Category: zerohedge

Kraft Heinz Announces Retirement Of Warren Buffett From Board

Just hours ahead of his widely anticipated annual letter, Kraft Heinz surprised the Berkshire faithful with news that Warren Buffett, 87, will retire from board following end of his term at the upcoming Kraft Heinz 2018 Annual Meeting of Stockholders.  

According to the satement, “Buffett decided to retire from the Board as he decreases his travel commitments.”

In his place, the board will nominate Alexandre Van Damme – board member of Anheuser-Busch Inbev and Restaurant Brands International as well as a director of DKMS – who will  to stand for election at 2018 Annual Meeting to fill Buffett’s vacancy.

Now will there be any more retirement surprises in just over 12 hours?

Full statement below.

Kraft Heinz Announces Retirement of Warren Buffett from Board of Directors

The Kraft Heinz Company (NASDAQ: KHC) (“Kraft Heinz”) announced today that Warren Buffett, will retire from the Company’s Board of Directors following the end of his term at the upcoming Kraft Heinz 2018 Annual Meeting of Stockholders. Mr. Buffett decided to retire from the Board as he decreases his travel commitments. The Company also announced that the Board of Directors intends to nominate Alexandre Van Damme to stand for election at the 2018 Annual Meeting to fill Mr. Buffett’s vacancy.

“It has been an honor to work with Warren for the past five years,” said Alex Behring, Chairman of the Board of Directors. “His many invaluable contributions to Kraft Heinz will have a lasting impact on the Company for years to come. The Board of Directors looks forward to his continued partnership as Chairman of our largest shareholder, Berkshire Hathaway. We are thrilled to add Alexandre’s expertise and perspective to Kraft Heinz, and believe that his executive experience and leadership will be extremely valuable to the Board, our leadership and company as a whole.”

Mr. Van Damme is, amongst others, a Board member of Anheuser-Busch Inbev and Restaurant Brands International as well as a director of DKMS, the largest bone marrow donor center in the world.

 

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When Bonds & The Dollar Sink, The Only Thing That Can Save Stocks Is QE

In the last 45 years, there have been seven periods of persistent US dollar and Treasury bond weakness and as BofAML notes, during six of those periods, stocks have been pressured significantly lower.

This could be a problem, as it’s happening again… and stocks are beginning to wake up to it…

There has only been one period in history when falling dollar and bond prices did not lead to slumping stocks…

And that was when QE was expanded drastically in March 2009.

So – were this morning’s warnings from Dudley and Rosengren about the likelihood of more QE more prophetic than many suspect?

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Weekend Reading: Tax Reform Doing Exactly What We Expected

Authored by Lance Roberts via RealInvestmentAdvice.com,

Shortly after the Tax Cut/Reform bill was passed by Congress, I did some analysis discussing the various myths of how those “tax cuts,” since they were primarily focused on corporations, would actually turn out.

Well, just two months into 2018, we already have some answers.

Myth 1:  Tax cuts will lead to a huge ramp up in earnings.

The problem with the idea that tax cuts will result in a huge increase in bottom-line earnings, is that estimates got way ahead of reality.

For example, in October of 2017, the estimates for REPORTED earnings for Q4, 2017 and Q1, 2018 were $116.50 and $119.76 respectively. As of February 15th, the numbers are $106.84 and $112.61 or a difference of -$9.66 and -7.15 respectively. 

First, while asset prices have surged to record highs, reported earnings estimates through Q3-2018 have already been ratcheted back to a level only slightly above where 2017 was expected to end in 2016. As shown by the red horizontal bars – estimates through Q3 are at the same level they were in January, 2017.  (Of course, “hope springs eternal that Q4 of this year will see one of the sharpest ramps in earnings in S&P history.) 

Wall Street ALWAYS over-estimates earnings and by about 33% on average. That overestimation provides a significant amount of headroom for Wall Street to be disappointed by year end, particularly once you factor in the “effective” tax rate that most companies actually pay.

