Tag: finance

One Trader Rants “It’s Time For Central Bankers To Stop Bullshitting & Admit They Failed”

Authored by Sven Henrich via NorthmanTrader.com,

Warning. Rant Alert

The global central bank easy money experiment has failed and it is past time that central bankers stopped bullshitting us and just admitted it.

Europe is about to enter a recession and rates are still negative, the US Fed just tried to reduce its balance sheet with the greatest economic backwind in years (tax cuts, record buybacks, 3% GDP growth) and still they failed miserably, forced once again to halt all rate hike efforts. After 10 years of being non stop “accommodative” the Fed tried for 3 months to not be accommodative and it blew up in their face as the bottom dropped out of markets.

Only emergency liquidity calls from Cabo by Treasury Secretary Mnuchin and a complete 180 degree reversal by the Fed stopped the bleeding. Again.

And so once again the Fed is asking us to play chase the dot plot. Always dangling higher rate forecast targets that never come to fruition:

Not playing anymore. For 10 years we’ve watched the dot plot being moved further and further into the future only to see it all flat line again now with a renewed halt in rate hikes and an end to reducing the balance sheet. The conclusion is pretty clear:

The Fed is trapped, the ECB is trapped, the BOJ is trapped – all doomed to intervene forever and ever amen always afraid to see markets go through a process of repricing and squeezing out the artificial asset inflation that 10 years of permanent intervention have wrought.

All are too afraid of the next recession and aim to avoid it at all costs. And who can blame them? The prospect of entering a global recession without enough ammunition to deal with it is a frightening prospect.

And don’t think for a minute that the next rounds of stimulus, i.e. QE4 and negative rates, will have the same effect as last time. Already the current effect is very questionable. The US has been stumbling from lower highs on the Fed Funds rate for decades with that stimulus of ever lower rates producing ever less real GDP growth:

The trend is so well established it’s no surprise that markets once again puked once the 10 year yield hit its 30+ year trend line:

And hence it’s also no surprise that the Fed, desperate to re-inflate asset prices  and to repair the market damage, once again caved as $SPX broke its trend.

If you look at the world through a linear lens they of course stepped in at precisely the spot where they always step in with no sign that liquidity has ever been normalized:

But unlike 2016 there’s no great new stimulus coming and this is precisely why markets are starting to price in rate CUTS, the end of the rate raising cycle. And it’s why Janet Yellen is also already talking about rate cuts.

That’s called the end of the easing cycle and is practically begging for this conclusion:

Bulls will tell you it’s all bullish, because a dovish Fed has been the spark for higher equity prices for the past 10 years. Problem is the last 3 times the Fed has ended its rate hike cycle and proceeded to an easing cycle a recession soon followed. So the same crowd that told you to buy stocks last year because of global synchronized growth is now telling you to buy stocks because the Fed is now easy due to a global synchronized slowdown that will prove to be temporary. Please.

Talk is already of a ‘melt-up’ either now or after a rate cut: 

“Given their reaction, investors now realize the importance of the ‘Powell Put.’ It even raises the possibility of a late-90s-style ‘meltup.’ The question is whether we need another December-style meltdown and Fed rate cuts before markets get bubbly, or whether the policy shift announced so far is already sufficient.”

Problem with that theory is that the Fed appears to be expecting more than a temporary slowdown. See for now the Fed has signaled it might merely halt its balance sheet reduction program:

But if they intend to merely pause or halt its reduction program why are they openly discussing buying bonds again and not on an emergency basis, but on a regular basis? Not kidding:

“U.S. central bankers are currently debating whether it should confine its controversial tool of bond buying to purely emergency situations or if it should turn to that tool more regularly, San Francisco Federal Reserve Bank President Mary Daly said on Friday.”

Stop bullshitting us.

Reality is what was promised to be emergency measures during the financial crisis have become permanent measures. What was promised to be reverted to normal can’t be reverted. Too great has been the debt expansion during the easy money years giving both governments and corporations license to load up on debt. And now they can’t normalize, they can’t raise rates, and they can’t stop intervening.

The emerging truth: Central banks will never “normalize” rates, they will never revert their balance sheets to pre-crisis levels, and they will never stop interfering with markets.

But they will not admit this to the public. What they will do is sanctimoniously complain about income inequality, the very income inequality they have helped propagate for decades. Powell last week:

“Speaking at a town hall in Washington D.C. to a group of educators, the central bank leader said his greatest economic fears lie outside the Fed’s purview. Specifically, he called for more aggressive policies to address income inequality.

“Wages at the middle and lower levels have “grown much more slowly” than those at the higher end, he said. “We want prosperity to be widely shared. We need policies to make that happen,” Powell added”.

Out of the Fed’s purview? Seriously? That’s revisionist history in the making as central bank policies have helped to greatly exacerbate wealth inequality by inflating the asset classes owned by the few. To not acknowledge this is to be revealed to not be serious about the issue.

After all what has screwed the middle class has helped produce the system we have now, a system that produces ever more wealth for the few at the expense of the many.

But you wouldn’t be able to tell this from the Fed pablum about how it only cares about doing a good job for the American people:

Sounds good right? Except public debt to GDP is 104%, corporate debt is over $9 trillion with over half being BBB rated:

But unemployment is low. Times should be good and happy. Instead we see waves of populism borne out of discontentment and fear destabilizing the entire Western World. Populism and nationalism usually come as a result of high unemployment and in the context of recessions and economic angst. It is these environments that breed political extremism and instability. Not now, they are already here.

Why?

Consider how our current form of capitalism works:

“Major U.S. banks shaved about $21 billion from their tax bills last year — almost double the IRS’s annual budget — as the industry benefited more than many others from the Republican tax overhaul. On average, the banks saw their effective tax rates fall below 19 percent from the roughly 28 percent they paid in 2016. And while the breaks set off a gusher of payouts to shareholders, firms cut thousands of jobs and saw their lending growth slow“.

Specifically 23 firms boosted dividends and stock buybacks by 23 percent, and they eliminated almost 4,300 jobs. And few have signaled plans to cut thousands more. Why? Because they can and technology enables it, indeed $BAC’s CEO recently boasted how technology allowed him to eliminated over 100,000 jobs at $BAC in the past decade.

