Category: zerohedge

While European stocks avoided the global slump suffered by Asia and the US on Monday, on Tuesday they were not so lucky, and were at the forefront of the global selloff, with the Stoxx 600 dropping as much as 1%, dragged lower by banks – well, really just one particular German bank which crushed sentiment – and a shocking guidance cut by German chemical giant, BASF, which slashed its EBIT outlook by 60% below consensus.

With all major markets slumping, world stocks fell for a third straight day on Tuesday, as concerns that earnings season may be far worse than expected mingled with fears about the ongoing global trade war coupled with rising nerves that central banks may be less dovish than expected. The S&P emini future was down between 0.4% and 0.6%.

The session started on the back foot with MSCI’s index of Asia-Pacific shares outside Japan dropped 0.4%, declining for a third day led by material and industrial firms, but pared earlier losses, having traded at its lowest level since June 19.  Markets in the region were mixed, as Chinese blue-chips ended down 0.3%, while Hong Kong’s Hang Seng fell 0.7%. Japan’s Nikkei was the only outlier as gains in a few heavyweights in the index helped it edge up 0.1%. Japan’s Topix gauge fell 0.2%, driven by Keyence, Sony and Shin-Etsu Chemical, as tensions between Japan and South Korea threatened to upset a global technology supply chain. The Kospi Index dropped 0.6%. The Shanghai Composite Index retreated 0.2%, with Bank of Communications and Kweichow Moutai among the biggest drags. Hong Kong leader Carrie Lam signaled withdrawal of a controversial legislation that would allow extraditions to China, bowing to weeks of mass protests; even so the Hang Seng Index declined 0.8% for a fifth day of losses. The S&P BSE Sensex Index fluctuated, as a quarterly earnings season started in India amid slower economic growth. The nation’s most valuable company, Tata Consultancy Services, fell as much as 3.9% ahead of results due today

Later in the session, European losses made up for some of Monday’s resilience with the Stoxx 600 Banks Index among Tuesday’s worst performers with a 1.2% drop, dragged down by Danske Bank’s profit forecast cut, UniCredit’s disposal of FinecoBank stake and continued concerns on Deutsche Bank’s overhaul: declines were led by Deutsche Bank -4.3%, Danske Bank -3.1%, and FinecoBank -2.7%.

With global macroeconomic clouds looming and critical policy signals due from Jerome Powell on Wednesday, the headlines and mood focused on three individual stocks… and they were not happy. Shares in BASF slumped almost 6% in Europe after the German chemicals giant issued what one trader described as a “shocking” profit warning, blaming a global slowdown and trade war between the United States and China.

The pain continued for Deutsche Bank, which tumbled as much as 5% after sliding 5.4% the previous day in a 10% intraday slide  after it axed 18,000 staff – while Apple’s overnight drop of more than 2% after a broker downgrade dragged the tech sector lower.

Some blamed Morgan Stanley, which as we first reported on Sunday, turned the most underweight on US stocks on record: “Both from a bottom-up and top-down perspective, equity market valuations appear far too ambitious,” Morgan Stanley analysts wrote in a note. It was particularly stark, they said, as the U.S. business cycle was in a downturn and both forward-looking indicators like global PMIs and global trade are now in contraction territory.

“Indeed, companies have begun cutting their 2019 profit forecasts, citing the trade conflict as a reason.” Just look at BASF.

Elsewhere, Apple’s suppliers, such as Murata Manufacturing and Taiyo Yuden, fell 2% and 4%, however, after Rosenblatt Securities cited a “fundamental deterioration” for the U.S. gadget giant over the next 6-12 months.  In Greater China, suppliers from Hon Hai to AAC Tech also lost between 1.4% and 3.1% and in Europe Infineon, ASM and STMicroelectronics slipped about 2%.

Meanwhile, in FX, the looming question remained the potential reaction to the weaker outlook from the world’s top central banks. A just as important question is what happens if the economy posts a sharp rebound, forcing banks to turn hawkish once again.

On Wednesday, Powell will answer some of the questions when the Fed chairman testifies before Congress; ahead of that, Mmney market futures are still fully pricing in a 25 bps cut at the Fed’s July 30-31 meeting, but have almost priced out a larger 50 bps move that had been seen as a real possibility a couple of weeks ago.

The dollar changed hands at 108.78 yen, having risen in the previous session to its highest in more than a month. The dollar index versus a basket of six major currencies was also a touch higher at 97.432, while the euro dropped as low as 1.1204, its weakest level since mid June.

And already the doves were startying to cry: “It would be pretty disruptive at this stage for Powell to rule out a cut in July or dampen expectations of a cut in July,” said Michael Metcalfe, head of global macro strategy at State Street Global Markets. “The last few Fed speakers, albeit non-voting speakers, have suggested July is not a done deal… and even now, if you look at economists’ forecasts, there is not a consensus that there will be a move, and yet the market is 100% priced.”

In commodities, oil prices were slightly softer as concerns about whether slowing global growth would hit demand eclipsed tensions over Iran’s nuclear program. Brent crude futures fell 0.2% to $64.01 a barrel. U.S. West Texas Intermediate crude futures shed 0.4% to $57.46. Gold prices also ticked lower, as the dollar scaled its multi-week highs. Spot gold was down 0.2% at $1,393.03 per ounce and U.S. gold futures fell 0.3% to $1,395.70 an ounce.

Looking at today’s calendar, expected data include NFIB Small Business Optimism Index. PepsiCo, Couche-Tard, Levi Strauss, and WD-40 are among companies reporting earnings

Market Snapshot

• S&P 500 futures down 0.4% to 2,965.25
• STOXX Europe 600 down 0.7% to 387.01
• MXAPJ down 0.5% to 519.66
• Nikkei up 0.1% to 21,565.15
• Topix down 0.2% to 1,574.89
• Hang Seng Index down 0.8% to 28,116.28
• Shanghai Composite down 0.2% to 2,928.23
• Sensex down 0.1% to 38,670.01
• Australia S&P/ASX 200 down 0.1% to 6,665.69
• Kospi down 0.6% to 2,052.03
• German 10Y yield rose 0.7 bps to -0.359%
• Euro down 0.1% to $1.1203
• Italian 10Y yield rose 3.8 bps to 1.429%
• Spanish 10Y yield rose 0.6 bps to 0.443%
• Brent futures up 0.4% to $64.37/bbl
• Gold spot down 0.5% to $1,388.04
• U.S. Dollar Index up 0.2% to 97.57

Top Overnight News from Bloomberg

• U.S. Commerce Department determined that China and Mexico are unfairly subsidizing exports of fabricated structural steel and said it would impose duties on imports
• Japan’s wages dropped for a fifth month, adding to concerns over the resilience of consumer spending as a sales tax increase approaches in October
• Japan will raise sales taxes as scheduled in October, barring a shock on the scale of the financial crisis that followed the collapse of Lehman Brothers, Finance Minister Taro Aso says
• Bipartisan Policy Center said there is a “significant risk” that the U.S. willbreach its debt limit in early September unless Congress acts. The group’s evaluation marked a revision from its previous forecast
• Oil fell as concern over the slowing global economy took precedence over geopolitical tensions
• The U.K. economy probably shrank for the first time since 2012 in 2Q, according to Bloomberg’s latest survey of economists. The prediction for a 0.1% contraction marks a downgrade from June, when economists only predicted stagnation. The survey came as retail industry reported another drop in sales and said “the picture is bleak”
• U.K. Conservatives working to prevent a chaotic Brexit have proposed legislation to stop the next prime minister suspending Parliament to force a no-deal break from the European Union
• Union chiefs on Monday said Labour’s policy must be to put any Brexit deal back to voters to approve — and that the party must oppose leaving the EU on any terms negotiated by the Conservative government
• More than half of U.K. businesses with non-British staff say they would be harmed by post-Brexit immigration plans, according to the British Chambers of Commerce and the global job site Indeed.
• The ECB will have plenty of newer notes to consider if it returns to the corporate-bond market as part of stimulus measures. Companies have issued about 108 billion euros ($121 billion) of ECB-eligible bonds this year. That has kept the overall ECB-eligible universe at just over 1 trillion euros, based on data compiled by Bloomberg
• Hong Kong Chief Executive Carrie Lam said controversial bill that would allow extraditions to China was “dead,” stopping short of saying she would withdraw the legislation after weeks of protests
• Airbus SE will ask airlines operating 25 of its older A380 planes to inspect their wings for possible cracks, a problem that’s arisen in the past on the double-decker aircraft

Asian equity markets were negative following the losses on Wall St where the majors suffered in a continued fallout from the tempered Fed rate cut expectations and cautiousness ahead of Fed Chair Powell’s testimony. ASX 200 (-0.1%) was once again led lower by gold miners and with financials pressured after APRA announced it will require Australia’s major banks to increase total capital by 3ppts of risk-weighted assets by beginning of 2024 which despite being more generous on the timeline than the initial proposal, is estimated to total an extra AUD 50bln of funds to be put aside by the banks. Nikkei 225 (+0.1%) initially bucked the trend as recent favourable currency moves kept the index afloat for most the session although eventually succumbed to the pressure in late trade. Hang Seng (-0.8%) and Shanghai Comp. (-0.2%) were lacklustre amid continued PBoC liquidity inaction and after less than constructive comments from China’s Vice Foreign Minister who warned of disastrous consequences if the US treats China as an enemy, while Geely Auto underperformed in Hong Kong after June sales volume slipped 29% Y/Y which prompted the automaker to cut its FY sales volume forecast by 10%. Finally, 10yr JGBs were flat with demand subdued as Japanese stocks remained afloat for most the session and amid mixed results at the 5yr JGB auction.