But even if we give Wall Street the benefit of the doubt and assume their predictions will be correct for the first time in human history, stock prices have already priced in twice the rate of EPS growth.

It is quite likely that once again Wall Street is extrapolating the last few quarters of earnings growth ad infinitum and providing even more fodder for the market rally. It is also quite likely Wall Street will be proven wrong on earnings as so often has occurred in the past.

Myth 2: Corporations will use those tax cuts to hire employees and boost wages

As I discussed previously:

“The same is true for the myth that tax cuts lead to higher wages. Again, as with economic growth, there is no evidence that cutting taxes increases wage growth for average Americans. This is particularly the case currently as companies are sourcing every accounting gimmick, share repurchase or productivity increasing enhancement possible to increase profit growth.“

Not surprisingly, our guess that corporations would utilize the benefits of “tax cuts” to boost bottom line earnings rather than increase wages has turned out to be true. As noted by Axios, in just the first two months of this year companies have already announced over $173 BILLION in stock buybacks.  This is “financial engineering gone mad” and something RIA analyst, Jesse Colombo, noted yesterday:

“How have U.S. corporations been deploying their new influx of capital? Unlike in prior cycles – when corporations favored long-term business investments and expansions – corporations have largely focused on juicing their stock prices via share buybacks, dividends, and mergers & acquisitions. While this pleases shareholders and boosts executive compensation, this short-term approach is detrimental to the long-term success of American corporations. The chart below shows the surge in share buybacks and dividends paid, which is a direct byproduct of the current artificially low interest rate environment. Even more alarming is the fact that share buybacks are expected to exceed $1 trillion this year, which would blow all prior records out of the water. The passing of President Donald Trump’s tax reform plan was the primary catalyst that encouraged corporations to dramatically ramp up their share buyback plans.”

SP500 Buybacks & Dividends By Year

“What is even more unwise about the current share buyback mania is the fact that it is occurring at extremely high valuations, which is tantamount to ‘throwing good money after bad.’”

Furthermore, there is scant evidence that wages are improving for the masses versus those in the executive “C-suite.” 

While well-designed tax reforms can certainly provide for better economic growth, those tax cuts must also be combined with responsible spending in Washington. That has yet to be the case as policy-makers continue to opt for “continuing resolutions” that grow expenditures by 8% per year and tack on another $2 Trillion in spending rather than doing the hard work of passing a budget.

Policymakers had the opportunity to pass true, pro-growth, tax reform and show they were serious about our nations fiscal future, they instead opted to continue enriching the top 1% at the expense of empowering the middle class. 

In the end, it is all working out exactly like we expected.

Here is your weekend reading list.

Economy & Fed

Markets

Research / Interesting Reads

“Based on my own personal experience – both as an investor in recent years and an expert witness in years past – rarely do more than three or four variables really count. Everything else is noise.” ― Martin Whitman

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Bonds Break 7-Week Losing Streak But Credit Cracks Start To Appear

A week of turmoiling up and down in rates and stocks… for not very much…

On the day we saw the same old pattern of gap up open, then weakness… but this time the latter half of the day saw buying, not selling…

 

The Dow and Small Caps managed to creep back into the green for the week as Nasdaq melted up to Wednesday’s highs this afternoon (as bond yields tumbled)…

 

The Dow bounced back into its 50-61.8% retracement zone. S&P managed to get back above (and close above) its 50DMA…

 

Credit markets had a notably weak week, diverging dramatically from equity risk…

 

Treasury yields were mixed on the week with the belly outperforming (and lower) while 2Y and 30Y were both higher…

 

With the 2s10s curve flatter for the 2nd week in a row…

 

10Y Yields were up 7 weeks in a row ahead of this week but the 10Y closed below last Friday’s close of 2.8749% breaking the losing streak…

As Bloomberg notes, That’s quite an unusual situation. The last time it happened was in May 2008, and before that it was May 2004. An eight-week streak of higher yields would have been the longest since a nine-week surge ending on April 1, 1994. Here’s the S&P 500 during those nine weeks:

But we note that US stocks are now their ‘most expensive’ relative to bonds since 2008…

 

The Dollar Index limped lower for the second day (coincidentally since China has returned from its new year festivities, banned VIX, and bailed out Anbang)…but ended higher on the week (3rd weekly gain of the last 4 weeks)

NOTE how tight the range has been in the last 36 hours.

