To The Moon, Alice! Virgin Galactic Options Volume Explode As Retail Piles In

To The Moon, Alice! Virgin Galactic Options Volume Explode As Retail Piles In

In case you missed it… there’s a futurist, technology stock that has utterly exploded higher this year against a background of absolutely nothing new fundamentally.

No, it’s not Tesla. It’s Richard Branson’s Virgin Galactic (SPCE)… which as of yesterday’s highs was up 210% year-to-date – double the performance of Elon Musk’s lowly little stock

Source: Bloomberg

Notably yesterday was a 25% drop from the highs (bear market) but this morning SPCE has taken off once again…

Though the company is just a fraction of Tesla in terms of market value, the frenzy around its shares is similar.

A look at the upper chart shows a similar sudden spike pattern similar in TSLA shares. That spike in TSLA coincided with a massive explosion at the time in options trading volume…

And looking at SPCE’s options trading, we can see the same pattern of sudden explosion in call buying as every millennial jumps on the bandwagon… because it’ easy, right?

More than 91 million shares traded hands on Tuesday. That’s the most since the company’s September 2017 public offering, more than 27-times the average volume, and dwarfs the activity seen in Tesla.

As Bloomberg notes, Virgin Galactic has become a favorite among retail investors, judging by activity on message boards like r/wallstreetbets

Gains are snowballing, options traders are piling in, chatrooms are lighting upwhat could go wrong?

We give the final word to Morgan Stanley analyst Adam Jonas, who offered a warning to investors chasing the rally that recent gains appear “to be driven by forces beyond fundamental factors.”


Tyler Durden

Wed, 02/19/2020 – 10:00

via ZeroHedge News https://ift.tt/2P8CktM Tyler Durden

China Prepares To Nationalize Systematically-Important HNA Group

China Prepares To Nationalize Systematically-Important HNA Group

The last time we looked closely at China’s “big four” conglomerates, HNA, Anbang, Evergrande and Dalian Wanda, was back in lat 2017 in the context of the systemic risk (i.e. record debt) that these companies had accumulated as part of their tremendous offshore M&A spree in prior years which however came to a crashing halt once the companies were no longer able to issue cheap debt and pursue a ponzi strategy of buying up more companies, then using them as even more collateral for even more debt for even more M&A and so on.

And while the systemic risk among these conglomerates declined in recent years, it still remained as a byproduct of the sheer size – measured by the number of people they employ as well as debt on the balance sheet – and may explain why according to Bloomberg, China is planning to take over, i.e., nationalize one of the most infamous of Chinese conglomerates, HNA Group, and sell off its airline assets “after the coronavirus outbreak hit the indebted conglomerate’s ability to meet financial obligations.”

In other words, while zombie conglomerates such as HNA, Anbang, et al were on the cusp of collapse for the past three years, all it would take to tip them over into insolvency was a “black swan”, or rather “black bat” event. Such as the coronavirus epidemic. Which left Beijing with little choice: nationalize the company, or let it fail and suffer the consequences as thousands of people are suddenly left without a job.

As Bloomberg further reports, the government of Hainan, the southern island province where HNA is based, “is in talks to take control of the conglomerate, which has been shedding assets after a global buying spree left it with one of the highest levels of corporate debt in China.” Bloomberg sources said that in keeping with a model laid out for bail outs of insolvent banks, the HNA airline assets could be taken over later by other local companies.

The report also said that the takeover announcement could be made as early as tomorrow, though talks are ongoing and could be delayed or fall apart, the people said.

The virus epidemic has killed more than 2,000 people, the majority of them in China, where it has crippled the world’s second-largest economy, shuttering stores, bringing factories to a halt and triggering a virtual shutdown of the airline industry. Since 2018, HNA has sold off tens of billions of dollars in assets including stakes in Hilton Worldwide Holdings Inc. and Deutsche Bank AG.

And speaking of Deutsche Bank, with a nearly 5% stake in the German lender, it remains unclear if HNA would be forced to liquidate this holding under after takeover, although judging by the kneejerk reaction lower, traders aren’t willing to hang around and find out.


Tyler Durden

Wed, 02/19/2020 – 09:51

via ZeroHedge News https://ift.tt/2HEk9be Tyler Durden

US Designates 5 Chinese State Media Outlets As ‘Foreign Missions’

US Designates 5 Chinese State Media Outlets As ‘Foreign Missions’

At a moment the Chinese state has continued its crackdown on American journalists and content — in the latest instance expelling three WSJ reporters for a “racist” opinion piece the US State Department has announced it will require five state-run news agencies which operate in the US to register as “foreign missions”. 

This means they must register all personnel and property with the US government and will be treated as additional foreign missions as defined under the Foreign Missions Act. They’ll effectively now have to comply with all rules governing foreign embassies and consulates. The outlets are Xinhua News Agency, China Global Television Network (or CCTV), China Radio International, the parent company of China Daily newspaper, and the parent company of the The People’s Daily newspaper.