Top Asian News

• Wumart, Meicai Said to Be in Final Race for Metro’s China Unit
• Geely Profit Warning Seen as Bad Omen for Other China Carmakers
• AB InBev Asia IPO Poll Signals Pricing Below Midpoint: Bernstein
• Temasek Portfolio Value Rises as Unlisted Assets Outperform

Major European indices are in the red this morning, [Euro Stoxx 50 -0.7%] losses are largely led by the Dax (-1.3%) as BASF (-6.0%) and Deutsche Bank (-4.5%) weigh on the index due to a profit warning and in continuation from yesterday’s restructuring downside respectively. BASF are firmly in the red after the issuance of a profit warning where notably the Co. now expect Q2 EBIT before special items to print at EUR 1.0bln, which is 47% down on the prior readin; additionally, Co. have lowered their FY outlook and are planning approximately 6k job cuts by the end of 2021. BASF’s downside has led to the Stoxx Chemical sector (-2.1%) underperforming its peers as the Co. hold a 13.4% weighting in the index. Additionally, the likes of Lanxess (-4.0%), Evonik (-3.0%) and Covestro (-6.0%) are suffering in sympathy. Separately, Danske Bank (-4.0%) also issued a profit warning, where the Co. revised their FY19 outlook down and believe that the generally weak momentum is set to continue. At the other end of the Stoxx 600 are Ocado (+5.6%) as the Co. reported H1 revenue of GBP 874mln which is 10.5% above the prior, aiding the FTSE 100 (-0.2%) in outperforming its peers, albeit still in negative territory, with the bourse also receiving some respite from a softer Sterling this morning.

Top European News

• Monte Paschi Said to Seek Buyers for $336m of Property
• Ocado Eases Investors’ Fears After Blaze at Robotic Warehouse
• Orange CEO Richard Cleared in Trial Over $451m Payout
• Irish Said to Accept Need for Border Checks in No-Deal Brexit

In FX, the biggest, but not the only G10 loser by any means as the Usd extends its post-NFP gains across the board and the DXY breaches 97.500 to trade at fresh multi-week highs of 97.588. However, the Aussie has been hit independently by a deterioration in NAB business and ANZ consumer confidence that together overshadowed an uptick in the former’s gauge of conditions. Aud/Usd has fallen through 0.6950 and Aud/Jpy is down through the 200 HMA (75.64), while the Aud/NZD cross is breaking below 1.0500 again or testing bids/support at the psychological level even though the Kiwi is also retreating further vs its US counterpart and only just holding above 0.6600.

• GBP – No deal Brexit risk and the prospect if not distinct probability of more bleak UK data on Wednesday have piled further pressure on the Pound as Cable slides to a fresh 6 month low and through the 1.2481 base posted last Friday. 1.2450 may offer Sterling some reprieve, though in truth there is little in terms of technical levels until 2019 troughs seen in early January around 1.2435-39 ahead of big option barrier defences lying at 1.2400.
• CAD – The Loonie has declined through 1.3100 ahead of Canadian housing data and tomorrow’s BoC policy meeting, with little support derived from firm crude prices or the fact that Canada has been excluded from US tariffs on fabricated structural steel imposed on China and Mexico.
• EUR/JPY – Also weaker vs the Dollar as the single currency dips through 1.1200 and nearer short term support around 1.1180-70, while the Yen retreats closer to 109.00 and tests a major Fib just ahead of the big figure at 108.92 (38.2% retracement of the move from 112.40 to 106.78).
• EM – Broad weakness vs the Buck, but the Lira is outperforming or holding up better than regional peers in wake of its more pronounced declines on Monday due to CBRT personnel changes and investor angst over the loss of independence/credibility. Usd/Try sitting tight within a 5.7450-7230 range in contrast to Usd/Zar up above 14.2300 and Usd/Rub over 63.8800.

In commodities, WTI and Brent futures have been choppy this morning, with initial weakness seen in-line with this morning profit warning driven poor stock performance. However, the complex is now in positive territory and towards the top end of the day’s range following industry sources state that Russia’s July 1st-8th oil output fell by 3%; which provided a bullish catalyst for oil on an day of relatively light newsflow for the complex thus far. Looking ahead, we have the weekly API release are expectations are for a headline draw of around 2.5mln; in addition, the EIA release their Short Term Energy Outlook which this month contains their Expanded Forecast Discussion at 17:00 BST, with the API and OPEC reports to follow later on in the week. Gold (-0.7%) is subdued as the yellow metal failed to hold onto the USD 1400/oz mark overnight, and is now towards the session low of USD 1388/oz as the dollar continues to strengthen and extend on its post-NFP gains. Separately, Copper prices are moving towards their lowest level in around 3 weeks on the risk-averse tone and ahead of the week’s key risk events of Powell’s dual testimony.

US Event Calendar

• 6am: NFIB Small Business Optimism, 103.3, est. 103.1, prior 105
• 8:45am: Fed’s Powell gives opening remarks on stress tests
• 10am: JOLTS Job Openings, est. 7,473, prior 7,449
• 10:10am: Fed’s Bullard to Make Welcoming Comments in St. Louis
• 2pm: Fed’s Quarles speaks on stress tests in Boston
• 2:20pm: Fed’s Bostic Speaks at Washington University in St. Louis

DB’s Jim Reid concludes the overnight wrap

As I’m sure you all will have seen, Deutsche Bank has announced a major transformation of its business to refocus on its core strengths. In light of this, we just wanted to make sure that everyone was aware that DB Research will remain at the forefront of the firm. As well as FIC, Macro, QIS, Data Science, and Thematic research, DB is still committed to providing extensive and top-quality Company Research coverage in Europe and the US. DB will combine Equity Research and Research Sales into a newly formed Company Research and Advisory Group to strengthen ongoing connectivity with institutional clients. So if you are a consumer of any of our research and have any questions, please let us know and we can try to answer them.

Aside from that and trying to avoid the world’s media when going to lunch, it hasn’t been a big 24 hours for headlines with markets in the twilight zone between last Friday’s employment report and tomorrow’s testimony from Powell. That will be followed by the minutes of the Fed’s June policy meeting later tomorrow and the second day of Powell’s testimony on Thursday. Our US economics team has a nice preview of what to watch for at these various events available here . We’ll be looking out for his comments on several important topics which have evolved since the last FOMC meeting, namely the trade war de-escalation, the strong jobs report, and still-low inflation expectations.

Back to the quiet markets, where last night’s -0.48% decline for the S&P 500 came with volumes around 25% below average and with the move driven by a bit of weakness in the tech sector. Indeed the NASDAQ ended -0.78% while the semi-conductor index shed -0.77%. This was after markets in Europe were a bit more tempered with the STOXX 600 down a very modest-0.05%.

Overnight one of the key headlines has been the U.S. Commerce Department announcing that it would apply duties ranging from 30.3% to 177.43% on Chinese imports of fabricated structural steel and an up to 74.01% duty on those from Mexico as the department found that both the countries are unfairly subsidising the product. The ruling is preliminary in nature and a final determination on the finding is scheduled on or about November 19. Imports of fabricated structural steel from China and Mexico in 2018 were valued at an estimated $897.5mn and $622.4mn respectively. In the greater scheme of things this is relatively small but the optics are bigger given the tense stage of trade negotiations between the US and China. The Mexican peso is down -0.20% this morning while, the Chinese onshore yuan is trading unchanged at 6.8822. Meanwhile, the US State Department has approved a possible US arms sale to Taiwan for an estimated cost of about $2.2bn. The move is not likely to go down well with China at a delicate stage of trade negotiations.

This morning in Asia markets are largely heading lower following Wall Street’s lead with the Hang Seng (-0.80%), Shanghai Comp (-0.57%) and Kospi (-0.17%) all down. The Nikkei (-0.04%) is trading flattish after erasing earlier gains. Elsewhere, futures on the S&P 500 are down -0.40%.

