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The Intermediate-range Nuclear Forces treaty (INF) signed in 1987 by President Ronald Reagan and Soviet leader Mikhail Gorbachev has now officially ended, six months after President Trump issued Moscow an ultimatum to cease its alleged violations. 

“Decades ago, the United States entered into a treaty with Russia in which we agreed to limit and reduce our missile capabilities,” the President said during his February State of the Union address.

“While we followed the agreement to the letter, Russia repeatedly violated its terms. That is why I announced that the United States is officially withdrawing from the Intermediate-Range Nuclear Forces Treaty, or INF Treaty.” 

The clock on that timetable has just run out, with the US announcing it has ripped up the landmark agreement. 

Moscow for its part has blamed the US for collapse of the treaty, with both sides over the past couple years frequently pointing the finger at the other for violating its terms, namely a ban on all land-based missiles with a range of between 310 and 3,400 miles.

Meanwhile, the AP reports on the day of the landmark deal’s final collapse:

The United States plans to test a new missile in coming weeks that would have been prohibited under a landmark, 32-year-old arms control treaty that the U.S. and Russia ripped up on Friday.

“Russia is solely responsible for the treaty’s demise,” Secretary of State Mike Pompeo said in a statement released on Friday.

VIDEO: NATO chief Jens Stoltenberg says the alliance will avoid “a new arms race” with Russia and will not deploy new nuclear missiles on European soil after a Cold War missile pact ended pic.twitter.com/UdwN9tUIOZ

— AFP news agency (@AFP) August 2, 2019

NATO Secretary-General Jens Stoltenberg also laid blame on Russia in remarks Friday, saying that NATO members “regret that Russia showed no willingness and took no steps to comply with its international obligations.”

He pledged that the alliance will avoid “a new arms race” with Russia and prevent powers from deploying new nuclear missiles on European soil, which has long been the chief danger that the INF for decades blocked. 

But could this be the start of a new unrestrained arms race which does see missiles creep onto European soil? 88-year old Former Soviet leader Mikhail Gorbachev thinks so.

“The termination of the treaty will hardly be beneficial for the international community, this move undermines security not only in Europe, but in the whole world,” Gorbachev told Interfax on Friday.

“This US move will cause uncertainty and chaotic development of international politics,” the original co-signer of the treaty with Reagan predicted. 

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

Authored by James Howard Kunstler via Kunstler.com,

Race Hustle

When the shining city is at hand, a special slum will be built for me and my meanness. I will be the person, if that’s what I am, in the slum; there will be one of everything; one rat, one tin can. … I will behave poorly.

– Thomas McGuane, Ninety-two in the Shade

After two double rounds of Democratic Party debates, one thing is for sure: the characters onstage are followers, not leaders, and they’re following each other off a cliff like so many Wile E. Coyotes, while the Golden Golem of Greatness streaks, beeps, and tweets across the buzzard flats below like the fabled Roadrunner.

In an epic and bizarre case of mimesis, the Democratic Party is mau-mauing itself into America’s political slum, complete with a rank-and-file demographic dependent on government largesse and an infestation of bad ideas, like the scurrying rats and cockroaches of the ghettos they pander to so relentlessly. The candidates themselves are so terrified of being a few syllables away from getting branded with the scarlet “R” on their foreheads — according the to the rules of Wokesterism — that they blindly submit to any idiotic Simon Says command, such as raising their hands in support of free medical services for illegal immigrants, to signal their racial uprightness and sensitivity.

How are the actual city ghettos and their denizens doing after half a century of Democratic Party rescue operations? Not so well, the Golden Golem averred last week about Baltimore, igniting a firestorm of grievance and objurgation from the political ghetto. Isn’t the point exactly that the people, and the place where they live, are not doing any better despite decades of federal programs, household assistance, affirmative action, and every other attempt to (theoretically) improve their existence? And isn’t the heart of the matter the desperate shame and chagrin of Democrats that none of this has worked?

It hasn’t worked… so, do more of it! That’s the Democratic Party’s neurotic strategy for winning the hearts and minds of this republic. Driving men out of households via the welfare rules that don’t allow “a man in the house,” and destroying family formation wasn’t bad enough. The Democratic party has spent the past three years vilifying and demonizing men and their “toxic masculinity,” and retailing the insane multiplication of “genders’ in a bad faith attempt to manufacture sexual “diversity” — with the net effect of negating all previous understandings of the relations between men and women.

