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California Governor Jerry Brown will release his final state budget tomorrow for the 2018-2019 fiscal year which will include, for the first time, tax revenue from weed sales.  As Reuters  notes this morning, Brown and state lawmakers have ‘high’ expectations for the new revenue stream which is expected to reach $1 billion over the next couple of years.  Meanwhile, if the estimates are even directionally accurate, the pot tax will be the largest “sin tax” collected in California at over 2.5x the revenue collected from the sale of booze (chart below per the 2017-2018 California budget).

Brown’s final budget is expected to show a $7.5 billion surplus on roughly $125 billion in annual expenditures…

The estimated budget surplus of $7.5 billion is a far cry from the $27 billion hole that was projected as Brown took the reins for his third term in January 2011. He had previously served as governor from 1975 to 1983.

For the current fiscal year, the state budget topped $125 billion in general fund spending and nearing $200 billion when funds from the federal government, bond sales and other sources are considered, state records show. California has the sixth-largest economy in the world and is the most populous U.S. state, spending $53 billion from its general fund budget for K-12 education, $15 billion for state colleges and universities, and $35 billion for health and human services in fiscal year 2017-2018.

…which is primarily spent on education ($68 billion), Health and Human Services ($35 billion) and, of course, the state’s massive prison system ($11 billion).

Meanwhile, as the Sacramento Bee notes, Brown’s new budget will also reflect efforts to circumvent Trump’s new federal tax law by allowing California residents to report their state taxes as if they were “charitable contributions.”

Gov. Brown blasted the new tax law while Republicans advanced it, calling it “evil in the extreme.” He charged that the law favored corporations over low-income Americans and seemed to single out his state by striking a popular state and local tax deduction that some 6 million Californians claimed last year.

Brown could use his budget to strike back by signaling his intent to adjust California tax laws in a way that would let residents claim new deductions on the federal returns.

One proposal, already submitted in a bill by state Senate President Kevin de León, would let Californians report their state taxes as if they were charitable contributions, allowing residents to deduct those taxes on their IRS returns. Another more complicated idea floated by tax experts would have California shift its personal income tax to a different employer tax that businesses could deduct.

Of course, Cali democrats who are celebrating their surplus budget may want to take a step back and put the magnitude of their “accomplishment” into perspective…

via RSS http://ift.tt/2CYfWhQ Tyler Durden

Authored by Sven Henrich via NorthmanTrader.com,

In technological singularity is the hypothesis that the invention of artificial super intelligence will abruptly trigger runaway technological growth, resulting in unfathomable changes to human civilization. A similar concept may apply to financial markets in the realm that is bond yields versus equity prices producing a runaway event in its own right perhaps.

 

Correlation does not imply causation but as you know I’ve been floating my theory of everything a bit lately (see: 2018 Market Outlook) and it relates to the relationship between yields and stock prices. Not just as a casual relationship, but as THE relationship to watch. My basic premise is that low yields have been the primary function with which the US, and the world for that matter, has been keeping itself on an artificial growth path as one bubble after another has burst. Unprecedented debt has been the result and low yields keep masking and delaying the eventual reckoning (see also The Debt Beneath).

You may have seen this chart from my writings:

The primary premise:  If this relationship is meaningful there’s a singularity where rising yields will hurt stocks as the cost of carry of the debt will grind everything to a halt.

This hasn’t happened yet obviously and frankly I can’t predict when it will happen. But I can observe.

Yesterday the 10 year pushed above 2.5% for the first time in a long time. And with historic overbought readings in equities it may be a folly exercise to prescribe any rejection in equities with rising yields this early, but bear with me.

Yesterday a couple of odd things happened. Firstly as I outlined internals were negative all day:

How unusual was this in context of new highs and a rising $VIX? This unusual:

Since the beginning of the year we’ve had virtually zero selling and cumulative internals always ended the day in the positive.

Except yesterday when the 10 year jumped above 2.5%. Negative internals prevailed all day long:

Let’s zoom in on my 10 year trend chart:

If this trend line is the relevant one we just did something we haven’t done since 2007: Bust above the trend line.

In 2007 such a burst above the trend line was the beginning of the end for stocks. Indeed going back to the late 80’s every single tag of the trend line has resulted in a dropping of the 10 year yield. And many times this was the direct result of Fed intervention producing stock market rallies or the Fed reacting to corrective activity in markets.

The 2000 top came near a trend line tag. The 1990/1991 recession required a dropping of yields following a trend line tag. The 1998 correction caused Greenspan to drop rates following a rise in yields. We know what happened after the 2007 peak: Zero bound by the Fed. The corrections in 2011 and 2012 were met with a drop in yields, the 2015/2016 corrections were followed by a record low 10 year. You see the trend.

