another site
The overnight ramp in yuan and US equity futures – on the back of Mnuchin’s comments – has been entirely erased as the algos were taught that tenses matter…
…a deal that WAS 90% done is different from a deal that IS 90% done…
via ZeroHedge News https://ift.tt/2Ndw8Cc Tyler Durden
RBOB Gasoline futures jumped overnight, accelerating their recent ascent ever since the explosion and massive inferon at the Philadelphia Energy Solutions (PES) plant, following a Reuters report that the largest east coast refinery is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex.
Shutting the refinery, the largest and oldest on the U.S. East Coast, would result in not only hundreds of lost jobs but also sharply higher gasoline prices as gasoline supplies are squeezed in the busiest, most densely populated corridor of the United States.
PES is expected to file a notice of intent with state and federal regulators as early as Wednesday, setting in motion the process of closing the refinery, the sources said.
The refinery, which could still change its plans, is also expected to begin layoffs of the 700 union workers at the plant as early as Wednesday, Reuters reported. The layoffs could include about half of the union workforce, with the remaining staff staying at the site until the investigation into the blast concludes.
As reported previously, the 335,000 barrel-per-day (bpd) complex, located in a densely populated area in the southern part of the city, erupted in flames in the early hours on Friday, in a series of explosions that could be heard miles away and which some compared to a meteor strike or a nuclear bomb going off.
The cause of the fire was still unknown as of Tuesday, though city fire officials said it started in a butane vat around 4 a.m. (0800 GMT). It destroyed a 30,000-bpd alkylation unit that uses hydrofluoric acid to process refined products. Had the acid caught fire, it could have resulted in a vapor cloud that can damage the skin, eyes and lungs of nearby residents.
Prior to the massive inferno, the refinery had suffered from years of financial struggles, forcing it to slash worker benefits and scale back capital projects to save cash. It went through a bankruptcy process last year to reduce its debt, but its difficulties continued as its cash on hand dwindled even after emerging from bankruptcy in August; some have speculated that cost cutting resulted in the structure becoming fragile and susceptible to accident.
After bankruptcy, Credit Suisse Asset Management and Bardin Hill became the controlling owners, with former primary owners Carlyle Group and Sunoco Logistics, an Energy Transfer subsidiary, holding a minority stake.
Last Friday’s blaze was the second in two weeks at the complex, spurring calls from Philadelphia’s mayor for a task force to look into both the cause and community outreach in the wake of the incidents. A spokesperson for Mayor Jim Kenney declined to comment on the potential closure of the plant.
That may be difficult as investigators on the scene are said to be dealing with unstable structures that need to be certified by engineers, slowing down the inquiry, city officials said. The investigation could ultimately take months or perhaps years. Additionally, the state Department of Environmental Protection said they have concerns about the integrity of storage tanks on site, the agency said on Tuesday. The U.S. Chemical Safety Board is also investigating the incident, according to Reuters.
While none of this will make much news outside of Philly, what will impact all East Coast drivers is that gasoline futures rose as much as 5.4% on Wednesday to $1.9787 a gallon, the highest since May 23. The front month price was at $1.945 early on Wednesday.
Futures are up 8.9% since Thursday’s close.
NY Gasoline prices have surged back into a premium over US Gulf Gasoline…
All of which will drag, as always with a lag, the price of gas at the pump notably higher…
The rally in U.S. gasoline futures has pushed U.S. gasoline prices above European and Asian markets, raising the prospects for US imports. According to Matthew Chew, oil analyst at IHS Markit, “chances are that (the wider price spread) could open up the arbs between U.S. Gulf/Europe and [the East Coast] PADD 1.”
via ZeroHedge News https://ift.tt/2Y9IJY5 Tyler Durden
Turmoil overnight in FX markets as a false tweet by one large financial news reporting site sparked algo-driven chaos for a few brief seconds.
