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It looks like Elon Musk lied when he said that the “funding was secured.”

Assuring that the SEC will have its hands full, Bloomberg reports that only now are Elon Musk and his advisers seeking a wide pool of investors to back a potential take-private of the automaker to avoid concentrating ownership among a few new large holders, according to people familiar with the matter.

Furthermore, quite contrary to even the loosest definition of “secured”, BBG adds that Tesla is holding early discussions with banks about the feasibility and structures of a possible deal, citing sources, and only now is it canvassing investors including large asset managers.

It’s not immediately clear how any of this is different from simply doing a follow on offering of public stock, one which takes out existing small shareholders, especially since Tesla would always have publicly filing (junk) debt as the core component of its capital structure, and thus instead of trading the stocks, those evil shorts would be buying CDS on the company instead.

Always a chooser and never a beggar, in addition to getting investors to allocate funds to a company that would have an idiotic pro forma leverage, Musk also hopes to retain control and “would prefer to amass a group of investors who could each contribute part of the funds because he wants to avoid having one or two large new stakeholders in the company.” Which immediately kills either SoftBank and the Saudi Sovereign Wealth Fund as potential investors.

But worst of all, and where the SEC should immediate opine is that according to the report, deliberations are at an early stage and the company hasn’t yet formally hired a bank to work on the process or made a final decision on how to proceed.

Since Musk first tweeted on Tuesday that he was considering taking Tesla private at $420 a share and that he had “funding secured,” he’s offered no evidence to back up the statement. People close to at least 16 financial institutions and technology firms, who spoke on the condition of anonymity, have said they weren’t aware of financing having been locked in before Musk’s tweet.

Meanwhile, even as the SEC is about to have a field day digging into Musk’s 10b-5 violation, several banks are predictably already pitching possible deal structures or financing scenarios for either Tesla or the company’s board to consider, chasing the millions of dollars in advisory fees that could be offered to whomever wins the mandates.

According to estimates from Jeffrey Nassof, a director at Freeman Consulting Services, banks advising Tesla could make $90 million to $120 million in fees, while advisers to Musk could take home $30 million to $50 million. If a deal involves debt financing, those providing funding could expect fees of about $500 million.

And now that the company has admitted that there was no deal, no term sheet, no agreement, we will look closely at the what the SEC does next in light of what appears to have been a glaring securities manipulation.

And now that there is confirmation there was no “funding secured”, TSLA stock promptly slumped on the news.

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The US’ spending problem is starting to become a major issue.

According to the latest Monthly Treasury Statement, in June, the US collected $225BN in tax receipts – consisting of $110BN in individual income tax, $91BN in social security and payroll tax, $4BN in corporate tax and $20BN in other taxes and duties- a drop of 2.9% from the $232BN collected last July and a reversal from the recent increasing trend…

… and in July, the 12 month trailing receipt total was barely higher compared to a year ago, up just 0.4% Y/Y after rising as much as 3.1% at the end of 2017.

Meanwhile Federal spending rose, up 9.9% from $275BN last July to $302BN last month.

… where the money was spent on social security ($83BN), defense ($49BN), Medicare ($24BN), Interest on Debt ($35BN), and Other ($111BN).

This resulted in a July budget deficit of $77 billion, in line with expectations, and a signification deterioration from the $43 billion recorded in July of 2017.

The July deficit brought the cumulative 2018F budget deficit to over $684BN during the first 10 month of the fiscal year, up 28% over the past year.

This is the highest 12 month cumulative deficit since May 2013; as a reminder the deficit is expect to increase further amid the tax and spending measures, and rise above $1 trillion as soon as next year.

Most Wall Street firms forecast a deficit for fiscal 2018 of about $850 billion, at which point things get… much worse. As we showed In a recent report, CBO has also significantly raised its deficit projection over the 2018-2028 period.

But while out of control government spending is clearly a concern, an even bigger problem is what happens to not only the US debt, which recently hit $21.3 trillion, but to the interest on that debt, in a time of rising interest rates.

As the following chart shows, US government Interest Payments are already rising rapidly, and just hit an all time high of $538 billion in Q2 2018. 

Interest costs are increasing due to three factors: an increase in the amount of outstanding debt, higher interest rates and higher inflation. Needless to say, all three are increasing; furthermore, a rise in the inflation rate boosts the upward adjustment to the principal of TIPS, increasing the amount of debt on which the Treasury pays interest, turbocharging the amount of interest expense.

The bigger question is with short-term rates still just around 2%, what happens when they reach the mid-3% as the Fed’s dot plot suggests it will?

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With the Lira at record lows amid its biggest single-day drop since Feb 2001’s crisis (when groups owning bank, media and holding companies jointly notoriously precipitated the domestic financial crisis by stashing away the home deposits in their offshore branches), Erdogan has made it clear that he is not backing down… for now.

First, Turkey has signaled no desite for an IMF bailout (having seen what happened to Argentina after theirs, who can blame him).

“We have received no indication from the Turkish authorities that they are contemplating a request for financial assistance,” IMF spokesperson Randa Elnagar said in an emailed statement.

And additionally, the Foreign Ministry said in statement.

“Turkey will give the necessary response to every step taken against it, as it has previously up to today,”

For now, at least, the Lira is not getting any worse…

The worst day since Feb 2001’s crisis…

Don’t forget though, as Erdogan said earlier in the day, “they have dollars, we have god.” Good luck buying a mocchachino with some ‘gods’…

“This is a textbook currency crisis that’s morphing into a debt and liquidity crisis due to policy mistakes,” said Win Thin, a strategist at Brown Brothers Harriman & Co. in New York.

“The way things are going, markets need to be prepared for a hard landing in the economy, corporate defaults on foreign currency debt, and possible bank failures.”