 

WTI bounced for the 2nd week in a row but dollar strength hit cooper and PMs…

 

NOTE that WTI/RBOB are back at somewhat key technical levels right before the XIV-driven collapse…

 

Bitcoin bounced back above $10,000 today – back to unchanged for February – but is marginally lower on the week (as the rest of the crypto space got hammered)…

 

Nasdaq and Bitcoin recoupled earlier today but this afternoon saw stocks higher and crypto slipped lower…

Is Bitcoin the leading indicator for The Dow?

 

Finally, You Are (Still) Here…

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Woman Rams Car Into Security Barrier Outside White House

The White House has been placed on lockdown after a woman driving minivan drove into a security barrier near the White House, and was immediately apprehended by the Secret Service.

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No personnel were injured during the incident, and the vehicle “did not breach” the White House complex.

Los Angeles Times reporter Noah Bierman tweeted “I’m locked in the White House press office. Secret Service has locked doors and appears to be looking into a security issue,” before adding “Secret Service is getting out some bigger guns. One guy had a helmet on.” 

The incident comes two days after the Secret Service reopened the streets around the White House and allowed workers into an evacuated building after authorities cleared a suspicious car parked nearby. 

 

 

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Around 100 White House staff were held in a park and federal employees were turned away from Executive Office Buildings while the incident remained under investigation. 

 

 

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Friday Humor? Russian “I Don’t Do Doping” Bobsledder Fails Doping Test

We couldn’t help but smile at the irony…

Following headlines that Russian curler (yes a curler) Alexander Krushelnitsky was found to have meldonium in his system (a drug designed to aid in intense high activity sports) earlier in the Games…

Russian bobsled federation president Alexander Zubkov has just announced that a second athlete, Nadezhda Sergeeva tested positive for a banned heart medication.

Sergeeva was the pilot of the bobsleigh team that finished 12th in Pyeongchang, and her positive test result was announced on Friday morning.

But what makes her case so ironic is that just days ago, she appeared in an Instagram video wearing an “I Don’t Do Doping” sweatshirt.

In the video below, posted to the social network on 15 February by filmmaker Roman Bibishev, Sergeeva features in several scenes wearing a sweatshirt emblazoned with: “I don’t do doping, I am ZASPORT.”

The substance that triggered Sergeeva’s positive result at the Olympics was trimetazdine, a medication used for angina sufferers. Sergeeva has denied taking the drug, with the Russian Bobsled Federation president Alexander Zubkov stating: “She confirms she took no such medication and the team confirms she was not issued any medication.”

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This Is What Jeff Gundlach Thinks Is “Fair Value” On The 10 Year

As Bloomberg’s Michael Regan writes, “pinpointing the exact level of Treasury yields that will break the back of the bull market has become the trendiest parlor game in town.” Earlier today, Tom Lee of Fundstrat became the latest to chime in, predicting that rates – which are rising due to reflation, – should support higher P/E ratios until interest rates are above 4%.

Then, it was Jeff Gundlach’s turn.

Recall that it was Gundlach who during a DoubleLine webcast on January 9 predicted that if the 10Year goes to 2.63% – it was at 2.50% then – “stocks will be negatively impacted.” However, he also added that if the 10Y TSY passes 2.63%, it will head well higher, likely pushing toward 3%. Gundlach also was the first to note that he expects a 3.25% print on the 10Y in 2018, a target which was since adopted by both Goldman and, today, Bank of America.

