Jamie Dimon On The End Of Trading: “The Battle Is More In The Tech World Than In Having Brilliant Traders”
The world of trading, as generations of traders knew it, is over, and it took a timestamp from Jamie Dimon to make it official: “The battle is more in the tech world at this point than in having brilliant traders.”
And so, in a world in which being a better trader – i.e. outsmarting everyone else – no longer matters as the market is now hopelessly broken by central banks, and instead just speed and the ability to frontrun orderflow is relevant, it is no surprise that JPMorgan was reserved in its Q3 revenue outlook, which while set to rise 10% in Q3 – only due to a base effect – will continue the recent trend of disappointing trading revenue
“We’re not jumping for joy,” JPM CEO Jamie Dimon said Tuesday during an investor conference in New York, quoted by Bloomberg. The 10% gain is only possible because Q3 2018 was very weak; on a sequential basis, the Q3 2019 revenue will be a decline of about 10% versus the already disappointing second quarter, Dimon said.
Other banks are set to be even worse: Citi’s trading revenue is set to drop this quarter amid the brief bout of volatility that gripped markets in August, CFO Mark Mason said Monday; Bank of America’s fixed-income trading revenue will likely be down “a little bit,” while equities trading has done well, COO Tom Montag said.
Over the past decade, Wall Street trading desks have transformed into deserted ghost towns, struggling to keep up with their electronic peers amid an unprecedented shift to cheaper, more efficient passive investing; at the same time struggles among hedge funds and moves to cheaper electronic trading have made banks’ securities units less profitable. According to Bloomberg, the five biggest U.S. banks saw a collective $5 billion drop in trading revenue in the first half of the year after an 8% slide in the second quarter and a 14% decline in the first three months of the year.
This is just the start: according to Dimon, margins will continue to drop across the financial sector as more trades move to electronic platforms, and as “trading” as we once knew it, is no more.
WTI Rebounds From Bolton-Drop After API Reports Big Crude/Gasoline Draw
WTI tumbled today thanks to neocon warmonger John Bolton being fired (and removing some hawkish premium from the market):
“The Bolton news is bearish as Bolton is a known hawk on Iran and the market is assuming that opens the door for talks with Iran,” said Phil Flynn, senior market analyst at Price Futures Group Inc.
But all eyes are likely to pivot back to fundamentals and supply tonight and tomorrow.
API
Crude -7.23mm (-2.8mm exp)
Cushing -1.4mm (-980k exp)
Gasoline -4.5mm (-800k exp) – largest draw since April
Distillates +600k (+100k exp)
Another week, another larger than expected crude draw reported by API (and big gasoline inventory drop)
Source: Bloomberg
WTI tumbled on the Bolton headlines early on but bounced very modestly on the bigger-than-expected API-reported crude draw
Finally, while hope remains high for more OPEC action, Bloomberg reports that oil prices would have to fall to $40-$45 a barrel for OPEC to make deeper production cuts, Equatorial Guinea’s Minister of Mines and Hydrocarbons Gabriel Mbaga Obiang Lima said in an interview, while attending the World Energy Congress in Abu Dhabi.
It’s happening again. Just like last time around, the head of the Federal Reserve is telling us that there won’t be a recession even though all of the evidence suggests otherwise.
Just before the recession of 2008, Federal Reserve Chair Ben Bernanke told the country that “the Federal Reserve is not currently forecasting a recession”, and shortly thereafter we plunged into the worst economic downturn since the Great Depression of the 1930s. This time, it is Federal Reserve Chair Jerome Powell that is attempting to prop things up by making positive statements that are not backed up by reality. Speaking to a group at the University of Zurich, Powell insisted that the Fed is “not at all” anticipating that there will be a recession…
Federal Reserve Chairman Jerome Powell said Friday that he doesn’t “at all” expect the U.S. to enter a recession, though he hinted the central bank will likely cut interest rates as expected this month.
“Our main expectation is not at all that there will be a recession,” Powell said in a panel discussion at the University of Zurich.
Meanwhile, things are literally falling apart all around us. Just a few days ago, I put together a list of 28 data points that clearly indicate that a recession is imminent, and since then we have gotten even more bad news.
