One week after a series of rather disappointing auctions, the US treasury has launched the week’s refunding sales, starting with today’s sale of $38 billion in 3Y notes, which moments ago stopped at a high yield of 1.562%, stropping 0.1bps through when issued 1.563%, and the lowest yield for the tenor since September 2017. This was the third consecutive 3Y auction that has stopped through the When Issued, a sign that investors still have substantial appetite for the short-end.
There was less enthusiasm if one looks at the bid to cover, which despite rebounding from last month’s 2.39, was still the second lowest since March 2009.
Finally, the internals were generally in line, with foreign buyers, or indirects awarded 46.7% of the auction, right on top of the 6 auction average; Directs saw a modest increase to 19.3% from 17.9% a month ago, and above the 16.3% average, while dealers ended up with 34% of the auction, unchanged from last month and just below the recent average.
Overall, a solid auction and one which sets up nicely for tomorrow’s sale of benchmark, 10Y paper.
via ZeroHedge News https://ift.tt/2Kk04Jl Tyler Durden
When they write the history of this crash at least there will not be any doubt about who to pin the blame on! Trade war. Great idea.
Stocks take a spanking! Bond yields tumble! High yield bonds offered only! China stops buying US agriproducts. Renminbi breaks 7. Trump calls China a “Currency Manipulator”! China responds with a FROAD! The global bull market stops. Suddenly. Crash, bang, wallop…
So much for Fed Juicing the markets and pandering to Trump by stopping Quantitative Tightening with last week’s minor rate ease. Utterly pointless. Global Markets now pay the consequences. Market is focused on the real stuff again – the implications on growth of a serious trade war between the US and China. Currency moves are at the forefront – China lets Rmb slip and then shows it can restrain it. This is way past a simple business cycle move – this is about fundamentals. China is serious and is not going to cave. What just moved the markets was real stuff – and you don’t need to be a genius to figure out Trump’s Trade War is not great news.
It probably doesn’t help Larry Summers tweeting: “We may well be at the most dangerous financial moment since the 2009 Financial Crisis with current developments between the US and China.” A No-Sh*T Sherlock award for stating the downright obvious is on its way to him. (But 2009? Where were you in 2008 Larry?)
Does this market have further to correct? Markets are lower – when to start buying again? Steady – lets figure out the reality:
We’ve got a politically inspired global trade war that isn’t going to end any time soon – which is likely to trigger global recession and slower growth – but also opportunities. Wars usually do.
Strong dollar is horrible news for EM. Competitive weakening by others will go nowhere.
Real economy – such as it still exists, is pretty much at top of cycle – witness earnings and full employment.
We’ve got massive financial bubbles – caused largely by artificially low interest rates and QE – in financial assets: global stocks and bonds – likely to see correction, and investors trying to exit illiquid bond markets – feels very 2008/2009 where illiquidity was major crisis.
We’ve got central banks out of policy options – so we’re likely to see them do the same as they done before, the danger being they fuel asset bubbles further.
We’ve now got over $14.5 trillion of global bonds yielding less than 0%.
The reality is pulling money from overvalued stocks to invest in overvalued bonds doesn’t look a very attractive option – even though it might be the loss limiting one.
Put all the market factors together, and the outlook for financial assets looks poor. But so much money is tied up in inflated stocks, I suspect it’s a correction rather than a crash. Where else can you go? Sell stocks to buy zero yield government bonds? That’s a choice… ?
I suspect the credit market takes a spanking – and an outbreak of illiquidity across bond markets. I’d keep any eye on fixed income ETFs – everyone says they are safe.. Yeah.. sure they are. Watch carefully…
The upside is wobbly markets spell massive opportunity to buy performing assets on the cheap. I’m looking for sellers of illiquid bonds and private assets. There are going to bids out there – just not bids sellers are going to like.
Blain’s Brexit Watch
Even as the global economy trips and tumbles, back here in Blighty, its same-as, same-as. Sterling gets a bit of a respite from the fact the rest of the world now looks as daft as the UK! Whoopee! B ut it won’t last long.
Jeremy Corbyn is vaguely suggesting a no-confidence vote in September. Gosh! How original? With Boris holding a majority of one, how long did Jeremey take to come up with that not-so-cunning plan? Boris’ chief strategist and headsman Dominic Cummings is quite clear in his strategy – doesn’t matter if Boris loses a no-confidence vote, it will be too late to avoid the Oct 31st deadline.
Facing out a confidence vote is Boris’ apparent strategy, but we’d prefer something a little more positive. The longer Boris can hang on without the distractions of a hostile parliament, the longer it gives him to reach a new agreement with Europe. But there aren’t many signs or signals of any meaningful discussions with Brussels (which is exactly why I suspect they might be happening?).
