstable and conflict prone Eastern Mediterranean. These developments are specifically aimed at Turkey, a neighboring state that has become increasingly aggressive and authoritarian. Turkey is threatening to derail the project within the context of ongoing Cypriot Conflict.

The project will be the culmination of a strategic alliance between three smaller countries who are faced with increasingly more aggressive competitors and crisis’s in the region. Turkey, Russia and Iran are all increasingly active in the region looking to forward their own interests. As the United States continues to play less of a role on the ground Cyprus, Greece and Israel will be able to create positive reinforcement through bilateral relations or the newly created secretariat economically, politically and militarily.

Who Stands to Benefit?

The domestic economies of the individual states within the trilateral alliance stand to benefit immensely from the project. Cyprus is estimated to have roughly 4.5 BCM of natural gas in the Aphrodite Field which is currently being developed within its Exclusive Economic Zone (EEZ), a huge sum. Israel is estimated to have significantly larger amounts within its EEZ in the form of the Leviathan and Tamar fields. Both of these small countries will benefit immensely from being able to export to the massive EU market through Greece. The latter’s own economy will likely see a boost from the investment needed to support the infrastructure of the pipeline. There is also the possibility of linking the pipeline to the operational Egyptian Zohr Field.

The EU will benefit from being able to diversify its energy sources. It would allow the EU to guarantee some energy security to its Member States as North Sea production falls. An over reliance on Russian natural gas also places the EU in a difficult position, because it continues sanctioning Russia over its activities in Ukraine and the meddling in the democratic processes of EU Member States. The EU will likely try to lower market prices on natural gas which have been steadily rising the last few years. In the long run, the EastMed Pipeline may provide nearly double the expected output of 10 BCM for export if ongoing offshore exploration provides positive outcomes.

Who is Missing Out?

Turkey and Russia are both set to lose out given current developments. Greece and Turkey have a historically difficult relationship which has recently flared up within the context of the 2016 Coup and Refugee Crisis. Cyprus and Turkey continue to butt headsover the northern half of the island following the 1974 War. Israel and Turkey were once close allies. The rise of Erdogan and the AK Party over a decade ago made Turkey a major patron of Hamas. The Mavi Marmara Incident has contributed to the deterioration in ties between the two sides. Turkey would have been the natural route for the Pipeline, but the ongoing disputes show why this will never happen.

Russia is the main supplier of natural gas to the EU and a historical ally of Greece. If the EU is able to continue to diversify its energy needs away from the Russian gas giants – of which the EastMed is a small but important first step – Russia will lose leverage over the EU within the context of both gas prices and geopolitical issues between the two sides. The historically close relationship between Russia and Greece is also in jeopardy. The pipeline project is heavily supported by the United States; when we couple this with Russia and Turkey’s warming ties, Russia appears to be losing a historically important relationship in an increasingly strategic region.

Possible Obstacles

Two major obstacles to the project are present in the form of the Lebanese based Hezbollah and Turkey. Hezbollah is Israel’s arch-foe, the two sides fought an all-out war in 2006, a conflict neither side wishes to repeat. This is something Hezbollah is attempting to use for its own advantage threatening to strike at Israel’s sea-based gas fields. Israel is preparing for this outcome, but Hezbollah’s missile arsenal is vast and powerful; any escalation in conflict, especially given the ongoing Operation Northern Shield may lead to disruptions in the project.

President Erdogan has made it very clear that he is vehemently against any development of the Cypriot gas fields within the EEZ without some form of resolution to the conflict. This has materialized with Turkish naval action in the past and with the beginning of own explorations in the EEZ. Turkey has used military force in the past and ongoing developments in the region -specifically the US withdrawal from Syria following a phone call with Erdogan – has emboldened Turkey. Aggressive action by Turkey to safeguard its own interests cannot be discounted.

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In late December 2018, a highly modified Russian commercial aircraft acted as a flying laboratory, completed its first test flight after an upgrade to perform flight test of new avionics, cameras, and sensors for the next-generation strategic bomber.

State-run Russian news media reported that a heavily modified Tu-214LMK (tail number 64507) aircraft completed its first test flight at the Gorbunov Kazan Aviation Plant on 29 December, said the Defense Blog. 

According to the official statement from the Tupolev aerospace company,  “the purpose of the upgrade of the Tu-214LMK testbed is to create a flying lab for testing in-flight onboard equipment complexes of the Tu-160.”

