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China trade talks stalling, shutdown impasse, and Hassett warning growth could be zero… it seems that ‘bad news’ is bad news again!!
S&P was up 0.8% early – that’s all gone now…
As VIX spiked…
With Nasdaq leading the drop since Friday…
And as stocks sank so did the dollar…
Did anyone else notice that US equity market stopped going up when China stopped adding trillions in liquidity?
via ZeroHedge News http://bit.ly/2FTrKTv Tyler Durden
With negotiations behind the partial government shutdown showing no signs of a breakthrough, an estimated 800,000 government employees are set to miss a second paycheck on Friday.
Roughly 420,000 federal employees are working without pay, while around 380,000 have been furloughed amid the longest shutdown in US history, according to CNBC.
While the actual economic impacts are thus far thought to be limited, specific companies and industries are feeling the effects.
Commercial airlines, for example, are facing slower demand as airports struggle with understaffed security checkpoints, are losing revenue. Last week, Delta said it had lost $25 million in revenue on account of the shutdown.
The hit to the overall gross domestic product in the first quarter is also difficult to quantify. Economists have come up with a range of numbers, but they agree that the longer the shutdown goes on, the wider the damage to economic growth. –CNBC
Hundreds of IRS employees, meanwhile, will probably skip work as part of a coordinated protest which takes advantage of a provision which allows them to stay home if they suffer a “hardship,” according to the Washington Post. With IRS offices headed into their busiest time of the year, the the shutdown may result in delayed refunds and frustrating wait times, despite President Trump’s promise not to delay payments.
“I have fielded no less than 30 to 40 calls, emails or text messages about hardship requests from employees daily since Thursday,” said Shannon Ellis, President of the National Treasury Employees Union.
The Trump administration last week ordered at least 30,000 IRS workers back to their offices, where they have been working to process refunds without pay. It was one of the biggest steps the government has taken to mitigate the shutdown’s impact on Americans’ lives.
But IRS employees across the country — some in coordinated protest, others out of financial necessity — won’t be clocking in, according to Tony Reardon, president of the National Treasury Employees Union, and several local union officials. The work action is widespread and includes employees from a processing center in Ogden, Utah, to the Brookhaven campus on New York’s Long Island. –Washington Post
Prospects for reopening the government were grim on Tuesday after President Trump’s latest proposal to end the impasse (which outraged immigration hard-liners), was immediately rejected by Democrats. His plan, which includes funding for most public agencies, promises to DACA recipients, and of course – funding for his wall, is headed for a vote this week in the Senate where it is anticipated to fail.
Trump maintains that he won’t sign any bill that does not fund the long-promised border wall.
Stretched workers are struggling
According to University of Michigan economist Michael Gelman and four colleagues, many furloughed federal workers will be forced to delay paying the mortgage or credit card payments.
The study looked at the effects of the 2013 government shutdown on nearly 7,000 federal workers – both those affected by the shutdown and not – along with more than 90,000 non-federal workers.
The researchers found that the median worker in the study had only enough cash or other liquid assets to cover just eight days of their average household spending. That cushion fell to just five days of spending just before payday. The bottom third of the group had, on average, a combined checking and savings account balance of zero on the day before their paycheck arrived. –CNBC
“Even if there are penalties or costs, late payment of a mortgage is a source of credit that is available without the burden of applying for credit,” write the authors.
For the most part, effected federal workers didn’t use credit cards to make up for their lost wages in 2013 – they simply postponed payments on outstanding debt. That said, the 2013 shutdown only lasted two weeks, while workers in the current shutdown will miss their second pay cycle – forcing many who have missed credit payments to face late fees.
Furloughed IRS tax examiner Will Kohler of Covington, Kentucky has run into an entirely different type of problem during the shutdown; his application for unemployment benefits is in limbo because the Treasury Department responsible for verifying his claim is closed thanks to the shutdown.
