Category: zerohedge

Over the past two years, a dramatic, profound divergence emerged between consumer and CEO (or corporate professional) confidence, with the former soaring to record highs while the latter tumbling to financial crisis levels.

While there was no immediate explanation for this, some such as Deutsche Bank showed that CEO Confidence tends to lead the ISM Non-Mfg PMI by 12 months with uncanny accuracy, suggesting that CEO confidence and sentiment may be – as one would expect – a far more accurate indicator of where the economy is headed, where consumer confidence is merely a lagging representation of of the economy and/or stock market at any given moment.

So now that we are two weeks into the new 2020, with the worst of the trade war with China behind us and the repo crisis supposedly over (if only until April tax season), has there been any material improvement in corporate executive confidence. As it turns out, according to the latest Deloitte CFO Signal Survey, the answer is not only no, but quite the opposite, because despite the record S&P high and the recent rebound in the US economy, CFOs at big US companies entered 2020 with almost all anticipating an economic slowdown against the backdrop of an overvalued stock market.

The Deloitte CFO Survey – which polled 147 CFOs from U.S., Canada and Mexico from companies that have more than $3 billion in annual revenue – showed that while the corporate leaders see the economy as “good,” they anticipate that before the year is over, conditions will slow. They also see consumer and business spending slowing, and 82% anticipate taking more defensive actions, like reducing discretionary spending and headcount, as a way to stave off the looming headwinds, CNBC reported.

In short, the people who know their companies – and the economy best – are confident that the conventional wisdom about a pick up in economic growth is dead wrong.

According to the survey, the coming slowdown is likely to be particularly acute in Europe and China, because while 69% of respondents see conditions in North America as good, the number is just 7% in Europe and 18% in China, the latter a three-year low as the country’s shift to a more consumer-focused economy and its trade battle with the U.S. both conspiring to hold back growth.

“North America is clearly the place where companies are continuing to increase their investment focus,” said Sandy Cockrell, Deloitte Global CFO program leader. “There’s still a high level of caution.”

The good news is that while CFOs do see a downturn, they’re not foreseeing a worst-case scenario… yet: expectations for an outright recession fell to just 3% in the fourth-quarter survey, down from 15% in the first-quarter 2019 survey (when stocks had just emerged from a vicious if bread Q4 2018 bear market). However, 97% say a slowdown already has begun or will start sometime in 2020.

These concerns, CNBC notes, are consistent with a recent Conference Board CEO survey that found recession at the top of the list of things to fear.

What could help reverse sentiment sharply higher? In a word (or three): trade war peace.  Cockrell said a lasting peace between the U.S. and China would be a big help. While the two countries are about the sign a phase one trade agreement, uncertainty over the impact tariffs the two sides have levied and could reinstitute remain problems.

“If we can get these trade deals done, that would be the biggest thing,” he said. “Uncertainty of having to price your supply chains makes budgeting and forecasting extremely difficult. From a CFO’s perspective, naturally they are going to be a bit on the conservative side, which they should be. But if they can get some clarity behind that, I would view that as a tailwind.”

Besides trade, CFOs are also closely watching the 2020 presidential election, with some 65% saying economic performance will depend significantly on the outcome, though few are making business adjustments yet based on the political landscape.

But the biggest paradox is CFO sentiment toward the market: as the S&P hits new record highs on an almost daily basis every day since the Fed launched QE4 last October, 77% of respondents said stocks are overvalued, the highest level in nearly two years. Just 4% said equities are undervalued, down from 10% in the last reading.

Why is this a paradox? Because while over three-quarters CFOs lament just how expensive the market has become, virtually all of them are scrambling to repurchase their “overvalued” stock, with total buybacks in 2018 and 2019 hitting record highs on largely thanks to Trump’s tax law, which allowed US corporations to repatriate about $1.5 trillion in offshore cash, much of which was then used by companies to buy back their stock. Other companies merely issue debt and use the proceeds to also buyback stocks. Meanwhile, looking ahead, SocGen forecasts that in 2020, S&P500 companies will buyback another $570BN in stock, just shy of the 2019 record highs.

