Tag: news

The most important question in all of finance is when the recession will end. The appearance of the strongest market recovery rally in 87 years, would suggest sunny days are ahead for the real economy. Though, the forward-looking market, is too forward-looking, ignoring today’s deep economic scarring and pricing in an economic recovery that could be years away. 

A majority of economists believe the US economy could emerge from the virus-induced recession sometime later this year or at some point in 2021, according to Bloomberg, citing a new National Association for Business Economics (NABE) survey.

About half of the respondents surveyed expect the economy to return to 4Q19 GDP activity level sometime in 2022.   

Sixty-six percent of respondents said the economy remains in a contraction that started in February, while 80% indicate a 25% probability of a double-dip recession. 

In terms of a recession – a ‘V-shaped’ recovery in the real economy this year is becoming a distant dream. It sounds more like government propaganda, one that is routinely pumped by the Trump administration, because, hey, it’s an election year… 

There’s an abundance of economic data out there suggesting the economic recovery is transforming from a ‘V’ to a ‘Nike Swoosh,’ shown below:

The NABE survey also showed many of the respondents believe Congress should pass another round of fiscal stimulus, with 22% indicating the size of the stimulus should be around $1.5 to $2 trillion. 

About 40% of respondents grade Congress’ fiscal response as “insufficient,” 37% believe it’s “adequate – while 75% said the Federal Reserve monetary policy response is “about right.” 

And maybe fears of a double-dip recession, or at least the belief a ‘V-shaped’ recovery is not in the cards this year as it would take trillions of more dollars of monetary and fiscal stimulus to supercharge the economy once again. 

We’ve highlighted the surge in money supply, following the virus-induced lockdowns, unleashed a massive spike in positive economic surprises as tracked by the Citi econ surprise index – though with waning stimulus, positive economic beats appearing to be stalling, suggesting the recovery could reverse. 

Even though President Trump signed an executive order to redirect disaster-relief funds to extend supplemental unemployment insurance, implementation has been slow. 

Hopes for a ‘V-shaped’ economic rebound continue to diminish. 

Authored by Michael Every via Rabobank,

“It’s Still Good! It’s Still Good!”

Many years ago there was an episode of The Simpsons where Homer decides to roast an entire suckling pig, apple in mouth and all. He even invites over the neighbours to enjoy his culinary triumph, the “Pig de resistance”.

“A toast to the host who can boast the most roast!” says Ned Flanders. This all infuriates his vegetarian daughter, Lisa, who takes the lawnmower and pushes the entire pig, which is on trolley, out of the garden, up a steep hill,…and then let’s gravity go to work. The pig rolls down the hill and crashes at speed through a hedge.

“It’s a little dirty. It’s still good! It’s still good!” cries Homer, running after it. Then the pig goes off a bridge and into the river.

“It’s just a little slimy. It’s still good! It’s still good!” cries Homer from the bridge. Then the pig gets sucked into a drainage hole in a dam, pressure builds up behind it, and it goes flying through the air like a missile on the other side.

“It’s just a little airborne. It’s still good! It’s still good!” bewails Homer.

“It’s gone,” says Bart.

“I know,” concedes Homer.

In the top-floor office of the Springfield nuclear power plant, Mr Burns looks out at the vista and says: “You know Smithers, I think I will donate one million dollars to the local orphanage….when pigs fly.” Both cackle. Then the suckling pig flies past the two stunned men.

“Will you be donating that million dollars now, Sir?” asks Smithers.

“No, I’d still rather not,” replies Burns.

Frankly, the above is as good a description of the US-China phase one trade deal as I can think of (as well as of the general attitudes of the very wealthy). The deal was, on paper, a feast for the US – lots and lots more NET exports to China, promises on other areas of contention, and a monitoring mechanism.

However, even if Covid-19 hadn’t pushed it down the hill, the underlying US-China dynamic would have anyway. The US and China and the market commentariat may be echoing Homer –“It’s still good! It’s still good!”– but this particular trade deal is already in the hole in the dam with water pressure building up behind it. It just hasn’t been violently ejected the thing into the air…yet.