Newsflash: that’s not going to work, either.

The shriekings of “racism” aren’t helping much anymore. Few observers have missed the fact that the city of Baltimore has been run by an African American city hall (Mayor, Police Chief, District Attorney) for many years, with over a billion dollars in additional federal assistance. So, if political power is the answer, how’s that working out? Add some extra shrieking about “white privilege” to explain the situation? How does “white privilege” explain the fact that 86 percent of kids in Baltimore primary schools can’t read and 89 percent can’t do arithmetic to grade level? This, despite the fact that at $15,564 per pupil, Baltimore is fourth highest per student of the 100 largest school districts in the nation, according to the U.S. Census Bureau.

Maybe becoming the party of a national race hustle isn’t such a good idea. The race hustle is wearing out its welcome in American politics, and the more the Democratic Party resorts to race hustling as its chief strategy, the sooner the party will go extinct. That is, if it doesn’t incite some kind of civil war first. Cue the cry, “That’s racist!”

Maybe there is a whole range of human values and human behaviors that have nothing to do with race — like reading to small children and helping them learn the English language so they don’t grow into adults who have to say “know what I mean?” every other sentence because they’ve barely acquired enough language skill themselves to know what they mean. Maybe there’s something called an American common culture that contains values and behaviors worth emulating rather than opposing. Maybe “multiculturalism” wasn’t such a good idea after all. Maybe ghetto culture is not such a precious foundation for a successful life. Maybe the Democratic Party should move out of the ghetto it’s built for itself.

via ZeroHedge News https://ift.tt/336XqxQ Tyler Durden

With the resurgence of US-China trade tensions and Friday’s jobs number (which confirmed that US labor-market growth is beginning to slow) raising expectations for more Fed rate cuts just days after Fed Chairman Powell appeared to suggest during the Q&A that the July cut might be a “one and done”, President Trump is finally getting around to addressing one of the other major developments from the past week that had, until now, seemingly gotten lost in the shuffle: North Korea.

Over the past couple of weeks, North Korea has carried out several short-range missile tests. Yesterday, we cited media reports that the Pentagon had tracked a projectile launched from North Korea early Friday morning (local time), citing an unnamed senior official, who further added it appeared similar to others launched over the past weeks.

JUST IN: North Korea fires two short range ballistic missiles, both landing in the sea, multiple US officials say; 3rd missile launch in 2 weeks. pic.twitter.com/4ym6UWE0bS

— MSNBC (@MSNBC) August 1, 2019

To be sure, Trump has taken news of these tests in stride. Following reports of the short-range missile launches, which, as Trump once again pointed out, don’t violate Kim’s agreement with Trump to refrain from ICBM launches, Trump reportedly appeared “unbothered” by Pyongyang’s latest salvos. When asked if he was worried about them, he told a reporter “no, not at all.”

But in a series of tweets on Friday morning, the President warned Kim Jong Un not to “disappoint me with a violation of trust”, adding that “there is far too much for North Korea to gain – the potential as a Country, under Kim Jong Un’s leadership, is unlimited.”

However, “there is also far too much to lose.” To fulfill Kim’s “great and beautiful vision for his country” the North Korean leader needs “the United States, with me as President” to “make that vision come true.”

Trump finished by asserting that Kim “will do the right thing because he is far too smart not to, and he does not want to disappoint his friend, President Trump!”

Kim Jong Un and North Korea tested 3 short range missiles over the last number of days. These missiles tests are not a violation of our signed Singapore agreement, nor was there discussion of short range missiles when we shook hands. There may be a United Nations violation, but..

— Donald J. Trump (@realDonaldTrump) August 2, 2019

…..Chairman Kim does not want to disappoint me with a violation of trust, there is far too much for North Korea to gain – the potential as a Country, under Kim Jong Un’s leadership, is unlimited. Also, there is far too much to lose. I may be wrong, but I believe that……

— Donald J. Trump (@realDonaldTrump) August 2, 2019

….Chariman Kim has a great and beautiful vision for his country, and only the United States, with me as President, can make that vision come true. He will do the right thing because he is far too smart not to, and he does not want to disappoint his friend, President Trump!

