Rand Paul Rages: “The Deep State Is Trying To Run Congress”

CIA Director Gina Haspel briefed leaders of multiple Senate committees Tuesday about the October murder of Jamal Khashoggi.

But Senator Rand Paul believes Haspel should share the CIA’s findings with all members of Congress.

Paul, a member of the Senate Foreign Relations Committee, exclaimed:

“To my mind this is the very definition of the deep state…”

“The deep state is that the intelligence agencies do things, conclude things, make conclusions but then the elected officials are prevented from knowing about this.”

Paul argued that if lawmakers aren’t allowed to have access to the intelligence community’s conclusions, then they can’t provide oversight.

“If we aren’t told about this and I’m not allowed to know about these conclusions, then I can’t have oversight,” he said.

“And so then state grows, the intelligence, the deep state grows and has more and more power.”

“I’ve read in the media that the CIA has said with high confidence that the crown prince was involved with killing Khashoggi,” Paul continued.

“I have not seen that intelligence nor have I even seen the conclusions. And today there’s yet another briefing and I’m being excluded. So really, this is the deep state at work … that your representatives don’t know what is going on in the intelligence agencies.”

We would be watching our back a little more than normal Senator Paul – truth like this is not acceptable in today’s America.

via RSS https://ift.tt/2E185QC Tyler Durden

WTI Extends Loss After Surprise Crude Build

Amid doubts over global economic growth (and demand) as well as rising Russia-Saudi decisions on supply (and Alberta production cuts), WTI has rebounded modestly post-trade-truce, holding around $53 (despite today’s carnage in stocks).

In an interview Tuesday, Saudi Energy Minister Khalid Al-Falih walked back recent calls for 1 million barrels of cuts to daily output by OPEC and other major exporters.

“It’s premature to say what will happen” in Vienna, Al-Falih said in an interview at a United Nations climate-change conference in Poland. “We need to get together and listen to our colleagues, hear about their views on supply and demand and their projections of their own countries’ production.”

The note of caution combined with news that the Saudis had slashed the pricethey charge to Asian customers to dent traders’ optimism.

“It’s not a good price signal,” said Bob Yawger, director of futures at Mizuho Securities USA in New York. “Either demand is bad or all the talk about cutting production is just lip service.”

API

  • Crude +5.36mm (-900k)

  • Cushing

  • Gasoline

  • Distillates

API reports a surprise 5.36mm barrel build in crude inventories (expectations were for a 900k draw). The 11th consecutive crude build in a row prompted a drop in WTI prices, back below $53

 

WTI popped up to $53 right before the API data hit but kneejerked lower on the print…

Given the market holiday tomorrow, we assume DOE data will be released on Thursday.

via RSS https://ift.tt/2rklGuN Tyler Durden

“Time To Pay The Piper” – Saxo Bank’s 10 Outrageous Predictions For 2019

A world containing Donald Trump as the US president makes outrageousness a cheap commodity in the daily news cycle, but Saxo Bank didn’t let that keep them from this year’s Outrageous Predictions: their yearly task of conjuring unlikely – but not impossible – events that may just come to life in the new year.

Will this be the year when Germany enters recession, Apple “secures funding” for Tesla, Trump tells Powell “you’re fired” and Labour sweeps to a resounding victory and names Jeremy Corbyn as prime minister sending GBPUSD to parity?

As Valuewalk’s Jacob Wolinsky notes, Saxo Bank, the leading Fintech specialist focused on multi-asset trading and investment, has today released its 10 ‘Outrageous Predictions’ for 2019. The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across financial markets.

While these predictions do not constitute Saxo’s official market forecasts for 2019, they represent a warning of a potential misallocation of risk among investors who typically see just a one percent likelihood to these events materialising.

The Outrageous Predictions for 2019 are:

  1. EU announces a debt jubilee

  2. Apple “secures funding” for Tesla at $520/share

  3. Trump tells Powell “you’re fired”

  4. Prime Minister Corbyn sends GBPUSD to parity

  5. Corporate credit crunch pushes Netflix into GE’s vortex

  6. Australian central bank launches QE on housing bust Down Under

  7. Germany enters recession

  8. X-Class solar flare creates chaos and inflicts $2 trillion of damage

  9. Global Transportation Tax (GTT) enacted as climate panic spreads

  10. IMF and World Bank announce intent to stop measuring GDP, focus instead on productivity

Commenting on the Outrageous Predictions, Chief Economist at Saxo Bank, Steen Jakobsen said:

“We have been publishing Outrageous Predictions for more than a decade and think this year’s list is both fascinating and shocking while encouraging investors to think outside the consensus box. It is important to underline that the Outrageous Predictions should not be considered Saxo’s official market outlook, it is instead the events and market moves deemed outliers with huge potential for upsetting consensus views.

This year’s edition has a unifying theme of “enough is enough”.

A world running on empty will have to wake up and start creating reforms, not because it wants to but because it has to.

The signs are everywhere. We think 2019 will mark a profound pivot away from this mentality as we are reaching the end of the road in piling on new debt and next year will see us all beginning to pay the piper for our errant ways.

The great credit cycle is already showing signs of strain in late 2018 and will rip through developed markets next year as central banks are sent back to the drawing board. After all, their money printing efforts since 2008 have only dug a deeper debt hole, and it has now grown beyond their mandate to manage.

“If some of these outrageous predictions see the light of day, we might finally see a healthy shift toward a less leveraged society, with less focus on short-term gains and growth, and a new focus on productivity and new economic revolution back toward globalisation with a fairer playing field after the immediate moment of crisis. On the negative side, we could see considerable worsening of central bank independence, a credit crunch, and big losses in the asset where everyone is too long: real estate.”

The Outrageous Predictions 2019 publication is available here and the full list of Saxo Bank’s Outrageous Predictions for 2019 reads:

1. EU announces a debt jubilee

In 2019, the unsustainable level of public debt, a populist revolt, rising interest rates from European Central Bank tapering/lower liquidity, and sluggish growth reopened the European debate on how to get ahead of a new crisis. Italian contagion sickens Europe’s banks as the EU lurches into recession. The ECB resorts to new TLTRO and forward guidance to limit the carnage, but it’s not enough and when contagion spreads to France, policymakers understand that the EU faces the abyss. Germany and the rest of core Europe, which refuses to let the Eurozone fall apart, have no other choice than to back monetisation. The Economic and Monetary Union extends a debt monetisation mandate to the ECB for all debt levels over 50% of GDP and guarantees the rest via a Eurobond scheme while moving the controversial Growth and Stability goalposts. A new fiscal rule allowing the first 3% of GDP in deficits to be mutualised in 2020 is adopted by EMU countries, with everything beyond subject to a periodic review by the European Commission linked to the state of the EU economy.