2017 saw a tag of the trend line and then a renewed rejection. The pattern is eerily similar to 2006 and 2007.

Are we repeating this pattern here? Or are yields about to break out? I can’t say, but if central banks wish for inflation I say be careful what you wish for.

Were yesterday’s negative internals (strength in banks notwithstanding) already an indication that the larger stock market is already sensitive to higher rates?

What is that point of the singularity?

Jeffrey Gundlach seems to think it’s at 2.63%:

“if the 10Year goes to 2.63% stocks will be negative impacted.”

He also is watching yields in relation to trend lines and his are different to mine which is fine:

Ultimately the market will let us know which trend line is relevant here.

But the main message is the same: Yields are rising:

And like us Gundlach is highlighting the complete lack of corrective activity, the one way action in equity prices and unprecedented volatility compression:

Overnight we see flushing in markets for the first time in 2018 as yields rose even further:

Guess markets didn’t like that.

Is 2.5% the singularity?

• If the 10 year drops back below 2.5% and stocks rally I think we have our answer.
• If it extends above 2.6% and stocks continue to drop I think we also may have our answer. In which case the answer is 2.5% not 2.63%.
• If stocks rally and the 10 year keeps moving higher then 2.63% is the next level to watch.

For now the 30 year track record is yields dropping following a tag of the trend line, or fake out above. An extended journey above markets have never had to contend with. A journey into the undiscovered country until the singularity is achieved.

via RSS https://www.zerohedge.com/news/2018-01-10/bond-market-singularity Tyler Durden

Bridgewater founder Ray Dalio has been preoccupied in recent months with promoting his new book – “Principles – and penning screeds about China and the struggles of the American working class.

But as Bridgewater Associates struggles to play down its tepid performance in recent years, it appears the firm’s recruiters have scored another victory that should keep investors distracted from its middling performance.

To wit, Bloomberg reports that the $160 billion hedge fund has hired Vanessa Selbst, the world’s most successful female tournament poker player. Selbst, a Brooklyn native, is reportedly focusing on “trade research and strategy.” Among both buy and sell-side firms, strategy and research are often euphemisms for marketing. And at a shop like Bridgewater – where the machines do most of the investing – most of the firm’s 1,500 employees are essentially window-dressing.

While the company didn’t officially confirm that it had hired Selbst, a note published on her Facebook page explaining her decision to give up professional poker said that she had taken a job at an unspecified hedge fund.

“The environment feels a lot like poker did back in the day – a bunch of nerdy kids collaborating to try to beat our opponents at a game,” Selbst said in her post. “It’s also really freaking difficult.”

 

News of Selbst’s decision to join the firm followed reports last week that former Bridgewater executive Bruce Steinberg and his family were among 10 Americans killed when a charter plane crashed into a mountain in Costa Rica about a week and a half ago.

According to Bloomberg, Selbst won $11.9 million in prizes over 12 years while playing professional poker.

 

In addition to her track record on the poker circuit, Selbst, 33, studied at Yale University as an undergraduate and also has a degree from Yale Law – a more traditional background for a hedge fund analyst.

Before joining Bridgewater, she worked part-time at a police misconduct plaintiffs’ law firm. Selbst said she gave up poker because it was starting to feel like a  “real job,” she told her followers. She also acknowledged that her hedge fund career might not work out.

Since about 2012, some of Bridgewater’s largest funds have seen their returns stagnate, as Jim Grant pointed out in a viral essay attacking the firm. Grant went so far as to suggest that the massive hedge fund might be a fraud.

In October, the firm unveiled a $700 million short position primarily against Italian financial stocks, its biggest disclosed short position involving European assets.

 

While Bridgewater PR wouldn’t comment, Selbst told Bloomberg that she thinks she’s getting the hang of the job.

“Every day I think I’m getting the hang of it, the next day I fail at the next challenge,” she said. “It’s exhausting, exciting, and completely humbling.”

Great. Maybe in a few months, she can circle back and explain to Bloomberg what exactly it is that Bridgewater’s employees during their 80-hour work weeks in Westport.

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Authored by Kevin Muir via The Macro Tourist blog,

I am a big huge Kodiak grizzly of a bond bear. It’s probably my number one conviction call. I believe, over time, long rates throughout the world will go higher – a lot of higher.

Yet the trader in me questions the wisdom of waking up this morning and grabbing a stack of pink tickets to smash bids in US bonds.

 

Let’s look at the headlines hitting the tape this morning.

Let’s recap. We have two of the world’s most recognized bond managers making some really bearish comments about US fixed income. Do you think Gross and Gundlach still have some selling to do? Not a chance. If anything, they are leaning short duration (at least versus their benchmark) and talking their book.