Kohler, who makes $38,000 a year, said many co-workers are in the same predicament. Not a single one has been approved for unemployment, he said. Kohler said workers like him are stuck in a difficult position, in part because they are restricted by government ethics rules from getting many kinds of outside work. –CNBC
“When it gets to a point where government employees have to go to a food bank, this is not the America that I grew up in,” said Kohler. “It’s mind-boggling. It really is.”
via ZeroHedge News http://bit.ly/2FJh4rg Tyler Durden
Authored by Charles Hugh Smith via OfTwoMinds blog,
Combine sky-high commercial rents in homogenized, gentrified urban areas and sharp declines in the incomes of the limited populace who can afford gentrified urban areas and what do you get?
A number of macro dynamics have set up gentrified urban America for a big fall in the coming recession. What does gentrified mean? Gentrified means only the gentry (top 10%) can afford to enjoy the urban amenities as commercial rents and the cost of doing business in desirable urban areas have skyrocketed along with residential rents.
As a result, low-margin businesses have been squeezed out of desirable urban neighborhoods along with lower-income residents. The top 10% is the only demographic who can afford to live in gentrified urban America.
As noted in What’s Really Happening to Retail?, Only Amazon-proof businesses can now survive in brick and mortar. And that quickly boils down to high-cost, high-margin food and drinks–cafes, bars, restaurants– and mega-corporate chains: Walgreens, Starbucks, Chipotle, etc. and smaller chains that cater to the needs/obsessions of the top 10%: fitness centers, etc.
On a per capita basis, America is grossly over-supplied with commercial real estate. But within the desirable urban cores, commercial rents have soared due to the relative scarcity of commercial space. As a result, landlords and property managers are asking exorbitant rents, and many are leaving spaces empty rather than rent them for less.
The net result is desirable urban zones are being homogenized: niche retailers and other small service providers can no longer afford the rents (unless they also own the building) and the only businesses that can afford the nosebleed rents are high-margin food-beverage establishments or corporate chains.
The irony is two-fold: the very diversity and novelty that attracted the top 10% is being eroded, while the reliance on free-spending young wage earners in the top 10% (or even top 5% in pricey urban zones) makes such gentrified urban areas extremely vulnerable to any downturn that trims the population, salaries and bonuses of the top 10%.
Drive out all the small businesses that the top 50% can afford and all that’s left is high-cost businesses only the top 5% can afford.
Even worse, the vast majority of these high-cost businesses are discretionary:nobody really needs a $5 coffee, $5 bagel, fitness center membership, etc., and buying a couple rolls of toilet paper and some instant noodles at Walgreens ins’t going to generate the per-square-foot sales Walgreens needs to keep the high-rent store in a gentrified urban neighborhood open.
Corporations have been able to pay high salaries and bonuses to top employees because sales and profits have continued marching higher for a decade. Once a recession cuts revenues and profits, corporate managers have no choice but to slash expenses.
All the low hanging expenses were cut a decade ago–fixed overhead, janitorial services, automation of lower-skilled workers, etc.
All that’s left to slash and burn is the top 10%. First, cut bonuses. Next, move the software-eats-the-world automation up the food chain, and outsource whatever’s still soaking up money in corporate HQ.
In effect, the top 10% is ripe for the disruptions of globalization and automation that have already laid waste to the bottom 90%. Here’s one way this works: Human Resources lays off 20% of the workforce making $100,000 or more, and then hires back some percentage at $75,000 because they know everyone else is laying off the same talent.
It’s called over-supply / over-capacity. There’s too many people with PhDs, Masters degrees, JDs, 10 years experience and so on, and not enough slots for everyone who’s overqualified.
And don’t forget, global corporations can’t afford loyalty to anyone or anything except their major shareholders. If someone in Singapore can do a job for half of what it costs in Silicon Valley, NYC, Austin or Atlanta, bye-bye job in high-cost USA.
