Category: zerohedge

January has been broadly negative for survey-based sentiment as hopeful expectations have been dashed again and again, but Chicago PMI beat, printing 65.7 (64.0 exp) but dropped from December.

The headline Business barometer rose at a slower pace, signaling expansion

Under the hood, things were mixed:

• Prices paid rose at a faster pace, signaling expansion
• New orders rose at a slower pace, signaling expansion
• Employment rose at a faster pace, signaling expansion
• Inventories rose at a slower pace, signaling expansion
• Supplier deliveries rose at a faster pace, signaling expansion
• Production rose at a slower pace, signaling expansion
• Order backlogs rose at a slower pace, signaling expansion

 

Not a pretty picture so far for surveys in January…

• Empire Fed Miss (Lower)
• Philly Fed Miss (Lower)
• Richmond Fed Miss (Lower)
• Markit US PMI Miss (Lower)
• Dallas Fed Beat (Higher)
• Chicago PMI Beat (Lower)

Which has sent ‘soft’ survey data surprises notably lower…

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If Deutsche Bank is right, the DJIA will lose one of its original “Industrial” founding members, which has been in the index since 1907.

General Electric has been an original component of the Dow Jones Industrial Average (DJIA) index – which was invented by Charles Dow in 1896 – for over 110 years. It may not be there for long, however: in a note from DB’s John Inch, the analyst writes that he “believes the chances that GE could be removed from the Dow are increasing as GE continues to face substantial challenges including earnings and cash pressure, tough global power generation markets, aggressive downsizing, shrinking its portfolio, management shake-up and SEC investigations.”

How would the expulsion take place? Deutsche explains:

The Dow is managed by committee (a part of S&P Global) that meets twice a year in secret to review (and potentially make changes) to the component companies. The index is intended to represent the “best” large companies in the US. The index is not market cap weighted but weighted by absolute share price. Consequently, apart from GE’s other challenges, as the company’s absolute share price has continued to drop (and as the share prices of the other companies have been increasing), GE increasingly falls into the category of outlier and consequently a likely candidate for removal, in our opinion.

In addition, the committee reportedly prefers for the Dow to incur no more than a 10:1 ratio between the component companies’ highest share price and lowest share price. Currently, the ratio between Boeing (the highest) and GE (the lowest) exceeds 20:1. Additionally, GE’s weighing in the Dow is 0.4% as of this moment: the lowest on record and making it a member of the index only in the loosest sense.

In September 2003, the last major Dow shuffle removed American Airlines, Bank of America and Hewlett Packard and added Goldman Sachs, Nike and Verizon. The share price average of the 3 stocks that left was $15 vs. $134.50 for the 3 stocks that were added.

Furthermore, if GE were to be removed from the Dow, the company does not have to be replaced with an industrial company. For instance, Honeywell and Altria were replaced with Bank of America and Chevron in early 2008.

This also means that the DJIA is only an “industrial” average in the loosest term of the world now.

Deutsche’s conclusion:

We believe headline risk to be the most significant risk factor if GE were to be dropped from the Dow – potentially amplified by GE’s high mix of retail investors (roughly 40% of GE’s common stock is held by retail investors).

Finally, one look at GE’s chart relative to the Dow shows why its expulsion from the DJIA is now just a matter of time.

 

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The Justice Department’s internal watchdog has been investigating former FBI Deputy Director Andrew McCabe for apparently sitting on emails obtained from Anthony Weiner’s laptop, the Washington Post‘s Devlin Barrett and Karoun Demirjian reported Tuesday (of note, Barrett was recently outed as a potential source of FBI leaks, according to text messages between FBI employees accused of political bias)

The DOJ Inspector General, Michael Horowitz, wants to know why McCabe allegedly took little to no action for approximately three weeks on the trove of emails sent by Hillary’s top aide, Huma Abedin – Weiner’s wife, which were discovered during an unrelated investigation into Weiner “sexting” with an underage girl. 

The inspector general, Michael E. Horowitz, has been asking witnesses why FBI leadership seemed unwilling to move forward on the examination of emails found on the laptop of former congressman Anthony Weiner (D-N.Y.) until late October about three weeks after first being alerted to the issue, according to these people, who spoke on the condition of anonymity to discuss the sensitive matter.

