Tag: news

Newly surfaced text messages between Former FBI Deputy Director Andrew McCabe and his counterpart at MI-5, the UK’s domestic security service, have cast new light on Britain’s role in the FBI’s 2016 ‘Russiagate’ investigation, according to The Guardian. 

Two of the most senior intelligence officials in the US and UK privately shared concerns about “our strange situation” as the FBI launched its 2016 investigation into whether Donald Trump’s campaign was colluding with Russia, the Guardian has learned.

Text messages between Andrew McCabe, the deputy director of the FBI at the time, and Jeremy Fleming, his then counterpart at MI5, now the head of GCHQ, also reveal their mutual surprise at the result of the EU referendum, which some US officials regarded as a “wake-up call”, according to a person familiar with the matter. –The Guardian

McCabe and Flemming’s texts were “infrequent and cryptic,” but “occurred with some regularity” after the June 2016 Brexit referendum. 

In his text message about the August 2016 meeting, Fleming appeared to be making a reference to Peter Strzok, a senior FBI official who travelled to London that month to meet the Australian diplomat Alexander Downer. Downer had agreed to speak with the FBI about a Trump campaign adviser, George Papadopoulos, who had told him that Russia had dirt on Hillary Clinton, the Democratic nominee in the race. –The Guardian

In 2017, The Guardian reported that Britain’s spy agencies had played a key role in alerting their American counterparts of communications between members of the Trump campaign and “suspected Russian agents,” which was passed along to the US in what was characterized as a “routine exchange of information.” 

UK begged Trump not to declassify

In May, President Trump issued a sweeping declassification order on materials related to the DOJ/FBI Russia investigation – leaving it in the hands of Attorney General William Barr to determine exactly what happened to Trump and his campaign before and after the 2016 US election. 

“For over a year, people have asked me to declassify. What I’ve done is declassified everything,” said Trump, adding “He can look and I hope he looks at the UK and I hope he looks at Australia and I hope he looks at Ukraine.” 

via ZeroHedge News https://ift.tt/2Zn9WHo Tyler Durden

Blain’s morning porridge, submitted by Bill Blain of Shard Capital

“Weebles Wobble but they don’t fall down..” 

I oft get accused of being too bearish, too miserable, and too gloomy.  That’s not true!  I’m a very happy, smiley, even jovial chap.  I’ve learnt it’s better to look at the facts, assume the worst and not be surprised. 30 plus years in markets also teaches me no matter how awful it looks, it’s never as bad as it might be, and it always gets better.  So being aware of just how bad it might get, rather than fooling ourselves how good we hope it might be, seems the best plan.

And, on the subject of self-delusional behaviour, from today “Blain’s Brexit-Watch” will be a regular part of the daily porridge – at the bottom, after the Fun-Stuff.

The Fun Stuff today will be the Fed decision.  Just how will the Fed frame a 25 basis point ease? Regular readers will know my view is a Fed ease is a pointless sop. The Feb will ease because they expect a now pretty-much unavoidable trade war and global slowdown, and really ought to be seen to be prepared for it.

The real issue isn’t even why we’re heading for global slowdown.  These include Donald Trump’s tweets y’day accusing the Chinese of reneging on their “agreement” to buy more US agricultural products – effectively scuppering the resumed trade talks before they started.  (Serious question to my US Republican friends: are you even remotely concerned about Donald’s increasing randomness?)

The real threat is China’s response.  Thus far they have avoided saying anything that might overtly damage the current meetings, but equally they made clear they are not going to respond to threats. Yesterday’s responses were coded, but re Trade they effectively asked what “agreement to buy US agricultural products” is Trump talking about?  At the Osaka G20 Trump demanded China bought more from US Farms, but they simply agreed to enter into a new round of talks.  While Trump accuses the world’s second largest and fastest growing economy of lying, Xi is talking about how China must now rely on domestic demand to manage current “risks and challenges”.  Xi is making clear he has no intention of pandering to Trump, and sending a clear signal Beijing is prepared for trade war if Trump presses the button.

Or does China now take the initiative? They are sounding increasingly confident. Yesterday they accused the US of provocation in “creating” the Hong Kong protests. This gets dangerous. Tensions are building over Hong Kong – which I warned could become a flashpoint. Bloomberg reported The White House monitoring a “congregation of Chinese forces” (Military or Armed Police) on the Hong Kong Border. Speaking to a former colleague yesterday, he confirmed a very nervous mood and a general exodus of risk capital to Singapore.  If China intervenes, they are betting Trump the Bully will stomp and shout, but stop short of a meaningful response.

