Tag: finance

Authored by Jonathan Turley,

NBC correspondent Andrea Mitchell and Delegate Eleanor Holmes Norton (D-D.C.) had a bizarre encounter yesterday when a man dressed only in a bra and panties rushed then near Black Lives Matter Square and the area claimed earlier as the “Black House Autonomous Zone.”

Mitchell immediately asked “where’s the police” and Norton added “where’s the police when you need them?” It is a question that many of us have been asking D.C. officials for weeks as police have stood by and watched statues destroyed and defaced around the city. 

This week, D.C. Chief of Police Peter Newsham stated that his department has made the “tactical decision” not to intervene as certain statues have been torn down in front of them. I have been highly critical of both this destruction and the failure of D.C. officials to act, including the iconic bust of George Washington on my own campus at George Washington University.

Thankfully no one was injured in this encounter:

The answer to the question however is equally troubling. Police are often around when violence and destruction occurs in these protests.

The question came up when reporters asked Newsham why officers stood around as mere pedestrians on Friday night as a mob pulled down the statue of Albert Pike in Judiciary Square. There have been good-faith calls for the removal of the statue, including by Norton.  I have participated in this debate for years on determining what public art should be removed and what standards we should apply to the preservation of historical monuments, including a discussion organized by the Smithsonian Institution a few years back.  Some monuments should be removed but this should be done with the consent and deliberation of the communities.  Indeed, such acts hold greater meaning when done through legitimate and consensual means.  This is not part of that debate, this is destruction by mobs who unilaterally determine what public art will be allowed and what will be destroyed.

After a mob was allowed to attach ropes and work to pull down the statue of Andrew Jackson, there was a belated response from federal and district officers. The statue however was defaced and was only saved from toppling by its sheer size.  Media reported that Mayor Muriel Bowser and her office declined any comment on the mob scene that was scene on every network. That was what one might call a “tactical political decision.”

The “tactical decision” made by the Newsham is a convenient and widely used approach around the country.  Leaders are allowing art to be destroyed rather than confront these mobs — not on the inherent value of the monuments but the right of society to make such decisions as a whole.  This is nothing new. Such tactical decisions have been made by universities for years as they watched their art destroyed without any action or discipline.  At the same time, police have been ordered to give mobs free range in destroying public art.  Even when arrests are made, prosecutors have dropped charges under pressure from the public. 

This same tactical decision has been made in other cities by leaders.  Just yesterday, a legislator was attacked and sent to the hospital for taking a picture of the destruction. Both journalists and pedestrians have also been attacked for filming such scenes by protesters. Democratic senator Tim Carpenter told the Milwaukee Journal Sentinel that he was beaten after taking a photo last night as two statues being toppled.

I took this pic- it got me assaulted & beat up. Punched/kicked in the head, neck, ribs. Maybe concussion, socked in left eye is little blurry, sore neck & ribs. 8-10 people attacked me. Innocent people are going to get killed. Capitol locked- stuck in office.Stop violence nowPlz! pic.twitter.com/Zw2hdfYG66

— Tim Carpenter (@TimCarpenterMKE) June 24, 2020

The protesters tore down the statue of Col. Christian Heg, who fought and died during the Civil War on the Union side

As noted earlier, the spectrum of action from cities and universities seems to range from deafening silence to cringing compliance in the face of such destruction.  At the University of Oregon, famous statues of the Pioneer and Mother Pioneer were torn down. The University condemned the destruction and then promptly promised that the statues would be carted away and not returned.

Thus, the answer to D.C. Delegate Norton’s question is that the police is often present, but remain mere pedestrians by design.  Call it “tactical” or consensual, but destruction of public art and historical monuments is occurring with the acquiescence of the city leaders.

On Friday, stocks slumped as second wave fears were reignited following a report that Apple would temporarily shutter 11 U.S. retail stores across Florida, Arizona, North Carolina and South Carolina. “Due to current COVID-19 conditions in some of the communities we serve, we are temporarily closing stores in these areas,” an Apple spokesman said in a statement.“We take this step with an abundance of caution as we closely monitor the situation and we look forward to having our teams and customers back as soon as possible.”

Fast forward to today, when with stocks already sliding on renewed virus of a second wave of virus infections, moments ago Apple reported that it would re-close another 7 stores in Houston and Texas due to the coronavirus spike.