A key question of the internal investigation is whether McCabe or anyone else at the FBI wanted to avoid taking action on the laptop findings until after the Nov. 8 election, these people said. It is unclear whether the inspector general has reached any conclusions on that point. –WaPo

In late September 2016, approximately five weeks before the US election, thousands of Huma Abedin’s work-related emails were found on Weiner’s laptop. According to WaPo, the New York FBI office alerted FBI headquarters within days – though accounts as to the exact date vary. 

Either way, McCabe was made aware of the matter by late September or early October, as the NY field office agents wanted to discuss the issue with DC Clinton email investigators to compare notes. According to people familiar with the matter, officials at FBI headquarters requested the emails’ metadata – which include the sender, recipient and timestamp.

While McCabe is said to have been involved in those discussions, accounts vary as to how much then-FBI Director James Comey knew of the situation. 

Some people involved at the time said Comey learned of the issue around the same time as McCabe. Others contend Comey did not know about it until weeks later. Senior Justice Department officials, according to several people familiar with the issue, were not notified until mid-October.

But for a period of at least three weeks, according to people involved at the time, nothing much happened a lag that has sparked the inspector generals questions. –WaPo

McCabe announced his departure from the FBI on Monday following a meeting with FBI Director Christopher Wray, in which they reportedly discussed the Inspector General’s investigation.

McCabe had previously announced a March retirement. Several media outlets reported that McCabe is using his remaining vacation days to go on “terminal leave” and that his official retirement from the agency won’t happen until March, allowing him to collect the full pension.

Also notable is that Wray was reportedly “shocked to his core” Sunday night after viewing a four-page confidential FISA memo said to detail egregious surveillance abuses by McCabe’s team. The next day, McCabe was forced to step down. 

Hannity sat down once again with journalist Sara Carter this week, whose sources say McCabe may have also instructed FBI agents to alter their “302” forms – the paperwork an agent files after interviewing someone: 

Shocked him to his core, and not only that, the Inspector General’s report – I have been told tonight by a number of sources, there’s indicators right now that McCabe may have asked FBI agents to actually change their 302’s – those are their interviews with witnesses. So basically every time an FBI agent interviews a witness, they have to go back and file a report. 

If the reports from Sara Carter and the Washington Post’s ever-connected Devlin Barrett are true, McCabe not only sat on the Weiner laptop emails related to the Hillary Clinton email investigation – but also asked FBI agents to commit crimes by altering paperwork. 

Or, as Sarah Westwood summarizes, this report suggests:

1. McCabe tried to stall probe of Weiner laptop emails til after the election
2. McCabe’s colleagues got suspicious about the delay
3. Comey sent 11th-hour letter that reopened the probe in order to correct for McCabe’s perceived bias

Further pointing towards evidence of political bias is an October, 2016 Wall St. Journal article which reported that McCabe’s wife received hundreds of thousands of dollars in campaign contributions from close Clinton ally, then-Virginia Governor Terry McAuliffe for her failed run at VA state legislature.

How can FBI Deputy Director Andrew McCabe, the man in charge, along with leakin James Comey, of the Phony Hillary Clinton investigation (including her 33,000 illegally deleted emails) be given $700,000 for wifes campaign by Clinton Puppets during investigation?

Donald J. Trump (@realDonaldTrump) December 23, 2017

President Trump allegedly chided McCabe over his wife’s loss during a phone call following the May 9th dismissal of ex-FBI Director Comey. According to three people who recounted the alleged incident to NBC News, Trump was so enraged by footage of Comey boarding a government airplane following his dismissal that he brought up McCabe’s wife during the conversation: 

The president was silent for a moment and then turned on McCabe, suggesting he ask his wife how it feels to be a loser…

McCabe replied, “OK, Sir.”

Trump then hung up the phone

An anonymous White House official disputed the account off the record, telling NBC, “this simply never happened. Any suggestion otherwise is pure fiction.”

Whether or not Trump said mean things to McCabe (a conveniently timed story from the MSM), the fact remains that he is now out of a job – and purportedly the focus of Inspector General Horowitz for a variety of politically motivated crimes.

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While the US Treasury had previously warned it would gradually increase TSY auction sizes, bond traders were looking to today’s Refunding statement for details on when and how much this increase would be. We got the answer moments ago, when the Treasury unveiled it would increase auction sizes for 3, 10 and 30 Year maturities and will increase other maturities, FRNs over the quarter.

