In a Daily Caller op-ed calling the Russian meddling narrative a “false public manipulation,” Russian billionaire Oleg Deripaska claims that Daniel Jones – a former FBI investigator, Feinstein staffer and now a Fusion GPS operative – told the Russian Oligarch’s lawyer in March, 2017 that Fusion GPS was funded by “a group of Silicon Valley billionaires and George Soros.“
Daniel J. Jones
Of note, Deripaska’s lawyer, D.C. lobbyist Adam Waldman, recommended Jones to investigate and verify the claims from the Fusion GPS anti-Trump dossier assembled by former UK spy Christopher Steele. Waldman was also an intermediary between Sen. Mark Warner (D-VA) and Steele in trying to arrange a meeting – which suggests that Waldman, Jones, Steele and Fusion GPS are all connected.
Deripaska describes the ongoing “Russia narrative” as nothing more than a scandal manufactured by the deep state. “Wagging the dog costs money,” writes Deripaska. “So, who is the “funding mechanism” of this “shadowy government?”” Why, none other than billionaire financier George Soros, according to Daniel Jones – as relayed to Congressional investigators by Deripaska’s attorney Adam Waldman:
[O]n March 16, 2017, Daniel Jones — himself a team member of Fusion GPS, self-described former FBI agent and, as we now know from the media, an ex-Feinstein staffer — met with my lawyer, Adam Waldman, and described Fusion as a “shadow media organization helping the government,” funded by a “group of Silicon Valley billionaires and George Soros.” My lawyer testified these facts to the Senate Intelligence Committee on Nov. 3. Mr. Soros is, not coincidentally, also the funder of two “ethics watchdog” NGOs (Democracy 21 and CREW) attacking Rep. Nunes’ committee memo. –Oleg Deripaska
Jones currently runs the Penn Quarter Group, a “research and investigative advisory” firm whose website was registered in April of 2016, days before Steele delivered his first in a series of Trump-Russia memos. Jones began tweeting out articles suggesting illicit ties between the Trump campaign and Russia as early as 2017.
As The Federalist’s Sean Davis reported last month, Congressional documents and leaked texts between Sen. Mark Warner (D-VA) and Deripaska’s attorney Adam Waldman reveal that Jones is “intimately involved with ongoing efforts to retroactively validate” the Steele / Fusion GPS memos.
Jones comes up in leaked text messages between Sen. Warner and Waldman as a point of contact for Christopher Steele. The encrypted text messages, leaked to Fox News, discuss efforts by Warner to secure Steele’s testimony.
“I spoke w Steele,” Waldman wrote on April 25, 2017. “He repeated the same position which is that he wants to be helpful but is fearful of the triumvirate of cost, time suck and reputation.”
“He asked me what your concern was about a letter first and I explained it but he would still like as a first protective step from you and [Sen. Richard] Burr asking him and his partner to assist w the investigation by answering questions,” Waldman added. “He [Steele] said he will also speak w Dan Jones whom he says is talking to you.”
“I pointed out there is no privilege in that discussion although Dan [Jones] is a good guy and very trustworthy guy. I encouraged him again to engage with you for the sake of the truth and of vindication of the dossier,” he wrote. –Adam Waldman to Mark warner
Jones’ name was also mentioned in a list of individuals from a January 25 Congressional letter from Senators Grassley and Graham to various Democratic party leaders who were likely involved in Fusion GPS’s 2016 efforts. The letter seeks all communications between the Democrats and a list of 40 individuals or entities, of which Jones is one.
Deripaska – Russia’s richest man before the 2008 financial crisis, has recently come under fire for his association with short-lived Trump campaign manager Paul Manafort. Last week a prostitute from Belarus claimed to have a tape of Deripaska discussing “plans” for the 2016 election, which she says she’ll release if someone gets her out of a Thai prison.
The “Deep State”
“Technology and the disintegration of evidence-based journalism permit a surprisingly small number of individuals to destroy bilateral or multilateral relations.” Deripaska writes. “Their motivation in shifting from an inconvenient reality into their desired reality is power and military-industrial commercial interests.”
What has been inelegantly termed the “Deep State” is really this: shadow power exercised by a small number of individuals from media, business, government and the intelligence community, foisting provocative and cynically false manipulations on the public. Out of these manipulations, an agenda of these architects’ own design is born.
“Unfortunately, I am personally familiar with this group,” writes Deripaska. “Before they moved to their current, bigger ambitions of reversing the U.S. presidential election results, they scurrilously attacked me and others from the shadows for two decades. The various story lines and roles they have created for me don’t survive close scrutiny and are internally inconsistent, yet they simply follow the “Wag the Dog” playbook: We don’t need it to prove to be true. We need it to distract them.”
While Deripaska may be a Putin-aligned Russian oligarch – he’s not alone in the growing chorus of voices on both sides of the aisle pointing to the absurdity of the Russia narrative – with Democrat rep Jim Himes even saying it’s a “running joke” between Democrats.
If the goal was to divide the nation after a Trump win, the “deep state” – with (allegedly) Soros-funded opposition research firm Fusion GPS at its side, has done a remarkable job.
After a barrage of breaking, surprise headlines and geopolitical developments, markets fall back to the familiar rhythm of trading the monthly payrolls (+205K exp), or rather, the far more important average hourly earnings (+2.8% Y/Y exp.) report. This morning, global shares hit a one-week high before easing a touch, as caution ahead of jobs data, and a potential disappointment in wage inflation outweighed a potential breakthrough in nuclear tensions over the Korean peninsula.
As a result, futures are somewhat mixed, with Asia trading higher, while Europe started off on the back foot but has recovered losses. The MSCI All-Country World index was 0.1% higher and set for a weekly gain of almost 2%.
As is traditionally the case ahead of payrolls, S&P futures have hugged the flatline.
Gains came mostly from Asian stocks which staged sharp rallies after U.S. President Donald Trump said he was prepared to meet North Korea’s Kim Jong Un, potentially marking a major breakthrough in nuclear tensions between the two countries. The summit news overshadowed a warning from China that it will take “strong” measures to counter U.S. trade tariffs.
“While it is easy to be cynical, one can’t help feeling these talks could well go the same way as previous attempts. But nonetheless it will be interesting to see how this one plays out,” said Michael Hewson, chief markets analyst at CMC Markets.
Commenting on Trump’s two main announcement this week, one desk had the following interestinh commentary:
President Trump must be delighted that his policies are paying off. His bellicose tweets have brought North Korea to the negotiating table and his use of cold war steel tariffs is effectively an invitation for trading partners to make him their best offer in order to secured tariff exemption. A weaker dollar is clearly part of Trump’s protectionist agenda as well and we believe investors will be looking to sell into any near-term dollar rallies.