The Tu-214LMK flying lab has been retrofitted to perform flight-test with highly advanced avionics developed for the next-generation strategic bombers.

Tu-214LMK’s modifications include installation of a Tu-160M2 radar system housed in the nose cone of the aircraft. 

Defense Blog said the flying lab would significantly reduce the risk as well as future flight test hours by enabling extensive in-flight testing and evaluation before much of the avionics are installed on the new bombers. 

Russia’s Ministry of Defence (MoD) ordered ten of the new bombers from United Aircraft Corporation (UAC), in a deal worth RUB160 billion ($2.7 billion), the ministry said in early 2018. 

“In its upgraded version, it [the engine] will be 10% more efficient, which will make it possible to increase the flight range of the strategic bomber by about 1,000 km,” Russian News Agency TASS said in a prior report.

During the upgrade, the new strategic bombers will get new avionics suite and the onboard integrated data control system. The Tu-160M2 will also feature satellite navigation systems, the short-range radio-technical navigation systems, the air signal systems, the defensive aids suite, and electronic warfare systems. 

The older, Tu-160s have been recently in the news. Last month, two of these bombers crossed the Atlantic for deployment in Venezuela. The bombers flew a 10-hour patrol over the Caribbean Sea from a base in Venezuela. Shortly after their visit, the bombers returned to their airbase in Russia. 

With new, advanced avionics and sensors currently in test, the next-generation strategic bomber is slated to enter series production in the second half of 2019. Maybe, with these new bombers, Moscow is planning to deploy them in America’s backyard, a move that would infuriate Washington. 

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Authored by Emma R. via VoE,

Head of online hate speech monitoring group “Näthatsgranskaren” Tomas Åberg receives tax funds for mass reporting pensioners and others who write critically about migration on Facebook.

And now he claims that his reports to the police have resulted in almost 150 hate speech convictions.

“1,218 police reports 2017-2018. 144 hate speech sentences, from 214 notifications. Many are waiting for prosecution!”, writes “Näthatsgranskaren” (The Online Hate Speech Monitor) on Twitter.

👮‍♀️1 218 polisanmälningar 2017-2018.
⚖️ 144 näthatsdomar, från 214 anmälningar. Många väntar på åtal!
✔ 10x ökning av fällande domar.

Följ, rekommendera, retweeta, gilla, kommentera, stöd oss!

Swish: 123 501 44 28
Bli månadsgivare: https://t.co/QakeZbAN5c
Bankgiro: 5232-9026

— Näthatsgranskaren.se (@Nathatgranskare) January 1, 2019

The group also states that its state-financed operations have led to a tenfold increase in the number of hate speech convictions in Sweden, reports Fria Tider.

Over the year, they further “researched, collaborated, and lectured on, among others, the Council of Europe’s conference on criminal online hate speech”, they claim.

The authority MUCF, which finances left-wing extremist organisations such as Expo, has so far granted just over €150.000 in contributions to the Online Hate Speech Monitor.

The group is run by Tomas Åberg, who a few years ago was investigated for extensive animal cruelty but escaped charges by avoiding being served the lawsuit.

Most of the contribution from MUCF goes to paying his salary.

Last spring, Åberg was nominated for the “Swedish Hero” award by one of Sweden’s major newspapers Aftonbladet.

However, the nomination was withdrawn when it was discovered that he had tortured his own animals to death.

The fact that the “Swedish Hero” event was sponsored by the pet insurance company Agria, probably had something to do with the decision to disqualify him.

via RSS http://bit.ly/2FgpVAu Tyler Durden

France is signaling it’s making preparations for a massive new crackdown on the gilets jaunes or “yellow vests” anti-government protests that have gripped the country for seven weeks. A new law under consideration could make any demonstration illegal to begin with if not previously approved by authorities, in an initiative already being compared to the pre-Maiden so-called “dictatorship law” in Ukraine.

In the name of reigning in the violence that has recently included torching structures along the prestigious Boulevard Saint Germain in Paris, and smashing through the gates of government ministry buildings, the French government appears set to enact something close to a martial law scenario prohibiting almost any protest and curtailing freedom of speech.