At this point, U.S. retailers have announced the closing of more than 8,200 stores in 2019, and we are going to break the old record for store closings in a single year by so much that the term “retail apocalypse” just doesn’t seem sufficient to describe the scale of what we are witnessing any longer.
Many are blaming “the Internet” for this colossal wave of store closings, but is “the Internet” also responsible for the transportation recession that has already started?
According to Zero Hedge, on a year over year basis heavy-duty truck orders were down 69 percent in June and 80 percent in July…
According to ACT Research, heavy-duty truck orders from the four largest truck makers in North America (Daimler Trucks North America, Paccar, Volvo Trucks USA, and Navistar International) collapsed 80% in July YoY. Orders in June plunged 69% from a year earlier.
As heavy-duty truck orders collapse, suppliers, such as ones who produce transmissions have predicted that the outlook for sales this year will be horrible.
And as global trade continues to plummet, one of the biggest shipping companies in the entire world has “temporarily suspended” one of their main routes…
Growth in the world continues to collapse into late summer, so much so that Maersk and Mediterranean Shipping Company (MSC) had to “temporarily suspend” their AE2/Swan Asia to North Europe loop until mid-November, removing 20,000 twenty-foot equivalent unit (TEU) a week from trade, reported The Loadstar.
None of this would be happening if economic conditions were good.
So let’s stop with the nonsense. Fed Chair Jerome Powell can deny reality all that he wants, but that isn’t going to change anything.
There are some people out there that are still finding solace in the fact that the official unemployment number in the U.S. is still so low. At just “3.7 percent”, it is the lowest that it has supposedly been in decades, but most people don’t realize that it has also been highly manipulated. It doesn’t include tens of millions of people that are working part-time for economic reasons, that are working temporary jobs or that are part of “the missing labor force”.
John Williams of shadowstats.com compares the official employment numbers to what they would look like if honest numbers were being used, and his figures tell an entirely different story.
According to Williams, the “real” rate of unemployment in the U.S. was hovering around 12 or 13 percent prior to the last recession, and then it shot up above 20 percent and has stayed there ever since. In fact, the alternate unemployment rate on shadowstats.com is currently sitting at 21.2 percent.
So that would suggest that we have never even come close to recovering from the last recession.
But of course “3.7 percent” sounds so much better than “21.2 percent”, and millions of Americans have completely bought into the false narrative that unemployment has been steadily falling since the early days of the Obama administration.
Unfortunately, we live at a time when a lot of people don’t want to hear the truth, and “reality” is defined by whoever has the biggest spin machine. Americans are more deeply divided than ever, and there is very little agreement on the direction that our country should go. Meanwhile, economic conditions are deteriorating a little bit more with each passing day and it has become exceedingly clear that a new crisis is upon us. And this new crisis has arrived at a time when our debt bubble is larger than it has ever been before. In fact, one expert has calculated that our total debt burden is now “running close to 2,000% of GDP”…
Total potential debt for the U.S. by one all-encompassing measure is running close to 2,000% of GDP, according to an analysis that suggests danger but also cautions against reading too much into the level.
AB Bernstein came up with the calculation — 1,832%, to be exact — by including not only traditional levels of public debt like bonds but also financial debt and all its complexities as well as future obligations for so-called entitlement programs like Social Security, Medicare and public pensions.
There is no way that this is going to end well.
The two major political parties will continue to relentlessly fight with one another, and it will mostly be about really silly stuff. But as they fight, our nation is literally steamrolling into oblivion, and there appears to be very little hope of avoiding our fate at this point.
And showed no signs of stopping in today’s trading session…
Source: Bloomberg
In fact the momentum factor has now crashed into the red for the year (after being up over 13% last week)…
Source: Bloomberg
It seems like the momentum factor reached a serious level of resistance once again…
Source: Bloomberg
This is now the biggest collapse in the momentum factor since the dot-com era and the financial crisis quant crash…
Source: Bloomberg
How long before this weighs more directly in the broad index?
Source: Bloomberg
And as momo collapses, Treasury yields are soaring as CTAs are forced to dump bonds…
Source: Bloomberg
And may mean that bonds have a long way to fall before this is over…
Source: Bloomberg
The impact of this factor unwind has sent cyclicals higher and defensives lower as Bob Pisani exclaimed “I think this is a good thing.” Except it appears ol’ Bob doesn’t see the driver of this shift as problematic at all…
Source: Bloomberg
On the day, Trannies and Small Caps surged (see short-squeeze below) as Nasdaq tumbled, only to be panic-bid back near unchanged on the day.