Specifically, the Treasury will offer $66 billion of Treasury securities – up from $62 billion last quarter – to refund approximately $46.6 billion of privately-held Treasury notes maturing on February 15, 2018. The securities are:

• Treasury to sell $26b of three-year notes vs $24b in Nov.
• Treasury to sell $24b of 10-year notes vs $23b from Nov.
• Treasury to sell $16b of 30-year bonds vs $15b Nov. level

Why is this important? Because it goes to supply, of which there will be plenty in 2018, in fact as Goldman calculated earlier this month, net Treasury issuance is set to double from $488BN to over $1Tn this year. And if there isn’t enough demand, it will mean that rates have to rise, perhaps sharply.

As a reminder, in November 2017, the Treasury announced its intention to adjust auction sizes in order to respond to increased borrowing needs resulting from the change to the Federal Reserve’s reinvestment policy for its System Open Market Account (SOMA) portfolio as well as the fiscal outlook. 

As such, Treasury announced modest increases to nominal coupon and 2-year FRN auction sizes beginning in February.  Additional seasonal borrowing needs will be addressed through changes in regular bill and/or cash management bill auction sizes.

So, over the next quarter, Treasury anticipates increasing the sizes of the 2- and 3-year note auctions by $2 billion per month.  As a result, the size of 2- and 3-year note auctions will increase by $6 billion by the end of the quarter. 

In addition, Treasury will increase the auction size of the next 2-year FRN auction by $2 billion in February.  Finally, Treasury will increase auction sizes by $1 billion to each of the next 5-, 7-, and 10-year notes and the 30-year bond auctions starting in February.  All changes are applicable to subsequent new issues and reopenings. In total, these adjustments will result in an additional $42 billion of new issuance for the upcoming quarter.  Auction sizes for TIPS will remain unchanged over the next quarter.  TIPS continue to be an important product in Treasury’s debt issuance portfolio, and Treasury is fully committed to the TIPS program.

As the Treasury further adds, it “anticipates these changes will stabilize the weighted-average maturity (WAM) of the debt outstanding at or around current levels, notwithstanding large, unexpected changes to borrowing needs.” It will also assess the need to make further adjustments to auction sizes at the next Quarterly Refunding in May based on projections of the fiscal outlook.

* * *

Separately, the Treasury Borrowing Advisory Committee agreed at its Jan. 30 meeting that while the U.S. should put emphasis on increasing the size of auctions for shorter-dated coupon-bearing securities, issuance at the long-end “should also be adjusted, just to a lesser extent,” resulting in a weighted-average maturity around the current level, minutes of the gathering showed.

The committee defined short-end as 2- to 5-year nominal tenors, adding that increases in floating-rate notes also considered to be appropriate.

Deputy Assistant Secretary Clay Berry said Treasury intended to announce increases in coupon sizes “but that flexibility will need to be maintained over the coming months and quarters,” given that current budget estimates hadn’t been released, and depending on further funding needs.

The TBAC recommended further study of a potential 2-month bill and possibility of additional settlement date at next quarterly refunding.

The TBAC’s full proposed US financing schedule for Q1  is shown below (Q2 can be found here):

 

The TBAC also suggested further study of the TIPS program “was warranted in terms of new issuance needs” and topic of potential increases in issuance should be revisited. The full powerpoint can be found here.

A presenting member suggested TIPS issuance should remain at ~7% of gross issuance, which would allow for up to $26b in additional supply over next year or so; should consider 5Y tenor for addressing new issuance, based on “solid demand and liquidity in that sector.”

The committee also discussed the difference between primary dealers’ projected net borrowing and the net borrowing assuming that Treasury does not change current issuance. In FY 2018, the remaining “funding gap” is projected to be $372 billion, which includes the expected $175 billion reduction in Treasury holdings in the Federal Reserve’s System Open Market Account (SOMA). In FY 2019, the funding gap is projected to be $882 billion, of which $287 billion is attributed to SOMA reductions.

In a surprising twist, while the market initially reacted with the long-end selling off after the Treasury announcement, it has since been aggressively bought, and was at sessions lows, around 2.94% at last check, suggesting that the market may have been expecting even more near-term supply.

 

 

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While The Fed may be getting nervous, we suspect the Trump administration will be smirking quietly as Labor Department data showed total U.S. employee compensation rose in the fourth quarter to match the biggest 12-month gain since 2008, as private-sector pay picked up.