Prime Minister Edouard Philippe presented the new initiative to curtail the violence and unrest while targeting “troublemakers” and banning anonymity through wearing masks on French TV channel TF1 on Monday. He said the law would give police authority crack down on “unauthorized demonstrations” at a moment when police are already arresting citizens for merely wearing a yellow vest, even if they are not directly engaged in protests in some cases. 

PM Philippe said the government would support a “new law punishing those who do not respect the requirement to declare [protests], those who take part in unauthorized demonstrations and those who arrive at demonstrations wearing face masks”.

Philippe’s tone during the statements was one of the proverbial “the gloves are off” as he described the onus would be on “the troublemakers, and not taxpayers, to pay for the damage caused” to businesses and property. 

“Those who question our institutions will not have the last word,” he added. 

However, if anything the protests have grown fiercer in response to any police crackdown or violence against demonstrators. Should all protests be banned under the new law, it could be the start of more violent riots gaining steam, as what began Nov. 17 as anger over fuel tax hikes has now turned into rage at President Emmanuel Macron and policies that seem to favor the urban elite. 

Other yellow vest inspired protests previously broke out across Europe, and in perhaps a sign of things to come a video from The Netherlands of a woman pushing her baby in a stroller being arrested by police apparently for merely wearing a yellow vest is going viral. 

Shocking Video of police brutality in The #Netherlands of a Women being arrested yesterday, because she was wearing an Yellow Vest, and did not wanted to take it off. while walking with her baby in the streets. #YellowVests SHAME ON YOU DUTCH POLICE OFFICERS! RT this to the world pic.twitter.com/vL99D1ThW0

— Sotiri Dimpinoudis (@sotiridi) January 6, 2019

In the video, police confront the woman in what appears a quiet neighborhood far away from any visible protest. Police were photographed alongside the baby on the street as the mother was dragged away. 

With the French prime minister now announcing coming draconian measures banning all protest, this is precisely the horrific scene that could begin to be repeated across France and the EU. 

In total at least six people have died and over 1,400 people injured during the French protests, with thousands arrested weekly, according to international reports. Over the weekend some 50,000 protesters continued demonstrating in multiple cities, leading to significant clashes in Paris, Bordeaux and Rouen. A number of commentators have noted that though there appear fewer demonstrators compared to December, there appears a serious uptick in violent acts on the part of both demonstrators and police response. 

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Via CorbettReport.com,

Each year, we lay the wreath. We hear “The Last Post.” We mouth the words “never again” like an incantation. But what does it mean? To answer this question, we have to understand what WWI was.

WWI was an explosion, a breaking point in history. In the smoldering shell hole of that great cataclysm lay the industrial-era optimism of never-ending progress. Old verities about the glory of war lay strewn around the battlefields of that “Great War” like a fallen soldier left to die in No Man’s Land, and along with it lay all the broken dreams of a world order that had been blown apart. Whether we know it or not, we here in the 21st century are still living in the crater of that explosion, the victims of a First World War that we are only now beginning to understand.

See “Part 1 – To Start A War” here…

Part Two – The American Front

The election of Woodrow Wilson once again shows how power operates behind the scenes to subvert the popular vote and the will of the public. Knowing that the stuffy and politically unknown Wilson would have little chance of being elected over the more popular and affable William Howard Taft, Morgan and his banking allies bankrolled Teddy Roosevelt on a third party ticket to split the Republican vote. The strategy worked and the banker’s real choice, Woodrow Wilson, came to power with just forty-two percent of the popular vote.

With Wilson in office and Colonel House directing his actions, Morgan and his conspirators get their wish. 1913 saw the passage of both the federal income tax and the Federal Reserve Act, thus consolidating Wall Street’s control over the economy. World War One, brewing in Europe just eight months after the creation of the Federal Reserve, was to be the first full test of that power.

But difficult as it had been for the Round Table to coax the British Empire out of its “splendid isolation” from the continent and into the web of alliances that precipitated the war, it would be that much harder for their American fellow travelers to coax the United States out of its own isolationist stance. Although the Spanish-American War had seen the advent of American imperialism, the thought of the US getting involved in “that European war” was still far from the minds of the average American…

All along the Western front, the Allies rejoiced. The Yanks were coming.

House, the Milner Group, the Pilgrims, the Wall Street financiers and all of those who had worked so diligently for so many years to bring Uncle Sam into war had got their wish. And before the war was over, millions more casualties would pile up. Carnage the likes of which the world had never seen before had been fully unleashed.