— Donald J. Trump (@realDonaldTrump) August 2, 2019

For what it’s worth, the North has said its missile tests were a warning to South Korea, which plans to resume military exercises with the US later this month.

Trump also insisted that the tests are “not a violation of our signed Singapore agreement”…though they might constitute a violation of United Nations sanctions…but that’s besides the point. But another thing to consider: Did Kim get “the tap” from Beijing to start acting up as the latest trade truce between the world’s two largest economies started to unravel? If so, might we expect more brinksmanship from the North in the coming weeks?

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

Via Economic Cycle Research Institute (ECRI),

Many in the consensus regard the widely-expected Fed rate cut as unnecessary. Yet, the elephant in the room remains the inflation cycle downturn that leaves the Fed with little choice but to cut rates.

This is because Fed officials believe they need to cut rates now to boost inflation while economic growth is still good. As Fed Chairman Jerome Powell recently stated, they wish to avoid the trap that Japan has fallen into and now confronts the Eurozone, where “lower expected inflation gets baked into interest rates, which means lower interest rates, which means less room for the central bank to react” when recession threatens.

The early-2018 downswing in ECRI’s U.S. Future Inflation Gauge (USFIG) predicted the current inflation cycle downturn. But this downturn was missed by most – including the Fed, which hiked rates last September and December after we warned of the downside risk for inflation. 

In fact, following the USFIG downturn (chart, upper panel), year-over-year (yoy) CPI inflation (lower panel, gray line) and yoy growth in the personal consumption expenditures (PCE) deflator (lower panel, black line) – the Fed’s inflation target measure – both turned down in mid-2018. That cyclical downswing continues, despite the latest uptick in core PCE deflator growth (not shown) that looks to be tariff-driven and thus likely to be temporary.

Now, many are focused on whether the Fed is acting in time to head off a recession, still ignoring the elephant in the room – the inflation cycle. However, it is the inflation cycle that bears watching.

Indeed, the downturn in the USFIG allowed our clients to be forewarned and prepared for the plunge in bond yields that began last fall. That downturn was a precursor to the Powell pivot early this year. Today, the ongoing inflation cycle downturn predicted by the USFIG gives the Fed plenty of room to cut rates.

*  *  *

Click here to review ECRI’s recent real-time track record. For information on ECRI professional services please contact us. Follow @businesscycle on Twitter and on LinkedIn.

via ZeroHedge News https://ift.tt/2YBOX6B Tyler Durden

To commemorate the most ferocious reversal in the market observed in years, we shared a laconic comment yesterday via twitter on what happened in the stock market in the milliseconds (and minutes) following Trump’s Thursday afternoon tweet:

All traders who stepped out for lunch are in for a little surprise…

— zerohedge (@zerohedge) August 1, 2019

Of course, the trader “surprise”, and what happened yesterday has to be taken in context – a move that first saw stocks plunge, then recoup all losses, then replunge… and continue to plunge today, in the process wiping out both shorts and longs.

That said, we were not the only ones to feel dazed and confused by the market action of the past 3 days: Nomura’s Charlie McElligott was just as frazzled, if not more, noting in his latest letter to clients that “that was one of the most manic 36 hours of trading I have ever witnessed in my 18 year career.”

Why? Read on the following selected excerpts from his Friday note for the various reasons why few will forget what happened over the past several days.

WHO SHOT WHO IN THE WHAT NOW?!

Well that was one of the most manic 36 hours of trading I have ever witnessed in my 18 year career

President Trump has again changed the market calculus—and thus investors (myself clearly included) are now forced to adjust their views on the monetary policy path from here, as this re-escalation of the China trade war likely forces the Fed (and “competing” Central Banks in beggar-thy-neighbor currency devaluation fashion) to once-again ‘bend the knee’ in preemptive strike against the negative forward growth implications

Thus, we now see FOMC OIS implying another 25bps now being fully priced-in for the Sept meeting (assuming 2.15 Fed Funds Effective), whereas after the Fed those odds were trending down through ‘just’ 60% likelihood.

