Trump Threatens Europe: “We Will Apply A Retaliatory Tax On Their Cars”

This is how trade wars escalate: Trump hasn’t even officially announced the steel and aluminum import tariffs, expected to be formally unveiled this coming week, and the rhetoric is already one of World Trade War I doom and gloom.

Hours after Trump tweeted on Friday morning that “trade wars are good, and easy to win,” European Commission President Jean-Claude Juncker said the bloc is prepared to respond quickly and forcefully by targeting imports of Harley-Davidson motorbikes, Levi Strauss & Co. jeans and bourbon whiskey from the U.S.

According to some, the preliminary EU retaliation was targeted in a way that would maximize political pressure on American leaders: Harley-Davidson is based in House Speaker Paul Ryan’s home state of Wisconsin, while bourbon whiskey hails from the state of Senate Majority Leader Mitch McConnell. San Francisco-based Levi Strauss is headquartered in House Minority Leader’s Nancy Pelosi’s district.

As Bloomberg noted, Juncker’s threat heightened the prospects of a global free-for-all, as the World Trade Organization said the potential of escalating tensions “is real” and the International Monetary Fund warned the restrictions would likely damage the U.S. and global economy. It also prompted speculation that in light of the widespread condemnation by US trading partners and allies, that Trump might step back and reconsider the sanctions.  This in turn led to a late-day burst in the stock market.

That however appears unlikely: first, in a tweet Friday morning, Trump doubled-down and warned of more trade actions ahead, casting them as reciprocal taxes, a term he has used for imposing levies on imports from countries that charge higher duties on U.S. goods than the U.S. currently charges.

“We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” Trump said in the tweet.

* * *

On Saturday, Trump’s resolve appears only to be hardened. For one, Trump’s newly reincarnated foreign trade advisor said that the tariffs will likely be signed early next week. On Friday, Navarro also made clear that there wouldn’t be any exemptions, for either Canada or other US allies:

“I don’t believe any country in the world is going to retaliate for the simple reason we are the most lucrative and biggest market in the world,” Navarro told Fox News Friday. “They know they’re cheating us. All we’re doing is standing up for ourselves.”

One look at the record US trade deficit, with both the entire world, and with just Europe, and one could make the case that he is correct.

And then, just to underscore that the market’s late Friday assumption that Trump may change his mind on trade wars may have been woefully premature, on Saturday trump unleashed a pair of tweets making it clear that he not only has no intention of backing down, but is already planning counter-retaliation to Europe’s retaliation.

In the first of two tweets, trump blasted that “the United States has an $800 Billion Dollar Yearly Trade Deficit because of our “very stupid” trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!”

More importantly, Trump followed that tweet with an explicit threat aimed at Europe, saying that “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

And yes, the trade imbalance is indeed big: in fact it has never been bigger.

Of course, that’s just how the EU likes it, and once Trump counter-retaliates to Europe’s retaliation, it will be Europe’s turn next to retaliate once again, eventually resulting in the tit-for-tat “prisoner’s dilemma” constant defection game taught in every Poli Sci 101 class, which also happens to be the worst possible outcome.

So what happens if over the next week a trade war officially breaks out? The answer will depend on how US trading partners such as China, Canada and the EU retaliate, but one thing is clear: as GMO’s Ben Inker wrote on Friday afternoon, for risk-assets this could be the start of a 40% (or more) crash in stocks:

Trade Wars are Bad, and Nobody Wins

Yesterday’s announcement by President Trump of imminent tariffs on steel and aluminum imports was taken poorly by global stock markets. Perhaps in an attempt to convince investors this was an incorrect response, early this morning he tweeted that “trade wars are good, and easy to win.” He is wrong, and beyond the simple fact of his wrongness, a trade war is probably more dangerous for investors at this time than at any other time in recent history given the implications it would have for inflation, monetary policy, and economic growth. The only positive from the tariffs is that it is a windfall profit increase for U.S. producers of steel and aluminum, which is at least positive for them. It is unlikely to cause any material increase in U.S. capacity to produce steel and aluminum and therefore unlikely to lead to many additional jobs even in those sectors. The negatives are much more significant. I believe these tariffs on their own will push inflation higher, and higher inflation is a threat to the valuations of more or less all financial assets today. But the greater threat is that this escalates into an actual trade war. A trade war would increase prices on a much broader array of goods and services, while simultaneously depressing aggregate global demand. This pushes us in the direction of not just inflation but stagflation, where both valuations and corporate cash flow would be under pressure. While there are scenarios that would be worse for financial markets—the proverbial asteroid on a collision path with Earth comes to mind—a trade war has the potential to be very bad for both the global economy and investor portfolios.

As I wrote about last December, a significant inflation problem might well be the worst thing that could happen to a balanced portfolio, leading to losses on the order of 40%. A global trade war would be exactly the kind of economic event that could foreseeably lead to losses of that magnitude.

Trade Wars are Bad

As a general rule, when you add “war” to your description of an event, it’s a pretty strong suggestion that it is unlikely to be either good or easy. Wars are sometimes well intentioned (the war on drugs), occasionally necessary (World War II), but seldom good and more or less never easy to win. Even if you do “win” easily, the longer term implications are often more problematic than you thought (the second Iraq War). There is still some time for this particular war to be averted. But while it is our general contention that equity markets tend to overreact to political and economic events, this is not one of those times.

via Zero Hedge http://ift.tt/2oMAiRT Tyler Durden

As Russian Bot Narrative Unravels, Even Liberals Say Enough Is Enough

It appears that the world’s biggest strawman is ablaze, and those who continue to cling to the rapidly dissolving “evil Russians” narrative to explain away everything from Hillary Clinton’s loss to conservative support for political issues are looking increasingly foolish in light of recent developments. 

Even former Secretary of State Condoleezza Rice thinks the Russia investigation needs to be wrapped up:

Keep in mind, there are two stories at play here; the first of course is the “Russian hacking” narrative – which posits that Russia wanted Hillary Clinton to lose the election, so they hacked the email accounts of key Democrats and the DNC and then gave them to WikiLeaks – possibly in coordination with the Trump campaign (an assertion which has more or less been lopped off the theory lately due to a lack of evidence). The second push has been the “Russian troll” narrative – which revolves around the theory that Americans were influenced by Russians purchasing ads and using “bots” on social media platforms – fake accounts which use automated systems to deliver a message or push a hashtag so that it goes viral.

