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Authored by Mac Slavo via SHTFplan.com,

Ninety-seven percent of CFOs (corporate financial officers) surveyed in a new poll believe that the United States will be in recession by the end of 2020.

Eighty-eight percent of CFOs represented in the survey work at companies generating greater than $1 billion in annual revenue.

Corporate financial officers are forecasting an impending economic downturn, according to a new survey of around 150 chief financial officers conducted by the consulting firm Deloitte. In its CFO Signals report covering the last quarter of 2019, Deloitte found that 97 percent of CFOs queried believe either an economic slowdown or recession will occur before the end of 2020. This is up from 88 percent one year ago. –Newsweek

According to a report by Newsweek, by the end of 2018, many CFOs surveyed “began to cite external factors” such as trade policy “over internal factors as the dominant constraint on their companies’ performance,” the report noted. And increasing concerns about a reversal of the longest economic expansion in U.S. history come amid related anxieties about Trump administration policies that may be hampering growth.

The external risk most frequently cited by CFOs in the survey was a combination of trade policy and tariffs.

The second-most cited external risk is political turmoil and general instability. Companies are also growing increasingly worried about upcoming election. While the impact of the 2020 election was only cited by a relative handful of respondents, its placement on the chart has moved substantially upward since the third quarter of 2019. –Newsweek

The CFOs surveyed expect very low interest rates and 10-year bond yields. They again expect a strong U.S. dollar as well in the upcoming year. At the same time, consumer and business spending expectations have fallen; CFOs are less likely to expect higher industry revenue and prices, according to the press release at PRNewsWire. 

Expectations for a U.S. economic downturn have risen since earlier this year, with 97% of CFOs saying that a downturn in the economy (a slowdown or a recession) has already begun or will occur by the end of 2020.  That’s up quite a bit from the 88% reported in 1Q19. Overall, 12% of CFOs say they believe a downturn has already commenced, and 14% say they already see signs of a downturn in their company’s operations.

“Compared to early 2019, companies appear to be taking more defensive actions related to downturn expectations — particularly around reducing spending and limiting or reducing headcount. While CFOs expect some form of U.S. downturn by the end of 2020, the good news is that expectations of a full-blown recession have fallen sharply since 1Q19.”  – Sanford Cockrell III, national managing partner of the U.S. Chief Financial Officer Program, Deloitte LLP

Perhaps this explains why one of the market’s most important pillars of support – buybacks – have suddenly collapsed?

Bernie Sanders (I-VT) needs to lighten up on his Democratic opponents, or he risks damaging the party going into this year’s election against President Trump, according to The Hill. 

According to those complaining, the 78-year-old Sanders will make it harder for Democrats to unify around a nominee after months of taking flack from their own side of the aisle – despite the fact that a Friday poll has him in the lead, and that his no-holds-barred approach may earn him the nomination.

“He needs to stop,” said one Democratic strategist who is unaffiliated with any candidates. “It’s not helpful and it actually hurts the party. It’s like he didn’t learn his lesson the last time. It’s incredibly short-sighted and terrible.”

The strategist highlighted Sanders’ recent comments in a LA Times editorial board meeting where he said that President Trump will eat Joe Biden’s lunch if he is the nominee.

“Joe Biden is a personal friend of mine, so I’m not here to, you know, to attack him, but my God, if you are, if you’re a Donald Trump and got Biden having voted for the war in Iraq, Biden having voted for these terrible, in my view, trade agreements, Biden having voted for the bankruptcy bill. Trump will eat his lunch,” said Sanders.

Sanders has also unloaded on Democratic rival Sen. Elizabeth Warren (D-MA), after giving campaign volunteers a script to tell potential voters that she was appealing primarily to upper-income Democrats and would not attract new voters to the party.

“I was disappointed to hear that Bernie is sending his volunteers out to trash me,” said Warren. “I hope Bernie reconsiders and turns his campaign in a different direction.”

Bernie Sander’s volunteers are trashing Elizabeth “Pocahontus” Warren. Everybody knows her campaign is dead and want her potential voters. Mini Mike B is also trying, but getting tiny crowds which are all leaving fast. Elizabeth is very angry at Bernie. Do I see a feud brewing?

— Donald J. Trump (@realDonaldTrump) January 13, 2020

According to Clinton campaign veterans, this looks like 2016 all over again.

“In and of itself it shouldn’t take on too much meaning,” said Philippe Reines, a longtime communications adviser to Clinton. 

