Tag: finance

Via The Daily Bell

 

Here is the key to investigating Donald Trump … We were successful because we collaborated with other journalists. Now it is time for the media to join forces once again – especially given the threat Trump poses  trump towers  ‘We are faced with a story that is too big and too important to handle on our own.’

The Guardian claims it “broke” the story of the Panama Papers and can  use the same techniques to harass Donald Trump. What they need to do is cooperate better with other newspapers and share a sense of joint purpose.

The Panama Papers, they claim, provided a big learning experience. They learned to cooperate better with other newspapers on a variety of fronts.

Donald Trump is now president. This challenges many of us, not least members of the press. Countless reporters are still shaken and stunned by how he singled out a CNN reporter, one of the most respected news outlets in the world, to attack and humiliate him during his first press conference since winning the elections.

 

Worryingly, none of his fellow journalists in the room stood up for him at the time.  This wasn’t Trump’s first attack on the press, and it certainly won’t be his last. The first White House press briefing, held on Saturday, featured bullying, threats and unproven claims. That is why a new level of solidarity and cooperation is needed among the fourth estate.

 

American journalists should stop him from dividing their ranks – however hard their professional competition may be. They should do the opposite: unite, share and collaborate. Even if doing so would mean embracing something quite unfamiliar and new to American journalism.  The Panama Papers has showed that a formerly unthinkable project of collaboration can work.

The paper elaborates on its experience, saying it shared with over 400 reporters, including many who ordinarily competed with each other. It was simply too large a story to handle without the help of others.

The paper claims it faces a similar situation with Trump. “There’s a wide range of possibilities for how news outlets could work together. “

Concrete solidarity is one approach, the paper claims. When one person is denied the opportunity of an answer, the next person should ask the same question, and the next, until the question is answered.

Additional solidarity goes beyond answering questions. Reporters should reach out to rivals on other newspapers if they are having trouble corroborating a story. Why not collaborate, the newspaper asks.

At the highest level of collaboration  are special joint projects.  Trump has dozens – even hundreds – of companies, too many for a single person to investigate. But a collaborative investigation offers the possibility of a more successful approach.

Trump’s potential cooperation with Russia is also promising. “Unknown conflicts of interests in both fields can turn out to be a huge danger to the national security of the US.  Collaboration could even mean working with foreign news outlets in different countries, whose reporters certainly might have more knowledge of Trump’s respective business partners than a US-based journalist.”

Such cooperation gave the Guardian much success with the Panama Papers, according to the Guardian and should be replicated with Trump if possible.

Of course a lot of this is not entirely true from our point of view. We don’t believe the Panama Papers were simply discovered by newspapers. It’s certainly likely that government played a part in the discovery of the papers before handing them off to various newspapers for a variety of reasons.

We’ve written a previous article indicating that Trump would have difficulties with the kind of negative articles the Guardian has in mind writing. Large-scale ongoing cooperation between newspapers would be a further challenge, though one he would likely overcome in time.

Conclusion: Trump is already said to be downcast that current coverage doesn’t always recognize his to govern as he hoped. Large-scale newspaper cooperation would just make things worse, but perhaps it won’t happen. The Guardian is exaggerating in our view with the Panama papers.

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Despite today’s expected decision by the UK Supreme Court, which ruled that Theresa May has to put the Brexit decision to a vote in parliament – in line with what May recently said she would – the government announced that the decision would not adversely impact its timeline for triggering Article 50 before the end of March, and that it would introduce Article 50 legislation “within days.” The result was little if any reaction from various asset classes, with the pound largely unchanged after some initial volatility.

So what happens next? Here, courtesy of Danske Bank’s Mikael Olai Milhoj, is a quick recap of next steps in the Brexit saga;

Government to introduce Article 50 legislation ‘within days’

