Stocks Pump’n’Dump On Powell’s Promise, Dollar & Bond Yields Tumble

Algos appeared to initially like Powell’s promise to “act as appropriate to sustain the expansion,” but it seems like that was not enough as stocks are giving back kneejerk gains.

Algos ran the stops up to unchanged then dumped…

 

But bond yields are a one-way street lower…

Source: Bloomberg

Along with the dollar…

Source: Bloomberg

Odds of a 50bps rate cut moved up to 11%.

This is exactly the kind of reaction you’d expect from a market that doubts the Fed will do enough  to offset “significant risks.”

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

The 80th Anniversary of the Nazi-Soviet Pact

Soviet Foreign Minister Vyacheslav Molotov and German Foreign Minister Joachim Ribbentrop sign the Nazi-Soviet Pact, as Joseph Stalin looks on. August 23, 1939.

Today is the 80th anniversary of the Nazi-Soviet Pact, signed on August 23, 1939. What I wrote on the 75 anniversary five years ago, remains true today. In this post, I reprint it with minor changes and additions:

History is full of cynical international agreements, many of which led to terrible results. But it is likely impossible to find any worse than this one.

The Nazi-Soviet Pact set the stage for history’s bloodiest war, which killed some 50 million people. Without assurance of Soviet noninterference, the Germans could not have gone to war against Britain and France (they realized that, in 1939, they lacked the military power to fight a two-front war). The agreement also enabled both powers to inflict horrible atrocities against the people of the Eastern Europe states they occupied as a result.

Everyone knows about the Nazi part of these crimes. The Soviet part is less well-known, but almost equally heinous. For example, the treaty gave the Soviets the “right” to occupy the Baltic States, and Eastern Poland. This led to the extermination of some 3% of Estonia’s population, and the deportation to Gulags of many more in all three Baltic states. The other areas occupied by the USSR (including a large part of eastern Poland) suffered comparable atrocities. It is difficult  to precisely calculate the overall harm caused by the Nazi-Soviet Pact. But the death toll surely runs into the many millions. Historian Timothy Snyder’s book Bloodlands: Europe Between Hitler and Stalin includes a far more extensive account of the many atrocities perpetrated by both regimes as a result of their agreement.

To this day, defenders of Stalin’s decision to sign the pact claim that he needed to do it because the British and French otherwise might have simply stood aside and let Hitler attack him. There is no justifying the Anglo-French appeasement of the late 1930s. But at least they did not actively collaborate with Hitler, as Stalin chose to do. Moreover, Hitler could not have attacked the USSR in 1939 without going through Poland, which the British and French had just guaranteed against German attack.

Finally, by allowing Hitler to deal with his Western enemies before having to worry about the Soviets, Stalin set up a situation where the Nazis could, in 1941, attack the USSR without having to face any other opponent on in Europe on land. By signing the pact with Hitler, Stalin himself helped create the absence of a “second front” that he later spent much of World War II complaining about.

On a more personal note, my great-uncle was killed in the Russo-Finnish War, just a few months after the pact was signed. Finland was, of course, one of the states allocated to Soviet [sphere of influence] under the agreement with the Nazis. It is unlikely that Stalin would have dared to attack Finland without first being assured of German noninterference. Thus, my relative became one of the millions who lost their lives as a result of history’s most infamous agreement. Many other relatives died in the Holocaust (which likely would not have happened on anything like the same scale without the Pact), and later phases of World War II that the agreement made possible.

Today is also an appropriate time to take note of the enormous contrast between present-day German and Russian views of the Nazi-Soviet Pact. Almost no one in the political mainstream in modern Germany defends the  agreement, or the other crimes of the Nazi era. By contrast, state-controlled media under the regime of ex-KGB Colonel Vladimir Putin, who called the fall of the Soviet Union “the greatest geopolitical catastrophe of the twentieth century” have have sought to whitewash the communist past, including the 1939 agreement with Hitler. Such refusal to learn the lessons of the past increases the likelihood of similar moral regression in the future.

 

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Powell Hints At More Rate Cuts, Says “Economy In Favorable Place” But Warns Of “Significant Risks”

The much anticipated Jerome Powell Jackson Hole speech on “Challenges for Monetary Policy” (which is never translated live), is finally out, and the first thing that stands out is Powell’s comment that the economy is in a “favorable place,” but immediately refers to “significant risks” in a text that according to Bloomberg “ultimately appears to signal a rate cut at the FOMC’s September meeting.”

In what appears to be a last minute rewrite of his speech following today’s Chinese retaliation, Powell calls attention to an “eventful” three weeks since the July FOMC meeting, highlighting negative developments, including:

  • New tariffs on China
  • “Further evidence of a global slowdown, notably in Germany in China”
  • A sharp downward move of long-term bond rates around the world “to near post-crisis lows”

In an attempt to appease Trump, Powell says that “based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion.”

Of note, Powell has devoted an entire section of his speech to trade uncertainties as a new challenge for monetary policy, which confirms that the more trade war escalates, the greater the Fed response, giving Trump a green light to escalate further.

A notable comment is that according to Powell, there are “no recent precedents to guide any policy response to the current situation.”

