Tag: finance

Misplaced Pride: Most Of The “Middle Class” Is Actually Working Class

Authored by Charles Hugh Smith via OfTwoMinds blog,

If we look at these charts, it looks like only the top 10%, or perhaps the top 20% at best, might qualify as “middle class” by the metrics described below.

The conventional definition of working class is based on income and education:the working class household earns between $30,000 and $69,000 annually, and the highest education credential in the household is a two-year community college degree or trade certification.

The definition of the middle class is also based on on income and education, but adds financial security as a metric: the middle class household earns $80,000 or more, holds 4-year college diplomas or graduate degrees, owns a home, has a 401K retirement account and so on.

(My own definition is much more rigorous, as I reckon “middle class” today should have the same basic assets as the “middle class” held 40 years ago: What Does It Take To Be Middle Class? (December 5, 2013.)

But in some key ways, income and education are misleading metrics: the key attributes that actually define the working class are:

1. Stagnant incomes: incomes that over time barely keep up with real-world inflation or even lose purchasing power.

2. Income insecurity: wages, benefits and pensions are not as guaranteed as advertised.

3. Not enough ownership of financial capital to be meaningful. Financial capital excludes household items, vehicles, etc. Financial capital includes stocks, bonds, certificates of deposit, ownership of a profitable business, equity in real estate, precious metals, bitcoin, etc.

By meaningful I mean enough to:

— augment Social Security benefits in a way that greatly improves the household’s lifestyle and retirement options

— equity that is significant enough to fund college educations so one’s children do not have to become debt-serfs to attend college

— enough capital to fund (or help with) a down payment for a house, i.e. inheritable wealth that transforms the children’s lives while the parents are still alive

— income from capital, i.e. income isn’t dependent on a government agency or government transfer.

How many U.S. households qualify to be middle class if that means:

— the household income has outpaced real-world inflation over the past 20 years

— the household’s financial capital/assets have grown to become meaningful (as defined above) in the past 20 years

— the household doesn’t depend on government transfers for much of its income / spending

— the household income and wealth are not dependent on financial bubbles, corporate guarantees, local government pensions on the verge of insolvency, etc.

While tens of millions of households qualify as “middle class” based on college diplomas and income, far fewer qualify when wealth and financial security are the key metrics. Plenty of households earn well in excess of $100,000 annually, but their financial status is as precarious and threadbare as any working class household.

They don’t own enough assets or capital to move the needle, and what they do own is generally dependent on financial bubbles or speculative gambles.

Feeling like we belong to the “middle class” because we have a college diploma and make a good income offers up a false sense of pride and progress.If we’re realistic about the financial wealth and security of “middle class” households, most qualify as working class: stagnant incomes, precarious financial circumstances, very little meaningful wealth and even less meaningful wealth that isn’t dependent on the bubble du jour or promises that might not be kept.

If we look at these charts, it looks like only the top 10%, or perhaps the top 20% at best, might qualify as “middle class” by the metrics described above.

What sort of society do we have if the bottom 20% of households are poor, the next 60% are working class/precariat and only the top 20% (at best) have any of the core attributes of “middle class” financial security and wealth?

If we take off our rose-colored glasses, we have a much more stratified economy and society than we might like to believe: there’s the top 1%, the next 4% “upper middle class,” the next 10% “middle class,” the next 65% working class, and the bottom 20% poor, those largely dependent on government transfers.

The “middle” has eroded away, leaving the top 15% who are doing very well in the status quo and the bottom 85% who are struggling to maintain a meaningful sense of prosperity and progress.

Personally, I’m proud to be working class in terms of my skillsets and values. Labels mean nothing. What counts is having skills, drive, agency, curiosity, frugality, integrity, self-discipline and kindness. Those forms of wealth cannot be taken from you when the bubble du jour pops and all the phantom “wealth” vanishes like mist in Death Valley.

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via ZeroHedge News http://bit.ly/2IJ2W0t Tyler Durden

US Officials Say Tanker Crew “Detained” – While Russia Thanks Iran For “Rescuing” Its Nationals

Just after his trip to Tehran where he met with Iran’s president Rouhani as well as Supreme Leader Ayatollah Ali Khamenei, during which a Japanese owned tanker was attacked in the nearby Gulf of Oman on Thursday along with another international vessel, Japan’s Prime Minister Shinzo Abe condemned the suspected attack in official statements. 

Speaking to reporters Friday he said: “Japan adamantly condemns the act that threatened a Japanese ship, no matter who attacked,” and further urged “all related countries” to avoid any “accidental confrontation” or an escalation of tensions. 

The Trump ally also spoke to the US president by phone on Friday, reportedly briefing him on his visit to Iran, Abe confirmed in his remarks, though without detailing what he conveyed to the White House. Trump had previously said during a Fox & Friends telephone interview that “it’s probably got essentially Iran written all over it.”

Via Fox: A picture obtained by AFP from the Iranian news agency Tasnim on June 14, 2019 shows what they say are some of the crew of the oil tankers which were targeted in suspected attacks in the Gulf of Oman, after they were reportedly rescued by the Iranian navy on June 13, 2019 in the Iranian southern port town of Bandar-e-Jask.

