Category: zerohedge

DARPA Prepares To Test Hypersonic Weapons In 2019

On Wednesday [May 01], the US Defense Advanced Research Projects Agency (DARPA) told reporters at the Defense Writers’ Group breakfast that two hypersonic weapons are due to fly in 2H19, reported National Defense.

DARPA Director Dr. Steven Walker said the top-secret military research agency is working with the Air Force on the development of two hypersonic weapons – the Tactical Boost Glide (TBG) and the HAWCt (HAWC).

“[They are] two very different concepts but when you’re talking hypersonic [weapons], it is good to have what I consider intended redundancy because it’s a hard technology, making materials and propulsion systems that last in 3,000° Fahrenheit temperatures is not easy,” Walker explained.

Walker said there is a slight probability the hypersonic weapons could fly in 1Q20, but was overly optimistic that the test would occur this year. DARPA partnered with the Air Force to develop hypersonic technologies in 2012, he noted.

“These [efforts] were focused on more tactical theater-level operations,” he said.

TBG is expected to be an air-launched rocket with speeds higher than Mach 5 (3,836 mph) and reach altitudes of 200,000 ft. The HAWC will also be air-launched, but its design is more of a hypersonic cruise missile. DARPA will air-launch both weapons from a Boeing B-52 Stratofortress.

“The bottom line is it is going to happen within a year from now and I think I’ll keep my fingers crossed for having some good success stories coming,” he added.

Walker was uncertain about which weapon will fly first. “It’s really a race between HAWC and TBG to see which one goes first,” he said.

However, the reason Walker said the test could extend into 1Q20 is that both weapons are currently in the initial stages of their assembly, integration and test phases.

“You have to qualify all the hardware components [and] sometimes you run into issues with qual tests,” he said. “You got to re-qualify things, put that all together and [then] you test the whole system and you hope it all works and has been done correctly. … [There are] all sorts of things once you get into testing real hardware that you have to face down every day and beat back.”

DARPA believes the new weapons can penetrate the world’s most advanced missile defense systems including Russia’s S-500 Prometey surface-to-air missile/anti-ballistic missile system.

“‘It’s an area that I believe the US really needs to make progress in and be a leader in,” Walker said. “From a technology standpoint, … we have led the way in hypersonics. I think some of our peer competitors though have taken that technology and turned it into capability faster than we have.”

The advantage of hypersonic weapons is not just the speed, but also the unpredictable trajectory and the range, he said.

“You also get a lot of potential maneuverability that we don’t have today,” he said. ‘It’s “a combination of all those factors [that] make it an attractive technology, which is why our adversaries are working on them.”

Last month, we reported that US Army Space and Missile Defense Command leader Lt. Gen. James Dickinson told the Senate Armed Services subpanel on missile defense policies about how the military is preparing to test five hypersonic weapons systems in the Marshall Islands in the central Pacific Ocean.

While we aren’t sure if both tests are related, it certainly points to a time when hypersonic technologies are being rushed into testing. This comes as Russia and China have allegedly matured hypersonic technologies, in Russia’s case, has already sent the Avangard into series production for rapid deployment.

via ZeroHedge News http://bit.ly/2GWcrZe Tyler Durden

Is OPEC Facing An Existential Crisis?

Authored by Cyril Widdershoven via Oilprice.com,

Global oil market fundamentals are looking particularly bullish, from the OPEC+ production cuts, to the constraints of exports in Nigeria and the U.S. sanctions on Iran and Venezuelan. While oil price volatility has increased thanks to financial analysts putting an emphasis on Trump’s apparent Twitter agreements with OPEC leaders, market fundamentals are still very bullish. Until the global market realizes that U.S. oil storage reports are not the be all and end all for oil prices, volatility will remain.

There is a new threat looming though as OPEC+ prepares to meet at its June 25-26th Ministerial Meeting in Vienna.

The internal cohesion of OPEC is being called into question at present, as several major member countries are facing not only external sanctions but threats of a total internal implosion of their respective regimes.

The removal of U.S. waivers for leading oil importers of Iranian oil and gas is putting the Tehran regime under severe pressure. While Trump’s target of reducing Iranian production to zero is unrealistic, the impact of the sanctions is undeniable. No new oil contracts have been reported between Iran and its main clients, China and India, since the sanctions. It seems that the fear of indirect sanctions by the U.S. is already having its desired result, Iran’s hydrocarbon exports have been hit hard and seem to have no response. Reports about Iran having trouble to pay not only its own bills, but also its proxies in Lebanon, Syria and Iraq, also show that the regime is struggling.