And even more importantly, we have China stating they may halt their purchase of US bonds. Again, if China had selling to do, would they jawbone down the price of US treasuries ahead of their sales? Do you think they are that naive? I will take the other side of that trade.

Now you might argue China didn’t say they would sell US Treasuries, but merely stated they might slow down (or stop) future purchases. The withdrawal of a big buyer would definitely weigh heavily on prices. Yet I believe China does not make these sorts of statements without some ulterior motive.

Here is some colour from Bloomberg’s reporting:

Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter.

China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the recommendations of the officials have been adopted.

The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they’re not allowed to discuss the matter publicly. China’s State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment on the matter.

First of all, the China State Administration of Foreign Exchange didn’t respond to the fax? Maybe the toner was empty?

But on a more serious note, this move is a negotiating tactic. Make no mistake about it. For whatever reason, China is choosing this moment to lean hard against the US Treasury market. I don’t know if they are trying to show Trump who is boss ahead of trade talks, or if there is some other game theory tactic at work. Either way, be careful assuming this is some market shift China announced ahead of time out of the goodness of their hearts.

---

How to play it

The recent backing up of long term US rates will tighten financial conditions. Up until now, as the Federal Reserve has raised short rates, the flattening of the curve, along with tightening of credit spreads, has resulted in easier financial conditions. Well, that’s now changing.

Now that the bond market is selling off, the Federal Reserve’s tighter monetary policy might in fact tighten economic conditions. This change might mean that now, instead of having to try twice as hard to slow down the economy, the Federal Reserve might find itself in a different situation where they can lean slightly against the wind and err a tiny little bit more easy. This equates to a steeper yield curve.

Having investors like Gross and Gundlach get negative on bonds, combined with some bearish rhetoric from China, might kick off the next wave of bear curve steepening.

But be wary of just assuming this is the start of the next bond secular bear market. Rarely do big name managers get the call correct down the day. The fact that everyone is so bearish leads me to believe there is a huge snapping turtle lurking beneath the brush, ready to bite the hands off of the newly minted bond bears.

Playing the steepener is a much better risk reward. Don’t forget the monster short speculative position at the front end of the US yield curve.

And although I have written about how the specs were betting on a flatter curve, I am shamelessly stealing Jeff’s great chart that shows the extent of this positioning.

When this trade unwinds, there is going to be some serious steepening.

---

An interesting development

Sometimes when a market relationship breaks down, it offers clues that something bigger is afoot in the financial system.

I don’t have any deep insights into these next couple of charts, but I think they are interesting nonetheless.

Over the past couple of years, the US 10-year yield has traded almost tick for tick with the USDJPY rate.

But over the past few weeks, US 10-year yields have been rising, while the USDJPY rate has been selling off (stronger yen).

The breakdown in the relationship is even more pronounced in the 5-year part of the curve.

I realize the BoJ recently announced some tapering of their QE, but this spread widening has been occurring since last November, well before any BoJ change in policy.

Longer term, I am both bullish on the Yen and bearish on bonds, so both of these developments are welcome news. And for a while, I struggled with holding both of these views due to the strong inter-market relationship. Yet now that it has apparently broken, I am getting more nervous that the next move might be for it to revert back for a bit.

---

Putting it all together

Although it is tempting to jump aboard the Gundlach/Gross/China bond bear trade, given the extended sold off nature of US fixed income, there are better trades. Buying bear steepeners or even getting outright short other sovereign bond markets are better risk rewards. I am going to write about this more in coming days, but the Canadian 10-year bond is yielding 37 basis points less than the US, with the Canadian economy consistently outperforming the US. Or how about the German 10-yr bund at a 55 basis point yield? I would much rather be short both of these markets than chasing the latest “hot headline call” from the two bond kings. If you are a longer-term investor, then, by all means, take heed of these US fixed income bearish calls. I strongly believe they will prove correct. Yet for anyone with a little more of a trading bent, take a breath and ask yourself where the next surprise will come from. There will most likely be better points to get short in the coming days or weeks.

via RSS http://ift.tt/2qMMEhc Tyler Durden

The largest search engine in the world is now relying on hyper-partisan “fact checking” organizations such as Snopes and Politifact to provide disclaimers on articles primarily from conservative websites.

The Daily Caller’s Eric Lieberman notes: 

When searching for a media outlet that leans right, like The Daily Caller (TheDC), Google gives users details on the sidebar, including what topics the site typically writes about, as well as a section titled “Reviewed Claims.”

Vox, and other left-wing outlets and blogs like Gizmodo, are not given the same fact-check treatment. When searching their names, a “Topics they write about” section appears, but there are no “Reviewed Claims.”

In fact, a review of mainstream outlets, as well as other outlets associated with liberal and conservative audiences, shows that only conservative sites feature the highly misleading, subjective analysis. Several conservative-leaning outlets like TheDC are “vetted,” while equally partisan sites like Vox, ThinkProgress, Slate, The Huffington Post, Daily Kos, Salon, Vice and Mother Jones are spared.

