Tag: finance

Six women of color have quit Sen. Elizabeth Warren’s Nevada campaign just before the state’s caucuses over a “toxic work environment in which minorities felt tokenized and senior leadership was at loggerheads,” according to Politico.

The six staffers represent just under 10% of Warren’s 70-person Nevada team. Three of them said they felt marginalized by the campaign, and that things only got worse after they took their concerns to human resources or their superiors.

“During the time I was employed with Nevada for Warren, there was definitely something wrong with the culture,” said field organizer Megan Lewis, who joined the campaign in May and left in December. “I filed a complaint with HR, but the follow-up I received left me feeling as though I needed to make myself smaller or change who I was to fit into the office culture.”

Another recently departed staffer, also a field organizer, granted anonymity because she feared reprisal, echoed that sentiment. “I felt like a problem — like I was there to literally bring color into the space but not the knowledge and voice that comes with it,” she said in an interview.

She added: “We all were routinely silenced and not given a meaningful chance on the campaign. Complaints, comments, advice, and grievances were met with an earnest shake of the head and progressive buzzwords but not much else.” A third former field organizer who was also granted anonymity said those descriptions matched her own experience. –Politico

This couldn’t come at a worse time for Warren as the Feb. 22 Nevada caucuses are fast approaching. Of note, the ex-Native American Senator came in third during this week’s Iowa caucuses. Politico notes that Warren has visited Nevada the least – spending just 12 days there, which was apparently another factor in her campaign staff’s discontent. What’s more, Warren’s campaign has scaled back their TV ads in the state by around $140,000.

Responding to the departures, Warren’s campaign said in a statement: “We strive for an inclusive environment and work hard to learn and improve,” adding “We have an organization of more than a thousand people, and whenever we hear concerns, we take them seriously. It’s important that everyone who is part of our team has a voice and can be heard. That’s why we are proud that we have a unionized staff and clear processes for issues to be addressed.”

Read the rest of the report here.

With the sellside piling in and rushing to outforecasting itself on how much global GDP growth will be hit in Q1 (and onward) as a result of the global coronavirus pandemic, which prompt Goldman to slash 2% from its global Q1 GDP forecast, and JPM to predict that China’s economy has effectively frozen in the first quarter, it was only a matter of time before the Fed jumped on the bandwagon and used nCoV-2019 as the latest bogeyman giving Powell free reign to cut rates and/or launch QE5 (as a reminder QE4 which was launched to “fix” the repo market is set to wind down in Q2).

And sure enough, in the latest semi-annual Monetary Policy Report submitted to Congress, the Coronavirus indeed makes a triumphant appearance, with the Fed board warning that the coronavirus outbreak “presented a new risk” to the economic outlook for the U.S. and warned of disruptions in global markets.

Specifically, with “fragilities in the corporate and financial sector” leaving China vulnerable to adverse developments, “because of the size of the Chinese economy, significant distress in China could spill over to U.S. and global markets through a retrenchment of risk appetite, U.S. dollar appreciation, and declines in trade and commodity prices” the Fed warned, adding that “the effects of the coronavirus in China have presented a new risk to the outlook.”

In short: if a global virus pandemic is about to halt global growth, the Fed is confident it can fix it by just making money even cheaper and/or printing it outright.

Never one to miss a market downtick, the Fed also pointed out that “in recent weeks, equity and bond markets gave up some of their gains as uncertainty about the economic effects of the coronavirus weighed on investors’ sentiment.” It was not immediately clear if the Fed has hit “refresh” since last Friday, when stocks soared over 3% in the past week, rising to new all time highs as markets priced in precisely the likelihood that the Fed would step in and “fix” any stock selloff as a result of the world’s global pandemic in decades.

The report, which was published ahead of Powell’s Feb 11 biannual testimony before Congress in which he will discuss the economy and monetary policy before the House Financial Services Committee, and the Senate banking panel the following day, also noted that “asset valuations are elevated and have risen since July 2019, as investor risk appetite appears to have increased”, oblivious to the grotesque irony that it was the Fed’s own balance sheet expansion by half a trillion dollars that sparked this asset “elevation”, and which shows no signs of slowing down. As a reminder, overnight SMBC Nikko explained just how the Fed’s balance sheet expansion is elevating stock prices: we urge Powell and all members of Congress to read the post.