In other news, Hong Kong Chief Executive Carrie Lam said that the controversial legislation that would allow extraditions to China was “dead,” however, she fell short of saying she would withdraw the bill after weeks of protests. Elsewhere, here in the UK, The Times has reported that Philip Hammond has told UK PM May that he would fund her legacy plans as a trade-off for her allowing Tory MPs free votes on efforts to stop a no-deal Brexit.

Getting back to markets, after the big moves in bond markets on Friday afternoon after the strong payrolls, Treasuries opened stronger but faded throughout the session to end the session a few basis points weaker. Ten-year yields eventually closed +1.6bps but are -1.3bps this morning to complete the round trip. Two-year yields underperformed, with yields up +2.9bps to their highest level in a month, sending the 2s10s curve -0.9bps flatter at 15.9bps. That actually means that the curve is now back to being the flattest since the end of May which is a little concerning. However, for now we’re just back to the bottom of the January-to-May range before we steepened up over the last c.6 weeks. As for Fed pricing, there’s still 24.5bps of cuts priced in for the FOMC meeting at the end of this month down from low 30bps before payrolls. A 50bps cut is now clearly being priced out.

The highlight in bond markets in Europe yesterday was Greece where 10y yields rallied as much as -13.4bps to 2.013% post the election result from the weekend, before moderating during the afternoon to end the session -5.1bps lower at 2.096%. That briefly brought 10y Greek yields to below 10y Treasuries for the first time since 2007, though they ended the session +4.7bps above the US benchmark. As for the rest of Europe, Bunds closed a touch lower at -0.366% while BTPs were +4.0bps higher in yield at 1.785% with most of the move coming at the end of the day following the announcement that Italy is looking to tap a 50y bond. This is a good time to highlight a note from Michal Jezek in my team which looked at negative yields in the EUR corporate bond market amongst other things. A couple of stats from the note stand out. One is that, based on where the Austria 100y bond is priced, Michal thinks Germany would likely be able to issue a 100y bond with a nominal yield around 0.7%. For my eyes, that’s getting close to a zero percent perpetual! Another is that one-third of EUR IG and a third of 1-2y EUR BBs now yield less than zero. See the full note for a lot more here .

In EM, the main talking point was Turkish assets where the Lira slid -1.87%, local 10y yields rose +74.5bps and Turkish equities fell -0.94% (although it did pare heavier losses) following the news we discussed yesterday morning that President Erdogan has dismissed central bank governor Cetinkaya over the weekend. To be fair the fallout in EM was contained only really to Turkey, with a basket of EM FX just -0.16% weaker and the MSCI EM equity index finishing -0.61%.

In other news, the ECB’s Coeure yesterday ruled himself out of the running for the top role at the IMF having been mooted as a potential successor to Lagarde. As for ECB policy, and the outlook in Europe itself, Coeure highlighted the slowdown in global activity and “significant” global risks which he therefore suggested “need an accommodative monetary policy more than ever” and that the ECB is “ready to react if new negative downside risks materialize”.

Finally, as for the data yesterday which didn’t really move the dial at all, German industrial production in May rose a little bit less than expected (+0.3% mom vs. +0.4% expected) while the May trade data revealed that exports rose +1.1% mom (vs. +0.9% expected) and imports surprisingly declined -0.5% mom (vs. +0.3% expected). Elsewhere, the sentix investor confidence reading for the Euro Area in July fell to -5.8 from -3.3 in June. That compares to expectations for a rise to +0.1, taking this month’s reading to its lowest since November 2014. In the US, the May consumer credit reading revealed a $17.1bn expansion in lending, roughly matching the recent trend, which has been healthily above the average of around $11bn. Separately, the NY Fed released its latest monthly survey of consumer inflation expectations. At the three-year horizon, they ticked up to 2.66% for June from a two-year low of 2.59%.

To the day ahead now which is a very quiet one for data with nothing of note in Europe and only the June NFIB small business optimism reading and May JOLTS report due in the US. It’s a busier day for Fedspeak with Powell due to make opening remarks at a conference on stress testing at which Quarles is also due to speak later. Meanwhile Bullard and Bostic are also due to speak separately while over at the ECB we’re due to hear from Visco, Villeroy and Lane at various stages.

via ZeroHedge News https://ift.tt/32i50Fp Tyler Durden

Blain’s Morning Porridge, submitted by Bill Blain of Shard Capital

“All the ducks are swimming on the water, fal di ral di ri do…”

Get ready for a long nervous summer.

Stock Markets were mildly upset by last week’s strong US employment report – but the ducks look to be swimming back into line. We’ll be listening carefully to what Fed speakers say this week – most likely they will remain dovish rather than rule out the ease cycle markets are praying for and Trump is demanding. As it looks likely the UK has plunged into negative growth over the last few months, the BOE will also join the easing queue. How smug will Carney be when he announces it? And Europe? Draghi has already promised the kitchen sink will be thrown at flatline growth… The ECB is likely to ease rates and resume its bond buying programme as early as September according to some analysts.

All of which means the next couple of summer months are going to be about avoiding treading gingerly to avoid triggering any of the major cluster-ouches that could ruin the holidays. We have to wait out the dog-day season for central banks to ease and restart the party. There are plenty of landmines the market might blunder into. Some of the visible threats to market calm include: Iran, US/UK relations in the wake of the ambassadorial betrayal (the leaks were from Tory Brexiteers), the prospects for real (as opposed to G20 posturing) China/US engagement, or US/Europe trade.

However, it’s the “no-see-ems” that cause most trouble in quiet markets. A big upside shock could be the Fed surrendering and easing early despite the strong numbers. That could be interesting – such a surprise would certainly push the market higher. (It would also confirm my belief the Fed has been taken over by the Pod People and markets are doomed to eternal distortion.)

Downside shocks could come from anywhere – a foolish Trump Twitterstorm, something in Europe, or how about a constitutional crisis in the UK. Summer sentiment can be a fickle thing. I still reckon Hong Kong is the place to be watching – and a bit surprised to read this morning its UK Policemen who are in senior positions at the head of the Royal Hong Kong Police Force. That can’t be an easy job. 

The bottom line – when it’s too quiet out there, it’s time to make sure you hard hat is in easy reach…

Bank in Yoorp…

Yesterday, we saw the all-too-familiar sight of bankers departing a sinking ship clutching pathetic boxes of possessions. Some banks die fast, some die hard and slow… some explode while others splutter on into the equivalent of banking dementia. Sadly, that’s true of too many European banks. I can understand the thinking behind folk buying that have been buying recent high-yielding European Tier 1 CoCos – delusional perhaps to think banks of the quality of MPS and Pireaus will qualify for too-big-to-fail.. but they’ve lasted this long… so maybe they are investable despite their dubious records.

The stock price action on Deutsche Bank said it all yesterday – 10% down on the latest and biggest slashing restructuring plan. But it got me thinking. Deutsche Bank lost its way in Investment banking the moment it lost its self-confidence and became scared of becoming a major global player. As soon as the staff realised it, they lost interest. Bad markets didn’t help, but the speed at which Deutsche’s position in markets crashed was extraordinary and a function of failed top management. After nearly 35 years in markets, I’ve seen it and lived it, all before…

When I was just a young investment banker I ended up with the Germany beat – despite not speaking a word of the language. I had to learn all about their multiple layered banking system and the quirks of the system, for instance; the stability of Pfandbrief financing (“Since pfandbreif laws were enacted, not a single bond has defaulted” which covered up the fact they were set up because so many banks defaulted before!) I learnt there were thousands of banks, and except for the big three (DB, Commerz and Dresdner), were all parochial players. I loved covering the German banks – they were good people, great fun and engaging. Sadly, and I’m sorry to say this, they aren’t particularly good bankers. Not their fault.

For a start their experience pool was far too shallow – you couldn’t learn in Frankfurt or Munich in a lifetime what my experiences in London and New York gave me in just a few years. And they learnt all the wrong things. While Germans are superb engineers, markets are not an engineering science, and they weren’t trained with the nimbleness of thought required to understand that. You might say something similar about some French banks – superb mathematicians and derivative quants, but lacking the intuitive feel for deals, people and markets that makes the Americans so much luckier – luck and understanding is something you make and learn for yourself.  

What is so wrong with German banking? If you call up the biggest most spectacular banking explosions you won’t find many German banks on the list – but their losses and subsequent costs to the German tax-payers of their public banks (the Landesbanken, Sparkassen and IKB ) over the past 10-years have been as extraordinary as the better known Lehman cardiac or the long-drawn out saga of RBOS. I could go through the names and remember their faces, but its not necessary.