How much of a decline in sales will it take to sink high-fixed costs cafes, bistros, fitness centers, etc.? I’m guessing a 15% decline in revenues will sink an outsized number of these enterprises, as their fixed costs won’t drop by much while their operating margins will drop into the red (losses).
Greed is sticky, meaning commercial landlords won’t drop their rents enough to be meaningful until bankruptcy is staring them in the face, and by then it’s too late to find any tenants.
Charts: let’s start with commercial space per capita: the US has way too much:
The Creative Class is one way of describing the top 10% of wage earners:
The top 10% now take home as much as the bottom 90%:
Incomes have only risen for the top 5% and the next 15%:
Combine sky-high commercial rents in homogenized, gentrified urban areas and sharp declines in the incomes of the limited populace who can afford gentrified urban areas and what do you get? A tidal wave of small businesses closing and very few takers for all that empty commercial space.
* * *
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via ZeroHedge News http://bit.ly/2HvBiXk Tyler Durden
After a brief hiatus in bond land driven by sharp stock market volatility, which saw a 40-day stretch without a single junk bond price in the primary market and a move wider in peripheral bonds, credit investors are again feeling the FOMO squeeze and expressed it vividly this morning in the form of record demand for sovereign bond offerings from italy, Spain and Portugal.
According to Bloomberg, sovereign bond offerings from Italy, Spain and Portugal in January have drawn unprecedented bid-side demand, for a total of €106 billion euros ($120 billion), up 14 percent from a year ago, helping a slide in peripheral euro-area yields in the past two weeks.
Spain saw by far the most demand, its offering nearly 5x oversubscribed, when it received €46.5BN in orders for €10BN, 10-year bond on Tuesday, following successful sales by Italy and Portugal earlier this month. The culprit behind the surge in demand: mostly Japanese pension funds and Mrs. Watanabe, as a breakdown of demand for Spain’s syndication showed Asian investors at 11.8%, up from 0.7% for the same offering in January 2018.
With investors once again scrambling to buy European paper, even with the ECB no longer officially in the picture except for reinvestments of maturing bonds, Spanish yields have fallen 17bps in the past two weeks, while Italian yields are down 21 bps alongside a broader surge in risk. Greece could also offer a medium-term bond soon, Danske Bank suggested.
As Bloomberg notes, the sales mark another step in the recovery for a region that saw sentiment weighed down by the risks of a deficit blow-out from Italy’s populist government. While rating companies downgraded Italy last year, Portugal was raised from junk status and Spain was upgraded. Now the nations are starting to benefit as investors are drawn to their relatively high yields.
“Volatility in Italy left tons of pent-up demand,” said Jaime Costero, a rates strategist at Banco Bilbao Vizcaya Argentaria SA in Madrid. There is also greater structural demand as the rating upgrades have drawn “new investors and wider credit lines,” he said.
Market sentiment has improved materially after Italy resolved a dispute with the European Union over its 2019 budget deficit, while weaker regional economic data spurred fears of a slowdown that may lead the European Central Bank to be more cautious about removing stimulus.
“There has been a widespread belief among investors that rates will likely remain low for longer, with central banks likely to be very cautious in pushing rates higher,” said SocGen strategist Jorge Garayo, quoted by Bloomberg. “Low volatility combined with a low level of rates has led investors to overweight periphery, more so with more market-friendly political posturing.”
Of course, it will likely be a different story should the recent return in market jitters spread, once again hitting the high-beta peripheral bond sector. For now, however, both Spain and Italy are delighted that even without the ECB’s backstop investors just can’t get enough of funding their deficit.
via ZeroHedge News http://bit.ly/2RKejwr Tyler Durden
Now in its 33rd day, the unprecedented government shutdown is creating serious strains for the 800,000 federal workers who are either furloughed or going without pay. Some have started looking for new jobs. Others have turned to Uber, Lyft and other gig-economy jobs. Still others are calling out out of frustration. The FBI is complaining that the shutdown is hampering investigations and is calling for lawmakers to at least authorize enough funding to get the DOJ up and running again. Some workers are turning to unemployment assistance. Others are starting to frequent soup kitchens.