The whispers of the future are all around us already: “Artificial intelligence and robotic process automation has helped the firm’s Wall Street divisions cut 84,000 work-hours a year”

His reward? Oh you guessed it:

A 15% wage increase in a year when $BAC stock dropped 15% despite dividends and buybacks:

When $22M a year are not enough, you get a corporate tax cut, lay off more people and make $25.6M per year instead.

“Greed, greed and more f***ing greed and cheap money” was the explanation in the rant of the financial crisis:

Nothing’s changed.

See you can’t lose in corporate America. As to the rest, well your real disposable income is stuck in neutral:

But don’t worry, the Fed is ready to give it back to you, the people:

By doing the same thing they’ve done for the past 10 years: Bullshit the people.

Yesterday the IMF warned of a global economic “storm” as growth undershoots even their downward revisions from January. Paul Krugman is now warning of a recession. Morgan Stanley just slashed euro zone 2019 GDP forecast to 1.0% from 1.6% a not trivial cut. The bank also cut inflation, bond yield & euro forecasts, and pushes out ECB’s first rate hike to June 2020.

Given this backdrop I have to ask this question:

And it’s really true, nobody knows and neither would we know the efficacy of any renewed central bank measures, although for now one must acknowledge their awesome power once again as complete policy capitulation has again managed to re-inflate the assets owned by the few:

Wealth inequality is just terrible, but we only care about doing a good job for the American people. Don’t you know?

It all rings hollow. And central bankers can’t be taken seriously on bemoaning wealth/income inequality when they themselves keep perpetuating it. Easy money policies have enabled the greatest debt expansion in our lifetimes, enabled politicians to ignore all meaningful structural reforms and the resulting wealth and income inequality has greatly contributed to political movements of populism and discontentment. But none of this is acknowledged by Powell, or Draghi, or Kuroda, the central bank overlords. Or Yellen or Bernanke. Or anyone in power. None of them bear any responsibility right? Who does? Nobody of course.

But who pays for it all? Everybody, for when the next recession comes corporations will have the greatest incentive ever to automate, downsize, apply new AI technologies etc. The signs are already there, just check the banking sector. There’s always money for dividends and buybacks and CEO pay raises, now watch what we can do with downsizing.

Careful folks, 4% unemployment is not the place to be complacent about coming job gains. Watch those layoff announcements, they are a’ rising, slowly, but surely.

Reality check:

No new highs without dovish capitulating central banks. No new highs without artificial liquidity and/or intervention. 10 years after the financial crisis this remains the primary price discovery dynamic.

Markets remain entirely dependent on running to their central bank daddies for help every time they get in trouble. This is the expectation central banks have set and this is the role they continue to play. Markets are spoiled trust fund kids. The age of permanent intervention began in 2008. The correction of 2018 just made central bankers finally admit it as they failed to stay non accommodative for not even 3 months before caving.

10 years after the financial crisis we are staring at a global economic slowdown with central banks never having normalized and, as a result, having a lot less ammunition at their disposal to react. The global economy is riddled with the highest debt loads ever, while the few have become richer than ever.

Think people are angry now? Watch the next recession.

The saddest part in all this is that the financial crisis gave a loud enough warning and a call to action. We, as a global society, wasted the opportunity for meaningful structural reform, instead we doubled down on the system that was already in place. And now we’re left hoping, hoping that the Powell put will be as good as the Yellen put and the Bernanke put before that. Cause the central bank put is all that’s standing between markets and the great unwind.

Rant Over.

*  *  *

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via ZeroHedge News http://bit.ly/2SG6cka Tyler Durden

MSM “Fact Checkers” Reveal Their Anti-Trump Bias With Absurd SOTU Analysis

It’s no secret that the mainstream media largely dislikes Donald Trump. Dubbed the “opposition party” by former Trump chief strategist Steve Bannon, outlets from CNN to MSNBC to the Washington Post and beyond have made minimal efforts to hide their bias against for the President.

With the Mueller investigation looking more and more like the “hoax” Trump claims it is, the MSM passed through the Overton window of credibility long ago – as scores of “anonymously sourced” bombshells have failed to find their target. The result? They’re simply turning Trump into a billionaire martyr.

And now – as columnist David Harsanyi notes in the New York Post – the MSM has resorted to pedantic fact checks of Trump’s State of the Union address that make them look as desperate as they are biased to in their efforts to bring Trump down. 

If media wants to challenge the context and politics of Republican arguments, that’s their prerogative. There are plenty of legitimately misleading statements worthy of fact-checkers’ attention. Yet, with a veneer of impartiality, fact-checkers often engage in a uniquely dishonest style of partisanship. And State of Union coverage gave us an abundance of examples of how they do it: –New York Post

Politico – for example, insinuated that President Trump was lying about the sexual assault of “one in three women” who make the long journey north to cross into the United States illegally. Not so fast – Drumpf, said Politico, which deemed Trump’s statement only “partly true.” It’s actually 31 percent of women, who are sexually abused based on a 2017 Doctors Without Borders report. 

Whether Doctors Without Borders’ scary statistic is accurate or not, is one thing. Trump, however, was being called out for asserting that “one in every three” illegal immigrants has been abused attempting to cross the border rather than “33.333 percent of women” — probably a rounding error in the poll. It is almost surely the case that every past president and every politician has used “one-third” or “one-half” rather than a specific fraction, and walked away without being fact-checked. –New York Post

The New York Times flatly interjected their opinion into their “fact check” of Trump’s SOTU address – ruling that Trump’s contention that there is “an urgent national crisis” at the border is “false” because illegal border crossings have been declining for two decades, and Customs and Border Protection agents had arrested just half of the number of people per month as they had in the mid-2000s. 

As Harsanyi points out – the Times can’t simply define a national emergency using pretzel logic. 

Even if those numbers are correct, there is no way to fact-check urgency. After all, a lessening crisis doesn’t necessarily mean it isn’t a pressing one. We’ve seen a steep decline in gun violence over the past 30 years. Would The New York Times ever “fact-check” a Democrat who argued that gun violence was an “urgent crisis” of public safety? Of course not. But this fluctuating standard allows journalists to “fact-check” any subjective political contention they desire.