A number of media pundits and even mainstream news networks like CNN raised an unusual level of skepticism regarding the attacks being hastily penned on Iran by Washington as well as the UK. 

Meanwhile, the Russian Foreign Ministry issued its own statements amid broader calls in Europe for “constraint” in assigning premature blame. Russia accused the US of “stoking tensions,” according to the AP, based on Washington’s “Iranophobic” stance which seeks to “artificially” fuel tensions, according to the ministry statement.

Russia’s statement further condemned the attack incident but called for a “thorough and unbiased international probe.”

Importantly, Russia also thanked Iran for helping rescue 11 Russian nationals who had been aboard one of the tankers, which is a stark contradiction to the claims of US officials, who are now saying Iran had detained the crew. 

Japan’s PM Abe had been on a state visit to Tehran this week when the tanker attacks occurred. Image via The Japan News/The Yomiuri Shimbun

If the whole saga which began early Thursday morning weren’t already bizarre enough with competing claims and counterclaims concerning basic facts concerning what happened, now we have this bombshell assertion via Fox:

U.S. officials have told Fox News that the crew of one of the two stricken oil tankers damaged outside the Persian Gulf were detained by the Iranians Thursday after first being rescued by another merchant vessel.

The crew of the Front Altair was first rescued by the Hyundai Dubai, according to U.S. officials, but Iranian gunboats quickly surrounded the ship and demanded the crew be turned over. The captain ultimately relented and ordered his crew to surrender.

The report adds shockingly that “The 23 crew members are now being held in Iran. It’s not immediately clear what the next steps are.” It has been confirmed that the 11 Russian nationals are among the 23 crew members from the Front Altair that US officials are now claiming as being “detained” in Iran.

Iran’s Press TV had shown the crew members in footage in “full health” relaxing on couches – which apparently US officials are spinning as a “hostage video” of sorts. 

More via Fox:

Pictures and footage from Iran’s English-language Press TV showed the crew members, saying they are all in “full health”. The 23 crew members, who were apparently in the Iranian southern port town of Bandar-e-Jask, appeared to be watching a speech by Supreme Leader Ayatollah Ali Khamenei.

So essentially, the Russian Foreign Ministry is thanking Iran for “rescuing” its nationals from the boat while US officials are simultaneously claiming crew members have been detained. 

Could this unfolding drama in the Persian Gulf get any weirder at this point? Indeed there’s likely much more bizarre and brazen claims to come. 

via ZeroHedge News http://bit.ly/2KiLbs4 Tyler Durden

Solomon: Delerious Democrats Now Accusing Team Obama Of Treason

Authored by John Solomon via The Hill

If you read the newspapers, tuned into the cable TV pundits or received an email from one of the Democrats running for president, you’d swear Donald Trump was back to his treasonous ways. 

All that was missing was an annoying OMG text exclamation punctuating the unfounded claims that Trump might violate the law in 2020 by accepting intelligence on a political rival from a foreign country. The inference, of course, is that it would come from a hostile power such as  Russia or North Korea or Iran.

Actually, what Trump told ABC News’ George Stephanopoulos was that he’d consider taking intelligence dirt about a rival from a friendly ally. (Norway was the actual example he used.)

Sound familiar? That is EXACTLY what the Obama administration did in 2016. It’s something no one in the media or the political space grasped during the tsunami of breathless reaction that followed the interview.

In July 2016, the Obama administration accepted unsolicited information from Alexander Downer, an Australian diplomat who just happened to have helped arrange a $25 million government donation to the Clinton Foundation years before. Downer said that he had witnessed a Trump campaign aide, George Papadopoulos, bragging about some dirt that the Russians supposedly had on Democratic candidate Hillary Clinton.

Though Downer’s claim was reported two-plus months after the alleged event, and was only hearsay gathered at a London tavern, the Obama administration gave it to the FBI which, in turn, thought it was weighty enough to justify opening a counterintelligence case against the lawfully elected Republican nominee for president.

In other words, the Democratic administration accepted dirt from a foreign friendly and used it to justify investigating its GOP rival.

And then, OMG, they did it again just a few weeks later.

In October 2016, less than three weeks from Election Day, the Obama Justice Department approved a Foreign Intelligence Surveillance Act (FISA) warrant to spy on the Trump campaign through its former adviser, Carter Page. The primary evidence supporting the warrant? A dossier written by a foreign friendly named Christopher Steele, a retired MI6 intelligence agent from Great Britain. Of course, the Justice Department and the FBI forgot to tell the courts that Steele actually was working on behalf of the Clinton campaign, but that’s a small detail for the purpose of this column.

For the second time in three months, the Obama administration took dirt on Trump from a foreign ally — this time, from one in Europe — and weaponized it for a criminal investigation.

No offense, but the media really are giving Trump way too much credit for the idea he floated on ABC News. The real scandal is that he’s just plagiarizing a playbook already used by Obama, Clinton and those 2016 Democrats.

And every Democrat and media pundit who accuses Trump of treason for considering taking dirt from, say, Norway in 2020 has now, by extension, accused the Obama administration of committing treason in 2016.

Of course, you’d never know that from the way the media and politicians have treated it.

The whole episode reminds me of one of my earliest memories as a professional journalist.