The trenches and the shelling. The no man’s land and the rivers of blood. The starvation and the destruction. The carving up of empires and the eradication of an entire generation of young men.

Why? What was it all for? What did it accomplish? What was the point?

See Part 3 here…

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Authored by Danny Haiphong via BlackAgendaReport.com,

The U.S. military state overthrows democratically-elected governments that it deems to be a threat to corporate interests.

“There is plenty of evidence that the United States is the most depraved and dangerous “meddler” in the affairs of other nations that history has ever known.”

Dan Kovalik is a labor and human rights lawyer, but most of all he is an anti-imperialist and an author of three books. Kovalik’s first two books tackled the specific US war drives against Russia and Iran. His third installment, The Plot to Control the World: How the US Spent Billions to Change the Outcome of Elections Around the World, addresses the broad scope of US election meddling abroad. The book provides much needed political and ideological life support to an anti-war movement in the U.S that has been rendered nearly invisible to the naked eye.

The Plot to Control the World is as detailed in its critique of U.S. imperialism as it is concise. In just over 160 pages, Kovalik manages to analyze the various ways that the U.S. political and military apparatus interferes in the affairs of nations abroad to achieve global hegemony. He wastes no time in exposing the devastating lie that is American exceptionalism, beginning appropriately with the U.S. imperialist occupations of Haiti and the Philippines at the end of the 19thcentury and beginning of the 20th. The U.S. would murder millions of Filipinos and send both nations into a spiral of violence, instability, and poverty that continues to this day. As Kovalik explains regarding Haiti, “While the specific, claimed justifications for [U.S.] intervention changed over time- e.g., opposing the end of slavery, enforcing the Monroe Doctrine, fighting Communism, fighting drugs, restoring law and order — the fact is that the interventions never stopped and the results for the Haitian people have been invariably disastrous.”

“Kovalik wastes no time in exposing the devastating lie that is American exceptionalism.”

US expansionism has relied upon the ideology of American exceptionalism to silence criticism and weaken anti-war forces in the United States. American exceptionalism claims that the U.S. is a force for good in the world and completely justified in its wars of conquest draped in the cover of spreading “democracy and freedom” around the world. Kovalik challenges American exceptionalism by showing readers just how much damage that US expansionism and militarism has caused for nations and peoples in every region of the planet. Russia, Honduras, Guatemala, the Democratic Republic of the Congo, Vietnam and many other nations have seen their societies devastated by U.S. “election meddling.” In Honduras, for example, a U.S.-backed coup of left-wing President Manuel Zelaya in 2009 made the nation one of the most dangerous places in the world to be a journalist, indigenous person, or trade-union/environmental activist. Thousands of Hondurans have been displaced, disappeared, or assassinated since the coup.

Another important aspect of The Plot to Control the World is its exposure of U.S hypocrisy surrounding the subject of “election meddling.” Since the end of the 2016 Presidential elections, the U.S. military, political, and media branches of the imperialist state have accused Russia of virtually implanting Donald Trump into the Oval office. The U.S. public has been fed a steady dose of anti-Russia talking points in an apparent effort on the part of the elites to beat the drums of war with the nuclear-armed state. No evidence has been presented to prove the conspiracy, as a recent National Public Radio (NPR) analysis states plainly. However, there is plenty of evidence that the United States is the most depraved and dangerous “meddler” in the affairs of other nations that history has ever known.

“The author shows readers just how much damage that US expansionism and militarism has caused for nations and peoples in every region of the planet.”

Just ask the much-vaunted Russians. Kovalik devotes an entire chapter to the 1996 Presidential election in Russia that re-elected the wildly unpopular Boris Yeltsin. The fall of the Soviet Union in 1991 began an era of “shock therapy” in the newly erected Russian Federation, a euphemism for the wholesale theft and transfer of socialized wealth into the hands of oligarchs and multinational corporations. Millions would perish in Russia from an early death due to the sudden loss of healthcare, housing, jobs, and other basic services. In 1996, President Bill Clinton ensured that Yeltsin maintained his near total grip on state power in Russia by providing the Russian President with a team of U.S. political consultants and over a billion dollars’ worth of IMF monies directly to the campaign. U.S. political and monetary support allowed Yeltsin to rig the election in his favor despite his dwindling popularity. Kovalik shows that if anyone should worry about election meddling, it should be the people of Russia and not the US elites that control Washington.