But despite it all, Trump and Congressional Democrats are refusing to yield. And a series of votes expected to be held Thursday on competing proposals – one a bid to temporarily reopen the government being pushed by Democrats, the other a compromise proposed by Trump over the weekend that was immediately rejected by Nancy Pelosi and Chuck Schumer – have little chance of passing, according to Reuters.
Republican Senate Majority Leader Mitch McConnell said he planned to hold a vote on Thursday on a Democratic proposal that would fund the government for three weeks but does not include the $5.7 billion in U.S.-Mexico border wall funding demanded by President Donald Trump.
Its prospects appeared grim. The House of Representatives has passed several similar bills, but Trump has rejected legislation that does not include border wall funding. McConnell previously said he would not consider a bill the Republican president refused to sign.
McConnell also planned to hold a vote on legislation that would include border wall funding and relief for “Dreamers,” people brought illegally to the United States as children, a compromise Trump proposed on Saturday.
No matter what Trump proposes, it’s likely to meet a frosty response from the Dems, who are insisting that the government be reopened before any deal on immigration can be struck (which effectively means that there wouldn’t be a deal).
Many Democratic leaders dismissed the deal as a “non-starter” and said they would not negotiate on border security before reopening the government. Democrats have said they would not trade a temporary restoration of the immigrants’ protections from deportation in return for a permanent border wall they view as ineffective. In 2017, Trump moved to end the Dreamers’ protections, triggering a court battle.
But not all of the problems are on the Democrats’ side. According to Bloomberg, Donald Trump’s closest advisers are confused about what Trump would be willing to accept as part of a deal with Democrats to reopen government, which has brought negotiations to a grinding halt. What’s worse, Trump’s Congressional liaison Shahira Knight, who has been the president’s chief shutdown negotiator, is reportedly planning to leave the White House in the coming months, a sign that Trump’s chief aides are growing increasingly frustrated with the impasse, Politico reported.
Two of the aides who spoke with BBG on the condition of anonymity outlined two contradictory proposals that they believed might win support from the president.
On Tuesday, people close to the president offered two different views of what he might concede in a possible negotiation. One said Trump wouldn’t accept any deal that didn’t deliver the full $5.7 billion in funding for a border wall that he seeks. Another said he’d be willing to reduce that amount if Democrats come up with concessions of their own.
The diverging views echo complaints from Democrats, who have said it’s impossible to negotiate with Trump because he and his representatives are at odds and make shifting offers that are subject to change at any time. And they’re not alone in that frustration. Senate Majority Leader Mitch McConnell stayed silent for the first weeks of the shutdown after Trump suddenly reversed course in December and rejected a spending bill the Republican-led Senate had passed.
Trump, for his part, has kept up his steady twitter assault in recent days, insisting that he won’t cave to the Democrats, and that he would move ahead with holding the State of the Union. Meanwhile, one of his top economic advisors warned that any hit to economic growth from the shutdown during Q1 would lead to higher compensatory growth in Q2.
Which begs the question: Is another explosion of volatility the only thing that could push Trump to compromise?
via ZeroHedge News http://bit.ly/2FJUkaL Tyler Durden
Authored by Bryce Coward via Knowledge Leaders Capital blog,
As a conceptual exercise, it may be useful to frame the current episode of market volatility (both upside and downside volatility) from the perspective of the stock market declines in 1998 and 2000. This is because the market decline in 1998 (fueled by the disrupting failure of Long-term Capital Management and the sharp devaluation of the Russian ruble) was quickly arrested and stocks went on to increase by another 58% before they eventually peaked and the real bear market started.
So, if the current environment looks more like 1998 than 2000 then this market cycle could still have another few years left and new all-time highs could be right around the corner. If, on the other hand, 2000 is a better analogy, then we could have bigger things to worry about.