As per my initial note yesterday, I was ready to enter a (now laughable) tactical “long USD” + “short duration” position (as well as a broad reversal of “momentum” themes within Equities—i.e. “long IWM / short Tech” with both a +USD and positioning pain “kicker”) into August’s seasonal volatility and high likelihood of Fed disappointment in September as per the Powell commentary.

What I was thematically anticipating was a broad “grossing-down” of popular cross-asset macro positioning on account of what I perceived as low prospects for any September easing from the Fed (due to stable US data and the Fed’s prior day messaging on their collective mindset, preferring “insurance” as opposed to “easing cycle”) and into PM mentality shift to monetization ahead of August vol / illiquidity

That said, following 1) the ugly ISM print details and most importantly 2) the fresh tariff round escalation from POTUS, that mindset has been conceptually “stopped-out” dead in its tracks, with a fresh wave of “stop-ins” to all-things Duration- / Rates- linked (i.e. +4SD move in Red ED$ yday)

This “Duration-Grab” has taken many forms:

• Real Money—both foreign and domestic—have been driving the demand seen on our desk for weeks, and that continued yday
• Overnight there was talk of Asian Real $ flatteners going-through, as well as outright long-end buying
• Suffice to say that on any breakout to new levels (in this case, fresh multi-year levels), you are likely going to see (negative) convexity hedgers active—which from the looks of the trade in swaps yday, we got that in the form of new Receiving flows
• Also too then it’s likely that there are fresh duration buys in the long-end originated from Vol Dealer desks, who too are being forced-in as per Gamma hedging requirements from the incessant Receiver demand

Yesterday the market “voted with its feet” in regard to “Fed Policy Error” via their perceived miserly 25bps cut and QT-cessation, destroying WTI Crude (-7.9% yday, bouncing today +2.3%), Breakevens (5Y -7bps yday, flat today) and 5y5y inflation (-8bps yday, flat today)—as such, Cyclical Equities were destroyed with Industrials -2.0%, Energy -2.3% and Fins -2.3% as the S&P’s three worst performing sectors—thus US Value factors were hard-hit as well;

Because of this explosion higher in “all things duration,” the big winner of the day within US Equities was thus “1Y Price Momentum” factor, which as I have explained for months is a pure expression of “Long Duration, Short Cyclicals”—thus posting a spectacular +3.6% return on the day, which was the largest positive daily return for the factor in over 3 years

As an indication of the “foaming at the mouth” nature of the current “Duration Grab” into today’s NFP—which up until yesterday had major potential to rock the boat of the Rates trade—a competitor’s survey of Rates Clients showed the highest proclivity of respondents to “buy the dip” in USTs on any upside surprise in today’s Non-Farm print since November of 2010

Please see my “Sequencing Adjustments” notes below for August “Equities Pullback” catalysts (Dealer Short Gamma, Dealer Short Vol, Systematic VIX Roll-down Unwind, > 95th %ile HF Gross Exposure, VIX + Seasonality / August Illiquidity which incentivizes “book down” behavior), perversely then into the clear risk thereafter of a powerful “short squeeze” thereafter on all of the new Fodder as single-name / ETF / index futs shorts which were pressed in size yday and into the inevitable September dovish Central Bank policy response.

SEQUENCING ADJUSTMENTS:

We certainly got our anticipated August “Vol Spike” call correct, with US Equities ‘vol of vol’ (VVIX) seeing a 9.2 vols move yday alone and indicating a massive grab for tails, as the whole curve was lifted. In line with this view, Equities are clearly now “open for the pullback” in the following weeks on mix of the following catalyst–