I suspect the odds of No-Deal on Oct 31st are shortening. Even if Boris does get Europe to agree an acceptable solution to the BackStop, his wafer-thin majority means he has a slim chance of getting it approved pre-Oct 31 in Parliament. Boris is betting he can win an election, but only after Brexit. If the plan is to deliver, as he promises, it’s difficult to see any alternative to No-Deal.
So stay short of sterling and… er, that’s the best I can suggest.
In many ways I prefer Trade Wars to Brexit.
via ZeroHedge News https://ift.tt/2KA2zpI Tyler Durden
After yesterday’s unprecedented revocation of an over 50-year old constitutional article which gave Indian-administered Kashmir special autonomous status, Pakistan’s army has shot back in provocative statements saying it will “go to any extent” to support Kashmiris amid an Indian military crackdown. “Pakistan Army firmly stands by the Kashmiris in their just struggle to the very end,” said General Qamar Javed Bajwa after meeting with top commanders over the crisis.
“We are prepared and shall go to any extent to fulfill our obligations in this regard,” he added, without specifying what form this might take. At the same time Pakistan’s foreign minister informed the United Nations it is prepared to act in response to the “critical situation”.
Indian soldiers recently patroling the Jammu-Srinigar National Highway, via the AFP.
The now voided Article 370 is legally and historically what assured a high degree autonomy for the Indian administered Muslim-majority state, enshrined in the constitution, which inhabitants there see as justifying remaining part of India. The Hindu nationalist Bharatiya Janata leadership in New Delhi, led by Prime Minister Narendra Modi, revoked the Jammu and Kashmir’s (J&K) status quo ability and rights to maintain their own local governance on Monday.
We noted this could put India and Pakistan on a direct collision course for war, following reports of weekend shelling in the contested region by Indian forces — indeed CNN has reported Indian-controlled Kashmir is on “lockdown” with phone lines and internet cut, as tens of thousands of Indian troops have been freshly deployed, and with key prominent local politicians under house arrest.
Videos out of Jammu posted to social media showed uniformed Indian soldiers filing through the streets in densely populated towns immediately following the revocation of Jammu and Kashmir’s special status.
A broad communications blackout is still in place, with a security crackdown likely to escalate, as Indian forces claim to continue operations aimed at rooting out Islamic militants.
Meanwhile, in stunning new statements, Pakistan’s Prime Minister Imran Khan predicted new suicide bombings will target Indian troops in the region, per The Telegraph:
As Pakistan’s parliament met to discuss the move, Mr Khan predicted there would be more terrorist attacks in Kashmir like the blast which killed 40 paramilitary police in Pulwama in February. India blamed that attack on Pakistan and the two sides came close to war.
“With an approach of this nature, incidents like Pulwama are bound to happen again. I can already predict this will happen,” Mr Khan said.
The Pulwama attack is what precipitated a series of events which led to Pakistan shooting down an Indian Air Force jet, briefly holding its downed pilot in detention. Thus Khan’s words represent a huge provocation likely to be met with fierce reaction from New Delhi.
Khan is also reported to have told Pakistan’s parliament in his address Tuesday that there’s “risk of genocide” as India’s army initiates its clamp down.
India has deployed thousands of troops to the Kashmir region, also asking tourists in the area to leave along with restricting internet as wellpic.twitter.com/wflV9ifWF7
A huge build-up of forces precipitated Monday’s revocation of Article 370, possibly in the tens of thousands.
Doval plan in Indian Occupied #kashmir: 280 companies of security forces are being deployed in the Kashmir valley. Sudden deployment of 28,000 extra troops is a clear sign oppression by force
All major entry and exit points of Srinagar have been taken over by Occupation Forces pic.twitter.com/X9u7dNAqNP
Also on Tuesday one of Pakistan’s foremost radical clerics, Maulana Abdul Aziz, former imam of the notorious Red Mosque in Islamabad, called for popular jihad in response to the Kashmir crisis.
“Jihad is now obligatory for Muslims in Pakistan because our Kashmiri sisters are waiting for our help,” Abdul Aziz said.
He said if Pakistan’s army isn’t willing, then authorities should open the border for militants to assist in the Kashmiri Muslim struggle.
via ZeroHedge News https://ift.tt/2MGZMxL Tyler Durden
Three major opioid distributors have offered to pay $10 billion to settle claims that the helped fuel the ongoing US opioid epidemic, as nearly 2,000 lawsuits loom against the drug giants, according to Bloomberg.
McKesson Corp, Cardinal Health Inc. and Amerisource Bergen Corp – which account for the majority of prescriptions supplied to pharmacies – made the verbal proposal while negotiating with a group of state attorneys general, according to three people familiar with the offer who aren’t authorized to speak publicly on the matter.
The proposal marks the first time in two years of discussions that the three distributors have put an actual dollar figure on a resolution.
Responding to the offer, the National Association of Attorneys General countered with a demand for $45 billion paid over decades to cover the costs of the public health crisis brought on by opioid abuse, addiction and overdoses.