The headline index rose 0.6% q/q (matching est.) after 0.7% gain in prior three months.

Wages and salaries rose 0.5% q/q following 0.7% gain.

Benefit costs increased 0.5% q/q after rising 0.8%.

Total compensation, which includes wages and benefits, rose 2.7% over past 12 months, the highest since 2008.

 

As Bloomberg details, private-sector wages and salaries rose from a year earlier by 2.8 percent, also matching the best gain of this expansion. Several industry groups registered increases of 3 percent or higher, led by transportation and material moving at 3.5 percent and service occupations at 3.3 percent, underscoring demand for labor.

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Two weeks after Attorney General Jeff Sessions sat for an interview with Special Counsel Robert Mueller, ABC News reported that Sessions’ office turned over a cache of internal correspondence, including documents related to Sessions’ proposed resignation and emails about the firing of National Security Adviser Michael Flynn.

The report is the latest sign that Mueller’s investigation has pivoted away from financial improprieties and actual links between Trump campaign officials and the Russian government and is now focusing on whether Trump is guilty of obstruction of justice for the firing of former FBI Director James Comey. Before the firing, Trump reportedly asked Sessions and Steve Bannon to leave the room before reportedly asking Comey to go easy on Flynn.

According to ABC, details of what the Justice Department provided to Mueller reflect how widely investigators are casting their net.

Citing sources familiar with the matter, ABC News reported in November that Mueller’s office was interested in obtaining internal emails related to the firing of FBI Director James Comey and the earlier decision of Sessions to recuse himself from the entire matter, but at the time it was unclear what other type of information Mueller’s office might have been seeking.

In an Oval Office meeting following Mueller’s appointment, Trump reportedly told Sessions that he should resign, prompting the attorney general to submit a letter of resignation that was ultimately rejected when advisers warned Trump against it. One month later, Trump demanded that White House aides fire Mueller, but he backed off after White House counsel Don McGahn and others made clear that they were opposed to such a move, according to a source familiar with the deliberations told ABC.

Emails and other documents produced during that time have been turned over to Mueller.

As ABC reminds us, Sessions and Rosenstein both played key roles in Comey’s high-profile removal. To publicly bolster the controversial move at the time, the White House released two memos written separately by Sessions and Rosenstein, with both faulting Comey for his handling of the FBI’s probe into Hillary Clinton’s use of a private email server when she was secretary of state. During a House hearing last year, Rosenstein refused to say whether he consulted with the White House before Comey’s firing or whether anyone asked him to write his memo, insisting such questions “may well be within the scope of the special counsel’s investigation.”

Mueller has already secured charges – and two guilty pleas – against four Trump associates, including Flynn. Flynn was fired only weeks into the Trump administration after then–Acting Attorney General Sally Yates informed White House officials that Flynn had lied to them about his contacts with Russian officials. Yates famously told Congress last year that the DOJ believed Flynn was “compromised” – meaning that he was vulnerable to blackmail from Russia. The DOJ has provided Mueller with documents related to this issue as well. Mueller has also asked former senior staff for information from their time at the department.

Sessions has taken the brunt of Trump’s wrath for recusing himself and allowing Rod Rosenstein to appoint Mueller after Comey was unceremoniously fired.

In announcing his recusal, Sessions said he and “senior career department officials” spent “several weeks” discussing whether his role as top foreign policy adviser to Trump’s presidential campaign last year meant his “impartiality might reasonably be questioned.”

In addition to Flynn, former Trump campaign adviser George Papadopoulos has also pleaded guilty to lying to the FBI and is now cooperating in the investigation.

While the Mueller probe drags on, we pointed out yesterday the existence of a second “Trump dossier” that was turned over to the FBI in October 2016 by Christopher Steele, the former UK spy who assembled the original “Trump dossier” at the behest of Fusion GPS and their Democratic Party backers.

The “second dossier” was authored by Cody Shearer, a former journalist who is considered a Clinton “hatchet-man.”

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Having dramatically beaten expectations last month (and printed way ahead of NFP), ADP has done it again in January, printing a 234k job gain in January (185k exp). The bulk of the gains were in Services (+212k vs +22k in Goods which are seeing slower growth).