The headline hit at time when stock uneasiness was “morphing into fright” as Bloomberg put it, after data showed virus cases spiking in Florida and Texas, California reporting a record 7,149 new cases, while New York, Connecticut and New Jersey said visitors would face a mandatory quarantine. The news sent the S&P sliding 2.7%.

“The latest coronavirus news is not positive for the stock market which was betting the worst of the pandemic recession was behind us,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “Hopes of investors looking for a better economy to improve the bottom lines of companies shut down in the recession have been dashed.”

Analysts have been paying attention to see whether other retailers follow suit to see if it adds any concerns to the reopening narrative, but so far Apple are the only ones doing so. 

Joe Biden invoked the 18th century “Logan Act” during a controversial 2017 Oval Office meeting to discuss the Michael Flynn investigation, less than two weeks before President Trump was sworn into office, according to newly released notes taken by former FBI special agent Peter Strzok.

According to Flynn’s legal team, “it appears” that Biden “personally raised the idea” of using the obscure law to prosecute Flynnn over his communications with the former Russian Ambassador to the United States – in which he asked Moscow to “reciprocate moderately” in response to sanctions placed on Russia over election meddling.

Looks like @JoeBiden and @BarackObama were complicit in framing @GenFlynn.

I can’t wait for Flynn to tell all he knows about these traitors. https://t.co/JynrbnuawE

— John Cardillo (@johncardillo) June 24, 2020

It’s unclear what Biden specifically said about the Logan Act during the January 5 meeting which included former President Obama, former FBI Director James Comey, national security adviser Susan Rice, and Deputy AG Sally Yates.

The notes were disclosed in a court filing Wednesday to the U.S. District Court for the District of Columbia around the same time a federal appeals court ruled in a 2-1 decision that the judge presiding over the case against Flynn grant the Justice Department’s motion to dismiss the criminal charges against him. U.S. Attorney Jeffrey Jensen of Missouri, who was picked by Attorney General William Barr to review the government’s case against Flynn, “obtained and analyzed” the document. Biden’s comment about the Logan Act are the only words that appear in quotation marks. –Washington Examiner

Elsewhere in the notes, Strzok wrote that Money said the calls between Flynn and Sergey Kislyak “appear legit,” while Obama stressed that “the right people” should investigate Flynn. This is in sharp contrast to an email Susan Rice sent to herself in which she said everything was done “by the book.”

This is very troubling. The Susan Rice email to herself clearly didn’t give an accurate portrayal of the meeting.
The “right people” is fundamentally different than “by the book”. https://t.co/AYs3oZ7qaX

— Richard Grenell (@RichardGrenell) June 24, 2020

Rice and Strzok’s accounts comport with each other over Obama asking if there was anything information he should withhold from the Trump transition team, to which Comey responded (according to Rice) “Potentially,” adding that he doesn’t know if Flynn has passed any classified information to the Russians, but that the “level of communication is unusual.”

According to Strzok’s notes, Obama said “these are unusual times,” with Biden saying “I’ve been on the Intel Committee for ten years and I never…” before the notes trail off.

Flynn pleaded guilty in December 2017 to lying to the FBI about his conversations with former Russian Ambassador to the US, Sergey Kislyak, during the presidential transition following the 2016 US election. He later withdrew his plea after securing new legal counsel, while evidence emerged which revealed the FBI had laid a ‘perjury trap‘ – despite the fact that the agents who interviewed him in January, 2017 said they thought he was telling the truth. Agents persisted with the case despite the FBI’s recommendation to close it.

Authored by Jeffrey Snider via Alhambra Investments,

I guess in some ways it’s a race against the clock. What the optimists are really saying is the equivalent of the old eighties neo-Keynesian notion of filling in the troughs. That’s what government spending and monetary “stimulus” intend to accomplish, to limit the downside in a bid to buy time.

Time for what? The economy to heal on its own. Fill up the bathtub, so to speak, with artificial stimulus water (aggregate demand) until such time as the basin stops leaking and it’s that much of a shorter way to go for the water level to rise back to normal without the need for further assistance.

What happens in the trough is what can make the worst kinds of troughs; second and third order effects where instead the negative forces are amplified and the recession becomes worse than “it needs to be.” That’s the Keynesian motto, essentially.

In some ways, though, they were too late for this one. The overreaction shutting everything down willy nilly as well as GFC2 took away time and space (to use a sports metaphor). The window for a successful outcome has already been perilously narrowed. What I mean is:

Americans have skipped payments on more than 100 million student loans, auto loans and other forms of debt since the coronavirus hit the U.S., the latest sign of the toll the pandemic is taking on people’s finances.