Of course, this is not a new view here. Yet it was further underlined by everything written about China written in the 50-point Trump agenda yesterday, which involves bringing jobs home using tariffs and taxes; it is underlined by the continued US crackdown on Huawei, for example – unless we presume other Chinese firms are going to be lining up to buy semiconductors from the US instead(?); and it is very much underlined by Politico reporting that the White House is considering officially designating China’s treatments of its Uighur minority as genocide, which is about as inflammatory an accusation as one can make – and a Biden campaign spokesperson has already used exactly that term.

Meanwhile, from the Chinese side, The Asia Times’ perpetual Belt-‘n-Roader Pepe Escobar gives a selective reading of the political tea leaves that highlights the following (my comments added):

• Beijing won’t shut US businesses operating in China, but new companies wanting to enter the market in finance, IT, healthcare and education services will not be approved (i.e., decoupling).

• Beijing won’t dump its US Treasuries (which would be impossible anyway) but is going to sell as much as USD200bn in 2020 (which means nothing at all for Treasuries as someone else will be happily buying them, but makes one wonder what China will be buying…and selling; not to the US and earning USD, presumably?)

• CNY internationalization (which is not happening) will be accelerated, including clearing USD through the CIPS system to mitigate any ban on using SWIFT. (Except the US controls the USD and can tell everyone if they use CIPS then they can’t use USD in SWIFT.)

• The PLA has been put into Stage 3 alert: all leave has cancelled for the rest of 2020; defence spending will rise to 4% of GDP; and more nuclear weapons will be produced. (Which will raise US-China tensions, is hideously expensive, and will push the fiscal deficit deeper into the red, while dragging the current account in the same direction.)

• Chinese is stressing self-reliance and “dual circulation” to focus on its internal market. (Which means they need higher wages for higher spending, which means a loss of export competitiveness and a current account deficit and no self-reliance; unless China decouples from the world.)

• The consolidation of the Eurasian integration project in parallel to a global CNY (e.g., economic powers like Belarus?)

In short, China appears determined to go its own way at its own pace, and even if the strategy it publicly suggests it will use to do so is not adequate given the potential pressure points the US can use against it, then it appears Beijing is more likely to adapt than concede. Such adaptation is very unlikely to meet the terms of the US-China phase one trade deal.

Read all the above and then ask yourself: “Is it still good? Is it still good?”

Right now, the answer is yes. However, the water (read: political) pressure is building, and when the time is right for either side… POP!!

The only way to see that isn’t the case is to believe that pigs can fly. Which, oddly enough, seems to be prevalent among many of Mr Burns’ friends in Wall Street, and those buying CNY at 6.90.

CNN‘s Don Lemon wants Joe Biden to stop ignoring violent race riots gripping the country – but not because of the crime, or the death, or the deep divide in America that’s caused the price of ammunition to skyrocket as mobs of unhinged leftists harass innocent people.

Nope, it’s because the riots are “showing up in the polling” and helping President Trump.

The following exchange took place between Lemon and CNN’s Chris Cuomo on Tuesday:

Cuomo: “You have COVID and Kenosha, Don, and what’s happening in Wisconsin, it’s a Rorschach test for where this country is, and I think it probably represents the biggest threat to the Democratic cause.

Lemon: “You took the words right out of my mouth.”

Cuomo: “That’s because we’re reading from the same teleprompter.”

Lemon: “That’s all you. This is where I come in. We’ll get to that. But when you said it’s too little too late, I don’t know about that. I mean, we still have a lot of time left until election day. I do think that this —what you said was happening in Kenosha is a Rorschach test for the entire country. I think this is a blind spot for Democrats. I think Democrats are hoping this will go away, and it’s not going to go away.”

“I think maybe Joe Biden may be afraid to do it. I’m not sure. Maybe he won’t, maybe he is. He’s got to address it. He’s got to come out and talk about it. He’s got to do a speech like Barack Obama did about race. He’s got to come out and tell people that he’s going to deal with the issue of police reform in this country, and that’s what’s happening now is happening under Donald Trump’s watch. When he is the president, Kamala Harris is the vice president. Then they will take care of this problem. But guess what? The rioting has to stop. Chris, as you know, and I know it’s showing up in the polling, it’s showing up in focus groups. It is the only thing right now that is sticking.” (Transcript via Breitbart)

Watch:

quiet part out loud https://t.co/2EZsI4DrV0

— Guy Benson (@guypbenson) August 26, 2020

And as Rusty Weiss of The Mental Recession notes – violent crime is now a major issue among voters heading into the 2020 election.

