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It’s been two days since former CFPB Director Richard Cordray resigned his post and named Deputy Director Leandra English as his successor, setting the agency up for what looks to be a brief but noisy legal dogfight. As was widely expected, English, who had formerly been Cordray’s chief of staff before he named her deputy director on his way out the door, filed a lawsuit late Sunday against President Trump to block Office of Management and Budget Director Mick Mulvaney from taking over as acting director of the agency. 

English's lawsuit has already triggered a widespread backlash from the legal community, including from the agency's chief counsel, who has said the law stipulates that Mulvaney should be allowed to take the reins. The CFPB is unique among government agencies in that the Dodd-Frank act allowed it a small measure of independence, as English pointed out in her lawsuit.

Cordray said he made English, a senior CFPB official, the deputy director specifically to bridge the divide between his tenure and Trump’s director pick, according to the Hill. Trump officially nominated Mulvaney, a decision that was widely expected, shortly after Cordray named English as his successor.

Mick Mulvaney

“The president may not, consistent with the statutory requirement of independence, install a still-serving White House staffer as the acting head of an independent agency."

English also claimed that she is the rightful acting director of the CFPB, and that the court should bar Mulvaney from running the agency in her stead – an argument that’s been widely criticized by legal experts. English claims that the provisions of the Dodd-Frank Act that outline the CFPB’s line of succession supersedes the Federal Vacancies Act, which Trump used to nominate Mulvaney without needing to first seek approval from Congress.

“The president’s purported or intended appointment of defendant Mulvaney as Acting Director of the CFPB is unlawful,” the complaint reads. The suit calls Trump’s use of the Vacancies Act “an obvious contravention of Congress’s statutory scheme” that “cannot be reconciled with Dodd-Frank’s mandatory language."

The crux of the legal dispute involves language in the Dodd-Frank act – which established the CFPB back in 2010 – that contradicts the Federal Vacancies Reform Act of 1998, as Politico explains. One factor working in English’s favor is that there’s no legal precedent: Cordray had managed the agency since it was created in 2010 – though it took three years for the Obama administration to win Congressional approval for Cordray.

The 2010 Dodd-Frank Act, which created the CFPB, explicitly says the consumer bureau's deputy director shall “serve as acting Director in the absence or unavailability of the Director,” giving the edge to English.

 

Yet the Federal Vacancies Act allows the president to install a temporary acting head of any executive agency who has already been confirmed by the Senate to another position, like Mulvaney has as leader of the Office of Management and Budget.

 

Still, the Vacancies Act says that an opening may also be filled if another law "expressly … designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity.”

 

It doesn't say whether one approach supersedes the other, something the courts will likely have to sort out.

As noted above, most legal experts – including, bizarrely, the CFPB's chief counsel – have argued that the Vacancies Act trumps (no pun intended) the language in the Dodd-Frank bill, meaning that the president’s pick has every right to run the agency. Mary McLeod, the agency’s chief counsel, intends to contest English’s lawsuit in court.

"As General Counsel for the Bureau, it is my legal opinion that the President possesses the authority to designate an Acting Director for the Bureau," McLeod wrote in a memo from Nov. 25, according to Politico. "I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB," she continued.

The DOJ’s interpretation of the law would also allow Mulvaney to assume control of the agency immediately. However, these interpretations likely won’t deter English from pushing ahead with the lawsuit. That said, her legal maneuvering appears to be a transparent, stalling tactic, a last-ditch effort to save her job in the hopes that her Democratic allies in Congress somehow summon the wherewithal to intercede on her behalf, or that the district court might rule in her favor, a decision that would likely be challenged by the administration, potentially launching a years-long legal battle. 

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The traditionally illiquid post-Thanksgiving week has started with a series of whipsaws across stocks and bonds, as European stocks turned positive after starting the day on the back foot, initially mirroring a slide in Chinese stocks and price action in U.S. equity futures as investors look to a possible – and absolutely critical – tax-plan vote in the Senate this week.

Bund futures retraced most of their earlier declines, pulling gilts higher in tandem. Meanwhile, the Dollar has extended losses in Europe after brief respite from selling in Asian trading, sending GBPUSD toward day highs aboive 1.33 and, paradoxically, the USD/ZAR hitting a one-month low, erasing all losses after S&P cut South Africa’s credit rating on Friday. In commodities, WTI crude pulls back from nearly two-year high of $59; nickel leads base metals lower in London trading. Oh and yes, Bitcoin hit another record high, just under $10,000.

Stocks in Europe erased early losses to edge higher, with defensive sectors including utilities, real estate, food and beverage, telecoms outperforming Monday, while cyclicals tech and basic resources dipped following a slump in industrial metal prices out of China. In terms of stock specifics, Julius Baer is the biggest faller in Europe, down as much as 5% after news that the CEO is to resign with immediate effect, subsequently fuelling worries that client assets could also depart. German Bunds fluctuated as Germany moved closer to a new government.

In Asia, stocks took a turn for the worse and failed to sustain the early momentum from last week’s Black Friday optimism in US, where the S&P 500 and Nasdaq posted fresh record levels. ASX 200 (+0.1%) was choppy after the 6,000 level provided resistance and Nikkei 225 (-0.3%) gave up opening gains and then some, as Japanese sentiment soured amid flows into JPY.

As noted earlier, in Asian trading, Shanghai shares fell 0.9% to a three-month low, having already been on a shaky footing due to a rout in the domestic bond market and fresh moves to reduce risks in the asset management industry that may bring a sea change for banks: the catalyst was a net-neutral PBoC liquidity operation in the backdrop of the recent bond market jitters, while Industrial Profits also slightly cooled.

“The Chinese stock market drop is reminiscent of the selloff that we saw in the summer of 2015, and that is causing some investors to become cautious going into the thin year-end markets,” said ING currency strategist Viraj Patel, in London.

Away from the main markets, bitcoin’s exponential ascent showed no signs of abating, with the cryptocurrency soaring to another record high just a few percent away from $10,000 after gaining more than a fifth in value over the past three days alone.

In macro, the big mover was the euro, which hit a fresh two-month high of 1.955 before paring gains and trading flat on the day, with a Merkel ally saying on Monday that the “grand coalition” talks may not begin until next year, potentially prolonging the uncertainty in Europe’s largest economy.

“There is optimism about the formation of a grand coalition in Germany, and economic surprise indices for the bloc are at an all-time high,” said Antoine Bouvet, rates strategist at Mizuho. “That means there could be more investment in Europe, driving the currency higher, and the corollary to that is for market expectations for ECB policy has to be more dovish.”