As previewed, the market now will focus onto today’s employment report in the US. The consensus is for a 205k February payrolls number, which follows 200k in January. The unemployment rate is expected to dip to 4.0% from 4.1%. But it’s the average hourly earnings print which is the bigger component focus for the market right now given the obsession with inflation. The market forecasts a +0.2% mom print (which should lower than annual rate by one-tenth to +2.8% yoy, driven by base effects).
Going into payrolls, Asian stocks were higher across the board after the lead from US where Trump confirmed aluminium and steel tariffs, but exempted NAFTA partners and was also said to be open to providing relief for allies. In addition, Asia-Pac risk appetite was further bolstered by geopolitical developments in which the South Korean National Security Office chief announced that North Korean Leader Kim is committed to denuclearization and will refrain from conducting further tests, with President Trump and North Korea’s Kim to meet by May.
Overnight, in its latest announcement, the BoJ kept monetary policy unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%. The decision was made by 8-1 vote with board member Kataoka the sold dissenter, who called for the BoJ to buy JGBs so 10yr yields or longer drop further and repeated that the BoJ should clarify it will ease further if domestic factors delay reaching price target. At the post-meeting press conference, Governor Kuroda faced a barrage of questions about the so-called exit from the current monetary easing scheme, but according to Goldman, the governor damped expectations for the exit for the foreseeable future. In fact, Goldman adds, and we agree, that it will be difficult for the BOJ to normalize interest rates before the impact of the next consumption tax hike, slated for October 2019, has run its course, given the weakness of upward pricing pressures and the strong intentions of the government.
Australia’s ASX 200 (+0.3%) and Nikkei 225 (+0.5%) were positive but with upside capped by a subdued commodities sector and weakness across steel names on Trump tariffs, while KOSPI (+1.0%) outperformed on the further appeasement in the Korean peninsula. Not helping the growth narrative was China’s CPI which came in blistering hot, surging 2.9%, or the most in 5 years. Elsewhere, Hang Seng (+1.1%) was underpinned amid the broad positivity in the region, while the Shanghai Composite (+0.6%) somewhat lagged after PBoC inaction led to a net weekly drain of CNY 240bln.
Also overnight, outgoing PBOC Governor Zhou Xiaochuan said market-access reforms should be accelerated and that the world’s second-largest economy “can be bolder in opening up”; Deputy Governor Yi Gang said stable progress will be made on capital-account convertibility.
Other key Chinese data:
Chinese CPI (Feb) Y/Y 2.9% vs. Exp. 2.5% (Prev. 1.5%); highest in over 4 years. (Newswires)
Chinese PPI (Feb) Y/Y 3.7% vs. Exp. 3.8% (Prev. 4.3%)
Chinese New Yuan Loans (CNY)(Feb) 839B vs. Exp. 900B (Prev. 2900B). (Newswires)
Chinese Aggregate Financing (CNY)(Feb) 1.17tln vs. Exp. 1.07tln (Prev. 3.06tln)
Chinese Money Supply M2 (Feb) Y/Y 8.8% vs. Exp. 8.7% (Prev. 8.6%)
Chinese commodities were hit hard by the jump in inflation and trade war announcement, with iron ore plunging 5%, now down 14% from February peak; steel rebar futures -7.8% this week in Shanghai, on course for biggest slump in a year.
DCE Iron Ore
European equities erased earlier losses before edging higher, chasing gains in the U.S. and Asia as the U.S. non-farm payrolls report draws near. Automakers remain underperformers as trade-related concerns linger. The Stoxx Europe 600 Index was fractionally higher (+0.1%) and heading for a weekly advance of 2.6%. GVC Holdings is one of the best performers on the gauge after the company said it made a strong start to 2018. Lagardere drags media shares to the worst industry group performance after posting weaker-than-expected full-year results. German Jan. ind. production fell 0.1% m/m; est. +0.6% m/m. U.K. February retail sales drop as BDO sees more ‘casualties.’
In global macro, the overnight narrative was dominated by the yen and the Norwegian krone, with the USDJPY jumping after Trump agreed to meet Kim Jong Un in an unprecedented summit; meanwhile, Norway’s headline inflation print beat every single estimate and came in higher than the central bank’s newly reduced target, providing fodder to krone bulls. The EUR/USD dropped below 1.2300, while MXN and CAD among the strongest major currencies after Mexico and Canada’s tariff exemption. Asia’s emerging currencies were mixed as concern over U.S. metals tariffs and possible retaliation from other nations was offset by news of the first ever meeting between the leaders of the U.S. and North Korea.
Meanwhile, few investors sought the safety of Treasuries ahead of February’s non-farm payrolls data. Treasury yields rise across the curve, led by 7Y-10Y sector. Core euro-area bonds extend losses as traders build concession ahead of large supply next week.
In the commodities complex, WTI and Brent crude futures remain in close proximity to yesterday’s lows with energy newsflow relatively light ahead of today’s Baker Hughes rig count. In metals markets, spot gold remains modestly softer after yesterday’s sell-off with prices suffering from an apparent easing in geopolitical tensions. Chinese steel futures were pushed to their lowest level since November as domestic producers call on the Chinese government to increase its efforts in retaliating to Trump’s tariff plans whilst sentiment also hampered for copper prices which were seen at their lowest level since September 2017.
Expected data include non-farm payrolls, unemployment and wholesale inventories. Big Lots and American Woodmark are among companies reporting earnings. The Fed’s Evans (1.40pm, 3.45pm and 5.45pm GMT) and Rosengren (5.40pm GMT) are both expected to speak on monetary policy and the outlook following the report so that’s worth also keeping an eye on.
Market Snapshot
S&P 500 futures little changed at 2,744.25
STOXX Europe 600 up 0.1% to 376.93
MXAP up 0.3% to 175.49
MXAPJ up 0.6% to 579.41
Nikkei up 0.5% to 21,469.20
Topix up 0.3% to 1,715.48
Hang Seng Index up 1.1% to 30,996.21
Shanghai Composite up 0.6% to 3,307.17
Sensex down 0.3% to 33,266.66
Australia S&P/ASX 200 up 0.3% to 5,963.23
Kospi up 1.1% to 2,459.45
German 10Y yield rose 2.0 bps to 0.648%
Euro up 0.02% to $1.2314
Italian 10Y yield rose 4.1 bps to 1.728%
Spanish 10Y yield rose 2.0 bps to 1.428%
Brent futures up 0.6% to $63.96/bbl
Gold spot down 0.2% to $1,319.11
U.S. Dollar Index little changed at 90.23
Top Overnight News
Trump hailed “great progress” in talks with North Korea. While a South Korean official said the meeting would take place by May, the White House indicated no timing has been set
U.S. slapped a 25% tariff on steel imports and 10% on aluminum on Thursday. The U.S. excluded Mexico and Canada, a concession that will remain in place as long as they reach agreement on a new North American Free Trade Agreement that meets U.S. satisfaction
People’s Bank of China Governor Zhou Xiaochuan said market-access reforms should be accelerated and that the world’s second-largest economy “can be bolder in opening up”; Deputy Governor Yi Gang said stable progress will be made on capital- account convertibility.