At the same time, Iran’s staunchest supporter in OPEC, Venezuela appears to be on the brink. Confronted by U.S. sanctions and increased political support from Arab and European countries for opposition leader Guaido, Venezuela is a facing an economic meltdown as its hydrocarbon sectors come to a standstill. In recent days the situation here has worsened as the opposition, supported by parts of the Venezuelan armed forces and security services, has openly started a rebellion to remove current president Maduro. The latter remains in power, but mainly due to Russian, Chinese and Turkish support. Iran’s Latin American partner is heading for a possible civil conflict of unknown proportions.

Based on these two key OPEC producers, at least on paper, OPEC’s internal structure is fragmenting. The Saudi-led OPEC+ production cut strategy is still in place, but it is partly successful due to the negative repercussions of the sanctions on Iran and Venezuela. The high level of compliance with the agreement (128%) is based on the loss of these particular volumes. At the same time, Saudi Arabia, UAE and Russia, are sticking to their roles, cutting as needed. Optimism about Iraq is based on uncertain assumptions, while Libya’s overall situation is highly volatilie.

To top up OPEC’s internal issues, Africa’s main oil producer Nigeria reports that it is not even able to sell some of its cargoes. Nigerian sources stated on May 2 that around 20 Nigerian oil cargoes are not sold, even after severe price cuts. Nigeria has already reduced its selling prices of a basket of May-loading crude oil grades, mainly as buyers were not showing an interest in contracts for cargoes offered at and above a premium of $2 compared to dated Brent. At present, Nigeria’s major grades, including Bonny Light and Qua Iboe, Forcados and Escravos, saw a decrease of around 20 to 25 cents compared with April. At the same time, Nigeria has been hit by several force majeurs, such as that declared by oil major Shell on exports of Nigeria’s major Bonny Light stream after the closure of one of two export pipelines, while Amenam, operated by Total, is also under force majeure. The main reason for this is not a lack of demand from China or India, but from European clients.

In the coming weeks, as analysts focus on production figures, storage volumes and demand, OPEC will be focusing on defusing pressure to increase production, while at the same time the Saudi-led faction will likely confront the Tehran-Venezuela (and possibly Iraqi) axis. Iran has openly threatened to undermine OPEC’s stability if no support can be gathered before the June meeting. In several statements to the press, Iran’s oil Minister has warned that OPEC is in danger of collapse. Tehran threatens at present to take all necessary measures to block oil and gas flows from OPEC members that are supporting the U.S. sanctions regime. At the same time, Tehran has warned to take measures against countries trying to fill in the supply gap left by Iran. Zanganeh reiterated the latter during a meeting with OPEC secretary general Barkindo in Tehran. Barkindo reacted by saying that OPEC will do its utmost to depoliticize oil and gas policies of the organization. OPEC’s SG statements however look very bleak in light of the growing heat in the conflict between Iran and Saudi Arabia. Zanganeh is counting on Iraq, Libya and Venezuela to keep the pressure on Riyadh an Abu Dhabi, not to fully support U.S. sanctions. The meeting in June will be crucial. Geopolitical pressure, combined with an aggressive power projection of Iran in the Middle East (Iraq, Syria, Libya), leaves less room to maneuver for Arab countries than before. Tehran’s hope to keep Moscow on its side also seems to be backfiring as Russia openly is behind OPEC+ cuts, while backing Saudi-UAE’s efforts in Libya.

In many ways this appears to be a repeat of the 2018 meeting of OPEC in Vienna. The main difference will be that Tehran has lost much of its internal OPEC powers, due to the departure of Qatar and the implosion of Venezuela. Tehran doesn’t hold any real cards anymore, even the threat of military action in the Gulf or elsewhere will backfire. The cartel is heading for a rearrangement of powers, a rearrangement in which a new actor may be taking part. Moscow is still heading for an official agreement with OPEC, threatening to topple any Iranian future in the cartel for a very long time. Putin’s need for Iran is gone, new power plays are already in place, in which Riyadh, Abu Dhabi and Libya are much more prominent.

 

via ZeroHedge News http://bit.ly/2J3lLOC Tyler Durden

How Democrats Plan To Destroy The Market

As US stocks have powered to fresh all-time highs, the health-care sector has emerged as a pariah for investors, as burgeoning support for ‘Medicare for All’ among the Democratic contenders for 2020 – part of an overall shift to the far-left for the party as a whole – has caused panic to set it.

All it took was a few formerly moderate candidates like Kamala Harris to follow Sanders’ lead and embrace Medicare for All, and holders of managed-care stocks were stuck with a $300 billion loss.

But while the price action in health-care has left thousands of investors frustrated, it’s just one harbinger of what could happen to the market depending on the outcome of the Democratic Primary, according to a Bloomberg piece published Sunday.