The dollar failed to sustain an early advance even as Treasuries dropped. The U.S. currency was initially supported by improved prospects that the U.S. tax bill will be passed this year, alongside profit taking following the Bloomberg Dollar Spot Index’s worst week in more than two months. Republican lawmakers in the U.S. Senate plan to hold a make-or-break floor vote on their bill as soon as Nov. 30. Yet, last week’s pattern that saw demand for the euro soon after the London open unfolded once more, as the common currency rose to 1.1957, its strongest level since Sept. 22. According to Bloomberg, a mix of names, including real money and leveraged accounts, added fresh upside exposure in both the euro spot and options markets. Demand for vanilla calls in tenors between 18 months and two years was seen in OTC trades, traders in Europe said. The chances that German Chancellor Angela Merkel ultimately pulls off a renewed coalition with the Social Democrats supports the front-end of the common currency’s volatility skew. At the same time, traders seem less worried over the risks surrounding Italian elections due by May next year, pushing six-month risk reversals to their most euro-bullish sentiment since 2009.

Asset moves aside, after a long weekend, investors are gearing up for a busy week, with Trump scheduled to address Senate Republicans at their weekly luncheon Tuesday on taxes ahead of a potential vote on tax reform set of November 30. Federal Reserve Chair Janet Yellen testifies before the congressional Joint Economic Committee in Washington, and the confirmation hearing for her nominated successor, Jerome Powell, begins. Adding to the mix are data on U.S. GDP, prices and jobs.

In rates, the yield on 10Y TSY gained less than one basis point to 2.35%; 10Y Bund yield fell one basis point to 0.35% while Britain’s 10-year yield dipped less than one basis point to 1.247%, the lowest in almost three weeks. Japan’s 10-year yield climbed one basis point to 0.043 percent, the highest in more than a week.

In commodities, West Texas Intermediate crude declined 0.8 percent to $58.48 a barrel. Gold increased 0.4 percent to $1,293.95 an ounce, the highest in six weeks. Copper fell 1% to $3.16 a pound.Elsewhere, nickel led a slump in industrial metals, with copper declining for the first time in seven sessions.

Economic data includes new-home sales and Dallas Fed manufacturing; on the Fed speaking circuit, we have two former Goldmanites: outgoing NY Fed President Bill Dudley, and Minneapolis Fed President Neel Kashkari.

Bulletin overnight summary from RanSquawk

• Commodity-linked currencies were mildly pressured as WTI crude pulled back from USD 59/bbl.
• EU equities pare initial losses in what has been a relatively quiet morning.
• Looking ahead, highlights include US New Home Sales

Market Snapshot

• S&P 500 futures up 0.07% to 2,602.75
• STOXX Europe 600 up 0.2% to 387.43
• MSCI Asia down 0.4% to 172.33
• MSCI Asia ex Japan down 0.7% to 564.57
• Nikkei down 0.2% to 22,495.99
• Topix down 0.2% to 1,776.73
• Hang Seng Index down 0.6% to 29,686.19
• Shanghai Composite down 0.9% to 3,322.23
• Sensex up 0.07% to 33,703.49
• Australia S&P/ASX 200 up 0.1% to 5,988.77
• Kospi down 1.4% to 2,507.81
• German 10Y yield rose 0.7 bps to 0.367%
• Euro down 0.05% to $1.1927
• Brent Futures down 0.2% to $63.76/bbl
• Italian 10Y yield rose 2.8 bps to 1.546%
• Spanish 10Y yield fell 2.0 bps to 1.466%
• Gold spot up 0.3% to $1,291.93
• U.S. Dollar Index down 0.06% to 92.73

Top Overnight Headlines

• Tax bill update: Republican leaders in the Senate plan a make- or-break floor vote on the tax bill as soon as Nov. 30
• Russia’s deputy foreign minister said North Korea’s pause in provocations indicates a step toward denuclearization of the Korean peninsula
• The China and Eastern Europe summit takes place in Budapest, Hungarian Prime Minister Viktor Orban hosts Chinese Premier Li Keqiang
• Senate plans tax vote amid Trump sales pitch: Tax Debate Update
• Germany’s standoff eases as wrangling shifts to coalition terms
• Black Friday online spending was record $5.03 billion: Adobe Systems
• Bitcoin closing in on $10,000 as cryptocurrency mania intensifies
• BOJ’s Suzuki: Slight YCC changes possible when inflation nears 2%
• Russia-OPEC said to agree framework to extend output cuts to end-2018
• Meredith Agrees to Buy Time Inc. With Koch Brothers Backing
• Senate Plans Tax Vote Amid Trump Sales Pitch: Tax Debate Update
• Roark Capital Is Said to Sweeten Buffalo Wild Wings Takeover Bid
• Bitcoin Guns for $10,000 as Cryptocurrency Mania Defies Skeptics
• Macy’s Says Fully Resolved Capacity-Related System Issues
• Cyber Monday Caps Strong E-Commerce Holiday Sales Growth
• Ryan Dismisses Deficit Concerns to Chase Political Win on Taxes
• Next Act in CFPB Drama Comes When Dueling Bosses Show Up to Lead
• French Anti-Fraud Office May Fine Fiat Up to EU9.62B: Monde
• iPhone X 4Q Production Improves, Momentum to Continue: KGI

In Asian markets, stocks took a turn for the worse and failed to sustain the early momentum from last week’s Black Friday optimism in US, where the S&P 500 and Nasdaq posted fresh record levels. ASX 200  (+0.1%) was choppy after the 6,000 level provided resistance and Nikkei 225 (-0.3%) gave up opening gains and then some, as Japanese sentiment soured amid flows into JPY. Chinese markets were among the laggards in the region, with Hang Seng (-0.6%) and Shanghai Comp. (-0.9%) negative after a net-neutral PBoC liquidity operation in the backdrop of the recent bond market jitters, while Industrial Profits also slightly cooled. Finally, 10yr JGBs were lacklustre with prices below 151.00 and demand suppressed after a tepid BoJ Rinban announcement for only JPY 550bln in the belly to short-end. Chinese Industrial Profits (Oct) Y/Y 25.1% (Prev. 27.7%). PBoC injected CNY 70bln via 7-day reverse repos, CNY 60bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos, for a total zero net daily liquidity injection. PBoC set CNY mid-point at 6.5874 (Prev. 6.5810). BoJ Board Member Suzuki said he is closely observing the side effects of monetary policy and that NIRP has a significantly large impact on earnings at financial institutions. Suzuki added he doesn’t not see a need for additional measures and commented that powerful easing must be maintained to reach target at early date, but that the BoJ could fine-tune policy prior to reaching the price goal.

