As the rhetoric describing Hong Kong protesters out of Beijing as well as the HK government gets more aggressive and assertive, are the mainland’s gloves about to come off? A senior Hong Kong official has claimed “elements of terror” are embedded among anti-Beijing pro-democracy protesters after a particularly violent weekend of unrest, and as demonstrators once again attempt to shut down the city’s busy international airport.
John Lee, Hong Kong’s secretary for security made the comments Monday, which is the first time a top Hong Kong official has invoked “terrorism” in relation to the months-long unrest.
“The extent of violence, danger and destruction have reached very serious conditions,” Mr. Lee said. “Radical people have escalated their violent and illegal acts, showing elements of terror.”— The New York Times
Police allege 100 molotov cocktails were thrown over the weekend, via AFP
The police have emphasized that rioters hurled as many as 100 firebombs at security personnel over the weekend, for which ample video evidence exists.
Mainland China’s narrative over the past month has been to emphasize foreign subversion driving the protests as well, and went so far as to accuse the United States of fueling the unrest.
As NPR noted previously, “Official state media pin the blame for protests on the ‘black hand’ of foreign interference, namely from the United States, and what they have called criminal Hong Kong thugs.”
Meanwhile bloody encounters and direct violence between HK police and anti-Beijing protesters continue to escalate.
I am trying to imagine this happening in US, but can’t because US cops would’ve shot and killed. Hong Kong police need to be commented for their restraint for not shooting Hong Kong protesters 👇🏼pic.twitter.com/P6nsQGRSIU
Lee’s “terrorism” comments Monday are unprecedented in terms of the Hong Kong government’s up until now more moderated rhetoric compared to that of Beijing, as Axios explains:
…the comments by John Lee, Hong Kong’s secretary for security, mark the first time a territory official has used rhetoric akin to China’s propaganda machine — which has compared the protesters to terrorists on several occasions.
Hong Kong’s secretary for security John Lee. Image source: inmediahk.net
Certainly we’re in for another violent week, as a widespread public workers strike went into effect Monday, further bolstered by Hong Kong high school students who pledged to join the strike on their first day back to school.
via ZeroHedge News https://ift.tt/2ZxB8HC Tyler Durden
What a fascinating environment; each week bringing something extraordinary. Yet there is this dreadful feeling that things are advancing toward some type of cataclysm.
“U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along? If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach… There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” Bill Dudley, Bloomberg op-ed, August 27, 2019
The former president of the Federal Reserve Bank of New York’s piece galvanized an overwhelmingly negative response. Virtually everyone agrees it would be an outrage for the Fed to take such a plunge into the political maelstrom.
A Federal Reserve spokeswoman responded:
“The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role.”
Former Treasury official Larry Summers weighed in (from CNBC interview):
“The Fed’s job is to stay out of politics. The Fed’s job is to respond to the best assessment they can make of economic conditions and adjust the economy – interest rates – appropriately… But for a trusted former official of the Fed, whose thinking is inevitably going to be tied to the Fed, to recommend that they raise interest rates so as to subvert the economy and influence a presidential election is grossly irresponsible – is an abuse of the privilege of being a former Fed official… It is not the job of non-elected appointed officials to a technocratic role to decide how they’re going to act so as to constrain and influence the behavior the President of the United States – and the behavior of the remainder of the government of the United States. That is to misunderstand entirely the role of appointed officials in a democracy.”
Summers’ view is certainly well-founded, at least in theory. But it’s an especially complex world in which we live.
Is it the job of non-elected appointed officials to a technocratic role to decide the performance of securities markets, hence the distribution of wealth throughout society?
Asking for trouble…
Dudley’s bold op-ed requires context. It followed the previous Friday’s disturbing presidential tweets and the S&P500’s resulting 2.6% drop. “…Who is our bigger enemy, Jay Powell or Chairman Xi?” “Our great American companies are hereby ordered to immediately start looking for an alternative to China…” And contrary to Larry Summers’ comments, Bill Dudley made no suggestion to “raise interest rates so as subvert the economy.”
The critical issue is instead whether the Fed should respond with additional monetary stimulus to ill-advised tweets and policy dictum that risks deflating market confidence. This outrage at the thought of the Fed becoming “political” is illusory. The Fed began its insidious venture into the murky political realm under Greenspan’s reign in the nineties.
It has been long accepted that the Federal Reserve should refrain from policies that amount to Credit allocation. Picking winners and losers within the economy should be outside the Fed’s purview and risks political backlash and a loss of institutional credibility.
The notion that the Federal Reserve would not respond to declining stock prices – under any circumstance – has become heresy. There was no outrage when the Greenspan Fed manipulated the yield curve and adopted an asymmetrical policy approach to underpin the securities markets. Where was the outrage when Bill Dudley (while at Goldman Sachs) and others specifically called for the Fed to adopt policies to spur mortgage Credit expansion for the purpose of systemic reflation after the collapse of the “tech” Bubble? There was even minimal debate when the Bernanke Fed employed unprecedented post-mortgage finance Bubble Credit allocation and reflationary measures. And it was as if I was the only analyst that had an issue when Bernanke later stated the Fed would “push back” against a tightening of financial conditions, essentially signaling the Federal Reserve would not tolerate a market correction.