So while most corporate Corner Suites are now convinced all stocks are overvalued, they keep a special place in their heart for their own stock, which they all are rushing to repurchase – especially tech CFOs…

… as the higher their own stock goes, the greater their equity-linked comp. In other words, while most agree stocks are overvalued, they will keep buying (back) these overvalued stocks as their pay literally depends on it.

Meanwhile, as everyone rushes to buyback their own stock, the entire market just gets even more overvalued, and it is up to the Fed to make sure not even a modest market correction takes place, or else the correction will promptly transform into a full-blown crash.

And just to keep everyone distracted from this great discrepancy, CFOs had a convenient scapegoat on which to “focus”: global warming. According to Deloitte, CFOs were also asked about climate change, with more than 70% saying they are under some pressure from stakeholders to take preventive actions. Perhaps that “action” is to buyback their own stock?

Individual US taxpayers are half as likely to get audited than they were in 2010, according to the Wall Street Journal, which notes that IRS tax enforcement has fallen to the lowest level in at least four decades.

In FY 2019, the agency audited just 0.45% of all personal income-tax returns, down from 0.59% in 2018 – marking eight straight years of declining reviews. In a Monday report, the IRS said that in 2010, 1.1% of tax returns were audited. The report did not provide details on audits by income category, or how much revenue has been recovered from the enforcement (or lack thereof).

According to the Journal, years of budget cuts and a heavier workload are to blame for the steady erosion of audit – which, experts say, is depriving the Treasury of billions of dollars while budget deficits rise.

The IRS budget is about 20% below the 2010 peak  in inflation-adjusted dollars, according to the Congressional Budget Office. During that time, Congress has given the agency more responsibility, including the implementation of the 2010 health care law and the 2017 tax law.

In Monday’s report, the IRS said the agency had lost almost 30,000 full-time positions since fiscal 2010, in areas including enforcement and criminal investigation. It now has about 78,000 workers and has been hiring over the past year. But the agency also projects that up to 31% of remaining workers will retire within the next five years. –Wall Street Journal

“The audit rate reported for 2019 was less than half of what it was in 2010, underscoring the depleted state of the IRS enforcement function, which urgently needs to be rebuilt,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a progressive group in Washington.

Investing in enforcement and tightening rules could generate about $1 trillion over a decade, according to Harvard University economist Lawrence Summers, who served as Treasury secretary in the Clinton administration, and University of Pennsylvania professor Natasha Sarin. The government estimates that each additional dollar spent on tax enforcement could yield more than $4 in revenue, and Democratic presidential candidates have made increasing IRS funding part of their agenda. –Wall Street Journal

Cuts to the IRS budget began after Republicans won a majority in the House of Representatives in 2010, and was further reduced after the Obama administration’s IRS targeting scandal in which the agency admitted in 2013 that it had given improper scrutiny to conservative nonprofit groups.

According to Trump-appointed IRS commissioner Charles Rettig, the administration has been trying to find new ways of remaining aggressive for tax-dodgers by using data analytics.

“Our compliance employees have a commitment to fraud awareness as we continue our enforcement efforts in the offshore and other more traditional compliance-challenged arenas,” writes Rettig in Monday’s report. “We want to maintain a visible, robust enforcement presence as we continue to explore innovative strategies and techniques in support of our mission.”

Authored by Paul Joseph Watson via Summit News,

Montana’s Glacier National Park is being forced to remove all signs that read “glaciers will all be gone by 2020,” after the doomsday scenario didn’t happen.

Some of the signs were already removed last year as it became clear the prediction wasn’t going to unfold.

Now the rest of the signs will have to be taken down too.

Glacier National Park spokeswoman Gina Kurzmen “told MTN News that the latest research shows shrinking, but in ways much more complex than what was predicted. Because of this, the park must update all signs around the park stating all glaciers will be melted by 2020,” reports 8KPAX.

In the late 90’s and early 2000s, scientists predicted that man-made global warming would cause melting glaciers, leading to rapidly rising sea levels that would sink coastal cities and towns.

The more dire forecasts have proven to be totally inaccurate and some glaciers are now growing.