Not only that, according to the same WSJ article, 106 million have “enrolled in deferment, forbearance or some other type of relief since March 1”, a level that is triple what was estimated at the end of April just one month prior.

One Hundred Six Million.

As I wrote before, this isn’t about share prices; except how Jay Powell intends to use the stock market as a means to try to offset any nasty consequences of regular folks and businesspeople from getting the idea conditions are anything other than awesome. Not today; everyone knows it sucks today. But tomorrow things will be soaring again, just hang in there like the S&P shows you!

One hundred and six million in the default pipeline, though, that can only mean the clock has already started ticking. The output of that pipeline is bankruptcy and loss, and wide distribution of both. A consumer who wins bankruptcy relief doesn’t extinguish their obligation, they’ve simply redistributed the loss to the bank or financial firm who first extended the loan.

Same for companies filing bankruptcy protection.

And that means already today banks as well as markets for, say, risky corporates are preparing for the possibility – likelihood – of pain only beginning in several months’ time. That’s how long a missed payment takes to become an impairment. Neither needs an actual default for liquidity to just vanish, a lesson everyone (but Economists) learned very well from GFC1.

Even if 90% (or even 95%!) of that 106 million gets worked out before default, that still leaves an overwhelming blow to first the financial system.

That’s why I wrote yesterday Jay Powell’s magic word program in especially corporate credit is at best temporary. There’s a looming showdown (watch what hedge fund lawyers are up to right now, sheltering assets) and more than one wave to it (a second wave of GFC2 is far more likely, and likely far more damaging, than a second hit from COVID-19).

So, in Powell’s mind what he has to do is get the business sector high on “money printing” and the 100% guaranteed, no-question-about-it, don’t-you-dare-fret inflationary environment this will bring. If he can do that, he believes business reaction will be positive enough that it then will limit the number of bankruptcies as well as other negative pressures before they can spiral (further) out of control.

A whole lot of happy thoughts for a future not yet written. Lacking any effective money, that’s monetary policy today.

Except, the future is already partially written; the clock started ticking the moment GFC2 completely surprised Chairman We Saw It Coming. Loan officers have said so as have that 106 million-strong group.

Before any of that, though, the task is much more basic. Just get everyone, or as close to everyone as humanly possible, back to work by next month, next week. If only it was that easy.

The “V” people all seem to think that it is; the government flipped a switch turning off the economy, so just toggle it in the other direction and stop worrying. Everything merely frozen in time, reanimated easily by the first thaw and warmth of reopened movement.

To that end, there’s been a fundamental misreading of what PMI’s have to say on the matter. These, like the economy itself, bottomed out two months ago in April. Since, they’ve been rising, rapidly, which has been taken as a sign of the “V.” As economies have reopened to some degree, the upward leg of these sentiment indices is in too many places equated with a return to growth.

To begin with, that’s not actually what these PMI’s are indicating. Since they are entirely second derivatives, the June flash estimate from Markit, for example, is simply stating that the contraction portion may be nearing its end. Not there yet, the economy is still contracting if at a much slower rate.

Markit’s US Composite PMI surged in June, registering 46.8 in the latest estimate compared to 37.0 in May and a low of 27.0 posted in April. That number by itself doesn’t equate to growth, it only suggests, again, the rate of contraction has slowed substantially.

We’re still in the downturn.

Not only that, the rate of indicated contraction in June remains rather steep – it’s only when compared to the absolute collapse in April that it seems a remarkable improvement.

What’s instead happening is that the upward slope of the PMI, like the employment report, is being extrapolated in a straight line into the months ahead. After all, you can’t go from steep contraction to rapid growth and recovery unless you first traverse these middle steps like 46.8 on the way to 80 or 85.

Far too many are assuming that’s what will happen; worse, they are making that assumption based on what they are led to believe is tremendous “stimulus.” Even the Markit press release cautions on both accounts:

Any return to growth will be prone to losing momentum due to persistent weak demand for many goods and services, linked in turn to ongoing social distancing, high unemployment and uncertainty about the outlook, curbing spending by businesses and households. The recovery could also be derailed by new waves of virus infections. Continual vigilance by the Fed, US Treasury and health authorities will therefore be required to keep any recovery on track.