In addition to noting “elevated asset valuations”, which as we showed recently as the highest since the dot com bubble..

… a section on financial stability was more descriptive than the previous report on possible points of stress. The Fed said that low interest rates had elevated asset valuations, and it also pointed to risks in the corporate debt markets. Specifically, the Fed has now joined the fallen angel downgrade warning, stating that “the concentration of investment-grade debt at the lower end of the investment-grade spectrum creates the risk that adverse developments, such as a deterioration in economic activity, could lead to a sizable volume of bond downgrades to speculative-grade ratings. Such conditions could trigger investors to sell the downgraded bonds rapidly, increasing market illiquidity and causing outsized downward price pressures.”

Of course, the Fed also discussed the Repocalypse – the event that triggered not only the hundreds of billions in liquidity injections via repo, but also QE4 – noting that volatility in repurchase agreement markets in September “highlighted the possibility for frictions in repo markets to spill over to other markets.”

Finally, the report also dedicated a section focusing on the slowdown of manufacturing in the U.S. in 2019. The Fed attributed the decline to a range of issues including international trade tensions, weak global growth, softer business investment, lower oil prices affecting drillers and the slowdown in production of Boeing Co.’s 737 Max airliner, to wit:

The slump in manufacturing last year is attributable to several factors, including trade developments, weak global growth, softer business investment, lower oil prices engendering a cutback in demand by drillers, and the slower production of Boeing’s 737 Max aircraft due to safety issues

Ominously, the Fed also said that when considering the implications of these declines in manufacturing production for the broader economy, “it is important to recognize that this weakness has likely spilled over to other sectors.”

Which is code for “even more money printing is guaranteed“. The only question is if it comes before or after negative rates.

The full report can be found here (pdf link):

Authored by Mac Slavo via SHTFplan.com,

The United States has implemented travel restrictions in recent days to keep the fast-moving coronavirus that has crippled much of China from spreading across America. But one epidemiologist is warning it won’t work…

“I have never seen instances where that has worked when we are talking about a virus at this scale,” epidemiologist Jennifer Nuzzo, a senior scholar at Johns Hopkins University’s Center for Health Security, testified before the House Foreign Affairs subcommittee.

Respiratory viruses like the one that’s sickened more than 24,300 across the globe and killed at least 490 in China “just move quickly,” she said, according to a report by CNBC. 

“They [new viral outbreaks] are hard to spot because they look like many other diseases. It’s very hard to interrupt them at borders. You would need to have complete surveillance in order to do that. And we simply don’t have that,” she said.

She also says that worrying about stopping the spread of the virus, when you can’t do that is diverting resources away from fighting the disease. So far, the best way to fight the virus is to wear a face mask.  Even a surgical mask is better than nothing. Masks have been slowly becoming available for purchase again, however, the price on them has risen quite a bit.  There is obviously more of a demand than supply right now.

Rep. Ami Bera, D-Calif., chairman of the House Foreign Affairs Subcommittee on Asia, the Pacific, and Nonproliferation, announced the hearing last week.

“While the threat of the coronavirus is relatively low in the United States at this time, we must be vigilant and prepared,” Bera said in a statement.

“I look forward to hearing from our expert witnesses on ways in which we can plan and respond to this virus. Congress needs to ensure the administration has the tools it needs to respond to and limit the outbreak.”

The U.S. government has implemented mandatory quarantine measures for the first time in about 50 years, health officials said last week. Flights from mainland China are being funneled through 11 U.S. airports, officials said, where all passengers are being screened for symptoms. Travelers from Hubei province are being quarantined for 14 days.

We keep hearing how the ruling class isn’t doing enough to protect us. 

Isn’t it obvious by now that they don’t really care? They need us for one thing: tax cattle.  Our health is the least of their concern. 

When it comes to deadly outbreaks such as this one, and any other future outbreaks, you’re better off preparing the best you can on your own.  Learn to grow and raise your own food, learn to quarantine yourself, and make sure you protect yourself and your family from infections while keeping your immune systems going strong.

