Inflation Markets Just Flashed Recession-Red-Flag For The First Time Since 2008

Amid all the talk of wage growth and surveys suggesting input and output prices are soaring, the market for ‘inflation expectations’ is suddenly flashing a recessionary red flag not seen since July 2008.

The last few months have seen short-term (5Y) inflation expectations in the breakevens market surge to their highest in 5 years; and while longer-dated inflation expectations have also risen, they have not kept pace with the short-end. A similar move was last seen in Q1/2 2008.

Simply put, markets are expecting an inflationary impulse in the short-term, but do not expect it to last as it will likely be swamped out by a recession as the economy is not grown fast enough to justify prices rising at that pace, and instead either profit margins will collapse or end demand shrivels as companies fail to pass through rising costs.

And, as a result, for the first time since July 2008, the inflation breakevens yield curve has inverted, with the market’s expectations for 30Y inflation now below that just 5 years ahead.

What is especially notable, is that the last time this happened, the US was already deep in recession (and we note that each time the 5Y has approached the 30Y, it has backed away – which given the sensitivity of stocks to breakevens could be problem going forward).

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Kim Jong-un Agrees to Meet Trump, Stormy Daniels Story Isn’t a ‘Sex Scandal,’ Obama Coming to Netflix? A.M. Links

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February Payrolls Smash Expectations, Soar By 313K But Hourly Earnings Miss

There was good and bad news in the just released payrolls report: on one hand, February payrolls soared by a whopping 313K, smashing expectations of 205K, and well above last month’s upward revised 239K (from 200K). This was the biggest monthly increase since October 2015.

The unemployment rate failed to drop to 4.0% as expected, remaining unchanged at 4.1%.

Here Goldman was right: the black unemployment rate dropped sharply, back to 6.9%, but even with that drop it was not enough to push the overall unemployment rate higher.

However, the not so good news was that hourly wages rose only 2.6% last month, below the 2.8% expected, with the February outlier of 2.9% also revised lower to 2.8%.

Developing

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Whose Dystopia Is It Anyway?

With social media platforms seemingly unable to distinguish Russian trolls from red-blooded Americans, the last two years have felt like a Deckardian purgatory. The frequency with which intellectual elites accuse their detractors of laboring on behalf of an always-approaching-never-arriving foreign power, meanwhile, smacks of Orwell. The proliferation of opioids in the American heartland, meanwhile, simply screams “delicious soma,” what does? (Marijuana? Alcohol? Twitter?)

“We live in Philip K. Dick’s future, not George Orwell’s or Aldous Huxley’s,” George Washington University’s Henry Farrell recently argued in the Boston Review. Despite being a poor prognosticator of what future technologies would look like and do, Dick, Farrell writes, “captured with genius the ontological unease of a world in which the human and the abhuman, the real and the fake, blur together.”

But the universe of possibilities is much larger than just Orwell, Huxley, or Dick. Below, Reason‘s editorial staffers make the case for nearly a dozen other Nostradamii of the right now, ranging from Edgar Allan Poe to Monty Python’s Terry Gilliam. As for why were debating dystopias, and not utopias: Because there is no bad in a utopia, and because no dystopia could persist for long without at least a little good, it’s safe to assume that if you’re living in an imperfect world–and you very much are–it’s a dystopian one.

Dick wasn’t wrong, but Edgar Allan Poe got there first, writes Nick Gillespie:

At the core of Philip K. Dick’s work is a profound anxiety about whether we are autonomous individuals or being programmed by someone or something else. In Do Androids Dream of Electric Sheep?, are the characters human or Nexus-6 androids? In The Three Stigmata of Palmer Eldritch and A Scanner Darkly, you’re never quite sure what’s real and what’s the product of too much “Chew-Z” and “Substance D,” hallucinogenic, mind-bending drugs that erode the already-thin line between reality and insanity.

Which is to say that Dick’s alternately funny and terrifying galaxy is a subset of the universe created by Edgar Allan Poe a century earlier. Poe’s protagonists—not really the right word for them, but close enough—are constantly struggling with basic questions of what is real and what is the product of their own demented minds.

This dilemma is front and center in Poe’s only novel, The Narrative of Arthur Gordon Pym (1838), which tells the story of a stowaway who ships out on the Grampus and endures mutiny, shipwreck, cannibalism, and worse. It becomes harder and harder for Pym to trust his senses about the most basic facts, such as what side of a piece of paper has writing on it. The conclusion—not really the right word for the book’s end, but close enough—dumps Pym’s epistemological problem into the reader’s lap in violent and hysterical fashion. A friend told me he threw the book across the room in disbelief when he read its final page, which anticipates the frustration so many of us feel while following the news these days. Just when you think reality can’t get any stranger or less believable, it does exactly that, in both Poe’s fictional world and our real one.