“These five U.S.-based entities are not independent news organizations — they are effectively controlled by the [Chinese] government,” a State Department spokesperson said Tuesday, Politico reports. 

Damaged entrance of China’s official Xinhua news agency after anti-government protest in Hong Kong, China. Image source: Reuters

An in a separate report, another US official said, “Obviously the Chinese Communist Party has always had a pretty tight rein on media in general and state-run media in particular but that has only further tightened since Xi Jinping took over.”

Registration under the Foreign Missions Act allows US authorities to demand that the five media entities disclose a lot more information about their internal operations. As the WSJ describes, “The move is part of a broader effort by the Trump administration to ferret out actions by China seen as inimical to U.S. interests — from academics and business executives stealing intellectual property to the spread of the Chinese government’s views by state-backed media and education institutions.”

Secretary of State Mike Pompeo earlier this month told the National Governors Association in a speech that he’s trying to curtail Chinese eavesdropping and data collection activities on US soil. Speaking of tighter restrictions on Chinese media organizations, he said: “This is just fairness, reciprocity, basic common sense. This is not an onerous restriction to put on China.”

Theoretically the “foreign missions” designation now means that in any diplomatic spat, the US could move to close and expel Chinese media outlets which would be akin to closing a consulate, giving Washington more leverage in any such extreme scenario. The State Department sees the outlets as part of a broad state propaganda machine:

“They are part and parcel of the People’s Republic of China propaganda machine,” the official said. “The fact of the matter is each and every single one of these entities does in fact work 100% for the Chinese government and the Chinese Communist Party,” the official added. “These guys are on the organizational chart.”

The People’s Daily and China Daily have already been registered as foreign agents since at least 1996 and 1983, under their parent company Hai Tian Development.

All of this sets the stage for the greater likelihood of Beijing ‘taking the gloves off’ in its ill treatment of US and Western media operating in China, amid increasingly critical coronavirus coverage. 


Tyler Durden

Wed, 02/19/2020 – 09:45

via ZeroHedge News https://ift.tt/37KKoHn Tyler Durden

New Op-Ed in the Washington Post: “The Constitution does not place a wall between the president and the Justice Department”

The Washington Post invited me to write an op-ed about President Trump, Attorney General Barr, Roger Stone’s sentencing. It is titled, “Trump has the constitutional power to intervene in Roger Stone’s sentencing. The Constitution does not place a wall between the president and the Justice Department.”

Here is the introduction:

President Trump tweeted last week that he has the “legal right” to tell Attorney General William P. Barr how to handle Roger Stone’s prosecution — bringing the fury of the legal establishment down on him. Federal prosecutors had recommended a seven-to-nine-year sentence for Stone, who was convicted of perjury and witness tampering. Trump tweeted that the recommendation was “horrible and very unfair.” Subsequently, the Justice Department dropped the recommendation.

More than 2,000 former Justice Department employees promptly declared in an open letter that they “condemn” Trump and Barr’s “interference in the fair administration of justice.” Donald Ayer, who served as deputy attorney general under President George H.W. Bush, wrote in the Atlantic magazine of Barr’s complicity in the sentencing shift: “Given our national faith and trust in a rule of law no one can subvert, it is not too strong to say that Bill Barr is un-American.”

Un-American? Absolutely not. Unconstitutional? Not even close. Unwise? Yes. As a policy matter, the president should stay out of sentencing decisions, especially those involving his friends. But the president is correct that he has the legal authority to intervene in the case. The Constitution does not create a wall of separation between the president and the Justice Department. To the contrary, the Constitution vests the “executive power” in the president. And the decision whether and how to prosecute someone ultimately belongs to the president.

The original draft included a lengthy discussion of Thomas Jefferson’s micromanagement of the Aaron Burr trial. I developed this history for an article I’m working on, tentatively titled “What if Mueller had subpoenaed Trump?” Here are the original sections that were ultimately cut:

In 1807, the Jefferson administration prosecuted Aaron Burr for treason. he was accused of trying to establish an independent nation in the Louisiana territory. The basis for the prosecution was dubious, and President Jefferson withheld certain documents that could have proven Burr’s innocence. But more relevant, for our purposes, is the close interest Jefferson took in the case. Throughout the trial, Jefferson frequently wrote to George Hay, the United States Attorney, with precise instructions on how to manage the case.

In one letter, Jefferson wrote that the “prosecution of Burr had begun under very inauspicious symptoms by the challenging & rejecting two members of the grand jury.” Jefferson worried that the remaining members would not indict Burr. Jefferson had a preordained result in mind, and was not willing to let the process determine Burr’s guilt.  Jefferson also complained that Benjamin Latrobe, who served in his administration, had to testify in the case as a witness. Latrobe’s testimony, Jefferson carped, caused a  “great inconvenience.” The President added, “I hope you will permit [Latrobe] to come away as soon as possible.” Here, the President was dictating the prosecutor’s trial strategy..