Notably growth in the manufacturing job additions is slowing…

 

As a reminder, ADP saw 250k jobs added in Dec versus just 148k for Non-Farm Payrolls.

Since Trump’s election, ADP’s print has been systemically higher than the BLS’ data? Makes one wonder if Zandi’s firm is helping The Fed with excuses to tighten?

Only inflation jobs sector declined…

 

Mark Zandi proclaimed on CNBC that this to be an “excruciatingly tight labor market.”

“The job market juggernaut marches on. Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs. If it falls short, it is likely because businesses can’t find workers to fill all the open job positions.”

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• As Yellen Hands Off at the Fed, Whither Her Go-Slow Approach? (WSJ)
• ‘This is our American moment,’ Trump urges cooperation (Reuters)
• President Tries Taking On a New Role: Optimist (WSJ)
• Trump’s Olive Branch to Democrats Cut Short by Divisive Tone of Speech (BBG)
• Signs of Old Age Abound in a Bull Market Closing In on History (BBG)
• Japan’s Fujifilm to take over Xerox in $6.1 billion deal, create joint venture (Reuters)
• Bitcoin Is Having Its Worst Month in Three Years (WSJ)
• For Bezos, Buffett and Dimon, a Health Push Years in the Making (BBG)
• Rival Employers Dread Possible Arrival of Amazon HQ2 in Their Town (WSJ
• For Bezos, Buffett and Dimon, a Health Push Years in the Making (BBG)
• One Indicator Says Bond Rout Going Too Fast for Stocks to Escape (BBG)
• Skywatchers in western North America will see moon turn red in rare eclipse (Reuters)
• Immigration Fight Shifts From Trump’s Wall to Family Green Cards (BBG)
• Bond Selloff Sends Ripples Through Corporate Debt Market (WSJ)
• Facebook Really Wants You to Come Back (BBG)
• Boeing says to deliver more planes in 2018 (Reuters)
• Judge Dan Polster Is Singlehandedly Trying to Solve the Opioid Crisis (BBG)

Overnight Media Digest

WSJ

– U.S. President Donald Trump, in his first State of the Union address, called for major, bipartisan deals on infrastructure and immigration, while reversing his predecessor’s vow to close the Guantanamo Bay prison facility for suspected terrorists. on.wsj.com/2BFNCMr

– Xerox Corp is nearing a deal with Japan’s Fujifilm Holdings Corp that would mark the end of the independence of the stalwart of 20th-century American industry. on.wsj.com/2BFgTXC

– Special counsel Robert Mueller is seeking an interview with Mark Corallo, the former spokesman for President Donald Trump’s legal team, according to a person with knowledge of the matter, in what would be the first contact between the special counsel and a onetime member of the president’s personal legal team. on.wsj.com/2BFbeAV

– Thomson Reuters Corp struck a deal to sell a majority stake in its financial-information and terminal business for $17 billion to a group led by Blackstone Group LP , a significant bet by the private-equity giant on financial data. on.wsj.com/2BF5ZkM

– Apple Inc is being investigated by the U.S. Justice Department and the Securities and Exchange Commission over potential securities violations related to the company’s disclosure of a software update that slowed older iPhones, people familiar with the matter said. on.wsj.com/2BEtE4S

– French authorities have deployed boats and helicopters off the coast of southwest France to search for the boss of sportswear maker Quiksilver after his empty boat was found washed ashore Tuesday. on.wsj.com/2BFzfI1

 

FT

– British Prime Minister Theresa May was starting a crucial trade visit to China on Wednesday as she admitted the two countries will not always see eye-to-eye in sensitive areas like steel over-capacity and intellectual property rights.

– Victor Cha, a former White House official who had been the Trump’s administration’s choice to be the next U.S. ambassador to South Korea, is no longer being considered for the post, two U.S. officials said on Tuesday.

– Indian ride-hailing company Ola announced plans on Tuesday to enter Australia, marking its first foray outside its home market and intensifying its tussle with U.S. rival Uber Technologies Inc.