And while Special Counsel Robert Mueller is rumored to be preparing fresh indictments for the Russian hacking group fingered by the largely discredited cybersecurity firm Crowdstrike – the Special Counsel’s case isn’t going to hold water unless he can explain how files can be transferred from the East Coast to Russia at 22.6 MB/s – a speed virtually impossible to achieve from halfway around the world – yet very common for a thumb drive. 

With claims of Russian meddling already on shaky ground – the absurd notion that the Kremlin was able to swing the election jumped the shark last month following Robert Mueller’s indictment of 13 Russian nationals at a “troll farm.” The official takeaway; those dastardly Russians, with no connection to the Trump campaign, were running a tiny propaganda shop (which had been in operation for years) that had no effect on the outcome of the U.S. election.

The icing on the cake had to be CNN literally dumpster diving in St. Petersburg, Russia outside the “troll farm” in search of hard evidence Mueller’s team must have overlooked.

Mueller’s indictment was immediately shredded by two media professionals close to the Russian meddling claims; Facebook’s VP of advertising, Rob Goldman, and journalist Adrian Chen of The New Yorker – neither of whom we’re guessing voted for Trump.

Goldman, in reaction to Mueller’s indictment, fired off a series of tweets which effectively dismantled claims of Russian election influence. In addition to noting that “The majority of Russian ad spend happened AFTER the election,” the Facebook exec wrote “The main goal of the Russian propaganda and misinformation effort is to divide America by using our institutions, like free speech and social media, against us.” 

Goldman’s comments were immediately picked up and retweeted by President Trump, who pronounced “The Fake News Media never fails.” 

Goldman was admonished by Facebook for his “freelance” thoughts, and issued an apology which amounted to “I couldn’t possibly know everything that Mueller’s team knows, disregard what I said.” 

Meanwhile Adrian Chen, who first profiled the indicted Russian troll farm in 2015, sat down with MSNBC’s Chris Hayes, where he proceeded to put things in perspective.

“Either I could stay silent and allow the conversation to be dominated by those pumping up the Russian threat, or I could risk giving fodder to Trump and his allies,” Chen wrote in the New Yorker. In describing the MSNBC interview, Chen added “I didn’t think that what amounted to a social-media marketing campaign—one whose supposed architects had a rudimentary grasp of the English language—could sow so much discord on its own.”

In addition to Goldman and Chen, Mollie Hemmingway of The Federalist notes: “Masha Gessen is a vehement and long-standing Putin critic. She has written a book warning about Putin and many articles comparing Putin and Trump. Even she, in a new article for The New Yorker, mocks the hysteria over the troll farms and says of the Russian bot operation that it was “not at all sophisticated, and about as bold as, say, keying a neighbor’s car under the cover of night.”

Even uber-liberal news outlet BuzzFeed published an article last Wednesday, titled “Stop Blaming Russian Bots For Everything,” 

Russian bots were blamed for driving attention to the Nunes memo, a Republican-authored document on the Trump-Russia probe. They were blamed for pushing for Roy Moore to win in Alabama’s special election. And here they are wading into the gun debate following the Parkland shooting. “[T]he messages from these automated accounts, or bots, were designed to widen the divide and make compromise even more difficult,” wrote the New York Times in a story following the shooting, citing little more than “Twitter accounts suspected of having links to Russia.”

This is, not to mince words, total bullshit.

And perhaps the most startling admission that it’s time to stick a fork in the Russian bot story is a February 20 article in the Washington Post – of all places, entitled “The U.S. political conversation is not and probably never was driven by Russian social-media bots.”

But reading the ads included in the indictment and looking at other ads released publicly by Facebook, it’s hard to come away with the sense that these were decision-makers for many voters. It’s often hard to measure the effectiveness of political advertising, but these ads seem particularly mediocre.

Hamilton 68

Feeding the ongoing Russiaphobia is a propaganda website run by The Alliance for Securing Democracy called Hamilton 68 – which claims to track Russian bots. It’s impossible to verify their claims, as the group does not disclose their methodology – yet anti-Trump politicians and pundits alike repeat its claims uncritically. On their advisory council are NeverTrumpers Bill Kristol and David Kramer – the guy John McCain sent to London to meet with Christopher Steele and bring back the discredited Trump-Russia dossier. 

With virtually every recent controversial topic which has made headlines pitting conservatives against leftists, Hamilton 68 will claim – absent any evidence, that “Russia” is pushing the conservative side of the argument. 

For example, Hamilton 68 was behind claims by Rep. Adam Schiff (D-CA) that Russian bots were behind a campaign to release a memo created by the House Intel Committee GOP majority: 

On January 23, public interest in the memo from the majority of the intelligence committee had been high, as evidenced by the demand to #ReleaseTheMemo hashtag on Twitter and Facebook. When the hashtag went viral, Schiff had a theory that it wasn’t the American public that was interested in abuse of the Foreign Intelligence Surveillance Act. Nope, it was Russians! Secret Russian bots were trying to make it look like Americans were interested in FISA abuse against a Trump campaign affiliate.

…

When Schiff advanced his theory that it was Russian bots — not Americans — who cared about FISA abuse, he received typical friendly media coverage. But when Twitter and Facebook refuted the claim, media outlets either downplayed it or pretended it didn’t matter.

…

Hamilton 68’s claim — later refuted by Twitter and Facebook — formed the entire basis of Schiff’s theory that it was Russian bots, not real Americans, who wanted to learn about FISA abuse by the FBI. Asked to respond to Hamilton 68’s claim, Twitter responded, “Because the Hamilton Dashboard’s account list is not available to the public, we are unable to offer any specific context on the accounts it includes.” They added, “We have offered to review the list of accounts contained in the Dashboard and this offer remains open.” –The Federalist

BuzzFeed notes: “The thing is, nearly every time you see a story blaming Russian bots for something, you can be pretty sure that the story can be traced back to a single source: the Hamilton 68 dashboard

But even some of the people who popularized that metric now acknowledge it’s become totally overblown.