Let’s start with interest rates. Prior to the market decline in 1998 the Fed Funds rate had been basically flat for more than two years. This is in stark contrast to the market peak in 2000 when the Fed had raised rates by 41% over 17 months. More recently, the Fed has raised rates by 1792% over 37 months, not to mention the balance sheet runoff policy. So from the view of monetary policy, 2000 is clearly the better analogy.
Long-term rates show us an even starker difference between 1998 and 2000. 10-year rates peaked in 1996 and had been falling for nearly two years before Long-term Capital Management (LCTM) failed and the selloff ensued. By late-1998 10-year yields had fallen by 41%. In contrast, long rates rose by 63% from the 1998 trough to the 2000 peak. That is to say, the selloff in 1998 took place in an environment of easing financial conditions and the selloff that began in 2000 took place in an environment of strongly tightening financial conditions. More recently, 10-year yields rose by 136% over the few years leading up to the September peak.
Changes in consumer prices can also be thought of as to contributing to either tightening or loosening financial conditions, with a lag. Price declines are stimulative while price increases are contractionary. For the several years leading up to the blowup of LTCM, consumer prices were declining. This allowed the Fed to sit on its hands while economic growth remained strong. But, the growth rate of consumer prices more than doubled from 1998 to 2000, putting pressure on corporate health. Similarly, consumer prices moved from about 0% to 3% from 2015-2018.
Crude oil prices, which admittedly played a larger role in constraining or stimulating US growth prior to the Shale Revolution than they do now, were declining strongly into 1998 vs rising strongly into 2000. Recently, crude oil prices more than doubled off the 2016 low. This has been a boon to oil producers, but a drag on non-oil consumption.
Finally, housing. Homebuilder sentiment was rising strongly from 1994 through 1999 and housing was an important support for growth that whole period. Housing was able to flourish because long-term bond yields/mortgage rates were generally declining. Rising rates finally started to impact housing in late-1999, and that marked the end of housing as a support to growth for the cycle. More recently, this measure of housing activity peaked in early 2018 as long-term interest rates/mortgage rates broke out to multi-year highs. It is unclear whether the decline in rates we’ve witnessed since the summertime will be enough to cyclically rescue housing, or if rates will need to decline significantly more in order for housing to get its mojo back.
As ever, the setup is one thing, and the policy response is quite another. The setup now looks a lot more like 2000 than 1998. That is, it’s a late cycle setup. Markets were able to shrug off the exogenous shock of LTCM because financial conditions were already stimulative and then the Fed followed up with rate cuts. Financial conditions leading up to 2000 were tightening, as they have been for the last 2+ years. There are many policy responses currently that could turn back the clock on the cycle. For example, the Fed could cut rates and/or stop shrinking its balance sheet, trade uncertainty could be removed, or China could continue to stimulate growth. In our opinion, the late cycle dynamic, which is so analogous to 2000, mean policy responses to unfolding events will be of utmost importance to determining the cyclical fate of the markets.
via ZeroHedge News http://bit.ly/2CJkTZA Tyler Durden
White House Council of Economic Advisers Chair Kevin Hassett warned during an interview on CNN this morning that if the government shutdown continues, there is a chance of zero growth in the first quarter:
“It is true that if we get a typically weak first quarter and extended shutdown that we could end up with a number that is very low.”
However, Hassett was quick to note that this could be followed by “humongous” growth in the second quarter if the government reopens.
Hassett confidently proclaimed that the chance of recession in 2020 is “very, very close to zero,” and sees no risk of a credit downgrade for the US.
Additionally, ever the optimist considering the statements from Kudlow yesterday (and Lighthizer over the weekend), Hassett reassured that he is confident the US and China will reach a deal.