NOTE – stocks melted up in the last few minutes as bond yields really spiked into the close.
Most-Shorted Stocks have soared this week too…(NOTE – this is the biggest 5-day short-squeeze since the start of the year)
Source: Bloomberg
Energy stocks were best today, despite oil prices plunging…
Source: Bloomberg
Bank stocks continue to outperform the broad market (as the beneficiaries of the factor unwind) and track the yioeld curve steeper…
Source: Bloomberg
It’s been a bond bloodbath the last 5 days…with the entire curve shifting higher by 22-25bps (and really getting hammered into the close today…
Source: Bloomberg
10Y Yields are up 5 days in a row – up a stunning 24bps – the biggest jump since Trump’s election in Nov 2016…
Source: Bloomberg
30Y Yields are at a key resistance level…hitting 2.20% today
Source: Bloomberg
The late-day carnage in bonds was focused more on the short-en, sparking a bear flattener…
Source: Bloomberg
Are rates set to soar even further given the positive surprise macro data?
Source: Bloomberg
WeWork bonds crashed today, erasing the post-IPO filing gains and falling back below par…
Source: Bloomberg
The Dollar trod water for the 2nd day in a row (hovering around the lows of Trump’s tariff tantrum)…
Source: Bloomberg
Cryptos continued to slide lower today…
Source: Bloomberg
Silver was best, managing to end unchanged as oil and gold underperformed…
Source: Bloomberg
Gold continues to trade in sync with global negative yield aggregate volume…
Source: Bloomberg
Meanwhile, the firing of neocon NSA John Bolton took war premium out of crude very suddenly (and tumbled into NYMEX close)…
Source: Bloomberg
Finally, while policy uncertainty has hit record highs, equity market uncertainty remains delusionally low…
Gold has been on a three-day skid, but as Fox Business anchor Liz Claman put it, “So what? It’s been a breakout summer for bullion.”
Over the last three months, gold is up about 12% and has hit six-and-a-half year highs in recent weeks.
Peter Schiff joined Claman, along with, Frank Holmes and Imaru Cassanova on The Claman Countdown to talk about the yellow metal.
Holmes started out the segment saying that recession fears are driving central bank easy monetary policy and that’s good for gold.
Each month we’re seeing more and more governments offering you a negative real rate of return on your money and that automatically makes gold much more attractive. And I don’t think it’s ending yet.”
Cassanova said gold has come back in favor after being range-bound for nearly six years.
In June, it broke out… The driver there was the Fed. What is the Fed signaling when they are shifting, when they are going from tightening to cutting? They’re saying we too are worried about the US economy. And investors responded to that — to the higher risk of a recession in the US.”
Claman noted China has added about 100 tons of gold to its reserves over the last nine months. She asked Peter if China’s stockpiling of gold plays into the picture. He said he expects China to keep adding gold, along with other central banks because they recognize the weakness of the US dollar.
The dollar is actually very weak. People have been looking at the dollar versus other fiat currencies. But if you look at the dollar’s decline against gold, that really tells you that we have a weak dollar, not a strong dollar, and I think it’s going to get a lot weaker. And I think foreign central banks are starting to position for the dollar losing its reserve currency status. And it’s going to lose that status not to another currency, but to real money, to gold. And that’s why central banks are buying. They’re going to keep buying, and individuals should be buying as well.”
Holmes pointed out that even if the trade war ends, there are still a lot of negatives in the economy and it will take a while for it to turn. Meanwhile, central banks are cutting rates in an expanding economy.
Cassanova said she sees a lot of risks in the financial system that should elevate gold to higher levels.
We’re talking setting new all-time highs.”
Peter said we’re going into recession regardless of what happens with the trade talks.
The Fed is taking rates down to zero, so that’s what’s going to happen.”
Peter pointed out that gold was under $300 in 2001. It moved up to $1,900 in 2011 when people were rightly concerned about the monetary mistakes that the Fed was making.