2. Apple “secures funding” for Tesla at $520/share

Apple realises that if it wants to deepen its reach into the lives of its user base, the next frontier is the automobile as cars become more digitally connected. After all, the late Steve Jobs showed that a company needs to bet big and bet wild to avoid complacency and irrelevance. Acknowledging that Tesla needs more financial power and Apple needs to expand its ecosystem to the car in a more profound way than that represented by the current Apple CarPlay software, Apple goes after Tesla. It secures funding for the deal at a 40% premium of $520 dollars a share – acquiring the company at $100/share more than Elon Musk’s errant “funding secured” tweet.

3. Trump tells Powell “you’re fired”

At the December 2018 Federal Open Market Committee meeting, Federal Reserve chair Jerome Powell signs on with a slim majority of voters in favour of a rate hike – one too many and the US economy and US equities promptly drop off a cliff in Q1 2019. By the summer, with equities in a deep funk and the US yield curve having moved to outright inversion, an incensed President Trump fires Powell and appoints Minnesota Fed President Neel Kashkari in his stead. The ambitious Kashkari was the most consistent Fed dove and critic of tightening US monetary policy. He is less resistant to the idea of the Fed serving at the government’s pleasure and is soon dubbed ‘The Great Enabler’, setting President Trump up for a successful run at a second term in 2020 by promising a $5 trillion credit line to buy Treasury Secretary Mnuchin’s new zero-coupon perpetual bonds to fund Trump’s “beautiful” new infrastructure projects and force nominal US GDP back on the path it lost after the Great Financial Crisis. Inflation reaches 6%, is reported at 3%, and the Fed policy is stuck at 1%. That’s deleveraging you can believe in via financial repression to the great detriment of savers.

4. Prime Minister Corbyn sends GBPUSD to parity

Labour sweeps to a resounding victory and names Jeremy Corbyn as prime minister on the promise of comprehensive progressive reform and a second referendum on a “to-be defined” Brexit deal. With a popular mandate and strong majority in Parliament, the Corbyn Labour government embarks on a mid-20th century-style socialist scorched earth campaign to even out the UK’s gross inequalities. New tax revenue streams are tapped into as Corbyn brings the UK’s first steeply progressive property tax into being to soak the wealthy and demands the Bank of England help finance a new “People’s quantitative easing”, or universal basic income. Utilities and the rail networks are re-nationalised and fiscal expansion sees deficits yawn wider to the tune of 5% of GDP. Inflation rises steeply, business investment languishes, and non-domiciled foreign residents run for cover, taking their vast wealth with them. Sterling is crushed on the double trouble of ugly twin deficits and lack of business investment on the still-unresolved Brexit issue. Cable goes from the 1.30 area where it spent most of the second half of 2018 and all the way down to parity at 1.00, a move of over 20% – with one dollar being equal to one pound for the first time ever.

5. Corporate credit crunch pushes Netflix into GE’s vortex

2019 proves the year of credit dominos toppling in the US corporate bond market. It starts with General Electric losing further credibility in credit markets, pushing the credit default price above 600 basis points as investors panic over GE’s $100 billion in liabilities rolling over in the coming years at the same time as the firm sees deteriorating cash flow generation. The carnage even spreads as far as Netflix where investors suddenly fret the firm’s fearsome leverage, with a net debt to EBIDTA after CAPEX ratio of 3.4 and over $10bn in debt on the balance sheet. Netflix’s funding costs double, slamming the brakes on content growth and gutting the share price. To make things worse, Disney’s 2019 entrance into the video streaming industry trims Netflix growth further still. The negative chain reaction in corporate bonds sets off massive uncertainty in high-yield bonds leading to a Black Tuesday for exchange-traded funds tracking the US high-yield bond market where ETF market makers are unable to set meaningful spreads, forcing a complete withdrawal from the market during a tumultuous trading session. The fallout in the ETF market becomes the first warning shot of passive investment vehicles and their negative impact on markets during turmoil.

6. Australian central bank launches QE on housing bust Down Under

In 2019, the curtains close on Australia’s property binge in a catastrophic shutdown driven most prominently by plummeting credit growth. In the aftermath of the Royal Commission, all that is left of the banks is a frozen lending business and an overleveraged, overvalued mortgage-backed property ledger and banks are forced to further tighten the screws on lending. Australia falls into recession for the first time in 27 years as the plunge in property prices destroys household wealth and consumer spending. The bust also contributes to a sharp decline in residential investment. GDP tumbles. The blowout in bad debt squeezes margins and craters profits. The banks’ exposure is too great for them to cover independently and bailout would be required from the RBA, perhaps recapitalising and securitising mortgages onto the RBA’s balance sheet.

7. Germany enters recession

A global leader for decades, Germany is struggling to upgrade its leveraging of modern technology. The crown jewel of the German economy, representing a cool 14% of GDP, is its car industry. The German car industry was supposed to be a growth juggernaut, registering 100 million sold cars in 2018. In the end, it only managed to unload 81 million cars, a mere 2% more than 2017 and well down from the 5-10% yearly growth rates from 2000s and forward. By 2040, 55% of all new global car sales and 33% of the stock will be EVs. But Germany is only just starting the transformation to EV and is years behind, and stiffer US tariffs won’t make things any better for German supply chains or exports. 2019 will be the peak of anti-globalisation sentiment and will create a laser-like focus on costs, domestic markets and production, and the further use of big data and reduced pollution footprint – the exact opposite of the trends that have benefitted Germany since the 1980s. As such, we see a recession arriving as early as Q3 2019.

