Tag: news

Authored by Walter Williams, op-ed via Townhall.com,

While it might not be popular to say in the wake of the recent social disorder, the true plight of black people has little or nothing to do with the police or what has been called “systemic racism.” Instead, we need to look at the responsibilities of those running our big cities.

Some of the most dangerous big cities are: St. Louis, Detroit, Baltimore, Oakland, Chicago, Memphis, Atlanta, Birmingham, Newark, Buffalo and Philadelphia. The most common characteristic of these cities is that for decades, all of them have been run by liberal Democrats. Some cities — such as Detroit, Buffalo, Newark and Philadelphia — haven’t elected a Republican mayor for more than a half-century. On top of this, in many of these cities, blacks are mayors, often they dominate city councils, and they are chiefs of police and superintendents of schools.

In 1965, there were no blacks in the U.S. Senate, nor were there any black governors. And only six members of the House of Representatives were black. As of 2019, there is far greater representation in some areas — 52 House members are black. Nine black Americans have served in the Senate, including Edward W. Brooke of Massachusetts, Carol Moseley Braun and Barack Obama of Illinois, Tim Scott of South Carolina, Cory Booker of New Jersey, and Kamala Harris of California. In recent times, there have been three black state governors.

The bottom line is that today’s black Americans have significant political power at all levels of government. Yet, what has that meant for a large segment of the black population?

Democratic-controlled cities have the poorest-quality public education despite their large, and growing, school budgets. Consider Baltimore, Maryland. In 2016, in 13 of Baltimore’s 39 high schools, not a single student scored proficient on the state’s math exam. In six other high schools, only 1% tested proficient in math. Only 15% of Baltimore students passed the state’s English test. That same year in Philadelphia only 19% of eighth-graders scored proficient in math, and 16% were proficient in reading. In Detroit, only 4% of its eighth-graders scored proficient in math, and 7% were proficient in reading. It’s the same story of academic disaster in other cities run by Democrats.

Violent crime and poor education is not the only problem for Democratic-controlled cities. Because of high crime, poor schools and a less pleasant environment, cities are losing their economic base and their most productive people in droves. When World War II ended, the population of Washington, D.C., was about 800,000; today, it’s about 700,000. In 1950, Baltimore’s population was almost 950,000; today, it’s around 590,000. Detroit’s 1950 population was close to 1.85 million; today, it’s down to 673,000. The population of Camden, New Jersey, in 1950 was nearly 125,000; today it has fallen to 74,000. St. Louis’ 1950 population was more than 856,000; today, it’s less than 294,000. A similar story of population decline can be found in most of our formerly large and prosperous cities. In some cities, the population decline since 1950 is well over 50%, and that includes Detroit, St. Louis, Cleveland and Pittsburgh.

Academic liberals, civil rights advocates and others blamed the exodus on racism — “white flight” to the suburbs to avoid blacks. But blacks have been fleeing some cities at higher rates than whites. The five cities whose suburbs have the fastest-growing black populations are Miami, Dallas, Washington, Houston and Atlanta. It turns out that blacks, like whites, want better and safer schools for their kids and don’t like to be mugged or have their property vandalized. And like white people, if they have the means, black people cannot wait to leave troubled cities.

White liberals and black politicians focus most of their attention on what the police do, but how relevant is that to the overall tragedy? According to Statista, this year, 172 whites and 88 blacks have died at the hands of police. To put police shootings in a bit of perspective, in Chicago alone in 2020 there have been 1,260 shootings and 256 homicides with blacks being the primary victims. That comes to one shooting victim every three hours and one homicide victim every 15 hours. Three people in Chicago have been killed by police. If one is truly concerned about black deaths, shootings by police should figure way down on one’s list — which is not to excuse bad behavior by some police officers.

Late last year, reports about Goldman Sachs reaching a settlement with the DoJ that – importantly – would allow the bank to avoid a criminal guilty plea left investors with the impression that, like the bank’s previous transgressions, Goldman’s slate would be wiped clean after a modest payout.

But as more third-party organizations raised questions about AG Barr’s connection to Kirkland Ellis, the law firm representing Goldman in the case (Barr received an ethics waiver, along with prosecutor Jeremy Rosen, also a K&E alum), and questioned whether the Trump Administration was trying to hide an attempt to forgive a serious example of corporate malfeasance involving a firm with connections reaching to the highest levels of the administration (several senior officials, including Treasury Secretary Steven Mnuchin, are Goldman alumni).

After months of radio silence on the case, the head of all criminal prosecutions at DoJ suddenly announced earlier this week that he planned to step down, despite several major publicity wins, including the prosecution of “El Chapo”. Brian Benczkowski, the anove-mentioned department head, oversaw many cases, including 1MDB. He said he was leaving to spend more time with the family. Barely one day later, the New York Times published a report claiming Goldman is backing away from a settlement with the DoJ because of demands that any settlement include the criminal guilty plea that Goldman is desperate to avoid (it’s relatively brief rap sheet is a point of pride for the company, even if its brand reputation doesn’t necessarily reflect this).