I am again reminded of the late Dr. Richebacher’s important insight that asset inflation is the most dangerous type of inflation, certainly riskier than consumer price inflation. There is (was) general agreement that more than a modest increase in consumer prices is undesirable and would provoke tightening measures from responsible central bankers. But with rising asset prices almost universally viewed constructively (while confirming the soundness of policies), there is no constituency motivated to rise up and demand measures to contain inflating asset prices and Bubbles.
It is now a consensus view that the Federal Reserve (and global central bankers) should backstop financial markets to promote economic growth and wealth creation. The Fed, market participants and most pundits prefer to ignore that such a doctrine places the central bankers at the epicenter of Credit, resource and wealth allocation. Such a position ensures the Fed now wades chest deep in the political muck. It’s been a slippery slope I’ve been chronicling now for over 20 years.
The Fed’s market-centric and interventionist approach has essentially supported incumbent Presidents and Washington politicians. From this perspective, it is clearly “establishment” and susceptible to “deep state” innuendo. This regime is today challenged by President Trump, with his penchant for tariffs, confrontation, and scathing attacks on the Fed and its Chairman. The President is essentially blackmailing the Fed: Play ball or you’ll be blamed, ridiculed and targeted, with clear risk of losing your jobs along with the institution’s coveted independence.
What Dudley is really questioning is whether the Fed needs to make a departure from its regime in response to the market, economic, institutional and geopolitical risks posed by an unorthodox President increasingly considered unstable and pursuing a dangerously ill-advised policy course. Should the Fed continue to backstop the financial markets when the marketplace is responding rationally to increasingly high-risk financial, economic and geopolitical backdrops? With the administration clearly pursuing a risky strategy while placing a gun to Powell’s head, should the Federal Reserve continue to enable such a policy course when it is deemed to put so many things at great risk?
Crazy like a fox. A clear flaw in the Fed’s interventionist regime is now being exploited, while Dudley’s “outrageous” op-ed is only making public what must be an area of intense discussion within the Marriner S. Eccles Federal Reserve Board Building.
Politico (Victoria Guida):
“Peter Conti-Brown, a professor at the University of Pennsylvania’s Wharton School who specializes in Fed history, noted that Fed watchers have long debated whether the central bank should be used as an insurance policy against bad economic policy decisions. But ‘in today’s climate, an op-ed from the former vice chairman of the [Federal Open Market Committee] arguing that the Fed should be transparently reactive to Donald Trump is a little bit dangerous,’ he said. ‘Where Dudley completely jumps the shark is by saying we should have a republic with central bankers who pick winners and losers… ‘If Powell follows Dudley’s advice … then we’ll mark that as the end of independent central banking,’ he said.”
A central bank beholden to securities market Bubbles has already forsaken independence. After accommodating the mortgage finance Bubble with years of loose monetary policy, the Fed has been completely hamstrung for the past decade. Our central bank waited too long to commence the process of normalizing policy. In the end, it was unwilling to impose any semblance of a tightening of financial conditions, despite securities markets signaling dangerous monetary excess. Still, the Fed is now condemned for excessive tightening that has put U.S. markets and economic prospects at risk. This is the narrative the President is using as he fashions a scapegoat while aiming to hammer the Fed into submission.
And from Slate (Jordan Weissmann):
“It is hard to overstate what a tremendously dangerous concept this is. Dudley is not talking about a conflict between two equal branches of government. If the economy crashes and Democrats don’t want to pass a stimulus because it might help Trump, that would be crappy and inhumane, but it’d also fundamentally be politics. Voters could decide who to hold accountable. Here, Dudley is effectively talking about an economic coup staged by a group of unelected technocrats. He doesn’t seem to be worried about the implications of this idea, because he feels the president has already politicized the central bank… The best way for the Fed to show it is not a political institution is to not act like a political institution, and intervene to help the economy when circumstances obviously dictate it.”
The problem: circumstances don’t obviously dictate that the Fed should be intervening. The unemployment rate is 3.7%, near a 50-year low. Stock prices are within 3% of all-time highs, while all varieties of bonds are priced at unprecedented lofty levels. And after declining to near zero in March, the Atlanta Fed’s GDPNow Forecast has current growth maintaining a reasonable late-cycle 2% pace.
August 28 – Bloomberg (Rich Miller and Christopher Condon): “A Republican member of the Senate Banking Committee called for the panel to hold a hearing on what he termed the danger that the Federal Reserve will meddle in the 2020 presidential election, a day after a former top central bank official suggested that the Fed resist interest-rate cuts that would aid Donald Trump. Senator Thom Tillis… said… he was ‘very disappointed’ that… Bill Dudley appeared to be ‘lobbying the Fed to use its authority as a political weapon against President Trump,’… ‘The president is standing up for America against China after 30 years of our country and our workers being ripped off and there is now an effort to get the Fed to try to sabotage the president’s efforts,’ Tillis said.”
The Fed’s political problem will not end with Donald Trump or Chinese trade negotiations. Going forward, our central bank will be under unrelenting pressure to support the markets and boost the economy – and will be a target for the party on the losing side of election outcomes.
As the Fed policy regime evolved, it failed to articulate a sound framework for explaining the factors driving monetary policy decisions. A view took hold that there is little risk of aggressive stimulus so long as consumer price inflation stays within its 2% target. As things turn increasingly dicey, the Fed will struggle to push back against calls for aggressive rate cuts and the restart of QE. For years now, loose monetary policy has accommodated egregious financial excess, including fiscal deficits approaching 5% of GDP during peacetime economic expansion. Deficits don’t matter; speculative excess and asset Bubbles don’t matter.