Top Asian Nerws

• China’s Top Uber-for-Trucks Apps Are Said to Agree on a Merger
• Credit Suisse Alumni Start Asia Credit Fund to Fill Lending Gap
• World’s Priciest Housing Market Seen Defying Doomsayers Into ’18
• China Shares Resume Decline as Year’s Top Performers Take a Hit
• ICBC, JD.com’s Finance Arm Announce Launch of Digital Bank

In Europe, price action was relatively contained with EU indices paring initial declines. In terms of stock specifics, Julius baer is the biggest faller in Europe, down as much as 5% after news that the CEO is to resign with immediate effect, subsequently fueling worries that client assets could also depart. In rates trading, the 163.06 resistance level in Bunds held in, and in fact 163.00 continues to prove pretty durable as noted previously. Indeed, as risk appetite picks up in general the 10 year German bond is now back in negative territory and testing the downside with a bit more conviction. From a high of 163.05 a fresh low at 162.77 just traded and volumes continue to pick up at 110k+. Aside from outright selling, it looks like option related flows are going through alongside some early position rolls from the front month Dec17 contract into Mar18. Recall, last Friday’s low was 162.67 and this is naturally now nearest support. Conversely, semi-core and periphery Eurozone debt is outperforming above water, especially Italian BTPs that continue to rally in wake of the Tesoro pulling this week’s term issuance (ie more competition for supply with the ECB). Note, 10 year futures have been 50 ticks ahead, with the yield down to 1.78% and spread to Germany in to 141bp. In the UK, Gilts also selling off and now near the bottom end of a 125.18-47 Liffe range vs last Friday’s 125.32 close.

Top European News

• Allianz Offers $2.2 Billion to Buy Remainder of Euler Hermes
• What the Central Banks Are Saying About Cryptocurrencies
• Germany Edges Closer to New Government as Merkel Lays Down Terms
• Julius Baer CEO Quits in Surprise Departure, Joins Rival
• Clock Ticks as Ireland’s Varadkar Scrambles to Avoid Election
• Santander Consumer Bank May Sell EU250m Covered Bond Tomorrow

In FX, the Euro was stable, paring early gains after no sign of any German or wider Eurozone political angst, as the single currency carves out fresh gains vs the Usd to trade above 1.1950. 1.2000 may present something of a psychological hurdle, but in truth there is nothing on the charts in terms of resistance until 1.2033 before the pair takes aim at the 2017 peak at 1.2092 (set on September 8). On the options front, only a small expiry at 1.1950 (270 mn) may not be enough to deter bulls. Eur/Gbp not quite as perky below 0.9000, with strong technical resistance at 0.9033 also keeping a lid on the cross. The yen was another beneficiary of Dollar weakness, and risk-off trade in Asia, as the pair retreats towards recent lows just ahead of the 111.00 handle, currently around 111.25 within a 111.10-70 range. The OZ dollar was back above 0.7600 (just) vs the Greenback after a brief set-back overnight on latest Chinese asset declines.

In commodities, WTI and Brent crude futures off slightly amid a rise in US oil rig counts, marking the first monthly rig count since July, as producers are attracted by rising crude prices. However, the downside has been capped given the rising prospect that OPEC and Non-OPEC members will agree output pact for 2018. Saudi Arabia and Russia reportedly agreed that extension of output cuts should be announced at the November 30th meeting, according to reports citing sources on Friday. There were also separate comments from the UAE Energy Minister who is said to be optimistic OPEC is to extend the output cut deal.  Kazakhstan says that it is ready to discuss extending the OPEC/Non-OPEC production deal.

Looking at today’s events, it is a fairly quiet start to the week with mostly second tier data releases including October new home sales and the November Dallas Fed manufacturing activity index in the US. The BoE’s Ramsden is scheduled to speak in the evening, followed later by the Fed’s Kashkari.

US event calendar

• 10am: New Home Sales, est. 625,000, prior 667,000; MoM, est. -6.3%, prior 18.9%
• 10:30am: Dallas Fed Manf. Activity, est. 24, prior 27.6
• 5:30pm: Minnesota Fed President Kashkari Participates in Forum
• 7pm: Fed’s Dudley Speaks on U.S. Economy: 10 Years After Crisis

DB’s Jim Reid concludes the overnight wrap

Welcome to the last week of November with December starting on Friday. Can the S&P 500 hold on to complete its 13th successive positive total return month? November is currently running at just under +1.5%. If so, it’ll be the first time ever in the c.90 years we have monthly returns data that we’ve seen such a run. We’ve also never seen every month in the year experience a positive total return. Whether November might create the first of these new records might depend on where we go on the expected Senate vote on tax reform later this week.

A reminder that the Republican leadership can afford to lose no more than two votes with Politico reporting over the weekend that as many as six Republican Senators are still withholding their support. If it eventually passes this week then differences with the House bill will then need to be reconciled before final legislation can be passed to President Trump. For now, Republican lawmakers are still committed to finalising the bill by Christmas as Senator Scott noted “I hope we can get it done by Christmas…if not, we’ll be here through Christmas, looking at the end of the year”.

Elsewhere this week, Fed Chair nominee Jerome Powell’s confirmation hearing takes place tomorrow. Our US economists expect this to go smoothly and will be followed by full Senate approval in the coming weeks. We also have current Fed Chair Yellen’s testimony before the Joint Economic Committee on Wednesday. Again our US economists don’t expect this to be much of game changer but she may feel less restrained in conveying her own opinions in light of this being her last appearance before Congress.

In terms of data the main focus this week will be the various inflation readings across the globe. In Europe we have the November CPI report scheduled for Thursday where the consensus expect a rise in both the headline (to +1.6% yoy from +1.4%) and the core (to +1.0% yoy from +0.9%). In the US on the same day we’ll also receive the personal income and spending reports, and PCE core and deflator readings for October. Japan’s CPI report is also out on Thursday. Other things to note this week include the second revision to Q3 GDP (+3.2% qoq annualized expected) in the US on Wednesday which our colleagues notecould see some upside risk given recent revisions to underlying data. Also worth highlighting are Thursday’s PMIs in China, the final European manufacturing PMIs on Friday and the US ISM manufacturing report on the same day.

There are also lots of central bank speakers this week and those at the Fed might be carefully watched given the concerns expressed in the last FOMC minutes (released just before the Thanksgiving break) about soft inflation. The full day by day week ahead is at the end but remember our new “Next Week, This Week…” document published on Friday which includes a cut out and keep table of upcoming events.