Lawyers for the bank have asked Deputy Attorney General Jeffrey Rosen to review demands by some federal prosecutors that Goldman pay more than $2 billion in fines and plead guilty to a felony charge, according to three people briefed on the matter.

The bank has sought to pay a lower fine and avoid a guilty plea, according to the people, who spoke on condition of anonymity because the talks are continuing.

The request, which was made several weeks ago, is not unusual for a high-profile corporate investigation and often comes in the final stage of settlement talks. But it has been a point of pride for Goldman that it has never had to admit guilt in a federal investigation, and the scandal has already been a black eye for the bank.

Authorities in the United States and Malaysia say more than $2.7 billion was diverted from the fund, known as 1MDB, in a scheme that involved the flamboyant financier Jho Low, the country’s former prime minister, and other powerful people. The fund was meant to finance projects for the benefit of the people of Malaysia, but some of the cash went to buy luxury apartments, yachts, paintings and even finance the movie “The Wolf of Wall Street.”

With the sentencing for the government’s key cooperating witness – the Goldman banker who put the deal together – coming up, and a trial for a member of that banker’s team expected next year, a decision by Goldman to pull back could create even more drama and reputational damage surrounding the bank’s work on 1MDB.

For those who aren’t familiar, 1MDB was a Malaysian sovereign wealth fund seeded with billions of dollars in borrowed money via bond deals underwritten by Goldman. However, the fund was pillaged by a banker named Jho Low, and other friends of Malaysian PM Najib Razak, who shared in the plunder. Razak just faced a major corruption trial, and Low is an international fugitive believed to be hiding out in China. There’s evidence that senior officers including ex-CEO Lloyd Blankfein and even David Solomon, the current CEO, may have been involved in dismissing numerous red flags about the deal raised by the bank’s newly emboldened compliance department (keep in mind, this deal was put together in the immediate aftermath of the GFC).

Then again, if Goldman gambles by pulling back, and Joe Biden defeats Trump in November, the bank might be facing a DoJ with an even more aggressive mandate to pursue corporate crime.

Authored by Mohamed El-Erian, op-ed via The FT,

Governments need to ensure durable growth that benefits more than the well-off in society…

For most of the last 15 years, the US economy has relied on a mix of public and private finance to liquefy financial markets, boost asset prices and drive economic growth.

What used to be a sequential process — private sector credit factories at full force during the good times, and massive injections of liquidity from the public sector during the more difficult times — has evolved into a simultaneous one. The resulting explosion in leverage has been cheered by markets and most economists, for now. But it will become a lot more problematic should finance’s front-running of the economy not be validated by strong growth that is also inclusive and sustainable.

Let us start with how we got to the great disconnect between economic and corporate fundamentals and appetites for risk, on the part of both providers and users of debt financing.

Going into the global financial crisis in 2008, private sector credit creation had operated in turbo-charge mode. In addition to buoyant issuance of bonds, there was a very rapid rise in securitisation, which found new ways to lever corporate and household balance sheets while reducing barriers to entry for creditors. But the whole process got carried away, resulting in excessive and unsustainable risk-taking by borrowers and lenders.

As the private sector went into a disorderly mode of deleveraging during the crisis, the public sector had no choice but to step in and do whatever it could to avoid a depression. Government debt and the Federal Reserve’s balance sheet soared — accompanied by assurances from officials that this growth would be reversed once economic growth recovered, and once the private sector had completed its de-levering in an orderly fashion. 

But exiting this regime proved difficult in the post-crisis years. A premature attempt to limit government deficits undermined growth, adding to households’ economic insecurity — especially as the benefits of the meagre growth flowed to the better-off segments of society. Rather than reduce its balance sheet, the Fed felt compelled to expand it, waiting for an elusive policy handoff to those more able to deliver genuine and durable economic growth.

Meanwhile, the private sector went on a borrowing binge as Fed-repressed interest rates encouraged and enabled not only the funding of operational expansion but also — in a much bigger way — the buying back of stock, the paying of high dividends and the pursuit of mergers and acquisitions. Then came the Covid-19 shock to the economy and markets.

Facing a new threat of depression, the public sector pivoted to a “whatever it takes” paradigm. The Fed’s balance sheet exploded — almost doubling to near-$7tn in less than a couple of months — as did US government borrowing, rising by an extra 15 per cent of gross domestic product.

The scale of such policies was once considered unthinkable. To overcome the risks of market malfunction and a credit freeze, the Fed is now underwriting not just liquidity risk and credit risk for high-quality companies, but also the risk of default in the junk-bond market. Fiscal measures have included sending cheques to US households as part of a broad-based relief effort.