• Dealers now clearly “Short Gamma” in Index / ETF (flipped below ~2980, as I highlighted in the past few notes ahead of the move)
• Dealers now too are clearly “Short Vol” in-bulk, thanks to the “50 Cent” VIX upside flows which have been trading in SIZE over the past few weeks
• Similarly, Systematic VIX Roll-down players in recent weeks had definitely reapplied significant size to the “Short Vol” trade, as per VIX futures positioning—thus, with the curve again “inverted,” they will be forced / unemotional hedging of these front-end shorts in UX1 and UX2
• Per competitor PB data, HF Gross-Exposure sits at > 95th %ile on a 10Y historical–yeouch
• VIX seasonality shows that the average VIX return in the month of August is +9.2% over the 29 year history of the index, the best avg return of any month and nearly +50% over the 2nd best month for VIX (which mind you happens to be September at +6.9% on avg)
• The currently higher level of realized vol will begin to “drag up” trailing realized vol inputs for the “Target Volatility” systematic fund universe, which are significantly positioned and thus open to mechanical deleveraging—i.e. our CTA model’s current ~ 10m high $ allocation to both SPX and NDX futures positions
  • As per my below tables, we would expect to see CTA deleveraging in the current +100% Long positions in SPX futures under 2916 (get to +56%), while Nasdaq futs would deleverage below 7731 (same 56%)
• Finally and anecdotally, we are now into the standard PM pre-holiday “gross-down” season, especially with YTD gains incentivizing profit-taking and after the “scar-tissue” of 4Q18 has conditioned folks to “take chips off when you CAN, not when you’re FORCED to”

HOWEVER, this “August Pullback” risk has to be watched with extreme precision, as the follow-up from there is the “perversion” I noted yesterday—which is that these market-shock events only FIRM the case for more investor conditioned “buy the escalated Fed easing case,” as external risks to growth further percolate—likely then forcing September to see a wave of fresh Central Bank “capitulatory easing.”

This danger of a ripping-rally thereafter is even more clear if you think about the amount of dynamic hedging Futures Shorts laid-out yesterday—as well as the fact that Equities funds were VIOLENTLY pressing their Shorts (i.e. 1Y Price Momentum Shorts closed -3.2%, a 1.2%ile outcome since 1984).

Punchline: this means there is massive “fodder” again building for another “Global Central Bank Policy Response” short-squeeze in the making ahead of the big September meetings.

via ZeroHedge News https://ift.tt/31lofNp Tyler Durden

Authored by Tom Luongo via The Strategic Culture Foundation,

The second debate among Democratic hopefuls was notable for two things. The lack of common decency of most of them and Tulsi Gabbard’s immense, career-ending attack on Kamala Harris’ (D-Deep State) record as an Attorney General in California.

Harris came out of the first debate the clear winner and Gabbard cut her down to size with one of the single best minutes of political television since Donald Trump told Hillary Clinton, “Because you’d be in jail.”

Gabbard’s takedown of Harris was so spot on and her closing statement about the irresponsible nature of the Trump Administration’s foreign policy was so powerful she had to be actively suppressed on Twitter.

And, within minutes of the debate ending the media and the political machines moved into overdrive to smear her as a Russian agent, an Assad apologist and a favorite of the alt-right.

Now, folks, let me tell you something. I write and talk about Gabbard a lot and those to the right of me are really skeptical of her being some kind of plant for Israel or the establishment. If she were truly one of those she wouldn’t have been polling at 1% going into that debate.

She would have been promoted as Harris’ strongest competition and served up for Harris to co-opt.

That is not what happened.

No, the fact that Gabbard is being smeared as viciously and baselessly as she is by all the right people on both the left and the right is all the proof you need that she is 1) the real deal and 2) they are scared of her.

When Lindsey Graham tweets about Tulsi Gabbard twice after a debate, when the Washington Post neocons like Josh Rogin are attacking her, you know she’s got their panties in a bunch.

You expect it from the Harris camp, obviously. But when it comes directly from people like Navid Jamali (double agent, navy intelligence, MSNBC contributor) you know the empire is beginning to get worried.

Like Jill Stein and Donald Trump, Gabbard is counting on Russian support. This is why she won’t criticize Assad. This is what we’ve become. An election rife with foreign influence. This is how they attack our election security, not by hacking, but by doing this. https://t.co/delzVncET1

— Naveed Jamali (@NaveedAJamali) August 1, 2019

Gabbard is now getting the Ron Paul treatment. It will only intensify from here. They will come after her with everything they have.

In the past week she’s destroyed Kamala Harris on national TV, sued Google for electioneering and signed onto Thomas Massie’s (R-KY) bill to audit the Federal Reserve. What does she do next week, end the Drug War?

Tulsi Gabbard is admittedly a work in progress. But what I see in her is something that has the potential to be very special. She’s young enough to be both passionately brave and willing to go where the truth takes her.

And that truth has taken her where Democrats have feared to tread for more than forty years: the US Empire.