In another letter, Jefferson urged Hay to “denounce [Marbury v. Madison for] it is not law.” Chief Justice John Marshall, who wrote Marbury, also presided over Burr’s trial. Hay acknowledged the directive, but ignored it.   Towards the end of the felony trial, Marshall issued a favorable ruling to Burr. Jefferson was incensed. He suggested that “these whole proceedings will be laid before Congress”; Jefferson was arguing, in short, that the record should be preserved to form the basis of articles of impeachment against the Chief Justice. Despite his bluster, there is no record that Jefferson actually sought to impeach Marshall based on the Burr case. Jefferson’s intemperate letters are in this respect not that different than Trump’s ephemeral tweets.

Eventually, Burr was acquitted of the felony charge. Immediately thereafter, Jefferson wrote Hay a letter that was joined by then-Secretary of State James Madison: “We are both strongly of [the] opinion that the prosecution against Burr for misdemeanor should proceed.” If the prosecution is “defeated,” Jefferson wrote, “it will heap coals of fire on the head of the judge”  — a reference to Chief Justice Marshall. Two days later, Hay followed Jefferson’s order, and sought an indictment against Burr for a misdemeanor charge. Once again, Burr was acquitted.

Let’s assume that President Trump in fact ordered Attorney General Barr to recommend a specific sentence Roger Stone. Such meddling would pale in comparison with Jefferson’s micromanagement of a high-profile, politically charged treason prosecution.

If we were drafting a Constitution from scratch, it may make sense to divide the executive power up. For example, in my home state of Texas, the Governor is separate from the Attorney General. This system has some virtue over the federal system.

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New Op-Ed in the Washington Post: “The Constitution does not place a wall between the president and the Justice Department”

The Washington Post invited me to write an op-ed about President Trump, Attorney General Barr, Roger Stone’s sentencing. It is titled, “Trump has the constitutional power to intervene in Roger Stone’s sentencing. The Constitution does not place a wall between the president and the Justice Department.”

Here is the introduction:

President Trump tweeted last week that he has the “legal right” to tell Attorney General William P. Barr how to handle Roger Stone’s prosecution — bringing the fury of the legal establishment down on him. Federal prosecutors had recommended a seven-to-nine-year sentence for Stone, who was convicted of perjury and witness tampering. Trump tweeted that the recommendation was “horrible and very unfair.” Subsequently, the Justice Department dropped the recommendation.

More than 2,000 former Justice Department employees promptly declared in an open letter that they “condemn” Trump and Barr’s “interference in the fair administration of justice.” Donald Ayer, who served as deputy attorney general under President George H.W. Bush, wrote in the Atlantic magazine of Barr’s complicity in the sentencing shift: “Given our national faith and trust in a rule of law no one can subvert, it is not too strong to say that Bill Barr is un-American.”

Un-American? Absolutely not. Unconstitutional? Not even close. Unwise? Yes. As a policy matter, the president should stay out of sentencing decisions, especially those involving his friends. But the president is correct that he has the legal authority to intervene in the case. The Constitution does not create a wall of separation between the president and the Justice Department. To the contrary, the Constitution vests the “executive power” in the president. And the decision whether and how to prosecute someone ultimately belongs to the president.

The original draft included a lengthy discussion of Thomas Jefferson’s micromanagement of the Aaron Burr trial. I developed this history for an article I’m working on, tentatively titled “What if Mueller had subpoenaed Trump?” Here are the original sections that were ultimately cut:

In 1807, the Jefferson administration prosecuted Aaron Burr for treason. he was accused of trying to establish an independent nation in the Louisiana territory. The basis for the prosecution was dubious, and President Jefferson withheld certain documents that could have proven Burr’s innocence. But more relevant, for our purposes, is the close interest Jefferson took in the case. Throughout the trial, Jefferson frequently wrote to George Hay, the United States Attorney, with precise instructions on how to manage the case.

In one letter, Jefferson wrote that the “prosecution of Burr had begun under very inauspicious symptoms by the challenging & rejecting two members of the grand jury.” Jefferson worried that the remaining members would not indict Burr. Jefferson had a preordained result in mind, and was not willing to let the process determine Burr’s guilt.  Jefferson also complained that Benjamin Latrobe, who served in his administration, had to testify in the case as a witness. Latrobe’s testimony, Jefferson carped, caused a  “great inconvenience.” The President added, “I hope you will permit [Latrobe] to come away as soon as possible.” Here, the President was dictating the prosecutor’s trial strategy..

In another letter, Jefferson urged Hay to “denounce [Marbury v. Madison for] it is not law.” Chief Justice John Marshall, who wrote Marbury, also presided over Burr’s trial. Hay acknowledged the directive, but ignored it.   Towards the end of the felony trial, Marshall issued a favorable ruling to Burr. Jefferson was incensed. He suggested that “these whole proceedings will be laid before Congress”; Jefferson was arguing, in short, that the record should be preserved to form the basis of articles of impeachment against the Chief Justice. Despite his bluster, there is no record that Jefferson actually sought to impeach Marshall based on the Burr case. Jefferson’s intemperate letters are in this respect not that different than Trump’s ephemeral tweets.