In his speech, the Fed chair also provides a historical tour of three different post-World-War-Two policy eras and their lessons for the Fed: the Great Inflation, the Great Moderation and the Great Recession, and adds that the Fed has learned how to tame inflation and has substantially improved the safety of the financial system, but is still unsure how to deal with the current era of super-low interest rates.

Of note, there are no explicit reference to a “mid-cycle adjustment” which was seen by many as the biggest hawkish threat, the result being that according to algos the speech is being seen as borderline dovish.

Here are the key highlights:

  • *POWELL: `WE WILL ACT AS APPROPRIATE TO SUSTAIN THE EXPANSION’
  • *POWELL: ECONOMY IN FAVORABLE PLACE, FACES `SIGNIFICANT RISKS’
  • *POWELL SAYS EVENTS SINCE THE JULY FOMC HAVE BEEN `EVENTFUL’
  • *POWELL: CAREFULLY WATCHING DEVELOPMENT FOR IMPACT ON U.S.
  • *POWELL: MONETARY POLICY HAS NO RULEBOOK FOR INTERNATIONAL TRADE
  • *POWELL: WE’VE SEEN FURTHER EVIDENCE OF A GLOBAL SLOWDOWN
  • *POWELL CITES BREXIT, HONG KONG, WEAKNESS IN GERMANY AND CHINA

Some more highlights:

  • *Fed’s Powell: Fed Will Act as Appropriate to Sustain the Expansion
  • *Powell: Three Weeks Since Last FOMC Meeting Have Been ‘Eventful’
  • *Powell: Fitting Trade Policy Into Risk-Management Framework Is a New Challenge
  • *Powell: Fed Faces Heightened Risk of Difficult-to-Escape Periods of Near-Zero Rates
  • *Powell: U.S. Economy Has Continued to Perform Well Overall
  • *Powell: Monetary Policy Cannot Provide Settled Rulebook for Trade
  • *Powell Sees Financial Stability Risks as Moderate, but Will Remain Vigilant
  • *Powell Sees Financial Stability Risks as Moderate, but Will Remain Vigilant
  • *Powell: Monetary Policy Cannot Provide Settled Rulebook for Trade
  • *Powell: Can Try to Look Through Passing Events, Focus on How Trade Affects Outlook
  • His full speech below (pdf link):

via ZeroHedge News https://ift.tt/2HlY4hS Tyler Durden

That ‘Vaping-Linked Lung Disease’ Might Not Really Be Linked to Vaping

There’s a bit of panic brewing in the press over lung problems that could be linked to vape products. The Centers for Disease Control and Prevention (CDC) “reports more than 150 cases of possible vaping-linked lung disease,” says The Hill. Others make even bolder claims.

More than 100 vapers have contracted a severe lung disease,” The Verge reports. “Vaping lung disease: CDC reports 153 cases,” says USA Today. Ars Technica warns that “vaping-linked lung disease cases” have jumped “from 94 to 153 in 5 days.”

But read closely, and it becomes apparent that nobody actually knows if vaping is causing this mystery disease or not. Nobody even knows if there is a disease, or how many people actually have it. That’s what the CDC is at the beginning of investigating.

For now, all officials know is that states keep reporting people with cases of mysterious lung and chest problems. “Many states have alerted CDC to possible (not confirmed) cases and investigations into these cases are ongoing,” says the CDC. Symptoms include shortness of breath, chest pain, and coughing—all common issues that can stem from a range of causes and ailments.

“The CDC and impacted states haven’t identified a cause,” notes The Verge. Nor has it actually verified suspected cases.

Those reporting the problems all say they have used vape products—albeit not what sort. Which leaves us with another possibility: that some particular faulty product or line of products is indeed causing trouble, but that this is not an issue with vaping at large.

We know that some patients in potential cases used THC-containing vape products, not nicotine-containing e-cigarettes. The Vapor Technology Association told The Hill that no nicotine e-cigarettes have been linked to the lung issues:

The e-cigarette makers’ trade group called for public health officials to “refrain from assigning unsubstantiated blame until the facts are known,” and said traditional nicotine-containing e-cigarettes are being wrongly conflated with THC-containing products.

In actuality, we don’t know at all what folks with many of the suspected cases were smoking, nor what other habits they may have shared, such as any history of regular cigarette or marijuana smoking. We don’t—and this is pretty damn crucial—even know if all of these patients suffer from the same affliction at all.

The fact that cases have spiked dramatically in the brief time since news of this “vaping lung disease” started spreading suggests we may have a different sort of contagion on our hands. Perhaps people who vape have been starting to freak out upon hearing the “lung disease” news and either suddenly noticed new symptoms (which also sound a lot like symptoms of a panic attack) or began interpreting ongoing symptoms in a new way.

Or maybe vaping is going to kill us! That’s certainly possible. The point is that right now, anything is possible. And until we know more, it’s irresponsible for folks to spread panic about products that have been helping many people leave more dangerous habits behind.