Shortly after the Reserve Bank of New Zealand said it would keep rates on hold Wednesday, Selerity tweeted the following (incorrect) headline (since deleted):
The tweet-reading-algos ran with it – no confirmation required – and dumped kiwi instantly, sending the currency 0.6% lower in a split-second, before reality set in (and stops were run)…
However, since the event, Kiwi is extending its winning run in wake of the RBNZ’s latest policy meeting and accompanying statement that reinforced guidance for lower rates, but was tempered somewhat by a balanced assessment of the economic outlook due to softer property prices vs more expansive fiscal policy.
via ZeroHedge News https://ift.tt/31PTGjT Tyler Durden
Tesla’s head of production in charge of all vehicle manufacturing at its Fremont factory, Peter Hochholdinger, has left the company, according to electrek.
Hochholdinger had come from Audi, where he was previously in charge of production for the Audi A4, A5 and Q5. At Audi, he oversaw more than 400,000 cars being built annually. Tesla touted his hire in 2016, sending out a press release at the time and saying they were “excited” to have him join the team. He was widely regarded as a veteran manufacturing executive that would lend credibility and much needed experience to the Model 3 manufacturing process.
His tenure at Tesla lasted barely over 3 years, which is basically a lifetime compared to many other executives who have departed the company in shorter order. Even the pro-Tesla bloggers at electrek couldn’t put a positive spin on Hochholdinger’s departure, stating:
While I often defend Tesla on their highly publicized executive departures, I think it’s fair to say that they had some significant talent exodus over the last year or so and now with Passin and Hochholdinger, it’s especially true for the production executive team.
Just seven days ago we reported that the company’s former VP of Human Resources and Head of Diversity, Felicia Mayo, had also left the company. Mayo nearly made it to her two year anniversary, but like many other departing executives, had enough and packed up in relatively short order.
Mayo was described as “one of a few black women leaders to break the glass ceiling and rise to executive ranks in a large, Silicon Valley tech firm.” According to the Kapor Center, less than 0.5% of Silicon Valley tech leadership positions are held by black women.
She was previously a VP at Juniper Networks before her move to Tesla, where she reported to Tesla’s vice president of people and places, Kevin Kassekert, and CEO Elon Musk.
Twitter seemed to take the news of Hochholdinger’s departure with slight skepticism.
“Peter Hochholdinger, Tesla’s head of production in charge of all vehicle manufacturing at Fremont factory, is just taking some time off to recharge and spend time with his family.” $TSLA $TSLAQ pic.twitter.com/z9YcgbfRQX
— passthebeano (@passthebeano) June 26, 2019
via ZeroHedge News https://ift.tt/2INLNUE Tyler Durden
Authored byMichael Lebowitz via RealInvestmentAdvice.com,
John Kelly – White House Chief of Staff
James Mattis – Secretary of Defense
Jeff Sessions – Attorney General
Rex Tillerson – Secretary of State
Gary Cohn – Chief Economic Advisor
Steve Bannon – White House Chief Strategist
Anthony Scaramucci – White House Communications Director
Reince Priebus – White House Chief of Staff
Sean Spicer – White House Press Secretary
James Comey – FBI Director
“Every week is shark week in the Trump White House,” wrote The Hill contributing author Brad Bannon in August of 2018. A recent Brookings Institution study shows that the turnover in the Trump administration is significantly higher than during any of the previous five presidential administrations. The concern is that for a president without government experience, a rotating cast of top administration officials and advisors presents a unique challenge for the effective advancement of U.S. policies and global leadership. Bannon(no relation to former White House Chief Strategist Steve) adds, “Inexperience breeds incompetence.”
Although the sitting president has broken just about every rule of traditional politics, it is irresponsible and speculative to assume either ineffectiveness or failure by this one argument. One area of politics that falls within our realm of expertise is a “rule” that Donald Trump has not yet broken; firing the Chairman of the Federal Reserve.