Eventually, Burr was acquitted of the felony charge. Immediately thereafter, Jefferson wrote Hay a letter that was joined by then-Secretary of State James Madison: “We are both strongly of [the] opinion that the prosecution against Burr for misdemeanor should proceed.” If the prosecution is “defeated,” Jefferson wrote, “it will heap coals of fire on the head of the judge”  — a reference to Chief Justice Marshall. Two days later, Hay followed Jefferson’s order, and sought an indictment against Burr for a misdemeanor charge. Once again, Burr was acquitted.

Let’s assume that President Trump in fact ordered Attorney General Barr to recommend a specific sentence Roger Stone. Such meddling would pale in comparison with Jefferson’s micromanagement of a high-profile, politically charged treason prosecution.

If we were drafting a Constitution from scratch, it may make sense to divide the executive power up. For example, in my home state of Texas, the Governor is separate from the Attorney General. This system has some virtue over the federal system.

from Latest – Reason.com https://ift.tt/2SE7c7B
via IFTTT

Trump Uses Clemency To Help Drug War Victims, Reward GOP Donors, and Spite James Comey

President Donald Trump granted clemency to 11 individuals on Tuesday, including former Illinois Gov. Rod Blagojevich, who was serving a 14-year prison sentence for a variety of political crimes including a scheme to sell an appointment to the Senate seat vacated by Barack Obama.

While much of the media coverage focused on Blagojevich and some of the other high-profile names on Trump’s clemency list (more on that in a moment), there are others whose names you don’t know but probably should.

People like Crystal Munoz, who spent the past 12 years in prison for a nonviolent drug offense. Munoz was convicted in 2007 of assisting a marijuana smuggling operation because she drew a map of a dirt road near Big Bend National Park in Texas. That map was used by drug smugglers, and the Drug Enforcement Administration eventually traced it back to Munoz, who got a 19-year prison sentence despite the fact that she never possessed or sold any of the drugs.

Nothing about Munoz’s case suggests that the 40-year-old mother of two girls is a danger to society who needs to be kept in a cage—she’s just another person in an endless line of drug war victims. Thankfully, Trump’s clemency order will allow her to return to her family.

People like Munoz are “are the forgotten majority of the country’s crisis in mass incarceration, a crisis that disproportionately impacts lower-income communities and communities of color, and they are every bit as deserving of a second chance,” said Holly Harris, executive director of the Justice Action Network, a criminal justice reform nonprofit that advocated for Munoz’s release. In a statement, Harris said she hopes Trump will “use this executive power to grant more commutations and clemencies in due course for any of the thousands of deserving individuals who are neither rich, nor famous, nor connected.”

Being rich and famous does seem to help, though. Blagojevich, a former contestant on Trump’s Celebrity Apprentice, seems to have ended up on Trump’s radar after Patricia Blagojevich made several appearances on Fox News to plead for her husband’s release. Trump also granted a full pardon to Michael Milken, a financier who served two years in prison in the early 1990s after being convicted by then-federal prosecutor Rudy Giuliani. Giuliani is now Trump’s personal attorney and Milken is a top Republican donor who reportedly watched the 2018 election results at the White House. Another pardon went to Paul Pogue, the owner of a Texas construction company who spent three years in prison for filing a false tax return. Pogue has also donated hefty sums to the Trump campaign.

While some of yesterday’s clemency recipients were forgotten people, Trump is clearly using his power to settle some political scores too.


FREE MINDS

China ousted three Wall Street Journal reporters in retribution for what the Chinese government said were racially discriminatory and slanderous opinion pieces. In a column published on February 3, Journal opinion writer Walter Russell Mead referred to China as “the real sick man of Asia”—a phrase with historical connotations unflattering to China.

But the three journalists booted from the country work for the Journal‘s news-gathering operation, not its opinion section. Recognizing that distinction, however, would first require a healthy respect for a free press—something that China’s government seems uninterested in cultivating.


FREE MARKETS

Rich places are getting richer, but economic activity isn’t becoming more concentrated in a few dominant places. In fact, economic activity—as measured by total income—is less concentrated in a handful of top metro areas today than it has been during most of the past half-century,” reports The New York Times in a deep dive into population and economic growth.

Despite the perception that economic growth is clustering in a few megacities, the real concentration is taking place in mid-sized-to-large cities, the Times reports. The share of economic activity taking place in America’s five largest cities has actually declined in recent decades, but the share of activity taking place in metro areas ranked 11th through 50th has grown.

In general, places are either getting bigger but not richer (like Las Vegas and Phoenix), or richer but not bigger (like the Connecticut suburbs of New York City). The places that are growing their wealth and their population are more like Austin, Texas, rather than San Francisco or New York.