The immediate impact on financial markets has been beneficial, and has extended well beyond the remarkable recovery in stocks that drove the Nasdaq Composite through the 10,000 mark for the first time on Tuesday and had the S&P show gains for 2020. Corporate bond issuance has been setting new records, as have inflows of investors’ funds into credit markets, despite very low yields. The spillover effects include more than $300bn of emerging-market bond issuance in the first five months of the year, exceeding levels for the same periods in 2018 and 2019.

This huge rise in financial leverage will prove advisable and sustainable if, and only if, economic growth picks up quickly and validates it. In such a scenario, companies’ and countries’ use of debt to bolster cash buffers and offset massive revenue shortfalls would be deemed to have been a wise way to avoid temporary liquidity problems turning into a crippling solvency risk.

But if growth disappoints, the economy and markets will have to cope with a massive debt overhang that results in even greater central bank distortions of markets and lower growth potential. There will be widespread debt restructurings too, and disorderly non-payments.

Given that this nascent economic recovery is subject to significant uncertainty, the answer is not to quickly de-lever balance sheets. Instead, there is a need for an evolution in approaches. Governments should ensure a stronger foundation for high and durable growth that benefits more than the well-off in society, and investors should be more disciplined in minimising exposures to bankruptcy risk and capital impairments.

Lastly, companies need to resist the temptation to use debt for more financial engineering and higher executive pay.

Managing editor Ed Harrison joins Lloyd Khaner, general partner and CIO at Khaner Capital Management, to discuss his macro outlook for the next year and beyond. Khaner explains some of the growth opportunities he sees in equity markets and breaks down how he determines value in a volatile market saturated with liquidity. In the intro, Peter Cooper gives an update on how the global reopening has affected the spread of coronavirus.

Not for the first time, major US and global brands have been caught in the middle of soaring US-China tensions and ratcheting tit-for-tat actions and rhetoric.

This also as the anti-mainland Hong Kong protests seek to gain the same level of attention and momentum of support that global George Floyd protests have of the past weeks.

And now the NBA’s biggest superstar has once again been thrust into the middle: “Hong Kong democracy activist Joshua Wong accused LeBron James of hypocrisy after the NBA superstar moved to form a group supporting black voting rights in the U.S.,” Bloomberg reports. 

Hong Kong’s most visible activist who is backed by the US and UK has called out LeBron for putting Black Lives Matter protests front and center, lately with a new black voting rights awareness initiative, while staying silent on China-backed police brutality in Hong Kong.

And then there’s the obvious fact of Hong Kong citizens not getting “the vote” regarding the recent deeply controversial China-imposed “national security law”.

Defending democracy is vital, but @KingJames only talks loud in the US. On China, not only is he silent, he actively shuts others up. He called @dmorey “misinformed” and “not really educated” for supporting #HongKong. All he cares about is money, not human rights. Hypocritical. https://t.co/vxVMWIjsjY

— Joshua Wong 黃之鋒 😷 (@joshuawongcf) June 11, 2020

Recall too that the NBA generally has remained in a financially vulnerable spot vis-a-vis the China issue after the Darl Morey tweet last year expressing support for HK street protests, leading Beijing to react by canceling lucrative broadcasts of NBA games in the country

Crucially James had turned against Morey’s comments, calling the controversial tweet “misinformed” — and in doing so the Hong Kong activists saw it as essentially a total betrayal of their anti-Beijing democracy movement. 

But especially given the current Black Lives Matter and George Floyd death related protests, Hong Kong activists have sought to both latch onto the movement while at the same time seeking mutual recognition from BLM leaders. 

When it comes to pro-BLM NBA players, it doesn’t appear that “support” will be coming anytime soon, also given the huge financial hit the NBA and other professional sports took amid the coronavirus shutdowns, and given the delicate future of the NBA in China.

Interestingly Wong is seen as close to both Western activists and even State Department officials, given also he’s recently testified before Congress.

It’s likely other major American brands will face the same dilemma.

“Believe in something, unless you are criticizing China.”

pic.twitter.com/YJ3fbBnteM

— Joshua Wong 黃之鋒 😷 (@joshuawongcf) June 11, 2020

Do citizens of Hong Kong get a vote?…

Everyone talking about “how do we fix this?” They say “go out and vote?” What about asking if how we vote is also structurally racist? https://t.co/GFtq12eKKt

— LeBron James (@KingJames) June 9, 2020

Amid a trend of corporations rushing to jump on popular protest band wagons of the day, in the case of Hong Kong they’re likely to consult the check book first, with high notions of freedom, democracy, and equality a far second. 