I expect Trump’s attacks are the first salvo in what will be only more intense political pressure directed at the Fed to employ aggressive stimulus measures.
August 30 – Wall Street Journal (David Harrison and Maureen Linke): “The decadelong economic expansion has showered the U.S. with staggering new wealth driven by a booming stock market and rising house prices. But that windfall has passed by many Americans. The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003… The top 1% of households have more than twice as much as they did in 2003. This points to a potentially worrisome side of the expansion, now the longest on record. If another recession comes, it could be devastating for people who have only just recovered from the last one.”
The rise of populism is in its initial stage. The situation turns much more serious when the current Bubble deflates. There are major costs associated with the Fed’s loss of independence – independence from politics as well as from market pressure. For now, however, markets are trading on the prospect of aggressive global monetary stimulus (rate cuts and QE).
President Trump on Sunday claimed that background checks wouldn’t have stopped any of America’s mass shootings over the past half-dozen years – attributing the phenomenon to mental illness.
“For the most part, sadly, if you look at the last four or five, even going back further five, six, seven years … as strong as you make your background checks, they would not have stopped any of it,” Trump told reporters at the start of a briefing on Hurricane Dorian, adding “It’s a big problem. It’s a mental problem, it’s a big problem.”
Trump stands strong against those who hate the Second Amendment: “I will say that for the most part, sadly, if you look at the last 4 or 5 going back, even 5 or 6 or 7 years, for the most part, as strong as you make your background checks, they would not have stopped any of it” pic.twitter.com/r8DC1TO1s0
Seven people were killed in West Texas on Saturday after a gunman embarked on a shooting rampage that ended in the parking lot of a movie theater in Odessa. The dead range in age from 15 to 57, while a 17-month-old toddler was among the injured.
The gunman, believed to be working alone, was shot and killed by the police. He had been using an AR-style weapon, which are used in less than 3% of homicides nationwide.
“It would be wonderful to say — to say ‘eliminate,’ but we want to substantially reduce the violent crime — and actually, in any form,” Trump added at the beginning of the Dorian briefing. “This includes strong measures to keep weapons out of the hands of dangerous and deranged individuals, and substantial reforms to our nation’s broken mental health system.”
“To reduce violence, we must also ensure that criminals with guns are put behind bars and kept off the streets.“
Following last month’s shootings in El Paso and Dayton, Trump called on Congress to discuss “meaningful background checks” for firearms purchases. He also called for changes to mental health laws.
“Serious discussions are taking place between House and Senate leadership on meaningful Background Checks,” Trump tweeted after the August shootings. “I have also been speaking to the NRA, and others, so that their very strong views can be fully represented and respected.”
….mentally ill or deranged people. I am the biggest Second Amendment person there is, but we all must work together for the good and safety of our Country. Common sense things can be done that are good for everyone!
In the aftermath of the shootings, Democrat politicians wasted no time capitalizing – with 2020 presidential candidate Beto O’Rourke announcing that if he’s elected, he will confiscate semi-automatic firearms from law-abiding Americans.
Robert Francis O’Rourke announces that if he’s elected he is going to confiscate your guns:
Reporter: How do you address fears that the government is going to confiscate people’s semi-auto firearms?
O’Rourke: “I want to be really clear, that’s exactly what we are going to do” pic.twitter.com/IQxIkhM1Yj
Labor Day, that one day a year that ostensibly honors the contribution of labor unions in America, is upon us. Don’t buy the hype. Labor Day is nothing more than the US government’s way of co-opting the holy celebration of May Day – and it’s time we took it back.
A Most Woke History
Originally established back in Rome by the Democratic Socialists of Aphrodite, the ancient Maiouma (so named in the olden days because it was celebrated in the month of May-Artemisios) was a nocturnal dramatic festival held every three years in which followers of Aphrodite and Dionysus partook of strikes, protests, and drunken orgies in celebration of free love, free money, and free time as taught by the most enlightened gods of any pantheon. Those progressives of yore – called paganus in the local tongue of the time but erroneously modernized by white conservatives to pagan – were fed up with the Republic’s abuse of the proletariat.
Their efforts paid off, and Rome became a bastion of sound government and central planning that ushered in a new era of wokeness and welfare. Under the great Emperor Commodus, whose reign is commemorated in porcelain monuments the world over, the people received reparations for the generations of oppression under the old Republic.
The Big Lie
Then the bigoted Emperor Constantine – a heterosexual, cisgender, white Christian male, of course – called the divine celebration obscene and abolished the holiday.
But you can’t keep a good progressive down, and May Day is still celebrated in honor of the old ones throughout Europe and a few utopias of Democratic control in the US like Chicago, Seattle, and San Francisco. But while most of the woke world celebrates May Day with the customary strikes and calls for less work and more money, the US government culturally appropriated it with Labor Day – as if we wouldn’t notice just because they moved it to September!
And the worst part is that it actually worked. While the bosses and bourgeois of the nation enjoy their beer and BBQ or their ski boats on the lake, the real workers in Walmarts, McDonalds, and Starbucks across the country are forced to either sit at home without pay (sitting at home is fine, but without compensation!?) or work on this most holy of days. Still the poor and uneducated don’t know any better. They’ve been indoctrinated to be good little workers and not complain. Too many don’t know that it is their right by birth to receive a reasonable living wage, whether they work or not, or that no one with a net worth under a million dollars should be forced to pay for housing, food, medical care, or the most necessary of life’s necessities – an iPhone!