Trump’s ‘best week‘ has just gotten a little better, after the US Court of Appeals for the DC Circuit tossed out Congressional Democrats’ third attempt to nail Trump after claiming he is in violation of the Constitution’s Emoluments Clause.

In a Friday decision, the court vacated a district court judge’s ruling that the Democrats had standing to sue Trump for accepting foreign payments at his Washington DC hotel, according to law.com – adding that the court would not participate in a political debate.

“Because we conclude that the Members lack standing, we reverse the district court and remand with instructions to dismiss their complaint, said Judges Karen LeCraft Henderson, Thomas Griffith and David Tatel in a per curiam opinion.

They found that, after past U.S. Supreme Court rulings on individual legislators’ ability to sue, “only an institution can assert an institutional injury provided the injury is not ‘wholly abstract and widely dispersed.’”

“Here, regardless of rigor, our conclusion is straightforward because the members—29 Senators and 186 members of the House of Representatives—do not constitute a majority of either body and are, therefore, powerless to approve or deny the President’s acceptance of foreign emoluments,” the opinion reads. –law.com

“The Members can, and likely will, continue to use their weighty voices to make their case to the American people, their colleagues in the Congress and the president himself, all of whom are free to engage that argument as they see fit,” the judges added. “But we will not—indeed we cannot—participate in this debate.”

As law.com notes, the ruling may finally signal the end of a lawsuit that has now stretched into its third year.

As we pointed out overnight, the big story in today’s jobs report would not be the January payrolls increase, which as we observed earlier was impressive, surging by 225K, well above the 165K consensus forecast, but the historical revisions to Payrolls data, which would be reduced by as much as half a million jobs as a result of the BLS’ recalibration of its business birth/death adjustment.

Sure enough, the reason why the market is in a risk-off mood and why yields are tumbling again, is because as expected, the payrolls revisions did indeed wipe out as many as 520K jobs in 2018 (as of April 2019), and the delta in December was a sizable and negative 422K, with 152.383 million pre-revision jobs contrasted to the 151.961 million post-revision.

The chart below shows the change in monthly payrolls pre and post-benchmark revision, and there are two things to note here: i) the bulk of the downward revisions took place during 2018, which means that the Fed launched its tightening cycle and was hiking rates based on false payrolls information even as yields were sliding with the bond market sniffing out the underlying misreported payrolls weakness, and ii) the February 2019 payroll gain was revised to just 1,000 from 56,000… but it was still a positive 1,000, as a negative number would have broken the string of 112 consecutive positive monthly increase in payrolls.

The best way to visualize the substantial revision lower to payrolls is in the Y/Y jobs growth chart, which shows that instead of rising as much as 1.9% in late 2018 when the Fed was already set to reverse its monetary policy to dovish, jobs were in fact growing at a far slower pace annually; and after a tumultuous 2018 and 2019, the pre- and post-series have now converged to roughly 1.4% annual growth.

There was a silver lining: in contrast to the negative job revisions, the growth of average hourly earnings looked stronger reaching a peak of 3.5% yoy on February 2019 (up from 3.4% yoy previously) as fewer working hours helped boost earnings.

The BLS also incorporate population controls to its household survey which helped boost the labor force participation rate which consequently bumped up the unemployment rate to 3.6%.

On net, the biggest loser here is Trump, as the annual revisions took some of the shine off one of President Donald Trump’s bragging points, as Bloomberg put it, cutting 2018’s job gain to just 2.31 million from 2.68 million, while the increases in 2017 and 2019 were roughly unchanged at about 2.1 million, meaning that each year under Trump — while still strong — has been slightly slower than the 2.35 million increase in the final year of Barack Obama’s presidency.

Authored by Sven Henrich via NorthmanTrader.com,

New highs again for tech as $NDX keeps relentlessly crawling higher, now 16.2% extended above its 200MA. As outlined yesterday’s it’s a key warning signal.

This latest rally has produced another warning signal and that is the leadership in $NDX is narrowing dramatically. Narrowing leadership has spelled trouble for $NDX in the past, especially as it is building tightening and steep price channels and/or wedge patterns.