ELECTION 2020

Tonight’s Nevada primary debate will be the first to include former New York City Mayor Michael Bloomberg, who has blasted into second place in some polls after an expensive advertising blitz. He’s not likely to get a warm welcome from his fellow candidates, and Sen. Elizabeth Warren (D–Mass.), in particular, is ready to go on the attack.

There will be plenty of fodder for the anti-Bloomberg crowd. Expect his longstanding support for (and explicitly racist defense of) stop-and-frisk policing to be a factor. And his track record of making demeaning comments about women. And the fact that, as recently as last year, he was caught on tape referring to transgender individuals as “a man wearing a dress.” Indeed, if there is any political capital left in the so-called “woke primary,” Bloomberg can expect to be on the receiving end of all of it.


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Trump Uses Clemency To Help Drug War Victims, Reward GOP Donors, and Spite James Comey

President Donald Trump granted clemency to 11 individuals on Tuesday, including former Illinois Gov. Rod Blagojevich, who was serving a 14-year prison sentence for a variety of political crimes including a scheme to sell an appointment to the Senate seat vacated by Barack Obama.

While much of the media coverage focused on Blagojevich and some of the other high-profile names on Trump’s clemency list (more on that in a moment), there are others whose names you don’t know but probably should.

People like Crystal Munoz, who spent the past 12 years in prison for a nonviolent drug offense. Munoz was convicted in 2007 of assisting a marijuana smuggling operation because she drew a map of a dirt road near Big Bend National Park in Texas. That map was used by drug smugglers, and the Drug Enforcement Administration eventually traced it back to Munoz, who got a 19-year prison sentence despite the fact that she never possessed or sold any of the drugs.

Nothing about Munoz’s case suggests that the 40-year-old mother of two girls is a danger to society who needs to be kept in a cage—she’s just another person in an endless line of drug war victims. Thankfully, Trump’s clemency order will allow her to return to her family.

People like Munoz are “are the forgotten majority of the country’s crisis in mass incarceration, a crisis that disproportionately impacts lower-income communities and communities of color, and they are every bit as deserving of a second chance,” said Holly Harris, executive director of the Justice Action Network, a criminal justice reform nonprofit that advocated for Munoz’s release. In a statement, Harris said she hopes Trump will “use this executive power to grant more commutations and clemencies in due course for any of the thousands of deserving individuals who are neither rich, nor famous, nor connected.”

Being rich and famous does seem to help, though. Blagojevich, a former contestant on Trump’s Celebrity Apprentice, seems to have ended up on Trump’s radar after Patricia Blagojevich made several appearances on Fox News to plead for her husband’s release. Trump also granted a full pardon to Michael Milken, a financier who served two years in prison in the early 1990s after being convicted by then-federal prosecutor Rudy Giuliani. Giuliani is now Trump’s personal attorney and Milken is a top Republican donor who reportedly watched the 2018 election results at the White House. Another pardon went to Paul Pogue, the owner of a Texas construction company who spent three years in prison for filing a false tax return. Pogue has also donated hefty sums to the Trump campaign.

While some of yesterday’s clemency recipients were forgotten people, Trump is clearly using his power to settle some political scores too.


FREE MINDS

China ousted three Wall Street Journal reporters in retribution for what the Chinese government said were racially discriminatory and slanderous opinion pieces. In a column published on February 3, Journal opinion writer Walter Russell Mead referred to China as “the real sick man of Asia”—a phrase with historical connotations unflattering to China.

Three journalists booted from the country work for the Journal‘s news-gathering operation, not its opinion section. Recognizing that distinction, however, would first require a healthy respect for a free press—something that China’s government seems uninterested in cultivating.


FREE MARKETS

Rich places are getting richer, but economic activity isn’t becoming more concentrated in a few dominant places. In fact, economic activity—as measured by total income—is less concentrated in a handful of top metro areas today than it has been during most of the past half-century,” reports The New York Times in a deep dive into population and economic growth.

Despite the perception that economic growth is clustering in a few megacities, the real concentration is taking place in mid-sized-to-large cities, the Times reports. The share of economic activity taking place in America’s five largest cities has actually declined in recent decades, but the share of activity taking place in metro areas ranked 11th through 50th has grown.

In general, places are either getting bigger but not richer (like Las Vegas and Phoenix), or richer but not bigger (like the Connecticut suburbs of New York City). The places that are growing their wealth and their population are more like Austin, Texas, rather than San Francisco or New York.


ELECTION 2020

Tonight’s Nevada primary debate will be the first to include former New York City Mayor Michael Bloomberg, who has blasted into second place in some polls after an expensive advertising blitz. He’s not likely to get a warm welcome from his fellow candidates, and Sen. Elizabeth Warren (D–Mass.), in particular, is ready to go on the attack.

There will be plenty of fodder for the anti-Bloomberg crowd. Expect his longstanding support for (and explicitly racist defense of) stop-and-frisk policing to be a factor. And his track record of making demeaning comments about women. And the fact that, as recently as last year, he was caught on tape referring to transgender individuals as “a man wearing a dress.” Indeed, if there is any political capital left in the so-called “woke primary,” Bloomberg can expect to be on the receiving end of all of it.