Trump

The increasing hostility to Wall Street and corporate America from candidates like Bernie Sanders and Elizabeth Warren, as well as what has become a bipartisan push to curb share buybacks (which would threaten corporations’ position as a crucial marginal buyer powering the decade-long bull market), threatens to spoil the stock-market party inspired by the Trump Administration, which has established itself as the single most market-friendly administration in recent memory. Ultimately, whether any of this legislation passes is irrelevant: A surging tide of support for these ‘progressive’ policies would likely be more than enough to send equities deep into the red. 

There has even been some talk of banning buybacks altogether, something that Goldman warned last month could tank the entire market.

And it could all happen sooner than many investors believe possible.

“Most people think that they don’t have to worry about it today,” Ryan Primmer, head of investment solutions at UBS Asset Management, said in an interview. “But we can just look at what’s happened with health care as an indication that you don’t know when it’s going to come.”

The market’s growing unease was evidence in Stephen Schwarzman’s comments Monday at the Milken Institute conference in Los Angeles this past week where he warned that the Democratic candidates and their policies threatened to slow the economic expansion, particularly by pushing for a rollback of tax reform.

Few presidents have aligned themselves with markets as closely as Trump, who cheers records in the Dow Jones Industrial Average and browbeat Federal Reserve Chairman Jay Powell for raising rates. His sweeping overhaul of corporate taxes capped a 35 percent rally in the S&P 500. Not everything has helped, but the image of a Republican-controlled government united in the cause of stocks was one many investors had begun to savor.

Another foreboding indication of just how damaging the Democrats’ approach can be even without legislation behind it is Alexandria Ocasio-Cortez’s success in driving Amazon out of New York City. One portfolio manager described her approach as ‘the exact opposite of what the Trump Administration is doing’.

Enter the opposition, its flag borne by the likes of Congresswoman Alexandria Ocasio-Cortez, whose condemnation of Amazon.com helped keep it from building a New York headquarters. Stocks may remain near record highs and few candidates frame themselves as the outright enemy of equities. But the episodes are evidence that plenty of Democratic contenders don’t view preserving profit margins as a top priority.

“That really is the polar opposite of what the Trump administration has done,” said Mark Stoeckle, CEO and senior portfolio manager of Adams Funds, which has about $2.5 billion under management.

If anything, some Democrats view the underperformance of health-care stocks over the past few months as a sign that their approach is working – because it signals that, for the first time, the market is taking the threat of a Bernie Sanders presidency seriously.

Not that the candidates are shedding any tears. A campaign aide for Senator Bernie Sanders – who is running for the Democratic nomination – touted the concerns among investors as a victory that signals growing support for his ideas like Medicare for All.

The aide said it shows that investors who didn’t consider Sanders a real threat before now believe he can win.

To be sure, health-care isn’t the only industry that the Democrats’ have in their sights. Elizabeth Warren and Bernie have railed against Wall Street, promised to break up the big banks, raise taxes and strengthen regulations.

Warren and Sanders have called for sharply raising taxes on wealthy people and corporations – often calling them out by name – to finance an expansion of the safety net. “Do you happen to know – anybody here happen to know how much Amazon paid in taxes last year?”

Sanders said at a CNN town hall last week. “Zero. All right? Owned by the wealthiest guy in America. That is an absurd tax system, a regressive tax system.”

Warren recently warned that major technology firms are hurting entrepreneurs. “The area around these giants are referred to by venture capitalists, investors, as the dead zone because it means you try to start up a business, you just run the risk that Amazon steps in front of you or Google steps in front of you or they buy you out before you have a chance to get started,” she said last week at the same series of CNN town halls.

Warren has also accused big tech firms of being monopolies that should be broken up (echoing some of the same rhetoric President Trump has used against Amazon). Already, under Trump, the FTC has set up a task force to apply more anti-monopoly scrutiny to big tech.

Other election themes bear watching, say bulls. They include stiffer regulation and the breakup of large companies, something Warren is advocating. Her proposal could see the dissolution of tech megacaps like Amazon.com Inc., Alphabet Inc.’s Google and Facebook Inc., which she’s called monopolies that harm innovation and small business.

“Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy,” Warren wrote in a recent blog post. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else.”

Warren’s motion hasn’t done much to the tech sector. Shares of Facebook barely budged following her announcement — ditto for Amazon and Alphabet. But critics say the proposal has the potential to be disruptive in a market that these firms all but dominate.

“You might see Facebook and Google and Amazon try to be broken up. That’s always a risk,” Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, said by phone. “There’s always been this political jargon and fighting and hell raising, so to speak, over the years.”