Germany’s banks have come croppers on just about everything: losing money in structured debt and ABS in the US, Greek debt, property and covered bonds in Europe, shipping and investments in Austrian banks. Their market is fractured into small localities. That’s the reason Deutsche Bank became a global bank in the first place – because its domestic market was too difficult, parochial and impossible. Yet, that’s where it’s going back to? That’s madness. And that’s why the stock price is where it is.. Down 94% from its peak at $91.63 in May 2007 to $6 today.  Walk away and don’t look back..

Before I run off, let me remind readers I published a new book over the weekend – The Fifth Horseman. (The link takes you to the Amazon Kindle page.) It’s a Polemic: who to blame for the ongoing destruction of the global economy. Most market histories are awfully dull affairs, so I tried to make this more interesting: Hell’s Top Banker, TJ Wormwood, managed the global crisis of 2007/08. It’s been so successful he’s looking to extend the programme. His latest “wheeze” to keep up the fear and uncertainty is to introduce a new Fifth Horseman of the Apocalypse – “Financial Meltdown”.

For less than the price of a couple of pints, you can have great read about why the markets are so distorted today…

via ZeroHedge News https://ift.tt/2JyFzqH Tyler Durden

Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin are about to lose out on another important milestone to Richard Branson’s Virgin Galactic: First space tourism company to go public.

According to Reuters, Virgin is planning an IPO as part of a deal with a special purpose acquisition company created by Social Capital CEO Chamath Palihapitiya.

SPAC’s typically have two years to raise money from investors and spend it to help take a company public.

The SPAC will reportedly invest about $800 million for a 49% stake in Virgin Galactic, according to the Wall Street Journal. That includes about $100 million that Palihapitiya is personally committing to the deal. Virgin’s existing investors will be left with a 51% stake, will retain control of the company.

Virgin has already collected some $80 million in deposits from customers who hope to be among the first tourists traveling to space, at a clip of $200,000 to $250,000 per seat. The company has raised $1 billion since 2004, mostly from Branson’s personal fortune.

Branson will be among the first travelers, and plans to be the first non-crew member to board the plane.

“Hopefully, in not many months’ time, I’ll fulfill my dream of going to space and others will soon follow,” Branson said earlier this year, according to CNN.

Meanwhile, Jeff Bezos’ Blue Origin expects to launch its first person into space by the end of the year.

SpaceX, which has focused more on launching satellites and resupply missions to the International Space Station, also plans to send tourists into space.

via ZeroHedge News https://ift.tt/2JoErHa Tyler Durden

At the end of the day, all of the frenzied whispers in the press about Deutsche Bank CEO Christian Sewing’s sweeping restructuring hardly did it justice. Instead of moving slowly, the bank started herding hundreds of employees into meetings with HR, first in its offices in Asia (Hong Kong, Sydney), then London (which got hit particularly hard) then New York City.

By some accounts, it was the largest mass banker firing since the collapse of Lehman, which left nearly 30,000 employees in New York City jobless. Although the American economy is doing comparatively well relative to Europe, across the world, DB employees might struggle to find work again in their same field.

According to Bloomberg, automation and cuts have left most investment banks much leaner than they were before the crisis, and the contracting hedge fund industry, which once poached employees from DB’s equities business, isn’t much help. Some employees will inevitably find their way to Evercore, Blackstone – boutique investment banks and private equity are two of the industry’s top growth areas – or family offices, which, thanks to the never-ending rally in asset prices (and the return of bitcoin), are also booming.

Oh, and of course, there’s always crypto. Some evidence has surfaced to suggest that many young bankers are already looking to make the leap.

For the highest-paid employees being let go this week, many will need to get used to lower pay. Some 1,100 ‘material risk takers’ have been let go. On average, they earned $1.25 million, with almost 60% of that in cash.

“A lot of these people are going to have to get used to less compensation,” said Richard Lipstein, managing director at recruiting firm Gilbert Tweed International, in a telephone interview. And “the percentage of compensation in cash is lower than it used to be.”

Many will need to leave the street, and possibly whatever city in which they are currently living, to find work elsewhere.

“A lot of the people coming out of DB are going to be very challenged to find jobs just because of the sheer change in the equity business,” said Michael Nelson, a senior recruiter at Quest Group. “When you are dispersing that many people globally, some of those people might have to leave the business.”

But although banking headcount has never returned to its pre-crisis levels…

…at least one major Wall Street institution is looking to hire some Deutsche people: Goldman Sachs.

While BBG’s piece on the layoffs focused on the difficulty these employees may face in finding new work, Reuters described the scene outside these offices, where one insider had warned about “Lehman-style” scenes.

Some presumably fired workers could be seen outside, taking photos with colleagues and splitting cabs, presumably to go to the nearest pub and quaff liquor, beer and prosecco.

Staff leaving in Hong Kong were holding envelopes with the bank’s logo. Three employees took a picture of themselves beside a Deutsche Bank sign outside, hugged and then hailed a taxi.

“They give you this packet and you are out of the building,” said one equities trader.

“The equities market is not that great so I may not find a similar job, but I have to deal with it,” said another.

After weeks of looming dread, employees were called into auditoriums, cafeterias and offices, handed an envelope with the details of their redundancy package, and shown the door.

It looks like Reuters’ reporters followed some of the employees at DB’s London office to the nearest pub.

Few staff wanted to speak outside the bank’s London office, but trade was picking up at the nearby Balls Brothers pub around lunchtime.

“I got laid off, where else would I go,” said a man who had just lost his job in equity sales.

Job cuts were limited to the offices in the bank’s main financial centers. Reuters discovered that even some employees in Bengaluru had received envelopes.

A Deutsche Bank employee in Bengaluru told Reuters that he and several colleagues were told first thing that their jobs were going.

“We were informed that our jobs have become redundant and handed over our letters and given approximately a month’s salary,” he said.

“The mood is pretty hopeless right now, especially (among)people who are single-earners or have big financial burdens such as loans to pay,” he added.

Sewing’s grand restructuring plan involves shutting down Deutsche’s entire lossmaking global equities business, cutting 18,000 jobs (roughly one-fifth of the bank’s total headcount) and hiving off €288 billion ($322 billion) of loss-making assets into a bad bank for sale or run-off. The goal of the restructuring is to reorient DB away from its troubled institutional business and more toward commercial banking and asset management.

As a JP Morgan analyst pointed out, questions linger over DB’s ability to grow, its “ability to operate a corporate franchise without a European equity business.”

Investors were also taken by surprise, which is probably why DB shares sold off again on Tuesday. Closing the bank’s European equity business as a radical step that few anticipated. Most of the leaks to the media seemed to suggest that the cuts would focus on its foreign business, particularly the troubled US equities unit.

But without an equities business, some clients might lose faith in DB’s ability to win business from large corporations. Then again, there’s also the sheer enormity of what the bank is trying to do: substantially grow revenues while cutting a huge chunk of its staff and closing whole businesses, some of which are synergistic with other businesses that will remain open.

As Daniele Brupbacher of UBS pointed out, the odds of success seem low: “Cutting costs by one-quarter while increasing revenues by 10 per cent over four years in the current market environment, while undergoing massive restructuring, could be seen as ‘challenging.'”

Restructuring costs are also probably weighing on shareholders’ minds: the restructuring is expected to produce a full-year loss.

Will corporate bank head Stefan Hoops succeed in doubling GTB’s pretax earnings to €2 billion over the next 2 years, and make a tangible return on equity of 15% by 2022? We guess it’s possible. We suppose it’s possible. But is it likely

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Authored by Daniel Lacalle,

The appointment of Christine Lagarde as president of the ECB has been greeted with euphoria by financial markets. That reaction in itself should be a warning signal.

When risky assets soar in the middle of a huge bubble due to a central bank appointment, the supervising entity should be concerned.

Lagarde is a lawyer, not an economist, and a great professional, but the market probably interprets correctly is that the European Central Bank will become even more dovish. Lagarde, for example, is a strong advocate of negative rates.

Lagarde and Vice President De Guindos have warned of the need to carry out measures to avoid a possible financial crisis, proposing different mechanisms to mitigate the shocks created by excess risk. Both are right, but that search for mechanisms to work as shock buffers runs the risk of being sterile when it is the monetary policy that encourages excess. When the central bank solves a financial crisis by absorbing the excess risk that the market once took it does not reduce it, it only disguises it. 

Supervisors ignore the effect of risk accumulation because they perceive it as necessary collateral damage to the recovery. Risk accumulates precisely because it is encouraged. 

Draghi said that monetary policy is not the correct instrument to deal with financial imbalances and macroprudential tools should be used. However, it is the monetary policy which is causing those imbalances when an extraordinary, conditional and limited measure becomes an eternal and unconditional one.