Data released Friday showed Chinese consumer inflation climbed 2.9% in February, beating a forecast of 2.5%
President Donald Trump and the Republican Party are being forced to put their political muscle into the race for a Pennsylvania House seat that should be theirs for the taking; it would be an embarrassing defeat for the president and yet another sign of a weakened GOP heading into the November midterm elections that will decide control of Congress
U.K. officials don’t expect to clinch a Brexit deal until two months before exit day, in March 2019, increasing the chances of chaos for executives and lawmakers
While news on the tariff exemption and Korean talks were seen as positive, analysts and investors said they’re waiting on follow-through actions on the summit and possible trade measures from other countries
The Bank of Japan stayed the course with its monetary stimulus
U.K. officials don’t expect to clinch a Brexit deal by the end of the year and privately think January is the real deadline to get an accord in time for exit day, according to people familiar with the negotiations
Asian stocks were higher across the board after the positive lead from US where on one hand President Trump confirmed aluminium and steel tariffs, but exempted NAFTA partners and was also said to be open to providing relief for allies. In addition, Asia-Pac risk appetite was further bolstered by geopolitical developments in which the South Korean National Security Office chief announced that North Korean Leader Kim is committed to denuclearization and will refrain from conducting further tests, with President Trump and North Korea’s Kim to meet by May. ASX 200 (+0.3%) and Nikkei 225 (+0.5%) were positive but with upside capped by a subdued commodities sector and weakness across steel names on Trump tariffs, while KOSPI (+1.0%) outperformed on the further appeasement in the Korean peninsula. Elsewhere, Hang Seng (+1.1%) was underpinned amid the broad positivity in the region, while Shanghai Comp. (+0.6%) somewhat lagged after PBoC inaction led to a net weekly drain of CNY 240bln, while participants also digested US tariffs alongside mixed Chinese lending and inflation data. Finally, 10yr JGBs were flat with markets focused on riskier assets and after an uneventful BoJ announcement. The PBoC skipped open market operations for a net weekly drain of CNY 240bln vs. last week’s CNY 120bln net injection.
Overnight, outgoing PBoC Governor Zhou said China’s economy will be less reliant on quantitative stimulus and that China may reduce reliance on money supply to boost growth. Responding to Trump’s tariffs, China Mofcom said it firmly opposes US trade measures and urged the US to withdraw tariffs on steel and aluminium, while it added it will take strong measures to safeguard its own interests.
Other Chinese data:
Chinese CPI (Feb) Y/Y 2.9% vs. Exp. 2.5% (Prev. 1.5%); highest in over 4 years. (Newswires)
Chinese PPI (Feb) Y/Y 3.7% vs. Exp. 3.8% (Prev. 4.3%)
Chinese New Yuan Loans (CNY)(Feb) 839B vs. Exp. 900B (Prev. 2900B). (Newswires)
Chinese Aggregate Financing (CNY)(Feb) 1.17tln vs. Exp. 1.07tln (Prev. 3.06tln)
Chinese Money Supply M2 (Feb) Y/Y 8.8% vs. Exp. 8.7% (Prev. 8.6%)
The BoJ kept monetary policy unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%. The decision was made by 8-1 vote with board member Kataoka the dissenter, who called for the BoJ to buy JGBs so 10yr yields or longer drop further and repeated that the BoJ should clarify it will ease further if domestic factors delay reaching price target.
Top Asian News
HNA Unloads More Land in Hong Kong as Selling Spree Picks Up
Indonesia Orders Coal Price Cut to Shield Power Producers
Diabetes Drug Developer Hua Is Said to Pick Hong Kong for IPO
BOJ Keeps Stimulus Unchanged Ahead of New Term for Kuroda
China Looks to Claw Back $1.4 Trillion in Lost Tech Listings
European bourses have seen a tame start to the session as is often the case during pre-NFP trade (Eurostoxx 50 -0.2%) with EU stocks not joining in on the gains seen overnight that came amid potential reprieve for US allies on the tariff front and a de-escalation of geopolitical tensions. Sector specific performance has been relatively broad-based thus far with some slight underperformance in material names following price action seen overnight in the metals complex. In terms of individual movers, GVC (+3.1%) leads the Stoxx 600 following their latest earnings report with Lagardere the laggard (-6.4%) after their earnings statement was met with a cold reception by the market.
Top European News
U.K. Industry Output Jumps Amid Oil Rebound, Record Factory Run
German Economic Momentum Moderates as Production, Exports Slip
Czech Inflation Dips Under Target as Central Bank Halts on Rates
Rotate Out of European Tech and Into Financials, UBS Says
In FX, USD majors are broadly split down the middle as the safer-havens underperform on latest US-NK developments and further signs that President Trump is willing to approach import tariffs on a country by country basis. Usd/Jpy has now broken free from its recent 106.00 anchor to the upside, above 106.50 and through the 20 DMA around 106.75-80, but could be contained by hefty option expiries within a new 106.50-107.00 range (1.2 bn and 3.8 bn respectively), with the upper end not just more alluring due to the size of interest at the strike, but also perhaps compelling if US jobs data is strong (wages especially). Usd/Chf is testing 0.9500, while Eur/Usd is trading either side of the 1.2300 handle and remaining lower after Thursday’s sharp reversal from initial postECB/Draghi presser peaks. In terms of tech analysis, 1.2334 seems to be capping the upside (21 DMA), while support is seen down at 1.2245 and there is also big expiry interest in close proximity with 1.8 bn running off at 1.2300 and 2.3 bn at 1.2350. The Loonie is amongst the G10 outperformers and back below 1.2900 vs the Greenback after Canada (and Mexico) got an indefinite exemption from steel and aluminium taxes pending NAFTA negotiations. However, today’s employment report offers plenty of scope for independent impetus and there are some decent option expiries that could come into play around 1.2815-25 (1.1 bn) and 1.3000 (1.6 bn). Elsewhere, Eur/Nok dropped (to sub-9.600) on stronger than expected Norwegian inflation data, with headline CPI above the new 2% target level just ahead of next week’s policy meeting. Looking at the Dollar Index, yesterday’s close above the 21 DMA at 89.820 bodes well for further recovery gains and a breach of the topside from the current circa 90.100-300 range.
