Israel Blames Iran For Gaza Violence As Rocket Fire Pauses

A day after the largest exchange of rocket fire between Israel and Hamas since 2014, Israel is blaming Iran for supplying both Hamas and Islamic Jihad with advanced surface-to-surface missiles, capable of traveling longer distances to hit targets inside southern Israel.

Rockets fired by Palestinian militants over the Gaza Strip in the early hours of Wednesday. Image source: AP.

The Jerusalem Post reports based on official Israeli military statements :

Despite Israel’s intelligence superiority over terror groups, as well a blockade imposed both by the IDF and Egypt, Hamas and other terror groups in the Strip have restocked their supply of weapons in the four years since the last round of fighting between Israel and Hamas.

The mass-produced Iranian mortar shells used in yesterday’s salvos were also used by Islamic Jihad in an attack in January, as well as a barrage 12 mortar shells toward an army outpost in November.

Israeli officials describe Tuesday’s Israeli strikes on Gaza as precipitated by dozens of projectiles fired toward Israeli settlements. In total throughout the day the Jerusalem Post estimates that 180 “Iranian-made” 120 millimeter mortar shells were fired by terrorists operating in the Gaza Strip, as well as 107-millimeter rockets, which have a reach of up to ten kilometers inside Israel. 

Israel for its part struck 65 locations across Gaza it described as Hamas terror sites, including what Israeli officials have identified as a massive weapons smuggling tunnel said to reach nearly a full kilometer into Israeli territory.

Israel has consistently blamed both “smuggling tunnels” and commercial ships as means through which Iran resupplies militant groups within the Gaza Strip — though Israel has had the 25 miles long by few miles wide strip of Palestinian land under near total blockade for years.

During the 2014 Gaza conflict which Israel refers to as Operation Protective Edge, Israeli authorities say they seized a “Klos-C Iranian commercial ship” operating under the Panamanian flag which was filled with Syrian long-range rockets. The Israeli Defense Forces (IDF) subsequently published video showing the boat seizure and the uncovering of the large cache of missiles. 

IDF officials have partly credited the total maritime blockade of Gaza, which human rights groups have denounced as tantamount to a war crime due to medicine and other essential humanitarian supply shipments being prevented from entering the deeply impoverished strip, with drastically reducing the number of projectiles fired from Gaza over the past few years.

Blame for Tuesday’s somewhat brief yet very intense round of violence was predictably put on the shoulders of the Iranians by Israeli officials. The Jerusalem Post cites Brig. Gen. (ret.) Yossi Kuperwasser, the former director general of the Ministry of Strategic Affairs and an IDF Military Intelligence division head, as saying Tuesday’s violence was “encouraged by the Iranians” — though offering no concrete evidence beyond past references.

General Kuperwasser said it was “another reflection of Iran’s frustrations and tensions which is trying to show it can cause trouble and instability,” he said, while also implying that IRGC Quds Force commander Maj.-Gen. Qassem Soleimani may have had a part to play in violence over the past months in tandem with Hamas political leader Yahya Sinwar.

The Israeli general said further, “Iran doesn’t want stability here. They want to make everyone realize that they are a player and that they should be taken very seriously with a lot of respect and in this way deter people from putting more pressure on them, but it isn’t working.”

Meanwhile Israeli military vehicles appear to be mustering along Israel’s southern border with Gaza, even as a reported Egyptian-assisted Israeli-Hamas tenuous ceasefire has continued to hold through Wednesday. Israel has denied early reports that it reached a ceasefire with Gazan militant groups; however, fighting is widely reported to have ceased by evening Wednesday. 

It’s unclear if any casualties resulted from Tuesday and early Wednesday’s strikes as none were immediately reported – though the Israelis say a Jewish kindergarten was hit, with no one killed. An emergency UN session is set to meet Wednesday after the US and other western states called for a formal condemnation of recent Hamas rocket attacks.

Violence has soared along the Gaza frontier in recent weeks during which 116 Palestinians were killed by Israeli fire at mass demonstrations for a right of return to ancestral lands now in Israel. Amid international condemnation for its use of lethal force at the mass demonstrations, Israel said many of the dead were militants and that the army was repelling attacks on the border fence.