Well, then people believed the Fed, that everything was going to work out, that they could unwind their balance sheet and normalize interest rates, and gold pulled back to just over $1,000. It’s now risen 50% off those lows because people are just starting to figure out that none of these problems were solved. In fact, the Fed has screwed up to a greater degree than even I imagined back in 2011. They’ve done a lot of damage to the economy and the gold price is headed a lot higher. The initial reaction was correct. The QE and zero percent interest rates were a big mistake and the only winner there is going to be the people who bought gold and silver.”
Apple’s Biggest Problem: Its “Buzz” Peaked Back In 2012
Apple just concluded its latest – and quite forgettable – iPhone launch presentation, where the company made the following “major” announcements (via BBG):
Cameras, cameras, cameras: big camera updates coming the iPhone 11 and iPhone 11 Pro lines.
Pricing: The iPhone 11 is $50 cheaper than the iPhone XR, coming in at $700. The iPhone 11 Pro prices are the same $1,000 and $1,100 as the iPhone XS and XS Max.
The big Apple Watch updates came last year. The new models look the same, but have always-on screens.
The iPad isn’t going to move the needle — a slightly bigger screen, but not much else.
$4.99 is Apple’s new services price: TV+ and Apple Arcade could be worthwhile.
And while Apple’s stocks was largely unchanged following the event, it did spark a question, first addressed by DataTrek’s Nicholas Colas: how much do global consumers actually care about Apple’s product suite? This isn’t just a question of how many Apple fanboys/girls there. After all:
AAPL is 3.8% of the S&P 500, a larger weighting than Utilities (3.4%), Real Estate (3.2%) or Materials (2.7%). Apple’s performance this week could either get the S&P closer to its all time highs (just 1.5% from here), or effectively cap US large cap returns in September.
AAPL is 16.9% of the S&P Tech sector, second only to Microsoft (19.4%). AAPL has been a drag on sector performance since the 2018 highs; MSFT has been the real source of the group’s strong 1-year performance.
To answer this question, Colas looked at the global volume of Google searches for 4 key Apple products: “iphone”, “apple watch”, “macbook” and “homepod”:
#1: Google searches for “iphone” peaked in September 2012 with the launch of the 5th model. Google searches for “iphone” last September for the XS model launch were 43% lower than that high water mark. Current search volume is at a new low back to 2010.
#2: Google searches for “apple watch” show a better trend, even if product updates have not created more buzz than the initial rollout. Searches through the year since the watch’s March 2015 introduction continue to grow, and peak interest often occurs during Holiday shopping seasons.
#3: Searches for “macbook”, which captures Google queries for both the Pro and Air models, peaked in June 2012. August 2019 searches were 24% below those levels.
#4: Searches for “homepod” are much lower than those for “amazon echo” over the last 12 months. Holiday 2018 saw the Amazon home automation/speaker product register 5x the number of searches and the gap was 2:1 last month.
DataTrek had the following takeaways from these charts:
Apple’s pivot to services in the music streaming, gaming and TV spaces is a necessary shift now that virtually all its hardware products are fully mature. The failure of the Homepod to best Amazon’s Echo offering is a remarkable miss in an important space.
Since the payoff from these initiatives is uncertain, both in terms of required investment and payoff, Apple’s valuation is likely to remain below peer group averages. That is the case just now, with AAPL trading at 16.9x forward earnings versus the Tech sector at 28.6x.
The most important catalyst for AAPL, and given its S&P weighting in US large caps as a whole, remains US-China trade negotiations. The charts show that Apple is no longer a new hardware story. Services will take time to grow. What’s left is a hope that upcoming trade talks will prove productive rather than further disrupt Apple’s China business and its global supply chain.
Colas’ bottom line: this one-time disruptor has matured and needs to transition into a company that leverages its billion-user iPhone platform to sell services. Yes, it certainly has the financial resources to do so. But it will have to go back to the disruption playbook of affordable products for a mass audience to be successful. Remember that iPhones 3-5 retailed for $199… That also means that going forward, the only announcements worth watching have to do with Services, as the hardware updates are increasingly trivial.
Netanyahu Rushed Off Campaign Stage In Southern Israel As Hamas Rockets Rain Down
Prime Minister Benjamin Netanyahu was at a campaign event in the southern Israeli city of Ashdod Tuesday when Hamas rockets were fired on the city.
Early reports said at least 5 Hamas rockets triggered inbound warning sirens in Ashkelon and Ashdod just as the prime minister was on a campaign tour through the region.