Following the December Federal Open Market Committee (FOMC) meeting in which the Fed raised rates and the stock market fell appreciably, Bloomberg News reported that President Trump was again considering relieving the Fed Chairman of his responsibilities. This has been a continuing theme for Trump as his dissatisfaction with the Fed intensifies.
Not that Trump appears concerned about it, but firing a Fed Chairman is unprecedented in the 106-year history of the central bank. Having tethered all perception of success to the movements of the stock market, it is quite apparent why the president is unhappy with Jerome Powell’s leadership. Trump’s posture raises questions about whether he is more worried about his barometer of success (stock prices) or the long-term well-being of the economy. Acquiescing to either Trump or a genuine concern for the economic outlook, Chairman Powell relented in his stance on rate hikes and continuing balance sheet reduction.
Notwithstanding the abrupt reversal of policy stance at the Fed, President Trump continues to snipe at Powell and express dissatisfaction with what he considers to have been policy mistakes. Before backing out of consideration, Steven Moore’s nomination to the Fed board fits neatly with the points made above reflecting the President’s irritation with the Powell Fed. Moore was harshly critical of Powell and the Fed’s rate hikes despite a multitude of inconsistent remarks. Shortly after his nomination, Moore and the President’s Director at the National Economic Council, Larry Kudlow, stated that the Fed should immediately cut interest rates by 50 basis point (1/2 of 1%). Those comments came despite rhetoric from various fronts in the administration that the economy “has never been stronger.”
Now the Kudlow and Moore tactics are coming from within the Fed. St. Louis Fed President James Bullard dissented at the June 19th Federal Open Market Committee meeting in favor a rate cut. Then non-voting member and Minneapolis Fed President Neel Kashkari publicly stated that he was an advocate for a 50-basis point rate cut at the same meeting.
All this with unemployment at 3.6% and GDP tracking better than the 10-year average of 2.1%. Given Trump’s stated grievance with Powell, Bullard and Kashkari could easily be viewed as trying to curry favor with the administration. Even if that is not the case, to appear to be so politically inclined is very troubling for an institution and board members that must optically maintain an independent posture. It is unlikely that anyone has influence over Trump in his decision to replace or demote Powell. He will arrive at his conclusion and take action or not. If the first two years of his administration tells us anything, it is that public complaints about his appointed cabinet members precede their ultimate departure. Setting aside his legal authority to remove Powell, which would likely not stand in his way, the implications are what matter and they are serious.
For more on our thoughts on the ability of Trump to fire the Fed Chairman, please read our article Chairman Powell You’re Fired.
Given Trump’s track record and his displeasure with Powell, we should prepare in advance for what could come as a surprise Tweet with little warning.
Ignoring legalities, if Trump were to demote or fire Powell, it is safe to assume he has someone in mind as a replacement. That person would certainly be more dovish and less prudent than Powell.
Under circumstances of a voluntary departure, a replacement with a more dovish disposition might be bullish for the stock market. However, the global economy is a complex system and there are many other factors to consider.
The first and largest problem is such a move would immediately erode the perception of Fed independence. Direct action taken to alter that independence would cast doubts on Fed credibility. Other sitting members of the Federal Reserve, appointed board members, and regional bank presidents, would likely take steps to defend the Fed’s independence and credibility which could create a functional disruption in the decision-making apparatus within the FOMC. Further, there might also be an active move by Congress to challenge the President’s decision to remove Powell. Although the language granting Trump the latitude to fire Powell is obtuse (he can be removed for “cause”), it is unclear that Presidential unhappiness affords him supportable justification. That would be an argument for the courts. Financial markets are not going to patiently await that decision.
With that in mind, what follows is an enumeration of possible implications for various key asset classes.