A recent poll from the Pew Research Center indicates violent crime is a major issue amongst voters heading into the 2020 presidential election.

A sizable 59 percent of voters in the survey indicate that violent crime, which President Trump has framed as happening in Democrat-controlled cities, is a “very important” factor in casting their ballots.

When broken down by party affiliation, the party of law and order becomes clear: 46 percent of Joe Biden supporters view violent crime as an important factor, while 74 percent of President Trump’s backers feel the same.

“A new Pew survey found that violent crime is now the fifth-most important issue for votes, with 59% listing it as ‘very important’ to their vote. For context, it’s nearly as important to Americans as the coronavirus, which ranks fourth with 63%”https://t.co/25M33A3GVy

— Josh Kraushaar (@HotlineJosh) August 24, 2020

Imagine what Lemon would say if the riots were helping Biden.

The is sociopathic and psychopathic behavior…basically stop because it’s helping #Trump? …these 2 are not right in the head. https://t.co/AyC6gnWHuB

— Ed ☯️ (@DowdEdward) August 26, 2020

Yesterday we explained why Bank of America, a contrarian voice among Wall Street banks, believes that hopes for an explicit announcement of Average Inflation Targeting (AIT) by Jerome Powell in his highly-anticipated speech titled “Monetary Policy Framework Review” to be delivered at 910am on Thursday which wraps up an examination of inflation which started in early 2019 among both among central bank officials and the public, will be a disappointment.

The first reason that an explicit policy would entail picking a specific time period over which PCE inflation is required to average 2% before beginning a policy normalization (hiking) process. This is a problem, because in simulations conducted by the BofA rates team, it found this could in require the Fed to remain on hold for 42 years!

Furthermore, explicit AIT could also cripple the Fed’s already waning credibility, not least of all because “it would also bring up difficult issues around the appropriate time period to calculate averages and the maximum realized inflation rates the Fed would tolerate while the average climbs higher.” Ultimately, BofA concludes that an explicit policy of AIT could greatly complicate both Fed communication and logistics. This would risk a reduction in the Fed’s credibility, which is already vulnerable given:

• the market’s pricing of inflation expectations well below 2% for the next 30 years, and
• its decade-long miss in achieving its inflation mandate

Explicit policies aside, there is the question of just what mere “forward guidance” and jawboning can do when the Fed is already at the limit of its firepower, and according to some has even crossed into illegal territory by purchasing corporate bonds. In other words, “the market is overhyping the Fed’s ability to change the course of inflation in the future, under any policy.” Here’s why:

To begin with, interest rates are already close to 0 across the entire Treasury curve. The principle of monetary easing is to increase aggregate demand by lowering the cost of funding, theoretically increasing borrowing for spending and investment. But at the current low rates, even if the Fed were to set all Treasury rates to 0bp, how many new borrowers and spenders would emerge? This is the problem of the zero lower bound that has worried the Fed and other central banks for years. The incremental ability to ease, without adopting deeply negative rates, is limited.

Yet one look at the market and front page headlines today, suggest that Bank of America is in the minority when it comes to what Powell will announce tomorrow, when under the smokescreen of “Average Inflation Targeting”, the Fed will essentially assure markets that rates will be at zero for years to come (42 if BofA is right).

So assuming that Powell does everything he can not to disappoint markets, the Fed chair then faces a far tougher task: convincing the public not only that the central bank can and will deliver in the wake of a pandemic that has eroded trust in institutions and put a huge chunk of the labor force on the unemployment rolls, but more importantly, convince Americans that higher inflation will be good for them in the long run – even as analysts, such as BofA , have already begun second-guessing whether a new Fed “framework” will fare any better than the current one in an environment where monetary policy is at the limit of what it can do to help the economy.

“The situation is really perilous right now and there is little that monetary policymakers at this point have left in their arsenal,” David Wilcox, former head of the Fed’s research division and now a senior fellow at the Peterson Institute told Reuters, adding that the Fed’s new framework, expected to be unveiled soon, will seem abstract unless it is coupled with new steps to enforce it, such as massive new bond-buying or the setting of explicit unemployment goals.