Image via The Times of Israel
There are reports that at least two interceptions were made by the Iron Dome anti-air defense system.
Former Defense Minister Avigdor Liberman was also reported to be in the south at the time of the attack, which was possibly timed as both campaigned ahead of a key September 17 election to form a new government.
At the time of the rocket attack, dramatic video captured Netanyahu being rushed out of a building in Ashdod by his security staff.
#IDF says two rockets were fired towards the cities of Ashkelon and Ashdod, both were intercepted by the Iron Dome. Here’s a video of Netanyahu being evacuated during the rocket sirens. pic.twitter.com/9XIDb9wRux
It’s expected that Israel’s Air Force will retaliate on Gaza significantly tonight, with reports that Hamas has already evacuated their posts in anticipation.
‘One America News’ Claims Defamation In $10 Million Lawsuit Against Rachel Maddow
It looks as though liberals may never learn that just because they disagree with someone’s opinion, it doesn’t automatically make them a tool of the Russian government. And leading the charge of liberals disseminating Russiagate nothingburgers, of course, continues to be Rachel Maddow.
Conservative television network One America News (OAN) is suing Rachel Maddow for $10 million after she referred to the network as “paid Russian propaganda”. OAN filed the defamation suit in federal court in San Diego, according to AP. OAN is a small, family owned conservative network that is based in San Diego and has received favorable Tweets from the President. It is seen as a competitor to Fox News.
OAN’s lawsuit claims that Maddow’s comments were retaliation after OAN President Charles Herring accused Comcast of censorship. The suit said that Comcast refuses to carry its channel because “counters the liberal politics of Comcast’s own news channel, MSNBC.”
It was about a week after Herring e-mailed a Comcast executive when Maddow opened her show by referring to a Daily Beast report that claimed an OAN employee also worked for Sputnik News, which has ties to the Russian government.
Maddow said: “In this case, the most obsequiously pro-Trump right-wing news outlet in America really literally is paid Russian propaganda. Their on-air U.S. politics reporter is paid by the Russian government to produce propaganda for that government.”
Except Maddow, likely still upset from spending 3 years trying to promulgate a Russian hoax that didn’t exist, didn’t quite get her facts straight.Big surprise.
OAN said in its lawsuit that while reporter Kristian Rouz was associated with Sputnik News, he worked solely as a freelancer for them and was not a staff employee of OAN. And the lawsuit includes a statement from Rouz stating that while he has written some 1,300 articles over the past 4 and a half years for Sputnik, he has “…never written propaganda, disinformation, or unverified information.”
Skip Miller, OAN’s attorney stated:
“One America is wholly owned, operated and financed by the Herring family in San Diego. They are as American as apple pie. They are not paid by Russia and have nothing to do with the Russian government. This is a false and malicious libel, and they’re going to answer for it in a court of law.”
The lawsuit included an August 6th letter from an NBC Universal attorney who stated that “OAN publishes content collected or created by a journalist who is also paid by the Russian government for writing over a thousand articles. Ms. Maddow’s recounting of this arrangement is substantially true and therefore not actionable.”
Californians have had it with PG&E, a convicted felon infamous for sacrificing safety, maintenance, reliability, and people to enhance “shareholder value.” But is San Francisco overpaying? Take a look.
This – the offer made on Sunday – has been kicked around in San Francisco since the catastrophic wildfire in Butte County in Northern California last year that killed 85 people, the cause of which was determined to have been PG&E’s electrical transmission lines – how they’ve not been maintained, including not removing vegetation near them. PG&E is infamous for skimping on maintenance and investment to maximize “shareholder value.” PG&E filed for bankruptcy in January, and its shares have collapsed by about 84% over the past two years, a good example of the results of maximizing “shareholder value.”
On Sunday, the City announced a plan to bid for PG&E’s “assets” in San Francisco for $2.5 billion. These “assets” are poles, power lines, transformers, and other electrical equipment, some of it under ground, some of it above ground, infamously maintained in the manner of PG&E, including this power pole and transformer a few feet from our balcony:
This pole is just an example. Note how the pole is completely rotten, how old the transformer is, and the insulators, and the wires. The pole was placed over 100 years ago, the transformer decades ago. I’ll show some additional stunning details in a moment. These types of power poles are all over San Francisco.