• As expected, the Supreme Court ruled that the parliament and not the government has the power to invoke Article 50, which formally starts the exit negotiations with the EU. Thus the Supreme Court upheld the High Court’s decision in November. Market reaction was limited.
• Based on stories in UK media, most cabinet ministers expected to lose the appeal case. In PM Theresa May’s Brexit speech, it also seemed that she had already accepted that the parliament needs to be involved in the negotiation process, as she mentioned the final deal will be put to a vote in both Houses of Parliament. For more details on PM May’s Brexit speech where she outlined her 12 Brexit principles please see Brexit Monitor #21, 17 January.
• However, it was a victory for the government that it does not need to consult the assemblies in Northern Ireland, Scotland and Wales before triggering Article 50.
• We do not think the Supreme Court’s ruling will delay the triggering of Article 50. Brexit Minister David Davis has said the government will introduce Article 50 legislation ‘within days’ (see Reuters, UK to introduce Article 50 legislation ‘within days’ – Brexit minister, 24 January) and it seems unlikely that either the Conservative Party or Labour will block the legislation in the House of Commons. In a   non-binding vote in December, MPs voted overwhelmingly to support PM Theresa May’s Brexit time table. It could be more problematic to pass the legislation in the pro-EU House of Lords where the Conservatives do not have majority, but it would probably create a constitutional crisis if the House of Lords tries to block or delay Brexit, see Reuters, Brexit plans unlikely to be slowed by Article 50 defeat, 24 January.
• In the Supreme Court’s judgement, it says in section 122 that ‘What form such legislation should take is entirely a matter for Parliament’, which allows the Government to present a very short bill, which makes it more difficult for the MP’s to make amendments. Both Labour and the Scottish National Party (SNP) have already said that they want to be heavily involved during the negotiation process.
• In other words, we will have some arm wrestling between the government and the members of parliaments in the coming two months ahead of the triggering of Article 50. However, it is worth noting that the EU is not bound by whatever strings may be attached by the UK government, so we still think we are heading towards a hard Brexit, as the UK cannot stay within the single market and get control over EU immigration at the same time.
• We still expect EUR/GBP to come under pressure as the triggering of Article 50 moves closer. We target EUR/GBP at 0.88 in 3M but see risks skewed to the upside.

The calendar of next steps in visual format:

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After a bizarre first press briefing earlier this week in which Sean Spicer slammed the media for their obsession with Trump’s inaugural crowd sizes, Spicer is set to take questions once again from an undoubtedly anxious press corps starting at 3:30PM EST.  Although yesterday’s briefing was somewhat more subdued, we suspect the press will be eager to pepper Spicer with questions regarding Trump’s rapid-fire signing of several executive orders aimed squarely at dismantling key components of Obama’s “legacy”. 

And while yesterday’s breifing was somewhat more subued than his first, Spicer sent a clear message that White House Press Breifings going forward will be anything but “traditional” by calling on the New York Post and the Christian Broadcasting Network for his first questions. 

Sean Spicer, the new White House press secretary, made it clear in his first official briefing that, like his boss, he would break with Washington precedents. After he stepped to the lectern yesterday and read a lengthy readout of the President’s day—three Presidential memoranda signed and several meetings with corporate C.E.O.s, union officials, and congressional leaders—he called on his first news organization, the New York Post.

 

So it was no surprise when Spicer ignored the first row of correspondents from the major news wires and TV networks and selected the Post, whose correspondent inquired, “When will you guys commence the building of the border wall?”

 

From the Post, Spicer moved on to a reporter from the Christian Broadcasting Network, who asked about abortion policy. Spicer eventually came back to the mainstream outlets in the front row. He did a commendable job of taking questions from a wide range of news organizations in a briefing that lasted well beyond the typical time period. He announced one change to the format: he would soon bring in reporters from outside Washington to ask questions via Skype, a modernization that seems harmless. Once Spicer got going, the briefing seemed almost routine—almost.

With that, tune in below to see what surprises will today’s briefing will bring.

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With no pressure in the repo market anywhere along the curve, there was little probability of a “surprise” squeeze into today’s 2Y auction, and predictably, today’s sale of 2 Year paper closed with a wide tail, printing at 1.21%, some 0.6bps wide of the When Issued 1.204%, which in turn was also well outside of the 1.176% yield the 2Y was trading at just ahead of the auction. This was below the 1.27% in December, but above the 1.085% in November and 0.92% 6 month average.

On the flipside, the internals were decidedly better with the Bid to Cover of 2.68 rising materially from December’s 2.436, and just better than the 2.62 6 month average.

Finally, after a foreign buyer strike over the past 6 months which saw Indirect bidders under 40% and even under 30% in July and August, foreign central banks were back, taking down 48.8% of the auction, compared to just 32.7% last month and 33% on average in the prior 6 auctions. With directs taking down 9.3% this means that Dealer were left holding 41.2% of the auction, the lowest takedown by primary dealers since May 2016.

Overall, while nothing to write home about, today’s auction was stronger than the “tailing” headline would suggest.

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Perhaps reports of the Trumpflation rally’s death have been somewhat exaggerated in the past few days. After RBC pointed out yesterday that equity generalists are “increasingly uncomfortable with reflation trades”, this morning we have seen the latest violent inversion in this theme.