Whether the distributors and attorneys general can agree to a deal remains uncertain. But reaching a compromise may not be the toughest hurdle. The distributors face almost 2,000 additional lawsuits brought by cities and counties across the U.S., with a separate group of lawyers leading the litigation. Getting them to sign on to any deal could prove challenging.
McKesson spokeswoman Kristin Hunter Chasen said in an emailed statement, “We regularly engage with the state attorneys general, but the company has made no settlement offers.”
The people familiar with the matter reiterated the companies — including McKesson — have made an opening proffer of a settlement price. Chasen declined to elaborate on McKesson’s discussions to resolve the litigation.
Spokeswomen for AmerisourceBergen and Cardinal Health declined to comment on the discussions or on what one company said was “speculation.” –Bloomberg
In July, UK-based drugmaker Reckitt Benckiser Group (RB Group) paid the US government a record $1.4 billion to end criminal and civil probes into allegations of illegal marketing of opioid addiction treatment medication, according to the US Justice Department.
According to Nephron Research analysts, a global settlement covering all opioid manufacturers could cost between $30 billion and $55 billion, while Wells Fargo analyst David Morris says it could reach $100 billion.
The ongoing lawsuits revolve around the claim that drugmakers – including Johnson & Johnson and Purdue Pharma LP – downplayed the risks of highly-addictive opioids, while overselling their benefits via ‘hyper-aggressive marketing campaigns,’ according to Bloomberg. Distributors, meanwhile, are accused of ignoring rampant painkiller abuse while illegally flooding states with pills.
One pharmacy in Kermit, West Virginia — population 400 — received almost 5 million doses from McKesson between 2005 and 2006, records show. About 30 miles from Kermit, the company shipped more than 5.8 million to a pharmacy in Mount Gay — population 1,800 — between 2006 and 2014. Another 2.3 million went to a pharmacy three miles away.
McKesson, Cardinal Health and AmerisourceBergen, along with other distributors, shipped a total of 76 billion pain pills over a six-year period starting in 2006, according to the U.S. Drug Enforcement Agency. The companies deny the governments’ allegations and have advanced dozens of legal and factual defenses, saying they complied with all state and federal laws. –Bloomberg
On Tuesday, lawyers from all sides will appear in federal court in Cleveland, Ohio, where many of the opioid lawsuits have been consolidated by US District Judge Dan Polster. The first trial was set to start Oct. 21, however the defendant companies have requested a dealy on the grounds that they need more time to prepare for “one of the most complicated trials in legal history.”
In an indication of how complicated settlement talks will be, local governments are pressing to set up their own negotiating class to represent more than 24,000 cities and counties to work a separate deal with the pharmaceutical industry. Many state attorneys general oppose the bid by cities and counties, an issue likely to come up at Tuesday’s hearing. –Bloomberg
“Fifty state attorney generals are better representatives of the people of their state,” said Ohio Attorney General Dave A. Yost in a July 23 letter to Judge Polster, adding that private attorneys hired by local governments would profit handsomely from any settlement.
That said, there may be issues with an omnibus settlement, according to University of Georgia law professor Elizabeth Burch.
“So it’s hard to see how this deal would fly given it can’t be crammed down on all the cities and counties,” she said, adding “The companies want closure. They don’t want to have to do two settlements.”
In order to overcome this obstacle, the state attorneys general are looking to structure a deal with the distributors which offers incentives for cities and counties which agree to the terms, according to Bloomberg‘s sources. Those who join early will likely reap a greater share of the settlement.
University of Richmond law professor Carl Tobias also thinks it’s going to be a tough nut to crack.
“It just may not make sense for the cities and counties to join this from a financial standpoint because they may be able to get more” through the cases they brought.
The cities and counties are worried any state deal would get used for general state expenses rather than local needs. They point to the $246 billion settlement in 1998 with tobacco companies in which few funds made their way to municipalities.
There already have been some state settlements.
In May, West Virginia agreed to accept $37 million from McKesson to resolve a suit brought by that state’s attorney general alleging it improperly distributed opioids there. West Virginia has the highest rate of drug-overdose deaths in the U.S.
Oklahoma, which sued drug makers rather than distributors, agreed in March to a $270 million payment from Purdue and then two months later accepted an $85 million accord with Teva Pharmaceutical Industries Ltd. A judge will rule later this month on Oklahoma’s claim J&J should pay as much as $17.5 billion for its role as the opioid crisis’ “kingpin.” The state plans to use the money for treatment of opioid addiction and research into the problem. –Bloomberg
Last week, in the aftermath of the Fed’s “mid-cycle” rate cut which sparked a tantrum in the market demanding the start of an easing cycle (which Trump appeared to deliver when he announced an escalation in the trade war with China which resulted in a devaluation in the yuan below 7.00 just days later), Nomura’s quant team cautioned that as a result of surging economic uncertainty, it anticipated the loss of the “buying support it has been getting from macro-oriented funds and longer-term investors” and the result would be systematic selling pressure which “could gain the upper hand for a while.”