If I claim that socialism is the greatest threat to American freedom and prosperity, I may well be right. I may have a lot of historical and economic evidence to back up my assertion. You can argue that I’m wrong. You can lay out statistics that attempt to prove me wrong. You can call me crazy. But you can’t produce an unbiased “fact-check” establishing that my opinion is conclusively false. You’re just writing an op-ed piece. –New York Post

NPR was clearly triggered when President Trump praised the number of women in Congress – tweeting: “FACT CHECK: President Trump praised the record number of women in Congress, but that’s almost entirely because of Democrats, not Trump’s party.” 

This isn’t a “fact check.” Trump said: “And exactly one century after Congress passed the Constitutional amendment giving women the right to vote, we also have more women serving in Congress than at any time before. That’s great. Very great. And congratulations. That’s great.”

Trump didn’t take credit for the number of women in Congress whatsoever, and ” their nitpicking created the impression that somehow Trump had misled the public. He did not,” writes Harsanyi. 

The Washington Post, meanwhile, “offered a number of egregious examples of outright misinformation.”  

In one of them, reporter Meg Kelly claimed that, “Abortion legislation in New York wouldn’t do what Trump said.” There are a number of words in her post intimating that Trump lied about the New York and Virginia late-term abortion bills, but none of her words debunk Trump’s core contention. Ramesh Ponnuru has a good rundown here.

Here’s what Trump said: “Lawmakers in New York cheered with delight upon the passage of legislation that would allow a baby to be ripped from the mother’s womb moments before birth. These are living, feeling, beautiful, babies who will never get the chance to share their love and dreams with the world. And then, we had the case of the governor of Virginia where he stated he would execute a baby after birth.” –New York Post

And here we get back to the pretzel logic – or a “clue” that you’re about to read a deceptive fact check on the topic of abortion, according to Harsanyi. When an author prefaces their comment by writing that “only” [insert small percentage] of viable babies are aborted, it serves to downplay the “fact check” with their own justification. 

“Indeed,” Kelly writes, “only 1.3 percent of abortions — or about 8,500 a year — take place at or after 21 weeks, according to 2014 data from the Center for Disease Control and Prevention and the Guttmacher Institute.” This number, as Ponnuru points out, is almost surely low. Whatever the case, Trump never claimed “most” abortions were post-20 weeks. Whether 8,500 or 15,000, thousands of viable babies are being aborted. No fact-checker would ever point out that only .0001 percent of legal gun owners commit crimes when talking about more firearm restrictions (and, yes, that’s an approximation).

And despite the Post‘s efforts to downplay Trump’s abortion comments – they did not “fact check” him whatsoever. Nothing the Post wrote countered Trump’s claim that abortion on demand until (and after) crowning is legal in New York. 

“How often it happens is up for debate. What the bill says is inarguable,” writes Harsanyi. 

In summary – the mainstream media’s blatantly biased “fact checks” have once again revealed their failure to remain objective, honest and factual. And while those on the left who are deeply mesmerized by partisan echo chambers may let these critiques slide – critical thinkers, particularly swing voters, will see right through the joke that has become modern journalism. 

via ZeroHedge News http://bit.ly/2E63n3L Tyler Durden

Rabobank: “Markets Risk Getting Pummelled By Fast-Moving Geo-Political Developments”

Submitted by Michael Every of Rabobank

It’s Valentine’s Day this week – and is love in the air? US President Trump has flagged a remarkable vision for North Korea, a country so poor and so mismanaged it is known for both nuclear weapons and cannibalism. A meeting 27-28 in Hanoi between Trump and Kim is now on and Trump tweeted “I look forward to seeing Chairman Kim & advancing the cause of peace!”, then: “North Korea, under the leadership of Kim Jong-un, will become a great Economic Powerhouse. He may surprise some but he won’t surprise me, because I have gotten to know him & fully understand how capable he is. North Korea will become a different kind of Rocket – an Economic one!” Talk about raising the bar – and dangling the keys of swinging-grooviness to Kim.

But could this be a tactical display of affection as US Trade Representative Lighthizer and Treasury Secretary Mnu-China arrive in Beijing to continue preparations for the next round of US-China trade talks. And on that front, optimists should read a Global Times editorial, “Smooth trade talks serve common interests of China and US”. That seems to be telling the story of an impending deal – but the gulf between the two rears its head. “To date, the US has openly talked about China needing “structural reforms,” especially in the hope that China will give up on its strategic plan “Made in China 2025.”….However, China will uphold the basic economic system and its right to develop high-tech manufacturing industries. The US government should have no more fantasies about China giving up its legitimate rights. After a few rounds of trade talks, it is reasonable to assume that the US is aware of where China’s bottom line lies.” As a backdrop to that, consider this story of a Chinese national walking away with a USD1bn stolen technology in his pocket; and the US Department of Energy closing its doors to foreign-talent recruitment

But then we see where self-image gap really lies: “…China has never been regarded by the international community as a country that breaks its promises…In terms of compliance with international treaties, it is no exaggeration to say that China’s credibility is much higher than that of the US.” Mmm, what about the South China Sea and breaches of both international law and promises to the US there? What about the UK-China agreement over Hong Kong, which China itself called meaningless?

Then the editorial makes clear the negotiations are basically over at this week’s level and it is all up to Trump and Xi, who aren’t going to meet before the deadline: “The 90-day negotiation between China and the US is to implement the consensus reached by the leaders of the two countries. The result shall be approved by the two leaders. It is not a trade consultation in the general sense.“ So nothing more than has already been offered will be on the table this week. And then the threats start. “The US government also needs to make rational judgements. If the negotiations fail, the US does not have more endurance than China. Both sides have no reason to turn a win-win situation into a total lose-lose outcome. In this case, no one shall stick to the idea of a unilateral victory. Mutual respect for the trade agreement must be the basic premise of a win-win situation.” I repeat, WHAT AGREEMENT? Surely not the soy and gas and paper-shuffling over “market access” for US financial firms? Yes, it appears so.

In short, markets risk getting pummelled by fast-moving political and geo-political developments, and this week offers no respite – and no love, believe me.