FREE MINDS

Ken “Popehat” White tries to dispel some of the most common delusions about the First Amendment. “If you’ve read op-eds about free speech in America, or listened to talking heads on the news, you’ve almost certainly encountered empty, misleading, or simply false tropes about the First Amendment,” writes White at The Atlantic. “Those tired tropes are barriers to serious discussions about free speech. Any useful discussion of what the law should be must be informed by an accurate view of what the law is.”

White tackles popular tropes like “you can’t shout ‘Fire!’ in a crowded theater” (wrong!), “hate speech is not free speech” (wrong!), and more. “Many free-speech issues that are controversial politically and culturally, by contrast, are utterly banal legally, and the Court has offered no signs of change,” he points out.


FREE MARKETS

“It’s a credit card, not a ‘virtual interface.’ There is nothing novel about a credit card.” At Forbes, writer Frances Coppola throws some water on tech-media hype about the new Apple Card and its purported potential to “disrupt” traditional banking:

A credit card is, as its name suggests, simply a line of credit which is drawn upon when using a card to make purchases. Apple’s card may be fancy (and fragile), but behind it is a bog standard credit facility, just like every other credit card in the world. So the question is, who is issuing that facility?

Credit card facilities are provided by banks. Cards may be branded by a retailer, but the actual issuer is always a bank….

Apple Card’s strapline “Created by Apple, not a bank” implies that the credit line is provided by Apple itself. If that were the case, then Apple Pay would be groundbreaking. It would mark Apple’s transformation into a bank—and a bank of such a size and reach would indeed eat the lunch of existing banks.

Sadly, the strapline is misleading to the point of dishonesty….The card that is “created by Apple, not a bank” is actually issued by—a bank.”

That’s right, Goldman Sachs is behind the “no bank” Apple Card.


ELECTION 2020

  • Radio host, ex-congressman, and former Trump supporter Joe Walsh may run against the president in the Republican primaries.
  • “For Harris, the health care morass is also threatening to become an ominous symbol for why, after her surge following the first debate, she’s fallen back since early July to where she started,” reports Politico. “She now polls closer to Pete Buttigieg and Beto O’Rourke than Sanders and Elizabeth Warren.”

QUICK HITS

  • The Justice Department sent the National Association of Immigration Judges a link to a white nationalist website post that made anti-Semitic attacks on judges
  • DARPA—you know, the group that “defends” our country by archiving and analyzing millions of sex work ads and dreaming up new ways for those in power to surveil citizens—would be the model for a creepy new “Health Advanced Research Projects Agency” that Trump is considering.
  • An embarrassing number of people—including U.S. Secretary of Energy Rick Perry—have fallen for an age-old internet hoax circulating on Instagram this week.
  • The U.S.-China trade war escalates again as China announced new tariffs on American automobiles, oil, and some industrial products.
  • Trump’s tariffs and trade wars are accelerating economic slowdown that could plunge us into a recession, writes CNN Business analyst Matt Egan. The chief investment officer at Morgan Stanley Wealth Management, Lisa Shalett, told him that “it is highly, highly likely that the US economy will continue to slow down” in 2020.
  • More on the Family Tree DNA/FBI link.
  • The European Union is reportedly devoting $100 billion to encourage Euro competitors to companies such as Amazon, Apple, Facebook, Google, and Microsoft.
  • If you’re not watching Derry Girls, you should be.
  • Why are inmate suicides up?
  • Police in Marshall County, Alabama, are proudly testing new frontiers in the War on Drugs. On Tuesday, they arrested residents for possession of THC extraction from marijuana plants.
  • A must-read from Emily Yoffe for Reason:

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The Calculus For Fed Inaction Is Getting Tougher By The Day

Authored by Bryce Coward via Knowledge Leaders Capital blog,

Over the last few days investors have been given a good amount of information to digest from incoming economic data, Federal Reserve meting minutes, and Fed speakers opining about monetary policy at the annual Jackson Hole conference. Even still, everyone is waiting on THE speech from Fed Chairman Powell tomorrow to set to the expectations for the Fed’s upcoming meeting in mid-September.  It’s clear from both the Fed meeting minutes as well as recent comments by Fed officials that there is no consensus for additional easing in September, let alone a 50 basis point cut in rates. Indeed, below are excerpts from three Fed speakers over the last few days, all suggesting no keen desire for more rate cuts.

Fed Rosengren: “We’re likely to have a second half of the year that’s much closer to 2% growth…I’m not saying there are not circumstances in which I’d be willing to ease. I just want to see evidence we are going into something that is more a slowdown.”

Fed Harker: “We’re roughly where neutral is. It’s hard to know exactly where neutral is, but I think we’re roughly where neutral is right now. And I think we should stay here for a while and see how things play out.”

Fed George: “We’re at a sort of equilibrium right now and I’d be happy to leave rates here absent seeing either some weakness or some strengthening, some kind of upside risk that would cause me to think rates should be somewhere else…I don’t yet see the signal that suggests it is time to get worried about a downturn…[a rate cut] is not required in my view.”

The market, on the other hand, continues to price in a 100% probability of easing in September, a two in three chance of more easing still at the October meeting, and a better than even chance of a third cut by January, 2020. Clearly there is a disconnect – a disconnect that in our view is getting harder and harder for the Fed to justify based on incoming data.