Palestinians and their supporters, however, say most of the protesters were unarmed civilians and Israel was using excessive force against them

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OPEC Overcompliance Has Created A Problem

Authored by Irina Slav via OilPrice.com,

Crude oil inventories in the Organization for Economic Co-operation and Development have fallen below their five-year average level, a high-ranking OPEC official told S&P Platts this week. They are now 20 million barrels below that average, the source said, thanks to OPEC’s over-compliance with the production cuts.

The news comes amid reports quoting Russia’s and Saudi Arabia’s energy ministers as saying they are negotiating a ramp-up of production ahead of the end-2018 deadline. The reports began emerging after Brent hit US$80 per barrel and India’s Petroleum Minister Dharmendra Pradhan called Saudi Arabia’s Khalid al-Falih to reiterate his government’s insistence on “stable and moderate” oil prices.

Was a phone call all it took for Al-Falih to make a U-turn in his statements regarding oil prices and start assuring the market that there is sufficient supply and there is no reason why Brent should trade above US$80? Probably not, although India is among Saudi Arabia’s largest clients, and its demand for oil is growing at the fastest pace in the world.

OPEC has been monitoring OECD inventories closely, and not just because its target in the cuts was the OECD inventory five-year average. There was talk a few months ago that this five-year average may not be the best measure of global oil supply. That talk was prompted by data suggesting the inventories were not falling as fast as OPEC had hoped, but with Venezuela’s production in a free fall, things settled and prices took off.

Now, after it became clear that Moscow and Riyadh are talking about a possible increase of 1 million bpd, oil prices lost all they had gained since the beginning of the month within a week. Perhaps the time has come for some urgently needed bullish oil news, such as the clearing of the glut. After all, before Al-Falih had assured India there will be enough oil, there were reports about Saudi officials admitting the Kingdom is targeting US$80 a barrel or higher to boost Aramco’s valuation.

While the OECD inventory target has been met, US$80 is seeming increasingly unlikely, despite some figures, including Goldman Sachs, continuing to be bullish on oil. As Russia’s Alexander Novak told Bloomberg on the sidelines of the St. Petersburg Economic Forum, no decision on increasing production has been made yet. It will be made in June, when OPEC+ meets to discuss the matter further.

There is also reason to be bullish for the fact that, according to some analysts, the additional supply that OPEC and Russia plan to bring online would “barely” compensate for the loss of production from both Venezuela and Iran.

Any optimism, however, should be cautious. U.S. production continues to grow and exports are also set for a further increase: June shipments are projected to hit 2.3 million bpd, of which 1.3 million bpd will go to Asian buyers. U.S. crude is cheaper than both the OPEC basket and the Russia Urals benchmark, so it would be eating directly into OPEC+’s market share. This is cause for concern in the cartel and in Russia, which has already made it very clear it would be happier with oil at around US$60 a barrel rather than US$80.

The decision to keep cutting or start ramping up needs to be unanimous, UAE’s Oil Minister Suhail al-Mazrouei told media this week. There is hardly any chance for surprises, however. So far, the cartel has gone where Saudi Arabia has wanted it to go, some more willingly than others, but still together, as higher prices are generally good for oil-dependent economies. But now, the memory of oil at US$30 is still too fresh, and a lot of oil consumers enjoyed faster economic growth thanks to cheap oil—they may be unwilling to pay so much more so soon.

OPEC is once again between the rock of U.S. shale production and exports, and the hard place of budget gaps and investment projects that need funding.

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Iran To Bring International Lawsuit Against “ISIS Founder” America Based On Trump Statements

After a US federal judge in New York ordered Iran to pay billions of dollars to the families of victims of the September 11 terror attacks earlier this month in a largely symbolic default judgement, Iran is reportedly prepping to sue Washington for terror attacks carried out against Tehran within the last year.

Iran says the US is responsible for the rise of ISIS, and is therefore indirectly to blame for twin terror attacks that rocked the Iranian parliament building and a popular religious shrine in June 2017, which left 17 civilians dead and 43 wounded, according to Iranian media figures.

“During the presidential campaign, Trump clearly spoke about the performance of his rival, Mrs. Clinton, saying that the US has created the ISIL,” Abolfazl Aboutorabi, a member of parliament’s judicial commission, announced on Tuesday in comments carried by Iranian state media. “The public prosecutor has also filed a lawsuit in this regard,” Aboutorabi added.

Iran hopes the initiative will shine an international spotlight on the Obama administration’s role in facilitating the rise of ISIS in Iraq and Syria — something President Trump repeatedly affirmed while on the campaign trail.