Consider that Turkey has finally spoken out about China’s alleged concentration camps in Xinjiang following the death of star Uhigur musician Abdurehim Heyit, whose family allege he was tortured to death in a “re-education centre”. Turkey now calls China’s actions “a great embarrassment for humanity”. That’s the first Muslim country to voice these concerns, and a great deal louder than anything we have heard from the usual stalwart defenders of global human rights. What does that imply for Turkey-China relations? Or Turkey-US? And hence for the battered Turkish currency?

Back in said defenders of global human rights, Germany has not closed its doors to China’s Huawei building its 5G network after Angela Merkel may have accepted Beijing’s promise that it won’t spy on it, honest. (As we see claims Brussels is riddled with hundreds of spies, including Chinese.) Strengthening a point I made last week, Germany fears Russia – and won’t stop buying Russian gas despite US pressure; it is one of the EU countries pushing to circumvent US sanctions on Iran, which is busy developing longer-range missiles; and it is winking at Huawei even as US Secretary of State Pompeo tries to rally US allies to shut it out. It also won’t pay 2% of GDP for NATO despite running budget surpluses; is not going to buy US F-35 fighter jets either, meaning no US nuclear umbrella; and over the weekend we saw calls in Germany for France to extend its nuclear umbrella for the whole EU, which other members will pay it for. So France would be the EU’s new nuclear shield. No more need for Uncle Sam. And hence Paris would be volunteering itself to be nuked to protect Latvia, for example – or Germany….Can I just say I am as sceptical about that as I am on the US-China trade deal? And can I also add the above also smells like a brewing US-German trade storm that markets are not pricing for?

And in the US, we have had news that talks (and many tweets) over the US border issue, suggesting that either a National Emergency or another government shut-down looms at the end of the week.

Something else for our currently lovey-dovey-(Feddy) markets to consider.

via ZeroHedge News http://bit.ly/2tik99x Tyler Durden

Reason #437 to own gold: The Fed wants Negative Interest Rates

And just like that, it seems we’re headed back to quantitative easing…

After cutting interest rates to nearly zero following the 2008 crisis, the Federal Reserve starting raising rates near the end of 2015 (from 0.25% to 2.5% today).

Following the most recent hike in December 2018, Chairman Powell seemed hell bent on further tightening, saying “some further gradual increases” were in the cards.

Then the stock market promptly fell nearly 20%.

Investors were in panic mode and calling for the end of the world.

The pain was too much…

Last month, the Fed left rates unchanged… and Powell removed any language about further hikes.

Already Powell is capitulating.

The new chief economist for the International Monetary Fund praised the move, saying she sees “considerable and rising risks” to the global economy.

And no surprise here, but Paul Krugman also supported the Fed’s policy. He’s also worried about a possible recession… but more worried the Fed won’t be able to cut rates low enough.

Central banks tried raising interest rates, but the market wouldn’t take it.

Now, the market is putting the likelihood of a rate hike this year at ZERO… and it’s expecting a rate cut next year.

Both the European Central Bank and the Bank of Japan were supposed to start tightening policy and raising rates… now, they are both considering cutting interest rates even deeper into negative territory.

And after a 20% drop in US stocks, the Fed has taken its foot off the pedal. But the people still want more…

The President of the Federal Reserve Bank of St. Louis thinks current interest rates are “too restrictive.” He too wants lower rates.

The San Francisco Fed agrees – they were singing the praises of negative interest rates in a recent research paper, saying they would have helped the economy recover even faster after 2008.

And SocGen economist Albert Edwards thinks the US will see negative interest rates and helicopter money (meaning central banks will print money and give it directly to the people) during the next recession.

When you’ve got Fed banks publicly praising negative interest rates, get ready… because it means they’re considering bringing negative rates to the US.

And that’s incredibly bullish for gold.

We’re not the only ones who think so…

The price of the yellow metal is trading at an eight-month high above $1,300 an ounce.

And central banks are buying hand over first. In fact, the folks that control the world’s money supply, are buying gold at the fastest pace since World War II.

Oh, and they’re lightening up on Treasurys at the same time (foreign purchases of Treasurys through October of last year were down by 50%).

The controllers of the printing press are trading their fiat for gold – and its 5,000 year history as the risk-free asset.

I guess people no longer want to lend money to a government that has no chance of ever paying it back.

But that’s just one reason (albeit a big one) that we’re bullish on gold today…

Another is that we’re not finding any new gold.

Gold and gold stocks have been out of favor for years, so mining companies slashed exploration budgets to 11-year lows to tighten their belts.

As a result, they’re finding less and less gold. So when demand really starts to heat up, the gold probably won’t be there…

Lots of the biggest players in the gold space have been warning about this set up.

This lack of new deposits is no doubt partly responsible for the mega gold mergers we’ve recently seen…

Just a month ago, Newmont Mining, one of the biggest players in the industry, acquired Goldcorp for $10 billion.

And in September of last year, Barrick Gold bought Rangold Resouces for $6 billion.

I wouldn’t be surprised to see a lot more deals in the sector (especially if the Fed does cut rates again, making money cheaper).

So we may see negative interest rates in the US, meaning you earn more holding gold (nothing) than you do losing money in cash.

And some of the biggest players in the gold sector are warning we’ve seen peak gold production.

Also, the biggest pools of money on the planet – central banks – are loading up on gold.

Dwindling supply met with tons of demand means higher prices.

Historically, gold has been a fantastic leading indicator of central bank policy…

The metal ran from under $1,200 an ounce to nearly $1,300 an ounce prior to the Fed’s reversal in January.

And if it runs higher from here, which we fully expect, it means all hell is about to break loose.

I’d recommend adding to your position while you still can.

You can buy physical gold, gold stocks, an ETF… or you can issue loans backed by gold with Silver Bullion.

But here’s one of my favorite ways to buy gold today (it’s almost never been this cheap).

Source

from Sovereign Man http://bit.ly/2Ss0Qd1
via IFTTT

Washington Eyes Crackdown On OPEC

Authored by Nick Cunningham via Oilprice.com,

Legislation targeting OPEC is suddenly gaining steam in the U.S. Congress, raising alarm bells for the cartel.

On Thursday, the House Judiciary Committee passed a bill that would allow the U.S. Justice Department to sue members of OPEC for manipulating the oil market. The so-called “NOPEC” bill would remove sovereign immunity, exposing member countries to antitrust regulation.