“I’m not convinced on this bot thing,” said Watts, the cofounder of a project that is widely cited as the main, if not only, source of information on Russian bots. He also called the narrative “overdone.”

Meanwhile, talking heads such as MSNBC producer Kyle Griffin have been more than happy to promulgate reports based on Hamilton 68’s nebulous Russian bot tracker:

So, as the Russian bot narrative implodes – the lens of history will mock the legacies of those who fell on their sword defending it to its last breath. Based on the murky evidence surrounding the Russian hacking claims, we expect it to suffer a similar fate. More importantly, the message from cooler heads on both sides of the aisle is clear: time to move on.

via Zero Hedge http://ift.tt/2H0SrD0 Tyler Durden

David Stockman On The Two Janets And The Perfect Storm Ahead

Authored by David Stockman via Contra Corner blog,

The Bloomberg news crawler this week was heralding the heart of our thesis: Namely, that “flush with cash from the tax cut”, US companies are heading for a “stock buyback binge of historic proportions”.

This isn’t a “told you so” point. It’s dramatic proof that corporate America has been absolutely corrupted by the Fed’s long-running regime of Bubble Finance. Undoubtedly, the C-suites view the asinine Trump/GOP tax cut not as a green light to invest and build for the long haul, but as manna from heaven to pump their faltering share prices in the here and now.

And we do mean a gift just in the nick of time. The giant Bernanke/Yellen financial bubble is finally springing cracks everywhere, putting corporate share prices and executive stock option packages squarely in harms’ way.

So what could be more timely and efficacious than an enhanced, government debt-financed wave of stock buybacks to rejuvenate the speculative juices on Wall Street and embolden the robo-machines and punters for another round of buy-the-dip?

Indeed, corporate stock buying is now cranking at a $1 trillion annual rate or nearly double the rate of the last several years. That huge inflow of cash and encouragement to Wall Street will undoubtedly break the market’s fall in the short-run; and over the next several quarters, perhaps, enable an extended stop-and-start stepwise decline rather than a sudden sharp plunge as in the fall-winter of 2008-09.

It also underscores why the Paul Ryan school of conservative policy wonks got it so wrong on the corporate rate cut. They still dwell in a pari passu world where higher after-tax rates of return would, in fact, stimulate increased investment, growth, employment and income. But they utterly fail to recognize that the Fed destroyed that world long ago, and that the current noxious regime of Keynesian monetary central planning is the deadly enemy of both economic prosperity and traditional free market-oriented conservative policy.

That is to say, the giant growth retardant in today’s economy is resident in the Eccles Building, not the US Treasury. Yet by slashing the corporate tax rate without off-setting spending cuts, and before first fixing the central bank problem, they have produced an epic mess.

And it is this mess—which we have described as a thundering monetary/fiscal collision—that will finally cancel-out the interim prop to the market from the corporate buyback binge. Moreover, on top of that we now have the Donald truly off the deep end with the launch of his one-man world trade wrecking show.

We describe it that way because when it comes to big picture policy impacts there is almost nothing the President can do on a unilateral basis to move the needle. Thus, he got nowhere on ObamaCare “repeal and replace” because there was no functioning majority on Capitol Hill; and he lucked out completely on his ballyhooed tax cut.

To wit, it happened only because the Congressional GOP was desperate to post a legislative success–any success–that it could use during the 2018 campaign as a reason to retain a Republican Congress. And that legislative trophy will come in especially handy if it becomes necessary as a matter of political survival to figuratively extend the mile-long trek from Capitol Hill down to the Trump White House by a considerable multiple of the same.

But trade is the one policy arena where the Donald can go completely rogue owing to the insidious section 232 of the 1962 trade act. The latter literally gives the President open-ended powers to impose tariffs and other trade protections in behalf of any industry deemed essential to “national defense” that is purportedly being injured by foreign competition.

Needless to say, the Donald’s un-varnished, un-vetted and un-shackled thoughts whims on most any topic are a thing of considerable disruptive potential. But when it comes to trade, his mind beats to the sound of a drummer not from this world or even possibly the next.

In follow-up to yesterday’s flying projectiles of steel and aluminum tariffs, Trump was all-in this AM on his twitter account, and what he had to say needs exactly no exegesis:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!

Never mind, of course, that from a narrow statistical vantage point there are only 376,000 US jobs in all of primary metals including steel, aluminum, copper, nickel and sundry lesser metals and alloys. By contrast, downstream metal using industries employ upwards of 8 million in durable goods alone and 960,000 in the auto sector, which happens to average about 3,000 pounds of steel and aluminum per vehicle.

Self-evidently, the 25% and 10% tariffs on steel and aluminum, respectively, will raise their input costs by those percentages, whether customers use domestic or imported metals because the purpose of these tariffs is to put a high domestic floor under what are otherwise world market based prices. Accordingly, the Trump tariffs will send economic harm cascading downstream—to say nothing of the virtually certain chain reaction of retaliation and counter-retaliation that these moves will foster in the global trading system.

So there is indeed a perfect storm brewing. After rattling around the White House for 13 months and frequently acting as if he doesn’t even run the cabinet departments (e.g. why didn’t he fire his dunce AG long ago?), the Donald has finally found the one policy grenade that he can toss into the fray all on his own. And in the very field where his ideas are as half-baked, naïve and incindiary as they come.

To be sure, it is almost certain that the Trump tariffs will get tied up in litigation just as the Muslim bans have been. After all, SecDef “Mad-dog” Mattis himself has attested that DOD accounts for only 3% of steel and aluminum industry output. So the “national defense” fig leaf for the Donald’s impetuous foray into rank protectionism will likely come under withering assault in the courts.

But that will not mitigate the near-term turmoil because the above quoted tweets make abundantly clear that on the matter of trade, Trump means to become a one-man wrecking crew; and that there is no one around the White House who can take away his primary weapon in the global trade war which is sure to ensue. Namely, his twitter account and its incendiary capacity to insult and incite trading partners from one side of the planet to the other.

In the context of the Donald’s newly launched trade war, we advert to the other menace bearing down on the Wall Street casino—notwithstanding the current buyback binge and the dip-buying reprise it is likely to ignite (a bit of that was evident in today’s big reversal to the green on the S&P 500).