If Erdogan’s comments above are true – then he has 3 options: 1) Hike rates (he said he wouldn’t), 2) Enforce Capital Controls (he said he wouldn’t), and 3) Confiscate Gold/Dollars…. (he never said he wouldn’t)

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Authored by Doug French via The Mises Institute,

“I’m not thrilled,” President Trump told CNBC’s Joe Kernen in an interview that aired on Squawk Box last month.

“Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.”

Since becoming POTUS, Trump has changed his tune about rates. When Janet Yellen was running the Fed, Trump said she should be “ashamed” for holding down rates. He endeared himself to libertarians at the time by saying the low rates created a “false stock market.”

Then after his election he mentioned the stock market constantly. “It would be really nice if the Fake News Media would report the virtually unprecedented stock market growth since the election,” Trump tweeted in October 2017. A year before Trump had warned America to beware of a “big fat bubble” in stocks.

Two weeks ago, he tweeted,

The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates — Really?

There’s plenty of blather that Trump is breaking with presidential norms by criticizing Jerome Powell’s rate hikes, but, the Donald is merely channeling Richard Nixon. When Nixon appointed Arthur Burns to be Fed chair in October of 1969, Burns was soaking up the applause during the announcement of his appointment when Nixon broke in, saying, “You see, Dr. Burns, that is a standing vote of appreciation in advance for lower interest rates and more money.” Later, in private, Nixon told his new Fed chair, “You see to it: no recession”

In a chapter for the book The Fed at One Hundred entitled “Arthur Burns: The Ph.D. Standard Begins and the End of Independence” I wrote,

The president didn’t trust the central bank, but with Burns he would have one of his own in charge. At the same time, when Burns took the oath of office in January 1970, Nixon said, “I have some very strong views on some of these economic matters and I can assure you that I will convey them privately and strongly to Dr. Burns. … I respect his independence. However, I hope that independently he will conclude that my views are the ones that should be followed.”

Trump’s communication style is different in that he hopes Chairman Powell will be reading his tweets and watching CNBC. However, Trump believes himself an imperial leader just as Nixon did.

Burns may have been a friend [of Nixon’s], but “he was still the emperor and I should therefore toe the mark — as should every good citizen, especially those that professed to be his friends.” Burns concluded his diary entry with, “now I knew that I would be accepted in the future only if I suppressed my will and yielded completely — even though it was wrong at law and morally — to his authority.”

Perhaps one day Powell will see Trump as Burns viewed his friend the president — as having

“uncontrolled cruelty,” and that he [Burns] “was seized suddenly with fear for the safety of our country which depended so heavily on this insecure man (the thought flashed through my mind of an earlier conversation, when he asked me to inform him when I thought it would be a good time to bring on an international monetary crisis and added, winking privately as he spoke, ‘I don’t mind crisis’ — the I being heavily underlined).”

Former Fed governor Kevin Warsh, a candidate for the Fed chair appointment, said on a Politico podcast this year that during his interview, Trump made clear his opinions on interest rate policy.

“If you think it was a subject upon which he delicately danced around, then you’d be mistaken. It was certainly top of mind to the president,” Mr. Warsh said. Later, he added:

“In some sense the broader notion of an independent agency, that’s probably not an obvious feature to the president.”

As Rob Crilly described the Trump administration in The Telegraph, “Each day brings fresh chaos and an escalating sense of crisis.”

Today, Fed policy is the chaos.

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Homeless people in the UK are wearing QR codes around their necks as part of a new Oxford University-backed initiative to bring panhandling into the digital age, reports the BBC. 

The “social innovation project,” called Greater Change, assigns a scannable QR code to each homeless person – completely obliterating the “Sorry, I haven’t got anything on me” excuse to keep on walking. Instead, it’ll be “Sorry, I totally would but I don’t have the app and my data plan is very restrictive.”

Scanning the barcode will pull up a profile of the homeless person – including the story of how they became homeless or what their job used to be, while the beggar patiently waits for donors to make their decision.

Donations from digital benefactors will then go into an account managed by a case worker “who ensures that the money is spent on agreed targets, such as saving for a rental deposit or a new passport.” 

“The problem we’re trying to solve here is that we live in an increasingly cashless society and as well as this when people give they worry about what this money might be spent on,” Alex McCallion, founder of Greater Change, told the BBC. –Telegraph

“So the solution we’ve come up with is a giving mechanism through your smart phone with a restrictive fund.”

The project is currently in a trial phase in Oxford, and is supported by Oxford University Innovation and Oxford’s Said Business School. 

Neil Coyle MP, the Labour co-chair of the All Party Parliamentary Group on Ending Homelessness, said: “Necessity has again become the mother of invention and now there is an app to try and help generate more public donations to homeless people. –Telegraph

“This intervention should not be necessary but with a Government ignoring the scale of the problem, any extra donations may help homeless people directly.”

Coyle noted that homelessness has spiked in recent years.

“It’s encouraging to see that people want to help rough sleepers, but the bigger picture here is that neither rough sleeping nor any form of homelessness should be an issue in Britain today,” said Jon Sparkes, CEO of homeless advocacy organization Crisis. 

The Big Issue, a magazine sold by Homeless people, says sales have been suffering as people are walking around with less and less physical cash, which has left the periodical looking to jump into the digital age as well. 

The magazine, which is sold by homeless people, has suffered as a result of people walking up and down Britain’s high streets without coins and notes in their pockets, as they now rely on cards and mobile phones for payments.

Russell Blackman, the Big Issue’s managing director, said earlier this year that they are looking into ways to roll out cashless payments to all its vendors. –Telegraph

“It is vital that we develop the right contactless solution for our vendors, ensuring that they can get instant access to their funds, even if they don’t have their own bank account due to a lack of permanent address,” he said.

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