With the election coming up, the risk is Trump feels he can’t afford to not to act.  Then it potentially gets very messy.

Trump is acting like he holds all the cards.  He doesn’t.  He needs to understand who does.  Watch Hong Kong

Interesting results from Apple y’day as they beat expectations.  They are managing the process of switching revenues from the increasingly commoditised mobile phone space into services rather well. They are retaining the allure of the Apple ecosystem, which ensures customer loyalty.  The prices of cheaper models may fall, but they will retain the must have buyers who will pay premium new model prices, and continue to attract wearables and services. It’s interesting Cook declined to say much of commoditising Apple services or wearables by making them more compatible with other operating services.  Disclosure: I am an Appleholic.  I can’t resist.  

Blain’s Brexit Watch

As the Sterling Time Bomb ticked down to $1.22, yesterday’s Brexit highlights included the threat of insurrection in the Valleys if the Welsh find it difficult to export Lamb to Europe. “Come home to a real fire… buy a cottage in Wales!”  Folk are getting nervous about weakening sterling, hence the BBC interviews with pensioners in France complaining they can’t go on holiday on their state pension because everything is so expensive.  Wait till import inflation really hits…

Today, Boris is in Norn Iron and about as welcome as a Lannister in Winterfell.

More hopeful were Boris’ comments about staying in the customs union for a time if a Brexit Deal can be struck. It’s a clear signal to Europe. He’s confirming his position clearly – give me some compromise and a deal Parliament can accept, and we can agree a Brexit agreement that benefits everyone.

But yesterday showed Europe aint for turning…

The secret of good comedy is timing..  I was talking to a client about Sterling weakness. We were wondering if Sterling weakness was overplayed, and my chap asked what would be the most obvious buy-signal? I suggested Boris Johnston’s refusal to pick up the phone to Leo Varadkar, the Irish Taoiseach, was telling – I opined the moment to buy Sterling would be Varadkar calling him, a clear sign Ireland, and therefore the EU, understood the dangers of No-Deal and would be willing to compromise on the backstop.

Little did we know that Boris has already called Leo, and the two of them were having a “frank exchange”. Boris politely asked for a renegotiation. Leo said no (actually I suspect it was blunter than that). “Uncompromising” was the official view.

A No Deal causes massive problems if the border is “closed/slowed” for customs. The political dimensions for the UK are enormous; risking the Good Friday peace agreement, encouraging Sinn Fien and its associated Thugocracy to reopen “operations” against the crown, and general distraction.  Nasty, but containable.

For Ireland a No-Deal is a nightmare.  Aside from the freight going across the Norn Iron border, the real issue is 88% of Ireland’s freight goes from Dublin to Hollyhead in Wales then onto Europe. (2017 numbers).  The ports with direct links to the continent are too small to handle Ireland’s trade with the EU – and take double the time of direct UK access to Europe, which is critical for agricultural exports.  There are solutions.  New ships would take time to arrange.  Logistical solutions are possible, such as “Authorised Economic Operators” to allow closed truck access through the UK – it works for Switzerland.  But will an angry UK let them work for Ireland, when Europe won’t let work for the UK?

A deal is much better than no deal.. what’s the current betting Boris can get a deal? 20/1 on a No Deal at the bookies does not equate to the 1 million to one Boris thinks likely….

Oh, what fun…

via ZeroHedge News https://ift.tt/2Yvk13D Tyler Durden

Two days after the Treasury announced that in the aftermath of the debt ceiling deal reached last week between Trump and democrats, it would rapidly rebuild its cash balance back up to $350 billion by borrowing a whopping $433 billion in debt in the current quarter…

… a massive $274 billion higher – or more than doubling – its prior forecast announced in April 2019…

… in the process significantly tightening up liquidity in the banking system and potentially resulting in turmoil in funding and money markets as the world is flooded with an issuance of T-Bills…

… the Treasury issued its quarterly refunding statement in which it revealed that it will keep its auctions of nominal coupon and floating-rate debt at a record this quarter as the US budget deficit continues to grow.

Specifically, the Treasury will offer $84 billion of Treasury securities – matching the amount sold in each of the last two quarters – to refund approximately $57.3 billion of privately-held Treasuries maturing on August 15, 2019, which will raise new cash of approximately $26.7 billion.  The securities are:

• A 3-year note in the amount of $38 billion, maturing August 15, 2022;
• A 10-year note in the amount of $27 billion, maturing August 15, 2029; and
• A 30-year bond in the amount of $19 billion, maturing August 15, 2049.