Trump also famously blamed then Democratic presidential nominee Hillary Clinton for the rapid rise of ISIS, especially in relation to policies she oversaw in Libya and Syria as Obama’s Secretary of State.

Trump first told his supporters in January 2016 that “Hillary Clinton created ISIS with Obama.” And in a CBS 60 Minutes interview that aired July 17, 2016, he said again, “Hillary Clinton invented ISIS with her stupid policies.”

Trump: Obama and “crooked Hillary Clinton” are the “founder” and “co-founder” of ISIS:

It’s the first time in history that a candidate who would go on to become president has blamed his predecessor for founding a terrorist group.

A fairly consistent theme of Trump on the campaign trail was that Obama and Hillary’s massive covert aid program to Islamist “rebels” in places like Libya and Syria facilitated the terror group’s rapid growth. He also blamed Obama’s hasty troop pullout from Iraq.

Long before joining the Trump campaign, former Defense Intelligence Chief under Obama Michael Flynn told Al-Jazeera it was a “willful decision” to support jihadists groups in Syria that included ISIS:

Indeed one surprisingly frank editorial in Britain’s premier mainstream Guardian newspaper concluded the same a full year before Trump first made the statements. The Guardian article, titled Now the truth emerges: how the US fulled the rise of ISIS in Syria and Iraq went viral after it was published in June 2015, and analyzed a then newly declassified Pentagon intelligence document which had been released as part of a watchdog group’s FOIA lawsuit connected to the Benghazi diplomatic compound attack. 

The Guardian summarized the Pentagon memo as follows:

A revealing light on how we got here has now been shone by a recently declassified secret US intelligence report, written in August 2012, which uncannily predicts – and effectively welcomes – the prospect of a “Salafist principality” in eastern Syria and an al-Qaida-controlled Islamic state in Syria and Iraq. In stark contrast to western claims at the time, the Defense Intelligence Agency document identifies al-Qaida in Iraq (which became Isis) and fellow Salafists as the “major forces driving the insurgency in Syria” – and states that “western countries, the Gulf states and Turkey” were supporting the opposition’s efforts to take control of eastern Syria.

Raising the “possibility of establishing a declared or undeclared Salafist principality”, the Pentagon report goes on, “this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime, which is considered the strategic depth of the Shia expansion (Iraq and Iran)”.

It appears that Trump’s provocative charge of Obama and Clinton being the “co-founders of ISIS” — statements made a year after the Pentagon intelligence memo’s initial release — were likely the direct result of his reading the Pentagon memo and accompanying media commentary.

In June of 2016 Trump tweeted a story linking to the Pentagon memo which opened with: “Hillary Clinton received a classified intelligence report stating that the Obama administration was actively supporting Al Qaeda in Iraq, the terrorist group that became the Islamic State.” Trump said of himself concerning his accusations against Obama and Hillary made that summer: “But he’s right”. 

At the time, multiple Iranian state media outlets also featured the Pentagon document, while also highlighting then candidate Trump’s statements blaming the Obama administration. 

It is this past commentary that Iran will utilize to make its case that the US is to blame for the 2017 ISIS terror attacks inside Iran, which it plans to file with the international court, according to FARS News Agency. The 2012 Pentagon memo, which has since 2015 been available to the public, will likely play a central role in Iran’s presentation of the case. 

Iran’s parliamentary judicial committee spokesman noted, “there is nothing more reliable than a claim raised by a country’s president.” 

In the summer of 2017 Trump announced that he shut down the CIA’s covert program to train and arm anti-Assad militants in Syria after he reportedly saw a video of “CIA vetted rebels” beheading a child in Aleppo.

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The Real College ‘Scam’

Today, all Americans are told, “Go to college!”

President Obama said, “College graduation has never been more valuable.”

But as John Stossel writes for Townhall.com, economist Bryan Caplan says that most people shouldn’t go.

“How many thousands of hours did you spend in classes studying subjects that you never thought about again?” he asks.

Lots, in my case. At Princeton, I learned to live with strangers, play cards and chase women, but I slept through boring lectures, which were most of them.

At least tuition was only $2,000. Now it’s almost $50,000.

“People usually just want to talk about the tuition, which is a big deal, but there’s also all the years that people spend in school when they could have been doing something else,” points out Caplan in my new YouTube video.