In commodities, WTI and Brent crude futures remain in close proximity to yesterday’s lows with energy newsflow
relatively light ahead of today’s Baker Hughes rig count. In metals markets, spot gold remains modestly softer after yesterday’s sell-off with prices suffering from an apparent easing in geopolitical tensions. Chinese steel futures were pushed to their lowest level since November as domestic producers call on the Chinese government to increase its efforts in retaliating to Trump’s tariff plans whilst sentiment also hampered for copper prices which were seen at their lowest level since September 2017
US Event Calendar
8:30am: Change in Nonfarm Payrolls, est. 205,000, prior 200,000
Unemployment Rate, est. 4.0%, prior 4.1%
Average Hourly Earnings MoM, est. 0.2%, prior 0.3%
Average Hourly Earnings YoY, est. 2.8%, prior 2.9%
Average Weekly Hours All Employees, est. 34.4, prior 34.3
Labor Force Participation Rate, est. 62.7%, prior 62.7%
I spent the last night before holidays at a big DB macro dinner with most people fixated about rates, inflation, and risks to the dollar weakness view. The risks to growth due to a China slowdown did come up a few times as well which it hadn’t as much at previous similar events I’ve been at. Usually at these dinners there tends to be quite consensual themes running through the core of it. However there didn’t seem to be high conviction last night. It’s seems a combination of the vol shock, the subsequent recovery, confusion about whether yields have peaked for now and Trump’s tariff plan have left conviction low.
Before the dinner, Deutsche Bank held its 8th annual Global Bank Capital Forum in London. Every year, it brings together major investors, issuers and senior regulators to discuss the latest market and regulatory developments in banking. This year, the event was attended by 120 investors and 70 representatives of banks from Europe, North America and APAC. The keynote address was delivered by William Coen, Secretary General of the Basel Committee on Banking Supervision, and the closing speech was given by Stanley Fischer, Vice Chairman of the Federal Reserve in 2014-2017.
Moving on to today, it’s the 9th anniversary of the closing low for the S&P 500 from the GFC. How time flies. In the PDF today we show our usual performance review chart for this period. There’s also some accompanying text further down the page to mark this occasion. Today is also payrolls day and in particular we’ll get the next instalment of the averagely hourly earnings saga that last month created mayhem in financial markets (full preview below). Ahead of that we’ve just had news of the BoJ policy meeting where members voted 8-1 to keep its yield curve settings and asset purchases unchanged while the statement reiterated that inflation expectations have been “more or less unchanged”. We shall hopefully learn more from Governor Kuroda’s press conference at 3:30pm local time which is just before our note goes to print.
The other big news this morning – that could lead to lower geopolitical risks – is that the US and North Korean leaders may meet for the first time after the South Korean National Security Council Chief Chung Eui-yong said North Korean leader Kim Jong Un “expressed his eagerness to meet President Trump as soon as possible”, while Trump said he would meet Kim “by May to achieve permanent denuclearization” by the North. In Asia, markets have pared back larger gains but remain higher with the Nikkei (+0.48%), Kospi (+0.92%), Hang Seng (+0.87%) and China’s CSI 300 (+0.55%) all up. Elsewhere, China’s departing PBOC Governor Zhou noted that “when we’re pursuing quality-oriented (economic) growth, we’ll depend less heavily on the credit-base growth model”. Datawise, China’s February CPI was above market at 2.9% yoy (vs. 2.5% expected) while the PPI moderated further to 3.7% yoy (vs. 3.8% expected).
The BoJ this morning follows a market moving ECB meeting yesterday where hawkish language was spun dovishly by Draghi in the press conference leading to a big round trip for the Euro and Government bonds. In terms of language, the most significant development yesterday was the ECB dropping the pledge to increase the asset purchase programme if needed following the policy meeting. Specifically the March statement removed the sentence “if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the asset purchase programme (APP) in terms of size and/or duration”. While a change to the easing guidance was expected, the complete removal rather than toning down or change in reaction function was a bit more of a surprise to markets.
To be fair the press conference wasn’t hugely eventful but markets reacted in a way which suggested a more dovish Draghi. When questioned on the dropping of the pledge to increase stimulus Draghi said that it was long overdue (a way of perhaps downplaying the language) and also unanimous across the council. He confirmed that the removal reflects the fact that stimulus is an “unlikely contingency now” and emphasised the improved economic backdrop now compared to 2016 when guidance was initially tinkered. Away from that, there wasn’t much change in staff economic forecasts. For growth, GDP was revised up one-tenth to 2.4% for 2018 and left unchanged in 2019 and 2020 at 1.9% and 1.7% respectively. For inflation, CPI was left unchanged in 2018 at 1.4%, revised down one-tenth in 2019 to 1.4% and left unchanged in 2020 at 1.7%. Unsurprisingly the recent escalation in tariffs and protectionist rhetoric was bought up with Draghi saying that “we are convinced that disputes should be discussed and resolved in a multilateral framework and unilateral decisions are dangerous”. He also confirmed that the ECB would assess the response of the exchange rate on the tariff discussion”.
The price action through the press conference is a little challenging to explain but clearly Draghi’s words and tone had a massive impact on changing the interpretation of the hawkish initial announcement. Indeed euro and bond yields first rose while equities sold-off however by the time Draghi was finished speaking much of those moves had fully reversed, before accelerating further in that direction into the European close. By the end of play, the euro had weakened -0.80% with a post meeting high to low range between 1.2298 and 1.2446. 10y Bunds finished 2.8bps lower at 0.625% with a post ECB range between 0.6236% and 0.700%. The ranges on BTPs and Spanish Bonds were 9bps and 8bps respectively. That weaker euro helped the likes of the Stoxx 600 and DAX to +1.05% and +0.90% respectively, as it gained from being broadly unchanged before Draghi spoke.
In the US the S&P 500 fluctuated before ending +0.45% higher and Treasuries -2.6bps lower to 2.858%. Overnight, President Trump has signed a proclamation authorising a levy of 25% duty on imported steel and 10% on aluminium, with the tariffs to take effect in 15 days. He has also warned of more “reciprocal taxes” on imports from countries that charge higher duties on US goods. That said, the market seemed to have taken some comfort that Canada and Mexico is exempt from the tariffs due to their status as key regional allies and Trump’s comments of “…we’re going to be very flexible” and that “I’ll have a right to (go) up or down (on the level of tariffs) depending on the country and I’ll have a right to drop out or add countries…” In terms of initial reactions, House Speak Ryan noted “I disagree with this action and fear its unintended consequences” while Senator Flake noted the so-called flexible tariffs are a marriage of two lethal poisons to economic growth – protectionism and uncertainty.