Authored by Ian Lyngen of BMO Capital Markets

The second wave has arrived; or at least that is the impression one would get by glancing at the selloff in risk assets and the outperformance of 10- and 30-year Treasuries. Increasing incidence of Covid-19 cases have been reported in several states; the drop in domestic equities speaks to the reality that the pandemic is the most powerful influence on the global outlook. This observation can almost go without saying – had it not been for the Fed’s caution against extraction of too much optimism from the May employment report and the growing sense that the market had ‘moved-on’ following the recent refocus on social unrest.

With the coronavirus once again front and center, attention will undoubtedly return to the daily stats – with the emphasis on south/southwest. Needless to say, it’s a non-ideal situation for the market, the economy, and the population as a whole – even if general expectations are for a less intense return of Covid-19. In addition to the case count, the prospects for re-lockdowns will be closely scrutinized; the economic ramifications of which would likely echo the initial round, but on a smaller scale. Our base case scenario is that the unfortunate directional change in the pandemic was not unexpected; although the drop in stocks might offer a different interpretation.

Our take on the reversal of risk assets is that the optimism got ahead of itself and domestic equities came into this week vulnerable to a less than satisfactory Fed showing. The Fed wasn’t in a position to do much more in terms of deliverables (i.e. YCC, forward guidance, etc.), therefore a disappointment risk was a ‘known’ – what’s impressive is the magnitude of the downtrade in stocks. To be fair, overbought momentum has been in place since the beginning of June; heightening the odds of a correction or consolidation. We’d erred on the side of assuming an in-range correction was more probable; much to our chagrin. The 200-day moving-average at 3013 marks an important support level and is shortly followed by the handle-change <3000. The weekly close will be key from a technical perspective, as well as any dip-buying interest during the overnight session.

The rates market has benefited from an impressive flight-to-quality bid that brought 10-year yields down to 65 bp to flirt with the lowest since mid-May. A breach of 62 bp would put rates back near the lows of 54 bp and as the initial economic optimism fades, investors may once again face the question of whether or not fresh record low 10-year yields are warranted during the second wave. For the time being, we expect anything <60 bp will prove to be a selling opportunity; or if nothing else a compelling level from which to reset steepeners. Overall, the price action has the tone of a technical correction rather than a paradigm shift of the macro narrative – the next few sessions will provide greater clarity.

Thursday’s Treasury rally was backed by strong volumes as cash traded at 188% of the 10-day moving average. 5s and 10s split the designation of most active issue each taking a 30% marketshare. The front-end garnered 17% with 2s and 3s taking 9% and 8%, respectively. 7s claimed a solid 9%, 20s 2% and the long-bond was elevated going into its reopening with a 12% marketshare.

A union representing New York City Police detectives has vowed to sue rioters who attacks its members.

“If you assault a New York City Detective and there are no consequences from the criminal justice system, we have to have other means to protect our detectives,” declared Paul DiGiacomo – president of the 19,000 member Detectives’ Endowment Association, adding that he will sue any ‘protester, rioter or looter who does violence against NYPD detectives, according to Fox News.

According to the NYPD, over 350 of its officers have suffered injuries during the protests.

“It’s heart-wrenching because they are out there doing a job under very difficult circumstances, trying to protect the innocent people that are protesting while the criminal element is within that group, assaulting, looting and victimizing not only police officers and detectives out there, but also the people of the city,” he said.

The first lawsuit has been filed against a looting suspect accused of stealing items from a pharmacy in Manhattan and who allegedly attacked Detective Joseph Nicolosi. The detective claimed he was injured in the struggle when the 19-year-old suspect resisted arrest. –Fox News

“They’ve had urine thrown at them, rocks thrown at them, shot at, assaulted. I don’t know how much more they could take a day of putting up with a lot out there. And, you know, they are the finest in the world and they are doing a fabulous job, but they are being demonized by the elected officials,” said DiGiacomo.

Civil rights attorney Ron Kuby characterizes the lawsuits as unfair given that police enjoy legal protections, such as qualified immunity, which prevents them from being sued.

“If the police want to use the civil law as a tool in their policing, those of us who pay their salaries have the opportunity now to engage in some real reform, which is, stop the indemnification of cops, stop the free lawyers for the police, stop the qualified immunity for the police — and we’ll see how that works out for them,” said Kuby, who added that “This is not a new tactic by the police. This was tried back in the 1990s in New York City, at another time when there was a great deal of unrest and ultimately, it didn’t work.”

Congressional Democrats and some state legislatures have moved to strip the police of qualified immunity, while Kuby notes that officers participating in lawsuits will give up their privacy.

“The cops freak out about their privacy concerns and don’t want their personal history handed over to the very people that they are suing,” he said. “That is another powerful reason not to go through with these lawsuits.”

DiGiacomo, meanwhile, said: “We will be behind our detectives and pursue these cases civilly and send a message to the criminal element, that you are not going to get away with this. If we can’t get you one way, we will get you another.”