When monetary policy disguises and encourages risk, macroprudential measures are simply ineffective. There is no macroprudential measure that mitigates the risk created by negative rates and almost three trillion of asset purchases. More than half of European debt has negative returns and the ECB must maintain the repurchase of maturities, injections of liquidity and even announce a new program of quantitative easing in the face of the lack of sufficient demand in the secondary market for those negative yielding bonds. That is a bubble.

Risk builds up slowly and happens instantaneously. That is what the central planner does not seem to want to understand and the reason why stress tests and macroprudential measures fail in the midst of monetary stimuli. Because they start from a fallacious base: Ceteris paribus and that the already accumulated imbalances are manageable.

When most Eurozone countries finance themselves at negative rates for up to seven to ten years, there is no reason to maintain current rates and stimuli.

The central planner can say that bond yields are low due to market demand, but when the Central Bank supplants the market by injecting, repurchasing maturities and announcing more monetary stimuli, the placebo effect in the real economy is imperceptible and the risk in financial assets is huge. The huge injection of money supply goes to other risk assets in search of a diminishing yield.

The eurozone has been in stagnation for several months, with many leading indicators worsening, and it is not due to lack of stimulus, but due to excess. 

1. 64% of the sovereign debt of the eurozone hs negative yields. Five trillion euros . Completely unjustified looking at solvency, liquidity or growth ratios.

2. Junk bonds are at the lowest yield in thirty years, while the rating agencies warn that the solvency and liquidity ratios have not improved. The BIS warned of the increase of zombie companies, eternally refinanced at low rates despite not being able to cover their interest expenses with operating profit. Meanwhile, companies on the verge of bankruptcy are financed at rates of 3.5-4%.

3. The multiples paid for infrastructure assets have soared in little more than half a decade and now no one is surprised to see 19 times EBITDA paid for assets driven by low rates and cheap debt.

4. Excess liquidity reached 1.2 trillion euros. It has multiplied sevenfold since the launch of the repurchase program.

5. The debt of non-financial companies in the eurozone remains above 78% of GDP, according to Standard and Poor’s, above the cycle maximum of the fourth quarter of 2008.

Many say that nothing has happened yet, although it is more than debatable, according to bankruptcies of financial entities and increase of zombie companies. However, the fact that there has not been a massive financial crisis yet does not mean that the bubble is not being inflated. And when that bubble is in several assets at once, there are no macroprudential measures to cover the risk.

The problem of central planners is one of diagnosis. They think that if credit does not grow as much as they think it should grow and investment and growth are not what they estimated, it is because more stimulus is needed. Many ignore the effect of overcapacity, excess debt and demographics while carrying out the greatest transfer of wealth from savers and the productive economy to the indebted.

Calls for prudence and risk analysis measures would be much more effective if misallocation of capital was not encouraged by the policy itself. We must be aware that lower rates and more liquidity will not improve the economy, but they may generate a dangerous boomerang effect on risk assets.

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Facebook activity among Britons has crashed by more than one third over the past 12 months, according to the analytics firm Mixpanel, first reported by The Daily Telegraph.

Since June 2018, several months after news of the Cambridge Analytica scandal was revealed, activity on Facebook’s mobile app in the UK dropped 38% through June 2019.

User clicks on web links or adverts inside the Facebook app declined in seven of the last 12 months, with an average monthly drop of 2.6%.

The alternative data outlines an entirely different story from Mark Zuckerberg, the chief executive of Facebook, who recently said Europe’s monthly active users continued to rise.

Investors have traditionally viewed the total number of users as a reliable metric of the social media company’s health, but with millions of fake accounts, many have turned to alternative data that shows a mass exodus of users started in the UK.

Last July, $120 billion was wiped off Facebook’s market value after it reported an unexpected drop in European users and shifted guidance about future growth lower.

Zuckerberg said last October that users in the US have plateaued and that future growth for the company would come from emerging markets. 

Mixpanel’s data, also, estimates how users open web pages or services on Facebook, provided another form of alternative data that serves as a proxy of user activity.

Matti Littunen, a social media expert at Enders Analysis, questioned the alternative data – didn’t believe the figures represented an accurate view of Facebook users’ activity across the UK, due to his belief that Facebook’s usage data showed an uptick. Instead, Mixpanel’s data could reflect changes in advertising tactics, he said.

Littunen said if usage does begin to fall – advertising prices will start to rise as firms compete for smaller audiences, leading advertisers to shift ad money elsewhere.

“Facebook has reached a very high level of user saturation in the core markets like the US and the UK, meaning that they have little margin for error before engagement drops from the peak,” he said.

“If Facebook usage were to drop by a third, Instagram would have to double in size to make up for it.

“No messaging app has supported a multi-billion dollar advertising business so far, so WhatsApp and Messenger would not be able to make up for a major shortfall.“

In a separate report, advertising research firm eMarketer said in May that users had spent an average of three minutes less on Facebook in 2018 than they did in 2017.

“On top of that, Facebook has continued to lose younger users, who are spreading their time and attention across other social platforms and digital activities,” eMarketer said.

Another Mixpanel report shows likes, shares, and posts have fallen 20% since April 2018.

The decline in Facebook activity by Brits coincided with privacy and hate speech scandals throughout 2018. In September, the company disclosed that a security breach exposed 50 million accounts – further deterring users from using the social media platform. 

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Authored by Raju Huidrom, Carlos Mulas-Granados, Laura Papi, and Emil Stavrev of the IMF Blog

The Czech Republic exports only a small number of cars and car parts directly to the United States, but it’s likely to suffer significant economic damage if that country were to impose tariffs on auto imports. The reason: the Czech Republic supplies parts that are used to build cars exported by other European countries.

Europe’s auto industry is one of many that are part of global value chains, in which different stages of manufacturing are dispersed among several countries. Because almost 70 percent of European exports are linked to value chains, tariffs imposed on products shipped by one country can affect many others. That is why, as we explain in a recent study, it’s important to view manufacturing through the prism of value chains when assessing the potential economic impact of tariffs or other economic shocks.

Two yardsticks

To do that, we need to distinguish between two yardsticks: gross value and value added. When a German resident buys a Volkswagen shipped from a factory in Bratislava, the purchase is recorded in gross terms as a Slovak export to Germany. But though that car was assembled in Slovakia, engine parts and other components came from third countries that provide a higher share of the value added to the final product than assembly does.

Distinguishing between traditional gross export measures and valued-added exports is especially important for Europe because the difference between the two is large; exports of other European countries to Germany are 8.3 percent of GDP in gross terms but only 2.9 percent of GDP in value-added terms.

To understand the importance of value-added measures, consider a scenario in which the United States imposes a 25 percent tariff on imports of cars and car parts. Gross exports of cars and parts from the European Union to the United States are 0.3 percent of EU GDP. The subsequent output loss for the EU is estimated at 0.1 percent of GDP, taking supply chain linkages into account. But only half the impact is in sectors and countries directly affected. The rest is transmitted via other sectors and trading partners along supply chains. Losses are distributed across more European countries than gross export data would suggest.

Let’s return to the case of the Czech Republic. Its direct exports of cars and parts to the United States are negligible in gross value terms. But in value added terms, the Czech Republic would rank fourth among European economies most hurt by car tariffs.

Our study also looked at how a big change in the pace of growth in the United States, China, or Germany—the three world trade hubs—would affect Europe through value chains. Our main conclusion was that growth spillovers from the United States and China are sizable, with larger effects on economies that are more exposed to them in terms of value-added exports.

On the other hand, we estimated that a growth shock that originates in Germany would have a smaller impact. This probably reflects the German economy’s smaller size relative to the United States and China. Also, Germany’s open and diverse economy is relatively resilient, so it was not a major source of independent shocks in the post-1995 period that we analyzed. Still, Germany could transmit shocks originating elsewhere, and its impact might be larger if growth were to be driven more by domestic demand. That was the case during the period around the reunification of East and West Germany in 1990.

These findings could be helpful for policymakers: measuring exports through value-added indicators gives a more precise picture of the distributional impact of potential trade shocks. And a better understanding of how trade shocks propagate through value chains could help formulate offsetting measures as well as policies to help the people who most likely to be affected.

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After White House Senior Advisor Jared Kushner unveiled his highly anticipated plan for peace in the Middle East during a two-day economic workshop in Bahrain, it was greeted with derision and exasperation by Arab leaders. The Palestinian leadership boycotted the event while a long list of commentators from Arab countries described the plan as “a colossal waste of time” and “dead on arrival”.

In fact, as Statista’s Niall McCarthy notes, new polling from the Palestinian Center for Policy and Survey Research has found that nine in ten Palestinians do not trust the goals of the plan.

You will find more infographics at Statista

Instead of focusing on the deadlocked political situation, Kushner instead focused on economics, intending to invest $50 billion to fund 179 regional infrastructure projects over the coming decade. $27.6 billion would go to the West Bank and Gaza with the remainder going to Jordan, Egypt and Lebanon.