When I first hit the presidential campaign trail as a reporter chasing the likes of Bob Dole,  Jesse Jackson, George H.W. Bush and a young Al Gore across the farm fields of Middle America in 1988, I stumbled across a silver-haired man at a greasy-spoon restaurant in LaCrosse, Wis. He was an old factory worker at the local brewery. A blue-collar company man who leaned Democrat.

I was sitting at the table across from him, obliviously banging on the keys of my Radio Shack Tandy 103 computer (a model now relegated to the Smithsonian’s heap-pile of technology) when he asked me the obvious: “You one of those reporters?”

“Yes, sir,” I answered politely.

“Do me a favor. Don’t dumb-down politics,” he said. “We’re smarter than you think.”

I’ve kept that sentiment close to my heart for three decades. And those looking to twist Trump’s ABC News interview into something it was not should take heed of the wisdom I was offered that day in LaCrosse.

American voters are a lot harder to fool than the political elite think.

John Solomon is an award-winning investigative journalist whose work over the years has exposed U.S. and FBI intelligence failures before the Sept. 11 attacks, federal scientists’ misuse of foster children and veterans in drug experiments, and numerous cases of political corruption. He serves as an investigative columnist and executive vice president for video at The Hill. Follow him on Twitter @jsolomonReports.

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

DOJ Issues Legal Opinion Backing Treasury’s Refusal To Release Trump Taxes

In a move that was expected yet will lead to fresh howls of outrage by Democrats demanding William Barr be drawn and quartered, late on Friday the Department of Justice released a 33-page legal opinion backing up Steven Mnuchin’s and the Treasury Department’s decision to reject a request by congressional Democrats for six years of President Trump’s tax returns.
 
“While the Executive Branch should accord due deference and respect to congressional requests, Treasury was not obliged to accept the Committee’s stated purpose without question, and based on all the facts and circumstances, we agreed that the Committee lacked a legitimate legislative purpose for its request,” wrote Steven Engel, an assistant attorney general in DOJ’s Office of Legal Counsel.

The document follows Steven Mnuchin’s rejection of a subpoena from House Ways and Means Committee Chairman Richard Neal (D-Mass.) last month, demanding Trump’s personal and business tax returns from 2013 through 2018.

When the Treasury Secretary rejected Neal’s request, he said that he did so upon the advice of DOJ, and that the Justice Department would publish a legal opinion with its advice. Back in April, Trump, who has agreed to “absolutely” release his returns once they are no longer under IRS audit, told reporters “Hey, I’m under audit. But that’s up to whoever it is. From what I understand the law is 100 percent on my side.”

Two months ago we quoted Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center who testified before Congress in February about Trump’s tax returns, and who said that “[The] request tests Mnuchin’s oath of office: whether Mnuchin will faithfully execute the laws of the United States, or whether Mnuchin will bend to the will of the president.”

Fast forward to today when we know the answer: Mnuchin simply did what the DOJ advised. And while democrats will be furious, demanding Barr’s scalp, several republicans will be happy with the DOJ opinion, especially Rep. Kevin Brady who two months ago said that “weaponizing our nation’s tax code by targeting political foes sets a dangerous precedent and weakens Americans’ privacy rights,” adding “As you know, by law all Americans have a fundamental right to the privacy of the personal information found in their tax returns.”

The full, 33-page memo (link) is below.

via ZeroHedge News http://bit.ly/2WJ1PI3 Tyler Durden

Orthodox Jews Threaten “Motherf***er” NY Lawmaker After Anti-Vax Law Passes

A group of anti-vaccination activists including Orthodox Jews fumed on Friday after the New York state legislature passed a bill that will eliminate religious exemptions as a valid excuse not to vaccinate children, according to the New York Post. Hours later, the bill was signed into law by Governor Cuomo.

Shouting from the gallery, one man dressed in traditional Orthodox Jewish attire threatened “We’ll be back for you Jeffrey,” referring to the bill’s sponsor, Jeffrey Dinowitz (D). 

Another protester shouted “Motherfucker” along with other profanities. 

“The government does not have the right to interfere with my personal religious beliefs,” said one woman quoted by WLNY, who added “We will not vaccinate. What’s going to happen is we’re going to either home school or we’re going to move out of state.“

Dinowitz felt that his safety was at risk following the vote. 

“I’m sure the hallways are very dangerous for me right now,” said Dinowitz, after the display. “I think it’s very sad that people who are up here in the name of religion were acting anything but. Judging by the way some people behaved and judging by the threats that we heard from some people, it would be prudent to exercise some caution.“

“This bill was never about [religion], it was about public health, as I said on the floor,” Dinowitz added. “It’s going to protect children’s health and we’ll never know which children don’t catch a terrible disease, but we know for this bill it will protect children.”

Defending the passage of the bill, Gov. Cuomo said in a statement: “The science is crystal clear: Vaccines are safe, effective and the best way to keep our children safe,” adding “This administration has taken aggressive action to contain the measles outbreak, but given its scale, additional steps are needed to end this public health crisis.”

The vaccine problem was witnessed first-hand Thursday at two schools in Williamsburg, which had to be closed by the Health Department for allowing dozens of unvaccinated students to attend classes, according to officials.