8. X-Class solar flare creates chaos and inflicts $2 trillion of damage

All life on earth exists thanks to the stable bounty of energy hurled our way by the sun, but Sol is not always a serene and beneficent ball of burning hydrogen. As solar astronomers are well aware, the sun is also a seething cauldron of activity capable of producing incredible violence in the form of solar flares, the worst of which see the sun vomiting actual matter and radiation in the form of Coronal Mass Ejections, or CMEs. In 2019, as solar cycle 25 kicks into gear, the earth isn’t so lucky and a solar storm strikes the Western hemisphere, taking down most satellites on the wrong side of the earth at the time and unleashing untold chaos on GPS-reliant air and surface travel/logistics and electric power infrastructure. The bill? Around $2 trillion, which is actually some 20% less than the worst-case scenario estimated by a Lloyds-sponsored study on the potential financial risks from solar storms back in 2013.

9. Global Transportation Tax (GTT) enacted as climate panic spreads

The world suffers another year of wild weather with Europe again experiencing an extremely hot summer, setting off panic alarms in capitals around the world. With the international aviation and shipping industry enjoying substantial tax privileges, they become the targets of a new Global Transportation Tax (GTT) that introduces a global ticket tax on aviation and a capital “tonnage” tax on shipping with the price linked to carbon emission footprints. The new tax charge is set to $50/ton of CO2 emissions which is twice previous proposed levels and significantly above the 2018 average of €15/ton under the European Union’s Emissions Trading System. The new GTT pushes up air travel ticket prices and maritime freight, increasing the general price level as the new tax is passed on to consumers. The US and China have previously contested fuel taxes on aviation, citing the 1944 Chicago Convention on International Civil Aviation, but China changes its stance as a natural progression of its fight against pollution. This forces the US to reluctantly join forces in a global transportation tax on aviation and shipping. Stocks in the tourism, airline, and shipping industries plunge on increased uncertainty and lower growth.

10. IMF and World Bank announce intent to stop measuring GDP, focus instead on productivity

In a surprising move at the International Monetary Fund and World Bank spring meetings, chief economists Pinelopi Goldberg and Gita Gopinath announce their intent to stop measuring GDP. They argue that GDP has failed to capture the real impact of low-cost, technology-based services and has been unable to account for environmental issues, as attested by the gruesome effects from pollution on human health and the environment in India and elsewhere around the world. Productivity is certainly one of the most popular, and yet least understood, terms in economics. Simply defined, it refers to output per hour worked. In the real world, however, productivity is a much more complex notion. In fact, it can be considered as the greatest determinant of the standard of living over time. If a country is looking to improve people’s happiness and health, it needs to produce more per worker than it did in the past. This unprecedented decision by the IMF and the World Bank also symbolises the transition away from the central bank-dominated era that has been associated with the collapse in global productivity since the global financial crisis.

*  *  *

Full ‘Outrageous Predictions’ Outlook below:

via RSS https://ift.tt/2Efy2wV Tyler Durden

Bloodbath – From Triumphant Truce To Deal Dysphoria In 36 Hours

Trump and Xi were the powdered sugar awesomeness on the top of the Powell vanilla latte yumminess from last week… and then this happens…

 

China stocks held up overnight…

 

European Stocks continued to give back Sunday night gains…

 

US Equity indices rapidly erased not just Sunday night gains but Friday afternoon’s pre-emptive push and Wednesday’s Powell Put levels…

“The Dow vigilantes have managed to get both a Powell put and a Trump put for the market,” said Ed Yardeni, lead strategist at his namesake research firm. “Jerome Powell turned into Santa Claus last Wednesday, markets certainly reacted joyously to his hints that Fed tightening would occur at an even more gradual pace. So if Jerome Powell is Santa Claus, then the two elves are President Trump and President Xi.”

But the Grinch just took that all away… From Friday’s close…

On the day, Trannies worst day since Brexit, but it was all a disaster…

 

Dow down 800 points!

 

The S&P stalled at 2800 once again and completed a triple top of lower highs…

 

All major indices crashed back below their key technical support levels…

 

TICK shows the massive sell programs hitting as stocks broke key technical levels. Momentum stocks collapsed…

 

Trannies and Small Caps are back in the red for 2018.

 

Bank stocks have been battered, tracking the curve lower…

For some context:

  • Global Systemically Important Banks are down 30% from 52-week highs.

  • US Financials down 14.5% from 52-week highs.

  • Goldman Sachs is down 33% from 52-week highs.

And regional banks crashed most since Brexit…

But while banks were busted, FANG stocks got monkey-hammered… back into bear market (down 22% from 52-week highs)

(FB -36%, AMZN -17%, NFLX 34%, GOOGL -17%. AAPL -24%)

Stocks plunged back to bond’s reality…

 

Treasury yields tumbled today with the long-end dramatically outperforming and collapsing the yield curve…

 

The 10Y TSY yield plunged below 2.90% intraday…

 

But if Cyclicals (rel to Defensives) are right, 30Y Yields have a long way to go…

 

And Long Bond futures broke back above their 200DMA…

 

The yield curve collapsed too with 2s5s, 3s5s inverted and 2s10s into single-digits…

 

All of which brought out a herd of asset-gatherers and commission-takers to explain how this is a dip, not an inversion… or that it’s different this time because of central bank intervention… not it is not!!

 

And the Eurodollar curves are now pricing in an extremely dovish trajectory…

 

Massively decoupled from The Fed’s guess…

 

Credit markets smashed wider today and equity protection soared (VIX>21) playing catch up…

 

The dollar repeated yesterday’s fund by diving overnight and ramping from the European open… (note it remains lower from Powell’s Put last Wednesday)…

 

The offshore yuan exploded higher (near 3-month highs)…but began to fade this afternoon after tagging september highs

 

But the Turkish Lira was hammered today…

Cryptos were also slammed today led by

 

PMs managed modest gains on the day as Crude and Copper rolled over…

 

Gold held on to gains as oil slipped ahead of tonight’s inventory data…

 

Finally, the biggest picture of all signals that volatility is coming… just like winter…

And with markets closed tomorrow, we suspect this is the scene on many trading floors…

And this did not age well…

via RSS https://ift.tt/2QwCkFY Tyler Durden

“Everybody’s Miserable”: Why Hedge Fund Analysts Suddenly Find Themselves In An Existential Crisis

As hedge funds continue their ‘monumental struggle’ to outperform passive investments and market indices that have provided impressive and steady double-digit returns over the last decade to earn their modest billions in fees, analysts in the industry – especially those at the mid- and senior-level – are having trouble finding, and keeping, work.

A prime example is David Goldburg, the title character in a Bloomberg profile of the deteriorating hedge fund environment. After working on Goldman Sachs’ prop desk, managing money for Michael Milken and failing at his own attempt to start a hedge fund, he couldn’t even find a job for one simple reason: at the not-so-tender age of 55, and with his experience, he was just too expensive.