 

Google’s new fact-checking sidebar “helpers” come two weeks after Facebook abandoned their fact checking program after it backfired a little over a year since inception – pointing to the fact that people were actually drawn to the “fake news” stories over articles without the designation. 

Disputed flags could sometimes backfire: We learned that dispelling misinformation is challenging. Just because something is marked as “false” or “disputed” doesn’t necessarily mean we will be able to change someone’s opinion about its accuracy. In fact, some research suggests that strong language or visualizations (like a bright red flag) can backfire and further entrench someone’s beliefs. –Facebook

Meanwhile, the fact-checkers themselves happen to be incredibly biased. Snopes – which is reportedly run by a degenerate, was dressed down by the Daily Caller in a December 2016 Exposé which contains clear examples of the organization’s liberal bias, flat out lies, and the individual opinions of the militantly liberal fact checkers who love insulting conservatives. 

Meanwhile, Politifact is riddled with propaganda and known for several instances of bias. They’re also funded by a Clinton Foundation donor. 

The Daily Caller points to an instance in which Google’s third-party “fact-checking” organization was flat wrong. 

 

The Robert Mueller fact check (pictured above) is a case in point for Google’s new feature.

Ostensibly trying to sum up the crux of the post, the third-party “fact-checking” organization says the “claim” in a DC article that special Counsel Robert Mueller is hiring people that “are all Hillary Clinton supporters” is misleading, if not false.

The problem is that TheDC’s article makes no such claim. Their cited language doesn’t even appear in the article. Worse yet, there was no language trying to make it seem that the investigation into the Trump administration and Russia is entirely comprised of Clinton donors. The story simply contained the news: Mueller hired a Hillary Clinton donor to aid the investigation into President Donald Trump.

Still, the Washington Post gave the claim, which came from Trump himself, its official “Three Pinocchios” rating. The method applies to several other checks. Claims concocted or adulterated by someone outside the TheDC are attributed to TheDC, in what appears to be a feature that only applies to conservative sites. –Daily Caller

Liberally-biased Snopes gives the Daily Caller a “mixture” of truth rating after claiming the outlet reported that “a transgender woman raped a young girl in a women’s bathroom because bills were passed…” when in fact the article in question makes no mention of a bill or any form of legislation – and in fact simply makes a straightforward report of a disturbing incident originally reported elsewhere. 

With conservative outlets under attack by questionable “fact-checking” organizations while liberal websites remain “unjudged,” one has to wonder how long it will be before lawsuits begin to fly.

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Sen. Dianne Feinstein made a startling admission when asked why she released the Fusion GPS transcripts on Tuesday without first informing Judiciary Committee Chairman Chuck Grassley (R-IA) ahead of time.

 

“I meant to tell him, and I didn’t have a chance to tell him, and that concerns me,” Feinstein told CNN Congressional correspondent Manu Raju, adding “I just got pressured, and I didn’t do it.” 

FEINSTEIN says she’s sorry to Grassley for not giving him a headsup about the release of the Fusion GPS transcript. “I meant to tell him, and I didn’t have a chance to tell him, and that concerns me,” she told us. “I just got pressured, and I didn’t do it.”

— Manu Raju (@mkraju) January 10, 2018

Which begs the question:

So then who “pressured” @SenFeinstein to release the transcript? https://t.co/8oEjOvb8nK

— Nick Short 🇺🇸 (@PoliticalShort) January 10, 2018

When asked to elaborate, Feinstein walked back her statement, saying “I wasn’t pressured,” without any further comment. Her office later said she misspoke and that she wasn’t pressured to release the transcript. 

Asked who pressured her, Feinstein says: “I wasn’t pressured” without reconciling her two statements. Her office later said she misspoke and wasn’t pressured to release transcript.

— Manu Raju (@mkraju) January 10, 2018

Nice walk back. http://pic.twitter.com/rR6ejtXTr8

— Nick Short 🇺🇸 (@PoliticalShort) January 10, 2018

Senator Feinstein released transcripts of Fusion GPS co-founder Glenn Simpson’s closed door testimony to the Senate Judiciary committee on Tuesday, infuriating Chairman Grassley. Simpson and fellow Fusion GPS co-founder Peter Fritsch penned an op-ed in the New York Times last week calling on congress to release the “full transcripts” of Simpson’s testimony. 

 

On Wednesday morning, President Trump tweeted “The fact that Sneaky Dianne Feinstein, who has on numerous occasions stated that collusion between Trump/Russia has not been found, would release testimony in such an underhanded and possibly illegal way, totally without authorization, is a disgrace.” 