This, as Charlie McElligott detailed, is precisely what happened on Monday when the S&P dipped below key CTA selling thresholds, as we discussed yesterday in “Here Comes The “Extreme Negative Gamma” Selling Avalanche” which materialized almost instantly, sending the S&P on its biggest daily drop of 2019:
Another reason why Nomura’s quants were worried was simpler: the calendar, i.e., August is a month where liquidity is especially thin as traders are on vacation, and the result tends to be a “volatility shock.”
And most remarakble was Nomura short-term forecast, according to which the Japanese bank saw “the S&P 500 being taken down into the 2,850-2,900 range.”
Just a few days later that’s precisely what happened.
But while Nomura should be commended for correctly predicting the dramatic market plunge that followed Thursday’s chaos, even if it did not necessarily anticipate the catalysts that caused it, what is more concerning is what Nomura sees happening next, namely that the “arrival of first volatility spike sets up the possibility of another one in late August or early September.“
As Nomura’s Masanari Takada recaps recent events, “equity markets in the US and worldwide were hit with a massive selloff yesterday. As market participants with a focus on fundamentals would have it, a somewhat hawkish FOMC meeting outcome dashed expectations for another exercise of the “Fed put”, and the US’s invocation of a fourth round of tariffs on Chinese goods added to fears of an intensifying battle between the US and China on the twin fronts of trade and currency policy.”
So far so good. What is not is the punchline, namely that Nomura has been expecting the “vol-up” scenario to arrive in two waves, and yesterday’s developments confirmed that the first wave had arrived.
To be sure, there was nothing shocking about this: as Nomura’s own forecast last week indicated, and going by an analysis of speculative traders’ methods and the available quantitative data on various market anomalies, Takada notes that the present selloff looks like a mostly predictable affair that has unfolded just as one might expect: yesterday’s selloff met the criteria for a “vol-up” scenario in that as of the 5 August market close,
the VIX had broken above 20,
the VIX futures term structure had gone into backwardation (between UX1 and UX2), and
the VVIX had broken above 100.
In attempting to pinpoint what supply-demand factors set the stage for the arrival of the first wave of higher volatility, Nomura highlights that hedge funds, after building up bullish positions in equities starting in mid-June and throughout July, have had their positions suddenly and seriously undermined.
As McElligott hinted yesterday when he slammed being short gamma in an environment such as this, the quintessential examples of such positions are:
trend-following strategies targeting the topside for US equities; and
bets on continued low volatility including short gamma strategies (like the selling of S&P 500 puts) and short positions in VIX futures.
Meanwhile, as we warned last weekend, speculative traders had piled into these positions in lockstep to the point of herding,so their moves to buy back puts (thereby pushing up implied volatility) and sell futures (whether to unwind positions or to hedge other positions) set off a chain reaction of selling in the stock market. The data show that hedge funds had in fact started reducing their net exposure to US equities (estimated 30-day rolling beta) on 1 August.
The risk-off mood also gained momentum, with Nomura’s proprietary gauge of US stock market sentiment registering a more negative reading (indicative of risk avoidance) than at any time since January 2019. Speculative traders of all stripes sold off US equities so as to reduce their net exposure. From the other direction, some global macro hedge funds and ultra-short-term traders hoping to partake in a near-term spontaneous rebound may well step in to buy stocks in a hunt for bargains. Nevertheless, Nomura thinks conditions on balance are such that among speculative traders, trend-following algos are especially likely to continue looking for opportunities to close out long positions. This is particularly true of CTAs, which may well exit the entirety of their existing net long positions in S&P 500 futures and NASDAQ 100 futures so as to make their positioning market-neutral, even without an assumption that a US economic recession is imminent.
What happens next?
In laying out the sequence of events, the Nomura quants predict that once the first wave of volatility has passed, global equity markets are likely to experience a spontaneous rebound. Contributing factors to such a relief rally could include expectations for a substantial rate cut by the Fed at the September FOMC meeting and stock purchases made by short-term contrarian investors.
However, for three specific reasons, Nomura expects any near-term rally to be no more than a head fake, and thinks that any such rally would be best treated as an opportunity to sell in preparation for the second wave of volatility that the bank expects will arrive in late August or early September. Worse, Takada warns that “the second wave may well hit harder than the first, like an aftershock that eclipses the initial earthquake. At this point, we think it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk.”
The bank then lists the three reasons:
1. The first reason for expecting any near-term rally to be short-lived is the seasonal pattern in US stock market volatility. The VVIX index (which measures the volatility of the VIX index, itself a measure of volatility) tends to spike twice in August, once in the first half of the month and once in the latter half. Whether these spikes occur in a given year depends to a large extent on whatever imbalances in supply-demand have built up in the market just ahead of the event, but the risk of a vol-up scenario in August does tend to materialize in years like this one, with speculative traders having staked out rather hefty bullish positions in equities through the end of July.
