A federal judge has ordered a court-appointed independent mediator move quickly to improve health and sanitation at Texas border facilities which have come under fire over reports that migrant children were subject to filthy living conditions, according to the New York Times.
California Judge Dolly M. Gee made the request late Friday to the court’s independent monitor to ensure that the reports were promptly addressed by July 12, and has demanded that the government report on what it has done about the situation “post haste.”
“We are hoping we can act expeditiously to resolve the conditions for children in Border Patrol custody,” said attorney Holly Cooper, who is part of a coalition of lawyers that have asked the federal court to take action.
The lawyers’ reports on conditions at a Border Patrol facility in Clint, Tex., where they said children were unable to bathe, were living in filthy clothes and diapers and were often hungry, prompted a public outcry and a new motion asking the court to force the government to move more aggressively to improve accommodations along the border for the thousands of migrants arriving from Central America.
Monitors from the Department of Homeland Security’s Office of Inspector General detailed other serious problems with overcrowding at Customs and Border Protection facilities in Texas’ Rio Grande Valley. –New York Times
While the new order does not directly order the Trump administration to take specific actions, it will provide an actionable glimpse into the living conditions of detained migrants, as well as recommendations to remedy the situation.
Last week, Customs and Border Protection officials disputed the reports that migrant children were being mistreated, with one employee telling journalists on condition of anonymity “I personally don’t believe those allegations.”
A Border Patrol facility in Clint, Tex., where observers reported unsanitary conditions. (Cedar Attanasio/Associated Press)
Democratic 2020 candidates have pounced on recent reports in Texas as political fodder – suggesting that the Trump administration has dealt with immigrants inhumanely.
On Sunday, Beto O’Rourke, a former El Paso congressman how running for president, scheduled a public “rally for migrant children” in Clint. Another Democratic candidate, Julián Castro, was planning to visit the facility on Saturday. –New York Times
Judge Gee noted in her order that the federal government had previously violated a 1997 consent decree known as the Flores settlement, which outlined care requirements for migrant children in government custody.
Lawyers filed an emergency request on Thursday for a temporary restraining order, accusing the government of violating the Flores standards at CBP facilities in the El Paso and Rio Grande Valley areas of Texas.
“The parties need not use divining tools to extrapolate from those orders what does or does not constitute noncompliance,” wrote Gee. “The Court has made that clear.”
Gee added that the “emergent” nature of the new reports “demands immediate action.”
via ZeroHedge News https://ift.tt/2xkPA57 Tyler Durden
According to (always wrong) conventional wisdom, anybody who has remained bearish on global markets since the financial crisis has not only lost a boatload of money, but has missed out on the opportunity to cash in on one of the most torrid bull markets in recent memory. They should also be out of business, insolvent or both.
Of course, as Horseman Global’s Russell Clark has proven over and over again, this is not the case at all. A few years back, we anointed Horseman “The world’s most bearish hedge fund” for a very simple reason: Of all existing asset managers, Russell Clark may have the biggest and longest net short position in history. Just look at the chart below, which shows not only that Clark’s net exposure was a remarkable $-78.6% (after -88.14% in March), with a gross short position of 102%, but that he had been effectively net short since 2011.
Yet, to assume that Clark has either thrown in the bearish towel, or somehow lost his shirt over the past ten years would be a mistake. Actually, his fund outperformed the S&P 500 for the period between 2012 – when he first went net short – until the end of 2018, only underperforming in 2016. In 2014, Clark posted double-digit returns when oil prices cratered (he was short). In 2013, he made money shorting Brazilian equities. He started with just $111 million when he took over the fund in January 2011, but AUM peaked at $1.5 billion in 2015.
However, the fund’s inconsistent performance (it’s not unusual for Horseman to be up or down 5% in a single month) has alienated some investors who are uncomfortable with the volatility, even as Horseman has bested most other hedge funds in terms of performance, as one former investor told Bloomberg.