Cuomo said that while he understands and respects the right to freedom of religion, “our first job is to protect the public health and by signing this measure into law, we will help prevent further transmissions and stop this outbreak right in its tracks.”

Dinowitz’s bill had been approved by the Democrat-led Assembly by a 77-53 vote, though the tally was unofficial. The legislation will end non-medical exemptions for vaccines statewide. –New York Post

 “I don’t ever remember in all my years here, the screaming in the Assembly chamber and the disruption in the Assembly chamber — people yell and scream outside and that’s fine, that’s fine — but the disrespect, not to me … Forget me … to the institution, to all the members of the state … was frankly a disgrace,” said Dinowitz. “And these are the religious people?! Shame on them. Shame on them.“

Controversy has been brewing in New York over some members of the Orthodox Jewish community’s refusal to vaccinate their children for religious reasons. As detailed in March by the New York Times: 

SPRING VALLEY, N.Y. — Erica Wingate was working at a clothing store in town this week when a male customer, with the black hat and sidelocks typically worn by ultra-Orthodox Jews, started coughing.

Another shopper standing next to him suddenly dropped the item she had been holding and clutched her child. “She was buying something, and she just threw it down,” Ms. Wingate recalled. “She said, ‘Let’s go, let’s go! Jews don’t have shots!’”

A measles outbreak in this suburban New York county has sickened scores of people and alarmed public health experts who fear it may be a harbinger of the growing influence of the anti-vaccine movement. But it has also intensified long-smoldering tensions between the rapidly expanding and insular ultra-Orthodox Jewish community and secular society.

The authorities here in Rockland County have traced the spread of measles to ultra-Orthodox families whose children have not been vaccinated.

It should be noted that while some ultra-Orthodox rabbis have come out against vaccines, it is a misconception that all Orthodox Jews don’t vaccinate. 

“The conception that is out there is completely distorted, and that is, that the Orthodox community for the most part don’t vaccinate their children, and that is not true,” said Rockland County legislator Aron B. Wieder, a prominent member of the Hasidic community.

Steve Gold, chairman of the Jewish Community Relations Council for the Jewish Federation of Rockland said in March: “I think it just opened up the door for everybody to say whatever they wanted to say,” adding “And they’re putting, the way it looks right now, 100 percent blame on the Orthodox community.” 

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

Turkey Sink Deeper Into Junk After Moody’s Downgrades To B1, Warns Of Government Default Risk

When it rains, it pours for Turkey, which already saw its currency slump earlier in the day when its foreign minister, Murat Cavuosglu, said that Ankara is ready to retaliate to any US sanctions imposed upon the NATO member state by the US over Turkey’s purchase of a Russian S-400 missile system. And then, with markets set to close for the day and today’s pounding of the Turkish lira put in the history book, Warren Buffett’s favorite rating agency, Moody’s, delivered what tomorrow will surely be called an act of aggression and prompt Erdogan to expel any Moody’s employees from Turkey and confiscate any office they may have in the country, namely a downgrade of Turkey deeper into junk territory, cutting its credit rating by one notch from Ba3 to B1, outlook negative.

As Moody’s explained “today’s downgrade reflects the view that the risk of a balance of payments crisis continues to rise, and with it the risk of a government default.” Pretty self-explanatory.

The news spiked the lira – which continues to be inexplicably bid after every incremental piece of bad news by “unknown” traders – as much as 300 pips lower, before the loss was cut in half, and the USDTRY closed the day at 5.8951. Of course, now that not only is Turkey’s sale of sovereign debt going to be that much more expensive, but once Trump does in fact hike tariffs on Turkey, there will be the usual bevy of “traders” angrily asking how they failed to sell the lira at the current extremely generous levels when they could. And if they don’t, we will remind them.

Moody’s full note is below.

Moody’s Investors Service (“Moody’s”) has today downgraded the Government of Turkey’s long-term issuer ratings to B1 from Ba3 and has maintained the negative outlook. The senior unsecured bond ratings and senior unsecured shelf ratings have also been downgraded to B1 and (P)B1 respectively from Ba3/(P)Ba3.

Concurrently, Moody’s has downgraded to B1 from Ba3 the backed senior unsecured bond ratings of Hazine Mustesarligi Varlik Kiralama A.S., a special purpose vehicle wholly owned by the Republic of Turkey from which the Turkish Treasury issues sukuk lease certificates, and has maintained the negative outlook.

Today’s downgrade reflects Moody’s view that the risk of a balance of payments crisis continues to rise, and with it the risk of a government default. The B1 rating balances these risks against the country’s fundamental credit strengths, particularly its large, diversified economy and still-moderate levels of government indebtedness.

In a related decision, Moody’s lowered Turkey’s long-term country ceilings: the foreign currency bond ceiling to B1 from Ba2; its foreign currency deposit ceiling to B3 from B2; and its local currency bond and deposit ceilings to Ba2 from Ba1.

The short-term foreign currency bond ceiling and short-term foreign currency deposit ceiling remain at Not Prime (NP). Ceilings generally act as the maximum ratings that can be assigned to a domestic issuer in Turkey, including structured finance securities backed by Turkish receivables. The decision to align the foreign currency bond ceiling and the government bond ratings reflects Moody’s view that exposure to a single, common threat — loss of external confidence and capital — means that the fortunes of public and private sector entities in Turkey are, from a credit perspective, increasingly intertwined.