So with the central banks now out of the way the market divert its focus onto this afternoon’s employment report in the US. The consensus is for a 205k February payrolls number, which follows 200k in January. Our economists are slightly below the market at 185k, which they still expect will be enough to drive down the unemployment rate to 4.0% from 4.1% (market also expects a 4.0% reading). Arguably it’s the average hourly earnings print which is the bigger component focus for the market right now given the obsession with inflation. Both the market and our economists forecast a +0.2% mom print (which should lower than annual rate by one-tenth to +2.8% yoy, driven by base effects). Keep an eye on the data due out at 1.30pm GMT. The Fed’s Evans (1.40pm, 3.45pm and 5.45pm GMT) and Rosengren (5.40pm GMT) are both expected to speak on monetary policy and the outlook following the report so that’s worth also keeping an eye on.
Finally onto Brexit. The EU Council President Tusk noted that “if in London someone assumes that the negotiations will deal with other issues first, before moving to the Irish (border) issue, my response would be – Ireland first”. DB’s Oliver Harvey believes that this is a negative and if agreement on Ireland has to happen before transition then the chance of getting to a transition deal this month are low. Notably, unnamed UK officials told Bloomberg that they now don’t expect a full Brexit deal by the end of the year.
Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the weekly initial jobless claims rose from last weeks’ 48 year low and was higher than expected at 231k (vs. 220k), while continuing claims was below market (1,870k vs. 1,919k expected). Elsewhere, a Fed report showed US household debt jumped 5.2% in 4Q, the fastest pace of this expansion while net worth rose $2.1trn to $98.7trn. Over in Europe, Germany’s January factory orders fell more than expected at -3.9% mom (vs. -1.8% expected) but annual growth was still solid at 8.2% yoy (vs 11.5% expected). The February Bank of France industry sentiment index was slightly above at 105 (vs. 104 expected) while the UK’s February RICS survey noted respondents had on net seen no change in home prices over the past three months and there was little expectation of change over the next three months.
Looking at the day ahead, January trade data in Germany will be due along with January industrial production reports for Germany, France and the UK. In the US, the aforementioned February employment report will be out. Following that report, the Fed’s Rosengren and Evans will speak as mentioned earlier.
Even though the scope of President Trump’s planned steel and aluminum tariffs wasn’t yet fully known when he stunned America (and global markets) a week ago by announcing at an impromptu meeting with steel executives that he’d be implementing a 25% tariff on steel and 10% tariff on aluminum, lawyers at every company that relies on imported steel or aluminum started scrambling to develop a plan for the worst-case scenario.
And while the reality is a watered-down version of the “no exemptions” rhetoric that Trump boasted last week (at least for now, considering that Mexico and Canada, countries that produce a significant chunk of America’s steel, are receiving a temporary dispensation as NAFTA talks are ongoing), hours after Trump signed his proclamation Thursday afternoon – announcing that the tariffs would take effect in 15 days – Bloomberg was ready with a story about America’s importers pleading their cases to the Commerce Department, all hoping to receive exemptions of their own, for “national security” or other reasons.
Companies that rely on steel and aluminum imports can ask the Commerce Department for a waiver if there’s a limited supply of the product in the US, or if, lacking the materials would put our national security at risk. But as Bloomberg points out, how these standards will be interpreted is anyone’s guess. Which is why aluminum can makers, pipeline builders and car companies are now making their cases about why they, too, should be exempt.
“The can industry relies on imported metal to make up for shortfalls of domestic steel and aluminum production. US steel producers are unable to satisfy domestic demand for food, aerosol and other can production,” the Can Manufacturers Institute said Thursday. The group will apply for exemptions for aluminum can sheets, aluminum ingots and steel tinplate – the material many food cans are made of.
A lobbying group for automakers is planning to press the Trump administration to expand the number of countries that would be exempt from the tariffs (which, incidentally, would also render them effectively toothless, though Trump has said they could raise tariffs on other countries to make up for it)…
The trade group that represents General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV hinted that automakers — which purchase about 15 percent of the steel and almost 40 percent of aluminum consumed in the U.S. — will press the Trump administration to water down the order by carving out exceptions for imports from some countries.
“The temporary exemption for our trading partners in Canada and Mexico is a step in the right direction,” said Matt Blunt, president of the American Automotive Policy Council. “We fully understand the desire to take action against nations whose unfair trade practices have led to global overcapacities in steel and aluminum, and encourage the administration to adopt a targeted approach.”
And a group representing natural gas producers is arguing that some of the types of steel that are necessary to build the tanks and equipment to harvest and store LNG aren’t available in the US…
The Center for LNG, a liquefied natural gas industry group, plans to seek an exemption because some of the five kinds of steels it uses aren’t available from U.S. sources. For example, steel used for cryogenic tanks, where fuel is stored after it’s been chilled to minus 260 degrees Fahrenheit (minus 162 Celsius), is hard to come by domestically, Daphne Magnuson, a spokeswoman for the group, said Thursday.
Oil and gas industry lawyers are struggling to make a case for an exemption since booming shale production (though, as we pointed out late last year, there are still many “known unknowns” that threaten the industry)…
The oil and gas industry’s success in boosting production has reduced the perception of energy security risk in Washington, which may make it difficult for oil companies to win exemptions to the tariffs, according to Kevin Book, managing director of Clearview Energy Partners LLC. The Trump administration may be reluctant to grant too many exceptions because it would have to raise tariffs on other countries to make up the difference, Book said in a note Thursday.
“We will work with the administration for maximum flexibility and consideration in how today’s proclamation is applied to minimize the impacts to U.S. investment in infrastructure, energy development, and building new facilities for America’s future,” Jack Gerard, president of the American Petroleum Institute, said in an emailed statement.
Pipeline developers are also hoping to use the “scarcity” argument to win exemptions. Of course, pipeline operators who are in the middle of massive projects are panicking that they might need to delay or cancel them because of a sudden surge in costs…something that would clearly kill jobs and lead to the type of bad optics that Trump doesn’t want to see.
Andy Black, president of the Association of Oil Pipe Lines, said in an interview Monday that pipeline developers would be seeking exemptions for when they can’t get sufficient materials sourced domestically. “That’s what pipeline operators feel like they need to keep a period of buildout going, so projects aren’t delayed or canceled because of cost,” he said.
…
Greg Armstrong, CEO of Plains All American Pipeline LP, told audience members at a Houston conference on Monday that he couldn’t buy one type of 26-inch (66-centimeter) pipe he needs for a specific project because it’s only made in three places — and none of them are in the U.S.
Plains is building two pipelines right now to bring oil from the booming Permian shale basin, Armstrong said. One would go to Corpus Christi, Texas, and the other to a major storage hub at Cushing, Oklahoma. The two projects will add about 750,000 barrels a day of capacity to move oil and will help send shale production to overseas buyers.
“We’ve got about $1.5 billion of projects under way right now that use quite a bit of steel, so we were trying to figure out how bad that hurts, depending on where we made orders,” he said.
We also wouldn’t be surprised to see some US states pushing for exemptions, as the job-hurting effects of higher steel and aluminum costs damage local importers: they might wield some political leverage because 12 of 15 states identified by Deutsche Bank’s Torsten Slok voted for Trump.