Tim Ng, chief investment officer of Princeton, N.J.-based Clearbrook Global Advisors LLC, says his fund pulled its money for similar reasons. “The stretches of negative performance and the high volatility of monthly returns became a consistent drag on our portfolio’s overall return, which prompted us to redeem,” he says.
But after a bruising Q1, when Clark got crushed by the torrid rally in US equities, more LPs have pulled out, and AUM has shrunk to just $713 million.
And unfortunately for Clark, as we wrote last month, after a dismal Q1, the fund’s losses more than doubled in April, when the it was down a staggering 12%, which brought its total loss YTD to more than 25%.
However, as we further noted for the fund which was massively short semiconductors, salvation was just days away, as after the disastrous April plunge in the fund’s P&L, the best possible news for Clark was that after a relentless ramp higher, none other than Donald Trump came to Horseman’s rescue, with the recent return of US-China trade – and the most violent escalation in global tech war – which sent semi stocks tumbling in May…
… and suggesting that much if not all of the April losses would be reversed, leading to our conclusion that “Horseman will have a far better YTD performance after May.”
That’s precisely what happened, because as Clark wrote in his latest letter to investors, the fund staged a remarkable rebound in May, returning a whopping 17.13%, which was its best return since October 2011, and its second best month in history.
It is no surprise then that Clark begins his latest letter in an almost euphoric fashion, and after the near-self doubt expressed in some of his other more recent letters, he starts off with a bang, to wit: “I must say, I love the hedge fund business. I am reminded of the scene in Trading Places when Winthrop takes Valentine to the commodity trading floor, and says “This is it. The last pure bastion of pure capitalism left on earth”. These days, with equities, bonds and currencies kept well within central bank control, sometimes there seems to be no pure capitalism left.”
However, in the hedge fund space, Darwinian capitalism still rules supreme. Make money or get out. Be the best or go home. And I love it.
The problem, as Clark’s mother used to tell him, “Only the mediocre are always at their best”. And here the abovementioned self-doubt comes creeping back: “the last three years I have not been at my best. In part for the central bank interference, but also because there are many crosswinds have been blowing. From the bottom of the fund in the last cycle in 2011 through to the top of the fund in early 2016, the prevailing winds were so easy to read. Falling commodity prices, underperforming emerging markets and strong bonds. As long as you did not stray from these area, it was hard to go wrong.”
Things got especially difficult in 2016, when “there was a bunch of mixed messages. This means investors have tended to focus on the future. Stocks that have growth (tech) or are guaranteed to exist in the future (real estate, staples and utilities) have prevailed in portfolios. This has led into a widely commented on feature of the market, the outperformance of growth and quality versus value.”
But then, the Horseman CIO adds, “the strangest thing happened at the end of April” when “the market gods decided that it was time for some clarity (or as much clarity as you ever can get from markets).” Market gods… or Trump who in early May rekindled the trade war with China, but that’s irrelevant for now, and instead in response to what was the clarity Clark refers to, he says that “China is likely headed for a recession and some sort of devaluation. The market indicators of this are fairly dear, with Chinese Yuan proxies such as Australian dollars, Korean Won and Taiwan Dollar all depreciating recently.”
Why does that mean China is going to devalue? Well Australia, Korea and Taiwan all have better trade balances, current accounts and fiscal positions than the US, and with expectations of US rate cuts rising, they should have appreciated. Australian dollar in particular is hard to understand given the huge rally in iron ore, except in the context of fears of Chinese devaluation. Recent moves in Hibor relative to Libor underscore this fear.
As a result, with the changes he made to the portfolio at the end of April, which we discussed previously here, “which reflected these changes in market, and all of them immediately made money.”
From long bonds, to a greatly reduced long book, to additions to the short book.
Even more exciting to Horseman is that when he looks at the long standing autocallable theme in the fund, “a China devaluation would likely cause many of the main markets that have suppressed volatility to fall dramatically, namely Kospi 200, HSCEI, Nikkei 225 and the Euro Stoxx 50.”