We are referring, of course, to what we have previously described as a thundering monetary/fiscal collision. Never before have both financial arms of the US government—-the Treasury and the central bank—-engaged in the simultaneous selling of securities with such malice aforethought as is now coming down the pike. During the year ahead (FY 2019) something in the order of $1.8 trillion of cash will be drained out of the bond pits to fund the $1.2 trillion fiscal deficit and the Fed’s $600 billion QT bond-dumping exercise.

While we have little doubt that the market will ultimately clear this crushing supply/demand imbalance, we have no hope at all that it will be at anything near the current 2.85% yield on the 10-year UST. What will eventually clear the decks is a “yield shock” that pushes the UST back into the 4-5% zone where it belongs (a real yield of 250 basis points plus 2.0% inflation).

As to the monetary policy side of the equation, Jay Powell and his drunken band of Keynesian central bankers are finally doing the right thing, albeit for the wrong reasons. That is, they are plowing full speed ahead to “normalize” monetary policy because they mistakenly believe we have arrived at the nirvana of “full-employment” and that it is therefore safe to reload their dry powder in order to be ready for the next recessionary downturn.

As we indicated earlier, however, safety on main street has nothing to do with it. What we actually have is a monumental financial powder keg in the casinos—so there is absolutely nothing safe about the Fed’s pivot to higher rates and QT. In fact, its normalization policy amounts to an exercise in tossing matches at Wall Street until ignition is finally, if unintentionally, achieved.

Moreover, we do think they will take it right up to the ignition point. While Powell is more a business-oriented Keynesian than was school marm Janet Yellen and her dashboard of 19 labor market indicators, he still views the main street economy just a few months or quarters at a time as she did.

In effect, the new Fed chair is just part of the Two Janets–the one who wears trousers and a tie. Both view the main street economy through the Keynesian beer-goggles of short-term deltas in the so-called “incoming data” that tell them nothing important or reliable.

Indeed, these indicators show utter failure on any kind of reasonable trend basis, but in the very short-run they have been bolstered by the global growth spurt emanating from the Red Ponzi’s massive pre-coronation credit impulse.

That’s over and done, of course, with credit expansion cooling rapidly and manufacturing output nearing the 50.0 crossover line in Chinese purchasing manager surveys. So the chart below on domestic US freight shipments captures the true story perfectly.

We are referring here to the privately published Cass Freight Index, which is based on hundreds of large US shippers from a broad array of industries—including consumer packaged goods, food, automotive, chemical, OEM, retail and heavy equipment–which use all modes of transportation including trucking, rails, barge and intermodal. Unlike much of the government GDP data which is distributed for for free and is probably worth about what users pay for it, the Cass Index is paid for by business customers who demand accuracy and transparency.

The stunning thing about this key metric of real main street activity, which is measured on an honest-to-goodness volume basis, is that there has been no recovery at all. As of January 2018, the index was still 14% below its pre-crisis peak, and has actually been trending slightly lower for the past three years.

But as they say on late night TV, that’s not all. The truth of the matter is that the January reading of 99.7 was a touch below the 100.0 reading from 18 years ago in January 2000, when Bill Clinton was still in the White House and Donald Trump was still a New York City Democrat. So if you are inclined to think that main street growth has been honing-in on the flat line—as in zero, zilch and zeds—you cannot find any better support than the picture below.

Except this isn’t what they see on Wall Street or the Eccles Building owing to the cult of the stock market. In the current price-discovery-free context that modern central banking has rendered, the only thing that really matters is short-run deltas that can be grabbed by head line reading algos and day traders as a signal to hit the “buy” key.

In fact, on a year-over-year basis the Cass Freight index is up a whopping 12.5% from January 2017, where it is riding the cresting movement of exports, imports and domestic goods triggered by the giant China credit impulse of 2016-2017. So you can call that a sloppy wet one from Emperor Xi, but it signifies exactly nothing about the sustainable state of the main street economy.

Indeed, you can peruse a whole heap of Fed meeting statements, minutes and speeches by the Two Janets and you will find no mention of the multiplicity of flat-lining and non-recovering indicators that abound on the main street economy. The chart below merely provides a few more examples–including gas and electric utility production, wholesale trade employment and manufacturing output.

All of them have flat-lined after the initial rebound from the Great Recession, and all of them are still below or at their 10-year ago pre-crisis level. Yet an economy surely is not in the pink of health or in any way healed when its use of gas and electric power is flat or when the output of goods or activity levels at wholesale have stalled out at decade ago levels.

Nevertheless, the Two Janets have found their way clear to wax on about a “recovery” narrative that is absolutely refuted by both the data and the deep economic malaise in Flyover America that put the Donald in the Oval Office.

So now comes the perfect storm.

The first Janet and her predecessors put the Donald in the Oval Office by a policy of cheap debt that inflated Wall Street, strip-minded main street and sent American production and jobs off-shore. That’s because the essence of  Bubble Finance was the prevention of a market based regime of high interest rates, low consumption and the deflationary cleansing that was necessary to keep the US economy competitive in a mercantilist, statist and credit bloated global economy.

Now the King of Debt paces around in the Oval Office oblivious to the baleful effects of the debt bomb he has helped unleash and the trade war projectiles that he has now tossed into the fray.

Meanwhile, the second Janet sees only smooth sailing on his GDP dashboard and financial equipoise in what is purported to be a prudentially regulated and reformed Wall Street. So he is plowing ahead with the epochal monetary policy pivot that will finally end 30 years of Keynesian fantasy by triggering a bond market “yield shock” and a consequent collapse of the Wall Street house of cards.

Oddly, it is not the four rate hikes in 2018 which Powell promised Congress this week that will actually prove to be the monetary trigger-man. Instead, it’s the silent, escalating pace of QT that will eventually do the job.

As we said yesterday, the Fed does not operate in a vacuum of time and space. The punters and front-runners who got hideously rich buying what the Fed was buying during the ghastly era of QE will be making the pivot, too, and long before the academics and apparatchiks who run the central bank figure out what is going down.

That is to say, by transforming the money and capital markets into outright gambling casinos and momentum driven wagering joints, The Fed has sown the seeds of its own demise.