Back in June, NASA reported that the Jakobshavn Glacier in western Greenland had thickened and “has grown for the third year in a row.”

The glacier prediction is by no means the only forecast global warming alarmists have got spectacularly wrong.

At the end of the 70’s, climate experts said that a new ice age was coming. It didn’t happen.

Paul Erlich’s prediction that hundreds of millions of people would die of starvation due to crop failure by the 1980’s also didn’t happen.

The 2004 prediction that major European cities would be underwater and that Britain would be plunged into a Siberian climate by 2020 didn’t happen.

Al Gore’s doomsday warning that the Arctic would have ice free summers by 2013 didn’t happen either.

Maybe since these “experts” been caught lying time and time again, we should stop listening to them.

*  *  *

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A judge in Cook County, Illinois has ordered Google to hand over 12 months of Jussie Smollett’s emails, photos, location data and private messages to the special prosecutor conducting an investigation into the actor’s 2018 hate crime hoax, in which he two associates say the actor paid them to dress up as white Trump supporters and beat him, according to the Chicago Tribune.

Two sweeping search warrants, obtained by the Chicago Tribune, provide the first public glimpse at the direction of the probe by special prosecutor Dan Webb more than four months into the investigation.

The warrants, filed last month in Circuit Court, sought a trove of documentation from Smollett and his manager’s Google accounts — not just emails but also drafted and deleted messages; any files in their Google Drive cloud storage services; any Google Voice texts, calls and contacts; search and web browsing history; and location data. –Chicago Tribune

Prosecutors sought Smollett’s data from November 2018 to November 2019 despite the fact that key events in the controversy happened between late January and late March of 2019. It’s possible, according to the Tribune, that authorities may be looking for any incriminating remarks from Smollett or his manager – who the actor claimed overheard his alleged assailants shouting “This is MAGA country.”

Also under scrutiny is the sudden dismissal of Smollett’s charges following the intervention of former Michelle Obama Chief of Staff Tina Tchen.

Tchen, a Chicago-based attorney, reached out on Feb. 1 to Chicago’s top prosecutor Kim Foxx – telling her that the “Empire” actor’s family had “concerns” about the investigation. Smollett was considered at the time to be the victim of an assault, however the actor was subsequently charged with disorderly conduct for filing a false police report in connection with a staged hate crime. In March, a Chicago grand jury slapped Smollett with a 16 count indictment for lying to the police – to which he pleaded not guilty.

The mysterious reversal by Foxx’s office — coming after Foxx herself stepped aside from overseeing the prosecution — sparked a public outcry that ultimately led Judge Michael Toomin to appoint Webb as special prosecutor in late August.

Toomin signed off on the search warrants on Dec. 6, the records show. In doing so, the judge ordered Google and its “representatives, agents and employees” not to disclose his order to turn over the records, saying to do so “may jeopardize an ongoing criminal investigation.” –Chicago Tribune

Despite Smollett’s accomplices readiness to testify against him in a slam-dunk case, charges against Smollett were dropped in what former Chicago Mayor Rahm Emanuel called a “whitewash of justice.”

It is unknown whether Google has already handed over the data on Smollett and his manager – while Chicago PD spokesman Anthony Guglielmi confirmed with the Times that the department is working with the special prosecutor on “follow-ups” to its initial investigaiton.

Read the rest of the report here.

With the narrative surrounding the crashed Ukrainian Boeing 737 changing by the minute, shifting away from a initially proposed theory of a technical error and shifting toward speculation the plane was accidentally or not taken down by someone (Iranians? Israelis? CIA?) on the ground, “evidence” is suddenly starting to emerge to validate this latest theory. And so moments ago, an unverified, unconfirmed video has appeared on the Telegram network, purporting to show the moment a missile strikes the Ukrainian flight PS752.

Iran: Unverified video purports to show Ukrainian flight #PS752 and the moment a missile strikespic.twitter.com/nDiZckxyVD

— Amichai Stein (@AmichaiStein1) January 9, 2020

Interesting video allegedly showing the moment a missile hits the B737. All the usual caveats apply (unverified source, unverified location, etc.). https://t.co/cKjz4diyOv

— David Cenciotti (@cencio4) January 9, 2020

Needless to say, this remains absolutely unconfirmed for now. As a reminder, moments after the crash the first unconfirmed footage of the Ukrainian airplane showed the plan on fire falling near Tehran.