The bill has appeared in the past under prior administrations. But previous presidents from both political parties have opposed taking punitive action, fearing damage to the U.S.-Saudi relationship.

Times have changed. President Trump has repeatedly posted angry tweets about OPEC, blaming it for high gasoline prices. That led to a revived push for the NOPEC legislation. The murder of Saudi journalist Jamal Khashoggi may have also been a turning point, erasing a lot of goodwill for Saudi Arabia in Washington.

In theory, OPEC members could face confiscation of their assets in the United States. Saudi Aramco, for instance, controls Motiva Enterprises, which owns the largest oil refinery in the country in Port Arthur, Texas.

According to the Financial Times, the prospect of the NOPEC bill becoming law has raised alarm bells not just for OPEC, but also for international oil companies who fear reprisals abroad. Companies like ExxonMobil and BP have major stakes in projects in places like Nigeria and Iraq. These OPEC-member countries could retaliate if they face punitive action from the U.S. government. The FT reports that the oil majors, along with the American Petroleum Institute and the U.S. Chamber of Commerce, are lobbying against the NOPEC legislation.

Analysts speculate that Qatar exited OPEC in 2018 not just because of its rivalry with Saudi Arabia, but also because it has major interests in the U.S., and does not want to face antitrust action. Qatar Petroleum, along with ExxonMobil, just gave the final investment decision for the $10 billion Golden Pass LNG project in Texas.

So, what are the odds of passage for the NOPEC bill? Joe McMonigle, senior energy policy analyst at Hedgeye, told Reuters that low oil prices have removed some of the urgency. “I don’t see any kind of groundswell for it,” McMonigle said.

However, the takeover of the U.S. House of Representatives by the Democrats gave momentum to the bill. One of the first acts of the new House Judiciary panel was to take up the legislation, which it quickly approved on February 7. A full House vote is now possible.

In fact, there is suddenly quite a bit of bipartisan support for the bill, making it closer to becoming law than at any point in history. Senator Chuck Grassley, a Republican, has proposed a companion bill in the Senate.

“The oil cartel and its member countries need to know that we are committed to stopping their anti-competitive behaviour,” Grassley said.

Across the aisle, Sen. Amy Klobuchar of Minnesota, also representing a state with significant ethanol interests, came out in support of the bill.

“Given President Trump’s known hostile stance towards OPEC it now looks like a very good chance that the bill will be voted through,” Bjarne Schieldrop, chief commodities analyst at SEB, said in a statement.

“The prospect of a passage of NOPEC legislation has added bearish pressure to Brent crude.”

It is still too early to say with any certainty, but if the NOPEC legislation were to become law, it could theoretically make it much more difficult for OPEC to set production limits with the aim of achieving certain price targets. It could also put in jeopardy the formalization of the OPEC/non-OPEC alliance with Russia, the so-called OPEC+ arrangement. OPEC and the non-OPEC group led by Moscow are currently negotiating such an entity.

Still, countries could individually raise and lower production. Or, more specifically, Saudi Arabia – the only country that can make massive changes to production levels – could still tailor output to meet strategic goals. But it wouldn’t be able to call upon other countries to chip in.

“The NOPEC legislation could end tactical, cooperative production cuts and increases orchestrated by OPEC,” Schieldrop said.

“It will probably not hinder Saudi Arabia to move production up and down on its own in order to address tactical turns and imbalances in the global oil market.”

Othes see a more significant impact.

“We are just a tweet away from Nopec becoming law,” Bob McNally of the Rapidan Energy Group told the FT. McNally said the legislation could lead to more volatility and lower prices if OPEC was unable to restrain supply.

“After a good dose of Nopec, if it was successful, we would end up begging them to reunite, get back into business and start controlling supply,” he added.

Maybe. But outside of oil companies themselves, there isn’t a massive constituency in the U.S. for OPEC. The cartel is not exactly popular in the United States. Moreover, if the NOPEC legislation became law and pushed down oil prices, Trump could claim credit and millions of American motorists would probably be thankful. It seems unlikely that there would be a political price to pay in the U.S. for lower oil prices and a crackdown on OPEC, even if American oil companies faced reprisals. Nobody is going to shed a tear for ExxonMobil if the company suddenly runs into trouble in Iraq or Nigeria because of the NOPEC law.

via ZeroHedge News http://bit.ly/2SG63xb Tyler Durden

Northeast Braces For Snow And Ice, Travel Disruptions Expected  

A fresh round of snow, ice, and rain is hitting the mid-Atlantic this afternoon. 

By late evening, the storm is expected to sweep across the Northeast into Tuesday night. A quick burst of winter precipitation will be the primary threat across the interior (north of the dashed line) with rain closer to the coast. 

Starting Tuesday morning, commuters in New York and the Northeast could experience delays along Interstate 95 and at regional airports in the affected areas.

A low-pressure system moving through the Midwest and the Great Lakes has unleashed a mix of winter precipitation across the mid-Atlantic Monday. By late evening, the storm’s crosshairs will be aimed at New York, Boston and the other municipalities along Interstate 95.

“A fast-moving storm will impact the Northeast Monday night through Tuesday night with a plethora of precipitation types. Initially, enough cold air will be present to promote snow from Philadelphia to Boston Monday night into Tuesday. However, warmer air will turn snow to sleet and rain from south to north Monday night through Tuesday evening, making for a messy mixture of precipitation and a tricky morning and evening commute for many Tuesday.

At this time, 1-3 inches of snow is expected from Philadelphia to Boston, along with a messy coating of sleet and ice on top before a change to rain. Across the interior, 3-6” of snow along with an icy mix is expected including Allentown, Pa. and Hartford, Ct. 6-12” of snow is likely across northern New York and northern New England, benefiting ski areas ahead of the President’s Day weekend. All precipitation will end Tuesday night into Wednesday morning from southwest to northeast,” stated Ed Vallee, owner and meteorologist at Empire Weather LLC.

As of 6 am ET Monday, the latest winter watches, warnings, and advisories stretch from Virginia to Maine through midweek.