Indeed, over the last week or so we’ve seen:

  • Aggregate US corporate profits revised lower by $200bn

  • Payroll employment revised down by 500K from April 2018-March 2019

  • Industrial production decline MoM and miss expectations

  • Capacity utilization decline MoM and miss expectations

  • Consumer sentiment decline MoM and miss expectations

  • Markit manufacturing and service sector PMIs decline MoM and miss expectations

It’s true that not all the econ data is coming in on the weak side. Importantly, retail sales came in higher than expectations thanks to Prime Day, housing data is mixed and initial unemployment claims have remained low. But we must remember that those data tend to be lagging in nature. More concerning is how the leading components of business surveys like the Markit survey are coming in at the lowest levels on record. On the manufacturing side, new export orders and new orders are in contraction and plunging. Worryingly, the weakness in manufacturing appears to be bleeding into services as service business expectations are also at new historic lows and plunging.

No wonder the market is pricing in three more 25bps rate cuts over the next five months. And regardless of Fed speakers so far this week, logic points to the Fed being more rather than less aggressive. After all, as we see it the Fed basically has two high probability options at this point.

  • Option A is to sit tight, perhaps dribble in another “mid-cycle” cut over the next several months and see how the data evolve. This is the option that George, Harker and Rosengren would most likely support.

  • Option B is to cut rates in September and signal at least two additional 25bps cuts by January, thereby meeting the market’s expectations.

The relative downside of Option A looks increasingly large compared to Option B. If the hawks win out and Option A prevails, the risks to a further slowdown/recession would increase in our view given the message from the leading economic data. This case would all but guarantee the eventuality of a 0% Fed Funds rate and possibly more quantitative easing. If they opt for Option B then perhaps a deeper slowdown/recession is avoided, which would allow the Fed to hold the policy rate at a relatively higher level. The worst case for Option B is that they end up in the same place as the Option A, with a policy rate of 0% and QE on the table, except that the lags from the easing campaign would have been less.

Of course, there are risks to option A including inflating a financial asset bubble, but the opposite is also true as we saw last December when Chair Powell told the world the Fed’s balance sheet was on “auto pilot”. Regardless, no matter how you slice it either policy option would seem to support bonds and gold, while only one option (Option B) would also support equities.

In our view, Option A would tend to result in lower inflation and growth expectations, bringing down the long end of the Treasury curve while pinning down the short end of the curve, thereby exacerbating the 10Y-3M and 10Y-2Y inversions. Falling long-term real rates would likely put a floor on gold prices even if the US dollar broke to new highs. Equities would likely struggle on the back of falling growth and inflation expectations.

Options B would tend to steepen the curve in our view by bringing down the short end faster than the long end. Long-term rates would face relatively limited upside thanks to falling term premiums that result from policy easing, and possibly significantly more downside. Still negative real rates would support gold prices and relative policy easing would tend to weaken the US dollar. Equities would be supported if inflation and/or growth expectations rose.

Given the circumstances outlined above of clear economic slowing with downside risks, the case for aggressive Fed easing has become quite a bit easier to make while the relative risks of the “mid-cycle” status quo have become greater. Either option is  likely to be eventually quite supportive of bonds and gold while only the dovish option is likely to support stock prices.

[ZH: And of course, today’s China trade retaliation further adds to the case above.]

via ZeroHedge News https://ift.tt/33TYqpD Tyler Durden

That ‘Vaping-Linked Lung Disease’ Might Not Really Be Linked to Vaping

There’s a bit of panic brewing in the press over lung problems that could be linked to vape products. The Centers for Disease Control and Prevention (CDC) “reports more than 150 cases of possible vaping-linked lung disease,” says The Hill. Others make even bolder claims.

More than 100 vapers have contracted a severe lung disease,” The Verge reports. “Vaping lung disease: CDC reports 153 cases,” says USA Today. Ars Technica warns that “vaping-linked lung disease cases” have jumped “from 94 to 153 in 5 days.”

But read closely, and it becomes apparent that nobody actually knows if vaping is causing this mystery disease or not. Nobody even knows if there is a disease, or how many people actually have it. That’s what the CDC is at the beginning of investigating.

For now, all officials know is that states keep reporting people with cases of mysterious lung and chest problems. “Many states have alerted CDC to possible (not confirmed) cases and investigations into these cases are ongoing,” says the CDC. Symptoms include shortness of breath, chest pain, and coughing—all common issues that can stem from a range of causes and ailments.

“The CDC and impacted states haven’t identified a cause,” notes The Verge. Nor has it actually verified suspected cases.

Those reporting the problems all say they have used vape products—albeit not what sort. Which leaves us with another possibility: that some particular faulty product or line of products is indeed causing trouble, but that this is not an issue with vaping at large.

We know that some patients in potential cases used THC-containing vape products, not nicotine-containing e-cigarettes. The Vapor Technology Association told The Hill that no nicotine e-cigarettes have been linked to the lung issues:

The e-cigarette makers’ trade group called for public health officials to “refrain from assigning unsubstantiated blame until the facts are known,” and said traditional nicotine-containing e-cigarettes are being wrongly conflated with THC-containing products.