The most serious of market implications begin with the U.S. dollar (USD), the world’s reserve currency through which over 60% of all global trade transactions are invoiced. The firing of Powell and the likely appointment of a Trump-friendly Chairman would drop the value of the USD on the expectations of a dovish reversal of monetary policy. The question of Fed independence, along with the revival of an easy money policy, would likely cause the dollar to fall dramatically relative to other key currencies. An abrupt move in the dollar would be highly disruptive on a global scale, as other countries would take action to stem the relative strength of their currencies versus the dollar and prevent weaker economic growth effects. The term “currency war” has been overused in the media, but in this case, it is the proper term for what would likely transpire.
Additionally, the weaker dollar and new policy outlook would heighten concerns about inflation. With the economy at or near full employment and most regions of the country already exhibiting signs of wage pressures, inflation expectations could spike higher.
The bond market would be directly impacted by Fed turbulence. A new policy outlook and inflation concerns would probably cause the U.S. Treasury yield curve to steepen with 2-year Treasuries rallying on FOMC policy change expectations and 10-year and 30-year Treasury bond yields rising in response to inflation concerns. It is impossible to guess the magnitude of such a move, but it would probably be sudden and dramatic.
Indecision and volatility in the Treasury markets are likely to be accompanied by widening spreads in other fixed income asset classes.
In the commodities complex, gold and silver should be expected to rally sharply. While not as definitive, other commodities would probably also do well in response to easier Fed policy. A lack of confidence in the Fed and the President’s actions could easily result in economic weakness, which would lessen demand for many industrial commodities and offset the benefits of Fed policy changes.
The stock market response is best broken down into two phases. The initial reaction might be an extreme move higher, possibly a move of 8-10% or more in just a few days or possibly hours. However, the ensuing turmoil from around the globe and the potential for dysfunction within the Fed and Congress could cause doubt to quickly seep into the equity markets. Two things we know about equity markets is that they do not like changes in inflation expectations and they do not like uncertainty.
Another aspect regarding such an unprecedented action would be the economic effects of the firing of Jerome Powell. Economic conditions are a reflection of millions of households and businesses that make saving, investing, and consumption decisions on a day-to-day basis. Those decisions are dependent on having some certitude about the future.
If the disruptions were to play out as described, consumers and businesses would have reduced visibility into the future path for the economy. Questions about the global response, inflation, interest rates, stock, and commodity prices would dominate the landscape and hamstring decision-making. As a result, the volatility of everything would rise and probably in ways not observed since the financial crisis. Ultimately, we would expect economic growth to falter in that environment and for a recession to ensue.
Although economic growth has been sound and stocks are once again making record highs, the market and economic disruptions we have recently seen have been a long time coming. Market valuations across most asset classes have been engineered by excessive and imprudent monetary policy. The recent growth impulse is artificially high due to unprecedented expansion of government debt in a time of sound economic growth and low unemployment. In concert, excessive fiscal and monetary policy leave the markets and the economy vulnerable.
The evidence this year has been clear. Notwithstanding the Federal Reserve’s role in constructing this false reality, President Trump has not served the national interest well by his public criticism of the Fed. If Trump were to remove Powell as Fed chair, the prior sentence would be an understatement of epic proportions.
via ZeroHedge News https://ift.tt/2X5E90B Tyler Durden
In a wide-ranging interview on Fox Business this morning, President Trump told Maria Bartiromo, reflecting in the bias against conservative speakers, that “we should be suing Google and Facebook and perhaps we will,” sending social media stocks lower…
Additionally, Trump warned that substantial additional U.S. tariffs would be placed on goods from China if there’s no progress on a trade deal after his planned meeting with Chinese counterpart Xi Jinping at the G-20 Summit in Japan.
“My Plan B with China is to take in billions and billions of dollars a month and we’ll do less and less business with them,”
Additionally President Trump blasted Vietnam as “worst [economic] abuser of everyone” and called for ECB chief Mario Draghi as “our Fed person,” reiterating that he has the right to demote or fire Federal Reserve Chairman Jerome Powell.
via ZeroHedge News https://ift.tt/2xgaGSg Tyler Durden
The farce that is this “market” just took a whole new turn for the surreal.