Which begs the question: if buying $3 trillion in bonds over just 3 months, a never been seen pace of debt monetization, failed to convince the market that inflation will rise over the long term as 30 Year breakevens at just 1.75% show…

… what will: buying $30 trillion? $300 trillion?

Or perhaps the Fed will punt, afraid of sparking an even more massive asset bubble, and instead of making an explicit AIT goal, merely acknowledges that a period of inflation overshoot is necessary to produce an average inflation rate of 2% over a cycle. This, according to BofA’s Ralph Axel “could take the form of officially changing the 2% inflation target to a range of 1.5-2.5%, or codifying that it will officially seek periods of inflation overshoots on the order of, say, 50-100bp to achieve its 2% goal on average through the cycles.”

Indeed, the minutes from the Fed’s last policy meeting indicated that may be the case, giving the central bank time to see how the economy behaves at this stage of the coronavirus pandemic. After all, it has already chopped interest rates to zero, started some bond-buying, and approved massive lending programs, however the market was disappointed when the Fed renounced Yield Curve Control for now – arguably a key market component of any inflation targeting regime.

One thing is certain: the Fed must do something if for no other reason than to give the impression it is fighting to reduce the surge in US unemployment as a result of the coronavirus shutdowns. And yet it begs the question: does the Fed really have any control over unemployment rate via the inflation channel?

It is not that long ago that the Phillips curve – which represents the theoretical linkage between the inflation rate and the unemployment rate in an economy – was declared dead. Indeed, until the March shutdowns, unemployment had collapsed to historically low levels without inflation even hitting the Fed’s 2% target. Expectations about inflation, considered key to the future pace of price hikes, also lagged, prompting even Yellen in one of her last speeches as Fed chair, to say that our understanding of inflation may be flawed by models that are misspecified and our inability to predict trends in sectors such as health care and housing which are large components of the price index.

In short, as BofA noted, the complete breakdown of the Phillips curve, inversely relating unemployment rates to wages, has long mystified the Fed and has caused them to rethink long-held concepts such as NAIRU (the non-accelerating inflation rate of unemployment).

And yet, despite a decade of failure, the hope now is that the reverse will work: that by sparking “asymmetric” as it is called in polite economic circles, or runaway – in the proper vernacular – inflation, will spark a flood of hiring. But why? In a world where it has become abundantly clear the US economy can operate just as efficiently on a “work from home” basis, why would corporations rush to rehire the same people they paid steadily rising wages instead of outsourcing to Vietnam or Eastern Europe?

As Reuters notes, the disconnect between employment and inflation has become a chronic problem not only for the Fed but for central bankers around the world. Without some inflation, interest rates remain lower than normal which while great for asset prices (this headline literally just hit on Bloomberg: *MSCI ALL-COUNTRY WORLD INDEX REACHES RECORD HIGH), it affords little room to help the economy by reducing them when recessions hit, as happened this year. Central banks are then faced with cutting rates quickly to zero and using politically more difficult tools like buying of government bonds and – for the first time ever – corporate bonds.

The Fed first put the inflation target in place in 2012, and has missed it most of the time since. As shown above, markets indicate the expected U.S. inflation rate 30 years out is just 1.75%, a level reflecting little worry about the risk of a jump in inflation and little faith in the Fed’s sway over the one economic variable a central bank is thought to control.

Which brings us full circle, with the thinking going as follows: if what the Fed has done so far hasn’t worked, then it’s time for the Fed to do even more of it.

“There is a growing realization that a 2% inflation target as originally put in place in the U.S. and around the world is not quite enough,” St. Louis Fed President James Bullard said in a recent interview with Reuters. Changing the framework could help “shore up the target and get expectations to stay at 2%,” he said. Actually, no, it would crush America’s already suffering middle class by sending prices higher even as wages continue to shrink.

It’s also why after Powell’s speech tomorrow laying the groundwork for AIT, at its policy meeting next month, the Fed is expected to change how it characterizes its inflation goal and instead of looking to achieve 2% inflation on an annual basis, it is expected to aim to achieve that level as an average over a longer time, and explicitly allow perhaps years of faster price increases to make up for years when prices rose too slowly.