The primary goal of the plan is to allow the Palestinian territories to better access international markets while simultaneously improving key infrastructure such as electricity, water and telecommunications. That would see Palestinian GDP double over the next ten years, generate an estimated one million jobs and halve the poverty rate. The U.S. and Israel would not be responsible for the funding – the Bahrain workshop aimed to raise capital from across the Arab world. As the polling shows, however, an economic plan totally lacking a political dimension is certainly not being viewed as realistic by Palestinians.

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Authored by Soeren Kern via The Gatestone Institute,

• German Defense Minister Ursula von der Leyen, nominated to be the next President of the European Commission, has called for the creation of a European superstate. “My aim is the United States of Europe…” she said in an interview with Der Spiegel. She has also called for the creation of a European Army.

• Belgian Prime Minister Charles Michel, nominated to be the next President of the European Council, has said that Eastern European countries opposed to burden-sharing on migration should lose some of their EU rights. He is also a strong proponent of the Iran nuclear deal.

• Spanish Foreign Minister Josep Borrell, nominated to replace Federica Mogherini as High Representative of the Union for Foreign Affairs and Security Policy, is a well-known supporter of the mullahs in Iran. Borrell has also said that he hopes Britain will leave the EU because it is an impediment to the creation of a European superstate.

• International Monetary Fund Managing Director Christine Lagarde, nominated to be the next President of the European Central Bank, has supported U.S. President Donald J. Trump’s trade war with China. “President Trump has a point on intellectual property. It is correct that nobody should be stealing intellectual property to move ahead…. On these points clearly the game has to change, the rules have to be respected.”

• “The best cure for Europhilia is always to observe the EU’s big beasts at their unguarded worst… unencumbered by any attachment to democracy, accountability or even basic morality… [W]e witnessed rare footage of the secretive process that propels so many retreads and second-rate apparatchiks into positions of immense power in Brussels and Frankfurt, utterly disregarding public opinion…. Everything that is wrong with the EU was shamelessly on display.” — Allister Heath, The Telegraph.

German Defense Minister Ursula von der Leyen, nominated to be the next President of the European Commission, has called for the creation of a European superstate. “My aim is the United States of Europe…” she said in an interview with Der Spiegel. She has also called for the creation of a European Army. Pictured: Von der Leyen (left) is welcomed by outgoing European Commission President Jean-Claude Juncker at the Commission’s headquarters on July 4, 2019 in Brussels, Belgium. (Photo by Thierry Monasse/Getty Images)

After weeks of frenzied backroom wrangling, European leaders on July 2 nominated four federalists to fill the top jobs of the European Union. The nominations — which must be approved by the European Parliament — send a clear signal that the pro-EU establishment has no intention of slowing its relentless march toward a European superstate, a “United States of Europe,” despite a surge of anti-EU sentiment across the continent.

Following are brief profiles of the nominees for the top four positions in the next European Commission, which begins on November 1, 2019 for a period of five years.

Ursula von der Leyen, President of the European Commission

German Defense Minister Ursula von der Leyen, the daughter of a prominent EU official, has been nominated to replace Jean-Claude Juncker as the next president of the European Commission, the powerful bureaucratic arm of the European Union. Von der Leyen, of the center-right Christian Democratic Union (CDU), was a compromise choice after the candidacy of Manfred Weber, a favorite of German Chancellor Angela Merkel, was rejected by critics, led by French President Emmanuel Macron.

Macron had favored the candidacy of European Commission Vice President Frans Timmermans, a Dutch Social Democrat. Timmermans, however, was rejected by the Visegrád Group — the Czech Republic, Hungary, Poland and Slovakia — due to his frequent criticism of their stance against mass migration and judicial reforms.

Von der Leyen has called for the creation of a European superstate. “My aim is the United States of Europe — on the model of federal states such as Switzerland, Germany or the U.S.,” she said in an interview with Der Spiegel. She has also called for the creation of a European Army.

At the same time, however, von der Leyen has been roundly criticized at home and abroad for her performance as German defense minister. During her tenure, Germany’s military has deteriorated due to budget cuts and poor management, according to Parliamentary Armed Forces Commissioner Hans-Peter Bartels.

“The Bundeswehr’s condition is catastrophic,” wrote Rupert Scholz, who served as defense minister under Chancellor Helmut Kohl, days before von der Leyen was nominated to the EU’s top post. “The entire defense capability of the Federal Republic is suffering, which is totally irresponsible.”

Writing for the Munich-based newspaper Süddeutsche Zeitung, commentator Stefan Ulrich opined that von der Leyen is an “unsuitable” choice:

“Von der Leyen is unsuitable because after six years as defense minister the Bundeswehr is still in such a deplorable state. She should have resigned a long time ago. As President of the European Commission, she will be overwhelmed.”

In March 2016, von der Leyen was cleared of allegations of plagiarism in her doctoral thesis. In September 2015, the newsmagazine Der Spiegel reported that plagiarized material had been found on 27 pages of her 62-page dissertation. The president of the Hanover Medical School, Christopher Baum, said that although von der Leyen’s thesis did contain plagiarized material, the school decided against revoking her title because there had been no intent to deceive. “It’s about mistake, not misconduct,” he said.

Von der Leyen is currently being investigated by the Berlin Public Prosecutor’s Office for nepotism in connection with the allocation of contracts worth hundreds of millions of euros to outside consultants. One such firm is McKinsey & Company, where her son David works as an associate.

Former European Parliament President Martin Schulz tweeted: “Von der Leyen is our weakest minister. That’s apparently enough to become Commission president.”

A Deutschlandtrend survey published on July 4 found that 56% of Germans believe that von der Leyen is not a good choice to lead the European Commission; 33% said that she is a good choice.

The European Parliament will vote on her nomination in Strasbourg on July 16. If approved, she will take over from Jean-Claude Juncker on November 1.

Charles Michel, President of the European Council

Belgian Prime Minister Charles Michel, the son of a prominent EU official, has been nominated to succeed Poland’s Donald Tusk as President of the European Council. The European Council defines the EU’s overall political direction and priorities. The members of the European Council are the heads of state or government of the 28 EU member states, the European Council President and the President of the European Commission.

Michel became Belgium’s youngest prime minister in 2014 at the age of 38. In December 2018, he resigned after losing a no-confidence motion over his support for the UN Global Compact for Safe, Orderly and Regular Migration. It proclaimed basic rights for migrants, but critics said it would blur the line between legal and illegal immigration. He now heads a caretaker government after an inconclusive general election in May 2019.

Michel has said that Eastern European countries opposed to burden-sharing on migration should lose some of their EU rights. “The European Union is not only an ATM when you need support,” he said. “Cooperation means solidarity and responsibility.”

Michel is a strong proponent of the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). He has criticized the Trump administration for withdrawing from the agreement: “No #IranDeal means more instability or war in the Middle East. I deeply regret the withdrawal by @realDonaldTrump from #JCPOA. EU & its international partners must remain committed and Iran must continue to fulfil its obligations.”

Michel has also condemned the Trump administration’s recognition of Jerusalem as the capital of Israel. “We know that tensions in Israel and Palestine are feeding a form of hatred and violence that is felt everywhere in the world. That’s why we have unequivocally condemned Donald Trump’s statement. It was oil on fire, we do not need it.”

Josep Borrell, EU Foreign Policy Chief

Spanish Foreign Minister Josep Borrell has been nominated to replace Federica Mogherini as High Representative of the Union for Foreign Affairs and Security Policy. Like Mogherini, Borrell is a well-known supporter of the mullahs in Iran and is likely to clash with the United States and Israel over the nuclear deal with Tehran.

In a February 19 interview with Politico, Borrell, a Socialist, declared that Israel would have to live with the existential threat of an Iranian nuclear bomb:

“The Americans decided to kill [the Iran nuclear deal], unilaterally as they do things without any kind of previous consultation, without taking care of what interests the Europeans have. We are not children following what they say. We have our own prospects, interests and strategy and we will continue working with Iran. It would be very bad for us if it goes on to develop a nuclear weapon…. Iran wants to wipe out Israel; nothing new about that. You have to live with it.”

On February 11, Borrell marked the 40th anniversary of the Iranian revolution by praising the achievements made by women in the country since Ayatollah Ruhollah Khomeini swept to power in 1979. The rights and status of Iranian women have, in fact, been severely restricted since the Islamic Revolution. In a Twitter thread, Borrell also encouraged the Iranian regime to wait out American sanctions in case U.S. President Donald J. Trump is not reelected in 2020.

In May 2019, Spain withdrew a warship, the frigate Méndez Núñez, from the USS Abraham Lincoln Carrier Strike Group, because of rising tensions between Washington and Tehran.