The Plot to Control the World takes readers into the Democratic Republic of Congo, where the CIA’s coup of revolutionary Patrice Lumumba continues to haunt the resource rich nation in the form of endless US-backed genocide. It travels to Guatemala, where the CIA overthrow of Jacobo Arbenz led to a U.S.-backed slaughter of a quarter million Guatemalans under the auspices of several military dictatorships. Kovalik shows us that the election of the fascistic Jair Bolsonaro in Brazil was no aberration, as the U.S. was primarily responsible for the rise in fascism in Brazilthrough its direct role in placing the nation under the control of a military dictatorship in 1964. The military dictatorship predated the CIA’s ouster of Chile’s Salvador Allende in 1973, which handed the once socialist state to Augusto Pinochet’s murderous and repressive leadership.

“The mission is always the same: to destabilize independent nations that refuses to bow down to the dictates of U.S. imperialism.”

The entire skeleton of the U.S. military state is on full display in The Plot to Control the World. The U.S. military state utilizes an array of tools to overthrow democratically-elected governments that it deems to be a threat to corporate interests. These tools include the U.S. intelligence agencies, so-called Non-governmental Organizations (NGOs) such as the National Endowment for Democracy, and the various branches of the military itself, to name a few. Regardless of the tools employed, the mission is always the same: to destabilize independent nations that refuses to bow down to the dictates of U.S. imperialism.Thus, while Nicaragua, the Democratic Republic of Congo, and Vietnam may possess unique histories, their economic and political development has been shaped by the destructive interference of the United States.

Dan Kovalik is not likely to be reviewed in the New York Timesor other corporate outlets. That’s because Kovalik unapologetically speaks out against U.S. empire and all that upholds it. In doing so, Kovalik’s The Plot to Control the World walks in the footsteps of anti-imperialists such as Michael Parenti and William Blum. Blum, a former State Department employee, spent his post-State Department life providing humanity with knowledge about how US imperialism operates on the global stage. The New York Timeswasted no time in slandering Blum in their obituary . This showed the great lengths that the ruling elites will go to discredit, defame, and condemn critics of the military industrial complex and how important it is for those who oppose war let go of any expectation that the corporate media will cover Kovalik’s work or anyone else who speaks out against war.

“White supremacy is the biggest lie of all and is completely embedded in the ideology of American exceptionalism.”

With that said, one of the reasons that the left in the U.S. is so weak is because it has been numerically and politically isolated by the lies of the Empire. White supremacy is the biggest lie of all and is completely embedded in the ideology of American exceptionalism. Despite the ruthlessness of the austerity and incarceration regimes, many Americans continue to be convinced that the U.S. is the most exceptional nation in the world and do not balk when its military wages wars abroad at the expense of U.S. tax dollars and civilian lives. U.S. imperialism has made sure that Americans feel that they are special colonizers who see the victims of the U.S. military state as savages worthy of slaughter. The Plot to Control the World is based on a different premise: internationalism. The book links the struggle against US imperialism to the needs of the oppressed and working class living in the heart of empire, making it an essential read for those who are sick and tired of the prevailing narrative of American exceptionalism and want to be armed with knowledge that is essential toward changing it.

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One of the biggest surprises involving the ongoing collapse of troubled California utility PG&E is how it was possible, that with the company reportedly contemplating a DIP loan ahead of a possible bankruptcy filing which sent PCG stock plunging and its bonds cratering to all time lows, that rating agencies still had the company rated as investment grade.

Late on Monday, this question got some closure after S&P became the first rating agency to take a machete to its rating for PG&E, when it downgraded the company by five notches, from BBB- to B, the fifth-highest junk rating; S&P warned that more cuts are imminent.

As we reported previously, PG&E’s shares plunged as much as 25% then as much as another 17% on Tuesday, to their lowest level since 2003, as investors worried about the potential for the company to file for bankruptcy as California investigators have been looking into whether the utility’s equipment ignited the deadliest blaze in state history in 2018 as well as fires in 2017, probes that could leave the company with legal liabilities topping $30 billion.

A spokesman for PG&E said in an email Tuesday the company’s board is “actively assessing” operations, finances, management, structure and governance while maintaining a commitment to improving safety.