And here again we go back to BofA’s math: it will take 42 years of 2.0% inflation to get back to normal; it would also take a decade of 2.5% inflation to offset the target shortfalls since 2012. It would also mean stocks at all time highs, while the average American standard of living will hit an all time low.

What about unemployment?

Well, the existing strategy treats super-low unemployment as a risk to inflation that the central bank needs to “mitigate” rather than as a bonus for workers as long as prices are tame. Ironically, record low unemployment in 2019 and early 2020 did nothing to spark higher inflation expectations; just the opposite.

And yet – the thinking goes – as the Fed supercharges inflation and greenlights faster price increases, implicit in an average inflation goal, which these days means simply higher stock prices with little impact on the broader economy or that biggest variable of all – higher wages – also known as “good inflation”…

… it ought to allow for lower unemployment since the Fed would leave financial conditions looser even as prices picked up.

Which basically boils down to the following argument: Americans will need to suffer through years, if not decades, of declining purchasing power and higher prices just so unemployment declines… which of course is bizarre in a time when increasingly more are hoping that Universal Basic Income from the government will replace traditional work for a growing chunk of the population.

Good luck selling the American people on that, especially at a time when the fastest price increases have been for essentials like food and appliances.

“What if we are unlucky and we get high unemployment and inflation over 2%?”, Columbia Threadneedle analyst Ed Al-Hussainy told Reuters. Those were the very conditions that led the Fed in the 1970s – a period of devastating stagflation – to wage a two-decade battle to set its credibility as an inflation fighter.

“Messaging the algebra to Congress and the public is a complete nightmare.”

By now, conservatives across the US understand that most of the violence being caused in the aftermath of these police shootings isn’t organized by locals, but rather by bands of traveling activists who live in nearby metropolises. In the Midwest, that’s Chicago, a hub of racial activism since Bernie Sanders went to school there back in the 1960s. Some might be coming from Milwaukee as well.

Just like we saw in New York City, many of the looters and people there committing acts of vandalism and violence are drawn from Chicago and other nearby areas.

On Tuesday’s broadcast of the Fox News Channel’s “The Story,” Rep. Bryan Steil (R-WI) stated that local law enforcement in Kenosha, WI are “very concerned large numbers of people are coming up from Chicago and trying to disrupt the public safety in the community of Kenosha,” in the wake of the shooting of Jacob Blake.

Meanwhile, left-wing pundits are already trying to frame the shooting as an act of white supremacist violence even though both the shooter and his victims were armed, and white.

Of course, nobody wants to mention the fact that Wisconsin Gov Tony Evers turned down the White House’s latest offer of assistance.

White House Chief of Staff Mark Meadows blasted Evers for his decision to turn down federal help and instead Meadows said that earlier in the day, he received a call from some members of the Wisconsin congressional delegation “really just pleading for help, said that the local sheriff and mayor and police chief need some additional assistance. So, I got on the phone right away and called the governor and offered assistance in the form of additional National Guard help. As you know, they’re going to have some additional National Guard there tonight. But you’ve got to, as a governor, and as elected officials, you’ve got to either ignore the problem — which, a lot of liberal governors are doing exactly that, they’re ignoring the problem — or you have to deal with it. … The president was on the phone with the governor today as well. We have National Guard standing by that, if the general for the National Guard needs additional help, we’re there to do it. But today, that request was denied by the governor.”

Some readers might wonder what causes some police shootings to evolve into massive “protest” movements, and others to be mostly ignored, or at least relatively much more mild? Kenosha is located right off the main highway that connects Chicago to Milwaukee, making it easily accessible to radical elements who tend to cluster in larger cities (in the second and third tier, if they don’t have rich parents who can help them afford an apartment in Brooklyn).

“This isn’t the Kenosha that I know. And if you look at where Kenosha is located, it’s along the lake between Milwaukee and Chicago. I’m very concerned, and I’ve heard from local law enforcement that they’re very concerned large numbers of people are coming up from Chicago and trying to disrupt the public safety in the community of Kenosha, all the more reason that we need to make sure that our community has the resources to be able to protect people’s lives, their personal livelihood, and their families, now.”

And after the damage is done, the suspects can zip right on back.