In actuality, we don’t know at all what folks with many of the suspected cases were smoking, nor what other habits they may have shared, such as any history of regular cigarette or marijuana smoking. We don’t—and this is pretty damn crucial—even know if all of these patients suffer from the same affliction at all.

The fact that cases have spiked dramatically in the brief time since news of this “vaping lung disease” started spreading suggests we may have a different sort of contagion on our hands. Perhaps people who vape have been starting to freak out upon hearing the “lung disease” news and either suddenly noticed new symptoms (which also sound a lot like symptoms of a panic attack) or began interpreting ongoing symptoms in a new way.

Or maybe vaping is going to kill us! That’s certainly possible. The point is that right now, anything is possible. And until we know more, it’s irresponsible for folks to spread panic about products that have been helping many people leave more dangerous habits behind.


FREE MINDS

Ken “Popehat” White tries to dispel some of the most common delusions about the First Amendment. “If you’ve read op-eds about free speech in America, or listened to talking heads on the news, you’ve almost certainly encountered empty, misleading, or simply false tropes about the First Amendment,” writes White at The Atlantic. “Those tired tropes are barriers to serious discussions about free speech. Any useful discussion of what the law should be must be informed by an accurate view of what the law is.”

White tackles popular tropes like “you can’t shout ‘Fire!’ in a crowded theater” (wrong!), “hate speech is not free speech” (wrong!), and more. “Many free-speech issues that are controversial politically and culturally, by contrast, are utterly banal legally, and the Court has offered no signs of change,” he points out.


FREE MARKETS

“It’s a credit card, not a ‘virtual interface.’ There is nothing novel about a credit card.” At Forbes, writer Frances Coppola throws some water on tech-media hype about the new Apple Card and its purported potential to “disrupt” traditional banking:

A credit card is, as its name suggests, simply a line of credit which is drawn upon when using a card to make purchases. Apple’s card may be fancy (and fragile), but behind it is a bog standard credit facility, just like every other credit card in the world. So the question is, who is issuing that facility?

Credit card facilities are provided by banks. Cards may be branded by a retailer, but the actual issuer is always a bank….

Apple Card’s strapline “Created by Apple, not a bank” implies that the credit line is provided by Apple itself. If that were the case, then Apple Pay would be groundbreaking. It would mark Apple’s transformation into a bank—and a bank of such a size and reach would indeed eat the lunch of existing banks.

Sadly, the strapline is misleading to the point of dishonesty….The card that is “created by Apple, not a bank” is actually issued by—a bank.”

That’s right, Goldman Sachs is behind the “no bank” Apple Card.


ELECTION 2020

  • Radio host, ex-congressman, and former Trump supporter Joe Walsh may run against the president in the Republican primaries.
  • “For Harris, the health care morass is also threatening to become an ominous symbol for why, after her surge following the first debate, she’s fallen back since early July to where she started,” reports Politico. “She now polls closer to Pete Buttigieg and Beto O’Rourke than Sanders and Elizabeth Warren.”

QUICK HITS

  • The Justice Department sent the National Association of Immigration Judges a link to a white nationalist website post that made anti-Semitic attacks on judges
  • DARPA—you know, the group that “defends” our country by archiving and analyzing millions of sex work ads and dreaming up new ways for those in power to surveil citizens—would be the model for a creepy new “Health Advanced Research Projects Agency” that Trump is considering.
  • An embarrassing number of people—including U.S. Secretary of Energy Rick Perry—have fallen for an age-old internet hoax circulating on Instagram this week.
  • The U.S.-China trade war escalates again as China announced new tariffs on American automobiles, oil, and some industrial products.
  • Trump’s tariffs and trade wars are accelerating economic slowdown that could plunge us into a recession, writes CNN Business analyst Matt Egan. The chief investment officer at Morgan Stanley Wealth Management, Lisa Shalett, told him that “it is highly, highly likely that the US economy will continue to slow down” in 2020.
  • More on the Family Tree DNA/FBI link.
  • The European Union is reportedly devoting $100 billion to encourage Euro competitors to companies such as Amazon, Apple, Facebook, Google, and Microsoft.
  • If you’re not watching Derry Girls, you should be.
  • Why are inmate suicides up?
  • Police in Marshall County, Alabama, are proudly testing new frontiers in the War on Drugs. On Tuesday, they arrested residents for possession of THC extraction from marijuana plants.
  • A must-read from Emily Yoffe for Reason:

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David Koch, R.I.P.

David Koch, who along with his brother Charles ran one of America’s most prominent political giving machines, has died at age 79.

Koch was one of four children of the oil industrialist Fred Koch, and along with his older brother Charles he became one of America’s richest men through the growth of the family business. Due to the brothers’ funding of political causes and candidates, the Kochs became betes noir of the American left. (Koch was for 36 years a trustee of the Reason Foundation, which publishes Reason magazine.) Often incorrectly described as a conservative or a Republican, David Koch was a lifelong libertarian whose work and giving reflected the values of free enterprise and limited government.