This morning in Asia, markets are trading lower with the Nikkei (-0.38%), Hang Seng (-0.56%), Kospi (-1.32%) and Chinese bourses down 0.7%-1.3% as we type. Elsewhere, China’s industrial profit for October has slowed mom to a still decent growth of 25.1% yoy (vs. 27.7% previous). China will continue to be in focus after the wobbles last week and the increasing chatter of a growth slowdown. Turning to the US holiday season shopping tally, early feedback suggests it has been strong for the online sector. Adobe analytics (which measures transactions at the largest 100 web retailers) noted Black Friday and Thanksgiving online  sales in the US rose 17.9% yoy to US$7.9bn. Elsewhere, marketing firm Criteo noted 40% of Black Friday’s online purchases were made on mobile phones, up from 29% last year. Conversely, Reuters noted anecdotal feedback suggests sales at traditional brick-and-mortar retailers may have been more muted. We shall find out more with the National Retail Federation scheduled to publish its estimate of sales on Tuesday.

Moving to Brexit talks, the Scottish Conservative Party leader Ms Davidson has warned time is running out as “if we don’t make it through in the next two weeks, to move to that next phase (on trade and transitional deal)….(then) it’s a setback”. The Sunday Times reported that the UK will improved its financial settlement offer to £40bln (c€45bn), but the exact figures will not be made public, while the FT has  noted that PM May will present an improved offer on 4th December. We wait and see if these initiatives kick start the negotiations. It seems the Irish border has moved to being the number 1 stumbling block for now.

Now briefly recapping market performance back on Friday. US equities (S&P +0.21%; Nasdaq +0.32%) strengthened on thin volumes after trading resumed for half a day post Thanksgiving. The S&P rose to a fresh all time high of 2,602 with modest gains in the tech and materials sector partly offset by telco and financial stocks. European markets were mixed but little changed. The DAX rose 0.39% partly on signs of increased support from the SPD to help Ms Merkel to form a new coalition government. Across the region, the Stoxx 600 and FTSE both dipped c0.1% while the CAC rose 0.20%. The VIX fell 2% to 9.67.

Government bond markets weakened slightly with core bond yields flattish to 2bp higher (Gilts 10y flat; Bunds +1.3bp; UST +2.3bp), while peripherals also rose 2-3bp. Turning to currencies, the US dollar index fell 0.47% while Sterling and Euro gained 0.21% and 0.69% respectively – the latter is back near its two month high. In commodities, WTI oil rose 1.6% to a fresh two year high following Bloomberg reporting that Russia and Saudi Arabia have reached a framework on potentially extending production cuts at the OPEC meeting on Thursday.

Away from markets, S&P has cut South Africa’s local currency debt one notch lower to junk status (BB+/Stable) citing its expectations for further deterioration in the country’s economic outlook and public finances. Moody’s still has its South Africa’s rating at investment grade (Baa3), but has put them on negative watch. The Rand fell c2% against the Greenback on Friday but has recovered c0.6% this morning.

The latest data from the European Banking Authority showed European banks have pared their exposure to Britain since the Brexit vote. Banks based in the EU bloc have cut their total assets tied to the UK by -16.3% yoy (-€356bn) to €1.59trn as at June 2017, with most the decline driven by a drop in derivatives related exposures.

In Germany, the latest Emnid survey show 52% of Germans believe Ms Merkel’s CDU/CSU and SPD should form a coalition government, but 39% oppose a grand coalition. On an individual party basis, support for CDU/CSU and SPD were little changed, up 2ppt and 1ppt from last week.

Wwe wrap up with other key data releases from Friday. In the US, the flash November Markit PMIs were slightly lower than expectations. The services PMI (54.7 vs. 55.3 expected) and manufacturing PMI (53.8 vs. 55 expected) were both softer. Hence, the composite PMI fell 0.6pt to 54.6 (vs. 55.2 previous) – now back to July levels.  In Germany, the November confidence indicators were solid. The IFO business climate trended higher (117.5 vs 116.7 expected) and IFO expectations were well above expectations at 111 (vs 108.8 expected) – the highest since November 2010. Elsewhere, the UK’s October housing finance approvals were very slightly lower than expected at £40.5bn (vs. £40.65bn), while Italy’s lumpy industrials orders fell sharply in September but were still up 4.5% yoy.

Looking at today’s events, it is a fairly quiet start to the week with mostly second tier data releases including October new home sales and the November Dallas Fed manufacturing activity index in the US. The BoE’s Ramsden is scheduled to speak in the evening, followed later by the Fed’s Kashkari.

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Blain’s Morning Porridge – November 27th 2017, submitted by Bill Blain of Mint Partners

Germany – not solved and likely to prove an even larger problem..

“El castillo, le torre yo soy, le espada que guarda el caudal.

Another massive shopping day – Cyber Monday. Let’s see if the declining footprint into US malls confirms the end of retail and tomorrow belongs to Amazon, Ebay and Tencent? Suspect so… (Personally, I’m furious as I bought a new evening suit recently and picked it up Friday to discover even a proper West-end tailor was having a “black Friday sale”. I won’t be going back there again!)

Looks like I got Germany wrong.

My predictions Angela Merkel would find herself trapped into a difficult minority or a convention defying second election look increasing unlikely as she is now threshing out a “Grand Coalition” CDU deal with the SDP. My “bad”.The membership of both parties apparently support it. I read a single member of her own party who dared to call for her resignation was subsequently booed down by the mob of enthusiastic Merkelistas.

The market is welcoming the news as far more positive for Germany than the earlier Jamaica Coalition, and positive for Europe as a reinvigorated Merkel will re-engage with Macron’s France to solve Europe’s many problems with sprinklings of German good-fairy dust.

Huh. I’ll reserve judgement. I suspect the path to a German coalition will remain fraught and distracting for some time to come. Moreover, although a new coalition will happen, I reckon that far from being positive, Germany is going to be one of the big negatives pulling down Europe next year. Everyone is talking about how strong European growth is – it’s not; across the soft-underbelly of the continent it’s anemic at best with massive unsolved youth unemployment. Except for Germany, European growth is positive, but constrained and lethargic.

In contrast, Germany is on fire – witness last week’s confidence numbers and the recent growth numbers. How long before the Bundesbank is demanding rate hikes to cool the overheated economy?

I suspect that far from Germany engaging closely with Macron’s European vision, self-interest will see Germany diverge further from Europe as political necessity dictate a harsh German line on further austerity and reform demands upon the rest of Europe. Banking Union is a non-starter before NPLs are sorted. Higher rates to suit Germany spell slowdown in Germany’s European satellites.