As RBC’s Charlie McElligott points out, “after yesterday saw painful “stop-outs” by the leveraged-hordes of UST shorts as the USD came ‘off’ on account of what looks to me the ongoing concerns surrounding President Trump’s ability to implement an alternative to a “border-adjusted” tax system, which had been a core driver of the Dollar’s appreciation thesis, “today we see both US rates reversing higher again with overnight UST weakness following 1) ongoing +++ data trajectory (the strongest Japan Manu PMI print in nearly 3 years alongside the best aggregate Markit Eurozone Manu PMI in series history and another Markit US Manu PMI beat as well) and 2) some intrigue around the pro-reflation $1T Senate Democrat Infrastructure plan proposal.  USH (Treasury Long Bond March fut) saw 8000 147/150 put spreads trade earlier, although it should be noted that we are seeing ongoing interest from TLT call buyers hedging for a short-squeeze on account of the significant short-base across UST futs and ED$.”

As McElligott summarizes, “a glimpse at thematic equities today is like a glimpse back to the halcyon days of late Nov / early Dec, as ‘cyc vs def,’ ‘inflation  longs,’ ‘high beta’ and ‘value’ factor all work, while ‘low vol’ and ‘growth’ suck wind.”

Further details which are attracting attention is the previously noted proposal by Democrats to launch a $1 trillion infrastructure investment:

Some focus in macro community today (with v little interest paid in equities, curiously) on the proposal from Senate Democrats of their own $1T infrastructure plan to President Trump per the NYT this morning.   The reason macros care so much of course is that a coherent and detailed infra policy would be another major boost to their view on higher rates / reflation.

 

Trump’s purported infra plan has had rough details out for months now via his website @ $1T in its own right, theoretically spread over 5 years but most importantly, with private-funding aspirations.  The Republicans are ironically the issue here for Trump, as historically this sort of “job / works program” stuff is the stuff they have despised as “big government mismanagement / pork barrel “creep.”  So this could be a fascinating test as to whether or not Trump can move across the aisle and ‘coalition build’….IF the plan has enough overlap with his own of course.  

 

From the ‘color me skeptical’ side: this is likely a symbolic gesture with no real intent or expectation to ‘get a deal done,’ where actual hope is to float this plan in ahead of the Jan 27th ‘due date’ on the Obamacare “reconciliation” bill.  If the new administration and Republicans can’t get their stuff together on that front, and the Dems were to ‘beat them to the punch’ on infra too, it would be an embarrassing PR start for Trump’s team. 

To McElligott, the implication “from a trading perspective, is that it would likely take further air out of the USD-longs and likely see rates travel lower as “reflation” bets come off.”

So maybe the Trump trade isn’t quite ready for its second coming just yet. Indeed, as the RBC strategist also notes, there is some substantial “US Trumpflation” trade fatigue, which is visible in ETFs “which  saw a major pension fund asset allocation trade yesterday at approx $3B a side ‘buy x sell,’ where the quick and dirty #hottake was a move “out of US equities / into international equities and fixed income.”

But the most interesting part in today’s RBC note was an interesting observation on a key decoupling in two of the key aspects of the Trumflation rally. To wit:

USD AND US RATES DECOUPLE FOR FIRST TIME SINCE ELECTION: As highlighted by Mark Orsley yesterday, rates continue to see ‘reflation’ bets placed, while Dollar longs look to be scaling-back / “selling the inauguration.”

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According to a new Reuters / Ipsos poll, a record number of disaffected, Hillary-supporting Californians now support secession from the United States because they’re just so “triggered” by Trump’s victory.  If successful, California would become the single largest “safe space” in the world.

Per the poll, 1 in every 3 Californians now support a “peaceful withdrawal from the union,” which is a substantial increase from the 20% who favored such a withdrawal the last time a similar poll was conducted in 2014. 

One in every three California residents supports the most populous U.S. state’s peaceful withdrawal from the union, according to a new Reuters/Ipsos opinion poll, many of them Democrats strongly opposed to Trump’s ascension to the country’s highest office.

 

The 32 percent support rate is sharply higher than the last time the poll asked Californians about secession, in 2014, when one-in-five or 20 percent favored it around the time Scotland held its independence referendum and voted to remain in the United Kingdom.

 

California also far surpasses the national average favoring secession, which stood at 22 percent, down from 24 percent in 2014.

Of course, as most of the country made a shift to the right in November’s election, California continued it’s steady march to the left with Democrats now controlling a super-majority in both houses of the legislature. 

As Reuters notes, many Cali residents felt triggered by Trump’s promises to actually enforce immigration laws and repeal Obamacare with one Democrat consultant saying that “many citizens believe it would be smarter to leave than fight.”