One the other side the impending perfect storm, we doubt that the Donald will still be standing. But we know that the Two Janets will be reviled for years to come.

via Zero Hedge http://ift.tt/2FQsS8r Tyler Durden

Live Feed: Shots Fired At The White House – Man Suffered “Self-Inflicted” Gunshot Wound Along Northern Fence

The Secret Service are responding to reports of a self-inflicted gunshot wound along the White House’s northern fence.

 

President Trump is staying at Mar-a-Lago for the weekend, and the Secret Service twitter account tweeted that there were no injuries aside from the shooter.

 

News footage showed officers taping off the scene.

Shots

Screenshots from the Fox News broadcast circulating on twitter appeared to show a man lying flat on the ground.

Shots

Follow along on the live feed below:

via Zero Hedge http://ift.tt/2FnfyuF Tyler Durden

Dumping US Treasuries: The “Nuclear Option” In Global Trade Wars, But Will They?

In response to Trump’s shocking announcement of a global trade war (which may have been  “born out of anger at other simmering issues and the result of a broken internal process”), the age-old question has once again returned front and center: will foreigners retaliate by selling US securities?

First a quick recap: there was $6.3 trillion in US Treasuries held by foreign nations as of Dec. 2017, of which over $4 trillion was held by official accounts: central banks, reserve managers, sovereign wealth funds, and others.

Also recall that much if not all of these official foreign Treasury holdings built up over the years as US trading partners converted dollars from persistent American trade surpluses into US debt.

Which is why, as Reuters’ Richard Leong writes, should China, Japan and other nations, which have recycled their trade dollars through their Treasuries holdings, suddenly decide to whittle them down, “markets could be in for a rough ride.”

Naturally, foreigners are well aware of the volatility-inducing leverage they have, and have previously threatened to sell US Treauries in response to adverse US policies: in April 2016, it was the Saudi Arabia  who Threatened to liquidate its Treasury holdings if Congress probed the country’s role in the Sept 11 attacks (Congress did, found the Saudis responsible, yet neither has Saudi Arabia “liquidated” its holdings, nor has the nation been found guilty of terrorism in any court of law, in any jurisdiction). Then in early January, Bloomberg reported that Chinese officials would recommend “slowing or halting”, or evening selling, US Treasuries (China subsequently denied the report as “fake news”).

Nonetheless, “the threats are real,” said Kristina Hooper, Invesco’s chief global market strategist. “We need more foreign demand, not less.” She is right: a foreign retaliatory move in the wake of Trump’s first big protectionist action, would come at a time when foreign demand for U.S. debt is seen critical to offset an expected surge in federal borrowing needs.

To be sure, it is unlikely that Beijing, Tokyo and other overseas central banks would dump Treasuries altogether, if at all, analysts and investors told Reuters: after all such a move would be tantamount to mutual assured destruction as the financial health of the entire world is closely tied to not only the viability of the dollar, but the stability of US rates. As a result, countries could wind up torching their own U.S. bond investments, without winning any guaranteed gains from Washington, analysts noted.

“They already own a lot of them. They would be shooting themselves in the foot,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management in Philadelphia.

Still what U.S. trading partners might do with their collective ownership of Treasury securities looms as a hefty risk not only for the bond market.

That said, foreigners don’t need to liquidate everything or even a majority of their holdings: all they need to do is engage in a sharp, acute selloff which sends yields sharply higher which – as events in early February showed – would also likely led to a stock market crash. And with Trump increasingly grading his performance by the daily moves in the S&P, a sharp market drop may be all foreigners need to accomplish to force Trump to reverse.

* * *

What happens next is unclear: the debt market had a seesaw response on Thursday and Friday with investors firstly buying U.S. Treasuries as a safe haven and sending the 10-year yield to a three-week low. This abruptly reversed on Friday, mostly due to worries that the Bank of Japan might exit its ultra-loose monetary policy. Investors also sold to make room for next week’s heavy corporate debt supply, and the 10Y yield closed Friday near session highs, just shy of 2.87%.

However, growing anxiety among traders about foreign retaliation through selling or buying fewer Treasuries may be coming into play, some investors and analysts said. “You can’t rule it out. It’s unsettling the market a bit,” McIntyre said.

For now, the data shows somewhat mixed indications, On one hand, the latest TIC data showed that while China had been buying Treasurys in the past year…

… Japan, of all countries, had been selling.

Meanwhile, a separate data set from the NY Fed showed that as of the latest week, Treasury securities held in custody at the Fed just hit an all time high of $3.079 trillion.

Yet while on the surface there appears to be no change in foreign appetite for US paper, there is a footnote: as Bloomberg noted on Friday, the share of US Treasurys held by foreign central banks (and the Fed) has steadily declined as U.S. debt increases. Their combined share has declined to 40% from 45% in 2015. The U.S. is increasingly relying on private investors, domestic and abroad, to soak up the debt.

What it means, according to Bloomberg, is that term premium will increase as price-sensitive investors make up a larger market share. That suggests that yields are more likely to rise than fall in coming months and quarters.

And as yields rise, and dollar funding conditions get tighter (as a result of the blowing out Libor-OIS spread) making hedging of TSY purchases increasingly more costly, foreigners may have no choice but to dump US paper, whether or not in retaliation to Trump.

The question then is whether the Fed will give up all pretense of an economic recovery and do with it has always done when faced with an insurmountable US capital flow problem: unleash QE and monetize the deficit.

In other words – while it remains to be seen if foreigners dump US Treasuries in angry retaliation, it is safe to say that as of this moment, the fate of the Trump administration is in the hands of the Federal Reserve.

via Zero Hedge http://ift.tt/2tgRyV0 Tyler Durden

Make Your Choice: Change By Pain Or Insight

Authored by Chris Martenson via PeakProsperity.com,

It’s time to make the decision. Choose wisely…

Most experienced investors know the four most dangerous words are: This time is different. 

It never is. 

And yet one of my key predictions here at Peak Prosperity is that The next twenty years will be completely unlike the last twenty years.

So am I saying that things really will be different this time?

Yes, I am. But to understand why, you have to look closely at the unprecedented moment in history in which we live, as well as how the Three E’s – the Economy, Energy and Environment – all tie together now in a way they never have before.