As you can tell from the pole, there is no competition in the power transmission business. This is the only set of wires to the building. It’s the same all across the country. Whoever owns the wires has a total monopoly. In the transmission business, there is no free market – so forget relying on the “market” to fix this issue. All the market wants from PG&E is dividends and a high share price, which translate into cost cuts, shitty maintenance, and inadequate investment.
The city of San Francisco would buy the power from power generators, including PG&E, which is also buying power from other power generators. There is actual competition among power generators with something like a real market, including market manipulation.
The $2.5 billion purchase price would be funded by a revenue bond issue. Last November, voters approved Proposition A that authorized San Francisco’s public utilities commission to issue bonds for the purpose of acquiring PG&E’s power equipment in San Francisco. “Funding secured,” as Elon Musk would say.
PG&E is headquartered in San Francisco, but it no longer has a lot of friends here. Power outages, sometimes lasting for hours, are fairly common. I have never lived in a city where they were as common as those I have experienced in San Francisco. Some of the outages are planned and come with advance notice. Others are surprise outages because of equipment failure of some sort. I have bought extra equipment to deal with them because I can’t just shut my business down. So there is no love lost.
PG&E also provides gas in San Francisco, and this would continue.
PG&E’s 30-inch gas pipeline in San Bruno, a town near San Francisco International Airport, exploded in 2010, killing eight people and incinerating the neighborhood. A federal investigation found that the pipeline, installed in 1956, had many defective welds; but as demand grew, PG&E increased the gas pressure to force more gas through the pipeline, rather than putting a modern gas pipeline into the ground. And there were numerous other shortcomings and revelations. Shareholder value had priority.
In 2017, a federal judge convicted PG&E on six criminal charges related to the gas pipeline explosion and imposed the maximum fine of $3 million, a barely audible slap on the wrist. No one went to jail, obviously, not even the regulators that had been in bed with PG&E. But it turned PG&E into a convicted felon, for whatever that’s worth.
So, where I sit, in my WOLF STREET media mogul empire, headquartered in San Francisco, electricity service cannot get a lot worse, in terms of price and reliability, but it can get a lot better. Ultimately, the City is responsible to local voters. PG&E is responsible to its bondholders and shareholders. Those are very different priorities, from my point of view.
But is San Francisco overpaying for dilapidated outdated equipment?
Here are more photos of the utility pole out front of our global corporate headquarters. There are many of these poles around. What I want to show is just how old this thing is.
There are wooden protectors still on the pole. In modern times, protectors are made of other materials, such as plastics. But these are wooden half-pipes along the pole, put over cables to protect them. There are two types of these wooden protectors on the pole, a large one for a big cable and a small one for a small cable.
These photos show further how PG&E has handled its maintenance (“what maintenance?”) and how it has invested in its equipment. This is the same pole, seen from the bottom up. Follow the red arrows to the large wooden protector half-pipes (click to enlarge):
The photo below shows the same wooden half-pipes a little further down the pole:
In the photo below, follow the red arrows to the small wooden half-pipe:
The photo blow shows the whole rickety top. Note the large wooden half-pipe along the right side of the pole:
The question here: Is San Francisco paying too much for “assets” that will then turn out to be “liabilities” instead, namely accidents waiting to happen due to PG&E’s run-down equipment and negligent maintenance? Who is going to be toast when the ancient transformer blows up that is eight feet from our balcony? And how much would the City have to pay for this toast?
Separating out San Francisco’s electric infrastructure, for a population of about 880,000, is not going to be another fatal blow for PG&E, given that it serves about 16 million customers in much of California. But it would be a blow.
There are discussions under way at the state level to split up PG&E into smaller electric utilities and selling them to the various cities. And there are discussions underway to split the gas and electric utilities.
PG&E, has long had regulators in its pocket, as numerous investigations and scandals have shown, including the investigation into the San Bruno pipeline explosion.
California also forced ratepayers to bail out PG&E after its 2001 bankruptcy via forced above-market rates, which continue to this day, while its bond holders and stockholders were made whole at the time.