In other words, yes, the prospects for second and third order effects (which we’ve already observed, quite severe in key places) that Jay Powell will have to be on his toes about. And that, more than anything, is why he lied his ass off on 60 Minutes, especially that whole part about “so we saw it coming.” He’s got to gaslight the world into believing they really are a vigilant group instead of the bunch of bumbling, incompetent bureaucrats they otherwise have shown themselves to be (time and time again).

But Markit’s data also illustrates how – even if you believe in “stimulus” – the odds are already stacked against the economy. The two words you never, ever want to hear under contraction conditions, let alone historic contraction conditions, are “cut” and “costs.” These are the very essence of dreaded pro-cyclicality.

The June survey meanwhile signalled [sic] further cuts to workforce numbers across the private sector, albeit at only a modest rate. Where an increase was noted, some businesses reported the return of furloughed staff. That said, hiring freezes and relatively weak demand led many other companies to shed employees in an effort to cut costs.

Markit’s data a glaring echo of the continuously terrifying level of jobless claims; a “modest rate” in the PMI data if compared only to itself.

If companies are in cost-cutting mode, and they obviously are, then that immediately puts a ceiling on the right side of the hoped-for “V” (arguing dead against the straight-line extrapolation) and then sets up the potential second wave of GFC2 and economic contraction. How? A weak labor market means instead of 90% of the 106 million work out their loan (or rent) situation before it goes too far, only 85% maybe even just 80% do!

Heaven forbid something like 75%. Ninety percent would already be big trouble.

Being unable to get close to everyone who has lost a job (or just lost income from wage or salary cuts plus those working less hours) back into their former groove is the real bogeyman lurking out there just over the visible time horizon. And that horizon is shrinking with every added missed payment due to a lost or shrunken paycheck.

Less consumer spending means curtailed revenues, no pathway to restore profitability, and therefore even more, say it with me, cost cutting by businesses.

It’s not the waves of bankruptcies that spell doom, such comes long before them. All you need is for markets, credit markets, to begin suspecting it’s a good probability. If that happens, like 2008 or March 2020, just watch how quickly it unravels and market liquidity up and disappears (again), how fragile things really are even though there’s that whole “flood” thing.

Despite Jay Powell’s (limited) success at the NYSE and (unqualified success) in the financial media, those seemingly little two words keep coming up in way too many places: cut costs.

Ever since the advent of active asset management, Wall Street has had two holy grails: finding a consistent source of Alpha (which these days simply means frontrunning the Fed), and finding a replacement to the most expensive cost-center in the asset management industry: analysts. And while many have tried and failed to replace (highly paid) humans, an obscure German hedge fund is appears to have struck gold after generating a 34% gain in 2020 using a machine-learning program targeting need-for-speed markets.

While many quants have struggled to exploit the promise of AI over the years, Quantumrock’s $50 million Volatility Special Opportunities Programme has just drawn an additional $500 million of institutional cash – after averaging an impressive 16% annual return since its 2016 inception. And, as Bloomberg reports, with senior personnel hailing from the tech industry rather than finance – similar to the world’s most lucrative hedge fund RenTec –  “founder Stefan Tittel credits the program’s capacity to ride febrile markets swaying from depression panic to euphoria in less than three months.”

“What we see now is that market regimes and patterns change almost on a daily basis,” said the Munich-based entrepreneur in his first asset-management venture. “Since we deploy an AI machine-learning platform — which is all the time analyzing and listening to the market and analyzing the shift in pattern probability — we can keep track of those changes.”

What is the secret of Quantumrock’s success?

According to the report, while half of the fund is a mundane balanced portfolio strategy consisting of S&P 500 and Treasury futures, “the other half comprises overlay strategies including volatility investing which made big bucks in this year’s extreme price swings.” And with the weighting and parameters shifting in sync with the market, when it’s quiet like last year, these strategies are activated less often. Alternatively, during times of excessive volatility, the fund seeks to leverage its… well, leverage.

To be sure, many would argue that Quantumrock’s impressive performance is a fluke and unlikely to be repeated consistently in the future: its success goes straight to a debate raging in this corner of systematic finance.

While many quants like short-term trend followers argue modern markets require ever-faster and more adaptable strategies, others say timing shifts in fickle markets is fool-hardy and costly.

So is the German fund’s AI the missing link? For now, the jury is out, and as Bloomberg concedes “it’s hard to broadly conclude whether it can deliver a tangible edge. That’s especially the case when the buzzword encompasses an array of techniques from scanning reams of text to decision trees used to find outperforming stocks.” But according to head of AI systems Roman Gorbunov, who has no background in finance, the technology beats traditional quant methods “because it can find patterns at a much larger scale and hone in on trading signals.”