Meanwhile, reading through the stock picker comments this morning, none of them sound particularly convinced on further upside from here, but all report strong sentiment indicators as the buying wave continues. My colleague Steve Previs notes the VIX hit 8.56 on Friday – a record low.

I’m still struggling to understand just how the market remains so convinced to the upside. Sure, we’ve got growth and it’s been a strong year, but that’s never sustained. Financial gravity dictates a sell-back at some point.

The numbers this year have been spectacular – according to my Macro economist, Martin Malone, through 2017 risk assets (stocks, and residential real estate) have delivered some $23 trillion of upside. That’s incredible! Meanwhile, monetary and fiscal policy, economic growth and global fixed income (risk free bonds) have delivered $15 trillion. Global GDP has grown $5 trillion to $80 bn. (The value of Global Residential housing has added $10 trillion to $210 trillion!)

What’s not to like? The IMF has update growth projections twice, and the EIU (Economist Intel Unit) upgraded growth on Saturday.

But these gains also highlight risks. Can the $13 trillion gain in Global stocks be maintained – and would a correction tumble global sentiment? Full employment (at least outside Europe) will prove inflationary (I’ve attached Martin’s inflation driver chat!). And there are just so many things visible on the threat board from Saudi, China, Brexit, Washington and Oil. Perhaps it’s the things not yet on the threat boards we should worry about – the no-see-ums, like the hi-yield bond bubble!

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Submitted by By Shant Movsesian and Rajan Dhall MSTA of FXdailyterminal.com

At the very start of the year, we recall the chorus of projections for EUR/USD to fall below parity, warranted by the euphoria over the Trump administration’s plans for a tax overhaul alongside the reform plans for healthcare, and allied to the assumption that Europe had too many headwinds to negotiate in order for underlying growth to impact significantly on the region.  Some were even calling for levels as low as 0.9500 and 0.9000.  Five months into the year and with the French elections voting in Emmanuel Macron, there was renewed confidence, and with recovery still pushing ahead, the shift in sentiment was near tidal as outside calls for 1.2000 became the consensus and hedge funds and money managers poured into the EUR across the board.  We saw EUR/CHF shaken out of its coma, with the SNB naturally welcoming the move back above 1.1000 and later 1.1500 – though as an aside, the Swiss central bank still believes the EUR is overvalued – the ECB are more worried about the speed of appreciation in the USD rate.

1.2000 achieved, it was not long before momentum kicked in and all and sundry were then looking for 1.2500, but all the while paying scant attention to time-frame, which is an all too forgotten metric in the markets these days.  The correction was due, and as we cited a few weeks back, it was a matter of where we based out, and this ranged from 1.1700 down to 1.1200 (ish) based on technical factors which we have tried to align with the US yield curve.  The Fed’s dot plot has eased off a touch, but the market has been significantly more downbeat, not least of all due to the multitude of obstacles standing in the way of tax reform first and foremost.  We will ignore the US equity markets, which seem to be running on their own rules at the present time, but the USD has naturally suffered, and by the sheer weighting in the USD index, the EUR has benefited the most. 

Looking at the Euro wide data on the leading economies, few can argue with the numbers, and with the likelihood of some of the key financial business migrating away from London, the prospects continue to look good for the continent.  Even so, the undercurrent of political fragmentation, which – let’s not forget – brought Marine Le Pen into the final vote, and the latest collapse in German coalition talks are all a recipe for potential instability, which at the very least should see an element of ‘discount’ in the EUR rate to some degree.  We also have the Italian elections next which are also a cause for some concern, as are those on NPLs within in a number of notable banks – not just in Italy. 

If we do push past 1.2000 next week, sellers will be looking to fade this on some of these factors, and we also have to factor in the Dec Fed hike, which is an opportunity for the FOMC not to miss as normalisation is still very much on the agenda, albeit slightly more gradual than before. 

Inflation is a worry across the globe, and we await the time when this near obsessive focus in the market fades away.  For not though, we get the latest CPI rate (Nov) on Thursday, with Germany and Spain releasing their prelim numbers the day before.  French, Spanish and Italian Q3 GDP numbers are also due out in the latter half of the week – all EU wide manufacturing PMIs on Friday.

In the US, standout is the Q3 GDP release on Wednesday with its latest revisions, and on Thursday, the core PCE index is expected to tick up, and is released at the same time as personal income and spending data.  US payrolls is released on Friday the week after, but the Nov manufacturing ISM is out at the end of next week, with the employment index having shown a healthy correlation to job numbers. 

Key data in Japan next week; not least of all the inflation numbers on Thursday, but the BoJ will be watching the core rates given the strong rise in Oil prices which should lift the headline.  As such, the JPY will stick to its funding status, and despite rumblings over persistent negative rates hurting banks as well as the huge asset buying fuelling an inflationary surge down the line, the price action suggests the market is not taking notice for now.  We can see this in evidence in the way EUR/JPY keeps bouncing back, while losses in USD/JPY have been pretty orderly.  

Good times for Sterling as the recent data run shows the economy is holding up.  No one – certainly not us – is suggesting a complete break down in EU talks will mean an outright collapse in the UK economy, but pushing GBP higher from current levels on an eventual stabilisation in Brexit and the consequent developments looks premature as yet.  Those buying the Pound on the interest rate perspective would also do well to book profits now, as this seems to be fading with the BoE looking for 2 more rate hikes in the next 3 years.  This looks to have been a clever communication ‘hedge’ of sorts, with Brexit to and fros always on hand to vindicate a change of heart within the MPC. 

On Brexit – the only driver of trade next week with no data on the schedule of note – the leading obstacle now standing in the way of progress to phase 2 talks on trade is the hard border issue in Ireland.  Northern Ireland will not entertain any differentiation in the agreement with the rest of Britain; more specifically the customs union.  With the Irish government itself dealing with internal issues which will dilute the decision making process, the deadline of the EU summit will be seriously tested – and we are being conservative here.  The divorce bill is still also an issue as the increased offer from PM May will likely be subject to concessions on trade – something which the EU have been not committal on so far, so there there is every reason to believe the optimism based rise in GBP could start to fade soon.  1.3400 and 1.3460 are key technical levels in Cable to watch out for, but in EUR/GBP we are already looking to the upper end of the range.  Clear 0.9050, and we could see some fresh upside traction developing. 