Let’s Take It Back
So let’s take back our day, comrades – and let’s do it for those poor souls who don’t even know how oppressed they are. This year let’s really stick it to the man. If your boss had the audacity to schedule you to work, no-call no-show the ba***rd! Or even better: Stand in front of the door to the business and decry the great oppressor to any who dare enter, lest unbeknownst to them – or even beknownst to them – they should support such skullduggery with their business.
Don’t have a job? Well done, comrade, you’re on the right track! Find your local group of activists – there’s bound to be an Antifa or PeTA meeting at a Starbucks near you, though any other organized protest group will suffice – and do your part. Throw those concrete milkshakes and smash those windows. If a small business owner or some middle manager dares demand you desist, punch that Nazi right in the neck. Violence is wrong, of course, but it’s not violence if they’re bad people, you know.
How ever you choose to contribute, know that you don’t stand alone. You are special. You are appreciated. And yes, you do deserve this day. Take it back.
via ZeroHedge News https://ift.tt/2ZxxiOI Tyler Durden
For equity markets, August was the most violent month of 2019, with the S&P tumbling 2.6% or more on at least three occasions, the same as the number of instances when the Dow plunged almost 1000 points – the worst since Q4 of 2018 when the S&P briefly entered a bear market – only to rebound furiously after Mnuchin’s infamous Christmas Eve phone call. Worse, in August the number of days when the S&P moved up or down by more than 1% was the highest since the February 2018 inverse VIX ETN implosion.
Which is why markets will be happy to see the back of August given how unpredictable the month has been on an almost day to day basis. Of course, as Deutsche Bank’s Craig Nicol notes, trade war fatigue was a big factor as investors contended with noise versus signals. However economic data has continued to deteriorate in Germany and China in particular, while the inversion of the 2s10s Treasury curve heightened concerns about recession risk in the US.
One constant in August for markets however was the unstoppable rally for government bonds. Indeed last month saw the amount of negative yielding debt in the world touch a new all-time high above $17 trillion, as the majority of European countries saw their 10y yields hit new record lows with BTPs even closing below 1.00% for the first time ever.
Meanwhile 10y and 30y Treasury yields at one stage passed below 1.50% and 2.00% respectively, the latter for the first time ever. Unsurprisingly then its bonds which make up the majority of assets which delivered a positive total return in August. Indeed that was the case in local currency terms for Gilts (+3.8%), Treasuries (+3.6%), BTPs (+3.5%), EU Sovereigns (+2.5%), Bunds (+2.3%) and Spanish Bonds (+1.6%). The last time Bunds had a stronger month was June 2016 while for Treasuries you have to go all the way back to November 2008.
As Deutsche Bank further notes, the big rally in rates also helped investment grade credit to strong total returns last month. Indeed USD IG returned +3.3% while sub and senior financials returned +2.7% and +2.2% respectively. EUR IG on the other hand returned a more modest +0.7%. Wider spreads in HY limited returns with USD and EUR HY returning +0.4% and +0.6% respectively.
While credit and government bonds made up the bulk of the assets which delivered positive total returns last month, Silver (+13.0%) and Gold (+7.5%) actually occupied the top two spots on the returns leaderboard as precious metals benefited from the risk-off in equity markets. All-in-all, 18 out of 38 assets (excluding FX) in Deutsche Bank’s asset scorecard that finished with a positive total return in local currency terms while 14 did so in dollar terms.
Unsurprisingly therefore it was equity markets which made up the bulk of those with negative returns. The Hang Seng (-7.1%) – roiled by the protests in Hong Kong – was bottom of the leaderboard while European Banks (-6.3%) struggled with the bond moves. All things considered, the decline for the S&P 500 (-1.6%) was fairly contained in the end especially considering it was down -4.5% just a few days into the month. The STOXX 600 returned -1.3% while EM equities were down a steeper -4.9%. It’s worth noting that Italy’s FTSE MIB (-0.4%) outperformed most other equity markets after political developments at month end in Italy helped to avoid snap elections.
In terms of where that leaves us year to date, there are still 36 out of 38 assets with a positive total return in both local currency and dollar terms. The two laggards are Copper (-3.7%) and now European Banks (-4.0%) following the move in August. Top of the leaderboard is the Greek Athex (+44.1%) which is a fair way ahead of the next equity market in Russia’s MICEX (+22.0%). The S&P 500 and STOXX 600 have returned a solid +18.3% and +16.0% respectively.
Meanwhile, USD credit is up +10.5% to +15.3% with IG outperforming HY while EUR credit is up +6.4% to +10.2%. As for bonds, BTPs (+12.5%) lead the way while Treasuries and Bunds have returned +9.0% and +7.6% respectively. Finally in commodities, outside of the decline for Copper, Gold (+18.5%) and WTI Oil (+21.3%) have seen a big rally this year.
via ZeroHedge News https://ift.tt/2UmcOCL Tyler Durden
As mentioned on Friday, welcome to both La Grande rentrée and weltschmerz: and combining the two, this week we are ‘back with a bang’. That seems appropriate given yesterday marked 80 years since the start of WW2, which one would have thought would have received far more media coverage than it did: instead, far more focus was on how similar some conditions are to the lead up to WW2.