Fast forward to today when speaking on CNBC, Gundlach estimated the fair value on 10Y yields in the USA to current nominal GDP. The gap is notable as current nominal GDP prints are above 4% with 10y yields below 3%.

Here is what he told CNBC:

Let’s start out with something people think I know something about, which is the bond market. And it seems that bond yields, let’s just talk about the ten-year treasury, are at a level that makes a pretty good of sense right now. I mean they’ve gone up a decent amount so far this year – ended last year at about 2.41% or so, they’re up 46 basis points or so. But one thing that people talk about is nominal GDP, and I’ve been talking about this for a long time. It’s a fairly good starting place, where you think about maybe the ten-year treasury should be.

Obviously there’s a lot of noise. I mean, they don’t track each-other anywhere close to perfectly. But it’s sort of like a dog that’s tied to a stagecoach that’s going across the country. It’s on a 100 foot rope, I mean, sometimes it will be behind the stagecoach and sometimes ahead, but if the stage coach is nominal GDP, and the not ten-year yield is sort of a dog, and yeah, there will be variation, one versus another, but they’re both going to end up going across the country together. There’s no way the dog can really stay that far away from the stagecoach.

So what’s going on now, nominal GDP in the united states is at 4.4%, which sounds really high compared to the 2.87 10-year treasury yield. But to be honest, it’s also manipulated. We should talk about Germany as a good starting place. The German yield is way down at a ridiculously low level because it’s manipulated. So the economic facts of Germany and the United States are not that different. The nominal GDP is about the same, the inflation rates aren’t that different, manufacturing is good in both areas, retail sales are good in both areas, but the German yield is being manipulated.

So when you think about a 10Y treasury yield, what we’ve been doing at Doubleline for the past few years really, is noting that it tends to reside in the average of nominal GDP and the competitor yield, which is the German yield.

So let’s look at where we are today.

The German yield is roughly 70 basis point, and nominal GDP is probably going to go up a bit, because GDP now from the Atlanta fed is 3.2% at present, and we’ll tack on a little bit of inflation, so let’s call it 5%. And so if you have 5% for nominal GDP in the U.S., and you have 70 basis points on Germany, add those together, you get 5.7. You divide by two, and lo and behold, you get 2.85%, which is within two basis points, even slightly less than that, as where you are today. So as long as bond yields do not break out to the upside, which is a clear and present danger right now, then you probably can keep some stability going in risk markets

Which then brings us to the follow up question: will yields break out to the upside? Here is what Gundlach said:

I have a low conviction feeling that we’re going to break out to the upside on yields. When I talked at the Barron’s roundtable earlier in January, I talked about how rates would likely rise this year, and a lot of people agree with that.

But right now the market is pressing right up against incredibly powerful yield resistance, particularly on the 30-year treasury bond.  The trendlines are all gone on all the maturities of the treasury market. If you go to the trendlines back to the last 5 years, in many cases even the great bull market that’s over 30 years, the move up in rates since September has taken out all of those trendlines. In fact, interest rates across the yield curve, other than the 30 year treasury have been rising since September 7th at an annual rate of about 200 basis points.

We’re coming up on almost five months into this yield rise, almost – really, coming up on almost six months now for this yield rise, they’ve been rising pretty quickly, but all the trendlines are gone. On the 30 treasury, you still have this one last line in the sand of – declaring that the bull market might still be intact and that’s the pivot point, which was the high yield back 18 months or so ago, and that’s at 3.22%.

So fascinatingly, the 30-year treasury bond closed at 3.22% a couple of days ago, right there, and it didn’t close above it. So for now, we’re only 6 basis points away from this incredibly important level.

So my viewpoint is this is a terrible trade location to be selling longer-term treasury bonds.

I’ll put it another way – if long-term treasury bonds are a great sale at 3.16%, they’re also a great sale at 3.25%. And we’re going to let the market decide on itself, give a signal as to if this breakout is going to happen.