The fact that Sneaky Dianne Feinstein, who has on numerous occasions stated that collusion between Trump/Russia has not been found, would release testimony in such an underhanded and possibly illegal way, totally without authorization, is a disgrace. Must have tough Primary!

— Donald J. Trump (@realDonaldTrump) January 10, 2018

Feinstein hit back, saying “I didn’t do anything illegal,” adding “That transcript has become so abused that time has come for people to take a look at it.”

Feinstein said in a statement, “The American people deserve the opportunity to see what he said and judge for themselves. The innuendo and misinformation circulating about the transcript are part of a deeply troubling effort to undermine the investigation into potential collusion and obstruction of justice.”

Trump later tweeted “The single greatest Witch Hunt in American history continues. There was no collusion, everybody including the Dems knows there was no collusion.”

The single greatest Witch Hunt in American history continues. There was no collusion, everybody including the Dems knows there was no collusion, & yet on and on it goes. Russia & the world is laughing at the stupidity they are witnessing. Republicans should finally take control!

— Donald J. Trump (@realDonaldTrump) January 10, 2018

If in fact Senator Feinstein was pressured to release the transcripts, it begs several questions; who pressured her, why now – less than a week after Fusion’s NYT op-ed calling for the release, and why couldn’t she pick up the phone and let Grassley know?

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Julian Assange has been granted an Ecuadorian passport, just one day after threatening to evict him from their London Embassy, according to a report in Ecuador’s largest newspaper and confirmed by ZeroHedge. 

Earlier today the WikiLeaks founder tweeted a picture of himself wearing an Ecuador football shirt, fueling speculation over his possible citizenship. 

http://pic.twitter.com/LB5jzQmJLb

— Julian Assange ⌛ (@JulianAssange) January 10, 2018

Ecuador’s largest newspaper, El Universo originally reported the news, citing “reliable sources” (translated): 

Five and a half years after Rafael Correa and his then Foreign Minister Ricardo Patiño gave him asylum in the Embassy of Ecuador in London, where he continues, the director of Wikileaks Julian Assange now has a certificate of Ecuadorian citizenship, with a code corresponding to the province of Pichincha

Reliable sources confirmed that the document number granted by the Ecuadorian civil registry to Assange is 1729926483 and that a passport had already been issued to him . It appears with the condition of “Inscrip.As400”, term with which late inscriptions are identified, for which an old database was used.

ZeroHedge verified the registration on the Ecuadorian Internal Revenue Service website, noting “The taxpayer is not registered in the SRI database.”

Word of the passport comes on the heels of news that Ecuador was planning to evict Assange, issuing a veiled statement that described his situation as “untenable.” Foreign Minister Maria Fernanda said Ecuador is “considering and exploring the possibility of mediation” to end Assange’s asylum, adding “No solution will be achieved without international cooperation and the cooperation of the United Kingdom, which has also shown interest in seeking a way out.” 

The move by Ecuador comes a few months after its president Lenin Moreno warned Assange to avoid inflammatory political statements and commenting on issues involving the country’s allies.

Assange spoke out in support for the Catalan separatists movement, which saw Moreno, who has been president of Ecuador since January, ask Assange to stay out of the Spanish crisis. 

Assange responded to Moreno on Twitter and accused him of attempting to silence him. 

‘If President Moreno wants to gag my reporting of human rights abuses in Spain he should say so explicitly–together with the legal basis,’ he said. –Daily Mail

Assange’s legal team issued a statement Wednesday, saying “The UN ruling, issued almost two years ago, is crystal clear in its language, Mr Assange is unlawfully and arbitrarily detained by the UK authorities and must be released.

“The UK should not permit itself to be intimidated by the Trump administration’s public threats to “take down” Mr Assange.”

UK government officials, meanwhile, are committed to arresting Assange the moment he sets foot outside the Embassy. “The Government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice,” said a spokesman.

The Ecuadorian Foreign Ministry walked back their threat of eviction, issuing the following statement Wednesday (translated): 

With regard to this case, the national government has complied with the Constitution, international conventions and the law, acting with the prudence and caution that warrants the protection of human rights and the defense of the right of asylum.

The Foreign Ministry reiterates that in the case of citizen Julian Assange will continue to seek solutions, in strict adherence to the norms and procedures of international law, in coordination with the United Kingdom, a country with which the best relations of friendship and cooperation are maintained.

Julian Assange, at the request of the Government of Ecuador, undertook not to intervene in matters unrelated to his asylum status.

Finally, the Ministry of Foreign Affairs and Human Mobility of Ecuador reiterates that it will not respond to rumors or distorted or decontextualized information on this case.