2018’s turn toward hamfisted authoritarianism echoes Terry Gilliam’s Brazil, says Christian Britschgi:

No-knock raids by masked, militarized, police officers. A ludicrously inefficient bureaucracy. Crackdowns on unlicensed repairmen. If all this sounds eerily familiar, you may have seen it coming in 1985’s Brazil.

Set in a repressive near-future Britain, the film tells the story of lowly civil servant Samuel Lowry, who wants nothing more than to hide in the comically inefficient bureaucratic machine that employs him, all while doing his level best to quietly resist both a narcissistic culture demanding he rise higher, and a brutish security apparatus looking to punish anyone who steps out of line.

Directed by Monty Python alum Terry Gilliam, Brazil is surreal, ridiculous, and often just plain silly. Yet there is something chilling about the film’s depiction of the state as a bumbling, byzantine bureaucracy that can’t help but convert every aspect of life into an endless series of permission slips, reinforced by a system of surveillance, disappearance, and torture.

Evil and inefficiency are intimately intertwined in Brazil—with the whole plot set in motion by a literal bug in the system that sends jackbooted thugs to raid the wrong house and arrest the wrong man. While the regime in Brazil lacks a central, dictatorial figure at the top of the pyramid, there is definitely something distinctly current about the world it depicts, with every application of force complemented by an equal element of farce. Trump’s first crack at imposing a travel ban, for instance, proved incredibly draconian and cruel precisely because of how rushed, sloppy, and incoherent the actual policy was.

Fortunately, our own world does manage to be far less authoritarian than the one depicted in Brazil and has mercifully better functioning technology as well. The parallels can still give one pause, however, when you consider what direction we might be headed in.

The current moment definitely tilts toward Ray Bradbury’s Fahrenheit 451, says Eric Boehm:

We are not living in a world where government agents raid homes to set books ablaze, but “there is more than one way to burn a book, and the world is full of people running about with lit matches,” as Ray Bradbury warned in a coda appended to post-1979 editions of his 1953 classic.

Specifically, Bradbury was warning about the dangers of authoritarian political correctness. In that coda, he relates anecdotes about an undergrad at Vassar College asking if he’d consider revising The Martian Chronicles to include more female characters, and a publishing house asking him to remove references to the Christian god in a short story they sought to reprint.

More generally, though, Bradbury was commenting on the common misunderstanding of Fahrenheit 451 as a story about an authoritarian government burning books. It is that, of course, but it’s really about how cultural decay allows authoritarianism to flourish. It was only after people had decided for themselves that books were dangerous that the government stepped in to enforce the consensus, Guy Montag’s boss tells him in one of the novel’s best scenes. “Technology, mass exploitation, and minority pressure carried the trick,” Captain Beatty explains. “Politics? One column, two sentences, a headline! Whirl man’s mind around so fast…that the centrifuge flings off all unnecessary, time-wasting thought!”

In place of literature and high culture, Bradbury’s dystopia has an eerily accurate portrayal of reality television. Montag’s wife is obsessed with the “parlor family” who inhabit the wall-sized television screens in the living room, and clearly has a closer attachment to them than to her husband. The ubiquity of those screens—and how the government exploits them—is on full display near the end of the story, when Montag is on the lam for revolting against orders to burn books, and messages are flashed across every parlor screen in the city telling people to look for the dangerous runaway fireman.

We might not live in Montag’s specific version of Bradbury’s dystopia, but we exist somewhere on the timeline that leads there—which is exactly what Bradbury, and Captain Beatty, are trying to tell us.

Wrong book! We’re really living in Neal Stephenson’s Snow Crash, says Katherine Mangu-Ward:

It’s 1992. Computers are running Windows 3.1. Mobile phones are rare and must be carried in a suitcase. A few nerds in Illinois are getting pretty close to inventing the first web browser, but they’re not quite there yet.

This is the year Neal Stephenson publishes Snow Crash, a novel whose action centers around a global fiber optic network, which can be accessed wirelessly via tiny computers and wearables. On this network, users are identifiable by their avatars, a Sanskrit word that Stephenson’s novel popularized; those avatars may or may not be reliable indications of what they are like in real life. Many of the characters work as freelancers, coding, delivering goods, or collecting information piecemeal. They are compensated in frictionless micropayments, some of which take place in encrypted online digital currency. Intellectual property is the most valuable kind of property, but knowledge is stored in vast digital libraries that function as fully searchable encyclopedias and compendia. Plus there’s this really cool digital map where you can zoom in and see anywhere on the planet.