In addition to the Northeast, eastern Iowa, Wisconsin and northern Michigan will experience the worst snow. Over the weekend, the Pacific Northwest got hammered, with more than a foot dumping on parts of the Seattle-Tacoma International Airport, NOAA NWS Weather Prediction Center said.

After the mid-week storm dissipates, temperatures will jump to 50 degrees Fahrenheit in New York before the second winter storm starts to move east this weekend.

via ZeroHedge News http://bit.ly/2WWVXah Tyler Durden

“We Have A New Kind Of Mass Squalor In America” But Kunstler Warns, Socialism’s Not The Answer

Authored by James Howard Kunstler via Kunstler.com,

Mistaken Futures

And so the Democratic Party has gone and hoisted the flag of “socialism” on the mizzenmast of its foundering hulk as it sets sail for the edge of the world. Bad call by a ship without a captain, and I’ll tell you why. Socialism was the response to a particular set of circumstances in time that drove the rise of industrial societies. Those circumstances are going, going, gone.

The suspicion of industry’s dreadful effects on the human condition first sparked in the public imagination with William Blake’s poem “Jerusalem” in 1804 and its reference to England’s newly-built “dark satanic mills.” Industry at the grand scale overturned everyday life in the Euro-American “West” by the mid-19th century, and introduced a new kind of squalor for the masses, arguably worse than their former status as peasants.

And thus it was to be, through Karl Marx, Vlad Lenin, and the rest of the gang, ever-strategizing to somehow mitigate all that suffering. Their Big Idea was that if government owned the industry (the means of production), then the riches would be distributed equally among the laboring masses and the squalor eliminated. You can’t blame them for trying, though you can blame them for killing scores of millions of people who somehow got in the way of their plans.

Nobody had ever seen anything like this industry before, or had to figure out some way to deal with it, and it was such an enormous force in everyday life thereafter that it shattered human relationships with nature and the planet nature rode in on. Of course, the history of everything has a beginning, a middle, and an end, and we’re closer to the end of the industrial story than we are to the middle.

Which opens the door to a great quandary. If industrial society is disintegrating (literally), then what takes its place? Many suppose that it is a robotic utopia powered by some as-yet-unharnessed cosmic juice, a nirvana of algorithms, culminating in orgasm-without-end (Ray Kurzweil’s transhumanism). Personally, I would check the “no” box on that outcome as a likely scenario.

The self-proclaimed socialists are actually seeing the world through a rear-view mirror. What they are really talking about is divvying up the previously-accumulated wealth, soon to be bygone. Entropy is having its wicked way with that wealth, first by transmogrifying it into ever more abstract forms, and then by dissipating it as waste all over the planet. In short, the next time socialism is enlisted as a tool for redistributing wealth, we will make the unhappy discovery that most of that wealth is gone.

The process will be uncomfortably sharp and disorientating. The West especially will not know what hit it as it emergently self-reorganizes back into something that resembles the old-time feudalism.  We have a new kind of mass squalor in America: a great many people who have nothing to do, no means of support, and the flimsiest notions of purpose in life. The socialists have no answers for them. They will not be “retrained” in some imagined federal crusade to turn meth freaks into code-writers for Google.

Something the analysts are calling “recession” is ploughing across the landscape like one of those darkly majestic dust-storms of the 1930s, only this time we won’t be able to re-fight anything like World War Two to get all the machines running again in the aftermath. Nor, of course, will the Make America Great Again fantasy work out for those waiting in the squalid ruins of the post-industrial rust-belt or the strip-mall wastelands of the Sunbelt.

Most of the beliefs and attitudes of the present day will be overturned with the demise of the industrial orgy, like the idea that humanity follows an unerring arc of progress, that men and women are interchangeable and can do exactly the same work, that society should not be hierarchical, that technology will rescue us, and that we can organize some political work-arounds to avoid the pain of universal contraction.

There are no coherent ideas in the political arena just now. Our prospects are really too alarming. So, jump on-board the socialism ship and see if it makes you feel better to sail to the end of the earth. But mind the gap at the very edge. It’s a doozie.

via ZeroHedge News http://bit.ly/2tfnG8C Tyler Durden

Morgan Stanley: “The Earnings Recession Is Here”

One week ago, when looking at the dramatic collapse in consensus Q1 EPS estimates, we noted that the “profit party” is over and the days of near record earnings growth are about to end with a bang as a result of the recent barrage in profit warnings and negative preannouncements, first and foremost starting with Apple, which issued a shocking guidance cut one month ago for the first time since 2001.

As a result, analysts have slashed their S&P500 earnings estimates for the first quarter, and the Q1 bottom-up EPS estimate dropped by 4.1% (to $38.55 from $40.21) during this period.

Strikingly, the first quarter marked the largest decline in the bottom-up EPS estimate during the first month of a quarter since Q1 2016 (-5.5%).  At the sector level, all eleven sectors recorded a decline in their bottom-up EPS estimate during the first month of the quarter, led by the Energy (-22.5%) and Information Technology (-7.3%) sectors. Overall, seven sectors recorded a larger decrease in their bottom-up EPS estimate relative to their 5-year average and their 10-year average for the first month of a quarter.

What is even more stunning is just how fast Q1 earnings have been slashed lower, with the S&P expected to post a 3.3% growth as recently as Dec 31, a number which is now down to -0.8%, as consensus for the first time expects Q1 EPS to post an annual decline due to downward revisions to EPS estimates during the month.

If analysts are correct, and the index does report an actual decline in earnings for the first quarter, it will mark the first year-over-year decline in earnings since Q2 2016 (-3.1%).

Fast forward to today, when one day after Morgan Stanley’s Michael Wilson noted that “Earnings Revisions Have Been Some Of The Worst We’ve Ever Observed“, the chief equity strategist is out with his latest dire proclamation, namely that the “Earnings Recession Is Here.“

Having long been one of the most pessimistic strategists on Wall Street, predicting that it is only a matter of time before an earnings recession strikes, Wilson today writes that his earnings recession call is playing out even faster than he expected, adding that “when we made our call for a greater than 50% chance of an earnings recession this year, we thought it might take a bit longer for the evidence to build.” In retrospect it took just over a month for forward guidance to collapse and “on the back of a large downward revisions cycle during 4Q earnings season, it’s becoming more clear.” Indeed, as we noted last week, consensus numbers have already baked in no growth for 1H19 (1Q projected growth is actually negative) with a hockey stick assumed in 2H19 that brings the full year growth estimate to ~5%.”