“But if it’s a harbinger of tone to come, that’s not great. And I say that as someone who doesn’t believe the primaries should be a cotillion or game of paddy cakes.” –The Hill

Reines also blames Sanders for not immediately backing Hillary Clinton when she won the nomination – after cheating against him, saying that Bernie “needs to either accept the plain fact — supported both quantitatively and anecdotally — that his supporters did not go all in for Hillary.”

“Giving him the benefit of the doubt about his intentions, he still needs to be mindful that at some point he might need to rally millions of people to support someone else. That’s not easy. You can’t just flip a switch. It’s a process. Your supporters have to believe you’re being genuine in your endorsement, and you have to convince them,” Reines added.

Sanders allies, meanwhile, take exception to the critics.

“I don’t see it any differently than Vice President Biden going after ‘Medicare for All,” said longtime Sanders ally Larry Cohen, chairman of Our Revolution – an organization which sprung from the 2016 Sanders campaign. “It should be about the issues and when we have differences and believe if something is better, we should say so.”

Authored by Wolf Richter via WolfStreet.com,

This solid recession indicator is starting to concern me again…

Commercial and industrial loans (C&I loans) at all commercial banks fell to $2.33 trillion as of January 1, the lowest since March 2019, according to Federal Reserve data on commercial banks, released on Friday. C&I loans peaked in August last year at $2.38 trillion and have since fallen 1.7%. This has occurred despite three rate cuts by the Fed over the period.

C&I loans are used by businesses for working capital or to finance capital expenditures. Working capital loans are usually collateralized by receivables and inventories. Capital expenditure loans are collateralized by equipment and the like.

These loans are often credit lines with floating interest rates – which are very low and very appealing for borrowers. And banks are eager to extend these loans and are offering them aggressively, even to my little company. So there is no issue at this side of the equation.

But demand from businesses for these loans is a sign of economic activity, a sign that businesses are expanding or curtailing their activities. And demand is sinking.

The chart shows the year-over-year percentage change of these loan balances. Note the relationship between the year-over-year declines (below the red line) and recessions. If loan demand suddenly bounces back over the next two or three months, I’d say the US economy has cleared this particular hurdle. But if the trend since August continues to go south and ends up in the -3% or worse neighborhood, a different scenario would emerge:

Year-over-year growth rates were in the red-hot neighborhood of 10% from late December 2018 through March 2019, then demand began to fizzle. By January 1, 2020, year-over-year growth was down to 0.6%.

The drop in 2015-2016 was associated with the Oil Bust and the industries related to oil and gas extraction, including manufacturing, trucking, and specialized segments of the tech and services sector. The balance of C&I loans dropped by $30 billion from the peak in November 2016 through March 2017, before beginning to rise again. But the growth rate never turned negative on a year-over-year basis, and a recession was averted. In 2016, GDP growth was only 1.6%, the slowest since the Financial Crisis.

Now we’re back in the same scenario, only worse: So far, loan balances have dropped by $42 billion in four months, from the peak in August 2019 through January 1, 2020.

The rekindled left-over oil bust has something to do with it, though the price of oil remains over twice as high as during the low point in 2016, and the oil bust today is not nearly as ferocious as it was back then.

Today, there are additional elements triggering the lack of demand for C&I loans, such as the broader slowdown in manufacturing and in the freight sector (outside of last-mile delivery for ecommerce). C&I loans are a broader measure of the economy, not limited to manufacturing. Many services businesses have C&I loans to fund equipment purchases or for working capital, collateralized by receivables.

C&I loans, in a growing economy, are growing at a good clip because they’re directly tied to business activity, for a broad range of businesses. And in the past, when loan demand declined significantly, a recession loomed. As for now, C&I loan balances have dropped 1.7% from the peak in August and are still up from a year ago, but barely, 0.6%. And if loan demand doesn’t bounce back soon and continues to head lower, it will be time to revive recession talk:

And more rate cuts won’t help in this respect. Interest rates are already low, and it’s not the cost of debt that keeps businesses from taking out C&I loans. It’s the lack of business on their part. C&I loan balances were surging in 2018 and 2019, even as interest rates were rising. But balances began to decline only weeks after the first rate cut at the end of July. This is a close-up of C&I loan balances over the past two years:

However, what happened during the Financial Crisis was special, in terms of my lifetime: Credit froze up; banks, some of which were collapsing, stopped lending; businesses stopped asking for loans; and C&I loans plunged off a cliff. This is not the scenario on the horizon at the moment.