QUICK HITS

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A Middle East Financial Crisis Is In The Making

A Middle East Financial Crisis Is In The Making

Authored by Tsvetana Paraskova via OilPrice.com,

A Dubai-based operator of ports and terminals around the world is returning to full state ownership with a proposed transaction and a subsequent delisting from Nasdaq Dubai.

This could be one of the latest signs that the oil-rich countries in the Middle East are still struggling to shore up budgets and finances in the aftermath of the 2014 oil price crash.

Under the proposed deal, global ports operator DP World will be delisted from Nasdaq Dubai after Port & Free Zone World (PFZW), a subsidiary of state-controlled Dubai World, buys nearly 20 percent of DP World’s shares it does not already own. DP World will become indirectly fully owned by the government of Dubai and will help the emirate’s investment vehicle Dubai World to repay some borrowings to its lenders.

“In the context of the planned delisting of DP World, a payment of US$5.15 billion is required from PFZW to Dubai World to assist Dubai World in discharging its outstanding obligations to its commercial bank lenders, so that DP World can implement its strategy without any restrictions from Dubai World’s creditors,” DP World said on Monday.

DP World’s Debt Will Grow in the Short Term

While the company wants to free itself from the shackles of demanding public markets, it will take on a lot of debt in the transaction in the short term, which prompted rating agencies Moody’s and Fitch Ratings to place DP World’s ratings under review for possible downgrades.

“The transaction will weaken the overall credit profile of DP World”, said Dion Bate, a Moody’s Vice President – Senior Analyst and local market analyst for DP World.

As per Fitch, DP World is the world’s fifth-largest container port operator by gross throughput, operating directly or via joint ventures, a portfolio of over 150 operations in more than 45 countries.

Deal Comes Amid Slower Economic Growth in Dubai

The planned delisting of DP World comes at a time when Dubai’s economic growth has slowed down since the 2014 oil price crash.

Source & credit: FT

Dubai’s economy grew by 1.9 percent in 2018, down from the 3.1 percent growth in 2017.

“The slowdown could be due to a combination of external factors such as the trade dispute between China and the US, economic instability among neighbouring countries and domestic issues such as the imposition of VAT across the UAE,” the Dubai government said in its Dubai Economic Report 2019.

Despite a recovery in oil prices in 2018, Dubai’s economic growth has failed to accelerate. In early 2019, businesses across Dubai were not optimistic about a major rebound in economic growth, entrepreneurs told FT’s Simeon Kerr.

Dubai’s economy is not directly dependent on oil, unlike the economy of Abu Dhabi, the other most famous and important emirate in the seven-emirate-strong United Arab Emirates (UAE).  

Dubai has for years relied on luxury real estate, tourism, logistics, and financial services for revenues, rather than on oil, which, truth be told, is not abundant in Dubai as is in and offshore Abu Dhabi.

Dubai Is Not as Insulated from Oil Prices As It Seems

However, as a financial, logistics, and tourism hotspot and hub in the region, Dubai’s economy suffers indirectly when petrodollars in the Middle East are fewer, and when the Persian Gulf governments start imposing taxes, often dampening consumer spending, in an effort to patch up coffers depleted after the oil price crash. The frequent geopolitical flare-ups in the region also weigh on investor and consumer sentiment, and add to global trends that constrain Dubai’s economic growth despite the fact that direct oil income is not the emirate’s main source of revenue.

During the 2008-2009 global financial crisis, it was oil-rich Abu Dhabi that came to the rescue of the state investment firm Dubai World to help it pay debt maturities. This kind of government-to-government bailout highlighted the fact that a diversified services-oriented economy like Dubai needed the petrodollars of the oil-rich Abu Dhabi to prevent debt defaults of some of its state-controlled companies during the financial crisis.  

Middle East Coffers Need Much More Non-Oil Revenues

But if the UAE and its neighbors in the Gulf were to meet a world of peak oil demand unscathed, they would need much deeper and urgent reforms in their economies, sources of revenues, and the way they are spending in order to preserve their net financial wealth over the next two decades, the International Monetary Fund (IMF) said in a recent report.

At the current pace of reforms, income, and spending, the six oil producers of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE—will see their current combined US$2-trillion wealth wiped out by 2034, if they do not significantly accelerate fiscal reforms and raise their non-oil revenues and non-oil share of their respective economies, the IMF warned earlier this month.  

Dubai may be a shining example of a diversified economy in the heart of the oil-rich Middle East, but when neighboring oil-dependent economies suffer, Dubai’s growth also slows down. The region is and will continue to be dependent on oil, and when oil prices falter, the oil-addicted Middle East will continue to struggle to patch up government budgets.


Tyler Durden

Wed, 02/19/2020 – 09:30

via ZeroHedge News https://ift.tt/2P6aVIY Tyler Durden

Expats Flee Hong Kong Over Protests, Coronavirus

Expats Flee Hong Kong Over Protests, Coronavirus

Expats living in Hong Kong have been fleeing the country after nearly a year of protests and the new, looming threat of the hyper-virulent coronavirus, which has already infected 62 people in the country as of February 17.