Trade negotiations for Canada – with the US and Mexico – are also hitting road-blocs, with the hard line drive by the US to implement measures to reduce their trade deficit the focal point for talks.  Naturally this would come up against resistance, and Canada’s Freeland was sanguine in her expectations as a result.  This does not seem to be having much of an impact on CAD, though nor is Oil price as it continues to try and push on to new highs. Rather the spot rate is now settling into a near term range with a slight skew to the upside based on fair value, which we continue to see in the 1.2500-1.2700 area.  The BoC have successfully reined in the hawkish market view on interest rates, so we are now back to data watching, and next week, we have Sep GDP and Nov payrolls to look to in Friday’s trading session.  USD sentiment will dictate until then, with support against the USD see at 1.2670.  Price action suggests a breach of this level will not yield much momentum just yet. 

Rate rises in Australia have also been priced out, but these were more so over the medium term.  2018 expectations were centred around the mid point of the year when the RBA would add another 25bps on rates, but slow wage growth and the CPI rate falling out of the central bank range have all but erased these projections.  The RBA ares still confident of economic pick up, but the market needs a little more to push AUD/USD materially higher from its recent lows, having based out ahead of 0.7500.  Next week we get some CapEx data on Thursday as well as credit numbers, which in the current light are attracting plenty of attention as does high household debt levels – a key concern in Canada also. 

Less focus on this in NZ, where private debt to GDP is less than 100% compared to 233% in Australia and 267% in Canada.  For comparison, the US is 200%.  Liquidity issues as well as economies to scale have been bypassed in the recent upside seen, which saw the spot rate breaching 0.7500, but we still have to look forward to the Labour led coalition policy intent, to see whether the NZD can outperform from current levels.  AUD/NZD is looking more intent on the downside these days.  Sub 1.0900 here could spark a return to much lower levels, which in turn could finally push NZD/USD back through 0.7000. 

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In early November, we discussed how commentators were become disturbed by the sell-off in Chinese government bonds after the Party Congress, which saw yields rise to 4.0%. The anomaly was that yields in less-liquid, unsecured Chinese corporate bonds had barely moved. Some sleuthing on the part of the Wall Street Journal discovered that the most likely explanation was that redemptions in China’s shadow banking sector, especially in the infamous $4 trillion Wealth Management Products (WMP), meant that cash needed to be raised…quickly. Highly liquid government bonds were the easiest option. Furthermore, retaining the higher-yielding corporate bonds was handy in meeting the guaranteed returns in the WMP Ponzi schemes.

The relative stability in corporate bond yields was short-lived, with the Chinese bond sell-off spreading to the corporate sector as November progressed. Besides the post-Congress focus on deleveraging, the mainstream explanation was that investors were differentiating between good and bad credits ahead of more than $1 trillion of local bonds maturing in 2018-19. The spin was positive as it would lead to capital being channeled more productively.

Needless to say, this was not how we viewed it. From our perspective, it looked like the emergence of cascading sell-offs within Chinese financial markets which have been abused by excessive leverage and Ponzi characteristics. Recent plunges in Chinese equities have strengthened our conviction. Indeed, as the new trading week opened, equities were hit again, as we pointed out last night and as Bloomberg observes this morning:

After taking a breather in the wake of a battering Thursday, Chinese shares resumed their decline Monday, with some previously high-flying consumer and technology companies among the hardest hit. The CSI 300 Index of large-cap stocks was down 1.3 percent as of the mid-day trading break, with ZTE Corp. and BOE Technology Group Co. both falling more than 6 percent…“Institutional investors are choosing to cash in toward year-end as valuations are near historic highs and market sentiment deteriorated after official media targeted Moutai,” said Shen Zhengyang, Shanghai-based analyst at Northeast Securities Co. He said the market “lacks steam” for further gains.

The CSI 300 finished the session down 1.3%, deepening a 6.8 percent decline posted in the final three sessions of last week, and reflecting disappointment that on Monday the PBOC provided no net liquidity to the system.

“The slides continue as blue chips have gained significantly this year,” said Shao Rui, analyst at Shanghai Securities Co. “The tighter liquidity conditions prompt institutional investors to lock in their profits.” After injecting a net 150 billion yuan last week, the central bank’s additions via open-market operations matched maturities Monday, suggesting cash supply will remain tight. China’s 12-month interest-rate swaps climbed for the first time in three sessions.

The consumer discretionary index fared even worse, falling 2.1 percent as BYD weighed. The Shanghai Composite Index lost 0.9 percent and the Shenzhen benchmark dropped 1.6 percent, with losses accelerating through the afternoon. What was notable is that for the second time in one week, the Chinese national team was not there to rescue investors with buying in the last hour of trading.

While the sell-off in Chinese equities is unnerving, our primary focus remains on conditions in credit markers in China and Hong Kong. After the Chinese open, we highlighted the tightness of credit in the Hong Kong interbank market, where 1-month HKD HIBOR spiked to its highest level since December 2008.

In this increasingly fragile environment, the portfolio manager who runs China’s best-performing bond fund sees a “high probability” that the rout in corporate bond markets will get worse in 2018. According to Bloomberg.

It’s been the worst month for China’s local corporate notes in two years. And it might just be the start, as the nation’s top bond fund manager says yield premiums could rise further in 2018. President Xi Jinping is stepping up efforts to trim the world’s largest corporate debt burden, after emerging even more powerful from the Communist Party’s twice-a-decade congress in October. Financial institutions are hoarding cash amid expectations the government will announce more measures to curb leverage, and that is pushing up borrowing costs in the money market.

“There is a high probability that credit spreads will widen next year given that there hasn’t been any improvement in the tight liquidity,” said Zhang Qinghua, general manager of fixed-income fund investment at E Fund Management Co. His E Fund Stable Value Bond-A fund has returned 15 percent, the best among fixed-income funds in China with more than 3 billion yuan ($454 million) of assets that are tracked by Bloomberg data.

Policy makers must walk a fine line. Bond market pain has already spilled over into equities, as rising borrowing costs tarnish corporate balance sheets. Economic growth could also be jeopardized if deleveraging sparked a rash of defaults. For now things appear under control. While two more firms missed bond deadlines recently, there have been only about 21 note defaults this year compared with 29 for all of 2016.

The 31 basis-point rise in the AAA corporate bond spread this month is the biggest increase since March 2015. Zhang sees further deleveraging measures by the Chinese authorities triggering a rise in the number of defaults.

Despite those market moves, the government is rolling out more deleveraging measures. Financial regulators this month proposed sweeping rules to curb risks in the country’s $15 trillion of asset-management products. The government is still focused on preventing financial risks and curbing leverage, as economic slowdown looks limited, according to Zhang. Closure of zombie companies may accelerate next year and some individual companies’ credit events are unavoidable. However, overall credit risks are declining because of improving profits and declining leverage ratios, he said.