“I don’t think it’s likely to happen, but if things get really bad it could be an option,” said Stephen Miller, 70, a retired transportation planner who lives in Sacramento and told pollsters he “tended to support” secession.

 

During the campaign, Trump alienated many in the Democratic-leaning state with his promises to crack down on illegal immigration, threats of creating a Muslim registry, remarks women found offensive and vows to repeal the Affordable Care Act, also known as Obamacare.

 

“There’s such hostility towards Trump that many citizens believe it would be smarter to leave than fight,” said Democratic political consultant Steve Maviglio, who last year ran the campaign against a proposed ballot initiative to break California into six states.

Meanwhile, Jerry Brown recently struck a more aggressive tone saying that California was “ready to fight” with the Trump administration over climate change initiatives.

“We’ve got the scientists, we’ve got the lawyers and we’re ready to fight.”

 

“Some people say that they’re going to turn off the satellites that are monitoring the climate.  I remember back in 1978 I proposed a satellite for California.  They called me Governor Moonbeam because of that.  I didn’t get that moniker for nothing.  And if Trump turns off his satellites, California will launch it’s own damn satellites.  We’re going to collect that data.”

And not surprisingly, Californians continue to express their frustration over their election loss with a series of never ending protests and destruction of private property…but clearly it’s the fault of Republicans that they’re unemployed.

On Friday, activists from the group waved signs saying “California out of the United States” and “U.S. out of California” at anti-Trump protests in Los Angeles and San Francisco, Marinelli said. They have requested approval from the state to begin collecting signatures for a pro-secession ballot initiative.

 

In Lodi, California, Democratic party activist Bruce Rubly, who told Reuters/Ipsos pollsters that he “strongly supported” California secession, said he thinks it
could happen if Trump and the Republicans who dominate the U.S. Congress impose conservative policies on such issues as the environment, immigration and marijuana legalization.

 

“There’s a whole series of things that are going to get Californians riled up,” said Rubly, 68. “And if he pushes those buttons in the wrong way, there’s going to be hell to pay.”

While Calexit will never happen, no matter how hard Cali’s disaffected millennials dream it, we suspect there are about 60 million American voters between the coasts that would welcome the permanently conservative United States that would result from such a move….it might just be a win-win.

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Via GEFIRA,

US-centric media are reporting that Japan has become the biggest holder of the US treasuries, surpassing China last month. However, this is true only in regard to single countries. If we consider the European Union member states collectively, then they appear to be the biggest holder of the US treasuries. It has been so almost one year long. Unfortunately, the EU’s holdings are artificially overstated because of some financial havens and they are going in the opposite direction to the trend: up rather than down.

According to the latest data from TIC (Treasury International Capital System), the EU was in possession of $1242 billion of US Treasuries in November 2016, $9 billion more than one month earlier. The EU was the only one from three biggest holders that increased its amount of US treasuries in November, while China and Japan continued to lower their holdings.

The EU became the top US Treasury holder in February 2016, i.e. one year ago. China’s holdings were then $1252 billion, while in November 2016 they were down to $1049 billion, which was a 16% decrease. If this pace of the Chinese sell-off is to be maintained, China may be surpassed even by the Euro Area, which is already holding $922 billion.

However, there is nothing to be proud of. While the global tendency is for countries to get rid of US government securities, European states like Ireland and Luxembourg are still buying them. As ZeroHedge points out, in November all foreign holders of US Treasuries combined sold $70.8 billion, the most in one month ever, bringing their total holdings down to 3.771 trillion, far below the $4.117 trillion held one year ago. The tendency is clear since the end of 2015 and Europe is going upstream.

The problem is caused by such financial hubs as Ireland, Luxembourg, and the United Kingdom (Ireland is the third single holder of US Treasury, just above another estimable tax haven: Cayman Islands). These three make up about 57% of the entire EU holdings, while only the UK is a big economy. During the next weeks the Gefira team will publish more on this topic trying to explain how it is possible that the Irish or Luxembourgers possess three times as many US papers as Germans, who have $86 billion (exactly the same amount is held by Russia).

We also recommend our latest edition of the Gefira Anticipation Bulletin where we show why such a big exposition of US Treasury is dangerous to the financial stability of Europe, especially in the context of Chinese economic troubles and enormous derivatives position of the biggest banks including European financial institutions such as Deutsche Bank.

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China is wasting no time to project power in a world in which it believes Donald Trump’s “America First” doctrine has created a “superpower vacuum.”