David Goldburg

That’s why instead of spending high 7-digits (or more) to retain “experienced” talent, hedge funds are instead hiring several younger analysts for the same price of one senior analyst, a process being called “juniorfication”.

There is a good reason for that: despite the S&P rising modestly in 2018, hedge funds have posted deplorable returns this year. In fact, as the Deutsche Bank chart below shows, hedge funds have generated no alpha (or beta for that matter) over the past 4 years.

Goldburg has been swept up by the turmoil gripping the hedge fund space, where analysts as young as 30 are facing an existential crisis in a changing Wall Street where capital markets no longer function without HFTs and central bank intervention. He told Bloomberg:

“It’s pretty brutal out there. If you have more than 15 years experience, and you want to transition to something else or want that next level of opportunity, there’s never been a worse time.”

He has a point: in addition to miserable returns, Bloomberg adds that automated trading, a world awash in data and passive investing have made stock pickers less influential. Hedge fund fees are down, making analysts targets for cuts. European regulations (thanks MiFid) have put researchers out of work. And in a 10-year bull market juiced by the Federal Reserve’s low rates and bond buying, insights more expensive than “buy the dip’’ simply cost too much.

In short, the industry is starting to contract, and analysts – those middlemen who make the 2 and 20 model possible – have no idea how to respond, especially as the growing prominence of (cheap) machines, makes some of their once key tasks no longer important enough to guarantee them work.

Meanwhile, in the last three years, nearly 400 more hedge funds around the world have closed than opened, according to Hedge Fund Research. That means not only are there more people looking for work, there’s little or no movement in existing jobs according to Bloomberg. This means that senior analysts who in years past would’ve gone on to start their own funds suddenly find themselves stuck (assuming they avoid getting fired) so there’s stagnation on the organizational chart.

The surviving so-called single-manager firms, even the ones managing tens of billions, are running leaner, said Ilana Weinstein, founder and chief executive officer of IDW Group, a hedge fund recruiter.

“If we think about the death of the analyst, I think you have to go up one level and talk about the death of most hedge funds,’’ Weinstein said.

To be sure, few analysts are in dire straits. Many of the senior ones were, or still are, making mid-to-high six figures, with plenty of upside in a good year, although 2018 is shaping up as the worst years since 2015 when the global stock market – if not the S&P – experienced a bear market.

But, as Bloomberg notes, many analysts also facing something worse: the panic that comes with realizing their career aspirations will never be attained. They may never make partner or run their own firm. They’re stuck.

And then there is the greatest shame of all: getting laid off, as Balyasny just did when as we reported last night, it laid off 20% of its employees after losing $4 billion in 2018 between poor performance and redemptions.

Those lucky ones who do keep their jobs, are starting to come to terms with the fact that they may not wind up progressing by starting their own firms – which is where the big money has always been – or making partner at their current job.

As if they didn’t have enough to worry about, offshore competition has been increasingly pressuring hedge fund workers, offering far cheaper alternatives half way around the globe. Software companies stocked with former analysts, like Linedata, are popping up and making an impact on the industry.

Jonathan Shapiro, a Linedata senior director said: “They’ve let people go due to their assets shrinking. We provide them with someone who’s just as qualified and is ready and eager to do that work for a fraction of the cost.”

As for Goldburg, who finally found a job outside of the hedge fund world (ironically, inside the “hot, hot, hot” du jour pot industry), he decided to project his personal sentiment to all his former co-workers : “everybody’s miserable and everybody’s trying to grind it out. Everyone wants that better opportunity and that better job, but they don’t exist. And no one wants to leave their existing seat because if you leave your existing seat, it’s like musical chairs – you might not be able to get another seat.”

via RSS https://ift.tt/2zBM08n Tyler Durden

Trump Admin Targets Amazon And Other E-Commerce Sites With Postal Reforms

President Trump has followed through on a July promise to reform the US Postal Service (USPS), which he referred to as Amazon’s “Delivery Boy.”

On Tuesday, the Trump administration released a report that recommends a series of measures that the Trump’s USPS task force says are needed to bring in more revenue for the profit-challenged Postal Service, which reported $3.9 billion in losses during fiscal year 2018, according to The Hill

“Although the USPS does have pricing flexibility within its package delivery segment, packages have not been priced with profitability in mind,” the report’s executive summary states. “The USPS should have the authority to charge market-based prices for both mail and package items that are not deemed ‘essential services.’” 

The report recommends that the USPS divide its mail and package shipments into essential and commercial service categories. Many e-commerce shipments would fall into the latter category, which would not be protected by existing price caps and thus be subject to rate increases.  

Senior administration officials say the Postal Service would be able to change package rates without an act of Congress. But such a move would likely require re-working negotiated service agreements with Amazon and other companies. –The Hill

While the move is clearly aimed at Amazon – which Trump warned in July over unfair business practices, administration officials have pushed back at the idea that the measures were specifically aimed at the company. “None of our findings or recommendations relate to any one customer or competitor of the Postal Service,” said one senior administration official in an anonymous statement to The Hill

The official added that “all companies” dealing in e-commerce, “including Amazon,” would “be impacted by those suggested reforms.” –The Hill

Except, Trump has had Amazon in his crosshairs for years… 

“The Amazon Washington Post has gone crazy against me ever since they lost the Internet Tax Case in the U.S. Supreme Court two months ago. Next up is the U.S. Post Office which they use, at a fraction of real cost, as their “delivery boy” for a BIG percentage of their packages….” Trump tweeted in July. 

The changes are part of an initiative Trump began in April when he assembled the USPS task force. The report also covers other areas where it thinks the USPS could improve its finances. 

It called on the Postal Service to restructure pre-payments of employee retirement and health benefits, which business groups say is the main driver of its fiscal woes. But it stopped short of endorsing bipartisan legislation that would end the pre-payments altogether, saying that doing so would place too much of a burden on taxpayers. 

The administration is also recommending the USPS make changes to its internal management, allowing governors to set fiscal targets and allowing the Postal Regulatory Commission to have more power if the goals are not met. –The Hill

 We’re sure Amazon won’t take this change out on their already-overworked warehouse employees…

 

via RSS https://ift.tt/2Pemuel Tyler Durden

Stockman To Trump – Tear Down That Deep State Wall…Of Secrecy

Authored by David Stockman via TargetLiberty.com,

When the Donald promised to “drain the swamp” during the 2016 election campaign, it did sound vaguely like an attack on Big Government, and at least a directional desire to shrink the state and let free market capitalism breathe.