Basically what I’m saying here is that every other entry in the feature is baloney. We are living in the world Neal Stephenson hallucinated after spending too much time in the library in the early 1990s. End of story.

Is it a dystopia? Sure, if you want to get technical about it: Our antihero, Hiro Protagonist (!), is beset by all manner of typical Blade Runner–esque future deprivations, including sub-optimal housing, sinister corporate villains, and a runaway virus that threatens to destroy all of humanity.

But in addition to the this-guy-must-have-a-secret-time-machine prescience of the tech, the book offers gritty/pretty vision of anarcho-capitalism that’s supremely compelling—when they’re in meatspace, characters pop in and out of interestingly diverse autonomous quasi-state entities, and the remnants of the U.S. government is just one of the governance options.

Stephenson’s semi-stateless cyberpunk vision is no utopia, that’s for darn sure. But the ways in which it anticipated our technological world is astonishing, and I wouldn’t mind if our political reality inched a little closer to Snow Crash‘s imagined future as well.

Katherine is off by three years. 1989’s Back to the Future: Part II is actually the key to understanding 2018, says Robby Soave:

Back to the Future: Part II has always been the least-appreciated entry in the series: It’s the most confusing and kid-unfriendly, lacking both the originality of the first film and the emotional beats of the third. But almost 30 years after its release, the middle installment of Robert Zemeckis’s timeless time-travel epic is newly relevant: not for accurately depicting the future, but for warning us what life would be like with a buffoonish, bullying billionaire in charge.

2015, the furthest point in the future visited by Marty McFly and “Doc” Emmett Brown has come and gone, and we still don’t have flying cars, hover boards, or jackets that dry themselves. But we do have a president who seems ripped from the film’s alternate, hellish version of Hill Valley in 1985, where the loathsome Biff Tannen has become a powerful mogul after traveling into the past and using his knowledge of the future to rig a series of events in his favor.

The similarities between Trump and alternate-reality Biff are so numerous that Back to the Future writer Bob Gale has retroactively (and spuriously) claimed the 45th president as inspiration for the character. Biff buys Hill Valley’s courthouse and turns it into a casino hotel. Biff is a crony capitalist who weaponizes patriotism for personal enrichment (“I just want to say one thing: God bless America”). Biff is a paunchy playboy with two supermodel ex-wives, a bad temper, and even worse hair. There’s no escaping Biff: He’s a media figure, a businessman, a civic leader, and even a member of the family.

“Biff is corrupt, and powerful, and married to your mother!” Doc Brown laments to Marty. Millions of Americans no doubt feel the same way about a man who similarly possesses the uncanny ability to commandeer our attention and insert himself into every facet of modern life. Sometimes it’s hard to avoid the feeling that we’re simply living through the wrong timeline—thanks, McFly.

We may not have hoverboards, but America is teeming with the legal “Orb” from Woody Allen’s Sleeper, observes Todd Krainin:

The world never recovered after Albert Shanker, president of the United Federation of Teachers, acquired a nuclear warhead. Two hundred years later, in the year 2173, the territory once known as the United States is ruled by The Leader, the avuncular figurehead of a police state that brainwashes, surveils, and pacifies every citizen.

Every citizen except for our hero, Miles Monroe. Cryogenically frozen in the late 20th century, Monroe is thawed out in the 22nd. As the only person alive with no biometric record, Monroe is essentially an undocumented immigrant from the past, making him the ideal secret weapon for an underground revolutionary movement.

“What kind of government you guys got here?” asks a bewildered Monroe, after learning the state will restructure his brain. “This is worse than California!”

Monroe’s quest to take down the worse-than-Sacramento government takes him through a world that’s amazingly prescient for a film that aims for slapstick comedy. He gets high on the orb (space age marijuana), crunches on a 15-foot long stalk of techno-celery produced on an artificial farm (GMOs), impersonates a domestic assistant (Alexa), and joins a crunchy underground (#Resist), in order to defeat The Leader (guess who).

Sleeper‘s most memorable invention is the Orgasmatron, a computerized safe space that provides instant climaxes for a frigid and frightened populace. It’s basically the internet porn and sex robot for today’s intimacy-averse millennials.

In the highpoint of the film, Monroe attempts to clone The Leader from his nose. This in a film released 23 years before real doctors cloned Dolly the sheep from the cell of a mammary gland.

By the film’s end, Monroe is faced with the prospect of replacing The Leader with a revolutionary band of eco-Marxists. But some things never change.

“Political solutions don’t work,” he prophesies. “It doesn’t matter who’s up there. They’re all terrible.”