The entire time I was growing up the prevailing wisdom was Social Security was the third rail of US politics. That, like so many other pearls of wisdom, was nonsense.

The true third rail of US politics is empire. Any candidate that is publicly against the empire is the enemy of not only the state, it’s quislings in the media, the corporations who profit from it and the party machines of both the GOP and the DNC.

That is Gabbard’s crime. And it’s the only crime that matters.

When the Empire is on the line, left and right in the US close ranks and unite against the threat. The good news is that all they have is their pathetic Russia bashing and appeals to their authority on foreign policy.

Foreign policy, by the way, that most people in America, frankly, despise.

And the response to her performance at the second debate was as predictable as the sun rising in the east. It’s also easily countered. Gabbard will face an uphill battle from here and we’ll find out in the coming weeks just how deep into Trump Derangement Syndrome the average Democrat voter is.

If she doesn’t begin climbing in the polls then the Democrats are lost. They will have signed onto crazy Progressivism and more Empire in their lust to destroy Donald Trump. But they will lose because only a principled anti-imperialist like Gabbard can push Trump back to his days when he was the outsider in the GOP debates, railing against our stupid foreign policy.

No one else in the field would be remotely credible on this point. It’s the area where Trump is the weakest. He’s not weak on women’s rights, racism, gay rights or any of the rest of the idiotic identity politics of the rest of the Democratic field.

He’s weakest on the one issue that got him elected in the first place, foreign policy. Hillary was the candidate of Empire. Trump was not. It’s why we saw an international conspiracy formed to destroy him and his presidency. Now that same apparatus is mobilized against Tulsi Gabbard.

That’s good. As a solider she knows that when you’re taking flak you are over your target. Now let’s hope she’s capable of sustaining herself to push this election cycle away from the insanity the elite want to distract us with and make it about the only thing keeping the world from healing, ending the empire of chaos.

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

For the first time that we can remember, an FOMC member – Boston Fed president Eric Rosengren – listed the (record) level of the stock market as one of the reasons why he dissented from Wednesday’s decision to cut rates as he found the case for cutting interest rates was not “compelling.”

“I do not see a clear and compelling case for additional monetary accommodation at this time,” he said in a statement Friday that listed 8 charts showing low unemployment, inflation likely to rise toward the Fed’s 2% target, and financial stability concerns “given near-record equity prices and corporate leverage” to wit:

But what was most remarkable, as noted earlier, is the fact that Rosengren explicitly noted the level of the market, noting that “stock prices are near all-time highs” as one of the eight market-linked reasons not to cut. Why is this notable? Because this is an indirect admission that the Fed was responsible for pushing stock prices to all time highs with its easy policies; as a result cutting here will only lead to even higher asset prices (unless of course, Trump intervenes and launches World War III as he appears to have done).

As a reminder, the Boston Fed president and his Kansas City Fed colleague, Esther George, were the two dissenters in favor of keeping rates on hold, leading to Jerome Powell’s first double dissent since he took the Fed’s helm in February 2018.

 

via ZeroHedge News https://ift.tt/335KQ1X Tyler Durden

University of Michigan Consumer Sentiment signaled a small downtick in July – despite soaring stock markets – but the confidence boost was very mixed across wealth cohorts.

While the highest income Americans became more confident in July, middle-income Americans’ confidence tumbled to 5-month lows…

However, as UMich points out, economic confidence has been remarkably stable since the start of 2017, despite ongoing trade uncertainties. The resilience displayed has been primarily due to a renewed sense of personal financial optimism. Indeed, recent surveys have recorded the most favorable net personal financial expectations since May 2003.

Positive job and income prospects, gains in net household wealth, and low inflation have bolstered optimism. At present, consumers do not anticipate a rapid acceleration in income growth rates, nor do they expect significant changes in inflation and unemployment rates. Consumers have not ignored mounting policy uncertainties as they have begun to take precautionary measures to increase savings and reduce debt. Favorable buying attitudes toward homes and vehicles have significantly receded from their cyclical peaks despite declining interest rates.

Finally, as UMich notes, a key issue is whether the recently announced tariffs on Chinese imports, covering more commonly purchased consumer items, will spark an even more cautious outlook.

via ZeroHedge News https://ift.tt/31fmLnt Tyler Durden