Before we go, here’s another photo that probably won’t make it on to MSNBC on Wednesday.

Authored by Jonathan Turley,

We have previously discussed the case of former Covington Catholic High School student Nick Sandmann who was repeatedly and falsely called a racist in an encounter with a Native American activist in front of the Lincoln Memorial. Various media organizations have apologized or settled cases with Sandmann for their unfair coverage, including CNN.

However, when Sandmann spoke at the Republic National Convention, CNN’s political analyst Joe Lockhart again attacked him personally after he criticized how the media got the story wrong. CNN’s Jeff Yang also attacked the teenager and even suggested that his speech proved that he was not innocent. Fellow CNN analyst Asha Rangappa attacked former United Nations Ambassador Nikki Haley as yielding to a racist America for not using what Rangappa suggested was her real name as opposed to “Nikki.” It turns out that Nikki is her lawful middle name and the Hill’s Saagar Enjeti noted it is “a Punjabi name.” That however is an appeal to reason not rage which seems to have little place in our national discourse or media coverage.

The personal attacks on speakers were beyond the pale, but hardly unprecedented.  What happened to Sandmann was a disgrace for the media and he had every right to speak publicly about his treatment by the media.

Sandmann is a pro-life kid who wanted to demonstrate against abortion.  He sought to play a meaningful role in his political system, which is what we all have encouraged.  Indeed, CNN has aired many such calls for young people to have their voices heard. He was in Washington as part of the annual “March for Life.” This is one of those voices.  Sandmann spoke about his horrific experience in being labeled the aggressor in the confrontation when all he did was stand there as an activist pounded a drum in his face.

Sandmann said this morning in an interview that he only learned at 3 am in the morning on the bus home that he was being labeled a racist who attacked or harassed this activist.

In addition to Lockhart, CNN opinion writer Jeff Yang said that the speech confirmed to him that he was guilty all along.

“Hey @N1ckSandmann, I watched your speech tonight at the #RNCConvention2020 with an open mind, thinking I might hear something that would convince me of your position that you were an innocent victim of a cruel media. I was disappointed, but not surprised, to hear otherwise.”

So Yang now believes Sandmann was the aggressor or the one who was at fault?  Yang even criticized Sandmann for not extending a “branch of peace” to Nathan Phillip, the Native American elder in the confrontation. Sandmann did nothing wrong in front of Lincoln Memorial. He just stood there as Phillip pounded a drum in his face.  Yet, Yang now believes that the media was not wrong or Sandmann innocent.

Yang previously personally attacked Pete Buttigieg for calling for a “vision shaped by the American Heartland rather than the ineffective Washington Politics.” Yang again viewed Buttigieg’s political statement as a license for personal insults:

“Okay, gloves off: This is the bullshittiest quote of many bullshitty quotes from this man, whose vision was shaped by Harvard, Oxford, McKinsey & Company and a keenly honed sense of ambition. Dude, your dad was a lit professor and you went to a private prep school. Quit fronting.” 

Nothing on the content of Buttigieg’s point. Just a personal attack from the CNN commentator.

The Sandmann controversy arose because of the very bias that Yang reaffirmed this week.  For many, the mere fact that he was wearing a MAGA hat was enough to declare him a racist.  An example that we previously discussed is the interview of “Above the Law” writer Joe Patrice with Elie Mystal. In the interview, Mystal, the Executive Editor of “Above the Law”, attacked this 16 year old boy as a racist.  Patrice agreed with Mystal’s objections to Sandmann wearing his “racist [MAGA] hat.” They also objected to Sandmann doing interviews trying to defend himself with Mystal deriding how this “17-year-old kid makes the George Zimmerman defense for why he was allowed to deny access to a person of color.”

It was entirely false that Sandmann was denying “access to a person of color.”  Yet, the interview is an example of the criticism (which continued with Lockhart) of Sandmann speaking publicly about his treatment. Mystal and Patrice compared this high school student to a man who was accused of murdering an unarmed African American kid and continued to slam him even after the true facts were disclosed.

After his remarks at the RNC (which is not an easy thing for most teenagers to do), Lockhart declared on Twitter “I’m watching tonight because it’s important. But i [sic] don’t have to watch this snot nose entitled kid from Kentucky.”