However, as Wilson is quick to note, “history says be skeptical of the inflection forecast.” Why? Because the projected y/y EPS growth in 4Q19 is ~9.5%.

This compares to an average projected rate of growth of 1% over 1Q – 3Q19, an inflection of ~8.5%. While we have seen this kind of inflection happen a few times since the early 2000s, these inflections were all related to

  1. comping against negative or slower EPS growth or
  2. tax cuts mechanically lifting the growth rate.

Neither of those forces are at play this year. In fact, it’s the opposite making the achievability of these estimates even more unlikely, to wit:

We are increasingly convinced that consensus earnings expectations for 2019 have further to fall and that the optimistic uptick currently baked into 4Q19 estimates is unlikely to happen. A modest further decline in earnings will deliver the earnings recession we called for. Equity returns can still be positive in this environment, but they will likely be weaker than they otherwise would have been and the odds of outright price declines are substantially elevated. Whether prices move higher or lower, volatility will likely rise meaningfully. So in essence, we are still looking at a bumpy, range bound market at the index level and think investors should continue to try and take advantage of the swings in price in both directions.

Furthermore, as Wilson puts it wryly, company managements tend to be an optimistic group. As such, we’re not surprised they are calling for a trough in 1Q. However, Wilson would advise against taking too much comfort in these calls for a trough in 1Q19 of the down cycle from the same people who didn’t see it coming in the first place. In addition to a trough in 1Q, consensus estimates are now forecasting a big second half inflection in growth.

Anything is possible, but we have little confidence in such an inflection given sharply falling top line growth and disappointing margins in the face of very difficult comparisons for the rest of this year. If we accept that an earnings recession is here, the key questions are how deep will it be and how long will it last? Again, it’s hard to know, but we can look to history for some context on how expectations for a large upward inflection in earnings usually play out.

And as the chart below shows, the kind of hockey-stick inflection point which consensus expects in Q4 is virtually impossible absent a positive reversal in virtually everything.

So what does it mean for markets if Wilson is right and an earnings recession is indeed nigh, while Wall Street’s rosy outlook is set for major disappointment?

As the strategist explains, when consensus is embedding an inflection further out, downward revisions, some drag on price returns and higher volatility are all to be expected. To analyze the impact of such a substantial cognitive bias, Wilson examined what tends to happen when consensus embeds a big jump in growth 4 quarters out compared to the next three quarters. He found that the numbers for all 4 quarters ahead tend to fall but the growth quarter tends to fall the most. In other words, “if current estimates move in line with history, we could see a full year decline of ~3.5% in S&P earnings.”

As a result of this analysis, Morgan Stanley is now lowering its Base Case 2019 S&P 500 EPS growth forecast to just 1% from 4.3% (and a token 1% at that, since Wilson effectively makes that case that it is far more likely than not that the final number will be negative). Wilson also notes that “history tells us to expect further downward revisions, higher volatility and a drag on prices.”

Wilson also found that “equity returns can still be positive in this environment, but they will likely be weaker than they otherwise would have been and the odds of outright price declines are substantially elevated. Whether prices move  higher or lower, volatility tends to rise meaningfully, with average year ahead price volatility realizing ~5% more than the full period average.”

Still, while Morgan Stanley has revised its earnings numbers lower, surprisingly, its bull, base, and bear case year end price targets remain unchanged for one simple reason: the lower rate environment provides support for year end target multiples, i.e., the Fed comes to the rescue again.

Even so, Wilson has no problem with strongly hinting to the bank’s clients what he really thinks will happen: “our base case year end target of 2750 is a lot less exciting than it was a month ago.”

via ZeroHedge News http://bit.ly/2GEetyr Tyler Durden

Congressional Democrats Join GOP Lawmakers Against Rep. Ilhan Omar After Anti-Israel Comments

House Democrats have called on congressional leaders to condemn controversial remarks made by Muslim Rep. Ilhan Omar (D-MN) suggesting that Israeli money has influenced US politics, reports Politico. 

Reps. Josh Gottheimer (N.J.) and Elaine Luria (Va.), who are both Jewish, are collecting signatures for a letter they plan to send to Democratic leaders expressing deep concern over “recent rhetoric from certain members within our Caucus, including just last night, that has disparaged us and called into question our loyalty to our nation.” The letter, which was obtained by POLITICO, is being circulated to Jewish Democrats. –Politico

Omar suggested in a Sunday night tweet that America’s support of Israel is due to donations by pro-Israel groups such as AIPAC, after an earlier tweet responding to journalist Glenn Greenwald was interpreted as anti-Semitic. 

Greenwald had slammed the GOP’s condemnation of Ilhan for embracing the “Boycott, Divestment and Sanctions” (BDS) movement, which claims Israel has “obligations under international law” to withdraw from occupied territories, remove the barrier in the West Bank, recognize Arab-Palestinian citizens of Israel as equals, and advocates sanctioning Israel until this is achieved.

In response, Ilhan tweeted: “It’s all about the Benjamins baby.” 

This set off a firestorm of debate over the first amendment and hate speech; first – whether Omar invoked the “anti-Semitic trope” of “Jews & Money” as Rep. Jerry Nadler (D-NY) claims, and second, whether it is inherently anti-Semitic to claim that Israeli money in US politics has influenced US policy towards Israel, as opposed to a fundamental belief Israel has a “right to exist” and should be protected from its enemies. Largely absent from the current discussion has been an actual debate over BDS and Israeli foreign policy.

Rep. Omar’s defenders have insisted that she should be free to criticize Israel.

Omar’s detractors such as Nadler and others have warned her to “be extremely careful not to tread into the waters of anti-Semitism or any other form of prejudice or hate.” 

Gottheimer and Luria implored Congressional Democrats to ” join us in calling on each member of our Caucus to unite against anti- Semitism and hateful tropes and stereotypes,” adding “In recent weeks, we have had conversations with multiple members of our Caucus who share our concerns about this rhetoric; we have also raised these concerns with Democratic leadership.”