For those who prefer their conclusions right up front, the simplest summary I can provide is that everything we think we know about “how things work” is just plain wrong.

This explains why, among many other grotesque distortions, the stock and bond markets are spectacularly overpriced and overvalued right now.

This danger is important to be aware of because when things correct, as they inevitably must, the next crash will be incredibly damaging. It could be as profound as that which dethroned Spain as a world power, permanently.

Peak Prosperity user Gyurash put this risk in context within his comment to our recent podcast on Economics for Independent Thinkers:

The mention of Paul Volker was interesting. I remember listening to a lecture given by Mr. Volker played on public radio in the mid 80s. He talked about the Spanish empire in the 16th century and the easy money train they had coming from South American gold and silver. He said that although it seemed to create great wealth it also made for a false economy in Spain. In addition to creating price bubbles, the Spanish did not use it to build much of anything other than big villas, built by itinerant foreign labor by the way, so when the gold and silver flow slowed when the biggest mines were effectively depleted, their economy crashed so hard that it never recovered, even up to today.

(Source)

Delusional Thinking

What’s worse than wishful thinking?  Delusional thinking. 

The sort of ideas that harm rather than help those who hold them.

Of the many current policy delusions I could rail about, perhaps the greatest of them all is the quite-impossible belief that we can have infinite growth on a finite planet.

I know, I know, refuting this is so brain-dead easy to debunk that it seems pedestrian, if not childishly so, to raise it here again. It’s quite an impossible proposition.

Even the most cursory of reviews of mining data (just one of many possible examples), show that many critical ores and minerals are vastly more difficult and expensive to extract and bring to market than they were just a few decades ago. And the trendlines keep getting worse.

But let’s go through this once again, because it’s such an important point.  For those of you already on my side of the boat, please bear with me.  Perhaps something new will emerge for you on this next go around.

The Harsh Math

Exponential expansion requires not just some new minerals coming to market, but exponentially more. 

It works out like this.  Suppose that 100 units of copper were produced in year 1, and output (as demanded by economic growth) was expanding at a 3% rate.  How long would it take for production to double?  The answer is that after 24 years we’d find that 203 units were being produced.  So a 3% growth rate means that it takes only 24 years to fully double production.

However, the more interesting fact is that over that same 24-year stretch, if we add up each year’s production into a cumulative total we discover that 3,546 units of copper had been produced.   How much copper would you guess was produced over the prior 24-year stretch (the one that got us to 100 units in the first place)? 

The answer is just 1775 units.  In other words, half the amount produced during the next doubling.  Going back further and adding up all of the doublings of copper production throughout all of history  we’d discover that each new doubling produced (and consumed) as much as the sum total of all the prior doubling periods combined.

You can prove this to yourself by looking at a doubling sequence such as 0.25, 0.5, 1, 2, 4, 8, 16, 32 etc.  Note that 4 is larger than (0.25 + 0.5 + 1 + 2) and that 8 is larger than (0.25 + 0.5 + 1 + 2 + 4) and that 16 is larger than (0.25 + 0.5 + 1 + 2 + 4 + 8) and so on — into infinity.

Again, each new doubling involves an increase that is larger than the combined values of all the prior doublings in history.

For the visually-minded, here’s that same idea expressed in an image:

How Many More Doublings Can We Possibly Have From Here?

Only the most delusional would argue that we can dependably double our extraction of key natural resources forever. 

Every two decades (or so), will we always be able to use twice as much farmland, twice as much fish in the sea, twice as much oil in the ground, as has been used before throughout all of human history?

Of course not. Planet Earth is a finite system.

This is why I claim that everything we think we know about “how things work” is wrong. Our entire economic and financial systems, their associated monetary models and their current financial asset prices, are predicated on the principle of continuous growth. And not just any sort of growth: Exponential growth.  Predictable doubling — forever.

Look, it’s ridiculously easy to prove that there won’t always be twice as much copper (or nearly any other key natural resource) as has been extracted throughout all of prior human history. Things run out. They deplete. They become more dilute as the high grades are exploited first.

At some point, doubling becomes impossible. That’s when you’ve past the point where half has been extracted and half still remains in the ground.  After that, there are exactly zero doubling periods remaining! 

Why care?

Because once the doubling periods are over, every single economic model and financial asset that is predicated on continuous expansion breaks. Our systems stop  steadily growing; and instead start increasingly shrinking.

This not a hard concept to grasp, intellectually, for most people with an open mind. But in practice, because it challenges our comfortable understanding of the world, because it collides with an entire Disney World of incompatible social belief systems, it’s pretty much impossible for the many people to even begin to wrestle with. Forget about a mainstream economist or central banker, whose salary requires them to adhere to the status quo.

The warning here is that we our deluding ourselves as a society. We are herding ourselves, lemming-like, straight towards the cliff ledge.

Think Critically!

Our mission here at PeakProsperity.com is to Create a World Worth Inheriting.  While we help people make informed decisions to imbue their lives with greater abundance and satisfaction today, it’s our dedication to the long-term picture that shapes everything we do.

Very few voices are standing about waving their arms in the air like we are, warning of the approaching cliff.  We’re aware that the point of no return might still be several decades out into the future, but we also realize that it could already be behind us. It’s nearly impossible to know right now given the complex system that is our planet — but given the existential risks involved, our opinion is that everyone should be mobilizing in response to this arriving (arrived?) crisis.

We often get labeled as narrow-minded “Malthusians”. Or accused of failing to account for human ingenuity. (Neither is accurate, we think.)

But in reality, we’re simply data driven. The facts are what they are. Logic is what it is.

And we get it. It’s both a factual and a logical nightmare for the infinite growth crowd that the earth is finite.

But as Einstein famously quipped:

And as your wrap your brain around the limits to growth, remember that you’re subject to the same comprehensive programming that envelops us all.  The messaging that constantly reinforces the idea that endless growth is what we need, and what we can expect.

This programming is subtle, reassuring and ubiquitous; which makes it hard to resist.  Here’s a prime example:

(Source)

To an economist like Bernanke, there are only virtuous expansions.  Of course, the sort of expansion he refers to is exponential growth.  Which is absolutely destined to fail in the long run (and now, maybe, the short).