For a journalism outlet, we’ve been embarrassingly slow to recognize that Orson Scott Card’s Ender’s Game explains the media world we live in, argues Peter Suderman:

In a 2004 feature for Time, Lev Grossman explored of a new form of web-based journalism that was then radically reshaping both the political and media landscapes: blogs. Grossman profiled several bloggers, most of whom were young and relatively unknown, with little experience in or connection to mainstream journalism. Yet “blogs showcase some of the smartest, sharpest writing being published,” Grossman wrote. In particular, bloggers were influencing some pretty big national conversations about U.S. military actions and politics.

From the vantage of 2018, all this might seem like old news: The mainstream media has adopted and amplified many blogging practices. But even in 2004, the idea of user-produced, semi-anonymous journalism, posted directly to the net with no editorial filter, had been in circulation for years as a sci-fi conceit—perhaps most prominently in Orson Scott Card’s 1985 novel, Ender’s Game.

In the book, a child genius named Ender Wiggin is sent to an orbiting military academy to prepare for a military invasion. While he’s away, his adolescent siblings—themselves unusually gifted—hatch a plan to manipulate world politics by posting psuedononymous political arguments on “the nets.” These essays are read by citizens and politicians alike, and both siblings develop powerful followings. Eventually, they help prevent the world from exploding into planetary war, and pave the way for mankind’s colonial expansion into space.

Card’s narrative was too compact, its assumptions about the influence of online writing too simplistic. But it previewed the ways in which the internet would expand the reach and influence of little-known writers—especially political pundits—who lack conventional journalistic training or credentials. Today’s internet-based media landscape is neither a utopia nor a dystopia, but a lively, raucous, fascinating, and occasionally frustrating extrapolation of what Scott Card imagined before any of it existed in the real world.

This year is definitely one of Heinlein’s “crazy years,” says Brian Doherty:

Robert Heinlein was one of the first science fiction writers to create a fictional structure that seemed to privilege prediction, with his “Future History” sequence, collected in the volume The Past Through Tomorrow.

Prediction was not Heinlein’s purpose—storytelling was. But his “Future History” chart started off with the “Crazy Years”: “Considerable technical advance during this period, accompanied by a gradual deterioration of mores, orientation, and social institutions, terminating in mass psychoses in the sixth decade, and the interregnum.” Heinlein made this prediction in 1941, so the “sixth decade” meant the 1950s.

Did he really predict the Trump era? Heinlein fans have seen in wild ideological excesses on both left and right a clear sign that we are, collectively, losing our minds. Instapundit‘s Glenn Reynolds thinks we are certainly in Heinlein’s Crazy Years, noting it’s become a cliché among Heinlein fans to notice. He sees as evidence totemic but useless responses to policy crisis, and a social networking age that allows for tighter epistemic bubbles for information consumers and producers. Factually, the internet makes it stunningly easier for anyone to have opinions about politics and policy far better informed by accurate facts and trends than in any previous era. That so many might choose not to do so shows why predictions of “crazy years” can seem so eternally prescient: People can just be crazy (colloquially).

A lot of the “crazy” news these days that might lead to the never-witty declaration that it’s “not The Onion” come from unusual personal qualities of our president; some come from excesses of the desire to control others’ thought and expression. But if “crazy” means dangerous, then recent trends in crime domestically and wealth and health worldwide indicate we are mucking along well enough.

Indeed, as per the title of Heinlein’s anthology, the past is tomorrow and probably always will be. That times of technologic advance will be followed by “gradual deterioration” (read: changes) in mores, orientation, and social institutions is the kind of golden prediction of the dystopia we eternally are moving in (and always moving through) with which it’s hard to lose.

Loing before the 2016 Flyover Takeover, Walker Percy predicted a frayed nation would disassemble itself, writes Mike Riggs:

It’s the 1980s, and liberals have taken “In God We Trust” off the penny, while “knotheads”—conservatives—have mired the U.S. in a 15-year war with Ecuador. Liberals love “dirty movies from Sweden,” knotheads gravitate toward “clean” films, like The Sound of Music, Flubber, and Ice Capades of 1981. America’s big cities, meanwhile, are shells of themselves. “Wolves have been seen in downtown Cleveland, like Rome during the black plague.” Political polarization has even led to a change in international relations: “Some southern states have established diplomatic ties with Rhodesia. Minnesota and Oregon have their own consulates in Sweden.”

Our guide through the social hellscape of Love in the Ruins is Thomas More, a descendant of Sir Thomas More (author of 1516’s Utopia) and a lecherous Catholic psychiatrist with an albumin allergy who nevertheless chugs egg-white gin fizzes like water. A stand-in for Percy, More is a keen social taxonomist and a neutral party in the culture war. He notes that liberals tend to favor science and secularism; conservatives, business and God. But “though the two make much of their differences, I do not notice a great deal of difference between the two.” In the bustling Louisiana town of Paradise, wealthy knotheads and wealthy leftists live side by side, in nice houses, with new cars parked in their driveways, just as they currently do in Manhattan, Georgetown, and Palm Beach. One group may go to church on Sundays, the other bird watching, but they are more like each other than they are the “dropouts from, castoffs of, and rebels against our society” who live in the swamp on the edge of town.