“We must speak out when any Member – Democrat or Republican – uses harmful tropes and stereotypes, levels accusations of dual loyalty, or makes reckless statements like those yesterday,” they added. 

Both Omar and Rep. Rashida Tlaib (D-Mich.) have been repeatedly attacked by the GOP for their critical views toward Israel and support for the Boycott, Divestment and Sanctions movement, which targets Israel’s treatment of Palestinians. But Omar’s latest tweet earned rebukes from members of her own party, including from freshman Reps. Max Rose (D-N.Y.) and Anthony Brindisi (D-N.Y.).

“We hope that our Caucus will take swift action to address these issues in the coming days by reiterating our rejection of anti-Semitism and our continued support for the State of Israel,” Gottheimer and Luria said in the letter to leadership.

Minority Leader Kevin McCarthy (R-Calif.) has threatened to take disciplinary action against Omar if Democratic leaders remain silent. One option under consideration, according to his office, is forcing a vote on a resolution from Rep. Lee Zeldin (R-N.Y.) condemning anti-Semitism.

GOP Conference Chair Liz Cheney (R-Wyo.) also called on Omar to lose her seat on the Foreign Affairs Committee. –Politico

Others accused Omar of breaking an election promise not to boycott Israel in addition to anti-Semitism.

Politico’s Jake Sherman weighed in, only to be promptly owned by his own pen. 

Others, such as the Washington Post‘s Dave Weigel, notes that Omar has undermined her own cause with “glib tweets.” 

via ZeroHedge News http://bit.ly/2SEVbzI Tyler Durden

Over 1000 ‘Scientists’ Sign “Dissent From Darwinism” Statement

Authored by Brittany Slaughter via TheCollegeFix.com,

Earlier this month, a long kept list of Ph.D. scientists who “dissent from Darwinism” reached a milestone – it crossed the threshold of 1,000 signers.

“There are 1,043 scientists on the ‘A Scientific Dissent from Darwinism’ list. It passed the 1,000 mark this month,” said Sarah Chaffee, a program officer for the Discovery Institute, which maintains the list.

“A Scientific Dissent From Darwinism” is a simple, 32-word statement that reads:

“We are skeptical of claims for the ability of random mutation and natural selection to account for the complexity of life. Careful examination of the evidence for Darwinian theory should be encouraged.”

Launched in 2001, the list continues to collect support from scientists from universities across America and globally. Signers have earned their Ph.D.s at institutions that include Harvard, Yale, Columbia, Cornell, Princeton, Brown, Dartmouth and the University of Pennsylvania. Others on the list earned their doctorates at Clemson, UT Austin, Ohio State, UCLA, Duke, Stanford, Emory, UNC Chapel Hill and many others universities. Still other signers are currently employed as professors across the nation.

Those who sign it “must either hold a Ph.D. in a scientific field such as biology, chemistry, mathematics, engineering, computer science, or one of the other natural sciences; or they must hold an M.D. and serve as a professor of medicine,” according to the institute.

The group points out that signing the statement does not mean these scholars endorse “alternative theories such as self-organization, structuralism, or intelligent design,” but rather simply indicates “skepticism about modern Darwinian theories central claim that natural selection acting on random mutations is the driving force behind the complexity of life.”

According to Discovery Institute Senior Fellow David Klinghoffer, the signers “have all risked their careers or reputations in signing.”

“Such is the power of groupthink,” he wrote. “The scientific mainstream will punish you if they can, and the media is wedded to its narrative that ‘the scientists’ are all in agreement and only ‘poets,’ ‘lawyers,’ and other ‘daft rubes’ doubt Darwinian theory. In fact, I’m currently seeking to place an awesome manuscript by a scientist at an Ivy League university with the guts to give his reasons for rejecting Darwinism. The problem is that, as yet, nobody has the guts to publish it.”

In interviews with The College Fix, some of the list’s signers explained why they were willing to go public with their skepticism.

“[Darwin’s theory] claimed to explain all major features of life and I think that’s very unlikely. Nonetheless, I think Darwinism has gotten to be kind of an orthodoxy, that is it’s accepted in the scientific community unthinkingly and it’s taught to kids unthinkingly,” said Michael Behe, a professor of biological sciences at Lehigh University.

“Getting a list of scientists who point out that they don’t believe the orthodoxy can kind of open up some minds hopefully,” he said.

“It is clearly a growing trend with biology to think that Darwin missed a whole lot of biology and cannot explain a good deal of evolution,” Behe added.

Regarding how his colleagues view the list, Behe said, “Most of my peers are unaware of it, but those who are aware of it don’t like it one bit. They think that anybody who would sign such a list has to have a dishonorable motive for doing so.”

Taking a stand comes with a risk. Scott Minnich, an associate professor of microbiology at the University of Idaho, said he has many times been accused of being “anti-science.”

“I signed this list when it first came out because of this intellectual deep skepticism I have that the random unintelligent forces of nature can produce systems that outstrip our own intellectual capacity,” he told The Fix.

Minnich went on to quote the writer C.S. Lewis: “Men became scientific because they expected Law in Nature, and they expected Law in Nature because they believed in a Law Giver.”

David Dewitt, chair of the Department of Biology and Chemistry at Liberty University, told The College Fix in an email interview he signed the list because “I don’t believe that Darwinism accounts for all living things. Natural selection doesn’t produce new information and can’t.”

Dewitt said he’s not alone.

“I think more scientists are realizing the limitations to Darwinism, specifically in regard to the origin of life and the complexity of the cell. So much of how cells actually work reveal how impossible it is that life arose from mutation and natural selection. As we have learned more and more about molecular and cellular biology, more scientists doubt Darwinism although they may not admit it for fear of repercussions,” Dewitt told The Fix in an email interview.

Shun Cheung, an associate professor of computer science at Emory University, referred The College Fix to his website to outline his concerns.

“When Darwin formulated his ‘evolution theory,’ [he] did not have good microscopes and the cell was a blob to him without any structure. Darwin thought that a cell was simple and without structure. We now know that a cell is like a complex factory consisting of many different components-each with a distinct function. Each part/component is necessary in the entire operation of the cell,” Cheung writes.

via ZeroHedge News http://bit.ly/2UUrDvj Tyler Durden