After 22 months in office, however, the truth is patently obvious: The only Swamp that Donald Trump wants to drain is one filled with his political enemies and policy adversaries at any given moment in time. Even then, you have to consult his tweetstorm ledger to know exactly who the swamp creatures de jure actually are.

Still, the Donald’s daily Twitter assaults on the Deep State are a wondrous thing. They surely do undermine public confidence in rogue institutions like the FBI, CIA and NSA, which profoundly threaten America’s constitutional liberties and fiscal solvency.

Likewise, his frequently unhinged tweets also lather their congressional sponsors and beltway poo-bahs with well-deserved mud and opprobrium. And the Donald’s increasingly acrimonious public feuding with Deep State criminals like James Comey and John Brennan is just what the doctor ordered.

The Deep State thrives and milks the public treasury so successfully in large part because the Imperial City’s corps of permanent policy apparatchiks like Comey and Brennan (and thousands more) pretend to be performing god’s work. So doing, they preen sanctimoniously to the adoration of their sycophants in the mainstream media, claiming to be above any governance or sanction from the unwashed electorate.

Attacking this rotten perversion of democracy, therefore, is the Donald’s real calling. While he lacks both the temperament and ideas to solve the nation’s metastasizing economic and social challenges and has no hope whatsoever to make MAGA, he is more than suited for his “Great Disrupter” mission.

That is, the existing order needs to be discredited and brought down first, and on that score his primitive economic populism will more than do its part. As we have previously explained, Trump’s deadly combination of Fiscal Debauchery, Protectionism and Easy Money will eventually blow the nation’s debt and bubble-ridden economy sky-high.

Likewise, his crude rendition of America First is not a blueprint for rebooting America’s national security policy, but it is an existential threat to Empire First and the Deep State’s usurpation of constitutional government. And even as the Donald lurches to and fro on Russia, Korea, the Middle East, NATO, globalism and so-called allies, the main job is getting done. That is, the War Party’s self-appointed role as global policeman and the Indispensable Nation is getting thoroughly discredited.

In terms of the Donald’s great mission of wrecking the Deep State, we would only take issue with him to this extent: Why in the world does he not understand that he is actually President and has a far more powerful weapon at his disposal than his Twitter account—-56 million followers to the contrary notwithstanding?

To wit, he has the unquestioned constitutional power to both appoint and fire his own cabinet, sub-cabinet and upwards of 3,000 Schedule C policy jobs; and also to declassify anything lurking behind the Deep State’s massive wall of unjustified secrecy if he deems it in the public interest.

Accordingly, Trump could have and should have fired Jeff Sessions long before he did and Rod Rosenstein even before that. After all, it is the spinelessness of the former and the Deep State treachery of the latter, that launched the hideous Mueller witch-hunt in the first place and that keeps it going from one absurdity to the next ridiculous over- reach.

Can there be anything more pitiful after 17 months of nothingburgers on the phony Russian collusion file than Mueller’s list of indictments. These include:

  • 13 Russian college kids for essentially practicing English as a third language at a St Petersburg troll farm for $4 per hour;

  • 12 Russian intelligence operatives who might as well have been picked from the GRU phonebook;

  • Baby George Papadopoulos for mis-recalling an irrelevant date by two weeks;

  • Paul Manafort for standard Washington lobbyist crimes committed long before he met Trump;

  • Michael Cohen for shirking taxes and running Trump’s bimbo silencing operation;

  • Michael Flynn for doing his job talking to the Russian Ambassador and confusing the confusable Mike Pence on what he said and didn’t say about Obama’s idiotic 11th hour Russian sanctions;

  • Rick Gates for helping Manafort shakedown the Ukrainian government and other oily Washington supplicants.;

  • Sam Patten, another Manafort operative who forget to register correctly as a foreign agent;

  • Richard Pinedo, a grifter who never met Trump and got caught selling forged bank accounts on-line to Russians for a couple bucks each;

  • Alex van der Zwaan, a Dutch lawyers who wrote a report for Manafort in 2012 and misreported to the FBI what he told Gates about it. That’s all she wrote and it’s about as pathetic as it gets. If nothing else, the fact that Mueller hasn’t been guffawed out of town on account of this tommyrot is a measure of the degree to which the Imperial City has fallen prey to the Trump Derangement Syndrome.

The Brennan Report – The Foundational Document of the RussiaGate Witch-Hunt

Still, we have to wonder why Trump doesn’t get the joke. Long ago he could have declassified everything related to the foundational RussiaGate document. That is, the January 6, 2017 report entitled, “Assessing Russian Activities And Intentions in Recent US Elections”.

The report was nothing of the kind, of course, and is now well-understood to have been written by outgoing CIA director John Brennan and a hand-picked posse of politicized analysts from the CIA, FBI and NSA. It was essentially a political screed thinly disguised as the product of the professional intelligence community and was designed to discredit and sabotage the Trump presidency.

As presented to the President-elect and released to the public in declassified form, it is all gussied-up with caveats, implying that the real dirt is in the “highly classified” version of the report. Except that’s just the typical Deep State hide-the-ball trick: When it can’t prove its “assessments” and “judgments”, it claims the evidence is top secret.

In the current case, the Imperial City is so red hot with Trump antipathy that any undisclosed smoking guns in the highly classified version would have leaked long ago. So the truth is, there is nothing more to the allegedly sinister Russian “influencing campaign” than the superficial blarney in the public version of the document.

And the latter boils down to ten pages of sweeping insinuations and airballs—plus a loony 9-page appendix which proves the totally public RT America cable TV network doesn’t think much of the Washington’s global meddling!

Indeed, we second the motion. In fact, when we first read this ballyhooed report our thought was that someone at the Onion had pilfered the CIA logo and published a side- splitting satire.

The 9-pager on RT America, which is presented as evidence of “Kremlin messaging”, is so sophomoric and hackneyed that it could have been written by a summer intern at the CIA. It consists entirely of a sloppy catalogue of leftist and libertarian based dissent from mainstream policy that has been aired on RT America on such subversive topics as Occupy Wall Street, anti-fracking, police brutality, foreign interventionism and civil liberties.