Yet even the wealthy must bear the brunt of social frisson. A local golf course magnate alternates between depression and indignation as the poor of Paradise challenge his decision to automate the jobs at his country club.

Love in the Ruins is the most radical timeline extending from the King assassination, Kent State, and the Tate Murders, three historical moments that helped undo the World War II–era fantasy—ever more childish in hindsight—of America as a cohesive unit. We were not one then, and are not now. Percy saw 2018 coming from a four-decade mile.

You are all wrong, says Jesse Walker:

Identity has never been as fluid, fungible, and multiple as it is today. That guy you’re arguing with on Twitter might actually be a crowd of people. That crowd of people you’re arguing with might actually be just one guy. Trolls try on a persona for an hour, then discard it for something new. Bots adopt a persona and stick with it, but without an actual mind in command. Your identity might be stolen altogether, leaving you to learn that an entity that looks like you has been spending money, sending messages, or otherwise borrowing your life. You might even wake one day to discover that someone has inserted your head onto someone else’s body, all so a stranger can live out a fantasy.

You can decide for yourself how much of that is a utopia and how much is a dystopia. All I know is that at some point we started living in Being John Malkovich.

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Movie Review: Gringo: New at Reason

If there were a special place for middling cultural products—the so-so pop song, the not-entirely-bad book—that would be the proper destination for a movie like Gringo. There’s nothing really dislikable about the picture, but that’s partly because there’s not really much to it. You’d expect any movie featuring Charlize Theron and David Oyelowo to have at least a few redeeming moments, and this one does—but it remains irredeemably so-so.

Oyelowo (Selma, Interstellar) isn’t an actor ordinarily associated with comedy, but he should really do more of it—he’s slyly funny here, playing a guileless Chicago pharma exec named Harold Soyinka, whose world is about to blow up in his face. Harold is a Nigerian immigrant with an all-American work ethic, a loving wife (Thandie Newton), and a childlike faith in his boss, Richard Rusk (Joel Edgerton). Unfortunately, Richard is a complete scumbucket, and thus a perfect match for his business partner, Elaine Markinson (Theron), an ice-bitch sex terrorist (she fondly reminisces about having once “pulled a train” with the entire lacrosse team in a Dairy Queen parking lot), writes Kurt Loder.

View this article.

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Your Last Minute Jobs Preview: How The Market Will React To Wages

While we already did an extended payroll preview (here), below we provide a last minute summary of what Wall Street firms expect the (less important) payrolls number – consensus exp. at 205K – to be, courtesy of Anthony Barton:

  • BNP 225K
  • JPM 225K
  • Goldman 210K
  • Jefferies 210K
  • Morgan Stanley 210K
  • Nomura 210K
  • Wells Fargo 210K
  • Credit Suisse 205K
  • Consensus 205K
  • Scotia 200K
  • BMO 200K
  • Barclays 200K
  • UBS 199K
  • RBC 190K
  • Citi 185K
  • Daiwa 185K
  • Deutsche 185K
  • HSBC 185K
  • SocGen 180K
  • TD 175K
  • Merrill Lynch 160K

And here is Bloomberg showing that when it comes to the market reaction, it’s all about the wage data; specifically, average hourly earnings data “drove or helped drive market reaction to five of past six monthly U.S. employment reports” (the NFP numbers below are as reported at initial release, not as subsequently revised).

January data released Feb. 2: NFP rose 200k vs 180k est.

  • Treasuries fell after report also showed highest y/y increase in average hourly earnings since 2009; 10Y yield closed higher by 5.2bp following an 8.5bp increase the previous day, which had no clear catalyst
  • S&P 500 fell 2.1%, its biggest drop in 16 months, and slid another 6.6% over the next four days

December data released Jan. 5: NFP rose 148k vs 190k est.

  • Treasuries rallied, with 10Y yield falling as much as 2bp to session low in the minute after the data; gains erased amid expectations for heavy corporate issuance the following week
  • Avg hourly earnings rose 0.3%, in line with forecast
  • S&P 500 rose 0.7% to record high

November data released Dec. 8: NFP rose 228k vs 195k est.

  • 5s30s curve steepened by more than 3bp (5Y yield declined, 30Y rose) as average hourly earnings rose less than forecast, however move was mostly erased by end of day
  • S&P 500 rose 0.6%

October data released Nov. 3: NFP rose 261k vs 313k est.