2. The second reason we cite is the positioning of trend-following algo traders in equity markets. Like hedge funds, trend-following algos including CTAs and risk-parity funds have been sucked into the aforementioned chain-reaction selloff. Even so, CTAs’ net long position in S&P 500 futures is still only about 45% smaller than it was at its most recent peak on 16 July. With much of the unwinding still left undone, we think CTAs are likely to continue selling futures for loss-cutting purposes. Meanwhile, we estimate that heightened stock market volatility will leave risk-parity funds having to dispose of another USD 15-20 billion worth of DM country equities in order to rebalance their portfolios. On this point, we need to emphasize that rebalancing trades by risk-parity funds tend to be clustered at the end of each month.
3. Third, global stock market sentiment is collapsing in an irregular way. Nomura reads the current trend in sentiment as suggestive of both deterioration in supply-demand for equities and a sharp downward break in fundamentals. Above all, the pattern in US stock market sentiment has come to even more closely resemble the picture of sentiment on the eve of the 2008 Lehman Brothers collapse that marked the onset of the global financial crisis.
Of course, Nomura caveats that the resemblance could “turn out to be merely superficial” however, Takada also warns that “it could also be that the market’s repeated pendulum swings between optimism and pessimism over how the US-China standoff might end have a meaningful historical parallel in the market’s long-ago mood swings over how the subprime mortgage crisis might play out.”
Therefore the quant thinks that even if US stock market sentiment were to start picking up, it may well collapse again in late August or early September. His conclusion: “we accordingly see a non-negligible threat of tail risks materializing in a way that shocks the market into panic selling.”
via ZeroHedge News https://ift.tt/2Zzff6M Tyler Durden
It was two days of contrast that tell us about America 2019.
In El Paso, Texas, and Dayton, Ohio, following the mass murders of Saturday and Sunday morning, the local folks on camera — police, prosecutors, mayors, FBI and city officials — were nonpartisan, patient, polite and dignified in the unity and solemnity of their grief for their dead and wounded.
But for the Democratic presidential candidates, the El Paso atrocity was like a loose football in the Super Bowl.
A mad scramble broke out over who would be first and most savage in indicting President Donald Trump for moral complicity in mass murder.
Never let a crisis go to waste is an old political adage.
And this crowd of candidates was not going to let that happen. Yet the naked political exploitation of these horrific acts, before the bodies of many had been removed from the crime scene, was appalling to behold.
Learning in Las Vegas of the slaughter at the Walmart in El Paso, his hometown, Beto O’Rourke flew back that same day and sped to the scene.
Railed Beto, Trump “is a racist and he stokes racism in this country … and it leads to violence. … We have a president with white nationalist views in the United States today.” He called Trump’s language about Mexican immigrants “reminiscent of something you might hear in the Third Reich.”
Asked on Sunday by CNN’s Jake Tapper if he believes the president is a “white nationalist,” Beto eagerly assented: “Yes, I do.”
Bernie Sanders, asked by Tapper if he agreed with Beto, replied:
“I do. It gives me no pleasure to say this … all of the evidence out there suggests that we have a president who is a racist, who is a xenophobe, who appeals, and is trying to appeal, to white nationalism.”
On the same CNN show, Sen. Cory Booker almost outdid Beto, “I want to say with more moral clarity that Donald Trump is responsible for this … (mass murder in El Paso) because he is stoking fear and hatred and bigotry.”
Booker went on:
“We have a president of the United States who is savagely fraying the bonds of our nation by speaking consistently words of hatred, words of division, words of demonization and demagoguery. … He is fueling an environment where white supremacists … are finding more and more license to strike out against the vulnerable, to strike out against the immigrant, to strike out against ‘the other.’”
Booker is saying Trump is rendering moral license to race conflict.
Elizabeth Warren issued a statement:
“We need to call out white nationalism for what it is — domestic terrorism. It is a threat to the United States, and we’ve seen its devastating toll this weekend. And we need to call out the president himself for advancing racism and white supremacy.”
Ironically, The Washington Times reports that the Dayton shooter, who killed his sister and eight others, “described himself on social media as a pro-Satan ‘leftist,’ who wanted Joe Biden’s generation to die off, hated Trump, and hoped to vote for Sen. Elizabeth Warren for president.”
“I want socialism, and i’ll not wait for the idiots to finally come round to understanding,” Connor Betts, the killer, reportedly tweeted.
Not to be left behind, Sen. Kamala Harris said of the president after the slaughter, he’s “a racist, there’s no question in my mind.”
These attacks, unprecedented in their savagery, testify to a hatred of Trump that is broad, deep and implacable, and unlikely to be constrained before November 2020.
Folks still speak wistfully of a return of the unity America once knew and of a coming together to stand again on common ground.