“If you just take a look at the faces of students, it’s obvious that they’re bored,” he says. “People are there primarily in order to get a good job.”

That sounds like a good reason to go to college. But Caplan, in his new book, “The Case Against Education,” argues that there’s little connection between what we absorb in college and our ability to do a job.

“It’s totally true that when people get fancier degrees their income generally goes up,” concedes Caplan, but “the reason why this is happening is not that college pours tons of job skills into you. The reason is … a diploma is a signaling device.”

It tells employers that you were smart enough to get through college.

But when most everyone goes to college, says Caplan, “You just raise the bar. Imagine you’re at a concert, and you want to see better. Stand up and of course you’ll see better. But if everyone stands up, you just block each other’s views.”

That’s why today, he says, high-end waiters are expected to have college degrees.

“You aren’t saying: you, individual, don’t go to college,” I interjected.

“You’re saying we as a country are suckers to subsidize it.”

“Exactly,” replied Caplan. “Just because it is lucrative for an individual doesn’t mean it’s a good idea for a country.”

Caplan says if students really want to learn, they can do it without incurring tuition debt.

“If you want to go to Princeton, you don’t have to apply,” he points out. “Just move to the town and start attending classes.”

That’s generally true. At most schools you can crash college lectures for free. But almost no one does that.

“In people’s bones, they realize that what really counts is that diploma,” concludes Caplan.

Because that diploma is now usually subsidized by taxpayers, college costs more. Tuition has risen at triple the rate of inflation.

It’s not clear students learn more for their extra tuition, but colleges’ facilities sure have gotten fancier. They compete by offering things like luxurious swimming pools and gourmet dining. That probably won’t help you get a job.

“If you’re doing computer science or electrical engineering, then you probably are actually learning a bunch of useful skills,” Caplan says. But students now often major in abstract topics like social justice, diversity studies, multicultural studies.

“But don’t the liberal arts expand people’s minds?” I asked. Philosophy? Literature? Isn’t it all making our brains work better?

“That’s the kind of thing you expect teachers to say,” answered Caplan. “There’s a whole field of people who have actually studied this (and) they generally come away after looking at a lot of evidence saying, ‘Wow, actually it’s wishful thinking.'”

A study found that a third of people haven’t detectably learned anything after four years in college.

Although Caplan thinks college is mostly a scam, he says there’s one type of person who definitely benefits — professors like him.

“I’m a tenured professor,” he said. “A tenured professor cannot be fired. … You got a nice income and there are almost no demands upon your time.”

Professor Caplan is only expected to teach for five hours a week.

I told him that sounded like a government-subsidized rip-off.

“Yeah. Well, I’m a whistleblower,” replied Caplan.

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No, Repealing the Volcker Rule Won’t Cause an Economic Collapse

The Federal Reserve on Wednesday announced a series of changes to Obama-era banking regulations intended to prevent banks from taking unnecessary risks with their clients’ money. The move will free smaller financial institutions from onerous federal rules and allow regulators to focus their attention on bigger banks that take greater risks.

The changes to the so-called Volcker Rule—named for former Federal Reserve Chairman Paul Volcker, who suggested the basic premise behind what eventually become a 700-plus page regulation included as part of the Dodd-Frank Act—were quickly criticized for supposedly bringing the entire financial system back to the precipice of 2008.

“This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,” Marcus Stanley, policy director at Americans for Financial Reform, told The New York Times. “If implemented, these proposals could turn the Volcker Rule into a dead letter, a regulation that would not meaningfully restrict trading activities at the banks whose problems could drag down the entire financial system—again.”

The reality is quite different. For starters, that’s because the Volcker Rule isn’t actually being repealed.

In theory, the Volcker rule is supposed to stop banks from engaging in what’s known as “proprietary trading“—using money on the bank’s own balance sheet to engage in speculative trades intended to generate profit for the bank. Typically, financial institutions make money by charging a fee for transactions on behalf of their clients, but proprietary trading allows banks to make direct bets on the market in the same way that individual investors might.

Complicating matters is that fact that banks routinely do invest some of their holdings as a way of protecting against risk in other parts of their portfolios. This hedging is a sound, and important, banking practice. But how do you tell the difference between hedging and risking proprietary trading? As Reason’s Peter Suderman noted in 2012, that question hamstrung much of the debate over the Volcker Rule and the Dodd-Frank Act in general. In the end, the law evolved as the legislation was written and ended up leaving banks with significant leeway to hedge various risks.