Born in Wichita in 1940, Koch earned undergraduate and graduate degrees in chemical engineering from MIT, where he also excelled in basketball. After working for outside companies from 1963 to 1970, including a stint at the management consulting firm Arthur D. Little, Koch began working in the family business in 1970 as a technical service manager at the subsidiary Koch Engineering for a salary of $16,000. He rose to be president of the division, and he went on to serve in various capacities in the set of privately owned family businesses, including president of Koch Engineering and Executive Vice President of Koch Industries. He retired officially last year because of his fading health.

In a 2005 interview for my book Radicals for Capitalism, Koch told me his father taught him that “big government was bad, and impositions of government controls on our lives and our economic fortunes was not good.” In the mid-1960s, with encouragement from Charles, he attended the Freedom School, an early libertarian educational institution run by Robert LeFevre, whose variety of libertarianism rejected both political activism and violence, even in self-defense. While LeFevre was one of their earliest exposures to the organized libertarian movement, both brothers denied that they ever embraced his entire package of ideas. As they began financing, working with, and guiding libertarian institutions in the 1970s, their activism involved support and promotion for the pro-market Austrian school of economics exemplified by Ludwig von Mises and F.A. Hayek. Libertarian educational institutions, think tanks, legal action groups, grassroots activism, magazines, criminal justice reform efforts, and student groups all received largess and guidance from the Koch brothers from the 1970s through the present.

In the 1980 presidential campaign, when recently imposed campaign finance restrictions hobbled third parties’ abilities to fundraise by severely limiting how much any single donor could give, David Koch took advantage of the fact that the rules allowed candidates themselves to self-finance as they wished: He became the Libertarian Party’s vice presidential nominee. He and running mate Ed Clark got more than 1 percent of the vote, a party record that would go unbroken until 2016.

Koch told New York magazine during that campaign that he’d been excited by the previous Libertarian presidential run by Roger MacBride, saying the party was “advocating all the things I believed in. [MacBride] wanted less government and taxes and was talking about repealing all these victimless-crime laws that had accumulated on the books. I have friends who smoke pot. I know many homosexuals. It’s ridiculous to treat them as criminals—and here was someone running for president, saying just that.”

After winning the vice presidential nomination, Koch told the assembled Libertarian delegates that the party’s members “represent the best hope for human freedom since the American revolution” and that “as a businessman, who’s run a successful company, who’s had to deal with the harassment and ridiculous interference of government in the affairs of my business….I can be particularly effective at communicating the libertarian ideas and concepts to the businessman.” Koch listed the run as his “proudest achievement” in a 1987 MIT alumni newsletter.

In 1984 Koch co-founded Citizens for a Sound Economy, a free market advocacy and research organization that later split into FreedomWorks and Americans for Prosperity, both prominent players in 21st century Republican and libertarian circles in the pre-Trump age (though Koch was only directly involved with the latter). Koch continued to donate and to often serve on the boards of market-oriented advocacy groups, and the political operation funded and managed by him and Charles became notorious in the Obama age as the supposedly sinister face of money in politics.

As was his way, Koch mostly declined to participate in public controversies over his political beliefs or funding. But as he told me in that 2005 interview, he had come to see political philanthropy as finding “aggressive salesmen” who understand that you can have the best product in the world but if you aren’t finding consumers to buy it, you need to do whatever it takes to sell it, including spending “staggering sums on advertising and promotion” in the mold of Proctor & Gamble. You have to find talented people with good ideas, and try different approaches, to help generate political and philosophical change.

Koch was an inveterate experimenter in that process, to the great benefit of many libertarian institutions—he told me he’d been on as many as 20 boards at a time.

The vast bulk of Koch’s philanthropy was not political. It included hundreds of millions of dollars for cancer research (he was diagnosed with prostate cancer in 1992) and major arts and sciences institutions, museums, schools, and public television, with much of his institutional philanthropy centered in New York City, his home for decades.

He is survived by his wife Julia and their three children.

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Grand Jury Subpoenas Issued For Up To 20 Officers At NYC Prison Where Epstein Died

Up to twenty employees at the Manhattan Metropolitan Correctional Facility (MMC) where Jeffrey Epstein died have been subpoenaed in connection with the wealthy pedophile’s unbelievable suicide.

Federal investigators obtained the grand jury subpoenaes while trying to understand what exactly happened leading up to Epstein’s suicide in what CNN reports to be “a new and significant phase in what appears to be a criminal investigation into the workers responsible for Epstein’s detention.”

Epstein was found hanged in his cell in the early morning hours nearly two weeks ago. The multimillionaire financier was awaiting trial on charges that he’d run a sex trafficking ring involving underage girls.

The suicide of one of highest-profile federal inmates was said to have deeply angered top officials at the Justice Department, and investigators with the FBI and the Justice Department’s Inspector General’s Office have been probing the circumstances that led up to it. –CNN

On Wednesday, Attorney General William Barr said that several witnesses “were not cooperative,” and had “required having union representatives and lawyers before we could schedule interviews.” Barr has ordered the FBI and the Justice Department’s inspector general to probe Epstein’s August 10 suicide. Also under review is a prior attempt from July 23 in which Epstein reportedly told his lawyers that then-cellmate Nicholas Tartaglione “roughed him up.” 