Bottom line: When President Trump warned ahead of the midterms that if Americans want to see the market and economy tank, they should vote Democrat, he was – once again – right. What’s worse: At this point, progressive Democrats wouldn’t even need to win to crash the market. They would only need to poll high enough to give investors a real scare.

via ZeroHedge News http://bit.ly/2WvkYZS Tyler Durden

The Glut Cometh

Authored by Eric Peters via EricPetersAutos.com,

Wouldn’t it be nice to know the canary’s going to sing before he actually does?

Very few saw the crash coming back in ’08 – which was the last time the car industry hit the linoleum and the cry resonated from Detroit to DC: I’ve fallen – and I can’t get up!

By the spring of ’09, GM had become Government Motors – and remains so, in spirit, to this day. The taxpayer bailout money has been paid back, but the company was fatally tainted by its roll-under-the-sheet with Uncle. It became a virtue-signaling company more than a car company.

Pontiac, Oldsmobile, Saturn and Hummer – dust in the wind. Along with about 20 percent of GM’s previous market share.

Chrysler eventually got bought by Fiat and shed Plymouth, then Dodge.

Ford didn’t take any taxpayer money but did get a “line of credit” – just in case.

They all bent knee.

Now comes the glut – and it could be the canary in the coal mine, just before he opens his beak.

More than 4.2 million new cars are stacked up unsold as of this month – which is an alarming half-million more cars than were stacked up guess when?

In the early spring of 2007 – just before the bird chirped. Not long after, he hit the floor.

Once again, people have abruptly stopped buying new cars. The question is – why?

The answer’s pretty obvious, then and now.

People can’t afford to buy them.

Back in ’08 it was mostly due to not being able to afford anything. The economy had tanked because the housing market had just collapsed and millions of people were more worried about making their mortgage payment than assuming a car payment.

It wasn’t because GM sold “gas guzzlers”- trucks and SUVs. Or rather, it wasn’t because GM was ignoring market demand for smaller, more efficient cars. People loved those “gas guzzling” trucks and SUVs – including Hummers, which GM was selling three different versions of, very successfully.

People wanted them, so GM built them – and sold them.

Chrysler and Ford did the same.

It is not rocket science.

But then came the housing crash and – just like that – the people who wanted and bought them no longer could.

It is Naderite gas-lighting to suggest this was the fault of the Big Three.

Or rather, it is Naderite wishful (vengeful) thinking.

It is an article of Naderite faith that the bulk of car buyers crave high gas mileage to the exclusion of other considerations. Including the cost of achieving high gas mileage.

This is as delusional as believing that most people prefer tofu burgers over Whoppers – but Burger King isn’t giving them the choice.

At any rate, the privately-owned banking cartel which controls the country’s finances – the “Federal” Reserve – “fixed” the problem by flooding the economy with free money. That is to say, with more debt – but at low or even no interest.

Unaffordable cars – gas guzzling and otherwise – were made to seem “affordable” by adding two or three years to the duration of the loan, which increased from an average of five years before the crash to six or seven afterward. And by reducing the interest on the now-longer loan, which fell to historic lows. Instead of 10 or 11 percent – which had been common through most of the ’90s – interest rates on new car loans were all of a sudden as little as 4 percent or even nothing at all.

Hard to resist – such a deal!

This was the real bailout – the one few understand because it’s almost never discussed. Perhaps because it would lead to a more substantive discussion of topics we’re not supposed to discuss – such as the cost of all the “gas saving” and “safety” technology being force-grafted to new cars.

Uncle helped the banking cartel by doing what Huxley suggested in his presciently predictive novel, Brave New Word (which was written almost 100 years ago).

Demand for new cars was “stimulated”  . . . by destroying as many used cars as possible. This was the infamous Cash For Clunkers program. While some of the cars were indeed “clunkers” – old and nearly worn out – most were merely paid-for.

They had many years of useful life left to go, but the problem – for the banking cartel and the government – was that no payments were being made on them.

Getting rid of them – and getting their owners into a new car (and new car payment schedule) solved that problem.

But it was by hiding the cost of money – and thereby, the cost of new cars – that the industry was resuscitated.

Temporarily.

It could go on only as long as interest rates remained low to none. When that began to change around the middle of last year, so did demand for new cars. That was the canary’s cue. Even a slight uptick in the cost of money makes the cost of new cars that much more obvious.

Or rather, that much more unavoidable.

Even the innumerate can tell the difference between a $399 per month payment and a $475 per month payment – and it’s that additional $76 (or whatever the amount is) that’s causing people to hesitate where they previously would have signed the paperwork.

The rat, so to speak, is cornered.