“You have a lot of noise in the data because markets are very efficient,” said Gorbunov, whose last gig was working on Amazon Inc.’s voice-command system Alexa. “If you have a situation where the strategy is performing well just because it utilizes noise and not real patterns, we can detect those situations in advance.”

What he actually means is that with the “market” now a mandated policy vehicle targeting 10-year-olds, where retail daytraders outperform career finance professionals, it is hardly a surprise that some coked-up algo which accentuates the market’s wild swings has been successful at outperforming the market. What is left unsaid is all the other algos that have blown up over the years trying to do just that.

Of course, if the fund can continue to successfully outperform not only the S&P500 but most hedge funds, that would be very bad news for thousands of highly paid analysts and PMs who year after year fail to beat their benchmark and/or the market, as most if not all of them will soon be replaced by a computer program. And they have Jerome Powell to thank for their upcoming obsolescence.

Authored by John Solomon via JustTheNews.com,

Attorney General William Barr is bringing increasing clarity to the focus of U.S. Attorney John Durham’s criminal investigation into the conduct of the Russia collusion investigators.

In a series of recent interviews, the nation’s chief enforcement officer has dropped some big hints about what is under investigation, who is and isn’t being investigated, and what evidence uncovered by the Durham team is emerging as important.

Barr also has suggested what events in the timeline are emerging as important in the 2016-17 effort to find dirt on President Trump and his campaign and transition team.

Here are the seven most important revelations Barr has made over the last month.

1. Timetable: Durham’s investigation has been slowed by the pandemic. But some action is expected by end of summer, and the probe could stretch beyond Election Day.

Barr told Fox News’ Maria Bartiromo on Sunday that the coronavirus has slowed Durham’s ability to interview witnesses and use a grand jury if needed, though he did not officially confirm there was grand jury activity in the case.

“It is a fact that there have not been grand juries in virtually all districts for a long period of time,” Barr said.

But most importantly, the attorney general laid out a likely timeline for when the first actions might be taken in the case, while stressing the probe could carry beyond the election.

“In terms of the future of Durham’s investigation, he’s pressing ahead as hard as he can, and I expect that we will have some developments, hopefully before the end of the summer,” Barr said. “But as I’ve said, his investigation will continue. It’s not going to stop because of the election. What happens after the election may depend on who wins the election.”

2. Barr believes evidence used by the FBI to justify opening an investigation into the Trump campaign’s ties to Moscow was very thin.

The attorney general has made clear in multiple interviews that Australian diplomat Alexander Downer’s meeting with Trump campaign aide George Papadopoulos at a London bar in May 2016 was a weak justification for opening Crossfire Hurricane.

Downer claimed Papadopoulos made comments about Russians possessing dirt on Hillary Clinton, and the FBI believed that was enough to predicate a counterintelligence investigation.

DOJ Inspector General Michael Horowitz agreed in his report that was enough, but found substantial evidence the FBI cheated afterwards to keep the probe going in the absence of evidence of wrongdoing.

Barr does not seem to accept the opening of the FBI probe was justified.

Papadopoulos’ alleged  “comment in a London wine bar” would be “a very slender reed to get law enforcement and intelligence agencies involved in investigating the campaign of one’s political opponent,” Barr declared Sunday.

Barr isn’t the only high-profile figure to think that. Former FBI Assistant Director for Intelligence Kevin Brock has said the FBI memo opening Crossfire Hurricane did not meet the standards for opening a counter-intelligence investigation.

3. Investigators are focused on what happened before Crossfire Hurricane officially started, including when Christopher Steele first began compiling his dossier.

In multiple interviews, Barr has made clear Durham’s team is examining what actions government officials and private individuals may have taken in the winter and spring of 2016 before the FBI officially opened its probe of the Trump campaign on July 31, 2016.

Perhaps the most tantalizing statement Barr has made on this came Sunday when he suggested it was important that Steele began working on his dossier before July 2016, raising the possibility that some unexplained events earlier that year may have been connected to that early Steele work.

“I understand why it is important to try to determine whether there was any activity before July, before the Papadopoulos wine bar conversation,” Barr explained. “And so people are looking at that. It’s significant also that the dossier was initiated before July.”

4. Barr views the FBI’s continuation of the Russia probe after the Steele dossier “collapsed” as an illegitimate effort to remove the president.