Now we can observe this again, specifically in new highs versus new lows:

Note during the summer rally of 2018 $NDX built a tightening wedge patter and new highs versus new lows started showing ever more pronounced weakening. Indeed the final highs in October 2018 came on virtually flat new highs versus lows. Markets broke down shortly after that.

Similar weakening patterns can be observed in the 2019 rallies before they produced short term corrections.

Since October (thanks Fed) $NDX has embarked on its steepest and most narrow channel in many years. Last week’s coronavirus scare landed $NDX on the support trend line, this week’s coronavirus optimism rally has brought $NDX back to its upper channel trend line. Algo ping pong?

Be that as it may but note the dramatically lower expansion in new lows versus new lows on this latest rally versus the previous January rally.

What’s driving it? Simple: Many components in $NDX are much weaker than record prices on the index indicate. And we can also see this in the number of components above their 50MA. Much weaker on the latest rally to new highs:

This is also a pattern of weakening participation and a negative divergence that has signaled a coming breakdown in the index.

It may be said that this index is being held up by 5-10 market cap heavy stocks that everybody owns with 3 asset managers controlling a 22%-25% voting share of them.

Narrow leadership, very narrow. This works as long as nobody sells. Recent history suggests that the combination of these signals and a high extension above the index above its 200MA continue to make $NDX an index at high risk of sizable reversal to come.

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Update (0950ET): Sources on both sides have confirmed that the spat won’t have any impact on the US-UK trade agreement that Trump and Johnson have touted.

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When Prime Minister Boris Johnson decided to defy the Pentagon’s warnings and approve Huawei’s bid to build “non-core” components of the UK’s 5G network, the White House quickly made its dissatisfaction known, as we reported at the time.

Johnson was walking a fine line between appeasing the US and China. But as one observer remarked at the time, “you can’t be half pregnant.” A report published Friday in the FT seems to have confirmed this sentiment by revealing that President Trump lashed out at Johnson, a leader whom he had one lavished with praise, in a phone call held shortly after the announcement.

During a phone call held last week shortly after Johnson’s decision was publicized, an aide said Trump was “apoplectic” with rage, and laid into Johnson using language that left many on the call completely dumbfounded.

A second official confirmed that the Trump-Johnson call was “very difficult.” British officials with knowledge of the exchange said they were taken aback by the force of the president’s language towards Mr Johnson. Mike Pence, US vice-president, said after the Huawei decision that the Trump administration had made its disappointment at the UK decision “very clear to them.” But the extent of Mr Trump’s anger was unknown until now. Downing Street, the US state department, the US National Security Council and the White House declined to comment on the call.

After the call, the White House released only a brief readout: “Today, President Donald J Trump spoke with Prime Minister Boris Johnson of the United Kingdom. The two leaders discussed critical regional and bilateral issues, including telecommunications security.”

 

Downing Street’s readout hinted at the tensions: “The prime minister underlined the importance of like-minded countries working together to diversify the market and break the dominance of a small number of companies.”

Privately, the British chafed at the US’s demands, particularly since the US didn’t have a superior product to offer to replace Huawei.

Sensing this, AG William Barr went so far as to suggest that the US buy stakes in Ericsson and Nokia, the two Scandinavia telecoms components giants, to allow the US to have something to offer its allies instead of just asking them to go without Huawei’s cutting-edge telecoms equipment for their 5G rollouts.

Mr Barr said America and its allies should be “actively considering” proposals for “American ownership of a controlling stake” in the European companies, “either directly or through a consortium of private American and allied companies”. He added “it’s all very well to tell our friends and allies they shouldn’t install Huawei’s, but whose infrastructure are they going to install?”

The two sides left reporters with distinctly different impressions about the condition of their relationship. The US reportedly insisted that the White House spent considerable time and resources trying to convince Johnson to abandon Huawei. However, Downing Street said President Trump’s strident views on Huawei were barely known to the administration before the phone call. Though Washington approved some sales to Huawei last year, Trump apparently still believes the company is “very dangerous.”

As one academic who spoke with the FT for its story about the rift pointed out, the UK’s decision to buy some equipment from Huawei could compromise the ‘Five Eyes’ intelligence alliance between the US, UK, Canada, Australia and New Zealand. Though Secretary of State Mike Pompeo has apparently made some progress in repairing the relationship during a recent visit to the UK – “friends don’t always agree on everything” – he also insisted that the US would take steps to ensure the security of the alliance.