As Bloomberg notes, PG&E’s record-low bond prices underscore how much more the company will have to pay to borrow in the future, even if California comes up with a legislative bailout. “It also highlights how vulnerable even highly regulated, traditionally dependable stocks like utilities can be to natural disasters such as wildfires and hurricanes.”

Meanwhile, as we discussed last Friday, whatever PG&E ultimate fate, it “will ultimately increase costs to California ratepayers and taxpayers, which already face a high cost of living,” S&P analyst Gabriel Petek, who rates the state of California, not PG&E, said in an email Monday. “The important takeaway to me is that these fires and how the ‘fire season’ is virtually a year-round phenomenon now represent a material consequence of climate change.”

In addition to the plunge in the utility’s notes due in 2034, the company’s 3.5% bonds due next year are currently yielding more than 9.9%, far above where most high-yield securities are paying and a level reserved for deeply distressed credits. As shown in the chart below, B-rated debt, the mid-tier of junk bonds, yields on average 7.5% as of Monday’s close, according to Bloomberg index data.

But while S&P took the axes to its ratings of PG&E, Fitch and Moody have yet to slash the company’s investment grade. And when they do, the next major headache will emerge for both management, shareholders and bondholders, as a similar “junking” by Moody’s to high-yield would result in a rerun of the AIG death sprial, as at least once cash collateral call for PG&E of at least $800 million – to guarantee power contracts – will be triggered according to a regulatory filing (according to Bloomberg no other ratings triggers have been disclosed, although as AIG demonstrated, these tend be hidden deep inside ancillary contracts and only a downgrade will reveal just how insolvent the company is).

An $800 million collateral call would be a major problem for PG&E, as the company only had $430 million of cash on its books at the end of September. To preserve liquidity, PG&E suspended its dividend and fully drew its lines of credit, an event which we said is the first flashing red light that a liquidity crisis now appears inevitable. Meanwhile, as reported last Friday, the company is considering filing for bankruptcy as soon as February.

And while state lawmakers and regulators are looking at options including allowing the company to issue bonds to pay its liabilities, or breaking up the utility, no decision had been reached yet.

At the end of the day, however, even the $800 million urgent cash need would merely be a milestone on the company roads to assured bankruptcy if PG&E is ultimately held responsible for the Camp Fire, as that would put it on the hook for billions of dollars of potential liabilities, by some calculations far more than the company has access to. Yet because the company has filed for bankruptcy before, it and lawmakers would probably try to avoid a repeat, said Ryan Brist, head of global investment-grade credit and portfolio manager at Western Asset Management, who however likely understands that a bankruptcy may be inevitable.

“That was a disastrous time for all participants involved,” Pasadena, California-based Brist said. “It would be my guess that the same parties would want to pursue a much less volatile solution this go around when faced with the tough problems of statewide wildfires.”

However, with about $18.6 billion of long-term debt as of the end of September, PG&E may be incentivized to file for bankruptcy, CreditSights analyst Andy DeVries said in a report Monday. Such a filing would give the company bargaining power with insurance companies as it tries to settle customer claims at a discount, he said.

But before any possible filing, the next immediate step will be more downgrades by rating agencies, perhaps as soon as tomorrow.

Fitch analyst Philip Smyth said that a determination by California regulators that PG&E’s equipment was involved in the Tubbs Fire in 2017 or last year’s Camp Fire would be the strongest impetus to cut the rating.

“Right now, there is no investigation that says with any clarity that has determined that their equipment was the catalyst,” Smyth said in an interview Monday. “Since we downgraded in November, I don’t think things have gotten meaningfully worse since then.”

Finally, the imminent – and aptly called – fall from grace for PG&E is just the harbinger of the mass downgrade wave among investment-grade rated companies, expected to hit once the economic cycle turns, potentially flooding the more than $1.19 trillion high-yield market with new issues (as Jeff Gundlach discussed earlier today). The silver lining here, if any, is that PG&E’s relatively small debt load on its own wouldn’t bring the flood that strategists at Morgan Stanley have warned could exceed $1.1 trillion.

Xerox was the most recent company to join the “fallen angel” ranks, while Altria was downgrade from single A to BBB. Whether PG&E avoids bankruptcy remains to be seen, but one thing is certain: the California utility will be the next prominent “Fallen Angel.”

via RSS http://bit.ly/2FhgiBw Tyler Durden