#Breaking First footage of the Ukrainian airplane while on fire falling near #Tehran pic.twitter.com/kGxnBb7f1q

— Ali Hashem علي هاشم (@alihashem_tv) January 8, 2020

 

Via Greg Hunter’s USAWatchdog.com,

Financial writer and book author John Rubino sees the world careening toward a debt reset at an increasing pace.

Rubino explains, “The coming monetary reset and what that means for gold and what that means for the rest of the global financial system, you don’t need a war to bring that about because we are making enough financial mistakes that will get us there in no time flat now without geopolitical turmoil…”

“If you add a big war in the Middle East into the equation, then anything can happen. A scenario right now that is very, very feasible is we start shooting in the Middle East and Russia and China is on the other side of this in one way or another. They help Iran, and we have our allies helping us, and we start using these next generation weapons that are breathtakingly powerful. Nobody has any idea what’s going to happen when we start throwing these things at each other… Oil spikes to $100 – $150 per barrel, and that tips the already extremely fragile global financial system over the edge. So, we get the ‘Greater Depression’ or the monetary reset or a hyperinflation or whatever we get sooner rather than later. It’s a disaster for everybody when it happens that way.”

Rubino says the monetary masters “tried to fix the financial system but could not do it.”

Adding that:

“If you think you are beyond the point of no return financially as an individual, you borrow as much money as you can, and then go bankrupt…

Governments in the world are starting to do that now or behaving that way… There is nothing they can do to fix the system. In the U.S., they tried to fix the system and scale back and they found out that is impossible.

The central bank in the U.S. cannot raise interest rates without the economy collapsing. . . . So, they basically gave up. . . . They are printing a lot of currency electronically and dumping it into the banking system. . . . The consequence for the currency is to make it less valuable year after year . . . then you get the crackup boom . . . where people just lose faith in the currency because they see the government is going to make it less valuable year after year. So, there is no point in holding that currency as savings. They spend it as fast as they get it.”

In closing, Rubino says, “We have entered a new stage which feels like one of the end stages of this process…”

“…when governments just give up and don’t even pretend to try and control their finances anymore.

Well, we are there. That’s when it will be clear to everybody that is the case, and then your gold goes through the roof. The investment thesis ends with you loading up on precious metals and then riding the inflation and/or monetary reset that has to happen because of past mistakes…

The nightmare scenario is if we are already having a financial crisis and then we have a war with China and Russia, it’s unimaginable. I cannot factor that into a scenario for financial asset prices because it is too crazy.”

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with John Rubino, founder of DollarCollapse.com.

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Apparently, Carlos Ghosn’s rambling, multi-hour, multi-lingual press conference has only heightened the diplomatic pressure that Lebanon is facing over its decision to harbor the former auto executive and now-infamous fugitive from Japanese justice. 

According to CNN, one day after American cable news became transfixed by Ghosn’s rambling press conference, choosing to cover it for hours despite the other major stories of the day, the Lebanese government has decided to slap Ghosn with a travel ban, meaning he will need to remain in Lebanon. 

Ghosn was asked about his travel plans during yesterday’s press conference, and assured reporters that he and his lawyers would put plenty of thought into any decision to travel outside of Lebanon. Of course, Ghosn is the subject of an INTERPOL red notice that Ghosn’s lawyers have reportedly told him they can fight. Lebanon confirmed that it received the red notice for Ghosn on Jan. 2.

Unfortunately for the Japanese, a red notice doesn’t compel local authorities to work with Interpol: Lebanon and Japan don’t have an extradition treaty, so Beirut is under no obligation to turn Ghosn over. 

As we’ve mentioned in our previous coverage of the Ghosn ‘Great Escape’, some Lebanese officials resent the fact that he “came to us with his problems”, after spending most of his professional life abroad. Ghosn’s parents were Lebanese, and he mostly grew up in Lebanon, though he also holds Brazilian citizenship. 