RATINGS RATIONALE

The impact of the continued erosion in institutional strength and policy effectiveness on investor confidence is increasingly outweighing Turkey’s traditional credit strengths including its large, diverse economy and the low level of government debt. Turkey is structurally highly reliant on external capital flows, and Moody’s confidence in its ability to continue to attract the large sums needed each year to repay debt and sustain growth is waning. It remains highly vulnerable to a further prolonged period of acute economic and financial volatility. Foreign exchange reserve buffers are weak and Moody’s expects them to weaken further over the next two years relative to economy-wide short-term liabilities. While policy announcements have been made, the political authorities have yet to implement a plan that would allow the economy to adjust to a new, more sustainable equilibrium due to the negative short-term economic impact that this adjustment would entail.

The government’s willingness or ability to implement policies that will sustain external investor confidence in the economy and financial system by addressing underlying weaknesses remains uncertain. Since mid-2018, the government has announced a number of economic reform packages. Ultimately, these announcements have been either reactive to particular pressures on the economy or a restatement of measures that would be credit positive if implemented, but have been discussed for years, and where little concrete has been done to execute on these policy aspirations. Most government measures, including those targeting the banking system, continue to be focused on the near-term priority of propping up economic activity at the expense of eroding the underlying resilience of the economy and its banking system to external shocks, in part by increasing its fragility to shifts in market sentiment.

The longer that remains the case, the more the weakness implied by Turkey’s very high reliance on external capital across all sectors of the economy comes to dominate Moody’s analysis; and the greater the risk of further externally-sourced shocks involving further capital outflows, loss of reserves, weakening in the exchange rate, rises in inflation and severe damage to medium-term growth. As a result, Moody’s believes that the country’s vulnerability to an acute and highly disruptive balance of payment crisis that ultimately would significantly constrain the capacity and perhaps the willingness of the government to service its debt is now more aligned to a single B rating, despite its still moderate debt burden relative to similarly-rated peers.

Turkey is indeed once again facing intermittent currency crises after a period of relative calm that lasted from late September 2018 through February 2019. In consequence, both gross and net reserves have fallen since February, with the decline in net reserves being particularly pronounced. Gross and net reserve levels have been structurally weak for many years, but this decline contributes to a significant increase in external vulnerability for the country. In 2019, Moody’s expects that short-term external debt repayments, currently maturing long-term external debt, and total non-resident deposits will total more than 2.6 times the level of FX reserves. Moreover, funding costs have risen rapidly, with yields up by around 400 basis points since February.

The fall in FX reserves seems contrary to the central bank’s longstanding policy to allow the exchange rate to float freely, and raises further concerns about the transparency and independence of the central bank and, by extension, Turkey’s broader institutional framework.
External pressures are exacerbated by the ongoing disagreement between Turkey and the United States, this time relating to Turkey’s purchase of the S-400 missile system from Russia. The sanctions which the US Congress will consider if the purchase goes ahead, while largely undefined to date, cast a further shadow over Turkey’s economy and financial system.
RATIONALE FOR THE NEGATIVE OUTLOOK
The balance of risk is firmly tilted to the downside. The risk of an acute balance of payments crisis remains relatively low in the very near term, consistent for now with the highest rating level in the single-B rating category. However, weakening external buffers point to this being an unstable equilibrium, and the more time passes the more the government’s ability to steer the economy away from a more credit-negative path of a balance of payments crisis is diminished. This, in turn, increases the probability of more credit negative outcomes involving the need for capital controls, restrictions on access to foreign currency and (sanctions permitting) external support.
There are a number of possible near-term drivers for further instability. In Moody’s view, the re-run of the Istanbul mayoral election on 23 June 2019 creates potential for political unrest that could trigger a further material decline in the value of the lira and a further depletion of FX reserves. The imposition of sanctions on Turkey could also lead to a further, highly credit negative, market reaction. Moreover, depending on the sanctions imposed, it could also raise doubts over Turkey’s ability to access an IMF programme, should one be needed in the future to avoid an escalation of a balance of payments and economic crisis. Even if Moody’s does not currently expect that to be needed, the potential tension between sanctions and external support could in itself further undermine investor confidence in the credit.
WHAT COULD CHANGE THE RATING DOWN/UP
Moody’s would likely downgrade Turkey’s rating if it were to become clear that avoiding a more credit-negative path was becoming increasingly unlikely, perhaps because of the currency crisis deepening further. Any indication that capital controls were becoming more likely or that Turkey’s fiscal strength was deteriorating in a significant way would be credit negative. A material deterioration in relations with the US in the form of sanctions would also put downward pressure on the rating due to the implications that might have for receiving IMF assistance.
Given the negative outlook, upward rating movement is unlikely. However, the rating could be stabilised if the authorities were able to present and, crucially, implement a credible and broad-based programme for addressing external pressures and engineering a rebalancing of the economy. Significant external financial support, and the policy agenda that would likely accompany it, would also be supportive for the rating.
NATIONAL SCALE RATINGS
Moody’s will shortly publish an update to its National Scale Rating (NSR) map for Turkey to reflect the downgrade of the government’s long-term issuer rating. Moody’s NSRs are ordinal rankings of creditworthiness relative to other credits within a given country, which offer enhanced credit differentiation among local credits. NSRs are generated from Global Scale Ratings (GSRs) through correspondences, or maps, specific to each country. However, unlike GSRs, Moody’s NSRs are not intended to rank credits across multiple countries. Instead, they provide a measure of relative creditworthiness within a single country. The full maps can be accessed through the “Index of Current and Superseded Compendia of National Scale Rating Maps by Country”.