Barr has repeatedly cited the fact that the FBI continued to rely on the Steele dossier after the former MI6 agent’s primary sub-source contradicted information in the dossier in January 2017 and March 2017 — and failed to tell the FISA court about the problems with the repudiated evidence.

“The dossier pretty much collapsed at that point — and yet they continued to use it as a basis for pursuing this counterintelligence investigation,” Barr noted this past weekend.

The attorney general suggested such behavior supports arguments that what was really going on was an attempted coup to remove Trump from office. “It is the closest we have come to an organized effort to push a president out of office,” he said.

5. There are multiple criminal investigations into leaks of classified information.

Barr made clear that Durham and others are examining multiple leaks for possible criminal violations while cautioning proving leak cases can be challenging. One of those is focused on who leaked Michael Flynn’s call with the Russian ambassador.

“Leaking national defense information, unauthorized disclosure of that information is a felony,” Barr said. “We have a lot of leak investigations underway.”

6. Barr is concerned by the outgoing Obama administration’s extensive unmasking of Americans’ conversations … but don’t expect Barack Obama or Joe Biden to get in trouble.

After the recent revelation that more than three dozen Obama administration officials sought to unmask intercepted conversations of incoming Trump National Security Adviser Michael Flynn, Barr declared, “It makes you wonder what they were doing.”

“It’s unusual for an outgoing administration, high-level officials, to be unmasking very much in the days they’re preparing to leave office,” he added. 

As a sign of that concern, Barr has named a U.S. attorney from Texas to assist Durham to examine the unmaskings for any illegalities.

But Barr also tamped down any expectation that the former president or vice president will be investigated, stating clearly they are not targets of the probe.

“As to President Obama and Vice President Biden, whatever their level of involvement, based on the information I have today, I don’t expect Mr. Durham’s work will lead to a criminal investigation of either man,” the attorney general said last month. “Our concern over potential criminality is focused on others.”

7. Durham is examining whether political pressures were applied during the intelligence community’s assessment of Russia’s intentions in 2016 election meddling. That could be bad news for former CIA chief John Brennan.

In the Obama administration’s final days, Brennan, outgoing DNI James Clapper and then-FBI Director James Comey release the Intelligence Community Assessment, which declared Russia  meddled in the 2016 election with hacking and Facebook ads and that Moscow’s intention was to help Trump win.

The first conclusion is widely accepted, while the second is more controversial, especially now that evidence has been declassified showing Russia was feeding derogatory disinformation about Trump to Steele. Why, experts wonder, would Russia be doing that if Putin wanted Trump to win?

Barr said Durham is investigating whether any political pressure was brought to bear to come to that second conclusion. Sources have told Just the News there is some evidence that CIA analysts and others had concerns about the strength of the evidence about Russia’s intentions.

Today in “why do Teslas keep randomly catching fire” news.

When Tesla began selling its Model S back in 2012, the cars were equipped with a “poorly designed battery” that was susceptible to leaking, according to a new Business Insider report. The battery leaks may have been the cause of short circuits and ensuing fires. 

What is more damning, and potentially exposing the company to criminal prosecution, is that Musk sold the cars despite knowing about the potentially deadly flaw. According to the report, the leaks became an “urgent concern” in spring 2012 due to two problems with the cooling system:

• First, the aluminum Tesla chose to use for the end fitting of the cooling coil was susceptible to cracks and pinholes, according to tests done by the third-party firm IMR Test Lab in the summer of 2012. Business Insider reviewed these test results. 
• And second, the design of the end fitting piece in the cooling system was imperfect, such that even after the part was brazed together, there were gaps between the cooling coil and its end fitting piece that connected it to the car, according to emails viewed by Business Insider. Sometimes, employees would have to force pieces together with a hammer to close gaps, according to internal Tesla documents viewed by Business Insider and a former Tesla employee.

BI says that e-mails it has viewed suggested the company had trouble fixing the problem and that battery leaks showed up  on the production line as late as the end of 2012. 

It also claims that cooling coils used by Tesla were sent to a test lab in upstate New York back in July of 2012 and that the results of the testing concluded that “the cooling coils did not meet chemical requirements for a regulation strength aluminum alloy.” The report alleges that even though Tesla knew about the design flaw, Model S vehicles kept rolling off the line. 