When a reporter suggested that he had swapped his cage in Tokyo for a larger cage in Beirut, Ghosn insisted that he didn’t feel like a prison in his new environment, where he has been reunited with his wife. 

“Obviously I don’t consider myself a prisoner in Lebanon,” he told reporters. “I’m happy to be here. I’m with my friends, my family. I don’t feel at all unhappy. I’m ready to stay a long time in Lebanon.”

On Tuesday, with Ghosn’s press conference imminent, and his threats to ‘name names’ having been made public, the Japanese issued an arrest warrant for his wife, Carole Ghosn. During his press conference, Ghosn dismissed the warrant as another attempt at Japanese persecution, and insisted that the timing wasn’t just a coincidence.

Ghosn said a lot during Wednesday’s press conference, which is hardly a surprise. After being locked up for 14 months, it was the first time we heard from Ghosn since his initial arrest for allegedly underreporting income and embezzling money. 

During his press conference, Ghosn delivered a rambling rebuttal of the official charges, accused senior Nissan executives of orchestrating his downfall, and insisted that Japan’s justice system “violates the most basic principles of humanity.” 

Another day, another rocket (alleged) rocket attack on a US airbase in Iraq.

 

Sumaria reports that rockets hit the Balad Air Base, about 40 miles north of Baghdad, where US troops are stationed.

Iraqi police officials said that Katyusha rockets were used.

This is the same base as was hit 5 days ago.

Developing…

Authored by Jason Ditz via AntiWar.com,

After the Trump Administration’s 75-minute briefing to the US Senate on the assassination of Iranian Gen. Qassem Soleimani, Sen. Mike Lee (R-UT) was deeply critical, calling it the worst briefing he’d gotten in his nine years in the Senate.

Saying the administration’s briefers offered little on the legal or practical justification for the attack, Sen. Lee particularly took umbrage at them warning the Senators that they must not debate the War Powers authorization for a war with Iran.

Those giving the briefing objected to the very idea of the Senate discussing the matter publicly, saying it would “embolden Iran.” Sen. Lee noted that this is a power Constitutionally reserved explicitly for the legislature.

“For them to tell us … for us to debate and discuss these things on the Senate floor would somehow weaken the American cause and embolden Iran in any other actions, I find very insulting,” Lee said, who did not specify to reporters on Capitol Hill which briefer made the assertion.

“It is not acceptable for officials within the executive branch of government — I don’t care if they’re with the CIA, the Department of Defense or otherwise — to come in and tell us that we can’t debate and discuss the appropriateness of military intervention against Iran,” Lee added. — ABC

Not only did Lee express annoyance that there was no pushback from any of the briefers on telling the Senate not to debate something legally in their purview, but he said that while he’d had problems with the language of Sen. Tim Kaine’s (D-VA) resolution, he has now decided that he will support the resolution, on condition of some amendments.

* * * 

Watch a frustrated Sen. Lee slam the briefing to reporters below:

After two disappointing, tailing auctions, moments ago the US Treasury sold $16 billion in 30 year bonds in an auction that was a blockbuster.

With both the 3Y and 10Y auctions earlier this week, and the first of the year and decade, tailing, traders were quite impressed when the 30Y auction stopped through the When Issued 2.358% by 1.7bps, pricing at a high yield of 2.341%, above December’s 2.307% but below November’s 2.43%. Curiously, this whopper of a result was actually rather tame considering just last month the stop through was 2.1bps (although following 5 tailing auction).

The internals were quite impressive as well, with the Bid to Cover surging to a 2-year high of 2.532, up from 2.455 in December, and the highest since January of 2018. Looking at the takedown, Indirects were allotted 63.0%, just shy of December’s 63.4%,  and the second highest since 2018. And with Directs taking 17.9%, below last month’s 21.1% but just above the six auction average of 17.1%, Dealers were left holding 19.1%, below the recent auction average of 24.1%.

Overall, this was an impressively strong auction, and a polar opposite of yesterday’s dismal 10Y, and which promptly sent the entire yield curve sharply lower.