While we agree with Zhang’s outlook for corporate bonds, we are less confident about his upbeat stance on Chinese equities.

Convertible bonds will outperform government and corporate securities next year because listed companies’ profit growth may remain high, boosting attractiveness of equity assets, according to Zhang. “Liquidity may also flow from the cooling property market to the equity market next year, supporting better performance of the equity market,” said Zhang.

Our sense is that the cascading, “snap sell-offs”, such as the one seen overnight in China, are going to get worse before they get better, and equities will increasingly be drawn into the mix.

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An Athens Appellate Court Prosecutor has found 36 people guilty for the infamous “Athens Stock Exchange Crash of 1999” that caused thousands of small investors to have lost their life savings.

As KeepTalkingGreece.com reports, it has taken 18 years for an Athens Appellate Court Prosecutor, Athina Theodoropoulou, to find guilty 36 individuals implicated in the affair – including stockbrokers, investors, and shipowners.

The accused had been previously tried on fraud charges and money laundering, but at the time the three-member appellate court of Athens, with different members on the bench, had unanimously declared all of the accused innocent on all counts.

The case was re-opened by the Areios Pagos, Greece’s Supreme Court, as the judges believed that the acquittal lacked sufficient legal justification.

They ordered that the case be retried from scratch.

According to prosecutor Theodoropoulou, the first court erroneously concluded that there were no damages incurred by those charged.

She said that the aim of the accused was to create an artificial image of the market, by cultivating a climate of investor prosperity and long-term stability.

“Afterwards, the system collapsed because the bloated stock prices were artificial,” she said.

 

“With your machinations, you undermined the law of the free market by pushing up stock prices to levels that they normally never would have reached,” she said, asserting that clear deception was involved.

 

“The price on the stock market board was not the ‘just’ value, as the accused falsely created it by injecting their stock packages into the market,” the prosecutor stated.

Crash scandal

In September, 1999, after a dizzying seven-year climb to nearly 6500 points, the Greek stock market suddenly experienced a sudden decline that ended only four years later, after huge numbers of small investors had lost their life savings on the bourse.

Within three years, by September 2002, the Greek stock market’s capitalization had lost 136 billlion euros in value.

Countless families were entirely destroyed financially.

The then Pasok government of Costas Simitis, with finance minister Yannos Papantoniou, had consistently and openly urged Greeks to invest, even going as far as to predict that the market would to soar.

The stock value of many bogus companies soared, with the owners pocketing the gains and investing nothing in the company.

Many critics viewed the crash as the greatest financial scandal in Greek history.

Judicial investigation into the ASE crash, the so-called “stock market bubble”, began in 1999 and ended in 2009 with charges against 67 defendants. IThe proceedings before the Three-Member Cassation Court of Appeal are continuing with speeches by the defendants’ lawyers.

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Elon Musk just gave people a powerful and eerie visual related to his belief that Artificial Intelligence (AI) could usher in a SkyNet style apocalypse where the machines take over and kill us all. In a talk given last July, Musk said, “I keep sounding the alarm bell but until people see robots going down the street killing people, they don’t know how to react because it seems so ethereal."

On Sunday Musk took to twitter to vividly illustrate his point, retweeting a creepy viral video which showcases the DARPA-funded Boston Dynamics "Atlas" military robot's astounding ability to do a back flip – something which researchers have called "bonkers" for the shocking and unexpected compounding leaps in development of humanoid robot technology that Atlas represents. 

Musk commented on the original "we dead" tweet with the ominous warning: "This is nothing. In a few years, that bot will move so fast you'll need a strobe light to see it. Sweet dreams…" 

And he followed with another tweet accompanied by the 90's hip-hop song "Regulate" emphasizing his oft-repeated message that AI is a "public risk" that must be regulated: "Got to regulate AI/robotics like we do food, drugs, aircraft & cars. Public risks require public oversight. Getting rid of the FAA wouldn’t make flying safer. They’re there for good reason."

This is nothing. In a few years, that bot will move so fast you’ll need a strobe light to see it. Sweet dreams… https://t.co/0MYNixQXMw

— Elon Musk (@elonmusk) November 26, 2017

we dead http://pic.twitter.com/lUys7DptdZ

— alex medina (@mrmedina) November 16, 2017

Got to regulate AI/robotics like we do food, drugs, aircraft & cars. Public risks require public oversight. Getting rid of the FAA wdn’t make flying safer. They’re there for good reason.https://t.co/6OXZC3UdMW

— Elon Musk (@elonmusk) November 26, 2017

In a recent Rolling Stone interview Musk told Neuralink staff after showing them a documentary on AI, “Maybe there's a five to 10 percent chance of success [of making AI safe].” He's long emphasized that governments need to "proactively" regulate and monitor advances in artificial intelligence before it's too late, as the technology poses "a fundamental existential risk for human civilization."

Rolling Stone's summation of Musk's words to the Neuralink crew points out that, "the problem with building something that's smarter than you is … that it's smarter than you. Add to that the fact that AI has no remorse, no morality, no emotions – and humanity may be in deep shit. This is the good son's second chance against the remorseless father he couldn't change."

He further admitted to the group that he invested in DeepMind – the British AI research company acquired by Google in 2014 – with the aim of keeping an eye on Google’s development of AI. "There's a lot of risk in concentration of power. So if AGI [artificial general intelligence] represents an extreme level of power, should that be controlled by a few people at Google with no oversight?" Musk told Rolling Stone. 

And Musk's instincts appear to be correct, as DeepMind itself proudly defines its purpose on its website as follows: "We’re on a scientific mission to push the boundaries of AI." Such personal monitoring of the industry is what Musk referenced in a previous talk in July when he said, "I have exposure to the most cutting-edge AI and I think people should be really concerned about it." 

Meanwhile, it appears that Musk's "sweet dreams" tweet regarding DARPA/Boston Dynamics' back flipping humanoid military robot hints at the future possibility that such a mind-numbingly advanced and capable machine is a prime example of just the type of robot, when equipped with AI, that will do us all in. As one researcher, commenting on the significance of the pre-back flip/post-back flip threshold, characterizes:

But I think we're in a new robotic age now. There was a time before Atlas could do backflips, back when robots were for factories, bomb disposal, vacuuming, and the occasional gimmick, and none of the useful ones were humanoids. Now we're living in an era where humanoid robots are apparently as agile as we are. So what will they be used for? It’s time to get out the popcorn.

Or ask Musk might point out, it will be too late to get out the popcorn as it will already be "lights out/sweet dreams" on the end of humanity from the moment such a super bot comes online and goes conscious.