As we reported earlier, the reason why stocks surged just after 5am EDT is because of a CNBC headline, according to which the US Treasury Secretary said that a US-China trade deal “is” – present tense – 90% complete.
This was quickly propagated by Bloomberg…
… which triggered a flurry of algo buying.
Doubling down, CNBC also tweeted as much saying in a tweet that:
“Treasury Secretary Steven Mnuchin says a U.S.-China trade deal is “about 90% of the way there.” https://t.co/3Q0wvJKKxD pic.twitter.com/of6yH5y3rs”
The problem: CNBC made a huge grammatical mistake, because instead of saying “is”, Mnuchin was actually using the past tense, and what he really said – for those who listened to the video – is that “we were about 90% of the way’ on China trade deal.
CNBC also promptly deleted its tweet which said the deal “is” 90% completed, and the current on CNBC headline now says “Mnuchin: ‘We were about 90% of the way’ on China trade deal and there’s a ‘path to complete this.”
The deleted tweet was also revised:
“We were about 90% of the way” on a China trade deal and there’s a “path to complete this,” U.S. Treasury Secretary Steven Mnuchin says. https://t.co/3Q0wvJKKxD pic.twitter.com/tZuHHhCEQ6
— CNBC International (@CNBCi) June 26, 2019
So basically Mnuchin said absolutely nothing new, and not only that, he did not provide any optimism that a deal was coming, but as we said earlier, was merely recapping what was already known.
But what is most absurd about this entire incident is that nobody who was buying futures – and global stocks – actually listened to the Mnuchin clip in which he clearly used the past tense, and a second just as absurd outcome is that after stocks surged at 5am on the patently wrong headline meant to boost optimism in a deal…
… they have yet to drop back to where they were before the Mnuchin fake CNBC news hit.
via ZeroHedge News https://ift.tt/2X7h2CJ Tyler Durden
With manufacturing signals across the globe collapsing, expectations were for a modest drop in US Durable Goods Orders in May, however, the 1.3% MoM drop was far larger than expected and not helped by a notable downward revision in April.
Worst still, on a YoY basis, durable goods orders plunged 3.3% – the most since July 2016’s post-Brexit panic.
Under the hood there was some silver linings to cling to with Capital Goods Shipments (ex-Air) rising 0.7% MoM (well above the 0.1% expected rise).
And a proxy for business investment – non-military capital goods orders excluding aircraft – rose 0.4% after a 1% decline in the prior month.
As Bloomberg notes, the pickup in equipment orders may ease concerns that unpredictable trade policy is weighing on manufacturers and complicating business investment. Stronger demand would offer more of a tailwind to second-quarter economic growth after a downbeat April figure.
But in this brave new world, bad news is better than good to keep that 50bps bogey on the table.
via ZeroHedge News https://ift.tt/2XDzZwa Tyler Durden
Don’t talk to me about snowflakes. I have one daughter in college and one about to enter and we have had some very interesting and, let’s just say loud, discussions about free speech, triggers, snowflakes, and safe spaces. On one occasion, they became very upset that I took the position that the political shock-jock, Ann Coulter, who, by the way, is antithetical to my own political views and I find repulsive, should be able to speak on the UC Berkeley campus. In fact, I was ready to drive down to the campus and protest for her right to speak.
I tried to explain to my daughters if only popular ideas were protected, there would be no need for the First Amendment. If you do not defend the free speech rights of the unpopular, even if their views are repulsive to you, our liberty will never be secure. My experience is that many university students have trouble grasping this concept. It is not to say they don’t have the right to not invite someone to speak but to block a speaker, which one group has invited? Come on, man!
Ironically, when I mentioned to the youngest how much we paid in taxes during the bountiful years, she was outraged. Maybe today’s high schoolers are sensible fiscal conservatives?