If you force me to make a bet, I would say I do think they’re going to break to the upside. And when they do, they will accelerate. And if they accelerate, clearly what’s happened ever since 2.50% was breached on the 10-year treasury is the prices of treasury bonds and the prices have equities have started to become more correlated, meaning that when yields go up, stocks start to suffer. And I think, if we started to tack on significant yield with the breakout from these levels, it seems to me we would go back into another drop for risk assets.

So with all that said, here is a convenient paraphrase from Citi, which – taking Gundlach’s logic one step further – writes that perhaps a better metric for “fair value” or preferably a solid back of the envelope for 10Y yields is potential nominal GDP: this is also convenient because the CBO publishes this metric for years into the future.

Finally, the chart below suggests that any move above 4% on the 10y bond is unlikely to be sustainable while current yields are closing the gap from obviously too low to just about right.

 

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Trump Dodges Kushner Security Question: “Gen. Kelly Will Make That Call”

President Donald Trump’s placid press conference with Australian Prime Minister Malcolm Turnbull took an interesting turn Friday afternoon when a reporter from the Washington Examiner asked the president about his son-in-law Jared Kushner’s future in the West Wing.

 

 

And the president, as he often does, surprised his audience by offering a rambling non-answer, saying he’d ultimately leave the decision of whether to grand a waiver in the hands of Chief of Staff John Kelly. This is the first time the president or anyone from the White House communications department has offered a clue as to its thinking about Kelly’s new policy.

A week ago, Kelly announced that he would soon begin revoking temporary security clearances from the dozens of senior administration employees who still don’t have them – and Kushner, who is in charge of a large portfolio of responsibilities, is probably the most senior among them.

 

 

Trump repeatedly referred to Kushner as an “outstanding” and “extremely talented and extremely smart” young man who – by the way – is working without pay. Trump spoke highly of Kushner’s work ethic and devotion to bettering the country, but also admitted that he would leave the question of whether to grant Kushner a waiver up to Kelly, saying “I have no doubt he’ll make the right decision” and that Kelly “would do what’s right for the country.”

“He is truly outstanding. He was very successful when he was in the private sector. He is working on peace in the middle east,” Trump said.

That’s the strongest indication yet – throughout more than a year of governing – that Trump might be willing to countenance the departure of Kushner, who, apart from being one of his closest advisers, is also a close family member.

Trump also alluded to the possibility of launching a nuclear strike – or some other devastating attack – on North Korea, the first time he’s used such harsh language in a while. He also reaffirmed his preference for “bilateral” trade deals, while lauding Australia’s help in the battle against ISIS.

Of course, Kelly could certainly decide to grant Kushner the waiver, bowing to the implicit pressure from his mercurial boss.

He also said teachers would be more effective defenders of children than security cards because the teachers “love the children”.

 

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Gates Pleads Guilty In Mueller Probe, Will Testify Against Manafort

A former Trump campaign aide and longtime business partner of Paul Manafort, Rick Gates, has pleaded guilty to two charges in a scheme in which Special Counsel Robert Mueller claims more than $75 million flowed through secret accounts set up by the pair.

Gates will plead guilty to a conspiracy to defraud the United States “by impeding, impairing, obstructing and defeating” the DOJ and Treasury, and a second count of lying to authorities over his work with Manafort in Ukraine by giving a “materially false, fictitious, and fraudulent statement” to the Special Counsel’s office. 

Gates and Manafort stand accused of laundering over $18 million in income related to lobbying activities on behalf of the former President of Ukraine, through his firm, DMI – of which Gates transferred over $3 million from offshore accounts to accounts he controlled. Manafort and Gates used millions of dollars from the offshore accounts to pay for personal expenses, including the payment of Gates’ mortgage, his children’s tuition, and even interior decorating for his Virginia home, Mueller claims. 

In a statement, Manafort maintained his innocence.