And when that happens, the fallout will be spectacular and highly destructive to the hopes and dreams of literally billions of people.

Make Your Choice: Change By Pain Or Insight

What’s unclear to me is if there can be any meaningful recovery from this next crash, whenever it happens and however long it takes. 

To return to the opening piece of this article, while I know that this time is different are dangerous words for investors to believe, the impending collision between delusional infinite growth thinking and resource limits and other realities will appear to the average observer like a gigantic change.  But, in fact, it simply will mean that humans are subject to the same limits as any other life form on earth. 

In other words, it really won’t be different this time. 

In boy-meets-girl story form, the plot line of the natural process for all forms of life is:

  1. organism finds tasty energy source

  2. organism expands exponentially into that energy source

  3. energy source dwindles even as organism continues into population overshoot, and then

  4. happy times turn into tough times, and organism population plummets

Given that literally everything we hold dear and take for granted, such as well-stocked supermarkets, 24/7 electricity, and an appreciating retirement portfolio are all themselves dependent on an economic model that requires perpetual exponential expansion, several questions emerge.

How can I protect myself, my family and those I care about? How can I secure a prosperous future? What do I need to do to develop the right mental models and belief system to deal effectively with the coming challenges?

You can either address these questions head-on now, while the world still works the way we’re accustomed to. Or later, under crisis conditions.

We’ve learned that there are two ways that people change their beliefs and then their actions: by pain or by insight.

Most people go the pain rout. And in the process, they waste a lot of valuable time that could have been spent constructively. It’s only after the heart attack, the divorce, the backing over the family dog while drunk—moments of extreme pain—that most people will begin to actively face the idea that they need to make different decisions in life.

But it doesn’t have to be that way. Part of the beauty of being human is that we can learn from observation, reflection and experience, and can adapt. Critical thinkers have this ability to change by insight. They use new information to put new behaviors into practice until those practices become new habits. And with better habits, we achieve better destinies.

So which route will you choose? Pain or insight?

The story told by the Three Es is loaded with the potential for plenty of painful moments over the next few decades. Sadly, a lot of people will not take precautionary steps far enough in advance to matter. They’re just not focusing on the risks right now. As a result, much of the world will be forced to change its behavior via the pain route.

Use this awareness as a sense of urgency to prepare now. To secure your future prosperity, as well as to help those regretting that they didn’t follow your lead.

In Part 2: Steps For Changing By Insight, we lay out our prescriptive guidance what what to do now, in a world saddled with record debts, and a debt-based system of money that itself is utterly and completely dependent on infinite expansion, where something’s got to give

If you believe in eternal infinite growth, then sure, stay invested in stocks and bonds and go ahead and buy the dips.

But if you don’t, take steps today to change your life by insight, secure your future prosperity, and serve as a model for others.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

via Zero Hedge http://ift.tt/2Fbl28n Tyler Durden

Hacked Elections, Nukes And A New Cold War: Putin’s Megyn Kelly Interview

NBC’s Megyn Kelly has tried to establish herself as the US media’s preeminent “Putin whisperer” since confronting the Russian president last year over allegations he sanctioned interference by hacking groups in the 2016 US presidential election. In a formal interview with the Russian president, Kelly asked the Russian leader about the latest development in the ongoing controversy, Mueller’s indictment of 13 Russians and 3 Russian entities for election meddling.

Ignoring that the indictment stated that the alleged activities of the trolls at the Internet Research Agency had no impact on the outcome of the election, Kelly insisted on pressing the Russian president about why Russia hadn’t acted to prosecute the men – including Yevgeniy Prigozhin, a wealthy Russian businessman.

Putin pointed out that no formal requests had been made by the US government, and no effort to share the incriminating information had been made.

“I have to see first what they’ve done. Give us a document, give us an official request” Putin said in the NBC interview adding that “We can not respond to that if they do not violate Russian laws.”

Kelly responded by listing some of the allegations, before Putin insisted that they shouldn’t be presented to him personally – but to Russia’s general prosecutor.

“This has to go through official channels, not through the press, or yelling and hollering in the United States Congress,” Putin said.

The broadcast aired a day after Putin grabbed headlines in Western media by revealing that Russia had recently finished testing a range of nuclear weapons that were capable of evading US anti-ballistic missile batteries, showing animated footage and digital representations of the missiles’ capabilities striking Florida which prompted an uproar at the US State Department.

Meanwhile, even though Russia has repeatedly criticized the US and NATO for installing anti-ballistic missile shields in Eastern Europe that Russia says more closely resemble offensive missile batteries, Putin pushed back against questions about whether the US and Russia were entering a new Cold War. The Russian leader said anybody spreading these accusations are more concerned with propaganda than accurate representations of the relationships between the two countries.

“My point of view is that the individuals that have said that a new Cold War has started are not analysts. They do propaganda.”

Repeating a claim that has been made by many Russian officials, Putin said the arms race between the US and Russia began when George W Bush withdrew from the anti-ballistic missile treaty in 2002.

“If you were to speak about an arms race, then an arms race began exactly at the time and moment the U.S. opted out of the Anti-Ballistic Missile Treaty,” he said.

When asked, Putin refused to answer direct questions about the missile tests, saying only that “every single weapons system that I have discussed today easily surpasses and avoids a missile defense system.”

Watch the full interview below:

via Zero Hedge http://ift.tt/2GZo289 Tyler Durden

7 Dead After “Monster Nor’easter” Pummels East Coast, Leaving Floods, Outages

At least seven people were dead after a “monster nor’easter” – officially called Winter Storm Riley – slammed the northeastern United States on Saturday, leaving a trail of flooded streets, power outages and brutal winds.

A 6-year-old boy died in Virginia after a tree fell on his family’s home, officials said. Others include an 11-year-old boy hit by a falling tree in New York state, a 57-year-old man in Upper Merion, Pennsylvania, hit by a tree while in his car and a 77-year-old woman struck by a branch outside her home in Baltimore.

The Tewksbury Police posted this photo to their Twitter account of a tree severely damaging a jeep, March 2

The storm strengthened rapidly Friday, undergoing what’s known as bombogenesis or “bombing out,” when a low-pressure system drops 24 millibars in 24 hours. It was the second “bomb cyclone,” to hit the region after a similar storm hit the northeast back in early January. home in Baltimore.