Has China succeeded in driving a wedge between President Trump and one of his most natural allies? It’s starting to look that way.

Submitted by Michael Every of Rabobank

As has been the case since Monday’s sell-off, there is an attempt to try to look on the bright side of the virus headlines. Chinese officials are spreading the word globally that things are under control and that other countries should not be closing their borders to China, in line with the WHO recommendations that says that free-flows of people during a potential epidemic is completely fine. Of course, at home China is still under draconian lockdown, with tens of millions of people not allowed to leave their homes, and hundreds of millions more voluntarily following the same advice. Moreover, as a former Mexican ambassador to China publicly notes, when Mexico briefly suffered from H1N1 bird ‘flu back in 2009 China’s response was to ignore the WHO’s recommendations and: place all Mexican nationals in China under quarantine; cancel all direct flights to Mexico; stop issuing visas to Mexicans; and closed all its consulates in Mexico.    

After having extended its Lunar New Year break, and yet with more cities and firms still shutting down than doing any re-opening, Beijing is starting to become cognizant of just how deep and serious the economic damage is going to be if this goes on much longer. We are, after all, talking about 80% of the economy, and 90% of exporters, simply not functioning. This is already seeing supply-chain knock-on effects for a swathe of global firms and this, very much like the virus itself, will snowball as time passes if nothing changes. For a country that was already seeing foreign firms talk about shifting production to other locations this is a problem. Thus, perhaps, some of the urgency in trying to stress that everything is returning to normal soon, and that the WHO advice is worth following – this time.

S&P, for example, are suggesting the virus might knock 0.8ppts off of 2020 GDP growth in China. That sounds a lot, doesn’t it? Until we realise that 80% of China’s GDP is probably shrinking by 10-20% y/y right now, a slump that makes the peak of 2008-09 look like a picnic by comparison and which frankly defies traditional economic statistical analysis of the S&P variety, where outliers like this get “winsorized” away and the underlying equilibrium GDP model kicks in and drags us back to a trend rate of growth again by magic. (Very much like an apparatchik, as I was saying yesterday.)

During The Great Recession did *everybody* stay at home and almost all business shut down? I don’t recall that being the case. If this virus *is* all over in days then one can make the case that Q2, Q3, and Q4 will see a huge bounce in GDP into double digits as everyone restarts work and eats out more, etc. Yet if this drags on through Q1 and into Q2–and I have not seen any serious virologists, merely not-at-all-serious economists, suggest such a rapid return to normal is possible–then the negative effects in the first third of the year are going to be so bad that the rest of the year is never realistically going to get us back close to 6% y/y GDP growth again, or 5.2%, regardless of empty new skyscrapers and shiny subways and high-speed trains. Surely the whole year will be flat at best? Obviously, 2021 GDP will then be gangbusters in Q1 and Q2 (“so buy stocks!”) – but there will also be lasting damage if this drags on as SMEs shut down and don’t reopen, and as already capital-constrained banks are forced to bail everyone out, and as the PBOC is then forced to bail banks out. Market calm that does not make for.    

Yes, are we seeing a slowdown in new virus cases reported this morning. We now have 31,481, which does show a day-to-day decline away from an exponential rate of growth *if accurate*. Yet for those market participants merrily saying this is “just a flu” (there are some) we also have 4,824, 15% of the total, in critical condition, and 638 deaths. Further, one arguably cannot measure the death-rate of any virus against the number of *currently* sick people: you surely measure it against those who eventually recover vs. those who don’t. Given we have 1,563 who have recovered vs. 638 dead (and 4,824 critical) that is a worrying ratio of 29% dead as an end-outcome, which is right up there with the MERS virus from a few years ago – although, yes, there is real reason for us all to hope that number will decline sharply as milder cases will be fully curable. But a simple flu this is not.