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

Curveball Corners The Fed – Powell Better Choose His Battles Wisely

Authored by Sven Henrich via NorthmanTrader.com,

If you went panic chasing into stocks following Jay Powell’s ‘ready to act’ speech on June 4 on the expectation for imminent rate cuts you just got thrown a curveball: Economic data just printed than better expected results. Retail sales and industrial production data rebounded from the previous months’ dismal readings. 0.5% for retail sales and 0.4% for industrial production for May.

The Atlanta Fed reacted quickly and updated their Q2 GDP model north of 2%:

That smacking sound you’re hearing is the sound of any immediate rate cuts being kissing goodbye, certainly for June and perhaps now even July.

Remember, the Fed is coming from the lowest bound ever to commence a new rate cut cycle. 225 basis points. Compared to the last 2 cycles they have less than half of available ammunition available. They’d be nuts to cut here, but with this crew who knows. After all they jump as soon as the market so much as sneezes.

But that’s the problem for the Fed here, the market is not sneezing, it’s jammed near all time highs on the expectation of rate cuts.

But it’s the Fed’s now fault, the constant proactive interventions have created the expectation game.

It was not always so. Todd Harrison sent me a note this week he published in 2007 and back then he already rightfully lamented the change in the Fed’s role:

“The Federal Reserve is supposed to act as a buffer when times are tough, a beacon in the light if you will, the lender of last resort. Over the course of time, they have become entirely more proactive. They stopped acting in response to crisis and began targeting financial assets in a series of events that unintentionally created one.”

Boy, how far we’ve come. All is gaming the Fed these days, every time:

So next week will be an expectations gaming exercise and the Fed’s main task will be the same as always: Carefully craft its language to not disappoint markets. ‘Yea we may not cut right away, but don’t worry, anything goes wrong we’ll be right there to save you’. I suppose if they want to throw a dovish bone to not disappoint they may just as well announce ending QT right away. It’s become a joke anyways compared to the expectations of autopilot outlined in 2018.

Despite the economic beats today the bond market is not buying it.

10 year versus $SPX:

And perhaps that’s all the excuse the Fed needs to throw the dovish bone and coax markets to new all time highs.

After all that’s what markets want and are expecting. Here’s BAML telling people to go all in.

Protection? Who needs that? Sell that. Buy everything else. The Fed has our back.

3,000 may well happen first, we’re not that far away. But there’s a longer term technical target out there:

Now there’s a reason for the Fed to cut rates. So if you’re buying stocks near all time highs anticipating rates cuts…be careful what you wish for.

If the Fed had a ton of ammunition a precautionary cut may make sense, but they don’t. They’re approaching this fight with the clip less than half full.

Better choose your battles very carefully, but don’t disappoint rate cut hungry markets. Best of luck with that.

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More this weekend in the Weekly Market Brief. For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

via ZeroHedge News http://bit.ly/2ZtFX05 Tyler Durden

Trump ‘Clarifies’ Foreign Intel Remarks; “Of Course You Give It To The FBI” 

President Trump on Friday engaged in a bit of damage control after telling ABC News that he wouldn’t notify the FBI if a foreign government offered negative information on a political opponent. 

Clarifying his remarks, Trump said that he would look at the information first, and if it was “bad” he would notify authorities. 

“Of course you give it to the FBI or report it to the attorney general or somebody like that,” Trump said in a wide-ranging interview with Fox & Friends. 

“First of all, I don’t think anyone would present me with anything bad because they know how much I love this country,” said Trump. “Number two, if I was, and of course you have to look at it because if you don’t look at it, you’re not going to know if it’s bad. How are you going to know it is bad?”

“I thought it was made clear. In fact, I actually said at the beginning that I’d do both,” said Trump 

Trump initially said on Wednesday that it would be absurd to call the FBI instead of taking the foreign-sourced information, then later in the same interview said “I think maybe you do both,” adding “I think you might want to listen, there isn’t anything wrong with listening.”

“Someone comes up and says, ‘Hey, I have information on your opponent.’ You call the FBI? Give me a break. Life doesn’t work like that,” said Trump. 

via ZeroHedge News http://bit.ly/2MM8qwA Tyler Durden

Seven Reasons To Be Highly Skeptical Of The Gulf Of Oman Incident

Authored by Caitlin Johnstone via Medium.com,

In a move that surprised exactly zero people, Secretary of State Mike Pompeo has wasted no time scrambling to blame Iran for damage done to two sea vessels in the Gulf of Oman on Thursday, citing exactly zero evidence.

“This assessment is based on intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high-degree of sophistication,” Pompeo told the press in a statement.