The 3-year note will be auctioned on August 6, 2019, the 10-year note will be auctioned on August 7, 2019, and the 30-year bond will be auctioned on Thursday, August 8, 2019.  All of these auctions will settle on Thursday, August 15, 2019.

The balance of Treasury financing requirements over the quarter will be met with the weekly bill auctions, cash management bills, the monthly note auctions, the August 30-year Treasury Inflation-Protected Securities (TIPS) reopening auction, the September 10-year TIPS reopening auction, the new October 5-year TIPS auction, and the regular monthly 2-year Floating Rate Note (FRN) auctions.

The US government is scrambling to finance a soaring budget deficit that is set to surpass $1 trillion in coming years as President Donald Trump is set to approve a bipartisan deal to suspend the debt limit until mid-2021 and boost spending. As a result, Wall Street analysts are predicting that auction sizes will need to be lifted again within about a year’s time. The deficit was $779 billion in fiscal 2018.

Meanwhile, commenting on the recent latest debt ceiling deal, members of the Treasury Borrowing Advisory Committee wrote to Steven Munchin that they were “pleased that you were able to negotiate a debt limit suspension bill with Congress well in advance of the deadline and are optimistic that the bill will become law in short order. It was noted, however, that this would mark the 7th debt limit suspension in less than 7 years.” and added that as debt limit suspensions expire, “Treasury has been required to employ extraordinary measures – increasing market volatility, operational risk and ultimately taxpayer cost.” And since the Committee strongly believes that “discussions on total borrowing are more appropriately considered when making appropriations rather than when funding previously approved appropriations”, the Committee “urged Congress to consider a repeal of the debt limit well ahead of the proposed 2021 expiration of the suspension.” Of course, that will never happen and instead there will be yet another debt limit suspension in due course, now that the debt limit has become nothing more than a farce.

Going back to the refunding announcement, the Treasury said it currently anticipates no further changes in issuance sizes for nominal coupon and floating-rate securities for the rest of the calendar year. The department also detailed changes to sales of Treasury Inflation-Protected Securities, or TIPS, over coming months as it continues plans it originally laid out last year to bolster its use of the securities.

Specifically, as Bloomberg notes, the Treasury said that it expects to increase the August TIPS 30-year reopening auction size to $7 billion, raise the September 10-year TIPS reopening auction size to $12 billion, and introduce the new October five-year TIPS at an auction size of $17 billion. The overall increases are consistent with the department’s prior guidance, the Treasury said.

Also of note was the discussion on potential turmoil to the money market as a result of the accelerated Bill issuances to rebuild cash balances, to wit:

A trimmed mean of primary dealer responses indicated that Treasury is anticipated to increase the supply of Treasury bills outstanding by $178 billion over the eight-week period following resolution of the current debt ceiling impasse.  In comparison, primary dealers estimated market capacity to digest bill issuance without a significant price adjustment or deviation from fair value over the same period to be $210 billion.  Furthermore, the primary dealers generally expected Treasury to resume meeting its cash balance policy at some point between September mid-month, related to the receipt of corporate taxes, and the end of the month. Committee members discussed the Treasury’s cash management policy, noting both the policy’s benefits related to risk management as well as the potential market disruptions that could occur if bill supply were increased too rapidly.  Smith emphasized that Treasury carefully balances these considerations when making its issuance decisions.  The Committee generally agreed that Treasury’s projected measured increases in bill supply balanced these factors well.

In other words, the Treasury doesn’t expect any disruption in money markets as a result of the planned increase in bill sales aimed at reaching the cash-balance goal. The net amount of bill sales at about $160 billion is seen as within the limits of what primary dealers have indicated the markets can handle and is less than what was issued following the previous suspension of the debt limit, according to an official who spoke to Bloomberg.

Finally, there was no mention of how the coming end to QT, or the Fed’s drawdown of its bond holdings, will affect debt sales. The Treasury also said it “continues to evaluate the possibility” of issuing a floating-rate security linked to the Secured Overnight Financing Rate, and here too no decision has been made. The government is interested in adding new securities that would bring in incremental demand for Treasury debt, Bloomberg reported.

via ZeroHedge News https://ift.tt/2ypea5B Tyler Durden

If anyone knows where the skeletons are buried contradicting the official 9/11 narrative then it’s none other than alleged terror mastermind Khalid Sheikh Mohammed. The Wall Street Journal and others report that he’s ready to spill the beans on Saudi Arabia’s involvement in the worst terror attack to ever take place on American soil as part of a victims’ lawsuit seeking damages from the kingdom as a state sponsor. 