Also in May 2019, Borrell accused the United States of acting “like a western cowboy” after the Trump administration recognized the president of Venezuela’s National Assembly, Juan Guaidó, as interim president of the country. Borrell said that Spain “will continue to reject pressures that border on military interventions” to remove from power Venezuelan President Nicolás Maduro. The Spanish Socialist Party has a long history of promoting the Marxist revolutionaries led by Maduro and his predecessor, Hugo Chávez.

In November 2018, Borrell explained why the United States is more politically integrated than the European Union: “The United States has very little previous history. They were born to independence with practically no history; the only thing they had done was to kill four Indians.” He later apologized for the “excessively colloquial manner” in which he downplayed the “quasi annihilation” of Native Americans. Borrell made no mention of the destruction of the native populations of Central and South America at the hands of Spanish conquerors.

Borrell has said that “Europe needs a new leitmotiv” and that the fight against climate change “should be one of the great engines of Europe’s rebirth.”

Borrell has also stated that he hopes Britain will leave the EU because it is an impediment to the creation of a European superstate:

“I belong to the school which believes that with the UK in the EU we will never have a political union. Personally, because I do want a political union, I don’t care whether the United Kingdom leaves because I know that to date, it has been an obstacle to further integration.”

In April 2012, Borrell was forced to resign as president of the European University Institute (EUI) due to a conflict of interest after it emerged that he was simultaneously being paid €300,000 a year as a board member of the Spanish sustainable-energy company Abengoa.

In October 2016, Borrell was fined €30,000 ($34,000) by the National Securities Market Commission (CNMV) for insider trading after selling 10,000 shares in Abengoa in November 2015.

Christine Lagarde, President of the European Central Bank

Christine Lagarde, a former French finance minister the current managing director of the International Monetary Fund, has been nominated to succeed Mario Draghi as president of the European Central Bank (ECB). Lagarde’s nomination has received mixed reviews. As the head of the IMF, she brings strong credentials in leadership, management and communications. She is, however, a lawyer, not an economist, and she has no experience in monetary policy.

During an interview with the Daily Show, Lagarde said that President Donald Trump “has a point” in his trade war with China:

“President Trump has a point on intellectual property. It is correct that nobody should be stealing intellectual property to move ahead. He has a point on subsidies, you cannot just go about competing with others out there that are heavily subsidized. On these points clearly, the game has to change, the rules have to be respected.”

Financial reporter Bjarke Smith-Meyer noted that Lagarde’s nomination came as something of a surprise and “pushes the European Central Bank toward an area it’s tried to avoid in its 21-year history: politics.”

Paul Taylor, a columnist for Politico, added:

“Central banking is rocket science. If you don’t get it right, the consequences can be tragic.

“That’s why EU leaders are taking a huge gamble in their decision to entrust the leadership of the European Central Bank to Christine Lagarde, a political rock star with no economic training and no practical experience of monetary policy.

“At a time when the ECB is running low on options for jolting the economy, Lagarde may have the acumen and authority needed to persuade reluctant, conservative Germany and the Netherlands of the urgent need to provide more fiscal stimulus….

“But by nominating the former French minister to succeed Italy’s Mario Draghi — the bold president of the bank who rescued the European economy in 2012 with a promise to do ‘whatever it takes to preserve the euro’ — the EU’s leaders have effectively decided that they don’t need a central banker to run their central bank….

“The surprise choice of Lagarde, 64, was part of a Franco-German trade-off under which conservative German Defense Minister Ursula von der Leyen, 60, was nominated to head the European Commission, breaking a political deadlock in which all the original candidates fell by the wayside….

“The main reason why Lagarde got the nod, instead of the experienced French central bank chief François Villeroy de Galhau, appeared to be gender.

“For the first time, the sensitive choice of ECB chief was the adjustment variable in political horse-trading over other top EU jobs — even though the bank is meant to be strictly independent of politics.”

In December 2016, France’s Court of Justice of the Republic found Lagarde guilty of negligence for not seeking to block a fraudulent 2008 arbitration award to a politically connected tycoon when she was finance minister. The court ruled that Lagarde’s negligence in her management of a long-running arbitration case involving tycoon Bernard Tapie helped open the door for the fraudulent misappropriation of €403 million ($450 million) of public funds in a settlement given to Tapie in 2008 over the botched sale of sportswear giant Adidas in the 1990s.

Reflections on European “Democracy”

Writing for The Telegraph, columnist Allister Heath, in an essay titled, “The EU is a Sham Democracy,” noted:

“Thank you, Eurocrats, for being yourselves. The best cure for Europhilia is always to observe the EU’s big beasts at their unguarded worst, wheeling and dealing in their natural habitat, unencumbered by any attachment to democracy, accountability or even basic morality.

“The spectacle of the past few days made for compulsive watching: we witnessed rare footage of the secretive process that propels so many retreads and second-rate apparatchiks into positions of immense power in Brussels and Frankfurt, utterly disregarding public opinion.

“Peeking into Europe’s dystopia was certainly the right medicine for pre-Brexit Britain, guaranteed to convert erstwhile moderates into raging Brexiteers as they looked on, aghast, at the shocking disconnect between elites and people.

“Everything that is wrong with the EU was shamelessly on display: a Franco-German stitch-up; smaller countries being bulldozed, especially Eastern Europeans; a constitutional coup which sidelined the (useless) European Parliament; the fact that so many of the new generation of EU leaders have had brushes with the law that would have terminated their careers in the US or UK; their explicit commitment to a ‘United States of Europe’ and a ‘European army’ (about which we keep being lied to); and the singing of a national anthem we were promised wouldn’t exist when the European constitution was voted down….

“While the EU apes some of the rituals of democracy, they are a sinister sham, and will always be. The EU is a technocratic empire, and can be nothing else.”

Writing for the European media platform, Euractiv, Jorge Valero lamented:

“After five summit days and hundreds of hours of phone calls, meetings and backroom chats, the EU conclave agreed on its new leadership. But the ‘white smoke’ that emerged from the Council building preludes storm clouds for the nominees and the European demos.

“Few winners came out of the distribution of the top posts sealed on July 2, and the European democracy was hardly one of them.

“Ursula von der Leyen, Charles Michel, Josep Borrell, and Christine Lagarde have good reasons to pop the champagne and toast their unexpected elevation to Commission president, European Council chair, High Representative and ECB chief, respectively.

“But it was a high price to pay for the badly needed gender balance….

“The fresh leadership will stand in the shadow of old scandals, legal cases and malpractice. Lagarde was found guilty of negligence in the Bernard Tapie scandal. Borrell was sanctioned by the Spanish market authority for using insider information in the sale of some shares.

“The German parliament launched an investigation into von der Leyen for nepotism and irregularities in allocating expensive contracts. And Michel’s career would hardly be the same if his father hadn’t been a Belgian minister and EU Commissioner.”

The British Conservative MEP Daniel Hannon, in a tweet, summarized: “Can anyone look at the people who will be running the EU for the next five years and then try to claim that the high tide of federalism has passed?”

via ZeroHedge News https://ift.tt/2XF6kyY Tyler Durden

Authored by Matthew Ehret via OrientalReview.org,

Canadian Foreign Minister Chrystia Freeland has become a bit of a living parody of everything wrong with the detached technocratic neo-liberal order which has driven the world through 50 years of post-industrial decay. Now, two years into the Trump presidency, and five years into the growth of a new system shaped by the Russia-China alliance, the world has become a very different place from the one which Freeland and her controllers wish it to be.

Chrystia Freeland

Having been set up as a counterpart to the steely Hillary Clinton who was supposed to win the 2016 election, Freeland and her ilk have demonstrated their outdated thinking in everything they have set out to achieve since the 2014 coup in Ukraine. Certainly before that, everything seemed to be going smoothly enough for End of History disciples promoting a script that was supposed to culminate in a long-sought for “New World Order”.

The Script up until Now

Things were going especially well since the collapse of the Soviet system in the early 1990s. The collapse ushered in a unipolar world order with the European Union and NAFTA, followed soon thereafter by the World Trade Organization and the 1999 destruction of Glass-Steagall. The trans-Atlantic at last was converted into a cage of “post-sovereign nations” that no longer had actual control of their own powers of credit generation. Under NATO, even national militaries were subject to technocratic control. This cage was perfect for the governing elite “scientifically managing” from above while the little people bickered over their diminishing employment and standards of living from below.

Even though the former Soviet bloc nations were in tatters by 1992, their sovereign powers could only be undone by applying the liberalization process which took 30 years in the west in a short space of only a decade. This was done under the direction of such monetarist “reformers” such as Anatoly Chubais and Yegor Gaidar under Yeltsin. Similar privatization and liberalization reforms were applied viciously to Ukraine and other Warsaw pact countries during the same period. Those pirates that became the “nouveau riche” of the west were joined by such contemporary modern oligarchs such as Oleg Deripaska, Boris Berezovksy, Mikhail Fridman, Roman Abramovich in Russia, alongside Petro Poroshenko, Rinat Akhmetov, Mikhail Khodorkovsky and Viktor Pinchuk of Ukraine (to name a few). Not to forget their spiritual roots, many of these oligarchs soon purchased houses in the swank upmarket sections of London which has come to be known as “Moscow on Thames.”