The driver was found guilty of three charges: contempt of a police officer, making threats and sexist remarks in public, and a serious violation of another person’s dignity because of her gender.
He was warned that if he failed to pay the fine, a prison term of a month would be imposed.
“This is the first time we have used this law to prosecute someone,” said Gilles Blondeau, spokesman for the public prosecutor’s office. “It is quite common for people arrested by the police to insult and threaten. But to personally blame a policewoman because of her sex is different.” …
Under the law, any behaviour expressing “contempt towards a person, because of their sexuality” or treating a person as “inferior or as reduced essentially to their sexual dimension“, which entails a serious attack on their dignity is punishable by up to a year in prison and/or a fine.
Some men are rude. Some men say mean things. They shouldn’t do that.
[ZH: we strongly suggest Silvio Berlusconi avoid Belgium]
But how weak must people be when they need a law to protect their feelings? It is almost as if some women think they need the state and their guns to protect them because women are unable to protect themselves.
That is an actual sexist attitude. It seems to suggest women are too frail to fend off mere words.
A strong self-assured woman would not need the law to retaliate against men who insult or offend her.
The fact that this criminalizes speech against a public official is even more concerning.
It doesn’t matter how rude, nasty, or offensive someone is, the right to free speech is more important.
You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.
In Mississippi, lawmakers celebrated International Women’s Day by passing the most restrictive abortion law in the US. In Spain, women celebrated the occasion by embarking on an “unprecedented” strike that saw millions of women flood the streets in towns and cities across the country, shouting their slogan: “Without us, the world stops.”
Women organized walkouts at their workplaces, with some demonstrations lasting up to 24 hours.
Two leading trade unions, the CCOO and UGT, said that by lunchtime the strike had snowballed into a “great success”, with 5.3 million women across the country joining the first of three two-hour work stoppages.
In Madrid, 80% of workplaces were observing the strike, they said after a picket at the doors of the city hall in Plaza Cibeles, according to the Telegraph.
Demonstrators – which included men and women – marked the start of the strike at midnight on Wednesday with a traditional cacerolazo: The collective banging of pots and pans to create a hellish racket.
Strikers even briefly blocked some of Madrid’s chief traffic routes during rush hour. In one of the few outbreaks of violence, four dumpsters near Madrid’s Complutense University were set on fire.
In Barcelona, groups of women blockaded several roads, with around 30 protesters blocking Gran Via, the city’s main road for an hour before they were removed by police.
As AFP explained, 10 unions called the strike to demand gender equality in compensation. It was meant to be a 24-hour strike. Famous female television broadcasters remained absent from radio or television.
Organizers also urged women not to spend money – and to avoid products like deodorant that typically cost more for the feminine version. The CCOO and UGT didn’t participate in the 24 hour strike, but rather organized strike windows for workers to stop working. The strike was meant to imitate Iceland’s 1975 work shutdown, when women took a day off in October of that year to demonstrate their vital contribution to the economy.
Pilar Lahoz, a 35-year-old office worker who carried a sign that read “Without us the world stops” in Madrid, told AFP that she has struggled to change jobs because potential employers rule her out when she says she is planning on having children.
“While we have advanced a great deal there is still much to do,” she said.
According to Eurostat, Spanish women earn 14.9% less than Spanish men.
Powerful politicians, including Deputy Prime Minister Soraya Saenz de Santamaria spoke of the discrimination they’ve endured: “There are still many things that need changing because even as deputy prime minister you experience unacceptable sexist behaviour.”
Famous actresses like Penelope Cruz and Rossy de Palma joined in the strike, with Cruz drawing attention for letting her partner Javier Bardem take care of their two children while she joined the demonstration.
Burundi President Pierre Nkurunziza travels the country with his own soccer team, playing local teams. The teams he plays usually know the score: Go easy on the president’s team and maybe let him score. But in a recent game in the town of Kiremba, the president played a team that contained a number of Congolese refugees who didn’t know who he was. They didn’t go easy on the team or the president, and he fell several times as the other team attacked him when he had the ball. Kiremba’s administrator and his assistant were later arrested and charged with “conspiracy against the president.”
In a secularized West, charitable organizations are the modern-day saints granting us our expiatory rites. Many humanitarian NGOs even seem to cater to Western consciences filled with guilt.
Since these NGOs say they work on behalf of “humanity” and for a “better world”, while possibly assuming that states and governments act only for the sake of social efficiency or their own self-preserving interests. Yet, often these NGOs risk becoming bureaucracies as much as states do, sometimes even with similar sexual and financial scandals. At times these NGOs also can look like just a “mammoth machinery” with more employees than services; a steep, often unaccountable budget, and an ideology promoting the worst “Western stereotyping“. The weekly magazine The Spectator called them “the bad charity“.
Lately, not a single week has passed without a negative story in the press about British NGOs. Now Oxfam, one of the wealthiest and most important of them, is sinking from a series of scandals in Africa and Haiti. It used, it seems, taxpayers’ money, intended for the earthquake victims, to pay for “Caligula-style orgies“. It also fired the actresses Kristin Davis and Scarlett Johansson, who volunteered as Oxfam “ambassadors,” after they appeared in advertisements for Israeli companies. Oxfam accused the women of rhetorically “oppressing” the Palestinians; meanwhile Oxfam’s staff was physically oppressing the Haitians.
Every year, not only at Oxfam, more than 1,000 acts of sexual abuse are committed by people who are supposed to be protecting children and vulnerable people, according to the British charities’ regulator. Even the NGO of David Miliband, the former Labour party frontrunner, was hit by a scandal of sexual abuse, fraud and corruption.
According to a report by the BBC, women in Syria have been sexually exploited by men delivering aid on behalf of the United Nations and other Western charities. “The exploitation is so widespread that some Syrian women are refusing to go to distribution centres because people would assume they had offered their bodies for the aid they brought home”, the BBC explains, quoting a new UN report on the humanitarian abuses.
According to Aidan Hartley in The Spectator, trouble for these NGOs began when they stopped helping people and started becoming politically correct by “blaming the West, stoking guilt and making Africa into a utopian playground for socialists from Sussex University”.
Israel recently banned representatives of 20 non-governmental groups from entering the country, including the British organization War on Want, which according to NGO Monitor fabricates accusations of “genocide” and “crimes against humanity” against Israel.
The historic Halo Trust was an organization beloved by Britain’s late Lady Diana. The actress Angelina Jolie in 2014 accused its executives of paying themselves handsomely with “consultancy fees.” The Kids Company was also exposed for evidently squandering money on the “lavish” lifestyle of its founder, Camila Batmanghelidjh.