Clark’s conclusion: “So clarity has returned. And just as Winthrop tells Valentine, it’s time to “buy low, sell high. Fear – that’s the other guy’s problem”. Your fund is long bonds, short equities.”
Alas, Clark’s euphoria won’t last long, because after a solid – for bears – May, June saw the strongest S&P performance in 84 years…. and the pain for the world’s most bearish hedge fund as confirmed by its latest exposure…
… will be nothing short of historic, with its performance in June likely to be another double digit return, only this time in the negative direction.
* * *
One final point: Clark’s assiduously dedicated contrarianism has earned him a cult following among professional investors. Though his name isn’t as widely known as an Ackman or a Loeb, his interview with RealVision was one of the company’s most requested videos from 2018, largely thanks to his reputation built up on these pages over the past 5 years as the “world’s most bearish hedge fund”, yet one which stubbornly refuses to throw in the towel.
Despite a wave of redemptions in 2016, 2017 and 2018, Clark, who keeps the bulk of his own wealth in Horseman, has retained an unflappable confidence in his investing view: “When people hate you and write terrible things about you, it tends to be the best time to invest.“
via ZeroHedge News https://ift.tt/2J76gm0 Tyler Durden
Millennials, already the most indebted generation of all time, are now flocking to high-interest loans to tie the knot, reported the Washington Post.
Demand for wedding loans has quadrupled in the past year, said David Green, chief product officer at Earnest, a San Francisco-based online lender, noting that couples spend approximately $16,000 on wedding loans and pay it off in three years. Interest rates range from 7% to 18%, is seen as a cheaper alternative to credit cards.
“People are carrying more debt, they want to get married but don’t have the funds to do so,” Green said.
The explosive popularity of these loans, experts say, has been in the last three years, shows how the bride’s parents aren’t picking up the tab anymore, but more of a collective effort by parents, grandparents, and even the bride and groom.
“Couples are getting married later, so they are more willing to pay,” said David Wood, president of the Association of Bridal Consultants. “At the same time, their parents are older, they may be on a retirement income and not have the means to pay for the wedding either.”
President Trump and the Federal Reserve are aboustely clueless in how they measure inflation. Considering the average cost of a wedding is skyrocketing, according to financial advisers. This comes as student loan debt hits $1.5 trillion and millennials have absolutely no savings.
“What’s driving this growth? Weddings are getting more expensive and people are waiting longer to get married,” said Todd Nelson, director of strategic partnerships for LightStream, a lending division of SunTrust bank. “It used to be, generally speaking, the father of the bride was on the hook for paying for the wedding. That’s not necessarily the expectation anymore.”
Personal finance experts said they’ve noticed more and more millennial clients who are taking out loans to fund their big day. Experts have told their clients that they don’t need an expensive Instagram-worthy wedding.
“The problem is, you don’t want to rely on a personal loan for something that isn’t necessary — and there is nothing necessary about an expensive wedding,” said Stefanie O’Connell, a personal finance expert and author of “The Broke and Beautiful Life.” “Everything about weddings is discretionary, aside from what you pay the county clerk.”
O’Connell, who is getting married later this year will not use loans but rather cash to pay for her big day, said she also helps clients understand that they need to look past their wedding day and see the big picture if a sustainable life without insurmountable debts.
“You have to put it in context,” she said. “You could spend $30,000 on a one-day celebration, or you could use it to put a down payment on a house. These loans sound great when you’re planning your wedding, but afterward, I hear a lot of regret.”
Brad Pritchett and David Chadd expected to pay for their wedding in cash, but a month before their wedding in February, they realized they went over budget.
“Quite frankly, we both have a taste level where we weren’t willing to compromise,” said Pritchett, 38, vice president of marketing for the American Heart Association. “It was important for us to have a great party to celebrate our love.”