By the end of the 1990s a new phase of this de-nationalization was unleashed with the unveiling of the Blair doctrine explicitly calling for a “post-Westphalia” world order which unleashed a wave of hellish regime change wars in the Arab World beginning with 9-11, and with a long term intention to target Libya, Syria, Iran, and Lebanon while expanding NATO’s hegemony against the potential re-emergence of Russia and China.

The Economic Meltdown Was Always the Intention

Let’s be clear: the whole point of the post-1971 world was directed with the intention of destroying the moral-political and economic foundations for western society. The belief in scientific progress and industrial growth was the cause of all true progress from the 15th century Golden Renaissance to the assassinations of the 1960s. The intended consequences of this post-1971 (zero growth) policy were:

1) The destruction of the productive forces of labor vis a vis outsourcing to “cheap labour markets” driven by shareholder profit.

2) The consolidation of wealth into an ever smaller array of private multi-billionaire owners under a logic of Darwinian survival of the fittest.

3) The creation of a vast speculative bubble supported by ever greater rates of unpayable debt and totally detached from the physically productive forces of reality.

Just like 1929, after years of speculation known as the roaring twenties, the “plug could be pulled” on the bubble in order to impose a bit of shock therapy onto a sleeping population who would beg for fascism as a solution if only it would put bread on their tables. Though this plan failed 80 years ago due to the American rejection of fascism under President Roosevelt, the belief that the formula could succeed in the 21st century was adhered to most closely as long as America was brought firmly under control of the City of London and their Wall Street lackies.

Although the fascist “solution” to their manufactured crisis was put down during WWII, this new attempt was premised upon the policy that a new system of Global Government managed by draconian regulation would be imposed under a “Green New Deal” framework whereby the instruments of banking regulation, state directed capital and centralized government (not evils unto themselves), would be directed only to green, low energy flux density forms of energy which inherently lower the population of the earth. This is very different from the protectionism, bank regulation, state credit and central authority exerted by America during the 1930s New Deal (or Eurasian New Silk Road policy today). The difference is that one system empowers sovereign nations, and increases the productive powers of labor and energy flux density of humanity while increasing quality of life, the other “Green” agenda has the opposite effect whereby monetary incentives are tied to decreasing the “carbon footprint” of the earth. The image of a drug addict getting paid heroine as an incentive to bleed himself to death is useful here.

With the slow collapse of first world economies after the assassination of nationalist leaders in the 1960s, the plan for depopulation and global government seemed to be unfolding without serious opposition.

The Role of Chrystia Freeland

Freeland’s bizarre role in this whole affair was to do what every good Rhodes Scholar is conditioned to do upon their completion of their indoctrination at Oxford: facilitate the tough transition of the “pre-collapse” world economy into a new operating system that was meant to be the “green post-collapse” world economy. It wasn’t going to be easy to tell a new “pirate class” of billionaires that they would have to accept losing much of their wealth (less population equals less money), and operate under a strict new global operating system of regulation necessary to contract the society. The Rhodes Scholarship program begun in 1902 to advance a re-organized British Empire and had worked alongside the Fabian Society for over a century producing more than 7000 scholars who have permeated across all fields of society (media, education, government, military and corporate).

In his 1877 will, Cecil Rhodes said this group should be “a society which should have its members in every part of the British Empire working with one object and one idea we should have its members placed at our universities and our schools and should watch the English youth passing through their hands just one perhaps in every thousand would have the mind and feelings for such an object, he should be tried in every way, he should be tested whether he is endurant, possessed of eloquence, disregardful of the petty details of life, and if found to be such, then elected and bound by oath to serve for the rest of his life in his Country. He should then be supported if without means by the Society and sent to that part of the Empire where it was felt he was needed.”

After leaving Oxford in 1993, Chrystia Freeland learned the ropes of “perception management” by working for the London Economist, Washington Post, Financial times and Globe and Mail and Reuters. After serving a stint as editor-at-large of Reuters, the time had come for her to play the role of Valery Jarrett to the “Barack Obama” of Canada then being prepped for Prime Ministership of Justin Trudeau.

She was perfect.

As an asset of the global propaganda system, Freeland had made high level contacts with those Ukrainian, Russian, and Western oligarchs mentioned above including Viktor Pinchuk and Mikhail Khodorkovsky. Larry Summers, George Soros and Al Gore, were just a few players in the west whom she considered her “close friends” and whom she was happy to bring into Canada during the period of re-organization of the Liberal Party (2011-2014) as it prepared to take power under the banner of the Canada 2020 think tank. What made Freeland even more special was that she was bred from a zealous family of Ukrainian nationalists under the patriarchy of her Nazi grandfather Michael Chomiak. This network was brought to Canada after WWII by Anglo-American intelligence and cultivated as a force with ties to pro-Nazi Ukrainian counterparts ever since.

Freeland’s admission into politics was managed by another Rhodes Scholar named Bob Rae who served as interim controller of the Liberal Party during several of the Harper years and was a major player in Canada 2020. Rae, who had been the NDP Premier of Ontario from 1990-1995 was happy to abdicate his seat to Freeland ensuring her entry into Trudeau’s inner circle and thus becoming his official handler.

Freeland Promotes the New Global Elite

Freeland has made it clear that she understands well that there is a fundamental difference in cultural identities of the “new rich” relative to the older oligarchic families which she serves. In the 2011 Rise of the New Global Elite, she describes it as follows:

“To grasp the difference between today’s plutocrats and the hereditary elite, who “grow rich in their sleep” one need merely glance at the events that now fill high-end social calendars.”

Freeland then breaks down the categories of “new plutocrats” into two subcategories: the good, technocratic friendly plutocrats who are ideologically compatible with the New World Order of depopulation, such as Bill Gates, Warren Buffet, George Soros, et al and the “bad” plutocrats who tend not to conform to the British Empire’s program of global governance and depopulation under the green agenda. In Freeland’s world “good oligarchs” are those who adhere to this agenda, while “bad oligarchs” are those who do not. Trump is a terrible Plutocrat, and – Viktor Yanukovych was a good plutocrat until he decided to not sacrifice Ukraine on the altar of the collapsing European Union and chose to throw Ukraine’s destiny into the Eurasian Economic Union in October 2013.

In the same paper, Freeland wrote:

“if the plutocrats’ opposition to increases in their taxes and tighter regulation of their economic activities is understandable, it is also a mistake. The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda– that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism… is preferable to incremental measures.” Quoting billionaire Mohamed El-Erian, the CEO of Pimco she wrote: “one of the big surprises of 2010 is that the protectionist dog didn’t bark.”

Freeland ended her article with this message:

“The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth… Let us hope the plutocrats aren’t already too isolated to recognize this”.

But what does Freeland really think of the technocratic management under a plutocratic governance of society? In Plutocrats vs. Populists (Nov. 2013), Freeland lets her pro-plutocratic worldview out of the bag when she gushes:

“At its best, this form of plutocratic political power offers the tantalizing possibility of policy practiced at the highest professional level with none of the messiness and deal making and venality of traditional politics… a technocratic, data-based, objective search for solutions to our problems”

Since a technocratic managerial class committed to a common ideology must be solidified for this system to work, Freeland goes on to make the case to recruit young people to the imperial civil service:

“Smart, publicly minded technocrats go to work for plutocrats whose values they share. The technocrats get to focus full time on the policy issues they love, without the tedium of building, rallying– and serving– a permanent mass membership. They can be pretty well paid to boot.”

The End of a Delusion?

Now that Russia and China’s new operating system shaped by the Belt and Road Initiative has created a force of opposition to this British-run Deep State design, nothing which those would-be gods of Olympus have attempted to achieve has succeeded. Syria stands strong and the Arab nations are increasingly joining China’s Belt and Road Initiative. Venezuela has failed to fall the way so many regimes have done before 2014 and NAFTA has been seriously challenged by a nationalistic president in the USA who has also totally rejected the Malthusian agenda with the killing of COP21 and the Green New Deal. Trudeau’s usefulness has withered away quicker than you can say “SNC Lavalin” and now the decision appears to be seriously humored whether Freeland will take the reins of Canada after Trudeau is eliminated in order to “preserve the dying British Empire” and the dream of Cecil Rhodes. While the universe may be organized by a principle of reason, no one can say the same applies to the mind of an oligarchic.

via ZeroHedge News https://ift.tt/2Jvh3XA Tyler Durden