For just one market example, yesterday saw new US and Chinese tariffs kick in, taking a further step down the trade war path – if that is what one still insists on calling it. I underline that more holistic view of the US-China standoff as the Wall Street Journal reports that “SEC Revives Fight Over Inability to Inspect Chinese Auditors of Alibaba, Baidu”. The SEC could yet “impose more oversight on US-listed companies that rely upon those [Chinese] auditors. The measures could include forcing the firms to disclose more about their business or accounting and restricting their ability to sell new shares.” Given the Chinese firms are unlikely to comply, that is a potential step towards an eventual US delisting; and don’t forget there is also a push in the US Congress to stop US capital flows into China via bill S. 1731, which will get a further bipartisan tailwind when Congress returns on 4 September. In short, this is a whole other new front in the US-China struggle (capital flows, following tech limits and tariffs), not a ‘trade war’.
Let’s see just how weak CNY fixing, and CNY itself, are today. Indeed, after the Chinese manufacturing PMI stayed well below 50 over the weekend, will we take out the low of 7.1926 on the back of this news-flow? If not today, then soon, surely. And then where?
In the UK we also have a crucial week where political analysts agree anything could happen: the UK’s relations with the EU; the fabric of the UK constitution in terms of legislature vs. executive; and even the UK’s internal relations with its own constituent countries, could all be permanently changed. The latest news suggests PM Johnson is still taking the hardest of lines and any Tory rebels prepared to vote with the opposition in a vote of no confidence, or to support a parliamentary procedure to force the government to request an extension of Article 50, will lose the whip and be de-selected as candidates at the next election: in other words the end of their political careers. There have even been mutterings about action to remove the controversial House Speaker, John Bercow (he of “Ordaaaa!” fame) due to his widely-regarded Remainer sympathies; and of Johnson himself, or a populist ally within the EU, such as Victor Orban of Hungary, then vetoing the UK request for an extension within the EU’s political architecture should it be passed.
Meanwhile, that career-ending UK election may be arriving even sooner than we had thought – in which case prepare for the angriest, nastiest “In Forever vs. Out Now!” election campaign. And recall it will be one where “In Forever” means the most radical left-wing economic policies seen in the UK since 1945 under a Corbyn government.
What else can we throw into the mix today?
How about Germany’s far-right AfD being projected to achieve 27.8% of the vote in Saxony and 23.5% in Brandenburg? Yes, they are not in power, or even close to power, but this is with low unemployment and what had been until recently a healthy German economy. Quite the worrying historical irony there.
How about former Far-right Italian Deputy PM Salvini, now out of power, calling for his supporters to march on Rome? True, that’s more 1920s than 1930s, but given the technocratic PD look like they will be running the finance ministry again, where they did so well last time that we ended up with a populist government, many are betting that Salvini will be back with a majority at some point.
How about Argentina reintroducing capital controls (yet again)? Well, they have. Exporters now have to repatriate USD within five days, and central-bank authorization is now required to buy USD, except in the case of foreign trade. Individuals will be limited to purchasing USD10,000 per month. Correct me if I am wrong, but wasn’t the Argentina bail-out the benchmark achievement of one Christine Lagarde, now about to run the ECB? I am asking for a friend…
And literally talking of ‘back with a bang’, yesterday we came perilously close to the start of a full-blown conflict between Israel and Hezbollah, which fortunately appears to still be lurking for some future date for now. That might sound irrelevant for a market already looking at the map with an expression like Munch’s ‘The Scream’ and asking “Where next?”, but when/if that war occurs it risks a far larger regional conflagration.
Meanwhile, against this geopolitical backdrop we return from the summer to continue to see global markets which now aggressively buy equities for their yield and bonds for capital appreciation: which is a brilliant strategy until rates have been cut to new negative terminal lows and stock multiple expansion is at new highs: at which point the music stops and someone is left holding seriously over-priced and under-delivering cans. And nobody makes any returns at all – which will be a real big bang.
via ZeroHedge News https://ift.tt/2MQ8oD9 Tyler Durden
Hong Kong’s Chief Executive Carrie Lam told a group of businesspeople last week that she has caused “unforgivable havoc” by igniting the anti-government protests gripping the city – and that she would quit if she could.
Lam’s also said during the closed-door meeting that she is now “very limited” in how she can resolve the ongoing crisis because the unrest has become a matter of national security and sovereignty for China, according to a 24-minute recording reviewed by Reuters.
“The political room for the chief executive who, unfortunately, has to serve two masters by constitution, that is the central people’s government and the people of Hong Kong, that political room for maneuvering is very, very, very limited,” she said, speaking in English. “For a chief executive to have caused this huge havoc to Hong Kong is unforgivable.”
“If I have a choice … the first thing is to quit, having made a deep apology,” she added.
Lam’s dramatic and at times anguished remarks offer the clearest view yet into the thinking of the Chinese leadership as it navigates the unrest in Hong Kong, the biggest political crisis to grip the country since the Tiananmen Square protests of 1989.
Hong Kong has been convulsed by sometimes violent protests and mass demonstrations since June, in response to a proposed law by Lam’s administration that would allow people suspected of crimes on the mainland to be extradited to face trial in Chinese courts. The law has been shelved, but Lam has been unable to end the upheaval. Protesters have expanded their demands to include complete withdrawal of the proposal, a concession her administration has so far refused. Large demonstrations wracked the city again over the weekend. –Reuters
She added that she was profoundly frustrated that she wasn’t able “to reduce the pressure on my frontline police officers,” or reach a political solution to “pacify the large number of peaceful protesters who are so angry with the government, with me in particular.”