🚨 WH adviser Kevin Hassett (@WhiteHouseCEA) acknowledges on CNN that US economic growth could be 0 for first quarter of 2019 if shutdown doesn’t end 🚨 pic.twitter.com/gHCg9Um1k4
— Aaron Rupar (@atrupar) January 23, 2019
via ZeroHedge News http://bit.ly/2Dt5w9s Tyler Durden
Authored by Tom Luongo via The Strategic Culture Foundation,
Earlier this week I did something I never thought I’d ever do. I watched over two hours of British Parliament. This was the session wherein Prime Minister Theresa May outlined her so-called Plan B deal for Brexit.
Needless to say, it wasn’t warmly received.
But a funny thing has happened on the way to Brexit. And I am as shocked to type this as anyone who follows me will be shocked to read it.
Theresa May has risen to become Brexit’s main champion.
As I said in my last article here:
Theresa “The Gypsum Lady” May went through an extraordinary twenty-four hours. First, seeing her truly horrific Brexit deal go down in historic defeat and then, somehow, surviving a ‘No-Confidence’ vote which left her in a stronger position than before it.
It looks like May rightly calculated that the twenty or so Tory Remainers would put party before the European Union as their personal political positions would be terminally weakened if they voted her out of office.
Blue Monday’s Parliamentary session confirmed for me that she has emerged from this fight stronger than she’s been since before the 2017 snap election debacle. May rightly pointed out, patiently and with a twinkle of smugness, that all calls for extending Article 50 or holding a second referendum were irrelevant.
Article 50 happens on March 29th and the whining of Remainer MP’s can’t stop it.
So, if they want a deal with the EU, then they have to give her and the government clear parameters to go back to Brussels to negotiate from. Otherwise, March 29th comes and Brexit on World Trade Organization rules commences.
But May also knows that her offer for talks with all sides of the House is a bit of a lie. She knows that the fractious nature of the Remain position precludes them coming up with a deal offer that will get majority support of the House of Commons.
And if you needed proof of this all you had to do was watch the endless parade of MPs.
For two hours I watched Remainer after Remainer grandstand and virtue signal about the need for the “People’s Vote” and whine for more time. The SNP threatened to leave the U.K. multiple times if they didn’t get their way.
It was like watching children have a tantrum over not getting their cookie.
None of them proposed one constructive solution to break the deadlock in the House. They simply stuck to their talking points and fulminated.
And May was firm. She may have even graduated from ‘The Gypsum Lady’ to ‘Calcite’ or ‘Feldspar.’
If she delivers a real Brexit that leaves the EU spluttering into their lattes and Remainers simpering about how unfair it all is, I’ll take back most of the mean things I’ve said about her.
The Remain crowd has had two years to influence negotiations knowing a “No-Deal” Brexit was the default position. They thought they could play politics, use Brexit chaos as a way for Labour to seize power and destroy the Tories.
And the eventual outcome would be a Brexit betrayal after two years of creating a false reality of the apocalypse of a “No-Deal” Brexit.
That plan has crashed and burned. The people want the vote respected, regardless of how they voted in 2016, Leave or Remain. The polls are clear that the country hasn’t shifted its stance.
The Tory Remainers in May’s cabinet thought they could scare everyone into weakening May with a horrible deal and get what they wanted – Brexit in Name Only. But that has failed as well.
You know things are desperate when the British establishment floated a rumor of a parliamentary coup against May. The calls for the People’s Vote and all of that are coming from people like Tony Blair speaking on behalf of George Soros.
But it didn’t happen. The reports of a draft amendment which would wrest control of the Brexit process from the Prime Minister made the rounds in the media, but nothing came of it during the session.
No one wanted to be the first to even broach the subject of removing the Prime Minister’s ability to conduct government business. May called Tony Blair’s bluff that MPs were not willing to throw out hundreds of years of Parliamentary rules to secure a political outcome there is little to no support for popularly.
The big loser in that debate was Labour Leader Jeremy Corbyn who has his hands tied by Labour Remainers. They insist on him backing a way to stop Brexit despite a majority of Labour MPs now representing districts which voted Leave in 2016.