“Notwithstanding that Rick Gates pled today, I continue to maintain my innocence. I had hoped and expected my business colleague would have had the strength to continue the battle to prove our innocence. For reasons yet to surface he chose to do otherwise. This does not alter my commitment to defend myself against the untrue piled up charges contained in the indictments against me.”

Mueller requested that the trial against Manafort and Gates to begin May 14, citing over half a million pieces of evidence, including imaged copies of 87 electronic devices. 

Gates will testify against Manafort in upcoming proceedings, and has been granted permission to travel to Boston with his children for spring break in the first week of March while wearing a GPS monitor. Based on court guidelines, he faces between 57 and 71 months in prison, however the Prosecution may request a shorter sentence.

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Several new tax and bank fraud charges were levied against the pair this week by Mueller, which detail a scheme to launder over tens of millions in income and mask over $10 million from Cypriot entities which were disguised as loans.

In total, the two face 32 charges – 20 more than the original 12 count indictment. 

Mueller indicted the pair last October for laundering millions of dollars earned while acting as unregistered agents of the former Ukrainian government. In the superseding indictment filed on Thursday in federal court in Washington, they face new charges of tax evasion and bank fraud, as Bloomberg reported on Thursday. 

“Manafort and Gates generated tens of millions of dollars in income as a result of their Ukraine work,” the new indictment said. “From approximately 2006 through the present, Manafort and Gates engaged in a scheme to hide income from United States authorities, while enjoying the use of the money.”

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NBC News reported yesterday that at least some of the bank fraud charges hinge on whether Manafort promised Stephen Calk, a Chicago Banker and president of the Federal Savings Bank, a position on Trump’s Council of Economic Advisers in August 2016. Manafort received three loans in total from Calk’s bank. Manafort borrowed nearly $18 million from the bank in 2016 and 2017.

Via NBC:

Special counsel Robert Mueller’s team is now investigating whether there was a quid pro quo agreement between Manafort and Calk. Manafort left the Trump campaign in August 2016 after the millions he had earned working for a pro-Russian political party in Ukraine drew media scrutiny. Calk did not receive a job in President Donald Trump’s cabinet.

The sources say the three loans were questioned by other officials at the bank, and one source said that at least one of the bank employees who felt pressured into approving the deals is cooperating with investigators.

In court filings Friday related to Manafort’s bail, federal prosecutors said they have “substantial evidence” that a loan made from the bank to Manafort using the Virginia and Hamptons properties as collateral was secured through false representations made by Manafort, including misstatements of income.

Meanwhile, Mueller’s team was able to persuade US District Court Judge Amy Berman Jackson to deny Paul Manafort’s modified bail package, noting that the properties pledged towards his $10 million bond was “unsatisfactory,” due to the fact that the property in question was already collateral on a loan for another property which Manafort may default on. 

Gates’ guilty plea follows weeks of speculation and a change in legal representation for Gates, who dropped lawyers Shanlon Wu, Walter Mack and Annemarie McAvoy for Sidley Austin senior counsel and personal acquaintance of Robert Mueller, Thomas C. Green.

Protecting Podesta?

Manafort worked closely with the Podesta Group as one of six lobbying firms to help Ukraine into the European Union between 2012 and 2014. Founded by Clinton campaign chairman John Podesta and his brother Tony, while operated by the latter, the Podesta Group was subpoenaed by Robert Mueller’s team last August in order to obtain testimony from executives who worked on the campaign.

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Of note, while Manafort’s firm earned $17 million consulting for Ukrainian President Viktor Yanukovych’s pro-Russia ‘Party of Regions.’ During the same period, Manafort oversaw a lobbying campaign for the pro-Russia “Centre for a Modern Ukraine,” (ECMU) a Brussels based think tank linked to Yanukovych which was pushing for Ukraine’s entry into the European Union.

The Podesta group, operating under Manafort, earned over $1.2 million as part of that effort.