Moving on, Charlie B. throws together a nice chart and also notes,
The REAL Fed Funds Rate (Fed Funds minus inflation) stands at 0.4%, which, if the Fed is done hiking (market saying 100% probability of a cut next month), would be the lowest terminal rate of any expansion ever. Monetary policy remains extraordinarily easy. – Charlie Bilello
Now, do you still wonder why gold is having a Ralph Kamden moment? “One of these days. You’re going to the moon, Alice!”
Q: How robust is an economy or stock market that freaks out over a barely positive real Fed Funds rate, is triggered if the word “patient” is not removed from an FOMC statement, and considers a less than super-dovish Fed as a microaggression?
A: A “snowflake” economy and market.
The market thought it had found its safe space with the dovish Fed and three rate cuts baked in. We seriously doubt it and are prepared for a macroagression.
We have been very busy working on data to provide you with a full and comprehensive scorecard of the Trump economy as the presidential campaign gets underway and the B.S. starts to fly in earnest, on both sides. It should be out in the next few days so watch for it.
Here is a little appetizer.
Because the current POTUS is always comparing his economy with that of his predecessors, we juxtapose several economic indicators during his first 2 1/2 years in office to the same timeframe as President Obama’s last few years in office. President Trump essentially inherited an economy on autopilot and goosed it with tax cuts and some deregulation.
The chart below illustrates that economic growth in the first 9 quarters of President Trump economy was 1.9 percent (0.8 percent annualized) higher than the last 9 quarters under President Obama. Net exports were the main contribution to the differential, which makes sense as the trade-weighted value of the dollar increased by over 20 percent during the Obama timeframe and declined 1.2 percent under President Trump, which includes a 10 percent decline in his first year in office. By the way, not one peep from the Obama administration about the Fed as the strong dollar created a more than massive economic headwind during their last few years in office.
Private fixed investment, mainly in nonresidential structures and equipment, was the second largest contributor to the growth differential, though residential investment has significnatly lagged under Trump.
Personal consumption, federal nondefense and state and local govenrment consumption and investment were big drags (negative) on the Trump-Obama growth differential.
Though nominal wages have grown faster during the Trump economy, inflation has almost doubled, resulting in lower real wage growth than in Obama’s last several months in office, which is also consistent with lagging real growth of personal consumption expenditures. The Phillips Curve does liveth.
Much more to come. Stay tuned, folks.
via ZeroHedge News https://ift.tt/2NbEfz9 Tyler Durden
An advanced U.S. Navy combat ship that is slated to be commissioned as the U.S.S. Billings collided with a berthed freighter in Montreal on Monday, FreightWaves reported. Both ships were damaged as a result, but their crews were safe. The U.S. Freedom-class littoral combat ship hit the M/V Rosaire A. Desgagnes at about 2PM on Monday, according to Lt. Cmdr. Courtney Hillson, a Navy spokesperson.
The Billings is 378 feet long and sustained damage below the waterline as a result. The damage to the 452 foot dry bulk vessel it collided with has not been fully assessed yet. The bulk vessel is owned by Quebec-based Transport Desgagnés.
The U.S. Navy is reportedly still investigating the incident and despite the fact that the Billings was “capable” of making it to its Florida homebase, it is being kept in Montreal for additional damage assessments.
Hillson said: “The Navy is conducting an investigation to understand what happened and why. We will incorporate lessons learned to ensure we conduct safe and effective operations.”
The Billings launched in 2017 and is one of the newest ships in the Navy’s fleet. It cost $362 million and is billed as a “high-tech, cost-effective surface warfare vessel suited for modern defense needs”. Freedom class combat boats like the Billings have “been plagued by a host of issues, which have kept them from going operational.”
The Rosarie was delivered in 2007 and built by Volharding Shipyards in the Netherlands, in collaboration with Jiangzhou Shipyard in China. It has a capacity of about 16,000 cubic meters.
via ZeroHedge News https://ift.tt/2XtiT4j Tyler Durden