A letter filed in the US District Court in Manhattan disclosed an offer to spare Mohammed the death penalty in exchange for his willingness to be deposed by the victims, who are seeking billions of dollars in damage from the kingdom, making it extremely politically sensitive regarding both embarrassing secrets of Riyadh’s role in 9/11 and the potential to severely damage US-Saudi economic ties. 

As Al Jazeera noted, however, it’s as yet “unclear if US President Donald Trump, who is close to the leaders of Saudi Arabia, would allow a plea deal for Mohammed to give evidence.” Furthermore, Bruce Fein, former US associate deputy attorney general, explained of the high stakes that, “If the plaintiffs win in this case, it could be hundreds of billions of dollars.” He added, “You have over 3,000 plaintiffs, compensatory plus punitive damages and a jury very hostile to Saudi Arabia, it could virtually bankrupt Saudi Arabia. All their assets in the US and elsewhere could be seized.”

The victims’ lawsuit has been slowly moving forward for years, especially after Congress in 2016 passed the Justice Against Sponsors of Terrorism Act (JASTA), allowing US citizens for the first time to sue a foreign state if that state sponsored international terrorism which harmed the victims.

Notably the declassification of the famous “28 pages” also in 2016, a secret document part of a 2002 congressional investigation of the Sept. 11 attacks, but which had remained hidden from public view since the report’s completion and was the only section to deal with the question of a state sponsor, was a huge milestone in further uncovering Saudi complicity.

The missing 28 pages from the 9/11 report began as follows:

“While in the United States, some of the September 11 hijackers were in contact with, and received support from, individuals who may be connected to the Saudi Government…”

It’s believed that Khalid Sheikh Mohammed’s crucial testimony could fill in key details surrounding what Saudi Arabia knew of the plot beforehand, and in what ways its intelligence facilitated it. Or his testimony could also open up entirely new avenues previously undiscovered. 

However, as Reuters notes, we could still be a long way out from that point: 

According to the letter, the plaintiffs’ lawyers have been in contact with lawyers for five witnesses in federal custody about their availability for depositions.

The lawyers said three, including Mohammed, are housed at the Guantanamo Bay, Cuba detention camp, where they face capital charges, while two are at the “Supermax” maximum security prison in Florence, Colorado.

According to the letter, Mohammed would not agree “at the present time” to be deposed, but that could change.

Ultimately, a lot of delicate issues, not the least of which is the Trump administration’s approval of a plea deal to spare the death penalty, would have to fall in line before Mohammed starts testifying. 

9/11 ringleader Khalid Sheikh Mohammed accuses the Saudi government of helping to coordinate the 2001 terrorist attacks. https://t.co/PO0Nrj5e60

— Max Abrahms (@MaxAbrahms) July 30, 2019

One person familiar with the case, but who remained unnamed, cited in the WSJ report said the families hope to gain the alleged terror mastermind’s cooperation: “One of the main things that the 9/11 defendants have to offer is closure, particularly closure for the victims.” He added: “With capital charges gone, there is an opportunity to tell the story of 9/11 once and for all.”

However, we doubt the US government and specifically the US-Saudi intelligence nexus and ‘deep state’ has the least bit of interest in doing this. But this is precisely what’s motivating the 9/11 victim’s families to press on — to expose the ugly truth. 

via ZeroHedge News https://ift.tt/2SRAP3Q Tyler Durden

Submitted by Michael Every of Rabobank

Gresham’s Law, Say’s Law, and Godwin’s Law

It’s Fed day and I honestly can’t bring myself to repeat what was already said on Monday and Tuesday other than “Yes, the Fed will cut but it won’t be enough”. Instead, let us take a moment to contemplate several laws that seem pertinent to our current situation.

First, Gresham’s Law: that bad money drives out good. That used to be the measure of how far a government or a central bank could debase money before everyone hoarded the good stuff and circulated only less valuable coinage. Yet as we contemplate everyone slashing rates again, the opposite appears to be true: everyone is piling into bad and/or directly money-losing assets as benchmark rates decline! One could make the argument for gold, of course, given there is a clear desire to see currencies go lower on the part of central banks, even if they can’t openly say so. (They now leave that to the politicians, of course.) But USD is still, for now, a modern version.