  • USTs rallied in reaction to flat average hourly earnings vs est. for 0.2% increase; y/y rate fell to 2.4%, lowest in more than a year; gains were temporarily erased, aided by unexpected increase in ISM Non-Manufacturing to highest level since 2005
  • 10Y yield closed lower by 1.3bp; 5s30s flattened to new multi-year low and volatility slumped
  • S&P 500 rose 0.3% to record high

September data released Oct. 6: NFP fell 33k vs est. for 80k increase; data reflected disruptions caused by hurricanes Harvey and Irma

  • USTs fell in reaction to 0.5% average hourly earnings increase (vs 0.3% est.), biggest since 2008. 10Y yield rose as much as 5.2bp to 2.40%, highest since May; it retreated from session high as stocks fell on report North Korea planned missile test and closed higher by 1.1bp
  • S&P 500 fell 0.1%

August data released Sept. 1: NFP rose 156k vs 180k est.

  • USTs rose as average hourly earnings also increased less than forecast and unemployment rate ticked higher, but failed to hold advance and closed lower following bigger-than-forecast increase in ISM Manufacturing to highest level in six years; 10Y yield closed higher by 4.9bp at 2.166% after trading at YTD low 2.084% earlier in week
  • S&P 500 rose 0.2%

(Source: Bloomberg)

* * *

Finally, remember, it’s not what they say – with plans to raise compensation at all time highs – but what they do, that wage inflation has barely budged from the post-crisis low.

 

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Crypto Carnage Continues – Bitcoin Below $9000

After a triple whammy of FUD this week (SEC crackdown, Mt.Gox overhang, and Japan shutdowns), cryptocurrencies are seeing broad-based selling pressure (majors down around 20-25%) with Bitcoin back under $9000.

Correlation has picked up once again as cryptos push lower…

 

And Bitcoin quickly broke through $10k and $9k barriers…

 

But it’s a sea of red across the crypto-space…

 

With Ethereum back in the red year-to-date…

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Frontrunning: March 9

  • Economists Forecasting Jobless Rate of 4%, the First Time Since 2000 (WSJ)
  • Trump Launches Global Race for Exclusion From Steel Tariffs (BBG)
  • China, Europe Slam as U.S. Metalworkers Cheer (WSJ)
  • Trump’s Historic Bet on Kim Summit Shatters Decades of Orthodoxy (BBG)
  • Over hotpot and soju, North Korea’s Kim Jong Un joked about himself (Reuters)
  • Trump Faces Prospect of Embarrassing GOP Loss in Pennsylvania (BBG)
  • Blown Earnings Calls Started the Bull Market. One Day They’ll End It (BBG)
  • Japan fears being sidelined (Reuters)
  • NJ Transit Trains Delayed After Rush-Hour Disruption (BBG)
  • Boeing has ‘cash horsepower’ for targeted acquisitions (Reuters)
  • Bitcoin’s Bad Week Is Getting Worse as Selloff Deepens to 20% (BBG)
  • Wynn Resorts Settlement Removes a Barrier to Steve Wynn Stake Sale (WSJ)
  • UBS Boosts Compensation for CEO and Staff After Profit Rises (BBG)
  • The Capital of America’s Gun Industry Hates Guns (BBG)
  • Tesla chief Musk says China trade rules uneven, asks Trump for help (Reuters)
  • At-Home Cancer-Risk Test Opens New—and Fraught—Field (WSJ)
  • Broadcom says will not sell national security assets to foreign firms (Reuters)
  • How Much Does Dwayne ‘The Rock’ Johnson Make for One Movie? (WSJ)
  • Police Have a New Tool in Their Arsenal: Therapists (WSJ)
  • Humanity’s Food Security Is More at Risk Than You Realize (BBG)

 

Overnight Media Digest

WSJ

– Uber Technologies Inc has reached an agreement to sell most of its Southeast Asia operations to local rival Grab Inc, ending a costly fight for market share in the fast-growing region. on.wsj.com/2IaeMzr

– Tesla Inc Chief Executive Elon Musk took to Twitter on Thursday to lobby the president on China’s trade stance on auto makers, saying the Middle Kingdom’s current rules “make things very difficult.” on.wsj.com/2IcXqCb

– Walt Disney Co’s shareholders on Thursday voted down a non-binding endorsement of the compensation given to Chairman and Chief Executive Robert Iger following an increase in December. on.wsj.com/2IeyRVx

– Troubled toy chain Toys “R” Us Inc is preparing to liquidate all its U.S. stores and abandon efforts to restructure through the bankruptcy process after a weak holiday season torpedoed plans to reorganize. on.wsj.com/2Ibe8BI