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Via ValueWalk.com,

Over the past 100 years, the borders in Central and Eastern Europe have been redrawn time and time again, often leaving groups of people separated from their home country by new borders. Although land often changed hands relatively peacefully, suddenly finding one-selves as an ethnic minority in a new country was bound to lead to tension and resentment.

While these resentments may reveal real disenfranchisement of ethnic minorities in Central Europe, politicians, especially populist figures, have seized on the outsider narratives inherent in the diaspora experience.

As the April 2018 election approaches in Hungary, Prime Minister Viktor Orban has been reaching out to the Hungarian minority in Romania, drawing criticism from Romanian leaders, while his supporters insist he is trying to lend his support Hungarians everywhere.

Rooted in History

Tensions between Romania and Hungary can be traced back to World War I and the Treaty of Trianon.

Although the Treaty of Trianon ended hostilities between the Allied Powers and the Kingdom of Hungary, the peace came at a great price to the Austro-Hungarian successor state. Hungary lost 2/3rd of its population and territory, leaving the former imperial hub landlocked in the heart of Central Europe. Most of its territory was ceded to Yugoslavia, Czechoslovakia, and Romania, as well as Austria, Italy, and Poland. Romania was granted the entire region of Transylvania, where an estimated 1.3 million ethnic Hungarians reside, making Hungarians Romania’s largest minority.

The loss of such a large chunk of territory and population would certainly leave its mark on national memory. Recently in Hungary, politicians have been revitalizing this narrative.

By derivative work: CoolKoon (talk)
Hungary1910-1920.png: The original uploader was Fz22 at English Wikipedia
(Original text: fz22 (talk)) – Hungary1910-1920.png, CC BY-SA 3.0, Link

Speaking on the June 4th anniversary of the Treaty of Trianon, Jànos Làzàr, Minister of the Hungarian Prime Minister’s Office, called on the beneficiaries of the treaty to apologize, insisting, “Trianon was a diktat, a historic injustice against a nation. The entire western world is indebted to Hungary.”

Lazar was careful to say that Hungary does not advocate for the redrawing of borders, rather they merely mean to ensure that the rights of minority Hungarians are protected everywhere. Romania has not taken it that way. The Romanian authorities used words like “provocative” and “dangerous” to describe the Hungarian government’s treatment of the issue.

Diaspora Politics

This isn’t the first time Lazar has intervened on behalf of Hungarians in Romania. Last spring, Lazar interceded in the case of an ethnic Hungarian brewer, Andras Lenard, in Romania who was being pressed by Heineken. Heineken was suing the upstart brewer claiming that their names, although different languages, were too similar. Hungarian politicians reacted by calling for a boycott of Heineken products as well as proposing legislation to ban the use of the Heineken red star as a communist symbol. Heineken responded by dropping the charges against Lenard.

The intervention of Hungary on behalf Lenard reflects a larger government policy of considering the Hungarian minority in Romania as Hungarians. In 2010, the Orban government expanded Hungary’s citizenship laws, making ethnic Hungarians in neighboring countries eligible for citizenship and therefore voting privileges. As the 2018 parliamentary elections appear on the horizon, Hungarian Prime Minister Viktor Orban has been encouraging Hungarians in other Central European countries to register to vote.

By The Independent – http://ift.tt/2BgAwpk (Jump to 391)
The Independent, (New York), June 14, vol. 98, 1919, p. 391 (Primary source, if any, not cited), Public Domain, Link

Orban’s critics claim that he is merely trying to leverage the 1 million eligible voters in Romania to attain a coveted 2/3rd majority in parliament for his Fidesz party. Fidesz is just two seats away from a majority that would allow them to make constitutional changes. Considering that in the 2014 elections 95% of the vote from citizens domiciled outside of Hungary went to the Fidesz party, mobilizing the Transylvanian vote is of key importance to the Orban administration. The fact that Orban may be able to mobilize thousands of votes in the diaspora is a sign that minority protection in Central Europe is an issue that should not be overlooked.

Orban doesn’t just encourage the dual-national Hungarian minority in Romania to vote in Hungarian elections, drawing further criticism from Romanian figures. In a trip to Transylvania just before the 2016 Romanian elections, Orban stirred angst against the government, claiming that the government is failing to help the ethnic Hungarians. Orban went as far as to say that the Romanian government lacks respect for the Hungarian minority. He urged them to vote in their own best interest in the elections.

Romanian critics of Orban have accused him of trying to meddle in their politics. Former President Traian Basescu even called for the removal of the Hungarian ambassador from Romania.

ReConnect Transylvania

ReConnect Hungary is a birthright program for Canadian and American young adults of Hungarian heritage. The program aims to help Hungarians in North America forge a sense of Hungarian patriotism through travel in the region and volunteer opportunities. Interestingly, the study trip is not limited to the country of Hungary, rather participants visit Hungary, as well as the Hungarian Diaspora in Serbia, Ukraine, or Slovakia to witness, “how young Hungarians outside Hungary are maintaining their identity and traditions.”

As of 2017 the program offers a three month long ReConnect Transylvania program. Participants in this program will spend 3-6 months working with an NGO in Transylvania to “discover the deepest layers of being Hungarian.” ReConnect Hungary also now offers a week long extension on the original two week long ReConnect Hungary program to explore Hungarian culture in Transylvania. By including the Diaspora in the discussion about Hungarian culture, this private-public partnership builds a concept of a Hungarian nation that traverses accepted borders.

ReConnect Hungary is part of a larger trend called diaspora tourism. Proponents of the trend argue that it cultivates a sense of cultural heritage abroad and encourages tourism, while critics claim local leaders are using it to manipulate foreign nationals.

Cultivating strong national identity abroad can be a powerful tool, and not just in dual-citizens. Hungary has already seen some success in this regard. In 1987 the Hungarian Human Rights Foundations, comprising of second generation American citizens, successfully lobbied congress for the removal of Romania’s Most Favored Nation status. The lobbying efforts were in response to the human rights violations of Ceau?escu’s communist regime, as well as specific abuses of the Hungarian population in Romania.

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How much cash do you have in your wallet right now?

Historically, it has been found that the amount of cash people carry is a key indicator of their use of cash. According to research from the European Central Bank, people in the eurozone carried an average of €65 in their wallets in 2016.

You will find more statistics at Statista

As Statista's Niall McCarthy notes, on a country by country basis, Germans tended to carry the most cash on average, €103.

People in Luxembourg had an average of €102 in their wallets while Austrians had €89.

People in France and Portugal had the least on average with €32 and €29 respectively.

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