“The United States will defend its forces, interests, and stand with our partners and allies to safeguard global commerce and regional stability. And we call upon all nations threatened by Iran’s provocative acts to join us in that endeavor,” Pompeo concluded before hastily shambling off, taking exactly zero questions.

Here are seven reasons to be extremely skeptical of everything Pompeo said:

1. Pompeo is a known liar, especially when it comes to Iran.

Pompeo has a well-established history of circulating blatant lies about Iran and the behavior of the Iranian government, and he recently told an audienceat Texas A&M University that when he was leading the CIA, “We lied, we cheated, we stole. We had entire training courses.”

2. The US empire is known to use lies and false flags to start wars.

The US-centralized power alliance has an extensive and well-documented history of advancing preexisting military agendas using lies, false flags and psyops to make targeted governments appear to be the aggressors. This is such a well-established pattern that “Gulf of Tonkin” briefly trended on Twitter after the Gulf of Oman incident. Any number of government agencies could have been involved from any number of the nations in this alliance, including the US, the UK, the KSA, the UAE, or Israel.

3. John Bolton has openly endorsed lying to advance military agendas.

I wrote an article about this last month because the Trump administration had already begun rapidly escalating against Iran in ways that happen to align perfectly with the longtime agendas of Trump’s psychopathic Iran hawk National Security Advisor. At that time people were so aware of the possibility that Bolton might involve himself in staging yet another Middle Eastern war based on lies that The Onion was already spoofing it.

On a December 2010 episode of Fox News’ Freedom Watch, Bolton and the show’s host Andrew Napolitano were debating about recent WikiLeaks publications, and naturally the subject of government secrecy came up.

“Now I want to make the case for secrecy in government when it comes to the conduct of national security affairs, and possibly for deception where that’s appropriate,” Bolton said. “You know Winston Churchill said during World War Two that in wartime truth is so important it should be surrounded by a bodyguard of lies.”

“Do you really believe that?” asked an incredulous Napolitano.

“Absolutely,” Bolton replied.

“You would lie in order to preserve the truth?”

“If I had to say something I knew was false to protect American national security, I would do it,” Bolton answered.

This would be the same John Bolton who has been paid exorbitant speaking fees by the pro-regime change MEK terror cult, promising the cult in a 2017 speech that they’d be celebrating regime change in Tehran together before 2019. This would also be the same John Bolton who once threatened to murder an OPCW official’s children if he didn’t stop getting in the way of his Iraq war agenda.

4. Using false flags to start a war with Iran is already an established idea in the DC swamp.

Back in 2012 at a forum for the Washington Institute Of Near East Policy think tank, the group’s Director of Research Patrick Clawson openly talked about the possibility of using a false flag to provoke a war with Iran, citing the various ways the US has done exactly that with its previous wars.

“I frankly think that crisis initiation is really tough, and it’s very hard for me to see how the United States president can get us to war with Iran,” Clawson began.

“Which leads me to conclude that if in fact compromise is not coming, that the traditional way that America gets to war is what would be best for US interests,” Clawson added. “Some people might think that Mr. Roosevelt wanted to get us into the war… you may recall we had to wait for Pearl Harbor. Some people might think that Mr. Wilson wanted to get us into World War One; you may recall we had to wait for the Lusitania episode. Some people might think that Mr. Johnson wanted to get us into Vietnam; you may recall we had to wait for the Gulf of Tonkin episode. We didn’t go to war with Spain until the USS Maine exploded. And may I point out that Mr. Lincoln did not feel that he could call out the Army until Fort Sumter was attacked, which is why he ordered the commander at Fort Sumter to do exactly that thing which the South Carolinians said would cause an attack.”

“So if, in fact, the Iranians aren’t going to compromise, it would be best if somebody else started the war,” Clawson continued. “One can combine other means of pressure with sanctions. I mentioned that explosion on August 17th. We could step up the pressure. I mean look people, Iranian submarines periodically go down. Some day, one of them might not come up. Who would know why? [Smattering of sociopathic laughter from the crowd.] We can do a variety of things, if we wish to increase the pressure (I’m not advocating that) but I’m just suggesting that this is not an either/or proposition — just sanctions have to succeed or other things. We are in the game of using covert means against the Iranians. We could get nastier at that.”

5. The US State Department has already been running psyops to manipulate the public Iran narrative.

State Department officials admitted to Congressional staff at a closed-door meeting on Monday that a $1.5 million troll farm had gone “beyond the scope of its mandate” by aggressively smearing American critics of the Trump administration’s Iran policy as propagandists for the Iranian government, according to a new report from The Independent. That “mandate” had reportedly consisted of “countering propaganda from Iran”, also known as conducting anti-Iran propaganda.

“Critics in Washington have gone further, saying that the programme resembled the type of troll farms used by autocratic regimes abroad,” says The Independent.

“One woman behind the harassment campaign, a longtime Iranian-American activist, has received hundreds of thousands of dollars from the State Department over the years to promote ‘freedom of expression and free access to information,’” the report reads.