Rubble rests on top of a car after a partially burnt building collapsed due to strong winds in Northeast Washington

According to Reuters, almost 2.4 million homes and businesses had no power in the Northeast and Midwest early on Saturday. Some utility companies warned customers that power might not be restored until later in the day or Sunday.

Wind knocks down power poles onto Arsenal Street in Watertown, Mass., March 2

New York City saw a mix of rain, snow, sleet and winds that wrapped up by evening. Over 4 inches of rain fell in eastern Long Island and parts of eastern Massachusetts.

Lighthouse Rd. begins to flood during a large coastal storm March 2, 2018 in Scituate, Mass

A tractor-trailer overturned on the Verrazano-Narrows Bridge in New York, photos showed.

In Boston and nearby coastal communities, storm surges and high tides sent seawater in the streets, the second floods there this year.

A National Guard vehicle brings emergency workers to residents trapped by flood waters due to a strong coastal storm on March 2, 2018 in Quincy, Massachusetts

Wind gusts of more than 90 miles per hour downed trees and power lines a day earlier. The highest wind gust was 93 mph in Barnstable, Massachuetts, while an 83 mph gust was measured in both East Falmouth, Massachusetts, and Little Compton, Rhode Island. Hurricane-force wind gusts will continue through coastal Massachusetts and Rhode Island Friday night.

Virginia Governor Ralph Northam and Maryland Governor Larry Hogan declared a states of emergency.  “Please use common sense, heed all warnings, and stay inside and off the roads if possible,” Hogan said in a statement.

Heavy snow fell across much of the interior northeast Friday afternoon, including in Syracuse and Albany, New York; New Jersey and eastern Pennsylvania.

Sussex County, New Jersey, has already seen 10 inches of snow by the afternoon. According to AccuWeather, the storm dumped as much as 18 inches (46 cm) of snow on parts of New York state and Pennsylvania. In Pennsylvania, a school bus was toppled over by high winds. No students were on board, and the driver’s injuries were minor.

Amtrak temporarily suspended service along the Northeast corridor until Saturday due to what it termed were “hazardous conditions for our customers and crews.” They announced around midnight Saturday that modified service would resume between Washington, D.C. and New York City at 6:20 a.m. and between New York City and Boston at 8:40 a.m.

Over 4,000 flights were canceled in the United States Friday, according to FlightAware. Nearly half of all scheduled flights at New York City’s LaGuardia Airport have been canceled today, the airport said. LaGuardia, Logan International in Boston and Newark Liberty International in New Jersey were the top-3 airports for cancelled flights on Friday.

One flight landing at Washington’s Dulles International Airport came in through turbulence so rough that most passengers became sick and the pilots were on the verge of becoming ill, the Federal Aviation Administration said.

And while the snow and rain will taper off as skies clear, but winds gusts of up to 50 miles per hour (80 kph) will persist through the day across the region, the National Weather Service said.

 

via Zero Hedge http://ift.tt/2Fka2sl Tyler Durden

When It Comes to Pot, Pain, and Cancer, Jeff Sessions Is An Idiot: New at Reason

Matt Kibbe writes:

I am a stage-four cancer survivor. No, that’s wrong. I’m not a survivor. I beat cancer’s ass into the ground, dusted myself off, and proceeded on with life. I don’t consider myself, or the millions of other people who deal with life-threatening or chronic conditions, a victim. We are not.

But surely, patients have enough to manage already without the idiocy rattling through Attorney General Jeff Sessions’ teeth every time he opines on opiods, cannabis, and pain management.

That’s right, I said it. Someone had to. Jeff Sessions is an idiot.

The problem is plain for anyone who has had an experience like mine to see: Our top federal law enforcement officer has no idea what real pain is really like, or what doctors do to manage it.

View this article.

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Guns, Code, and Freedom: New at Reason

Cody Wilson Gun control is not dead,” says Cody Wilson. “Gun control is undead. We just keep killing it but it keeps coming back.” Wilson, a crypto-anarchist and serial troublemaker, launched the age of the digital gun in 2013 when he published files showing how to make the Liberator, a 3D-printed pistol. It set off a panic in the media and in anti-gun political circles.

By late 2014, his company, Defense Distributed, had raised enough capital to begin manufacturing the Ghost Gunner, a miniature computer numerical control (CNC) mill designed to take an “80 percent lower” for an AR-15 and turn it into a legal, untraceable, fully functioning metal firearm. (While the 3D-printing process is additive, creating objects out of soft material such as plastics, milling is subtractive, cutting away material from an existing structure, and can be done to both plastics and metals.)

For the uninitiated, the Ghost Gunner’s purpose takes some unpacking. A lower receiver is the part generally considered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to be the “firearm,” whether other components are present or not. It is also the part that must be stamped with a serial number when produced by a commercial manufacturer.

So-called 80 percent lowers (or “80 percent frames”) are, as the name suggests, only four-fifths complete. As a result, they’re not firearms in a legal sense. Anyone can purchase an 80 percent lower and then use his own tools to do the remaining mill work, turning the object into a working weapon. It is perfectly licit in the U.S. to make a gun this way; outside of California, it does not need to be registered or serialized.

For four years, Wilson has been embroiled in a legal battle over his work. But it’s not the ATF he’s fighting—it’s the State Department. Shortly after publication of the Liberator instructions, the agency forced Defense Distributed to remove those files from its website, citing violations of the International Traffic in Arms Regulations (ITAR).

In 2015, joined by the Second Amendment Foundation and the legendary attorney Alan Gura, Wilson challenged the State Department’s order on First, Second, and Fifth Amendment grounds. They later petitioned the Supreme Court for a temporary injunction that would null the take-down order until their lawsuit is resolved. In January, the high court declined to hear the case, sending it back to a lower court in Texas to be argued on the merits.

Despite the ongoing legal skirmishing, Defense Distributed in late 2017 released new files allowing the Ghost Gunner to mill handgun frames in addition to rifles. In December, Reason‘s Mark McDaniel spoke with Wilson about the future of gun control, how a weapon can be speech, and where Western liberal decadence is taking us.

View this article.

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