But like so much in Dodd-Frank, the Volcker Rule has never been very clear about the distinction between hedging and taking unnecessary risks. No one less significant than the “Frank” in Dodd-Frank slammed the final version of the Volcker Rule when it went into affect for creating an “untenable” situation where banks were being forced to comply with a rule that failed to articulate how to comply with it.

“The results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly,” then-Sen. Barney Frank (D-Mass.) told The Hill in July 2012.

That’s exactly what’s finally happening.

“This proposed rule will tailor the Volcker rule’s requirements by focusing the most comprehensive compliance regime on the firms that do the most trading,” Fed Chair Jerome Powell said in a statement. “Firms that do more modest amounts of trading will face fewer requirements.”

Specifically, the changes divide financial institutions into three tiers. As CNBC explains, banks with more than $10 billion in assets—Wells Fargos and Goldman Sachses of the banking world—will still need to comply with the strictest set of rules, while banks with between $1 billion and $10 billion in assets will face “reduced compliance requirements” and those with less than $1 billion will no longer have to demonstrate compliance with the Volcker Rule at all.

That’s in line with a set of Dodd-Frank reforms passed by Congress and signed by President Donald Trump earlier this month. That law will exempt banks with less than $250 billion in assets from Dodd-Frank’s so-called “enhanced prudential standards”—strict regulations regarding liquidity, risk management, and capital meant to serve as a “stress test” for banks’ balance sheets. Together, the two actions indicate that the Trump administration is taking a pretty reasonable approach to financial regulation: asking bigger banks to shoulder heavier regulations and preventing those rules from swamping smaller financial institutions. Additionally, the changes will allow federal regulators to focus their enforcement efforts on the banks that could prove to be an actual risk to the economy if they overplay their hands.

Of course, it might be preferable to have fewer financial regulations on all banks. Instead of limiting the types of risk that financial institutions can take, government should simply force banks to face the consequences when those risks fail to pay off. But as long as there is an implicit—or explicit—promise that taxpayers will serve as a backstop to banks considered “too big to fail,” then it probably makes sense to force the banks representing the biggest potential cost to taxpayers to comply with additional rules.

Addressing that moral hazard is essential to correcting the current shape of financial regulations. In the meantime, setting the little guys free from rules that were only ever meant to be aimed at Wall Street’s biggest banks is likely to benefit investors and entrepreneurs by increasing market liquidity and access to credit.

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Brazil Commodities Slammed As Nationwide Strike Intensifies, GDP Estimate Down 38%

  • Brazil’s nationwide truck driver strike has entered its 10th day

  • Key exports have been severely affected, from beef and soybeans to coffee and cars

  • Bloomberg cuts GDP growth estimate from 3.2% to 2%, a decline of 37.5%

  • Concessions made to truckers will cost the Brazilian government 14.4b Real (US$3.85 Billion) throughout the remainder of 2018 

  • Lower GDP may reduce revenue by additional 20b-25b reais, or 0.25% of GDP, could force govt to cut expenditures further by 3b-10b reais to meet 159b-real fiscal deficit target (Bloomberg)

  • Brazilian oil workers began a 72-hour strike on Wednesday, and have demanded that Petrobras fire CEOP Petro Parente while permanently lowering fuel prices

  • Millions of chickens have been prematurely slaughtered as feed failed to reach farmers

The situation in Brazil has gone from bad to worse, as the nationwide trucker strike has expanded into a strike by oil workers, who began a 72-hour strike on Wednesday – affecting several rigs, plants, refineries and ports in the latest challenge for state-owned oil firm Petroleo Brasileiro SA, whose shares have fallen roughly 30% in two weeks. Brazil produces approximately 2.1 million barrels of oil per day, making it Latin America’s largest producer of crude. 

The oil worker strike is yet another blow to conservative President Michel Temer, as Brazil’s political climate is fiercely polarized. 

Late on Tuesday, Reuters reported that Temer was considering an overhaul of a market-based fuel pricing policy at Petrobras, which could provoke even more investor flight. Temer’s office said in a Wednesday morning statement that he would preserve the policy.

The oil sector strike included workers on at least 20 oil rigs in the lucrative Campos basin of 46 operated by Petrobras, as the company is known, according to FUP, Brazil’s largest oil workers union. Petrobras said any disruption would not have an immediate major impact on its production or overall operations. –Reuters

The strike has crippled virtually every major industry countrywide, while key commodities such as soybeans, beef, coffee and cars have been severely affected. 