6. The Gulf of Oman narrative makes no sense.

One of the ships damaged in the attacks was Japanese-owned, and the other was bound for Japan. This happened just as Japanese Prime Minister Shinzo Abe was in Tehran attempting to negotiate a de-escalation between the US and Iran with Trump’s blessing , and just after Iran had released a prisoneraccused of conducting espionage for the US in what many took to be a gesture of good faith.

Iran has been conducting itself with remarkable restraint in the face of relentless sanctions and provocations from the US and its allies; it wouldn’t make much sense for it to suddenly abandon that restraint with attacks on sea vessels, then rescue their crew, then deny perpetrating the attacks, during a time of diplomatic exchanges and while trying to preserve the nuclear dealwith Europe. If Tehran did perpetrate the attacks in order to send a strong message to the Americans, it would have been a very mixed message sent in a very weird way with very odd timing.

7. Even if Iran did perpetrate the attack, Pompeo would still be lying.

Pompeo’s statement uses the words “unprovoked” twice and “Iran’s provocative acts” once, explicitly claiming that the US empire was just minding its own business leaving Iran alone when it was attacked out of the blue by a violent aggressor. Sometimes the things put out by the US State Department feel like they’re conducting experiments on us, just to test the limits of our stupidity.

As noted in this article by Moon of Alabama and this discussion on the Ron Paul Liberty Report, the US has been provoking Iran with extremely aggressive and steadily tightening sanctions, which means that even if Tehran is behind the attacks, it would not be the aggressor and the attacks would most certainly not have been “unprovoked”. Economic sanctions are an act of war; if China were to do to America’s economy what America is doing to Iran’s, the US would be in a hot war with China immediately. It could technically be possible that Iran is pushing back on US aggressions and provocations, albeit in a strange and neoconservatively convenient fashion.

Either way, we have seen exactly zero evidence supporting Pompeo’s claims, so anyone you see hastening to blame Iran for the Gulf of Oman incident is either a war whore or a slobbering moron, or both. Knowing what we know about the US-centralized empire and its pre-existing regime change agenda against Iran, there is no reason to believe Pompeo and many reasons not to.

*  *  *

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via ZeroHedge News http://bit.ly/2WG7tFR Tyler Durden

Markets Stuck In Limbo As Traders Brace For Next Week’s Fireworks

Heading into today’s session, the mood had already soured on chip names after Broadcom’s dismal guidance cut, which slammed tech names in Asia and Europe, and which pressured the Semiconductor sector lower all day, and also prevented the Nasdaq from turning green all day.

The latest econ data from China did not help, with Industrial Production missing the lowest estimate, and printing at a 17 year low in the latest confirmation that Beijing’s attempt to reflate the local economy is failing, even as retail sales staged a modest rebound from last month’s disastrous print.

However, while traders were absolutely certain that next week the Fed had no choice but to telegraph a rate cut cycle was imminent, that conviction was dented a bit when the US reported strong retail sales and, more importantly, solid upward revisions to last month’s data…

… although even so, the odds of a July rate cut barely shifted, remaining solidly above 80%.

As such, with no new information about either next week’s Fed cut, or the outcome of the critical G-20 meeting where the fate of the US trade war may be decided (but won’t be) the market meandered, and went nowhere, with Construction and Banks outperforming, while Tech, Energy, and the Russell all underperformed.

Meanwhile as stocks drifted, so did Tsy yields, with the 10Y yielding 2.09%, after sliding below 2.06% earlier in the session, before rebounding to unchanged, even as the recent trend is clearly lower, and a 1 handle is distinctly possible next week if the Fed does in fact surprise dovishly.

Things were more dramatic in Europe, where the 10Y Bund hit a new negative record of -0.27%…

… as European 5Y5Y inflation swaps also hit a new all time low as central bank credibility is rapidly evaporating.

Worse, as BofA showed earlier, the yield on all global debt ex the US is now at an all time record low as deflation is once again becoming the norm, while the amount of negative yielding debt is back to all time highs.

Well, deflation for everyone but the US perhaps, because in FX, the dollar once again reigned supreme, with the yen, euro and cable all sliding, while the DXY – having rebounded perfectly off the 200DMA – was rising toward its next big resistance level around 98, while the BBDXY emerged back over 1200 offsetting much of the market’s recent fears of a Fed rate cut. It does beg the question: what if anything can bring the dollar lower?

Perhaps the most interesting asset of the day was gold, which increasingly more investing legends are backing into what will be the Fed’s next easing cycle, and which after briefly attempting to breakout above a 2 year resistance, was smacked down, sliding $20 from intraday highs, suggesting that another attempt at a breakout will have to be attempted again next week.

And so, as we enter the most important week of the year, equity traders remain surprisingly calm, even as rate vol continues to soar and commodity volatility is not too far behind.

Still, as we noted earlier, next week could result in turmoil in rates vol, where one or more dealers is said to be nursing a major, $100MM+ loss, and should the Fed turn even more dovish, said turmoil could well and finally migrate to the equity space as well.

And after what was a largely wasted day, we look toward next week’s fireworks, where BofA laid out a matrix of what to expect between the two key events: the G-20 meeting and the FOMC, and where the range of outcomes could send the S&P from below 2,650 to above 3,000.

 

In short, brace for a violent return in volatility.

 

via ZeroHedge News http://bit.ly/2Zth9Fh Tyler Durden