Interest rates can’t be kept low to no anymore because the flood of new money via the Fed dilutes the value of the money already there; in order to make money on devalued money, one must charge interest that makes up for the depreciation of the loaned sum.

Car loans can’t be extended much more, either.

Six years is already too long – from the standpoint of anyone who isn’t innumerate. By six years from new, the average car is worth less than the balance still owed. Making further payments on such a loan is like trying to pump gas into a tank with a silver dollar-sized hole in it.

What was it Kevin Costner said about no way out?

Actually, there is a way – but it might take a real crash this time to reset things:

Let the market – rather than Uncle – decide the value of attributes such as gas mileage and saaaaaafety – and let people pay for what they want.

If new cars became more affordable – which they would if the market were permitted to operate – it wouldn’t be necessary to hide their cost. Nor to extort the taxpayer to finance the resurrection of an industry made unprofitable by government fatwa’ingrather than its own misreading of the market.

Meanwhile, now is a very good time to buy a new car . . .  if you can still afford to buy one.

*  *  *

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via ZeroHedge News http://bit.ly/2ZY8aNr Tyler Durden

As Trump Approval Rating On Economy Skyrockets, Biden Slams President As “Aberration” 

President Trump’s approval ratings are on the rise since the release of the Mueller report – with CNN begrudgingly admitting the percentage of people who approve of how Trump is handling the economy “is the highest number we’ve ever seen.” 

In other polls, Trump has made significant gains amid the lowest unemployment rate in nearly 50 years and a 3.2% increase in seasonally adjusted hourly earnings over last year. 

A Gallup poll released on Friday reveals that Trump’s approval ratings are at all time highs, with 91% approval among Republicans – near all time highs. 

Among Democrats, Trump has a 12% approval rating, up from 4% in March. 

And what did Joe Biden use as his opening pitch? 

The former Vice President called the Trump administration “an aberration” during a 2020 campaign event in the eastern Iowa city of Dubuque.

“Limit it to four years,” Biden told a ballroom crowd of 600 according to the New York Times. “This is not the Republican Party,” Biden added, citing “my Republican friends in the House and Senate.”

Translation; Trump is a giant, ongoing threat to the Uniparty (as Steve Bannon calls it). 

Biden’s decision to suggest that Trump is the problem while extending an olive branch to Republicans has “exposed a significant fault line in the Democratic primary,” as the Times puts it. 

Democrats, like Senators Bernie Sanders and Elizabeth Warren, see the president as a symptom of something deeper, both in a Republican Party overtaken by Trumpism and a nation cleaved by partisanship. Simply ousting Mr. Trump, they tell voters, is not enough.

It’s a debate that goes beyond the policy differences separating a moderate like Mr. Biden from an insurgent like Mr. Sanders, elevating questions about whether the old rules of inside-the-Beltway governance still apply. And it has thrown into stark relief one of the fundamental questions facing the Democratic electorate: Do Democrats want a bipartisan deal-maker promising a return to normalcy, or a partisan warrior offering more transformative change? –New York Times

It seems the Times agrees with Democrats like Sanders and Warren, as the report notes that “Trump has tightened his grip on the party, installing loyalists in key positions and commanding fealty from Republican candidates as some of his loudest Republican critics retired rather than face electoral defeat.” The Times also notes that many Congressional Republicans have voted “almost in lock step with the president, even as he cast aside longstanding party orthodoxies, such as free trade, and sought to exert his will on traditionally nonpartisan institutions like the Federal Reserve and Justice Department.” 

(The Comeys, McCabes, Ohrs, Peter Strzok, Lisa Page, Eric Holder, Loretta Lynch, James Clapper, John Brennan and 150 years of US history aside, totally nonpartisan). 

In other words, even if Trump doesn’t win in 2020, ‘Trumpism’ has taken over. 

Biden’s pitch, however, is that he’s an “electable pragmatist who can reach across the aisle.” 

“I just want to see decency again,” said Biden event attendee Jimmy Stumpff, who wore a “Make Lies Wrong Again” shirt to the Cedar Rapids event last week. “I feel Biden’s our best chance to beat Trump — by far,” he added. 

John Anzalone, a Democratic pollster who has previously advised Mr. Biden, said it should be no surprise that bipartisan appeals sell, even in a party primary. “Guess what,” he said. “Democratic primary voters agree with the fact that a Democratic president should work with Republicans to get things done.”