The typical scenario would be something like in the prior two recessions where the business cycle does its thing, where a wave of business debt restructurings and bankruptcies reduce outstanding debts at the expense of investors and banks, and where businesses are hunkering down, and loan balances shrink because of declining demand, tightening credit standards, and debt restructurings.

The US economy is not there yet. C&I loans haven’t reached that stage yet, and might bounce back over the next few weeks or months. But if they continue to head south, the recession scenario is a big step closer.

*  *  *

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There’s been a number of theories to emerge surrounding President Trump’s incredibly risky decision to assassinate IRGC Guds Force chief Qasem Soleimani, including that it was all the brainchild of hawkish Secretary of State and former CIA Director Mike Pompeo.

But an emerging reporting consensus does indicate that the public justification for the strike — that Soleimani posed an “imminent” threat as he was orchestrating an attack against American troops and sites in the region — was manufactured based on flimsy intelligence. The evolving and contradictory statements within the administration itself demonstrates at least this much. 

And now according to the latest NBC bombshell it’s becoming clear that the top IRGC general’s killing was actually months in the works:

President Donald Trump authorized the killing of Iranian Gen. Qassem Soleimani seven months ago if Iran’s increased aggression resulted in the death of an American, according to five current and former senior administration officials.

Apparently the “option” to take him out was already on the “menu” of Pentagon contingencies long before Soleimani’s fateful Jan.3 early morning passage through Baghdad International Airport.

Reports NBC based on multiple officials, “The presidential directive in June came with the condition that Trump would have final signoff on any specific operation to kill Soleimani, officials said.”

The Dec.27 Kataeb Hezbollah rocket attack on a US base in Kirkuk then became a core element of the official rationale, given it killed an American contractor later identified as 33-year old Sacramento resident Nawres Waleed Hamid, who had been assisting the Army as a linguist. 

The new report confirms further that it was both National Security Advisor at the time John Bolton as well as Mike Pompeo that had Trump’s ear on the subject.

“There have been a number of options presented to the president over the course of time” related to bold steps to curtail Iranian aggression, a senior administration official told NBC, which reports further: 

The president’s message was “that’s only on the table if they hit Americans,” according to a person briefed on the discussion.

The origins of the plan to assassinate the top IRGC elite force general and popular “national hero” inside Iran actually evolved initially out of 2017 discussions involving Trump’s national security adviser at the time, retired Army Lt. Gen. H.R. McMaster.

The report explains: 

The idea of killing Soleimani came up in discussions in 2017 that Trump’s national security adviser at the time, retired Army Lt. Gen. H.R. McMaster, was having with other administration officials about the president’s broader national security strategy, officials said. But it was just one of a host of possible elements of Trump’s “maximum pressure” campaign against Iran and “was not something that was thought of as a first move,” said a former senior administration official involved in the discussions.

The idea did become more serious after McMaster was replaced in April 2018 by Bolton, a longtime Iran hawk and advocate for regime change in Tehran. Bolton left the White House in September — he said he resigned, while Trump said he fired him — following policy disagreements on Iran and other issues.

So there it is: Bolton’s ultra-hawkish influence is still in effect at the White House.

Congratulations to all involved in eliminating Qassem Soleimani. Long in the making, this was a decisive blow against Iran’s malign Quds Force activities worldwide. Hope this is the first step to regime change in Tehran.

— John Bolton (@AmbJohnBolton) January 3, 2020

And the torch is being carried further by Mike Pompeo.

But again while none of this should come as a surprise, it’s yet further proof on top of a growing body of evidence that Washington is yet again telling bald-faced lies to the public about a major event that could lead America straight back into another disastrous Middle East quagmire. 

In what appears to be the latest shooting incident to rock the state of Virginia in recent months, police are reportedly responding to reports of an active shooter near a school in Henrico County, near Richmond.

The area isn’t far from Virginia Beach, which was rocked by a shooting back in June.

Henrico Police tweeted news about the shooting and advised townspeople to stay away.

#HPDAutoTweet: Henrico Police responding to a report of active shooter near the area of 7800 Block WOODMAN RD. Avoid area. Call 911 (text if you can’t) in case of emergency. Updates forthcoming.

— Henrico Police (@HenricoPolice) January 13, 2020

Henrico police received a call via text to 9-1-1 of an active shooter along the 7800 block Woodman Road. Henrico police are on scene and there are NO reported injuries. Henrico police continued to clear the school to ensure everyone’s safety. Media staging Our Lady of Lourdes

— Henrico Police (@HenricoPolice) January 13, 2020

There are no reported injuries, and police are still working to clear the school.