But where is the evidence for that hope?
If Trump’s fabled base is to going to stand loyally by him, and the Democratic candidates are going to unleash this kind of bile against him, whoever wins in 2020 will be not be able to unite us, absent a Pearl Harbor-style attack on this country.
Clearly the issue in the 2020 campaign is going to be Trump.
Is impeachment now back on the table? How can it not be?
Though Robert Mueller found no collusion between the 2016 Trump campaign and the Russians, support for impeachment hearings passed the midway mark inside the Democratic caucus in the House last week, even before the horrible weekend.
And if Democrats believe about Trump what their candidates say about him — that he is a white nationalist racist and xenophobe deliberately stoking fear, hatred and violence, whose words and actions call to mind the fascist Italy of Benito Mussolini and Third Reich of Nazi Germany — how can the Democratic leadership credibly not try to impeach him?
Yet, blaming the massacre in El Paso on the rhetoric of Donald Trump is a charge that can come back to bite his attackers. Neither the right nor left has a monopoly on political extremism or violence. And the hate-filled rhetoric of the left this last weekend exceeds anything used by Trump.
via ZeroHedge News https://ift.tt/2ZFnLBg Tyler Durden
Zimbabwe’s economic situation will continue to sour in 2H19 due to unfavorable weather conditions, foreign currency shortages and widespread power cuts, its finance minister said, as he responded to a deteriorating economic outlook by blacking out inflation statistics through the second half, and finally acknowledged what the International Monetary Fund told him in April: economic turmoil ahead.
Prices of essential goods and services have, in some cases, quadrupled this summer, due to the government renaming the RTGS currency as the Zimbabwe dollar, which has been on a rapid decline amid shortages, including electrical power, petrol products, American dollars, and food, reported Bloomberg.
Many Zimbabweans who supported the toppling of decades-long ruler Robert Mugabe two years ago are discovering that their economic situation is the most serious in a decade.
Emmerson Mnangagwa replaced Mugabe in 2017, he promised millions of Zimbabweans of an economic revival and that we are “open for business.” The sugar high of optimism only lasted for a short time; the effects of money supply expansion through the sale of Treasury bills under Mugabe’s rule has outweighed any positive advancements in the last several years. Mnangagwa outlawed the American dollar in favor of local currency that can’t be traded internationally, effectively making it extremely difficult for international firms to do business in the African country.
“Zimbabwe is at a tipping point and if it falls over the edge it’s going to be quite a long way in coming back,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. “The wheels are falling off. There is no way out of a Ponzi scheme other than a massive infusion of cash to pay off your creditors.”
*chart
Zimbabwe isn’t the only country suspending its inflation statistics for the next six months. Venezuela has also done the same, after inflation in the South American country printed a red hot 1,698,488% in 2018. Zimbabwean officials need to collect comparable data since the introduction of the new currency in February. The last time this happened, it was 2009, when the country dropped the Zimbabwe dollar in support of American dollars after inflation climbed to 500 billion percent.
Steve H. Hanke, a professor of applied economics at the Johns Hopkins University in Baltimore, told Bloomberg that if the black-market exchange rate is used, Zimbabwe’s annual inflation rate is 558%, three times more than the official rate published by the government.
Jee-A van der Linde, an economist at NKC African Economics in Paarl, South Africa, said abandoning the official annual rate is “no real loss from an analytical perspective,” adding that “these elevated inflation readings did little more than create panic and damage what little confidence was left.”
Countries that are in crisis tend to halt the publication of inflation data. In 2013, the IMF condemned Argentina for manipulating its inflation data.
The dollar peg was dropped in February, and the return of the Zimbabwe dollar in June has led to the rapid depreciation of the currency officially trading at 9.0347 to the dollar on Aug. 6.
The government has said it had no other alternative but to reintroduce its own currency amid foreign-currency shortages, something that Hanke objects.
“The Achilles heel is the introduction of the new currency to the exclusion of the dollar,” he said. “They have decided to go in the completely opposite direction and claimed it’s the best thing since sliced bread and it’s going to be an absolute disaster.”
Japhet Moyo, secretary-general of the Zimbabwe Congress of Trade Unions, has warned that cost of essential services jumped 400% this year while pay has risen only by 10%. This has left many millions of people broke and starving.
About 59% of rural Zimbabweans, or about 5.5 million people, don’t have food, a new report by the United Nations and aid groups said last month.
#RECAP These military trucks and buses have been delivered to Zimbabwe – a country that has no food to feed 5.5m people hit by drought; a country that has no electricity, fuel, bread and medicines. A country whose leader urges citizens to take the pain while flying private jets pic.twitter.com/I1MZhIXNGQ
It’s entirely possible that the return of street protests over collapsing economic conditions could flare-up in the coming months as there is only so much Zimbabweans will tolerate before an outright economic collapse.
via ZeroHedge News https://ift.tt/2KsyHf3 Tyler Durden
The opinion is here; the court concluded that Palin had adequately alleged “actual malice”—a misleading term meaning that the New York Times editor responsible for the article over which she was suing knew it was false or likely to be false—and the district judge therefore erred in dismissing the case. (This of course doesn’t show that Palin has proved such knowledge, only that she should be offered a chance to prove it.)