Lam’s failure “to offer a political situation in order to relieve the tension” was the cause of her “biggest sadness,” and has made her life miserable.
“Nowadays it is extremely difficult for me to go out,” she told the group. “I have not been on the streets, not in shopping malls, can’t go to a hair salon. I can’t do anything because my whereabouts will be spread around social media.“
If she were to appear in public, she said, “you could expect a big crowd of black T-shirts and black-masked young people waiting for me.” Many of the protesters wear black at demonstrations.
After enjoying relatively high popularity in the initial part of her tenure, Lam is now the least popular of any of the four leaders who have run Hong Kong since its handover from British to Chinese rule in 1997, according to veteran pollster Robert Chung, who runs the Public Opinion Research Institute. –Reuters
We’re guessing reports of undercover police officers acting as agents provocateurs, and police indiscriminately beating people aren’t going to inspire much sympathy for Lam’s plight.
Beijing isn’t ‘at the gates’ according to Lam
Lam told the group that Beijing has not imposed any deadlines for ending the crisis ahead of the country’s October 1st National Day celebrations, and that China had “absolutely no plan” to deploy the People’s Liberation Army troops on the streets of Hong Kong – something the world has been watching for after the bloody events at Tiananmen Square in Beijing a generation ago. Lam told the attendees that Beijing is acutely aware of the potential damage to China’s reputation if the military is used to quell the movement.
“They know that the price would be too huge to pay,” said Lam, adding “They care about the country’s international profile … It has taken China a long time to build up to that sort of international profile and to have some say, not only being a big economy but a responsible big economy, so to forsake all those positive developments is clearly not on their agenda.”
According to Lam, China is “willing to play along” with the protests – even if it meant Hong Kong would suffer a short-term economic hit.
As Reuters notes, the protests in Hong Kong mark the biggest challenge to the rule of Chinese President Xi Jinping since he took power in 2012. The unrest comes amid a slowing Chinese economy, escalating rivalry with the United States, and a ‘tit-for-tat’ trade war. The Taiwan issue has “further frayed relations between Beijing and Washington,” according to the report.
Lam’s remarks are consistent with a Reuters report published on Friday that revealed how leaders in Beijing are effectively calling the shots on handling the crisis in Hong Kong. The Chinese government rejected a recent proposal by Lam to defuse the conflict that included withdrawing the extradition bill altogether, three people with direct knowledge of the matter told Reuters.
Asked about the report, China’s Foreign Ministry said that the central government “supports, respects and understands” Lam’s decision to suspend the bill. The Global Times, a nationalistic tabloid published by the Communist Party’s official People’s Daily, denounced it as “fake.”
As protests escalated, Lam suspended the bill on June 15. Several weeks later, on July 9, she announced that it was “dead.” That failed to mollify the protesters, who expanded their demands to include an inquiry into police violence and democratic reform. Many have also called for an end to what they see as meddling by Beijing in the affairs of Hong Kong. –Reuters
Lam was picked as Hong Kong’s Chief Executive in March 2017, vowing to “unite society” and local rifts within the city that remains “by far the freest city under Chinese rule,” according to the report.
“Hong Kong is not dead yet, said Lam. “Maybe she is very, very sick, but she is not dead yet.”
via ZeroHedge News https://ift.tt/32guimC Tyler Durden
Hurricane Dorian is already setting all sorts of records, and it hasn’t even reached the United States yet. As I write this article, this “lawnmower from the sky” is ripping through the Bahamas with immense fury. The east coast could potentially be the next target, and widespread evacuations have already been ordered all along the Florida coastline, and that even includes President Trump’s Mar-a-Lago resort. For many years, there has been a tremendous amount of debate in the scientific community about whether we should add a new category to the Saffir Simpson scale because of how powerful hurricanes are becoming.
Many meteorologists have advocated adding a “Category 6” or even a “Category 7” to the scale, and without a doubt the power of Hurricane Dorian will almost certainly renew that debate. And as you will see below, if the scale had already been expanded, Hurricane Dorian would likely be considered to be a “Category 6” storm right now.
Let’s start with what we already know. According to the latest information from the National Hurricane Center, Hurricane Dorian currently has maximum sustained winds of 185 miles per hour…
LOCATION…26.6N 77.3W ABOUT 95 MI…150 KM E OF FREEPORT GRAND BAHAMA ISLAND ABOUT 175 MI…280 KM E OF WEST PALM BEACH FLORIDA MAXIMUM SUSTAINED WINDS…185 MPH…295 KM/H PRESENT MOVEMENT…W OR 270 DEGREES AT 5 MPH…7 KM/H MINIMUM CENTRAL PRESSURE…910 MB…26.88 INCHES
We are also being told that wind gusts “exceeding 220 mph” have been detected, and at this point Dorian has already become far more powerful than most of the models were anticipating.
So how does this storm stack up against some of the other monster storms in recent history?