Via S&P Global Platts Insight blog,

In this week’s pick of energy and commodities trends, European wind generation storms into 2020 and oil refiners in Asia and Europe feel the impact of US-Iran tensions. Plus, S&P GSCI index performance in 2019 reveals investors’ darlings among commodities.

1. European wind charge sweeps away nuclear concerns

What’s happening? Wind generation records tumbled across Europe last year and 2020 got off to a flying start in week 1 with fresh output highs across Nordic markets. There are now over 200 gigawatts of wind capacity installed across Europe, up from 189 GW a year ago. Stormy weather, further spikes in green generation and continuing low gas prices are expected in the short term. These factors drove week 3 German power down 30% in value year on year versus January 2019’s average Eur49.40/MWh.

What’s next? This week also marks the start of a wave of 10-year overhauls to French reactors, at a time of reduced availability across Europe’s dominant nuclear generation fleet. Normally this would have a bullish impact on power price but the reality is that near term curve contracts are wilting as the mild, windy winter proceeds.

2. Asia looks to LatAm for heavy crude amid Iraqi supply risk

What’s happening? Major Asian importers of Iraqi Basrah crude including Taiwan’s Formosa, Indonesia’s Pertamina, Japan’s Itochu, South Korea’s GS Caltex and SK Innovation, China’s PetroChina and Unipec told S&P Global Platts that their cargo loadings for January have not been affected by recent events in the Middle East. However, Iran’s recent missile attacks on US military bases in Iraq raises the possibility of Baghdad becoming a proxy battleground between the US and Iran for months to come, jeopardizing regular flow of Basrah crude to the Far East.

What’s next? Several Asian refiners are poised to venture into Latin America, as they prepare a contingency plan to ensure adequate supply of medium and heavy crude feedstocks. State-run and independent Chinese refiners, as well as major South Korean end-users, are increasingly focusing on heavy crude supplies in Latin America, with Brazilian Lula, Colombian Castilla Blend and Mexican Maya top potential substitutes for Basrah.

3. S&P GSCI records strongest performance since 2007

What’s happening? The S&P GSCI, one of the most widely recognized benchmarks of global commodity market beta, ended 2019 up 17.6%. This was the S&P GSCI’s 10th-strongest performance since 1990 and its best annual return since the heights of the commodity super cycle in 2007. Gains were driven by the petroleum complex and metals, while agriculture and livestock detracted from headline performance.

What’s next? The S&P GSCI Iron Ore was the best performing S&P GSCI single commodity index in 2019. It ended the year 83.1% higher, on the back of several significant supply curtailments and persistent Chinese steel demand. With global supply prospects improving, the performance of iron ore prices in 2020 will depend even more heavily on the strength of domestic Chinese steel demand.

4. Palladium keeps smashing records as regulators chase clean air

What’s happening? Palladium remains a standout performer across the metals sector, going from strength to strength. The main driver is increasingly stringent emissions standards: palladium’s main use is in autocatalysts for petrol-powered engines. The physical market has reportedly been tight for the last couple of years and this is helping to propel the metal to new records.

What’s next? With the $2,000/oz hurdle now easily cleared, the sky really is the limit according to market sources. Emissions standards are set to get tougher as global governments step up efforts to avert a climate catastrophe. This is likely to mean higher platinum content in converters, boosting overall demand for the metal and providing price upside. One potential disruption could be substitution, whereby the market opts to switch from expensive palladium to its more affordable sister metal platinum. However, according to industrial sources this could take two to three years to implement.

5. Brent crude spike puts pressure on NWE refinery margins

What’s happening? Refining margins in Northwest Europe slumped sharply early last week, squeezed by a Brent price spike as high as $72/b after Iran retaliated against US military targets in Iraq for the killing of General Qassem Soleimani. Despite expectations of sharply higher middle distillates margins due to support from the IMO 2020 marine fuel rules, European gross margins remained near the bottom of their five-year range. Regional margins have also been depressed by heavy production and stockpiling of low sulfur diesel by refiners ahead of the Jan 1 2020 IMO marine fuel spec change and milder than normal winter temperatures hitting heating oil demand.

What’s next? Regional traders are closely watching ongoing strikes over pensions in France which have hampered some refiners and disrupted fuel deliveries to the pumps. The strikes are scheduled to end on Monday but could be extended, forcing more draw-down from commercially held fuel stocks. Further out, surging demand for low sulfur fuel oil due to the IMO 2020 changes is widely expected to support refining margins for oil products in Europe in the first half of 2020 through stronger distillate cracks.