“If we don’t deliver these cars we’re f—ed,” CEO Elon Musk had told his team, according to the report, around the same time. The company delivered more than 250 Model S sedans in Q3 2012. 

No doubt, the tone was set at the top. There was even a running joke at Tesla that the first 10,000 Model S VINs would all be different, due to all of the design flaws. An ex-employee told BI: “I think it’s common in every auto company that vehicles are released with design flaws. It’s called running design changes.”

The NHTSA is currently investigating Model S and Model X vehicles made between 2012 and 2019 for battery issues, as we reported back in October 2019. Consumer attorney Edward Chen claimed in a petition to the NHTSA last year that “Tesla is using over-the-air software updates to mask and cover-up a potentially widespread and dangerous issue with the batteries in their vehicles.”

Chen also argued that Tesla owners “saw the range of their Teslas on a charge fall by 25 miles (40 kilometers) or more after Tesla released two battery software updates beginning in May.”

The notice states: “The petitioner alleges that the software updates were in response to a potential defect that could result in non-crash fires in the affected battery packs and that Tesla should have notified NHTSA of the existence of this potential defect and conducted a safety recall. The petitioner also alleges that this software update reduces the driving range of the affected vehicles.”

Chen’s allegations were echoed by the BI piece released on Wednesday.

Jason Schug, a Vice President at Ricardo Strategic Consulting said to BI: “When we disassembled the Tesla Model X, a technician accidentally spilled coolant in the battery pack and it sat there for a long time. There was no immediate danger, but when we removed the battery modules quite a while later we found a lot of corrosion on the battery cells and it was bad enough that some of the cells were leaking electrolyte.  If this were to happen in the field and go unnoticed, it could result in bricking the battery.”

He continued: “There was an incident with another manufacturer that a vehicle that had been in a crash test spontaneously combusted weeks later. Coolant had spilled in the battery during the crash and, when it evaporated, it left a residue which conducted electricity into a short circuit, which overheated the battery and triggered a fire.”

On Wednesday morning we also reported that the NHTSA was opening a preliminary evaluation into Tesla’s touchscreens in its Model S. Earlier today, we also reported about a Tesla in Germany that crossed the center lines of a roadway and slammed, head-on, into oncoming traffic, killing 3 people. That was the latest in a long line of suspicious looking Tesla accidents and fires, some of which involving autopilot and others resulting in deaths. 

“Another day, another article where we reach the inevitable conclusion of being absolutely dumbfounded that the NHTSA and the NTSB still allow Tesla vehicles on the road,” we wrote just hours ago, while posting photos of yet another accident scene. 

We have urged the NHTSA and NTSB to take strict action to limit the potential danger of Teslas on the street. In addition to touchscreen issues, we have also written about Model Y quality issues (such as the car’s rear bumper or backseat falling off and seatbelts being defective) and have posted a litany of stories involving sudden unintended acceleration events and spontaneous vehicle combustion.

Now we may finally have a clue as to why so many Tesla fires have occurred in recent years.

You can read Business Insider’s full expose here. 

Following yesterday’s strong 2Y auction, the wave of stellar demand for US paper continued when the Treasury sold a record amount of 5Y paper at the lowest yield on record.

Today’s sale of $47BN in 5Y Note was the highest on record, as the Treasury continues to sell ever greater amounts of debt.

The high yield on the auction was 0.330%, 0.6bps through the When Issued 0.336%, down from last month’s 0.334% and the lowest yield on record, which suggests that with the Fed preparing to roll out Yield Curve Control, TSY buyers are increasingly betting that the 5Y tenor will be included in any rates cap.

The internals were solid, with the Bid to Cover jumping from last month’s 2.28 to 2.58, above the six-auction average of 2.47.

Foreign buyer demand also jumped, as Indirects took down 62.3%, the most since December, and above the 59% average. And with Directs taking down 15.8%, also above the 10.8% recent average, Dealers were left holding 22.0% of the auction.

Overall, a very solid auction perhaps facilitated by the lack of a drop in yields this morning as risk assets faded, and with little suggestion that buyers are concerned about the short-end getting dislocated in the near future despite the coming avalanche of new debt issuance.

American cities face an imminent fiscal reckoning of apocalyptic proportions.

New York City is expected to suffer a sharp decline in tax revenues, resulting in Mayor Bill de Blasio to consider laying off tens of thousands of city employees. 

De Blasio is mulling over a new plan that would cut 22,000 city employees to save the city upwards of $1 billion in expenses after virus-related lockdowns led to a decline in revenue, reported Bloomberg. 