Well, according to Weather Underground, Dorian has already tied the all-time record for “strongest landfalling Atlantic hurricane”…
Dorian is now tied for having the second-highest winds of any Atlantic hurricanes on record:
1. 190 mph (Allen 1980)
2. 185 mph (Dorian 2019, Labor Day 1935, Gilbert 1988, Wilma 2005)
3. 180 mph (Mitch 1998, Rita 2005, Irma 2017)
4. 175 mph (11 storms, including Maria 2017, Katrina 2005, Andrew 1992, Camille 1969)
Dorian is tied for strongest landfalling Atlantic hurricane on record:
1. 185 mph: Dorian 2019 (Bahamas), Labor Day 1935 (Florida Keys)
2. 180 mph: Irma 2017 (Barbuda, St. Martin, British Virgin Islands)
3. 175 mph: Camille 1969 (Mississippi), Janet 1955 (Mexico), Dean 2007 (Mexico), David 1979 (Dominican Republic), Anita 1977 (Mexico)
And if it gets just a little bit stronger, it could potentially have the strongest winds that we have seen in any Atlantic hurricane ever.
On the Saffir Simpson scale, hurricanes with maximum sustained winds of 130 mph to 156 mph are considered to be “Category 4 storms”, and any storm with sustained winds of 157 mph or greater is considered to be a “Category 5 storm”.
If we gave Category 5 the same 27 mph range that Category 4 has, that would mean that “Category 6” would hypothetically begin at 184 mph.
And since Hurricane Dorian currently has sustained winds of 185 mph that would make it a “Category 6 storm” on our hypothetical scale.
The good news is that Hurricane Dorian appears to be making a sharp turn and may not actually make landfall in the U.S. at all.
If that is what ultimately takes place, that will be extremely good news, but this storm has proven to be exceedingly unpredictable so far and anything could still happen.
By tomorrow morning the forecast may have completely changed once again, and the storm could once again be making a beeline for the coast. If Dorian does make landfall in the U.S., the devastation is likely to be exceedingly great. Just check out what Dorian is doing to the Bahamas at this moment…
As the eyewall of the storm hit the island, it bent utility poles and snapped trees and beat buildings with the howling wind. Bahamian Prime Minister Hubert Minnis announced Sunday parts of Marsh Harbor – a town of more than 6,000 – appeared to be ‘underwater’, sending desperate locals onto their roofs for shelter from the floodwaters.
In one heartbreaking video a mother is heard pleading for help and prayers as she is stuck in the upper level of her Abaco Islands home with her baby while huge floods of water inundate the street.
The east coast could be in for a similar fate, and the NOAA is specifically warningthat just a “small deviation to the left of the track could bring the intense core of the hurricane” directly over the Florida coast…
Given the uncertainty in the track forecast and the anticipated increase in size of the hurricane, a Hurricane Warning and Storm Surge Warning have been issued for a portion of the Florida east coast. It is once again emphasized that although the official track forecast does not show landfall, users should not focus on the exact track. A small deviation to the left of the track could bring the intense core of the hurricane its dangerous winds closer to or onto the Florida coast.
We are entering a time when many of our old assumptions will no longer apply. This is going to be an era of great turmoil for our planet, and we are seeing bizarre weather extremes all over the world in 2019.
So far this year we have seen one of the bitterly coldest winters in a century, unprecedented rainfall and flooding in the middle of the country, thousands of wildfires burning “the lungs of the Earth” to the ground, and record high temperatures all over the planet this summer.
Now we are dealing with a hurricane that is so intense that it could be considered to be a “Category 6 storm” if the Saffir Simpson scale was expanded, and many people believe that this is just the beginning.
Let’s keep a very close eye on this storm. If it starts heading toward you, get out while you still can, because you definitely don’t want to be there when this monster storm hits.
via ZeroHedge News https://ift.tt/2NKfWH7 Tyler Durden
A cross-party group of MPs who are opposed to leaving the EU without a deal on Oct. 31 have settled on their plan to stop PM Boris Johnson from running down the clock: They’re reportedly planning to pass legislation that would force Johnson to seek a three-month delay of Brexit Day, according to Bloomberg.
If the legislation passes, Johnson would either need to secure a new withdrawal agreement with the EU by mid-October, or press the EU27 to grant the UK another extension, something that the bloc would likely support.
Details of the rebel plans to stop a no-deal Brexit on Oct. 31 by pushing legislation through Parliament are beginning to emerge.
Two people familiar with the draft law told Bloomberg it would compel Johnson to seek a three-month delay if he’s been unable to get a new Brexit deal through the House of Commons by Oct. 19 or to persuade lawmakers to back a no-deal departure.
That would set Jan. 31 as the new deadline for Brexit.
DB assigned this ‘legislative’ route for stopping a ‘no deal’ Brexit combined odds of just 10%. Johnson has repeatedly threatened to call for snap elections if Tory MPs don’t fall into line and support leaving the EU with or without a deal on Oct. 31 (the threat is a cudgel intended to make MPs worried about losing their seats fall into line…it’s tantamount to a game of chicken since snap elections would risk throwing control of Parliament to Labour). Johnson would effectively treat a vote to block no deal as a vote of no confidence in his government.
Goldman Sachs believes there’s still a high likelihood that Johnson calls for a snap election on or around Oct. 17 if the PM “decides this week that a pre-Brexit general election is his best response to a legislative lock on “no deal.” DB sees this as one possible outcome, though they believe the overall odds of Johnson choosing this route are just 5%.