 

NYT

– Facebook Inc on Tuesday said that it would ban all ads for Bitcoin and other cryptocurrencies, in order to stop promotions that it sees as “frequently associated with misleading or deceptive promotional practices.” (nyti.ms/2ntfYV2)

– Exxon Mobil Corp on Tuesday said that it would triple its oil and gas production in the Permian Basin by 2025, the latest sign that the boom in national crude production is gaining momentum. (nyti.ms/2EoA8rk)

– A consortium led by Blackstone Group LP on Tuesday said that it had taken a 55 percent stake in Thomson Reuters Corp’s Financial and Risk division in a deal that values the division at $20 billion, including debt. (nyti.ms/2npKwI0)

– Volkswagen AG on Tuesday suspended its chief lobbyist Thomas Steg amid a growing furor over experiments on monkeys that were meant to promote the virtues of diesel-powered vehicles. (nyti.ms/2E26H0o)

 

Canada

THE GLOBE AND MAIL

** Ahead of the Canadian government’s July 1 date for federal legalization of recreational marijuana, two marijuana producers the Green Organic Dutchman Holdings Ltd and Tilray are planning to go public in coming weeks. tgam.ca/2BFDMu0

** Calgary-based Shaw Communications Inc confirmed on Tuesday that it has offered voluntary severance packages to 6,500 non-unionized employees of both Shaw and Freedom Mobile and expects about 10 percent of those workers to accept the offer. tgam.ca/2BFTWDB

NATIONAL POST
** British Columbia’s government wants to restrict shipments of oilsands crude in pipelines and on railways cars in the province through a series of proposed new rules that is set to create additional uncertainty for Kinder Morgan Canada Ltd’s C$7.4 billion ($6 billion) Trans Mountain pipeline expansion. bit.ly/2BHEK9c

** Next week, the Ontario government will receive C$1 billion, the gross proceeds from its latest green bond offering. It’s the fourth offering it will have completed over the past three years, the largest it has brought to the market and the biggest by any Canadian issuer. bit.ly/2BGfDn9

 

Britain

– Informa Plc, the British events organiser behind the Monaco Yacht Show, has agreed to the terms of a 3.9 billion pounds ($5.52 billion) deal for its rival UBM Plc as it strives to keep pace with Relx, the world leader in the sector. bit.ly/2Fv47gR

– The investigation into potential misconduct in the running of Carillion Plc will be expanded to look at up to 169 directors across the failed construction company, MPs have been told. bit.ly/2BFnql5

The Guardian

– The Financial Conduct Authority has agreed to publish the full confidential report into the mistreatment of small businesses by the Royal Bank of Scotland Group Plc, in a significant U-turn by the City watchdog. bit.ly/2EoAIp2

– BP Plc will add rapid charging points for electric cars at its UK petrol stations within the next two months, in the latest sign of an oil giant adapting to the dramatic growth of battery-powered cars. bit.ly/2Enqu8v

The Telegraph

– The Governor of the Bank of England has urged the government to abandon the use of the retail prices index as a measure of inflation, especially in the issuance of government bonds. bit.ly/2BG2fzc

– Stephen Haddrill, the head of the Financial Reporting Council has called for an investigation into whether the Big Four accounting firms should be broken up in the wake of Carillion Plc’s collapse, amid concerns that auditors failed to spot major financial malpractice at the contractor. bit.ly/2GvKxCn

Sky News

– The British arm of TGI Fridays is being put on the menu of prospective buyers amid a steep downturn which has hit much of the casual dining sector. bit.ly/2rPfLkB

– An assessment of the likely impact of various Brexit scenarios was leaked to undermine the exit talks, a government minister has claimed. bit.ly/2DS24ac

The Independent

– Ryanair Holdings Plc has agreed to recognise the British Airline Pilots’ Association to represent all of the airline’s 600 employed pilots based in the UK. ind.pn/2DNMIn2

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Dow leader Boeing jumped 5%, set for a new all time high with a market cap north of $200 billion, after reporting earnings that blew away expectations, bolstered by surging deliveries of the 737, the planemaker’s biggest profit-center, and an unexpectedly large one-time gain from U.S. tax cuts.

The company reported adjusted Q4 earnings of $4.80 a share, or $3.06 a share excluding the tax gain; both numbers were comfortably above the $2.90 consensus estimate. Revenue for the aircraft maker rose 8.9% to $25.4 billion, also beating the $24.7 billion analyst estimate. The company announced a $1.74 per share benefit in Q4 from the lower corporate levy and said it expects more benefits to come this year. In more good news, the tax reduction is taking effect just as the company starts to see large, taxable cash gains from its 787 Dreamliner after a decade of losses.