It seems that £35 million of public money have also disappeared down the black hole of the Libor fund, established by then-Chancellor of the Exchequer George Osborne to support war veterans. The Sunday Times disclosed that in fact, it “wasted” vast amounts of money.
In England, philanthropic organizations have become a bureaucracy. There are evidently more than 195,289 registered charities in the United Kingdom that collect and spend almost £80 billion a year. Altogether, the NGOs employ one million employees, more than the automobile, aerospace and chemical sectors in the UK. Most of the large NGOs in the UK, however, spend less half of their income each year on charitable works, according to the True and Fair Foundation. The Daily Telegraph found that the executives of many NGOs saw their salaries increase, despite efforts to curb pay levels.
In Haiti, after a devastating earthquake in 2010, humanitarian efforts, it seems, did more harm than good. First, UN peacekeepers brought cholera to the island, killing almost 10,000 people. Then, the UN troops sexually abused Haitian children in a child sex ring. Third came the scandal of Oxfam. It seems like a colonialism of the do-gooders.
Another British NGO, Amnesty International, we are told, excuses Islamic extremism. Its secretary general, Claudio Cordone, said that “defensive jihad” is not “antithetical” to the struggle for human rights after Amnesty came under scrutiny for the relationship with CAGE, another NGO founded by an extremist Muslim, Moazzam Begg, which campaigns for the release of imprisoned jihadists. When one of Amnesty’s senior officers, Gita Sahgal, expressed concerns, she was suspended. “To be appearing on platforms with Britain’s most famous supporter of the Taliban, whom we treat as a human rights defender is a gross error of judgment,” she wrote.
Amnesty International has come under scrutiny for its relationship with CAGE, an NGO founded by an extremist Muslim, Moazzam Begg, which campaigns for the release of imprisoned jihadists. When one of Amnesty’s senior officers, Gita Sahgal (pictured), expressed concerns, she was suspended. (Image source: Nano GoleSorkh/Wikimedia Commons)
Some NGOs have been financing Islamic terrorism, especially in Syria, with taxpayers’ money. William Shawcross, president of the Charity Commission, called it a “deadly” problem for the charities. More than half the humanitarian donations from the United Kingdom to Syria through small NGOs have ended up in the hands of ISIS and other jihadist groups, according to the think-tank Quilliam Foundation. In this way, millions of pounds, thanks to the generosity of British taxpayers, have fallen in the hands of terror groups,
Fatiha-Global, which should have brought help to Syrian refugees fleeing the war, instead diverted the funds to the Islamic State, the very terror group which had caused the refugee crisis to begin with. To top it off, the head of Fatiha-Global, Adeel Ali, was photographed with the jihadists of the Caliphate — the same Jihadist group that beheaded British volunteer Alan Henning, who had come to Syria on behalf of the subsidiaries of Fatiha.
A leading national property finance company has collapsed potentially leaving an estimated 10,000 residential, commercial and property investors in the lurch about the fate of nearly $300 million worth of deposits.
Deposit Power, which provided interim finance to property buyers, has closed its doors after the collapse of New Zealand’s CBL’s insurance, which was an issuer and guarantor of deposit bonds.
Sale Complications
Worried mortgage brokers, who recommended the products to clients, are seeking advice on whether clients need to buy other cover, or secure additional or replacement financial risk bonds. It could mean unspecified risks, uncertainty and deal delays for tens of thousands of counter parties, financiers and their representatives, including lawyers and other brokers.
Mortgage brokers, who act as an intermediary between borrowers and lenders, are being warned the status of existing loan guarantees is unknown, pending applications will not be processed and no payments have been taken.
Investors calling the Sydney-based office are being answered by a recorded message the company is facing “external issues” and that it is unable to process any deals.
Deposit Power’s bonds were sold to individuals, first time buyers, retirees, self-employed borrowers, trusts, corporate entities, or self managed super funds purchasing commercial or residential property. It was established in 2012 and regulated by the Australian Securities and Investments Commission.
They were also heavily marketed to first time and off the plan property investors. A deposit guarantee is an alternative method of placing a deposit on a property.
CBL in Interim Liquidation
The New Zealand High Court last month ordered CBL Insurance be placed in interim liquidation on an application by the Reserve Bank of New Zealand as the insurer’s prudential supervisor.
In New Zealand, liquidators are warning those insured by CBL, or any beneficiaries of its policies, to seek advice on whether they need to buy other cover or secure additional, or replacement financial risk bonds.
Information Lacking
According to the article, CBL has yet to inform Australian liquidators about whether Sydney-based Deposit Power will fully, or partially, back the bonds.
Here’s a hint: When authorities shut down guarantors, it’s because they have gone bust. The question is not whether anyone will be fully paid back, it’s whether anyone will be paid back anything.
Guarantee Scams
Guarantors make money in good times but because of leverage they go bust in bad times. In the case of CBL, we see the true nature of its guarantee: It was worthless.
China is the rising world power. This much is clear, but nowhere is that reality felt more than behind closed doors in Washington, D.C. The global hegemony of the United States is being challenged, and the contest is perfectly encapsulated in what’s happening now in the small African nation of Djibouti.
Strategically located at the southern entrance to the Red Sea on the route to the Suez Canal, Djibouti is home to both U.S. and Chinese military bases, and the two are only miles apart. The U.S. base houses around 4,000 military personnel and is used as a launching pad for operations in Yemen and Somalia.
On Tuesday, Reuters highlighted how the situation at a key port in Djibouti has U.S. officials worrying over China’s growing reach:
“Last month, Djibouti ended its contract with Dubai’s DP World, one of the world’s biggest port operators, to run the Doraleh Container Terminal, citing failure to resolve a dispute that began in 2012.
“DP World called the move an illegal seizure of the terminal and said it had begun new arbitration proceedings before the London Court of International Arbitration.”
It also described the reaction in Washington at a session of the House of Representatives Armed Services Committee:
“During a U.S. congressional hearing on Tuesday, which was dominated by concerns about China’s role in Africa, lawmakers said they had seen reports that Djibouti seized control of the port to give it to China as a gift.”
Speaking before lawmakers, Marine General Thomas Waldhauser, the top U.S. commander in Africa, warned that the military’s ability to resupply and refuel ships would be greatly affected if China restricted access to the port:
“If the Chinese took over that port, then the consequences could be significant.”
He also suggested there would be “more” such power projections from China in the coming days:
“There are some indications of (China) looking for additional facilities, specifically on the eastern coast…So Djibouti happens to be the first — there will be more.”
For China’s part, the country’s Foreign Ministry has rejected the notion that China would exclude a third party from having access to the port and asked the U.S. to keep an open mind.
“We hope that the U.S. side can objectively and fairly view China’s development and China-Africa cooperation,”ministry spokesman Geng Shuang told a press briefing.