And with good reason. Calling for a snap vote would require 100 opposition MPs to vote with the PM to win the necessary two-thirds majority. Goldman believes they could be swayed if Johnson shows them “concrete evidence” that he’s already sought permission from the EU27 to call for another Article 50 extension.
“Traditionally, the date of a general election is in the gift of the prime minister,” the note said. “In our view, it would be suboptimal for Labour MPs to allow the Conservative government to call an October election that characterizes the Labour front-bench as a Brexit saboteur. That said, the Labour leadership would certainly find itself in a difficult position.”
Meanwhile, a ‘draft legal text’ that would function as Johnson’s latest ‘alternative’ to the Irish Backstop was reportedly discussed by his cabinet on Monday. Irish PM Leo Varadkar, meanwhile, said Monday that he’d be willing to consider some alternatives to the backstop proposed by the Ulster Unionists, which he described as “interesting.”
This begs the question: Is this Europe’s first tentative step toward caving on the widely hated (in the UK, at least) backstop? Johnson has called Europe’s bluff on the backstop. Will Brussels finally stop pretending that it has the legal authority to impose arbitrary physical borders between two sovereign nations?
For now, judging by cable’s demise today…
Source: Bloomberg
…the market is not buying the new plan as anything but high hopes for the remainers.
via ZeroHedge News https://ift.tt/2NMaC60 Tyler Durden
For plutocrats, this summer has gotten a bit scary. Two feared candidates are rising. Trusted candidates are underperforming. The 2020 presidential election could turn out to be a real-life horror movie: A Nightmare on Wall Street.
“Wall Street executives who want Trump out,” Politico reported in January, “list a consistent roster of appealing nominees that includes former Vice President Joe Biden and Sens. Cory Booker of New Jersey, Kirsten Gillibrand of New York and Kamala Harris of California.”
But seven months later, those “appealing nominees” don’t seem appealing to a lot of voters. Biden’s frontrunner status is looking shaky, while other Wall Street favorites no longer inspire investor confidence: Harris is stuck in single digits, Booker is several points below her, and Gillibrand just dropped out of the race.
Meanwhile, Bernie Sanders and Elizabeth Warren are drawing large crowds and rising in polls. In pivotal early states like Iowa and especially New Hampshire, reputable poll averages indicate that Biden is scarcely ahead.
“Bankers’ biggest fear” is that “the nomination goes to an anti-Wall Street crusader” like Warren or Sanders, Politico reported, quoting the CEO of a “giant bank” who said:
“It can’t be Warren and it can’t be Sanders. It has to be someone centrist and someone who can win.”
But the very biggest fear among corporate elites is that Warren or Sanders could win — and then use the presidency to push back against oligarchy. If Biden can’t be propped up, there’s no candidate looking strong enough to stop them.
Biden, Warren and Sanders, as the New York Times reported on Wednesday, are “a threesome that seems to have separated from the rest of the primary field.” In fourth place, national polling averages show, Harris is far behind.
Biden’s distinguished record of servicing corporate America spans five decades. He is eager to continue that work from the Oval Office, but can he get there? A week ago, a Times headline noted reasons for doubt: “Joe Biden’s Poll Numbers Mask an Enthusiasm Challenge.” Enthusiasm for Biden has been high among Democratic-aligned elites, but not among Democratic-aligned voters.
While corporate news organizations — and corporate-enmeshed “public” outlets like NPR News and the PBS NewsHour —evade primary contradictions, Sanders directly hammers at how huge corporations are propelling media bias and undermining democracy.
Even though he has inspired media onslaughts — such as the now-notorious 16 anti-Sanders articles published by theWashington Post in a pivotal 16-hour period during the 2016 primary contest — the Sanders campaign is so enormous that even overtly hostile outlets must give him some space. In an op-ed piece he wrote that the Post published seven weeks ago, Sanders confronted Biden’s wealth-fondling approach.
Under the headline “The Straightest Path to Racial Equality Is Through the One Percent,” Sanders quoted a statement from Biden:
“I don’t think 500 billionaires are the reason why we’re in trouble.”
Sanders responded,
“I respectfully disagree” — and he went on to say: “It is my view that any presidential candidate who claims to believe that black lives matter has to take on the institutions that have continually exploited black lives.”
Such insight about systemic exploitation is sacrilege to the secular faith of wealth accumulation that touts reaching billionaire status as a kind of divine ascension. Yet Sanders boldly challenges that kind of hollowness, shedding a fierce light on realities of corporate capitalism.
“Structural problems require structural solutions,” Sanders pointed out in his Post article, “and promises of mere ‘access’ have never guaranteed black Americans equality in this country. . . . ‘Access’ to health care is an empty promise when you can’t afford high premiums, co-pays or deductibles. And an ‘opportunity’ for an equal education is an opportunity in name only when you can’t afford to live in a good school district or to pay college tuition. Jobs, health care, criminal justice and education are linked, and progress will not be made unless we address the economic systems that oppress Americans at their root.”
Like many other progressives, I continue to actively support Sanders as a candidate who bypasses euphemisms, names ultra-powerful villains – and directly challenges those in power who’ve been warping and gaming the economic systems against working-class people.
Those systems are working quite nicely for the ultra-rich, like the giant bank CEO who told Politico that “it can’t be Warren and it can’t be Sanders.” That’s the decision from Wall Street. The decision from Main Street is yet to be heard.
via ZeroHedge News https://ift.tt/32ig4BC Tyler Durden