Here are the facts that led to the lawsuit:
On January 8, 2011, Jared Loughner opened fire at a political rally for Democratic Congresswoman Gabrielle Giffords in Tucson, Arizona (“the Loughner shooting”), killing six people and injuring thirteen others. Representative Giffords was seriously wounded in the attack.
Shortly before the tragic attack, Sarah Palin’s political action committee (“SarahPAC”) had circulated a map that superimposed the image of a crosshairs target over certain Democratic congressional districts (evoking, in the view of many, images of violence). Giffords’ district was among those targeted by the SarahPAC crosshairs map. The image had been publicized during the earlier political controversy surrounding the Affordable Care Act, but in the wake of the Loughner shooting, some speculated that the shooting was connected to the crosshairs map. No evidence ever emerged to establish that link; in fact, the criminal investigation of Loughner indicated that his animosity toward Representative Giffords had arisen before SarahPAC published the map.
Six years later, on June 14, 2017, another political shooting occurred when James Hodgkinson opened fire in Alexandria, Virginia at a practice for a congressional baseball game. He seriously injured four people, including Republican Congressman Steve Scalise (“the Hodgkinson shooting”). That same evening, the Times, under the Editorial Board’s byline, published an editorial entitled “America’s Lethal Politics” (“the editorial”) in response to the shooting.
The editorial argued that these two political shootings evidenced the “vicious” nature of American politics. Reflecting on the Loughner shooting and the SarahPAC crosshairs map, the editorial claimed that the “link to political incitement was clear,” and noted that Palin’s political action committee had “circulated a map of targeted electoral districts that put Ms. Giffords and 19 other Democrats under stylized cross hairs,” suggesting that the congressmembers themselves had been pictured on the map.2 In the next paragraph, the editorial referenced the Hodgkinson shooting that had happened that day: “Though there’s no sign of incitement as direct as in the Giffords attack, liberals should of course hold themselves to the same standard of decency that they ask of the right.”
The Times faced an immediate backlash for publishing the editorial. Within a day, it had changed the editorial and issued a correction. The Times removed the two phrases suggesting a link between Palin and the Loughner shooting. Added to the editorial was a correction that read: “An earlier version of this editorial incorrectly stated that a link existed between political incitement and the 2011 shooting of Representative Gabby Giffords. In fact, no such link was established.” The Times also clarified that the SarahPAC map had overlaid crosshairs on Democratic congressional districts, not the representatives themselves.
Twelve days after the editorial was published Palin sued the Times in federal court….
The Times moved to dismiss the case, and the district judge held an evidentiary hearing to decide whether the allegations of “actual malice” against the Times were plausible; the judge concluded that the allegations weren’t plausible, based on the testimony of “James Bennet, the editorial page editor at the Times and the author of the editorial”:
Bennet was the hearing’s only witness. Bennet explained at the hearing that his reference to Palin in the editorial was intended to make a rhetorical point about the present atmosphere of political anger. He also recounted the editorial’s research and publication process and answered inquiries about his prior knowledge of the Loughner shooting six years earlier and any connection to Palin. Bennet testified that he was unaware of any of the earlier articles published by the Times, or by The Atlantic (where he had previously been the editor‐in‐chief), that indicated that no connection between Palin or her political action committee and Loughner had ever been established. In addition to answering questions from the Times’ counsel, Bennet responded to questions by Palin’s counsel and the district judge.
No, said the court of appeals: Among other things, the district judge’s decision “relied on credibility determinations not permissible at any stage before trial.” And the court of appeals held that Palin’s proposed amended complaint sufficiently alleged knowledge of falsity or likely falsity on Bennet’s part:
The [Complaint] alleges that, from 2006 to 2016, Bennet was the editor‐in‐chief of The Atlantic, where “he was responsible for the content of, reviewed, edited and approved the publication of numerous articles confirming there was no link between Mrs. Palin and Loughner’s shooting.” The complaint references several articles about the Loughner shooting published by The Atlantic during Bennet’s tenure, the most notable of which is entitled “Ten Days That Defined 2011.” The part of that article discussing the Loughner shooting reads: “… the bad thing to come out of this already terrible story was a round of blame hurling, with people rushing to point at Sarah Palin’s infamous target map …. In truth, Loughner is clinically insane and this was not really about politics at all.”
At the hearing, Bennet stated that he could not recall reading those articles, and even if he had read them, he did not have them in mind when he published the editorial. The district court, in rejecting Palin’s theory as implausible, credited this testimony as truthful when it found that Bennet’s failure to read the articles was simply a research failure that did not rise to the level of actual malice.