Curiously, the Podesta Group was clearly tipped off to Manafort’s investigation, as the firm retroactively filed DOJ forms they should have filed years earlier to disclose their work with the Centre for a Modern Ukraine and the Obama administration. The Washington Examiner reported last August:

Back in April, the powerful Washington lobbying firm run by Clinton ally Tony Podesta filed a document admitting its work for the pro-Russia European Centre for a Modern Ukraine may have principally benefited a foreign government. New disclosures revealed dozens of previously unreported interactions the firm made with influential government offices, including Hillary Clinton’s State Department and the office of former Vice President Joe Biden, while lobbying on behalf of the center. Embattled ex-Trump campaign manager Paul Manafort failed to disclose his extensive lobbying efforts on behalf of the center at the time as well.

One of the filings is for Tony Podesta himself, who was a bundler for Hillary Clinton’s 2016 presidential campaign. Tony and his brother John–Clinton’s 2016 campaign chairman–co-founded the lobbying firm in 1988.

Gates’ guilty plea suggests that he and Manafort “tricked” Podesta, ostensibly “company A” or “company B,” into their money laundering scheme:

“To conceal the scheme, Manafort and GATES developed a false and misleading cover story that would distance themselves and the Government of Ukraine, Yanukovych, and the Party of Regions from the Centre, Company A, and Company B. For instance, in the wake of extensive press reports on Manafort and his connections with Ukraine, on August 16, 2016 GATES communicated false talking points to Company B in writing.”

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Paul Manafort, on the other hand, was indicted last October for – among other things, failing to register for the same work that Podesta retroactively “remembered to file” as the Mueller investigation was heating up. 

While the Podesta Group was disbanded shortly after Tony Podesta stepped down last year in the wake of the Mueller inquiry, a former longtime executive of the now-defunct lobbying firm who has been “extensively” interviewed by Robert Mueller’s team revealed to Fox that Manafort and the Podesta group had been working together since at least 2011 on behalf of Russian interests, and that Manafort was at the Podesta Group offices “all the time, at least once a month,” peddling influence through the ECMU think-tank. Manafort allegedly brought a “parade of Russian oligarchs” to Congress for meetings with members and their staffs, however, Russia’s “central effort” was to get to the Obama administration.” 

We don’t expect much of Manafort and Podesta’s alleged “oligarch peddling” operation to see the light of day, considering that it would implicate the Obama administration and directly ties to the Uranium One deal that Mueller’s FBI should have prevented from happening based on evidence from an undercover operative in the Russian nuclear industry, but who knows – maybe Manafort will write a book in prison depending on how things shake out. 

Rick Gates, on the other hand, should be out in 18 months, returning home to wife and four kids. 

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Treasury Yields Tumble After Art Cashin Warns “All Hell Will Break Loose” If 10Y Hits 3%

If there is one thing that should scare investors out of a crowded trade, its a warning from veteran Wall Street-er Art Cashin.

As a reminder, speculative investors have never been more one-way positioned short in Treasury yields…

And UBS’ Art Cashin warned during a CNBC interview yesterday that it could be a bad day for the markets once the yield on the benchmark 10-year Treasury hits 3 percent:

“That 3 percent level is both a target and a kind of resistance. Everybody knows it’s like touching the third rail,” 

“The assumption is once they do it, all hell will break loose. So we’ll wait and see.“

The sharp moves seen Wednesday were probably due to “our friends, the long-lost ‘bond vigilantes,'” Cashin told “Squawk on the Street.”

“We’re going to need a couple weeks to see if the bond vigilantes really are back or not,” Cashin said.

“Or whether it was simply a fluke. But remembering what bond vigilantes look like, it certainly had fingerprints on them.“

But for now, since Cashin’s warning, it seems more than a few investors have taken some short bond chips off the table as Treasury yields have tumbled…

 

As bond yields have finally caught up to the inflationary signals from copper/gold…

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