A brief timeline of events as previously reported: 

On August 20, 2010, the Swedish Prosecutor’s Office issued an arrest warrant for Julian Assange over a rape allegation – two weeks after the US Embassy met with the Pirate party and had concerns over Assange leaking US secrets. The net day, Swedish cancelled the warrant.  “I don’t think there is reason to suspect that he has committed rape,” says one of Stockholm’s chief prosecutors, Eva Finne. Swedish prosecutors did however continue to investigate a separate allegation of molestation, though they felt it was not a serious enough crime for an arrest warrant. 

On September 1, 2010, Swedish Director of Prosecution, Marianne Ny, reopened the rape investigation against Assange.

On November 18, 2010, Stockholm District Court approved a detention request for Mr. Assange, who had traveled to London. Two days later, Swedish police issued an international arrest warrant. On December 8, 2010, Assange is taken into British custody and taken to an extradition hearing. Eight days later, Assange posts bail and walks free in London until May 30, 2012 when the UK Supreme Court rules that he should be extradited to Sweden. 

August 16, 2012, Assange begins his asylum at the Ecuadorian embassy in London – where he has remained for over five years. 

In February, 2016, a UN panel found Assange to be detained unlawfully in the Ecuadorian embassy.

[INSERT: 160205115725-julian-assange-un-ruling-reax-bts-00000404-exlarge-169.jpg]

In May, 2017, Swedish authorities once again dropped their case against Julian Assange, with his Swedish lawyer Per Samuelsson told Swedish media “It is a total victory for Julian Assange,” adding “He is free to leave the embassy whenever he wants.”

Unfortunately, that’s not going to be quite so easy for the time being – as Assange faces immediate arrest by the UK for skipping bail in his extradition hearing. Moreover, in April of this year, CNN and the Washington Post simultaneously reported that Attorney General Jeff Sessions’ DOJ has prepared criminal charges against Assange over 2010 leaks of diplomatic cables and military documents. 

While the DOJ seems intent on locking Assange up, the WikiLeaks founder has also received tremendous support from certain members of congress. 

As we reported last week, Congressman Dana Rohrabacher travelled to London in August with journalist Charles Johnson for a meeting with Assange, where Rohrabacher said the WikiLeaks founder offered “firsthand” information proving that the Trump campaign did not collude with Russia, and which would refute the Russian hacking theory.

Rohrabacher brought that message back to Trump’s Chief of Staff, John Kelly, to propose a deal. In exchange for a presidential pardon, Assange would share evidence that would refute the Russian hacking theory by proving they weren’t the source of the emails, according to the WSJ. 

However – when Trump was asked in late September about the Assange proposal, he responded that he’d “never heard” of it, causing Rohrabacher to unleash on John Kelly, who he blamed for blocking the proposal from reaching the President. Rohrabacher told the Daily Caller: 

“I think the president’s answer indicates that there is a wall around him that is being created by people who do not want to expose this fraud that there was collusion between our intelligence community and the leaders of the Democratic Party,” Rohrabacher told The Daily Caller Tuesday in a phone interview.

“This would have to be a cooperative effort between his own staff and the leadership in the intelligence communities to try to prevent the president from making the decision as to whether or not he wants to take the steps necessary to expose this horrendous lie that was shoved down the American people’s throats so incredibly earlier this year,” Rohrabacher said.

With Assange possibly having been granted an Ecuadorian passport, it appears that perhaps the wheels are in motion for his legal extraction from their London embassy. 

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Moody’s is the first of the major ratings agencies to venture some commentary on the impact of Trump tax reform on the US credit rating.

In an ironic twist, on the same day as Chinese officials, reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, Moody’s warns that US tax cuts are seen as a credit negative for the USA Sovereign rating.

As Bloomberg reported: U.S. TAX CUTS SEEN AS CREDIT NEGATIVE FOR SOVEREIGN BY MOODY’S

 

In a presentation on the implications of the new tax law, Moody’s commented:

“Any boost to economic growth from the new US tax law will be modest and depend on how businesses and individuals deploy tax savings; growth unlikely to offset negative impact on government deficits.”

Additionally, the contribution of tax cuts to aggregate growth will be modest, around one-tenth of a percentage point of GDP.

Maybe China is on to something as USA Sovereign CDS is trading at around 1.7x that of Germany CDS – a level near 9 year highs…

 

 

Full Moody’s Presentation below:

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Authored by Simon Black via SovereignMan.com,

We’ve all heard the term “Kodak Moment.”

It’s a popularized phrase to describe a picture-perfect moment – one that should be forever captured on Kodak film.

Like Kleenex tissue, Kodak was once so large and popular, the company worked its way into basic lexicon.

Kodak was founded in 1880 by a man named George Eastman. He started producing dry plates (a new type of photographic plate that reduced the cost of photography) in Rochester, New York.