Now Californians have lost patience. And dismembering PG&E is a real option. Earlier this year, San Francisco’s public utility commission, in studying the feasibility of purchasing PG&E’s electrical equipment in San Francisco, found that a municipally owned utility could provide lower electricity rates due to lower funding costs in the bond market, and because the municipal utility would be a non-profit and would not have to make Wall Street happy. It might actually focus on its customers, who are voters.
Given the mess we’ve been in with PG&E, just about anything is better than the status quo of a monopoly whose bondholders and shareholders continue to get bailed out by rate payers, and whose rate payers in turn continue to get shafted and even killed by inadequate maintenance and investment. But that $2.5 billion looks like a lot of money for this crappy infrastructure.
* * *
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‘We Believe Him’: Desperate Farmers Blame USDA – Not Trump – For Their Problems
Of all President Trump’s critical constituencies, none have been asked to sacrifice as much as America’s farmers. Many midwestern farmers were already in a difficult spot when President Trump first came on the scene, hammered by low crop prices and farms teetering on the brink of bankruptcy.
But in the nearly three years since Trump’s inauguration, the situation for most farmers has gone from bad to worse. In retaliation for President Trump’s trade war, China has cut off imports of American soybeans. And even Trump’s farm bailouts haven’t quite made up for the damage to the midwestern economy that has occurred under his administration.
Despite this, most farmers remain loyal to Trump, and plan to vote for him again in 2020. Instead, Reuters reports, many farmers are directing their anger not at the Trump Administration, but at the USDA and the Washington bureaucracy, which believe is working to thwart President Trump’s true agenda.
Unfounded conspiracy theories have reportedly been circulating online and among farmers that the USDA is the true source of American farmers’ financial malaise. This has led to farmers threatening a USDA employees during a crop study earlier this year, prompting the agency to withdraw its personnel from the field.
According to a Reuters poll, Trump’s approval rating in rural areas has fallen slightly to 71% from a peak of 79%. Still, many farmers are struggling to “emotionally process” their pain.
Farmers are struggling with how to emotionally process their pain from the Trump administration’s policies, and anger at the USDA may be a coping mechanism, said Ted Matthews, a Minnesota psychologist who has spent 30 years counseling farmers and rural residents across the Midwest.
“The question I hear from farmers who voted for (Trump) is, ‘We believed him when he said he would help make the farm economy better, that we could save our farms. Now, who do we blame?'” Matthews said.
Of course, directing their rage at the faceless Washington bureaucracy is easier than directing it at Trump – someone they supported and voted for.
“It’s much easier to be angry at a faceless Washington bureaucracy than at the man you voted for,” said Jere Solvie, 69, grain and hog farmer from west-central Minnesota who voted for Trump and still supports him.
According to Reuters, the USDA enjoyed a brief honeymoon with farmers thanks to Agriculture Secretary Sonny Perdue’s southern charm. But the secretary was booed last month in Minnesota, after his agency made a few critical missteps, including releasing a crop estimate that prompted the biggest drop in corn futures in three years.
This is a sharp contrast to early days in the administration, when Agriculture Secretary Sonny Perdue was a reliable point person. His folksy southern charm and his appeals to patriotism helped sell Trump’s policies to farmers, even the trade war.
But Perdue’s honeymoon in farm country has ended. Farmers booed the agriculture secretary in Minnesota last month after he joked: “What do you call two farmers in a basement? A whine cellar.”
“He’s supposed to support us, especially during times of distress,” said Gary Wertish, a fourth-generation Minnesotan who farms 500 acres of corn, soybeans and navy beans, and heard the remarks in person.
Grain farmers were already furious that corn futures prices Cv1 posted their biggest drop in three years after USDA estimated a bigger-than-expected crop on Aug. 12, despite floods that slowed planting.
As desperation sets in, more farmers might finally turn on the president, particularly after a difficult harvest season.
Wes Hitchcock, a corn farmer and Trump supporter in Sparks, Nebraska, wrote a 1,700-word paper titled “USDA vs. Trump” and has repeatedly posted it on Facebook in a grain market discussion group with 13,000 members.
Hitchcock said he was unable to plant about 30% of the 2,200 corn acres he had planned to grow because of heavy rains this spring. The corn he did manage to plant is not looking great, either, he said.
“I’m going bankrupt and everybody else will this year too,” he said in a phone interview with Reuters.
After all, farmers might change their minds if they end up bankrupt.