Most export terminals ran out of soybeans for shipments scheduled for Tuesday and Wednesday, Lucas Trindade de Brito, manager at export group Anec, said in a telephone interview.

Among Brazil’s 109 beef plants, 107 suspended operations and two are running below 50% of capacity, exporter group Abiec said in an email.

Exports of 40,000 tons of beef haven’t been shipped as planned, and thousands of trucks loaded with perishable products, including boned meat, are halted on roads.  –Bloomberg

Alas, the strike has also triggered the premature slaughter of millions of chickens after vital feed failed to reach farmers. 

The government announced Sunday that it will cut taxes on diesel fuel, while freezing the price for 60 days followed by a monthly adjustment going forward. The measures will reportedly cost around 9.5 billion reais (US$2.6 billion) through the end of the year, which led Bloomberg to cut GDP growth estimates from 3.2% to 2%. 

The measures will cost about 9.5 billion reais ($2.6 billion) through the end of the year, Finance Minister Eduardo Guardia said Monday at a news conference. Part of that bill will be covered by using a government contingency fund and by erasing payroll-tax cuts enjoyed by some industries, but other, as-yet undisclosed, measures will also be required, Mr. Guardia said.

“The loss of tax revenue will need to be compensated,” he said. –WSJ

Meanwhile, as hundreds of demonstrations rage across the country, many are calling for the country to return to a dictatorship that ran for two decades until 1985. 

“We need help from the military to resolve our problems in Brasília, to remove the bandits from there and to put the house in order,” said one driver, Gabriel Berestov, 44.

José Lopes, leader of the Brazilian Truck Drivers’ Association, warned on Monday that the strike movement had been hijacked. “There is a very strong group of interventionists,” he told reporters. “They are people who want to bring down the government.”

The subject ricocheted around Brazil. On Tuesday, Temer told foreign journalists he saw “zero risk” of a military intervention. His minister of institutional security, Gen Sergio Etchegoyen, said the armed forces had no intention of intervening and that the idea was a “subject from the last century”.

The theme is deeply controversial in Brazil, which lived under a military dictatorship for 21 years, during which hundreds of regime opponents were executed and thousands more tortured. –The Guardian

Around 15-20% of Brazilians support military intervention, according to Marcus Melo, professor of political science at the Federal University of Pernambuco. 

“Those who are still mobilising are militants and outliers,” he said. “We are in a situation of social convulsion.”

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“I Want To Know What I Can Say”: Trump Rehearsing For Questions In Mueller Probe

The question of whether President Trump will sit down with special counsel Robert Mueller seems to have been answered, as President Trump’s attorney Rudy Giuliani reportedly told NBC News White House correspondent Kelly O’Donnell that he and President Trump have been rehearsing both “in person and by phone” and that President Trump said “I want to know what I can say that’s not privileged and what’s [sic] I can say which is…”

Earlier in the month, Giuliani – who was hired by Trump to handle the Mueller investigation, revealed that Trump’s legal team was “several weeks away” from deciding whether Trump would agree to an interview with Mueller’s team.

Giuliani told the Washington Post on Wednesday that Trump won’t agree to an interview unless prosecutors allow the President’s legal team to review documents related to the FBI’s use of an informant, Stefan Halper, to spy on several members of his 2016 campaign. 

“We need all the documents before we can decide whether we are going to do an interview,” Giuliani said in an interview with The Washington Post, using Trump’s term “spygate” to refer to the FBI actions, which former officials have said were well within bounds.

Giuliani’s latest demand further ratcheted up the pressure that Trump and his lawyers are trying to place on special counsel Robert S. Mueller III’s team as his investigation into alleged coordination between Trump’s campaign and Russia reaches a key juncture. –WaPo

President Trump once again slammed the special counsel’s “Rigged Russia Witch Hunt” over Twitter on Tuesday, writing that he needs to “start focusing my energy on North Korea Nuclear, bad Trade Deals, VA Choice, the Economy, rebuilding the Military, and so much more.” 

In previous comments, Giuliani has said that Trump did nothing improper and is eager to talk with Mueller. Tuesday, however, he said he didn’t want to make a call on whether Trump will sit down for an interview “until they decide whether they are going to give us the documents or not.” 