– Cigna Corp’s $54 billion deal for Express Scripts Holding Co is the latest sign that healthcare’s biggest players believe they can no longer go it alone, and they must branch into other businesses to forge integrated products aimed at curbing costs. on.wsj.com/2IdzwGP (Compiled by Bengaluru newsroom)

 

 

NYT

– Walt Disney Co has turned to one of its favorite filmmakers, Jon Favreau, to produce and write a live-action “Star Wars” television series for its upcoming streaming service. nyti.ms/2HgQaE8

– The Trump administration rejected Idaho’s plan to allow the sale of stripped-down, low-cost health insurance that violates the Affordable Care Act. nyti.ms/2p3LJES

– Former U.S. President Barack Obama is in advanced negotiations with Netflix to produce a series of high-profile shows that will provide him a global platform after his departure from the White House. nyti.ms/2FzM7Wd

– Adult film actress Stormy Daniels filed a lawsuit this week seeking to break a 2016 agreement to keep silent in return for a $130,000 payout, opening what could be a precarious new legal front for a White House already beset by the investigation by the special counsel Robert Mueller III. nyti.ms/2FF3rcj

– U.S. President Donald Trump defied opposition from his own party and protests from overseas as he signed orders on Thursday imposing stiff and sweeping new tariffs on imported steel and aluminum. nyti.ms/2FBbcQG

 

Canada

THE GLOBE AND MAIL
** U.S. President Donald Trump has exempted Canada and Mexico from his steel and aluminum tariffs pending the renegotiation of NAFTA, simultaneously offering his continental trading partners a welcome reprieve and tightening the vise on them at the bargaining table. tgam.ca/2HkZQgy

** Canada’s economy is “progressing well” in the face of protectionist threats and the impact of higher interest rates on heavily indebted consumers and homeowners, according to deputy Governor of Bank of Canada Timothy Lane. tgam.ca/2Hkph26

NATIONAL POST
** Alberta signaled on Thursday it’s prepared to escalate its fight with British Columbia over the Trans Mountain pipeline by cutting off oil exports if obstruction of the C$7.4 billion ($5.75 billion) expansion continues. Alberta Premier Rachel Notley said in a speech that province intends to do whatever it takes to end British Columbia’s pipeline blockade. bit.ly/2p0OaZa

** Housing starts rose to 229,737 in February, a 7 percent increase compared to the previous month, according to seasonally adjusted annual rates from the Canada Mortgage and Housing Corporation. Construction of condominiums and other dwellings containing multiple units jumped by 14 percent nationwide, compared to a 7 percent decline in single-detached houses. bit.ly/2HgKo5l

 

Britain

The Times

– The Financial Conduct Authority delayed shutting down a broker at the centre of allegations of money laundering and share ramping despite fears the firm was close to collapse in order to allow the FBI to complete an undercover investigation. bit.ly/2HgrJXq

– Aviva Plc was accused on Thursday of considering “very aggressive action” against thousands of retail investors after it said it may buy back their lucrative bonds without paying a premium. bit.ly/2p0Oebd

The Guardian

– Channel 4 has reached a deal with the government to move hundreds of staff out of London and create a new “national HQ” in another city – but it will not be forced to sell its 100 million pounds ($138.00 million) base in London. bit.ly/2HhZ5F8

– Wagamama, TGI Fridays, Marriott Hotels and Karen Millen are among the companies named and shamed by the government for failing to pay the legal minimum wage. bit.ly/2p0MYVx

The Telegraph

– The European Central Bank has dropped its long-standing pledge to boost stimulus if conditions deteriorate, signalling the triumph of German-led hawks and marking a major turning point in the eurozone’s monetary regime. bit.ly/2HkSHx3

– UK would face a better prospect of avoiding U.S. tariffs on steel and aluminium after leaving the European Union, U.S. President Donald Trump indicated Thursday night. bit.ly/2HinM4f

Sky News

– London is “in contention” for the listing of oil giant Aramco, and is an attractive destination, the Saudi Arabian energy minister has told Sky News. bit.ly/2HiS72B

– KFC has returned to its old delivery contractor to supply chicken to restaurants after hundreds of outlets were forced to close last month. bit.ly/2oWR3dk

The Independent

– The European Union has rejected the Chancellor Philip Hammond’s bid to include an unprecedented section on financial services in the post-Brexit trade deal, warning that “life will be different” for banks once Britain leaves. ind.pn/2p4Pydl

 

 

 

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Gary Cohn Tells Trump To Pick Knight As Replacement

Gary Cohn may have been the “Last Jedi” (according to Citi), but he has picked a Knight to replace him.