Tartaglione has denied hurting Epstein, and recently asked a judge to transfer him out of MCC and into another prison after reportedly receiving death threats from guards – including that there would be a “price to pay” if he talks about Epstein’s death. 

Investigators are reportedly focusing on two guards tasked with watching Epstein, who have both been placed on leave in the wake of Epstein’s death. The official story is that they fell asleep on the job. There are also reports that the guards falsified records to show they had checked on Epstein every 30 minutes as required – which, if true could expose them to criminal charges. 

In the days since Epstein’s death, reports of mistakes and mismanagement behind the walls of the hulking Manhattan facility have emerged.

Barr has cited “serious irregularities” and a “failure to adequately secure” Epstein by the jail, and has in recent days overhauled the leadership there and at the Bureau of Prisons in Washington. –CNN

Prosecutors hope to learn from the lieutenants in charge of Epstein’s cell block what exactly happened the night he died; whether guards properly conducted their rounds to check on prisoners, and how work was handed off between shifts. 

“The fact that this is a grand jury investigation means that they are investigating a specific crime. It tells me that it’s something more than just ‘Let’s pick up the pieces and do a report’ like an inspector general would normally do,” said former federal prosecutor Elie Honig. 

The 66-year-old Epstein, who had not been checked for hours before his death, was found unresponsive in his cell after being taken off suicide watch days earlier. He reportedly tied a bedsheet to the top of a bunk bed and swan dove with enough force to break a bone in his neck. 

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David Koch, R.I.P.

David Koch, who along with his brother Charles ran one of America’s most prominent political giving machines, has died at age 79.

Koch was one of four children of the oil industrialist Fred Koch, and along with his older brother Charles he became one of America’s richest men through the growth of the family business. Due to the brothers’ funding of political causes and candidates, the Kochs became betes noir of the American left. (Koch was for 36 years a trustee of the Reason Foundation, which publishes Reason magazine.) Often incorrectly described as a conservative or a Republican, David Koch was a lifelong libertarian whose work and giving reflected the values of free enterprise and limited government.

Born in Wichita in 1940, Koch earned undergraduate and graduate degrees in chemical engineering from MIT, where he also excelled in basketball. After working for outside companies from 1963 to 1970, including a stint at the management consulting firm Arthur D. Little, Koch began working in the family business in 1970 as a technical service manager at the subsidiary Koch Engineering for a salary of $16,000. He rose to be president of the division, and he went on to serve in various capacities in the set of privately owned family businesses, including president of Koch Engineering and Executive Vice President of Koch Industries. He retired officially last year because of his fading health.

In a 2005 interview for my book Radicals for Capitalism, Koch told me his father taught him that “big government was bad, and impositions of government controls on our lives and our economic fortunes was not good.” In the mid-1960s, with encouragement from Charles, he attended the Freedom School, an early libertarian educational institution run by Robert LeFevre, whose variety of libertarianism rejected both political activism and violence, even in self-defense. While LeFevre was one of their earliest exposures to the organized libertarian movement, both brothers denied that they ever embraced his entire package of ideas. As they began financing, working with, and guiding libertarian institutions in the 1970s, their activism involved support and promotion for the pro-market Austrian school of economics exemplified by Ludwig von Mises and F.A. Hayek. Libertarian educational institutions, think tanks, legal action groups, grassroots activism, magazines, criminal justice reform efforts, and student groups all received largess and guidance from the Koch brothers from the 1970s through the present.

In the 1980 presidential campaign, when recently imposed campaign finance restrictions hobbled third parties’ abilities to fundraise by severely limiting how much any single donor could give, David Koch took advantage of the fact that the rules allowed candidates themselves to self-finance as they wished: He became the Libertarian Party’s vice presidential nominee. He and running mate Ed Clark got more than 1 percent of the vote, a party record that would go unbroken until 2016.

Koch told New York magazine during that campaign that he’d been excited by the previous Libertarian presidential run by Roger MacBride, saying the party was “advocating all the things I believed in. [MacBride] wanted less government and taxes and was talking about repealing all these victimless-crime laws that had accumulated on the books. I have friends who smoke pot. I know many homosexuals. It’s ridiculous to treat them as criminals—and here was someone running for president, saying just that.”

After winning the vice presidential nomination, Koch told the assembled Libertarian delegates that the party’s members “represent the best hope for human freedom since the American revolution” and that “as a businessman, who’s run a successful company, who’s had to deal with the harassment and ridiculous interference of government in the affairs of my business….I can be particularly effective at communicating the libertarian ideas and concepts to the businessman.” Koch listed the run as his “proudest achievement” in a 1987 MIT alumni newsletter.

In 1984 Koch co-founded Citizens for a Sound Economy, a free market advocacy and research organization that later split into FreedomWorks and Americans for Prosperity, both prominent players in 21st century Republican and libertarian circles in the pre-Trump age (though Koch was only directly involved with the latter). Koch continued to donate and to often serve on the boards of market-oriented advocacy groups, and the political operation funded and managed by him and Charles became notorious in the Obama age as the supposedly sinister face of money in politics.