When asked on Sunday during an appearance with CNN’s Dana Bash wither he thinks the Mueller probe is legitimate, Giuliani replied “Not anymore. I don’t. I did when I came in.”

In an appearance later in the day on Fox News, Giuliani told host Bill Hemmer “The reality is we’re not going to sit him down if this is a trap for perjury…he wants to explain that he did nothing wrong.” 

Giuliani said on Tuesday that Mueller’s office indicated that Trump’s interview would be a final step in the investigation. “They reserved the possibility they might have to interview a few people as a follow up,” he said. “But they said they had pretty much finished. This was four weeks ago.”

“I don’t think they would have asked to interview him until they are pretty much finished with everything,” Giuliani said. “They’re only going to get one shot at him. They know that. You look pretty amateurish if you interview him and you don’t have all the facts gathered.”

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Harvey Weinstein Indicted On Rape, Criminal Sexual Act Charges

Shortly after Harvey Weinstein handed himself over to the NYPD to be arrested and arraigned for numerous allegations of sexual assaults, moments ago the disgraced former Hollywood exec was officially indicted by a grand jury on charges of rape in the first and third degrees, and criminal sexual act in the first degree.

Commenting on the indictment, Manhattan DA Cyrus Vance said that “this indictment brings the defendant another step closer to accountability for the crimes of violence with which he is now charged. Our office will try this case not in the press, but in the courtroom where it belongs.”

And so the process which ends up with Weinstein, who has recently been liquidating much of his assets to pay for the mounting civil and criminal legal bills, serving time behind bars officially begins.

The full statement by Manhattan District Attorney Cyrus R. Vance, Jr., on Weinstein’s indicment is below:

“A Grand Jury has voted to indict Harvey Weinstein on charges of Rape in the First and Third Degrees, and Criminal Sexual Act in the First Degree.

“This indictment brings the defendant another step closer to accountability for the crimes of violence with which he is now charged. Our office will try this case not in the press, but in the courtroom where it belongs. The defendant’s recent assault on the integrity of the survivors and the legal process is predictable. We are confident that when the jury hears the evidence, it will reject these attacks out of hand.

“I thank the heroic survivors for their strength throughout this process. I also thank Commissioner James O’Neill and members of the New York City Police Department for their dedication to this case. This investigation remains active and ongoing. We continue to urge additional survivors and others with relevant information to call us at 212-335-9373.”

 

 

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Trump Plans To Unleash Steel, Aluminum Tariffs On EU As Delay Deadline Looms

Time’s up! A month ago, President Trump delayed his EU steel and aluminum tariffs decision and as of Friday, that deadline is over and the US allies across Europe will face big decisions on retaliation.

Amid threats from various European leaders – and the potentially unipolar world order repressing blowback from Trump’s Iran decision and subsequent sanctions – The Wall Street Journal reports that the Trump administration, unable to win concessions from European Union counterparts ahead of a Friday deadline, is planning to make good on a threat to apply tariffs on European steel and aluminum, according to people familiar with the matter.

The announcement is reportedly likely to occur on Thursday, and will be 25% on imported steel and 10% on imported aluminum.

However, one person familiar with the matter said the administration’s plans could still change, particularly if the two sides are able to cobble together a last-minute deal, though both sides suggest such a deal is unlikely.

This won’t go down well with Mr Juncker who previously said he will not accept threats in talks with the United States to secure a permanent exemption from U.S. import tariffs on steel and aluminum.

“I would like to reiterate the call that this exemption be made unconditional and permanent.

We consider that the U.S. measures cannot be justified on the basis of national security…

We will continue our negotiations with the United States, but we refuse to negotiate under threat.”

Will the EU dare to break US sanctions on Iranian oil? Or Iranian business deal? As retaliation for these tariffs?

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The Headwind Facing Housing

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

There are a large number of public and private services that measure the change in home prices. The algorithms behind these services, while complex, are primarily based on recent sale prices for comparative homes and adjusted for factors like location, property characteristics and the particulars of the house. While these pricing services are considered to be well represented measures of house prices, there is another important factor that is frequently overlooked despite the large role in plays in house prices.