Second, Say’s Law: supply creates its own demand. This is the “Just build and they will come!” hope as we re-embark on monetary policy previously reserved for extreme crisis: Of course, first you have to get them to build, not speculate on money-losing assets. And even then Say’s Law doesn’t hold true – you can and do get over-supply of goods relative to demand both in one market and in aggregate. Then we end up with all vs. all as sluggish economies parasite the consumers of others – all the more so if the central banks nudge-nudge wink-wink their currencies lower too.

Consider those laws and is it any surprise that as the US and China sit down to talk trade we see US President Trump tweet: “China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through. Our Economy has become MUCH larger than the Chinese Economy is last 3 years. My team is negotiating with them now, but they always change the deal in the end to their benefit. They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in past 30 years, and continue to rip-off the USA, even bigger and better than ever before. The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now…or no deal at all. We have all the cards, our past leaders never got it!”

Meanwhile, a Bloomberg editorial today argues “Hong Kong is running out of time. Signs are building that the city’s political crisis is starting to affect its financial and business prospects…Hong Kong’s reputation for political stability, reliable institutions and effective governance was won over decades. Once lost, it will be hard to regain.” This, as it appears protestors arrested Sunday night are to be charged with rioting (maximum sentence: 10 years) whereas the ‘white-shirts’ who violently attacked protestors the previous Sunday have been released without charge or face much less serious offenses. Bloomberg also reports: “White House Eyeing Chinese Forces Gathered on Hong Kong Border”. That carries implications here that I don’t need to go in to.

But let me now bring in the third law – Godwin’s Law: as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1. Indeed, nowadays it usually takes no more than two Tweets to get to that accusation in most online interaction. What’s the relevance? There is a growing swell of anti-China opinion in US policy circles. Seasoned pro-China journeymen have been elbowed aside by younger, hawkish experts who sound even more confrontational that Trump: and some of them use Godwin-esque language. Yes, there are still voices in markets lobbying or pricing for US-China free trade winning out. But let’s rewind the clock and see what the economic debate looked like in the mid-1930s before Godwin.

As a recent Jerusalem Post editorial shows, US President F.D. Roosevelt–the progressive champion of the New Deal–had a pre-WW2 policy to maintain trade and diplomatic relations with Nazi Germany; the Treasury Department even permitted the Nazis to forego a “Made in Germany” label and instead mark goods as having been made in a particular city or region to confuse US consumers. The liberal establishment also shared that stance. Smith College’s president visited Nazi Germany in 1933 and found “no cases of mistreatment” of Jews; Barnard College’s dean toured Germany in 1935 and announced Hitler’s desire to acquire “new land” was “legitimate”; Vassar College’s president saw the boycott as a step toward war, and in 1934, organized a tour of Nazi Germany; and a Bryn Mawr professor similarly denounced the boycott as “simply war without bloodshed.”

Let me make myself abundantly clear: I AM NOT MAKING ANY COMPARISONS OF ANYONE TO HITLER! There is no Godwin goin’ on.

What I am trying to show is that Gresham’s Law matters for markets even in a world without coinage; Say’s Law is a nonsense that will make central banks ignoring Gresham’s Law create worse global imbalances that lead to geopolitical tensions; and hence as US policy hawks start to circle those who think we can avoid a trade rift between the US and China using highfalutin free trade arguments overlook the chequered history of such a principled stance. Anyway, something to think about while we wile away the hours waiting for the Fed.

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

While The Fed has clearly veered from any data-dependence (aside from the level of The Dow), some still care about the state of the nation’s ‘real’ economy and today’s ADP was expected to rebound from dismal May and June data and its did with a better-than-expected 156k print for July.

“While we still see strength in the labor market, it has shown signs of weakening,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

“A moderation in growth is expected as the labor market tightens further.”

Goods-producing jobs rose 9k while Services dominated once again, rising 146k in July, but notably very small businesses (1-19 employees) have seen job losses for three straight months…

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is healthy, but steadily slowing. Small businesses are suffering the brunt of the slowdown. Hampering job growth are labor shortages, layoffs at bricks-and-mortar retailers, and fallout from weaker global trade.”

Goldilocks? Or enough bad data for Powell to cut?

via ZeroHedge News https://ift.tt/2KhPYr0 Tyler Durden