“There is this narrative about Democratic primary voters that they’re all about anger and the fight, or principles,” Mr. Anzalone added. “But real voters know one thing: If anything is going to get done to help them, it’ll have to be done across party lines.” –New York Times

Let’s see how well Biden’s GOP outreach works with more liberal Democrats in coastal states… 

via ZeroHedge News http://bit.ly/2J1qYGv Tyler Durden

Hedge Fund CIO: “In The Next Recession Rates Will Quickly Fall 100bps. Then Go To Zero. Then We Do MMT”

Submitted by Eric Peters, CIO of One River Asset Management

“The economy is roaring,” said Vice President Pence, unemployment having just hit a 50yr low of 3.6%. “The President is very interested in bringing fresh ideas to the Fed. People with a renewed and fresh perspective. People who understand the dynamic approach to this economy that he’s been putting into practice,” he said. “When I was in congress, we had a debate about the Fed’s dual mandate. It might be time to revisit that, having the Fed focus on monetary policy, and just watching inflation,” he added. “This is exactly the time not only to not raise interest rates, but we ought to consider cutting them.”

Overall:

“China is adding great stimulus to its economy while at the same time keeping interest rates low,” tweeted Trump. Chinese fiscal stimulus this year is on track for a +4.25% jump (up from +3% in 2018). Their local governments are authorized to issue $320bln worth of special purpose bonds to fund infrastructure this year, a +59% jump from 2018. And new bank loans jumped $860bln in Q1 alone. Chinese 7-day interest rates are +2.55%, with real GDP growing at +6.4% and nominal GDP expanding +8.7%. Their stock market leads the world in 2019, surging +26% priced in dollars. “Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing,” continued our President, fingering his iPhone. Our Federal Reserve balance sheet surged from $870bln in Aug 2007 to $4.5trln in Jan 2015 and has since contracted to $3.9trln through quantitative tightening. They hiked overnight rates to +2.5% to normalize policy, with core PCE inflation now +1.6%. “Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records & at the same time, make our National Debt start to look small!” concluded Trump, the S&P 500 +17.5% year-to-date, our national debt surpassing $22trln (slightly larger than US annual GDP). But if you subtract the debt owned by the Fed, our true debt is rather smaller than our economy. And if our central bank resumes buying debt, while government borrowing/spending expands the economy, then our true national debt/GDP declines further still. And that is exactly where the United States of America is headed.

In the Future:

“Investing is about looking forward,” said the CIO. “In the future, we’ll look more like today’s Europe than we’ll look like America’s past,” he continued. “Which means our rates are at least 100bps high.” US overnight rates are +2.5%, with 2019 nominal GDP forecast at +4.5% (200bp spread). EU rates are -0.40% with 2019 nominal GDP forecast at +3.6% (a 400bps spread).

“In the next recession, US rates will fall 100bps quickly. Then go to zero. And after that, we’ll just have to see what direction we go,” he said, “But that’s probably to MMT.”

Splitting Atoms:

“MMT is entirely valid and has been embraced by Japan, even if they don’t call it by name,” said the CIO. Japan’s debt to GDP ratio stands at nearly 250%, but the central bank owns half of it and continues buying. Overnight interest rates are -0.10%, 10yr bond yields are -0.06%, the currency is stable and there’s barely any inflation. “Lots of people scoff at MMT because they think it’s the equivalent of opening Pandora’s box. But that’s like denying the existence of nuclear physics because you think humans can’t be trusted with atomic weapons.”

“In Japan, they chose to suppress inflation to protect older people,” continued the CIO. “The older Japanese own the property and assets. So they’ve made the younger people have to work harder to buy these things from them.” That’s what the rentier class in every society has always done and will always do. “Japan could have made different policy choices as they deployed MMT. But the economic structure they chose has protected the status quo, while getting the most work out of young people. That’s how the world generally works.”
 
“We are quite obviously headed to MMT in the US, Europe and China,” said the CIO. “But it is still not clear how it’ll be deployed.” In Warren Mosler’s construct, MMT is best used to run an economy efficiently, supporting full employment and investment in expanding a nation’s productivity and productive capacity. “History tells us that the rentier class coopts policy to enhance their position. So while MMT is a framework suited to get people out of poverty, by the time we’re finished, it’ll probably be used to further expand inequality.”
 
Easy Money:

“One of the neat things about the past decade is that capital markets subsidized innovation,” said the CIO. “I no longer own a car. I pay $6 to get home and apologize to my driver that it’s such a cheap ride. But he says: No sweat, I get a $100 bonus for every 10 rides.” It’s great for consumers today but long-term value-destructive for suppliers of capital, even though equity markets don’t reflect that destruction now. “And this will continue as long as markets reward top line growth, and executives who ignore the bottom line get paid in stock.”
 