“De Blasio presented a $95 billion budget in February. That was reduced to about $89 billion in April after the coronavirus outbreak. On Wednesday, he said the budget must be pared down to $87 billion, and the city needed to find about $1 billion more in savings. The city may have to lay off workers, de Blasio said, if the city doesn’t get fiscal aid from Washington or state authority to borrow $7 billion.”  – Bloomberg 

Budget shortfalls are forcing New York City and other municipalities across the country to cut jobs and spending, similar to what was done around the 2008 financial crisis when local austerity stymied an economic recovery. 

De Blasio has already pledged for the first time to slash the New York Police Department’s funding for the next fiscal year, following weeks of social unrest and mounting demands that he overhaul the department. 

“We’re committed to seeing a shift of funding to youth services, to social services, that will happen literally in the course of the next three weeks, but I’m not going to go into detail because it is subject to negotiation and we want to figure out what makes sense,” de Blasio said in early June. 

De Blasio, searching for ways to trim down the budget, is likely to target public service jobs. Now it remains to be seen if he’ll cut New York’s bravest, that are police and firefighter jobs…     

Authored by Paul Hickin via S&P Global Platts Insight blog,

Oil markets are recovering quickly, but may have hit the buffers.

Deep production cuts from West Siberia to West Texas and resurgent gasoline demand have helped revive prices, however, a huge stock overhang and fears of further economic lockdowns to counter a second wave of the coronavirus pandemic remain significant risks to a full recovery.

“We see 4 million b/d of new demand coming on each month through to August as the world recovers from the lockdowns,” said Chris Midgley, global director of S&P Global Platts Analytics, at a media briefing June 18.

“But in September, as you go to the lower traditional seasonal demand, it’s only 1 million b/d, and that’s maybe when you will see more oil coming on the market. So there is a danger that people get too confident.”

The next move on output levels by OPEC and its major ally Russia is critical. The so-called OPEC+ group of 23 producers has rolled over historic cuts close to 10 million b/d through July and toughened up its language on compliance by Iraq and Nigeria. Combined, these measures – including shut-ins mainly in the US and Canada – have removed 14.5 million b/d from the market.

However, some analysts continue to question the ability of Iraq and Nigeria to fully deliver on their side of the bargain.

Complicating matters further, US production declines have stabilized. The US oil and gas rig count fell by seven week on week to 292, rig data provider Enverus said June 18, as the bottom forecasted for weeks appears to be settling into the domestic drilling landscape.

“With oil prices testing $40/b that really does encourage some of the smaller US producers to increase their production,” Midgley said.

But Platts Analytics still expects 3.3 million b/d in lost US production by the end of next year, given the damage to operators caused by the collapse in oil prices.

Oil price ‘no man’s land’

The long-term recovery in prices depends on the restoration of stable market fundamentals. Dated Brent, the physical benchmark used to price two-thirds of the world’s oil, has tripled in value since hitting a 21-year low in April. The measure of high-quality North Sea crudes is now trading at around $40/b.

Platts Analytics forecasts oil prices could be stuck in a range between $35/b and $45/b in the near term. This is a level many producers will find unsustainable indefinitely, despite the industry cutting costs. Midgley describes this range as a “no man’s land,” not low enough to cut supply and not high enough to revive production.

Mercuria CEO Marco Dunand told S&P Global Platts in a recent interview OPEC+ was trying to put a $40/b floor to the market.

“We see a consensus between Saudis, US and non-OPEC members to get the market to $40/b,” Dunand said. “A sub-$40/b market creates a lot of pain for those countries … is there a consensus to get to $50/b? Is there a consensus to get it higher?”

The prospects for a so-called sustained V-shaped recovery could be dashed by a second wave of the pandemic taking hold. Markets are on edge after new breakouts have already started to emerge in Beijing and India. Midgley suggests a revival in the pandemic is “almost inevitable.”

New lockdowns and restrictions on demand will add to the problem of reducing global oil stocks. Around 1 billion barrels have built up in commercial storage, and refinery runs in key markets remain below seasonal averages. For the week ending June 12, Platts Analytics put overall global downtime at 18.5 million b/d amid outages in Africa, Japan and Europe.

Given the weak state of fundamentals, oil markets are right to remain nervous about the prospect of a second wave of COVID-19 hitting demand. As such, if the oil market remains in today’s no man’s land for a while longer, it may not be the worst outcome.