So Corbyn now must half-heartedly back a Second Referendum which is political suicide as well as continuing to screech about taking ‘No-Deal’ off the table even though he, himself, voted Leave and wants to see a stronger Brexit than most of his MPs.
The press will continue to ratchet up the fear of a ‘No-Deal’ while behind the scenes both governments prepare for the most likely outcome at this point, exactly that.
This entire fight continues to highlight the growing disconnect between the representatives of the people and the people themselves. British electoral politics is opaque and designed, like the U.S.’s, to ensure continuity at the top while the rubes in the rural areas are systematically disenfranchised.
Parliament is paralyzed by politics, conflicting loyalties and an over-inflated sense of self-importance. So is Congress here in the U.S. The difference is, however, that it looks pretty clear that Remainers aren’t willing to die on the Brexit hill while Nancy Pelosi and the Democrats will go full tilt off the cliff in their opposition to Trump.
Calls at this point for a second referendum are the face of absolute panic. May herself referenced the EU’s track record of forcing the people to vote again if they didn’t do so the way they wanted originally. That should leave little doubt as to where she stands on this.
And at this point I have to think she understands the stakes for Britain, the Tories and herself if this process is further compromised by a political class so corrupt, arrogant and misinformed that it refuses to acknowledge its growing irrelevancy.
The path on Brexit is clear: either the Remainers get together and submit a framework to Brussels which works for them that May can negotiate from or they revoke Article 50 and start the whole process over again.
For that to happen at this point requires a cross-party coup. And I saw none of that in the two hours I watched earlier in the week.
And all of the Remainers know they will be lynched if they try that.
So, another week and nothing has changed except that all the bleating and breast beating of the ‘No-Deal Equals Death’ crowd has amounted to very little.
A divided house cannot stand. A divided house cannot agree on something it doesn’t want even more so. May is right to stick to her guns here. It will leave her in a very strong place politically if she delivers a Brexit the people voted for and the politicians hate.
That’s the calculus she got right in this.
via ZeroHedge News http://bit.ly/2CJispU Tyler Durden
The yen has been weakening all day, and moments ago the USDJPY hit 110.00, the highest level since the start of the year – rising alongside 10Y TSY yields and S&P futures – after Japan’s exports fall and Bank of Japan cuts inflation outlook again.
On Wednesday morning, in its latest policy decision, the Bank of Japan kept its monetary policy unchanged as expected, but cut its inflation forecast, and now expects CPI forecast for the fiscal year starting in April to be only 0.9% down from 1.4%, citing lower oil prices, but really just the latest admission that Abenomics is failing to gain traction. The BOJ also trimmed its estimate for fiscal 2020 to 1.4% from 1.5%.
“The yen came under pressure as the perception that the current low interest-rate condition in Japan will continue longer after the BOJ cut its inflation forecast,” said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley Securities.
“BOJ’s decision to lower its inflation forecast has added to the perception that it will continue its current ultra-loose monetary policy for longer, without suggesting it will ease further”, said Tadashi Matsukawa, head of fixed-income investment at Pinebridge Investments Japan.
There was more bad news for Kuroda and Abe overnight, when Japan’s exports tumbled 3.8% Y/Y in December, twice as bad as the expected -1.9%, and the lowest since October 2016, in yet another confirmation that i) global trade is slowing rapidly and ii) Japan will need to find a way to lower the Yen even more if it hopes to boost the country’s exports.
Still, as Bloomberg notes, the dollar continues to face stiff resistance near 110 yen as two key psychological risk factors – U.S.-China trade tensions and U.S. government funding legislation – remain unresolved. That said, as Japanese interest rates are expected to stay low, local investors may decided to send their money abroad, which could provide support to USD/JPY.
via ZeroHedge News http://bit.ly/2RM39ao Tyler Durden
It could be a while before Americans see former New York City mayor Rudy Giuliani back on cable news defending President Trump and rebutting the latest batch of Mueller probe leaks. According to the Associated Press, Trump is furious with his lead attorney after Giuliani made an array of misstatements and slips during interviews over the past week, squandering a golden opportunity to push back against the Mueller probe and the “opposition party” media after BuzzFeed’s embarrassingly inaccurate report that Trump had instructed Michael Cohen to lie to Congress (a report that was disputed by Mueller’s office in an unprecedented move).