Residents wear masks as they march to protest against the government’s plan to set up a quarantine site close to their community amid the Wuhan outbreak, in Hong Kong, on Feb 2, 2020.PHOTO: REUTERS

It’s just becoming an unstable environment to raise a child in,” said Ian Jacob, owner of a construction materials company who is leaving Hong Kong with his wife and 10-year-old daughter after 15 years, according to the Straits Times.

“We watched as the situation got worse and worse,” he said of the political unrest which has unfolded over the past year.

With classes suspended again amid the coronavirus outbreak, the prospect of more home schooling for their 10-year-old daughter pushed them to take refuge in Auckland, New Zealand.

Mr Jacob said they’ll be moving back there for good once the school year ends in Hong Kong. –Straits Times

According to the Times, expats who have been thinking about leaving the politically unstable city have a sense of urgency due to the coroavirus, which has officially killed over 2,000 people and infected over 75,000.

Meanwhile, Hong Kong Chief Executive Carrie Lam has been oddly criticized for closing schools until mid-March due to the coronavirus threat, unlike Singapore.

Critics accuse Chief Executive Carrie Lam’s government of mishandling the latest crisis compared with Singapore, which has kept schools open.

An exodus by expats like Mr Jacob could further damage an economy already reeling from the unrest and the virus, with visitor numbers plunging and unemployment rising.

Hong Kong residents who come from elsewhere play outsized roles in finance, law and other service industries that make the city a global business capital. –Straits Times

There are just under 700,000 foreigners and mainland Chinese living in Hong Kong, accounting for nearly 9.5% of the population according to the 2016 census. Half of all expats ion the Special Administrative Region are from the Philippines and Indonesia – the primary source of domestic help. Additionally, there are around 35,000 Britons and 14,800 Americans.

And while the Times can’t say exactly how many people are considering leaving, “there is growing anecdotal evidence of a shift in sentiment among expats,” as evidenced by relocation companies which have experienced a spike in inquiries about moving, along with predictions that the ongoing political crisis will only “worsen in the days and weeks ahead,” as the city deals with the virus – according toa February 11 report from risk consultants Steve Vickers and Associates.

Links International Relocation Ltd had a 45 per cent increase in inquiries about moves in the second week of February compared with a year earlier, said Mr Patrick O’Donnell, the company’s Hong Kong-based managing director.

Typically the peak season for overseas moves is in June, yet springtime already is starting to look busy, said Mr Timothy Tao, Hong Kong-based director of business development with relocation company Asia Tigers Group. Inquiries have jumped in the past month, he said.

People are telling us: How soon can you pack us up?” Mr Tao said. –Straits Times

Meanwhile, worried workers have been panic buying groceries – emptying out shelves, and working from home. This has left restaurants struggling.

According to a February 12 letter from the British and French chambers of commerce, Hong Kong is at economic risk if a mass exodus occurs, and could threaten the city’s global status.

“If the specific needs of international schools cannot be rapidly addressed, this will very likely trigger decisions of families (not just expatriates) to leave Hong Kong in the coming weeks,” wrote Rebecca Silli and Peter Burnett, chairs of the French and British chambers.

“This would also have dramatic consequences on the international schools’ financial position, even to the point of putting at risk the continued operation of some.”

Some families have opted to temporarily relocate until the political situation in Hong Kong settles down.

Insurance industry executive Ruth Lu, who has children ages 7 and 11, has rented a house with a pool on the Thai island of Koh Samui while schools are closed.

“We don’t even need to wear masks,” she said.

A native of China’s Jiangsu Province who has lived in Hong Kong for more than 20 years, Ms Lu has no immediate plans to move but the unrest has soured her on the city.

“It’s not the old Hong Kong like when I first arrived,” she said.

Others, such as several bankers interviewed by Bloomberg, said they had moved abroad with their families until the outbreak has subsided. 

Approximately 75% of the families at the prestigious private Chinese International School with over 1,530 students, have provided their whereabouts – with 20% of them reporting to be outside Hong Kong, according to headmaster Sean Lynch.

The US State Department, meanwhile, has warned Americans about travel to Hong Kong – advising increased caution, while allowing non-essential State Department employees and their families to evacuate.


Tyler Durden

Wed, 02/19/2020 – 09:10

via ZeroHedge News https://ift.tt/2HDo1cp Tyler Durden

Market Euphoria, Global Slowdown

Market Euphoria, Global Slowdown

Authored by Daniel Lacalle via DLacalle.com,

We are in very interesting times. We live what is probably the most surprising bull market in history. Excess of demand-side policies, massive liquidity injections, and low rates have zombified the economy and driven debt to all-time highs, while the economic slowdown is evident.