Actually, your author has appeared dozens of times on RT America and advocated nearly every position cited by the CIA as evidence of nefarious Russian propaganda. And we thought it up all by ourselves!

So, yes, we do think US intervention in Syria was wrong; that Georgia was the aggressor when it invaded South Ossetia; that the American people have been disenfranchised and need to “take this government back”; that Washington runs a “surveillance state” where civil liberties are being ridden roughshod upon; that Wall Street is riven with “greed” and the “US national debt” is out of control; that the two-party system is a “sham “and that it doesn’t represent the views of “one-third of the population” (at least!); and that most especially after killing millions in unnecessary wars Washington has “no moral right to teach the rest of the world”.

So there you have it: Policy views on various topics that are embraced in some instances by both your libertarian editor and the left-wing Nation magazine; and which are held to be examples of Russian messaging—even alarming evidence of nefarious meddling in our electoral process.

Moreover, it turns out that RT America is not even in the top 95 cable channels according to published rankings, and may have an audience of less than 30,000 viewers per day, according to even the rabidly anti-Putin Daily Beast. Still, by the lights of John Brennan and his coterie of CIA hacks, that’s apparently 30,000 too many citizens being exposed to anti-establishment opinion.

In that regard, we especially got a yuck from the following example of RT’s nefarious attempt to influence American voters. Not only have we uttered these very same thoughts on RT America, but we also conveyed them on the Fox Business network and didn’t even get censored!

Some of RT’s hosts have compared the United States to Imperial Rome and have predicted that government corruption and ‘corporate greed’ will lead to US financial collapse.”

Needless to say, if this is an example of the work being done by the US intelligence community with its $75 billion annual budget, they are giving the idea of pouring money down a rathole an altogether new definition.

In fact, does the juvenille fool who penned this drivel think Washington is purer than Caesar’s wife? The report whines and slobbers about RT America’s indirect support from the Russian government and an alleged $190 million subsidy from the Russian state.

Yet Washington spends upwards of $800 million per year on the U.S. Agency for Global Media, which is the parent organization of its own international propaganda arms: Voice of America, Radio Free Europe/Radio Liberty, Radio y Television Marti, Radio Free Asia and the Middle East Broadcast Networks.

And that’s just the tip of the iceberg. It doesn’t count, for example, the $170 million per year spent by the National Endowment for Democracy (NED) to subvert governments which Washington doesn’t like. Indeed, the two sub-agencies of NED (one for the Dems and one for the GOP) were chaired by two of Washington’s most blood-thirsty regime changers—Madeleine Albright and the late Senator John McWar of Arizona.

Unlike RT America, of course, these two cats caused the deaths of hundreds of thousands of innocent civilians who happened to be domiciled in places they deemed in need of that very special kind of “influencing” that is delivered from the business end of a Tomahawk cruise missile.

Beyond that, there is billions more of “agit prop” and NGO funding that is channeled through the CIA, DOD, the State Department, the Agency for International Development and many more—-all designed to “influence opinion” in dozens of foreign countries where the people need to be advised of the correct line from Washington.

Yet the report’s mendacious attack on the utterly irrelevant RT America is the stronger part of the document!

The main body of the document consists of 10 pages of bloviation which amount to this: The very distinct probability that Vlad Putin strongly dislikes Hillary Clinton, who did liken him to Adolph Hitler; and preferred Donald Trump, who was a wet-behind- the-ears real estate gambler from New York City, thereby still in possession of sufficient common sense to see that Russia is no threat to America and that rapprochement with Putin was in order.

Actually, it gets a lot richer. The US government did spend tens of millions covertly supporting the so-called “color revolutions” on Russia’s doorstep, including the Rose Revolution in Georgia, the Orange Revolution in Ukraine, the Tulip Revolution in Kyrgyzstan, the Jeans Revolution in Belarus, the Grape Revolution in Moldova and, most especially, the so-called pro-democracy protests in Russia during 2011-2013 that were aimed at vilifying and discrediting Vladimir Putin.

Yet Imperial Washington wears absolute blinders with respect to this kind of bald-faced meddling in the internal politics of other sovereign nations. There is not an iota of connection between the safety and security of the American people domiciled between their ocean moats and whatever some two-bit dictator is doing in Belarus or the intrigues of the communist party in Moldova.

Soft Power Aggression—How The Imperial City Makes a Living

The explanation for this kind of soft-power aggression, therefore, is not national security: It’s what Imperial Washington does for a living. That is, the billions of taxpayer money being pumped through the foreign policy agencies, NGOs, think tanks, advocacy organizations and sleazy lobbying operations like those of the Podesta brothers and Paul Manafort finance there own raison d’etre .

via RSS https://ift.tt/2PjJusl Tyler Durden

“Make Volatility Your New Best Friend” in 2019, But Not Before “One Last Hurrah”: BofA

While not quite as bearish as Morgan Stanley which last week downgraded US stocks to a Sell, in its year ahead outlook for markets and the economy in 2019, Bank of America writes that “the long bull market cycle of excess stock and bond returns is expected to finally wind down next year, but not before one last hurrah.”

The bear market vibe at the end of 2018 is expected to continue, with asset prices finding their lows in the first half of the 2019 once rate expectations peak and global earnings expectations trough; however, BofA Merrill Lynch also forecasts a record high peak in earnings for the S&P 500 next year and plenty of upside potential for investors who make volatility their new best friend.

In short, just like Gartman, the bank is covering all bases being both bearish (near-term), bullish (medium-term) and again bearish to close the year, predicting a “baby bear” market in the early part of 2019, or as Michael Hartnett called it – “big lows” – two weeks ago, before rebounding and rising as high as 3,000 before and closing the year around 2,900, officially a decline from the bank’s 2018 year-end forecast of 3,000.

“In our view, the current weakness in the markets is not a reflection of poor fundamentals. Rather, it’s caused by a confluence of idiosyncratic shocks that create very real risks for investors to be concerned about but also opportunities for vigilant, well-positioned investors to pursue,” said Candace Browning, head of BofA Merrill Lynch Global Research.

For the year ahead, the Research team forecasts modest gains in equities and credit, a weaker dollar, widening credit spreads, and a flattening to inverted yield curve, signaling a tighter squeeze on liquidity that calls for higher levels of volatility. This comes against a backdrop of slowing, but still-healthy economic growth; mild inflation, except in the U.S. where inflationary pressures are building; and a notable slowing in global EPS growth from the torrid pace of 2017 and 2018.