Though this isn’t the first time Giuliani has botched a cable news interview and been temporarily yanked from the administration’s batting order, the AP says Trump’s patience with Giuliani – with whom he regularly speaks – is almost at its end, and some are pushing the president to start looking for a new lead attorney.
Reports about Trump’s frustration with Giuliani, as well as renewed calls for a blanket ban on future interviews, follow a spectacular string of gaffes that began Sunday with an embarrassing appearance on Meet the Press where Giuliani suggested that the Trump Tower Moscow talks had continued through the election and continued during a New Yorker interview where Giuliani seemed to suggest that he had heard tapes made by Michael Cohen of his conversations with the president – tapes that haven’t been previously acknowledged.
Vanity Fair’s Gabriel Sherman reported that the campaign to oust Giuliani is being led by Ivanka and Jared, who worry that it’s only a matter of time before Giuliani says something irredeemably damaging about the president. Some inside Trump’s inner circle worry that Giuliani has “lost his mind.” Moreover, the Associated Press reported that some want to bar Giuliani from participating in evening interviews because they worry that he has been drinking before going on-air.
Some of Trump’s allies have suggested that Giuliani be barred from evening interviews because of concerns that he was going on TV after drinking, according to three Republicans close to the White House. Giuliani has previously insisted he does not have an issue with drinking, denying to Politico last May that it affected his interviews. He added: “I may have a drink for dinner. I like to drink with cigars.”
Like many of his peers in the administration, Giuliani is reportedly extremely dissatisfied with his job as Trump’s attorney due mostly to his boss’s mercurial temper (something that has no doubt been aggravated by Giuliani’s erratic behavior).
As I’ve previously reported, the Trump-Giuliani relationship hasn’t been good for weeks. Giuliani has said privately that he “hates the job” and that Mueller’s final report will be “horrific” for Trump. Facing these challenges and pressures, it’s understandable he would make mistakes, the thinking goes. “Everyone who works for Trump screws up because there’s no way to please the guy,” an outside Trump adviser said.
So why does he stay? Perhaps because, after years of irrelevance following his spectacular failure during the 2008 Republican primary, Giuliani enjoys the press attention. He regularly texts with news anchors. Still, the modern media environment isn’t what it once was, and Giuliani has definitely struggled to adapt.
“There’s a school of thought that it’s better to be famous and ridiculed than ignored,” a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. “This has been a trial by fire for him,” the friend said. “He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught.”
But, frustrating as the job may be, Giuliani also may be addicted to it. Friends said the former New York mayor was embittered after being out of the limelight for years following his failed 2008 presidential campaign. He’s been exhilarated by the press attention that comes with being Trump’s lawyer. Sources said Giuliani often books his own interviews and frequently texts with television news anchors. “There’s a school of thought that it’s better to be famous and ridiculed than ignored,” a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. “This has been a trial by fire for him,” the friend said. “He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught.”
Still, after struggling to find an attack-dog-in-chief to lead his legal team, Trump has been otherwise happy with Giuliani’s approach. In other words, when he’s on, he’s on. But his most recent performances represented a “major slip.”
“Rudy had done a very good job going on TV and fighting back and laying down a defense of the president,” said Sam Nunberg, a former Trump campaign official. “But now it’s time to get precise, you can’t be so loose anymore. He had a major slip.”
But Giuliani has slipped up before. And with Mueller reportedly closing in on the final stages of his investigation, which is expected to end with a lengthy report about Trump’s misdeeds that Giuliani is expected to rebut, switching horses mid-race also carries risks of its own.
via ZeroHedge News http://bit.ly/2MqCVo4 Tyler Durden