Confirming rumors that emerged earlier in the week, Politico reports that the now former White House chief economic adviser Gary Cohn is focusing on one more thing he wants to do before he leaves his post: help President Donald Trump pick his successor, and it appears he is eager to preserve the continuity set by his short, tax-free tenure.

According to Politico sources, the candidate Cohn is pushing for is his deputy director of domestic policy, Shahira Knight — a former Hill staffer and ex-lobbyist — as his replacement as National Economic Council director.

Shahira Knight

Best known for her May 2017 Bloomberg profile as “The Economist Who Helped Write Trump’s Tax Plan in Five Days“, Knight is the NEC’s resident tax expert, who was integral to working with lawmakers to develop the historic tax legislation; more importantly unlike Peter Navarro, she is said to have “allies throughout the Hill and downtown.” One Republican lobbyist said she has “the inside track if she wants it.”

Whoever inherits the job faces the challenge of retaining the same level of influence as Cohn did. The former Goldman Sachs banker and New York Democrat turned the non-Senate confirmed slot into a powerhouse position and quickly became a “killer” in Trump parlance, who the president largely viewed as a peer.

Knight’s biggest competitor is said to be Larry Kudlow, a former associate director for economics and planning in the Office of Management and Budget under President Ronald Reagan and now a CNBC pundit and informal adviser to the president. He also keeps close ties to Cohn. “But Kudlow has openly rejected Trump’s tariffs push — leading some to say he’ll never get the job.”

Knight faces another challenge: Trump himself. If picked, she will have to fight “to ensure the roughly 30-person NEC team stays in the policymaking loop in a nontraditional White House where Trump often prefers to make decisions solo.”

To be sure, Gary’s opinion will carry a lot of weight with Trump, who praised the former Goldman COO in a press conference on Thursday:

“Gary had the ability to bond with the president in a special way,” said Paul Winfree, Trump’s former deputy director of the Domestic Policy Council, now director of the Roe Institute for Economic Policy Studies at The Heritage Foundation. “The president respected Gary’s past life and present. They are both rich guys from New York.”

Winfree added: “Gary was also able to bring a certain credibility to the policy discussions based on his life. He could say, ‘Mr. President, I know this works because I’ve seen it work with my own eyes.’ And the president believed him because Gary had clearly made a livelihood practicing what he preached. I suspect that a similar personality would have similar influence.”

Still, as Politico notes, this week’s fight over tariffs – which ended up being substantially watered down prompted amused comments if Gary may not come back himself – “exposed the limits of Cohn’s influence.”

Whoever succeeds him will have to contend with the ascendance of White House aides like Stephen Miller and Peter Navarro, who favor tighter immigration restrictions and more protectionist trade measures — anathema to economists, many business executives and Wall Street.

And speaking of Navarro, as Axios reported yesterday, the China hawk is also said to want the position. “He is well-liked by Trump because he often tells the president what the president already believes, said Winfree, the former administration official.”

That said, Cohn resignation and Navarro’s ascent may be a catalyst for more depatures: at least three NEC staffers are said to be considering leaving the White House within the next few months, according to three people with close White House ties. More could follow depending on Cohn’s successor.

Many NEC staffers have privately told friends and associates they would quit if Navarro, the White House’s resident trade hawk, got the job — a possibility that one senior administration official called a long shot.

There’s also a sense among some administration officials that the White House has yet to hit on a candidate with enough gravitas needed to lead the NEC in the Trump era and must dig deeper for candidates.

Other names in the mix include OMB Director Mick Mulvaney and the head of the Council of Economic Advisers Kevin Hassett. Few in the administration want to move either men from their current posts, since they are widely viewed as competent and even-keeled.

Other names mentioned include Robert Steel, an investment banker and former Goldman Sachs executive who served in the Treasury Department under President George W. Bush. It’s not clear if Steel would be interested in the job.

Press reports have also mentioned former Federal Reserve Gov. Kevin Warsh, but Warsh is said by those who know him to not be interested in the position.

At a White House briefing on Wednesday, press secretary Sarah Huckabee Sanders declined to comment on prospective candidates. “I’m not going to get into any naming or a list, but I can tell you that the president has a number of people under consideration, and he’s going to take his time making that decision,” she said.

* * *

According to Politico Cohn is expected to advise the president on the pick and help with the transition — with input from Cabinet members such as Treasury Secretary Steven Mnuchin, other economic advisers, and Trump’s unofficial kitchen cabinet of longtime friends, real estate developers and businessmen.

But White House officials like to remind outsiders that the president is surrounded by smart, capable aides but that none of them — no matter how competent they seem — are as important to the American public as the president himself.

“At the end of the day, the American people voted overwhelmingly for President Donald J. Trump,” Sanders said. “They voted for his policies, his agenda and for him to be the ultimate decision-maker.”

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