One day after a senior Chinese diplomat said on Monday that Beijing is prepared to “assume a role of world leadership if others step back from that position” after U.S. President Donald Trump pledged in his first speech to put “America first”, Beijing has reportedly deployed an advanced Dongfeng-41 ICBM system in Heilongjiang Province, which borders with Russia.

According to China’s nationalist Global Times tabloid, “the Chinese military intentionally revealed the Dongfeng-41 and connected it with the inauguration of US President Donald Trump. They think this is Beijing’s response to Trump’s provocative remarks on China.”

The Global Times added that “pictures of China’s Dongfeng-41 ballistic missile were exposed on Chinese mainland websites,” citing reports in “some Hong Kong and Taiwan media.” One of the reports was identified as the Apple Daily, another tabloid-style resource based ot of Hong Kong, according to RT. “It was revealed that the pictures were taken in Heilongjiang Province. Military analysts believe that this is perhaps the second Dongfeng-41 strategic missile brigade and it should be deployed in northeastern China,” the report in the Chinese newspaper notes.

The Dongfeng-41 is a nuclear solid-fuel road-mobile intercontinental ballistic missile. With a range of 15,000 kilometers and a payload of 10-12 nuclear warheads, it can target anywhere in the world and is widely considered one of the most advanced intercontinental ballistic missiles. China has yet to reveal the ICBM to the general public during a military parade or any similar event. Most information of the advanced weapon remains highly classified.

There has been speculation that China plans to deploy at least three brigades of DF-41s throughout the country. According to the Global Times, the image was purposefully leaked to coincide with Trump’s inauguration, in light of the US president’s confrontational stance towards China.  Earlier today, China’s foreign ministry responded to comments by White House speaker Sean Spicer, urging the US to “act and speak cautiously” when it comes to the disputed South China Seas to “avoid harming the peace and stability” in the region.

China routinely uses demonstration of its military prowess to send signals to challengers like the US. For instance, it tested a railcar-launched version of the DF-41 in December 2016 just as then-Defense Secretary Ashton Carter visited the aircraft carrier ‘USS John C. Stennis’ deployed in the South China Sea.

Meanwhile, Russia has welcomed the placement of China’s ICBM next to its border, saying it is not an indication of threat toward China’s northern neighbor.

The alleged deployment of the DF-41 near Russia’s border should not be read as a threat to Russia, military analyst Konstantin Sivkov told RIA Novosti.

 

“DF-41 missiles placed near Russia’s border are a smaller threat than if they were placed deeper in the Chinese territory. Such missiles usually have a very large ‘dead zone’ [area within minimal range that cannot be attacked by a weapon],” he said, adding that the ICBMs would not be able to target Russia’s Far East and most of Eastern Siberia from the Heilongjiang Province.

The Kremlin agreed with the assessment, saying that China is Russia’s “strategic partner in political and economic senses.”

“Certainly, the actions of the Chinese military, if the reports prove correct, the military build-up in China is not perceived as a threat to our country,” said Kremlin spokesman Dmitry Peskov.

It is, however, perceived as a threat to the US, and nowhere was that made more clear than in China’s own wording.

As the Global Times added, “the US has the world’s most powerful military strength, including the most advanced and powerful nuclear arsenal. But Trump has called for a nuclear arms build-up many times. Even Washington feels that its naval forces and nuclear strength are lacking, so how can China be content with its current nuclear strength when it is viewed by the US as its biggest potential opponent?”

The Global Times then notes that “China’s nuclear capability should be so strong that no country would dare launch a military showdown with China under any circumstance, and such that China can strike back against those militarily provoking it. A military clash with the US is the last thing China wants, but China’s nuclear arsenal must be able to deter the US.“

The dangerous tone continued throughout the article:

The US has not paid enough respect to China’s military. Senior US officials of the Asia-Pacific command frequently show their intention to flex their muscles with arrogance. The Trump team also took a flippant attitude toward China’s core interests after Trump’s election win. Enhancing communication and mutual understanding is not enough. China must procure a level of strategic military strength that will force the US to respect it.

 

A China with or without the Dongfeng-41 is different to the outside world. That is the significance of the Dongfeng-41. We hope this strategic edge will be revealed officially soon. It will not bring the China Threat theory, but will only add authority to the People’s Liberation Army.

While Trump has had a busy morning, dismantling Obama’s (and Warren Buffett’s) anti- Keystone pipeline legacy, and has hardly caught up with the latest news out of China, we are curious how the US president will react – either on Twitter or otherwise – to the knowledge that what until now was a diplomatic “war of words”, has not so quietly spilled over into what appears to be another nuclear build up arms race.

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