The company’s forecast was just as impressive:

• Sees FY core EPS $13.80 to $14.00, estimate $13.38 (range $12.93 to $14.81) (Bloomberg data)
• Sees FY revenue $96.0 billion to $98.0 billion, estimate $93.58 billion (range $90.23 billion to $95.52 billion) (BD)
• Sees FY operating cash flow about $15.0 billion

But perhaps most importantly, in Q4 Boeing generated record operating cash flow of $13.3 billion; and repurchased 46.1 million shares for $9.2 billion

Just this January Boeing had already surged 15%, the largest gain among the 30 members of the Dow Jones Industrial Average and the biggest contributor to the index’s YTD gains. The stock has more than doubled since the start of 2017 as Boeing surpassed General Electric Co. to become the largest U.S. industrial company by market value, according to Bloomberg.

Meanwhile, the futures remains bright: in addition to its humming military business, lower taxes are combining with record jetliner deliveries to fuel the cash gush at Boeing, the biggest gainer on the Dow Jones Industrial Average last year and so far in 2018. Free cash flow was $2.47 billion in the fourth quarter, Boeing said in an earnings report Wednesday, exceeding the $1.66 billion expected.

“The buyback and cash flow have been the whole story on the stock for the last year,” Ken Herbert, an analyst at Canaccord Genuity, said in an interview prior to earnings. And speaking of buybacks, Boeing has promised to return the equivalent of its free cash flow to investors through an $18 billion share buyback program and 20 percent dividend increase approved by directors in December.

There has been bad news along the way too, but it was largely ignored: for one, revenue has declined since 2015. Boeing slowed deliveries of its highly profitable 777 jetliners as sales waned amid a shift to a new model, but EPS have continued to rise, largely boosted by buybacks which resulted in a 15% drop in the company’s average share count.

Under Chief Executive Officer Dennis Muilenburg, Boeing has rolled out new planes like the 737 Max and 787-10 with few glitches while rival Airbus SEbattled engine delays for its A320neo and A330neo. Muilenburg’s campaign to make Boeing leaner has lowered the cost of goods and services.

The planemaker is forecasting sales growth in 2018 as Boeing lifts 737 output by 11% and pockets additional tax savings. Revenue will range from $96 billion to $98 billion, the company predicted, compared with the $93.6 billion expected by analysts.

Most importantly, Boeing’s premarket surge has sent Dow Jones futures over 210 points higher, which may be all this market needed to BTFD.

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The months-long will-they-won’t-they back-and-forth between South Korea’s various regulatory bodies and the cryptocurrency market is finally nearing its final moment of clarity.

Today, in one of the more concrete indications that South Korean regulators aren’t planning a China-style stampout of the cryptocurrency market, the country’s finance minister assured jittery traders that the country is not planning to ban cryptocurrency trading – a possibility that has been raised several times in recent months, sending bitcoin plunging on every occasion.

According to CoinDesk, Kim Dong-yeon said, “there is no intention to ban or suppress cryptocurrency [market],” in response to a question from a lawmaker about the government’s plans to regulate the industry.

Instead of taking the dramatic step of shutting down all local exchanges – like China did – the minister assured his audience that, just as we reported last month, “regulating exchanges is [the government’s] immediate task.”

Reports that South Korea was considering a cryptocurrency ban hammered the market in December. Officials reportedly believed the market was overheating and required more scrutiny. However, officials quickly backtracked, and South Korea’s presidential office clarified on Jan. 11 that a plan to ban trading cryptocurrencies “is one of the measures prepared by the Ministry of Justice, but it’s not a measure that has been finalized.”

That plan has reportedly now been thrown out.

Instead, yesterday saw the introduction of new rules banning the use of anonymous virtual accounts for trading – from now on, South Koreans will need to use their real names on bank and exchange accounts. Furthermore, authorities said traders who don’t comply will face penalties.

As the above chart shows, South Korea is one of the world’s biggest markets for trading bitcoin and other digital currencies. But as China’s crackdown demonstrated, an outright ban in South Korea probably wouldn’t have a lasting impact on the market; many of the businesses would simply migrate to more open economies, and domestic traders would take their business to foreign exchanges.

Despite the reassurances, bitcoin and the other large cryptocurrencies were extending this week’s weakness Wednesday morning following President Donald Trump’s first State of the Union address.

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