In August 2016, the 30-year fixed mortgage rate as reported by the Federal Reserve hit an all-time low of 3.44%. Since then it has risen to its current level of 4.50%. While a 1% increase may appear small, especially at this low level of rates, the rise has begun to adversely affect housing and mortgage activity. After rising 33% and 22% in 2015 and 2016 respectively, total mortgage originations were down -16% in 2017. Further increases in rates will likely begin to weigh on house prices and the broader economy. This article will help quantify the benefit that lower rates played in making houses more affordable over the past few decades. By doing this, we can appreciate how further increases in mortgage rates might adversely affect house prices.

Lower Rates

In 1981 mortgage rates peaked at 18.50%. Since that time they have declined steadily and now stands at a relatively paltry 4.50%. Over this 37-year period, individuals’ payments on mortgage loans also declined allowing buyers to get more for their money. Continually declining rates also allowed them to further reduce their payments through refinancing. Consider that in 1990 a $500,000 house, bought with a 10%, 30-year fixed rate mortgage, which was the going rate, would have required a monthly principal and interest payment of $4,388. Today a loan for the same amount at the 4.50% current rate is almost half the payment at $2,533.

The sensitivity of mortgage payments to changes in mortgage rates is about 9%, meaning that each 1% increase or decrease in the mortgage rate results in a payment increase or decrease of 9%. From a home buyer’s perspective, this means that each 1% change in rates makes the house more or less affordable by about 9%.

Given this understanding of the math and the prior history of rate declines, we can calculate how lower rates helped make housing more affordable. To do this, we start in the year 1990 with a $500,000 home price and adjust it annually based on changes in the popular Case-Shiller House Price Index. This calculation approximates the 28-year price appreciation of the house. Second, we further adjust it to the change in interest rates. To accomplish this, we calculated how much more or less home one could buy based on the change in interest rates. The difference between the two, as shown below, provides a value on how much lower interest rates benefited home buyers and sellers.

Data Courtesy: S&P Core Logic Case-Shiller House Price Index

The graph shows that lower payments resulting from the decline in mortgage rates benefited buyers by approximately $325,000. Said differently, a homeowner can afford $325,000 more than would have otherwise been possible due to declining rates.

The Effect of Rising Rates

As stated, mortgage rates have been steadily declining for the past 37 years. There are some interest rate forecasters that believe the recent uptick in rates may be the first wave of a longer-term change in trend.  If this is, in fact, the case, quantifying how higher mortgage rates affect payments, supply, demand, and therefore the prices of houses is an important consideration for the direction of the broad economy.

The graph below shows the mortgage payment required for a $500,000 house based on a range of mortgage rates. The background shows the decline in mortgage rates (10.00% to 4.50%) from 1990 to today.

To put this into a different perspective, the following graph shows how much a buyer can afford to pay for a house assuming a fixed payment ($2,333) and varying mortgage rates. The payment is based on the current mortgage rate.

As the graphs portray, home buyers will be forced to make higher mortgage payments or seek lower-priced houses if rates keep rising.

Summary

The Fed has raised interest rates six times since the end of 2015. Their forward guidance from recent Federal Open Market Committee (FOMC) meeting statements and minutes tells of their plans on continuing to do so throughout this year and next. Additionally, the Fed owns over one-quarter of all residential mortgage-backed securities (MBS) through QE purchases. Their stated plan is to reduce their ownership of those securities over the next several quarters. If the Fed continues on their expected path with regard to rates and balance sheet, it creates a significant market adjustment in terms of supply and demand dynamics and further implies that mortgage rates should rise.

The consequences of higher mortgage rates will not only affect buyers and sellers of housing but also make borrowing on the equity in homes more expensive. From a macro perspective, consider that housing contributes 15-18% to GDP, according to the National Association of Home Builders (NAHB). While we do not expect higher rates to devastate the housing market, we do think a period of price declines and economic weakness could accompany higher rates.

This analysis is clinical using simple math to illustrate the relationship, cause, and effects, between changes in interest rates and home prices. However, the housing market is anything but a simple asset class. It is among the most complex of systems within the broad economy. Rising rates not only impact affordability but also the general level of activity which feeds back into the economy. In addition to the effect that rates may have, also consider that the demographics for housing are challenged as retiring, empty-nest baby boomers seek to downsize. To whom will they sell and at what price?

If interest rates do indeed continue to rise, there is a lot more risk embedded in the housing market than currently seems apparent as these and other dynamics converge. The services providing pricing insight into the value of the housing market may do a fine job of assessing current value, but they lack the sophistication required to see around the next economic corner.

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