Two big themes are expected to affect asset returns and the pace of economic growth in 2019:

  1. An unprecedented level of global monetary policy divergence as the U.S. Federal Reserve continues to hike interest rates and other major central banks don’t; and
  2. whether a strong U.S. economy decoupled from the rest of the world, particularly Europe and China, can be sustained. The answer to that question could depend on big wild card risks in 2019: resolution of the trade war between China and the U.S., an EU political/economic crisis, and political gridlock in the U.S. that could slow capital investments and deteriorate investor sentiment.

The bank’s 2019 macro and market forecasts are summarized below:

BofA analysts summarized their views on the market and made the following 10 macro calls for the year ahead:

  1. Global profit growth declines: Earnings growth is expected to decline sharply next year, from >15 percent to <5 percent on a year-over-year basis. The BofA Merrill Lynch Research team is bearish stocks, bonds, and the U.S. dollar; bullish cash and commodities; and long on volatility. We expect to turn tactically risk-on in late spring, but to start 2019 with a bearish asset allocation of 50 percent stocks, 25 percent bonds and 25 percent cash.
  2. S&P 500 Index peaks: Earnings growth also is likely to slow in the U.S., though the near-term outlook remains somewhat positive. The Standard and Poor’s 500 Index is expected to peak at or slightly above 3,000 before settling in at a year-end target of 2,900. We forecast earnings per share (EPS) growth of 5 percent, which would put the S&P 500 EPS at a record high of $170 next year. Our U.S. equity strategists are overweight health care, technology, utilities, financials and industrials, and underweight consumer discretionary, communication services and real estate.
  3. Cash gets competitive: For most of this long cycle, cash yields couldn’t hold a candle to more compelling asset class alternatives like stocks and bonds; with cash yields higher than dividend yields for 60 percent of the S&P 500 already, cash becomes even more competitive in 2019. Our Fed call puts short rates close to 3.5 percent by the end of 2019, well above the S&P 500’s 1.9 percent dividend yield. Moreover, in a rising-rate environment, cash-generative investments have outperformed credit-sensitive assets. Given cash’s re-rating, 2019 boils down to a strategy of buying sources of cash and selling users of cash.

  4. U.S. economy slows as fiscal stimulus fades: Real U.S. GDP growth of 2.7 percent is forecast for 2019, slowing in the second half of the year as the effects of fiscal stimulus begin to fade. The unemployment rate could reach a 65-year low of 3.2 percent by year-end, pushing wage growth of 3.5 percent in aggregate. Consequently, core price inflation should gradually rise to 2.2 percent through 2019 and hold as rates continue to rise. The housing market is no longer a tailwind for the U.S. economy: we believe housing sales have peaked and home price appreciation is forecast to slow.
  5. Global economic growth decelerates: The global economy is forecast to grow 3.6 percent in 2019, down slightly from 3.8 percent in 2018, with inflation hovering around 3 percent. Most major economies are likely to see decelerating activity, with real GDP growth of 1.4 percent in both Europe and Japan, and 4.6 percent growth in aggregate among the emerging markets. Chinese growth is likely to further weaken early next year as a result of still-tight financial conditions and the U.S.-China trade conflict; however, a steady stream of monetary and fiscal stimulus measures to turn the economy around is expected.
  6. Global monetary policy divergence: Global monetary policy is expected to become less friendly in 2019. A divided government means that additional fiscal stimulus in the U.S. seems unlikely. Europe is largely frozen in place by its budget rules, and Japan appears ready to implement yet another ill-timed consumption tax hike, in our view. Further divergence in monetary policy between the Fed and other major central banks is expected to continue. We forecast the Fed will hike rates four times in 2019, reaching a terminal funds rate of 3.25-3.50 percent by year-end. Meanwhile, the European Central Bank and Bank of Japan are unlikely to raise policy rates meaningfully above zero for at least another two years.
  7. Credit cycle continues despite widening spreads and flattening curves: Globally, the credit markets face high levels of episodic volatility in 2019 with shrinking supply and quantitative tightening putting 25 to 50 basis points of upward pressure on investment grade and high-yield bond spreads. In the U.S., total returns of 1.42 percent are forecast for high-grade corporate bonds and 2.4 percent for high yield. The U.S.-leveraged loan market remains a bright spot in the credit spectrum, with total returns of between 4 and 5 percent. High-grade and high-yield corporate credit are expected to deliver total returns of 1 percent in Europe and, in Asia, 3 percent and 4.9 percent, respectively.
  8. Emerging markets: After a major sell-off in 2018, emerging market assets are cheap and under-owned and could be a big winner in 2019 as the dollar weakens, yet EM remains highly vulnerable to spillover effects of U.S.-China trade tensions. We are bullish Brazil and expect its post-election rally to continue, and Russia is expected to improve as we believe sanction risk is priced in. Meanwhile, the outlook is bearish for Mexico, where credit rating downgrades are a concern and volatility surrounds policy changes under its new president.
  9. Foreign exchange volatility on a weaker dollar: The U.S. dollar was the best performing asset class in 2018, however, most of the dollar gains appear to be in the past. A weaker dollar is expected in 2019, against a stronger euro and Japanese yen. We forecast the EUR/USD and USD/JPY to reach 1.25 and 105, respectively at year-end. The strength of the dollar will depend heavily on evolution of the trade relationship between China and the U.S., which in the short term may mean selling the dollar against a currency insulated from trade war rhetoric, such as the British pound and Swiss franc.
  10. Commodities modestly positive: The outlook for commodities is modestly positive despite a challenging global macro environment. We forecast Brent and WTI crude oil prices to average $70 and $59 per barrel, respectively in 2019; weather-induced volatility is expected in the near term for U.S. natural gas, as cold weather could propel winter natural gas over $5/MMbtu, yet we remain bearish longer term on strong supply growth. In metals, we remain cautious about copper because of Chinese downside risk. We forecast gold prices will rise to an average of $1,296 per ounce, but could rally to as high as $1,400, driven by U.S. twin deficits and Chinese stimulus.