Eventually the company adopted the razor and blades strategy of selling inexpensive cameras and making big margins on the consumables – paper, film and chemicals.

It’s hard to believe now, but Kodak was the innovator of its day. By 1976, the company accounted for 90% of film and 85% of camera sales in America. It was known as “The Great Yellow Father.”

Until the 1990’s, it was considered one of the five most valuable brands in the world (today, those brands are Apple, Google, Microsoft, Coca-Cola and Amazon).

 

And Kodak was actually the first company to introduce the digital camera, back in 1975.

A 24-year old employee named Steve Sasson was tasked exploring practical uses for Kodak’s newly-invented charged coupled device (C.C.D.) – a sensor that took an incoming, two-dimensional light pattern and converted it into an electrical sensor.

Though the job sounds high-tech, especially for 1970’s standards, it wasn’t a glamorous gig.

Sasson’s invention took 50 milliseconds to capture an image and 23 seconds to record it to a tape. He would take the cassette tape out and hand it to his assistant, who would put it in the playback unit… 30 seconds later, you got a 100 pixel by 100 pixel black and white image.

Sasson promised Kodak’s executives the processing time would decrease as technology improved (remember… this was 1975).

But Kodak killed the product, fearing it would cannibalize its film business. Not to mention, the company didn’t believe anyone would ever want a digital camera…

“They were convinced that no one would ever want to look at their pictures on a television set,” Sasson told the New York Times. “Print had been with us for over 100 years, no one was complaining about prints, they were very inexpensive, and so why would anyone want to look at their picture on a television set?”

We know how the story played out…

Digital photography killed the film business. Kodak entered the digital camera business, but those became a low-margin commodity (which were soon replaced by smart phones).

Kodak went from peak revenues of $16 billion in 1996 to bankrupt in January 2012.

The company emerged from bankruptcy in 2013 as Eastman Kodak – a company focusing on business technology and printing solutions.

And yesterday, Eastman Kodak (KODK) returned as a Wall Street darling.

Shares of the 130-year old company soared 120% after it announced it’s adopting blockchain technology and creating its own digital currency – the KodakCoin. It’s up another 75% as I write this.

 

The platform, called KodakOne, says it’s a “new economy” for photographers to license their work and get paid.

Kodak isn’t the only publicly traded company to mention blockchain or crypto and see its shares soar…

Last month, Long Island Iced Tea Corp. – a beverage company – changed its name to Long Blockchain Corp. and saw its shares nearly triple in a day. The company was facing a potential Nasdaq delisting unless its market value rose above $35 million for 10 business days in a row (the blockchain stunt achieved that goal).

Then, last week the company said it was buying 1,000 bitcoin mining machines and offering as many as 1.6 million shares to raise capital… while continuing to make its juices, lemonades and teas.

Yesterday Long Blockchain Corp. announced it was halting its plans to raise capital, though it will still evaluate “multiple specific opportunities” in blockchain.

Also last week, the Securities and Exchange Commission (SEC) halted trading in Hong-Kong based UBI Blockchain Internet (formerly known as JA Energy)… the company’s stock price soared from $9 on December 11 to $87 on December 18 – even though it has no revenue and provided a disconnected phone number in its regulatory filings

Even the SEC is getting in on the joke…

The Fort Worth, Texas branch of the SEC recently tweeted “We’re contemplating adding ‘Blockchain’ to our name so we’ll increase our followers by 70,000 percent.”

This type of market behavior is pure madness… struggling lemonade companies are getting into cryptocurrencies. And the market is rewarding them.

Same with UBI Blockchain Internet, which appears to be an outright fraud.

Comparisons to the tech bubble abound – when companies with zero tech focus would add “dot com” to their name and see their shares soar.

I’ve been writing this year about avoiding major mistakes that can cripple your wealth (including this piece urging caution about Ripple just before it plunged in price.)

And once, again, I’d urge caution in the crypto space. I’m not saying you shouldn’t buy any. Nor should you necessarily sell if you’re sitting on big gains.

But now probably isn’t the time to go all in. Money today is acting completely irrationally in regards to bitcoin and other cryptocurrencies.

Kodak, a textbook case study in how to fail with technology, is launching its own blockchain and coin. Lemonade companies are mining crypto. Paris Hilton and Jamie Foxx are promoting initial coin offerings.

It’s a circus. And most of these hair-brained schemes will fail.

Remember, any successful investment has to be based on something real – property, cashflow, an underlying technology.

Investments based on nothing but hype are HUGE mistakes. And that’s what we’re seeing in the crypto space.

Luckily, they’re easy to avoid.

*  *  *

If you are interested in speculating in Cryptocurrencies, I encourage you to download our free Crypto Currency Report – A Different Perspective on Crypto.