At the congressional hearing on Tuesday, General Waldhauser pointed out that the U.S. was entering new territory in terms of physically competing with China over resources on the ground:
“China has been on the African continent for quite some time, but we as a combatant command have not dealt with it in terms of a strategic interest.”
And it’s territory the military is entering slowly. “We are taking baby steps in that regard,” Waldhauser said.
All this cautiousness speaks directly to what’s happening here. One power, the United States, is sensing a legitimate threat from another, China. And in the case of Djibouti, the proximity is forcing tensions out into the open.
While giving a talk on U.S.-Africa relations at George Mason University on Tuesday, Secretary of State Rex Tillerson called Djibouti “a very critical trading route for the world’s economy and a critical partner in securing that trading route.”
He also compared the United States’ and China’s approaches toward African nations:
“The United States pursues, develops sustainable growth that bolsters institutions, strengthens rule of law, and builds the capacity of African countries to stand on their own two feet. We partner with African countries by incentivizing good governance to meet long term security and development goals.”
Tillerson said this model “stands in stark contrast to China’s approach, which encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term, self-sustaining growth.”
This depiction settles nicely into the grander narrative of China as one of the world’s “revisionist powers” that “seek to create a world consistent with their authoritarian models.” That’s the picture painted by Secretary of Defense James Mattis back in January.
He was unveiling a broad new strategy at the Defense Department, one that shifted focus away from terrorism.
“We will continue to prosecute the campaign against terrorists that we are engaged in today,” Mattis said, “but great power competition — not terrorism — is now the primary focus of US national security.” The defense secretary’s comments echo those of President Donald Trump in a speech on national security in December.
In that speech, Trump noted that “whether we like it or not, we are engaged in a new era of competition.” Indeed, and the fact of it is very much on display at the south end of the Red Sea.
On Thursday night, South Korea National Security Adviser Chung Eui-yong abrutptly announced at the White House that North Korean dictator Kim Jong-Un had asked President Donald Trump for face-to-face talks, and that the American had agreed. The White House quickly confirmed the report.
“President Trump greatly appreciates the nice words of the South Korean delegation and President Moon. He will accept the invitation to meet with Kim Jong Un at a place and time to be determined,” White House press secretary Sarah Huckabee Sanders said in a statement. “We look forward to the denuclearization of North Korea. In the meantime, all sanctions and maximum pressure must remain.”
Kim Jong Un talked about denuclearization with the South Korean Representatives, not just a freeze. Also, no missile testing by North Korea during this period of time. Great progress being made but sanctions will remain until an agreement is reached. Meeting being planned!
There has been no shortage of skepticism and derision pointed at Trump’s move, which would mark the first time a U.S. president has ever met with the head of North Korea, with which Washington is still technically at war. For instance, Naval War College professor and The Death of Expertise author Tom Nichols:
Here’s what will happen:
– huge photo op
– propaganda bonanza for NK
– post summit, NK renegs on everything, keeps nukes
– NK blames US
– wasted time buys progress to ICBMs
– US looks like saps, allies facepalm
– nuclear NK, Kim looks like a global badass, US looks like chumps
Middlebury Institute of International Studies Professor Jeffrey Lewis lays out in a mini-tweetstorm the credentialed objection: “North Korea has been seeking a summit with an American president for more than twenty years. It has literally been a top foreign policy goal of Pyongyang since Kim Jong Il invited Bill Clinton,” Lewis writes. “To be clear — we need to talk to North Korea. But Kim is not inviting Trump so that he can surrender North Korea’s weapons. Kim is inviting Trump to demonstrate that his investment in nuclear and missile capabilities has forced the United States to treat him as an equal.”
Call me inexpert (accurately enough!), but I am so far failing to see a problem that outweighs the sliver of opportunity here.
This news comes out of the best possible generator of Korean-peninsula peace ideas: direct and unmediated talks between North and South (characterized here by the Washington Post as “the latest surprising development in a burst of diplomacy that both Koreas hope will stave off threats from the United States”). At those meetings the Norks reportedly expressed a desire for mutual denuclearization, normalized relations, and a lack of military provocations in the meantime.
It’s important to recognize that—however much one dislikes the president and his foreign policy ideas—Donald Trump has been very consistent about two things when it comes to a nuclearizing North Korea: 1) It is primarily a problem for North Korea’s immediate neighbors, and 2) the U.S. will be happy to threaten maximum force/craziness as necessary to prod NoKo & Co. to the negotiating table.
At the February 2016 GOP presidential debate in New Hampshire, at which the Jeb Bushes and John Kasichs were happy to skylark about “regime change” and pre-emptive strikes, Trump suggested we “let China solve that problem.” At a general election debate with Hillary Clinton in Las Vegas, Trump asserted flatly that he “would certainly not do first strike,” though he wouldn’t “take anything off the table” (and anyway, “China should solve that problem for us”). Two bombing expeditions last spring—the “Mother of All Bombs” dropped over Afghanistan, and the missile attack on a Syrian airfield—were, by many reports, part of a deliberate campaign of “strategic unpredictability” designed above all to influence the decision-making process in Korea.
This approach certainly has its drawbacks. Threatening “fire and fury” on North Korea, as Trump did last August, not only incentivizes the Hermit Kingdom to speed up its own nukes, but it whips the American public into a war-frenzy. It’s not hard to see how such a gambit could go horribly wrong, particularly given a political class in which respected statesmen such as Sen. Lindsey Graham (R-S.C.) can say with a straight face such madness as, “All the damage that would come from a war [with North Korea] would be worth it in terms of long-term stability and national security.”
It is also not hard to imagine the Tom Nichols scenario—lots of naïve diplomacy, photo ops, and then some months later we learn that the new Horror Missile is that much closer to being operational for a strike on Maui. But what exactly, in that scenario, is lost? A few months of our innocence?
Here are the alternative scenarios served up by American politics over the past 25 years of slow-build nuclearization, ongoing starvation, and sputtering diplomacy: A Sen. John McCain (R-Ariz.), who thinks it’s a swell idea to threaten North Korea with “extinction.” A then-President George W. Bush, who includes the country in his “Axis of Evil” speech that foreshadowed the Iraq War. A Democratic veep candidate Tim Kaine saying, “Look, a president should take action to defend the United States against imminent threat. You have to.”
The world’s lousiest country, run by paranoid murderers, has responded to all this by pursuing nukes at the cost of most everything else. Is there a chance Kim Jong-Un would trade that fear for slightly more security and some more trade money coming in? Probably not, but maybe! And I have a hard time seeing the better alternative critics of this move have in mind.
Burundi President Pierre Nkurunziza travels the country with his own soccer team, playing local teams. The teams he plays usually know the score: Go easy on the president’s team and 
This news comes out of the best possible generator of Korean-peninsula peace ideas: direct and unmediated talks between North and South (characterized