By crediting Bennet’s testimony, the district court rejected a permissible inference from the articles: that one who had risen to editor‐in‐chief at The Atlantic knew their content and thus that there was no connection between Palin and the Loughner shooting. That Palin’s complaint sufficiently alleges that Bennet’s opportunity to know the journalistic consensus that the connection was lacking gives rise to the inference that he actually did know.
The [Complaint] also includes allegations suggesting that Bennet in particular was more likely than the average editor‐in‐chief to know the truth about the Loughner shooting because he had reason to be personally hostile toward Palin, her political party, and her pro‐gun stance. Bennet’s brother, a Democrat, had served as a United States Senator for Colorado since 2009. In 2010, Senator Bennet was endorsed by two House members whose districts had been targeted by the SarahPAC map. Two days before the Loughner shooting, a man threatened to open fire on Senator Bennet’s offices, and thereafter both Bennet brothers became “outspoken advocate[s] for gun control.” Also, during the 2016 election, Palin endorsed Senator Bennet’s opponent and Representative Giffords endorsed Senator Bennet.
The district court gave no weight to these allegations, finding that political opposition did not rise to the level of actual malice. We agree with the district court that political opposition alone does not constitute actual malice, but we conclude that these allegations could indicate more than sheer political bias—they arguably show that Bennet had a personal connection to a potential shooting that animated his hostility to pro‐gun positions at the time of the Loughner shooting in 2011. Palin’s allegations are relevant to the credibility of Bennet’s testimony that he was unaware of facts published on his watch relating to the Loughner shooting and that he made a mistake when he connected Palin to the that shooting. Palin’s allegations present a plausible inference that Bennet’s claim of memory loss is untrue.
At a minimum, these allegations give rise to a plausible inference that Bennet was reckless when he published the editorial without reacquainting himself with the contrary articles published in The Atlantic six years earlier. And that plausible inference of recklessness is strengthened when added to Palin’s allegations that Bennet had reason to be personally biased against Palin and pro‐gun positions in general. When properly viewed in the plaintiff’s favor, a reasonable factfinder could conclude this amounted to more than a mistake due to a research failure.
Second, the PAC also alleges that certain aspects of the drafting and publication process of the editorial at The New York Times permits an inference of actual malice. Elizabeth Williamson, the editorial writer who drafted the initial version of the editorial, had hyperlinked in her draft an article entitled “Sarah Palin’s ‘Crosshairs’ Ad Dominates Gabrielle Giffords Debate.” The article stated, contrary to the claim in the published editorial, that “[n]o connection” was made between the SarahPAC map and Loughner. The link was also included in the final version of the editorial, a version that Bennet essentially rewrote. The Times argues that the hyperlink shows the absence of malice. But the PAC alleges that, by including a hyperlink that contradicted the argument of his editorial, Bennet “willfully disregarded the truth.”
The district court, siding with the Times, concluded that including the hyperlinked article was further evidence of simple mistake. After crediting Bennet’s testimony that he did not read the hyperlinked article, the district judge concluded that a mistake was the only plausible explanation. But the inclusion of the hyperlinked article gives rise to more than one plausible inference, and any inference to be drawn from the inclusion of the hyperlinked article was for the jury—not the court. In any event, under these circumstances, it was arguably reckless for Bennet to hyperlink an article that he did not read.
Third, the district court concluded that the correction swiftly issued by the Times again demonstrated that the only plausible explanation for the erroneous statements was a mistake. Yet, it is also plausible that the correction was issued after a calculus that standing by the editorial was not worth the cost of the public backlash. Bennet could have published the editorial knowing—or recklessly disregarding—the falsity of the claim, and then decided later that the false allegation was not worth defending.
At bottom, it is plain from the record that the district court found Bennet a credible witness, and that the district court’s crediting his testimony impermissibly anchored the district court’s own negative view of the plausibility of Palin’s allegations.
The district court at one point stated that Bennet’s “behavior is much more plausibly consistent with making an unintended mistake and then correcting it than with acting with actual malice.” Perhaps so, but it is not the district court’s province to dismiss a plausible complaint because it is not as plausible as the defendant’s theory. The test is whether the complaint is plausible, not whether it is less plausible than an alternative explanation.
The jury may ultimately agree with the district court’s conclusion that Bennet was credible— but it is the jury that must decide. Therefore, at the pleading stage, we are satisfied that Palin has met her burden to plead facts giving rise to the plausible inference that Bennet published the allegedly defamatory editorial with actual malice. We emphasize that actual malice does not mean maliciousness or ill will; it simply means the statement was “made with knowledge that it was false or with reckless disregard of whether it was false or not.” Here, given the facts alleged, the assertion that Bennet knew the statement was false, or acted with reckless disregard as to whether the statement was false, is plausible.
The case can now go forward. Thanks to Alan Kabat for the pointer.
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