As was his way, Koch mostly declined to participate in public controversies over his political beliefs or funding. But as he told me in that 2005 interview, he had come to see political philanthropy as finding “aggressive salesmen” who understand that you can have the best product in the world but if you aren’t finding consumers to buy it, you need to do whatever it takes to sell it, including spending “staggering sums on advertising and promotion” in the mold of Proctor & Gamble. You have to find talented people with good ideas, and try different approaches, to help generate political and philosophical change.

Koch was an inveterate experimenter in that process, to the great benefit of many libertarian institutions—he told me he’d been on as many as 20 boards at a time.

The vast bulk of Koch’s philanthropy was not political. It included hundreds of millions of dollars for cancer research (he was diagnosed with prostate cancer in 1992) and major arts and sciences institutions, museums, schools, and public television, with much of his institutional philanthropy centered in New York City, his home for decades.

He is survived by his wife Julia and their three children.

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Your Last Minute Jackson Hole Preview: Powell In Turmoil

While we shared an extended preview of Jerome Powell’s Jackson Hole speech overnight, which in light of the latest trade war development which saw China impose tariffs on another $75BN in US goods, may have to be rewritten as an even more forceful response from Trump is now virtually assured, here is a summary snapshot of what Wall Street expects from today’s main financial event.

As we noted yesterday, following surprisingly hawkish comments from Philly Fed president Harker, Kansas City President Esther George and Boston Fed president Eric Rosengren, all of whom voiced their opposition to additional cuts, the market-implied odds of a 50bps rate cut in September has tumbled to just 2% as of this afternoon, down from 41% a week ago, resulting in yet another inversion in the 2s10s curve as 2Y Treasury yields spiked.

If anything, Thursday’s hawkish tone was a reminder that it is premature to expect a signal on the size of the Fed’s September move something which the market desperately wants; In fact, as Morgan Stanley writes, Powell will certainly choose to maintain flexibility on size by reminding us the Fed “will act as appropriate to sustain the expansion.”

Furthermore, there’s been no gathering since the July FOMC, the few policymakers who have since spoken publicly have either been surprisingly hawkish, or have underscored that there is no pressing need to take additional action… and there’s still more data to get through ahead of the next meeting.

Key risks: As Morgan Stanley’s Ellen Zentner writes, watch for the use of “somewhat” when Powell is describing further adjustments. Investors may associate the word “somewhat” with 25bp. Acknowledgment that downside risks have increased with no characterization of “somewhat” could be taken as confirmation that it is likely the Fed makes a larger cut in September, although that now appears unlikely.

Some additional details courtesy of RanSquawk.

The theme of the economic symposium at Jackson Hole this year is “Challenges to monetary policy”, the same as in 1999. The theme is broad enough to cover the task of bringing inflation to target (policy framework related themes), the challenge of central bank independence, and of course of administering monetary policy at a time of heightened global trade risks and softening global growth.

The Jackson Hole presentation schedule, released late on Thursday, reveals that neither Kuroda nor Draghi would be present, and instead Mark Carney is the only other prominent fixture on today’s calendar, delivering the Luncheon Address at 2pm ET. Another notable, if very confused, central banker present will be RBA governor Philip Lowe, who will headline a Saturday morning panel.

There are also geopolitical themes that the Fed will need to navigate (US/China is the obvious one, but also Japan and South Korea, while the Fed has noted Brexit risks in the past, which seem to be resurfacing again now). Concerns around
these themes are now manifesting themselves in the yield curve, where recent inversions portend recessions ahead, leaving the Fed facing arguments that it is either is behind the curve, or does not have the tool set to tackle the issues it faces. Given that a cocktail of these issues have been keeping a lid on inflationary pressures, the messaging from Fed officials will set the stage for the 18th September FOMC, where the market is pricing 30bps of easing (implying a cut is fully priced, and there is some probability of a 50bps move).

Amid the market turmoil, and dovish actions by many global central banks, the Fed may emphasize that QT is over, and Fed policy is now accommodative; the market may be especially attuned for any insight on the magnitude of a rate cut, while 50bps is still a scenario on some bank desks; some of the dovish elements have dismissed the notion of a single 50bps rate cut in the past (see Bullard, who has not signalled any panic about the risk sell-off/yield curve inversion, preferring to judge the data, while noting it has been coming in decent recently). More generally, it may be an opportunity  for central bank officials to calm the market after its recent rout (the full agenda is not released until the day before the event gets underway, however, the event is usually attended by bigwigs from other major central banks too). One criticism the Fed and ECB faced after their respective July policy meetings was the lack of clarity – with the two dissents on the FOMC, and Draghi clearly unable to have the GC unanimously back his views on looser policy made in the run up to the meeting.

Some desks have said they would prefer Fed Vice Chair Clarida and FOMC Vice Chair Williams to attend and make remarks, both of whose messaging may be more distinct than that of Chair Powell’s was after the July FOMC, and despite the criticisms levelled at Williams recently, both of those are also able to provide more academic insight than Powell might be capable.

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