In the eurozone, the mirage of macroeconomic rebound is fading, with very poor figures from Germany, France, Italy, and Spain. At the same time, the collapse of Japan’s GDP in the fourth quarter proves that misguided tax increases do have significant negative implications and the estimates of the global impact of the coronavirus range between an optimistic 0.3% and a cautious 0.7% of global GDP. However, risky assets continue to soar and shrug off poor data in what seems like an endless bullish trend.

There is a determining factor in this equation of weak macro, rising debt, and incorrect policies. Financial repression covers a large part of the risks with a blanket of euphoria. With global money supply at $79 trillion and major central bank balance sheets above $21 trillion, irresponsible monetary policies continue to incentivize excessive debt and too much risk. By making the lowest risk assets -sovereign bonds- exceptionally expensive, the rest of financial assets -stocks, private equity- soar almost in unison creating an illusion of endless rising valuation and optically acceptable multiples. When the 10-year yield of most sovereign bonds is negative in real terms, multiples of equities and financial transactions rise accordingly.  However, disguising risk does not eliminate it.

It is not a surprise that the world stock markets added $17 trillion in total capitalization in 2019, according to Deutsche Bank, highly correlated with central banks adding hundreds of billions in liquidity every month. Stock markets all over the world shrugged off poor macro, weak earnings’ and political risk as the ECB, BOJ, PBOC and Fed injected hundreds of billions in the market every month.

It is not a coincidence either that many politicians try to claim the good performance of markets as their doing. Politicians of all colors and ideology congratulate themselves on the rise in bonds and stocks as if it were the result of their policies, and not of the dangerous and perennial monetary insanity of central banks. This is an important problem because risk is not only disguised, reckless fiscal policies are rewarded.

The ECB’s balance sheet is already almost 40% of the eurozone’s GDP and the macro leading indicators point to further weakness. The same is true in Japan, where the BOJ balance sheet already reached 100% of Japan’s GDP. The Federal Reserve has reversed the so-called normalization and its balance has increased by 11% since August. What about China? The balance sheet of the central bank has also skyrocketed drowning the economic and financial troubles with massive liquidity injections. Unfortunately, consensus commentators see the actions of the Japanese central bank as the future, not a warning. Janet Yellen recently mentioned that the Fed should purchase stocks and troubled assets in a downturn, following the example of the Bank Of Japan. According to the BoJ funds flow report for Q3 2019, the bank now owns some 8% of the entire Japanese equity market and 77.5% of the country’s ETFs. Now Japan is close to recession again. Success.

What the market is discounting is financial repression intensifying into 2022. According to Citibank, the balance sheet of the major central banks will likely increase by the highest level since 2011 in the 2020-2021 period, almost a trillion dollars more than at the end of 2019 (this data does not include China).

What is the problem? While central banks maintain bubble-like valuations on many risky assets, investors see downward revisions of growth estimates, worsening industrial activity and corporate profits that do not warrant optimism. Moreover, faith in the placebo effect of central banks can end one day. That is why we find seemingly contradictory indicators: gold and the US dollar rise as safety assets but, at the same time, the most cyclical sectors soar in the stock market. Commodities – especially copper and oil – reflected the global slowdown even before the outbreak of the coronavirus buy, at the same time, markets take more risk in emerging economies.

The earnings season reflects this contradiction as well. On the one hand, earnings – at the close of this article – show a drop in sales of 0.50% and a decline in net profits of -0.05% in Europe’s Stoxx 600, with six sectors delivering negative growth. In the United States, S&P 500 earnings are similar, although slightly better. An increase in sales of 3.5% and profits of 1.31% with four sectors in negative growth. The reaction of stock markets is surprisingly bullish as long as the published results are mildly decent. When the lowest risk asset is extremely expensive, expensive stocks look relatively and optically cheap compared to hugely appreciated bonds.

Financial repression is also leading to “financial corporate inequality”. Multi mega-caps, big components of indices, get massively bid and their bonds are sold at the lowest yields on record, while mid-sized companies face relatively poorer demand and limited access to credit and liquidity.  A large part of the excess liquidity goes directly to large stocks and big corporation bonds due to the massive purchase of passive instruments linked to the main indices. 

We cannot fall into the trap of ignoring the macroeconomic reality and the trend in earnings just because “everything goes up”. Additionally, we cannot ignore monetary reality either. Market euphoria should not make us ignore major problems disguised under the monetary laughing gas, and we need to continue looking for relative value opportunities without ignoring the risks but without ignoring the monetary evidence.

Liquidity injections and rate reductions are likely to increase. The monetary history of the world reminds us that states and central banks never turn back when it becomes clear that their policies do not work, they always accelerate… Until the placebo effect stops working. Predicting when will it happen is almost impossible. We just know it does stop. Until then, falling into the monetary trap of no perceived risk is as dangerous as being out of the market. In an increasingly difficult environment, the prudent investor must constantly be aware of the risks to seek attractive long-term opportunities.


Tyler Durden

Wed, 02/19/2020 – 08:55

via ZeroHedge News https://ift.tt/2SECdrW Tyler Durden