Why is this teenager “entitled”?  Because he is discussing his role in a national controversy or his abuse by the media, including CNN? CNN settled with Sandmann. When did that become “entitled”? The message from these media personalities seems to be that Sandman is expected to simply stay silent and such interviews make him either a George Zimmerman wannabe or a textbook case of entitlement. Of course, media figures like Lockhart can continue to slam Sandmann, but he is . . .  well . . . entitled to do so.

Nikki Haley gave one of the most polished speeches at the RNC. 

There is clearly much in the speech that many do not accept about racism in America. However, Haley lashed out that it is

“…now fashionable to say that America is racist. That is a lie. America is not a racist country. This is personal for me. I am the proud daughter of Indian immigrants. They came to America and settled in a small Southern town. My father wore a turban. My mother wore a sari. I was a Brown girl in a Black and White world. We faced discrimination and hardship. But my parents never gave in to grievance and hate. My mom built a successful business. My dad taught 30 years at a historically black college. And the people of South Carolina chose me as their first minority and first female governor. America is a story that’s a work in progress. Now is the time to build on that progress, and make America even freer, fairer, and better for everyone.”

That speech led to an immediate personal attack from Rangappa that Haley bowed to racism by dropping her real name: “Right. Is that why you went from going by Nimrata to ‘Nikki’?” Rangappa asked.

Right. Is that why you went from going by Nimrata to “Nikki”? https://t.co/buGFcY48gQ

— Asha Rangappa (@AshaRangappa_) August 25, 2020

The problem is that Haley birth name is Nimrata Nikki Randhawa. She is not the first politician to use her middle name like Alexander Boris de Pfeffel Johnson, who goes by Boris. Then there is Willard Mitt Romney.  Was Romney denying his roots by going with Mitt? Yet when a minority member uses her middle name, it is somehow evidence that she is a racist tool.

What is telling is that, rather than address the underlying argument on systemic racism in our society, analysts like Rangappa prefer to attack Haley personally and suggest that she is some type of shill for racism. Why? Rangappa teaches at Yale and in academia such ad hominem attacks are viewed as the very antithesis of reasoned debate.  Likewise, in journalism, such attacks were once viewed as anathema, particularly when they are based on false assumptions.

There is much in these conventions to debate. In truth, I have never liked political conventions and view them all as virtually contentless. Nevertheless, there have been parts of the RNC that I have criticized, including the appearance last night of Secretary of State Mike Pompeo in a departure from past traditions of keeping such cabinet members out of political convention roles.  Once again, such important lines of separation were obliterated by the Trump Administration.  I also found reformed former felon John Ponder’s remarks to be powerful, but I agree with critics that the incorporation of a pardon signing into the events at a political convention to be wrong. I have also previously criticized the use of the White House for the political convention, including for the First Lady’s speech (which I also thought was a good speech).

Those are issue worthy of debate and people of good faith can disagree on the merits. That is a lot more productive than attacking an 18-year-old kid because he had the audacity to criticize the media and support President Trump.  There is, of course, a troubling entitlement evident in these stories. It is the entitlement is enjoyed by media figures who feel total license to personally attack anyone who challenges their narrative or supports Trump. It is not just permitted but popular. This is why Merriam-Webster defines “entitlement” as the “belief that one is deserving of or entitled to certain privileges.”

It turns out the proverbial “deal with the devil” that Elon Musk has made between Tesla and China (a relationship we have called into questions many times, including here and here) could finally be coming back to bite Musk.

It appears that congressional negotiators are starting to take notice of just how cozy Musk and China have becoming over the last few years – and some of them are now “considering whether NASA contracts awarded to Elon Musk’s SpaceX represent a potential national security risk” as a result, according to the Washington Examiner. 

Let us spoil the inquiry for them: yes. But now, it seems like it’s not just us that understands this. 

A congressional Republican aide involved in NASA negotiations was quoted as saying: 

“What is there to stop them from going to Musk directly and saying, ‘We’ll call your line of credit early, unless you give us X, Y, or Z?’ And, there’s no real clarity that there’s any kind of mechanism that would stop that other than good behavior by an individual.”

The question comes at a time of heightened tension between the U.S. and China. In addition to contentious trade negotiations last year, the China-induced global pandemic and questions about ongoing IP theft have kept the Trump administration on guard against potential threats out of China.