Which leads us to the following “9 Trades” for 2019 from Michael Hartnett:

  1. Long VXX (IPATH S&P 500): Q1 long volatility play on liquidity withdrawal, policy impotence & uncertainty, rising recession odds.
  2. Long US 2s10s flatteners: H1 play on US yield curve inversion, Fed’s intention to hike 4 times in 2019.
  3. Short LQD (iShares iBoxx $ I): 2019 play on excess leverage, shadow banking & credit contagion risk
  4. Long KBWB (KBW Bank ETF), short IAI (iShares-DJ BR DL) and PSP (Invesco Global List): 2019 “long liquidity, short leverage” play…long Main St banks, short Wall St banks & Private Equity.
  5. Long BRIC vs. short FAANG vs. QQQ (Inv QQQ Trust Ser 1): Long BRIC (Brazil, Russia, India and China), short FAANG (Facebook, Apple, Amazon, Netflix, Google) play on value outperforming growth.
  6. Long AUD/USD, long EMB (Ishares): Q2’19 play on China growth inflection, bullish commodities, inflation hedge.
  7. Long XHB (S&P Homebuilders): Play on H2’19 peak yields once Fed hikes fully priced in.
  8. Long USSWIT5: Play on global policy populism driving fiscal stimulus, infrastructure spending, wage growth.
  9. Long SX7E: The most contrarian bull trade of 2019; highest beta to “The Big Low”; ECB rate hike Dec’19.

via RSS https://ift.tt/2SrdkNq Tyler Durden

French ‘Yellow Vests’ Reject Macron’s Six-Month Tax Delay As Student Protests Intensify

Despite French President Emmanuel Macron letting his people “eat cake” with a six-month suspension of the government’s new “climate change” fuel taxes, the so-called “Yellow Vest” movement which has been protesting throughout France for more than three weeks is still spitting mad. 

“We didn’t want a suspension, we want the past increase in the tax on fuels to be canceled immediately,” said Yellow Vest organizer Benjamin Cauchy on BFM TV. “Suspending the tax to re-instate it in six months is taking the French people for a ride. French people aren’t sparrows waiting for crumbs from the government.”

The president’s silence drew the wrath of some. “Macron has still not deigned to talk to the people,” said Laetitia Dewalle, a Yellow Vests spokeswoman, on BFM TV. “We feel his disdain. He maintains his international engagements but doesn’t speak to the people.”

Sebastien Chenu, a spokesman for Marine Le Pen’s far-right National Rally party which has supported the Yellow Vests in hopes of capturing their votes, said on LCI that “the French won’t be fooled. The government has understood nothing, it’s just playing for time.” –Greenwich Time

Others, however, may have been assuaged by the “limited time moratorium” on the taxes – as a Tuesday BVA opinion poll for La Tribune reveals that 70% of French citizens surveyed think the postponement justifies stopping the Yellow Vest protests. 

Meanwhile, French police ordered the cancellation of two football matches scheduled for Saturday, while French interior minister Christophe Castaner told lawmakers on Tuesday that additional security personnel would reinforce the 65,000 police and gendarmes during this Saturday’s planned protests. Some police unions have floated the idea of drafting the army as backup, according to Paris-based journalist Catherine Field. 

French students, meanwhile, have intensified their protests around the country – setting ire to buildings and engaging in violent clashes with the police. The students have “gradually started to get involved” with the Yellow Vest movement, leading to riots in southwest France, Lyon, Marseille, Bordeaux and the city of Orleans. A school in Blagnac, near Toulouse was reportedly set on fire Tuesday, according to Reuters

Macron’s backing down comes as his popularity hit a new low. A poll by Ifop for Paris Match magazine and Sud-Radio released Tuesday found the president’s support had fallen six points to 23 percent. Philippe was at 26 percent. While Macron and parliament, where his party holds a majority, don’t face new elections until 2022, the reversal on taxes may undermine the rest of his reform agenda.

The protesters, who started out blockaded traffic across France, brought their fight to Paris over the last two weekends. They defaced the Arc de Triomphe, burned hundreds of cars and blocked roads and fuel depots. –Greenwich Time

Meanwhile, the Yellow Vest protests continue to take their toll on French businesses – with big-box retailers suffering an average 8% decline in sales on Saturday per Nielsen. 

With all of that said, it will be interesting to see what Saturday brings. 

via RSS https://ift.tt/2RAW4oT Tyler Durden

Gundlach: Yield Curve Inversion Shows “Total Market Disbelief” In The Fed’s Hiking Plans

Back in late 2016, Jeff Gundlach predicted that the yield on the 10Y Treasury would hit 6% in four or five years (so by 2021) at the latest. Not any more.

DoubleLine’s CEO became the latest bond guru to chime in today on the collapsing yield curve, and specifically the inversion observed between the two- to five-year maturities…

… which to Gundlach suggest “total bond market disbelief in the Federal Reserve’s prior plans to raise rates through 2019.” As discussed repeatedly over the past 24 hours, the 2s5s is now the most inverted it has been since the financial crisis…

… while the closely-watched 2s10s was less than 10bps away from inversion at one point on Tuesday.

Gundlach is right: according to the market not only is the Fed barely likely to hike just once in 2019 (or not even, technically, with just 22bps of hikes priced in) but it is now pricing in a rate cut in 2020 (if partial so far, at -6.5%).

Gundlach also told Reuters that “if the bond market trusts the Fed’s latest words about ‘data dependency,’ then the totally flat Treasury Note curve is predicting softer future growth (and) will stay the Fed’s hand.”

“If that is indeed to be the case, the recent strong equity recovery is at risk from fundamental economic deterioration, a message that is sounding from the junk bond market, whose rebound has been far less impressive.”

As a result, Gundlach believes Powell will need to be especially careful what he says when the FOMC meets later this month to deliver on their promised rate hike, especially after Powell’s Oct.3 “rookie mistake” that sent yields surging and stocks tumbling.

“There can’t be another screwup like last time, when they dropped ‘accommodative’ but simultaneously characterized the Fed Funds rate as ‘a long way’ from neutral”, Gundlach said.

Of course, should Powell double down on his recent dovish tone, it would be seen as merely doing Trump’s bidding with the president repeatedly threatening to “remove” the Fed chair if rate hikes continue, in the process compromising the flawed perception that the Fed is independent, and leading to even more market volatility and confusion.

In short: Powell’s best and only option may be simply to resign and let someone else deal with the mess that Bernanke and Yellen left.

via RSS https://ift.tt/2RuRSal Tyler Durden