The quandary for China between releasing the quarantine straitjacket in days to stop its economy from getting truly sick, and allowing a virus like this to spread further as people start to mingle again is truly awful. There are no good options. For a world with a serious lack of final end-demand, and which has been relying on China, along with increasingly “Chinese” central banks, this is going to be a nasty shock either way that Mr Market is treating like he is Mr Magoo. (Oh, and Donald Trump was apparently “apoplectic” with PM Boris Johnson over his recent Huawei decision in a recent call, with suggestions that the UK might now be trying to backtrack; the US is allegedly also floating the idea of buying shares in firms like Nokia and Ericsson to help build a Western 5G alterative. Something else for China to be worrying about, of course.)

For example, Bloomberg is this morning trying to sell the fact that Chinese government bond yields are dropping (-33bp this year) as a good news story. It isn’t, even if that single trade is one I have long supported if one simply has to be in Chinese markets. If China is seeing its yields plummet, what does that say about global growth prospects? What does that say about global reflation? It’s a long bonds story – full stop. Of course, lower yields mathematically means higher P/E ratios for equities too (“so buy stocks!”). Until yields have gone as low as they ever can, real activity has ground to a halt, and we have a world where bonds can’t go any higher, equities can’t go any higher, central banks and governments can’t afford to let either collapse, and only FX markets have any pricing function.

Talking of pricing functions, the RBA have hilariously used their Statement on Monetary Policy this morning to make clear that rates are on hold right now, and that further rate cuts could do more harm than good with only two left in the can before QE has to start. I always guessed these guys spent all day on the Domain.com property website, but the timing is pure black comedy, as is their call that the unemployment rate will be going down and not up just as Chinese tourism collapses. On which note, today has already seen Japanese household spending collapse -4.8% y/y in December before anyone even sneezed and real labour earnings -0.9% y/y. Gambatte, ne?

Also talking of pricing functions, this time political, and of black comedy the US Iowa Democratic caucus moved into even more surreal areas yesterday, with a press report that up to 30% of the votes might have been tabulated wrong due to bad math skills; then a very slow final count; then populist Bernie Sanders taking the lead and publicly claiming victory; and at the same instant the Democratic National Congress chairman Tom Perez saying an “immediate recanvas” was needed instead. In the UK they called that a “People’s Vote” – perhaps he could use that terminology? Meanwhile, previous Iowa ‘winner’ Mayor Pete is busy appointing ex-Goldman Sachs staff to his campaign team. Hope and Change, people.

Just days after Ford reported a $1.7 billion operating loss during the fourth quarter, released 2020 guidance that failed to impress, and prompted a nearly double-digit drop in its shares in after-hours trade, the Detroit carmaker has announced a major executive shakeup on Friday.

WSJ reports that Ford President Joe Hinrichs is retiring, an ouster likely tied to the company’s poor performance, now that its shares are trading at less than $9 while Tesla trades at an almost unbelievable multiple.

Joe Hinrichs

Strategy Chief Jim Farley will take his place.

• FORD PRESIDENT OF AUTOMOTIVE JOE HINRICHS TO RETIRE: DJ
• FORD TO NAME STRATEGY CHIEF JIM FARLEY COO: DJ

Last year, Ford angered president Trump by laying off thousands of manufacturing employees as it ended production for all of its sedans in North America as it pivots to focusing on the trucks and SUVs that comprise its most popular models.

Ford shares ticked higher on the news, though the reaction was relatively muted.

Maybe he can get a job at Tesla?

For once the ADP private payrolls report was not that far off.

With Wall Street expecting a 165K print in this morning payrolls report, and with ADP coming in at almost 300K, the whisper number was obviously well above the official consensus, and the BLS did not disappoint, because just as Trump hinted a few days ago with his “jobs, jobs, jobs” tweet, in January the US created a whopping 225K jobs, smashing expectations, and well above last month’s upward revised 142K print.

The unemployment rate nudged higher by 0.1%, rising to 3.6%, above the 3.5% expected, yet still just barely above 50 year lows. Of note, the unemployment rate for both hispanics and blacks also rose to the highest since mid-2019.

Most notable, however, for markets was the rebound in hourly earnings, which rebounded from last month’s upward revised 3.0%, hitting 3.1%. Notably, after plunging in December to 3.2% from a decade high 3.8%, the average hourly earnings for production and nonsupervisory workers also staged a modest rebound, rising to 3.3% in January.

Developing

 

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