Colorado Sen. Cory Gardner said: “I’m concerned that companies in China could come into the U.S., make a sweetheart deal, take sensitive information, take proprietary technologies, and use it to enrich their own space program, their own national security efforts in China.”

Garnder has suggested that “the Government Accountability Office review NASA contractors for potential ties to China” and that NASA leaders take into account ties to China when awarding contracts. “The level of concern I’m hearing from companies who are in the U.S. and are concerned about this is alarming,” Gardner concluded.

Should Garner’s proposals gain traction, they could disproportionately affect SpaceX, due to Musk’s financial involvement with the Chinese government. Tesla secured a $1.4 billion credit line from state owned banks in December, the article notes.  

An aide commented: “The thrust of that is obviously self-interested because they’re competitors, but it doesn’t mean that it’s not a valid concern. It’s sort of a classic dynamic, right? An established provider, an established interest, that is challenged by an upstart interest … if there was no SpaceX, ULA would love it because ULA would get more contracts. That doesn’t mean that the question isn’t worth asking and answering, though.”

The aide argued that it isn’t just Musk’s companies that are being targeted. “There are at least seven aerospace companies that have some element of Chinese investment that would raise red flags, like Tencent,” they said. Some in congress think that Gardner’s proposals are too vague to implement. 

 “I look at these provisions as pretty commonsense protections of our space programs and space technologies,” Gardner said. His team seeks to have malefactors banned from NASA contracts for at least a year and then giving NASA the opportunity to extend that ban for as long as 10 years. 

A space industry executive concluded: “You live by wrapping yourself in the flag, you die by wrapping yourself in the flag sometimes. Elon is just having his own tactic used against him. And I promise you that if Elon could find his own Chinese angle to use against ULA, he’d do it.”

Recall, we were months ahead of this story when, back in April, we asked whether or not Musk risked becoming a Chinese asset due to his close ties and financial dependence on the communist country. 

Oil prices continued to rise overnight on the heels of the double-whammy of storms in the Gulf as more than 84% of oil output in the Gulf of Mexico has now shut, while almost 3 million barrels a day of refining capacity has been closed.

“Oil traders will be pre-occupied with the developments of the hurricane today,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “The most dangerous hurricane of the past 15 years is approaching the major U.S. oil producing and refining center.”

All of which makes today’s inventory data somewhat un-impactful since it is dated from before any shut-ins (although it could signal demand issues if it bucks the API-reported trend).

API

• Crude -4.524mm (-4.3mm exp)

• Cushing -646k

• Gasoline -6.392mm (-2.7mm exp) – biggest draw since April 2019

• Distillates +2.259mm (-700k exp)

DOE

• Crude -4.689mm (-4.3mm exp)

• Cushing -279k

• Gasoline -4.583mm (-2.7mm exp)

• Distillates +1.388mm (-700k exp)

Following API’s reported big draws in crude and gasoline, expectations for official data was for more draws and that was confirmed – the fifth weekly crude draw in a row…

Source: Bloomberg

Notably, Bloomberg’s Mike Jeffers notes that data from the Strategic Petroleum Reserve suggest that another 1.8 million barrels of crude was withdrawn from the SPR last week, so we’ll need to add that to any drop in commercial stockpiles to get a true picture. The volume of crude held in the SPR fell by 6.7 million barrels in the first three weeks of August, after increasing by 21.2 million barrels between April and July.

Additionally, as storms loom, there will typically be draws as drivers fill up to tanks to prepare or evacuate. Then comes a period of slow demand as folks stay put.

US Production rose modestly last week, after falling the prior week (and obviously will fall next week thanks to storm shut-ins) but we note that the rig count rose by 11 last week and we wonder if this is the trough for production in the short-term…

Source: Bloomberg

WTI was trending slightly lower, around $43.60 (up on the day), ahead of the official data, and was unchanged on the data..

Finally, Bloomberg notes that, on its current track, the storm could lead to around 10% to 12% of U.S. refining capacity being shut for more than six months, according to a disaster modeler with Enki Research. 

Tanker rates to ship gasoline from Europe to the U.S. are already surging even before Laura makes landfall.