Anecdote:

“This next phase will require real vision,” said Lithium, handsfree on Highway One. “Getting here, to a place where Tesla, Uber, Lyft and their ilk are selling lots of stuff while burning through billions was a forecastable thing,” he explained. “If you had predicted 5yrs ago that Uber would have 4mm drivers, at a loss of $4bln per year, and people were going to love it, the only true foresight would’ve been that people were going to love it. That was investment genius.”

Lithium banked hard, the Pacific swell to his left, Malibu’s sandy cliffs to the right. “If you’re willing to incinerate that kind of money, you can do almost anything.” You just can’t do it forever. “But if you’re telling me they’re going to make a ton of money in ten or fifteen years, or they’re going to get the transition to autonomous driving just right. Well, that’s an infinitely greater challenge,” he said, shifting into ludicrous mode.

“For so many disruptive companies today there isn’t a realistic winning scenario. By the time ride-hailing firms get close to profitability, you have to believe that driverless technologies will have arrived. And this will be an incredibly disruptive thing for their models. But you need to believe they’ll ‘own’ driverless transportation, and there’s no strong case for why they will,” explained Lithium. “Maybe in a couple years Uber will only burn $2bln, then $1bln, then autonomous will arrive and they’ll burn $15bln.” That’s what the transition will look like. “Five years ago, you knew Tesla would get here, and you’d be crazy to go short until this time came. But you could also forecast that from here, it would get really hard.” And it has.

“So here we are now, and where’s the road to profitability? Not clear. So to profit in this next phase, you’ll need the vision to see who will actually make money.”

via ZeroHedge News http://bit.ly/2VhfftN Tyler Durden

Yuan Tumbles As FX Markets Adjust To Trump Trade Threats

Early indications across the (admittedly thin) FX markets is that ‘pain’ is on its way for risk assets after Trump’s China Trade deal threats.

Yuan has plunged to 3-month lows…

And USDJPY is down notably (typically signaling derisking of carry-trade funded risk assets)…

We’ll see if the algos buy the dip when US futures market open. Also note that China is still on holiday today.

via ZeroHedge News http://bit.ly/2UZwJ9i Tyler Durden

“Just A Human Being”: Rachel Maddow’s Latest Resistance Hero

This is were three years of failed Russiagate conspiracy theorizing and fixation leads you — into the arms of fanatical endless war proponent John Bolton: “John Bolton God bless you, good luck..” one can now hear on “resistance” network MSNBC prime time.

MSNBC’s Rachel Maddow is now championing neocon national security adviser John Bolton’s “humanity” given he apparently went loose cannon this past week, vowing to confront Russia over Venezuela even as his boss President Trump downplayed Moscow’s role in the crisis after a Friday phone call with Putin.

“This is what John Bolton, human being, thought his job was this week,” Maddow said on her show Friday night. Both Pompeo and Bolton had clearly gone a bit rogue with their overly bellicose Venezuela comments, while Trump appeared to be more restrained — and for Maddow this was of course cause for championing the neocon interventionist line: “Hey, John Bolton, hey, Mike Pompeo, are you guys enjoying your jobs right now?” she questioned. 

On Friday Trump had said following the phone call, Putin is “not looking at all to get involved in Venezuela other than he’d like to see something positive happen in Venezuela, and I feel the same way.”

Maddow, who once prided herself on slamming and deconstructing Bush-era regime change wars, now finds Trump not jingoistic enough. She stridently questioned:

“How do you come to work anymore if you’re John Bolton? Right, regardless of what you thought about John Bolton before this, his whole career and his track record, I mean, just think of John Bolton as a human being. This is what John Bolton, human being, thought his job was this week.”

She further cut to a clip of Bolton criticizing Russia’s alleged military involvement in Venezuela to prop up Maduro, because apparently uber-hawk Bolton is now a “fearless truth-teller” in Maddow’s world.

“You thought that was your job,” Maddow said. “But it turns out not at all, not after Vladimir Putin gets done with President Trump today.”

It bears repeating that among the loudest right-leaning voices who joined the chorus of leading establishment Democrat Russiagaters included previously forgotten about neocons who were quickly rehabilitated by the “Resistance” — David Frum, Max Boot, Robert Kagan, Bill Kristol among them. 

And then there was the nauseating phenomenon of watching liberals lionizing Trump-skeptical Republican Congressional leaders like Lindsey Graham, Jeff Flake, and the late Sen. McCain.

Because it’s awful, just awful! – that Trump might actually prefer peace to waging war in multiple places…

Restraint vs. war in multiple places? Maddow apparently advances the humanity of those advocating the latter. 

It amounted to, at times, a picture of a President at odds with the officials who this week have called vociferously for a change in power in Caracas and have consistently declined to rule out a US military intervention.