More and more people want to dive into crypto currencies and everyone’s focus is on Bitcoin’s price. But, the price is not what matters… I see so many people make the same wrong assumptions and mistakes that could be fatal to their capital. That’s why my team and I have written this special report where I share a different perspective on cryptocurrencies. Reading this report will ensure you are an astute cryptocurrency speculator

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Following today’s blockbuster, if still unconfirmed, report from Bloomberg that China is contemplating slowing or halting outright the purchase of US Treasurys in retaliation for an escalating trade confrontation with the US, which in turn led to a modest, if brief, selloff across the curve, some have asked if this is merely posturing or if China is actually ready to pull the plug.

This question breaks down into three distinct parts.

The first is whether China is ready to not only violate global capital markets, in the process certainly hurting itself as the largest offshore holder of US debt, but has the determination to proceed with this plan once it begins, even after the “BTFD” algos emerge. This was at the core of Steven Englander’s argument presented earlier today:

Can [China] afford for asset markets to blow this off completely and yet again ‘buy the dip’? For any threat to be credible, the impact probably has to last more than six hours. If there is a wave of market-close buying of assets, any future retaliation would have to be even stronger, and this would carry risks both to China and other countries.

Then, there is another, even more important question: is China ready to replace the US as the global bogeyman, i.e., the catalyst for what could be a global recession if the Chinese “retaliation” goes too far, to wit:

How will [China] react to the rest of the world saying  “Thank you for appreciating my currency, raising my bond yields, and putting downward pressure on equity prices?”  China’s move, if pursued or if it unleashes other concerns, could raise questions about the longevity of a bull market that was finally putting to bed the legacy of the GFC, the EZ debt crises and the EM sell-offs of recent years. If their bilateral trade dispute with the US leads to a global asset market sell-off, their case for establishing themselves as an alternative global financial lynchpin weakens. Most likely they take very limited actions, even pull back some of the comments, but imply this is a warning that they can retaliate if the US is too aggressive or irresponsible.

Then there is the most important question of all: is China even capable of hurting Treasury pricing for an extended period of time: as today’s 10Y Treasury sale showed, there was a surge in demand following the selloff in US paper over the past 48 hours, implying that should China be willing to liquidate its $1.2 trillion in TSYs, someone may be more than happy to buy these at a same, or better yet, lower price. This is the argument made by Bloomberg’s macro commentator Ye Xie earlier today.

China added $131b in Treasury holdings in the first 10 months of last year, or $13b a month. How much U.S. government securities traded among primary dealers in every single day last year? More than $500b. While China’s actual purchases may be bigger than the official data because it may have covered its trail in accounts in places such as Belgium, the truth remains that the ocean is just too big for one whale to make a splash, even as large as China is.

If anything, one could make an argument that a reduction in China’s holdings could, at times, drive down yields, instead of pushing them up, as shown in this chart. When the PBOC sold Treasuries in its foreign reserves in early 2016 to offset capital outflows, it may have helped spur demand for safe havens from investors who were concerned about a China crash. As China’s economy started to recover in the second half of 2016, it resumed the purchases and the yields went up slightly.

Xie made another point: in light of China’s plunging current account surplus (which according to some calculations has now become a deficit), “the big picture is that the heyday of China’s reserve accumulation — its appetite for Treasuries — is long gone.”

In other words, China may be halting Treasury purchases not because it is making some profound political statement, but simply because it no longer has the need, or purchasing power, to buy them.

Ok fine, but what about the opposite: will China be selling Treasurys?

The answer to that will have to wait as it depends as much on China’s own strategy, complex as it may be, as what Trump may say or tweet at any given moment. Therefore making any predictions on this topic is just as irrational.

What we do know with near certainty, however, is whether China, or other foreign official entities, have been dumping Treasurys in recent months. For that, we go not to the hopelessly inaccurate and delayed Treasury International Capital report, which is far better known for its annual revisions than its accurate “data-keeping”, but to the Fed’s weekly H.4.1 statement, and specifically the line item for “Securities Held in Custody for Foreign Official and International Accounts: Marketable U.S. Treasury Securities.”

As regular readers know, this is the most comprehensive, and most concurrent, data set available demonstrating what, if anything, foreigners are doing with their US Treasurys, the vast bulk of which are kept not offshore, but actually at the NY Fed as “custody” securities.

What this data shows is that after hitting an all time high of just over $3.05 trillion in the second week of December, foreign-held Treasurys are virtually unchanged, or just a modest $30 billion lower in the last two weeks, to $3.02 trillion. Compare this number to the sub $2.8 trillion hit in late 2016 when the combined selling by China and “Belgium” took US Treasury holdings in custody to the lowest level since mid-2012.

 

In other words, when the Chinese Treasury selloff begins, we will know. For now – and contrary to what Bill Gross said earlier – it certainly has not.

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