Trump has become frustrated this week as national security adviser John Bolton and others openly teased military options and has told friends that if Bolton had his way he’d already be at war in multiple places. — CNN

And now, months into 2019, we get to hear Maddow waxing eloquent about the innocent “human side” of none other than John Bolton. 

Of course, Maddow should first consider whether Bolton or his neocon ilk ever once paused to consider whether those they advocate dropping bombs on — from Iraq to Syria to Libya to Yemen to Gaza to Venezuela — are themselves actually human beings who simply wish to live out their daily lives in peace. 

via ZeroHedge News http://bit.ly/2Vh9xZ2 Tyler Durden

Netanyahu Vows “Massive Retaliatory Strikes” To Continue As 600 Rockets Fired From Gaza

Following a reported five hour long Israeli security cabinet meeting on Sunday, the Israeli Defense Forces (IDF) have been instructed to continue conducting strikes across Gaza — this in response to a stunning approximate 600 rockets fired towards southern and central Israel by Hamas and Islamic Jihad since Saturday morning.

Saturday IDF air strikes on Gaza City, AP Photo

Prime Minister Benjamin Netanyahu said “massive attacks against terrorist elements” are to continue to his weekly Cabinet meeting. “Hamas bears the responsibility not only for its own attacks and actions but also for the actions of Islamic Jihad, and it is paying a very heavy price for this,” he added.

Israel has responded with some 260 airstrikes on Gaza, according to the IDF, resulting in 17 Palestinians killed, including militants and civilians, with the death toll mounting.

The Palestinian health ministry blamed Israeli attacks on Saturday for the killing of a one-year old baby and the child’s pregnant mother in Gaza, however which the IDF disputed, claiming the deaths were due to a Hamas rocket misfiring. 

Schools and businesses remained close across southern Israel, with much of the population within range of Hamas rockets in the south seeking bomb shelters.

CNN has cited three Israelis killed as rockets continue to rain down unabated, citing Israeli rescue and hospital officials.

A 58-year old Israeli man whose house was hit by a rocket was the first death by Gaza rocket fire since the end of the 2014 war. Other Israeli civilians have been reported critically injured as the numbers of Hamas direct hits on Israeli residential buildings are rising. 

Meanwhile, the IDF has claimed a successful strike on a Hamas operative it says was known for transferring Iranian money to terror groups inside the strip. 

Currently there appears no end in sight to the violence, as both sides have vowed to sustain and ramp up the attacks.

The UN and Egypt said they are attempting to mediate a ceasefire – so far these attempts through the weekend have failed, however.

via ZeroHedge News http://bit.ly/2ZZTqO3 Tyler Durden

World’s Biggest Cash-Money-Printer “Confident We’ll Be Selling More Machines Soon”

Amid the global war on cash, the rise of cryptocurrencies, and tightening central banks, the world’s biggest money-printer is turning its attention elsewhere to stay afloat.

After 201 years, German firm, Koenig & Bauer AG – the market leader for machines that print the world’s banknotes – is pushing into printing on Coke cans and beverage cartons.

“Here we are attacking the former monopolist”, Chief Financial Officer Mathias Daehn said in an interview with Bloomberg at the company headquarters in Wuerzburg, referring to Stolle Machinery, a unit of Japan’s Toyo Seikan Group Holdings Ltd while picking a lidless Coke can from his windowsill.

Koenig & Bauer dominates the market for printing on three-piece food cans, but the more sophisticated printing of two-piece containers for beer and Coca-Cola is largely in the hands of Stolle, Daehn says.

But reports of the demise of the banknote business have been greatly exaggerated according to Bloomberg, as it appears the establishment is losing the war on cash…

As Bloomberg reports, Koenig & Bauer, in which Chief Executive Claus Bolza-Schuenemann, great-great-grandson of the company founder, and his family still own about one-fifth of the shares, is tight-lipped about the buyers of their banknote printing machines. However, Daehn confirmed that all U.S. dollar and euro banknotes are printed on the company’s machines.

“In high-margin security printing, where we hold over 90 percent of the world market, we continue to see a good development with a stable new machines business,” Daehn said.

“Especially emerging markets need increasing amounts of cash, as cash in circulation closely correlates with gross domestic product”, Daehn said, countering reports that banknotes are becoming obsolete because of the advance of cashless payments.

While there have been some ‘scares’ it appears the money-printing business’ trend is once again alive and well…

The first two months of 2019 have been “very pleasing,” Daehn said. “The project situation is good and the orders are good, too.”

“We are confident that we will soon be selling more machines,” Daehn said.

We are too…

You’re welcome.

 

 

 

 

via ZeroHedge News http://bit.ly/2Lyc3Wy Tyler Durden