So having a great, Instagram-worthy, one-day celebration, or otherwise called a wedding in 2019, is now being funded by high-interest loans that are putting millennials into further debt – thus their long term financial survivability will be in question in the next downturn.
via ZeroHedge News https://ift.tt/2FGqlPn Tyler Durden
As if we aren’t being tracked, recorded, and monitored enough, the Pentagon now has a laser that can identify a person by their heartbeat. Your heartbeat is going to be a lot harder to hide than your face…
As MIT Technology Reviewreports, the Pentagon has developed a laser that can identify people from a distance by their heartbeat alone. The technology, known as Jetson, uses laser vibrometry to identify surface movement on the skin caused by a heartbeat, and it works from 200 meters away.
Everyone’s cardiac signature is unique, and unlike faces and fingerprints, it can’t be altered in any way. As with facial recognition and other biometrics which rely on optimal conditions, though, Jetson does have a few challenges. It works through regular clothing such as a shirt, but not thicker garments, such as a winter coat. It also takes about 30 seconds to collect the necessary information, so right now it only works if the target is sitting or standing still. And, of course, its efficiency would also depend on some kind of cardiac database. Nonetheless, under the right conditions, Jetson has over 95 percent accuracy. –Engadget.
This would mean the Pentagon’s goal is to create a cardiac database of everyone’s heartbeat in order to monitor, track, and surveil all of us. Orwell’s future looks better than what we’re going to be experiencing. Official documents from the Combating Terrorism Technical Support Office (CTTSO) suggest this has been in the works for some time. However, it could have other applications as well.
Proponents say that this could help doctors wirelessly monitor patients, and it may very well be sold to the public as such using propaganda. However, if history is any indication, this will be used as a tool of mass surveillance just like our smartphones are now.
Move over facial recognition! The government is going to soon track us by our cardiac signatures!
via ZeroHedge News https://ift.tt/2Nnqa1D Tyler Durden
Yesterday, Federal District Judge Haywood Gilliam of the Northern District of California issued two rulings against President Trump’s effort to reallocate military funds to build his proposed border wall. The decisions conclude that Trump lacked the authority to transfer those funds without additional authorization by Congress. The rulings address lawsuits against the border wall brought by the Sierra Club and other groups, and by the states of California and New Mexico, respectively.
These decisions come as no surprise because they largely build on the reasoning of Judge Gilliam’s earlier decision to issue a preliminary injunction against the use of these funds for wall-building projects in areas of the border covered by the lawsuit in question. I analyzed it here. The principal differences are that the new rulings establish permanent injunctions against the use of the funds, not just a temporary injunction, and that they apply to wall-building in several more parts of the border area than the earlier injunction covered. Judge Gilliam explains that this is because there is now a more extensive record on what the federal government proposes to do in these additional areas.
I agree with Judge Gilliam’s analysis of the main issues in these cases, and explained the reasons why in my post on his earlier ruling (which has much more detail on the legal issues). The administration’s attempted diversion is a threat to separation of powers and would set a dangerous precedent if upheld by the courts. Conservatives who may cheer Trump’s efforts now won’t be so happy when the next Democratic president uses similar shenanigans to reallocate funds to projects favored by the political left.
As I also noted in that post, these decisions are just the start of what will almost certainly be a prolonged legal battle over Trump’s wall-building plans. The government is already appealing Judge Gilliam’s earlier ruling, and there are also numerous other pending lawsuits related to the wall.
Judge Gilliam is the first federal judge to address (some of) the substantive issues at stake in the wall litigation. But, earlier this month, another federal trial court dismissed a wall lawsuit filed by the Democratic-controlled House of Representatives because the judge concluded the House lacked standing to file the claim. I criticized that ruling (which is also likely to be appealed) here.
Even if the standing decision stands up on appeal, it is unlikely to prevent judicial review of Trump’s wall-building plan, because there are many other lawsuits against it brought by parties who clearly do have standing, even if the House does not. The real import of the standing decision is its potential impact on other separation-of-powers disputes between the president and Congress.
To briefly sum up, Judge Gilliam’s decisions represent a notable victory for critics of Trump’s wall-building plan. But this is just the beginning of what is likely to be a lengthy legal battle. Stay tuned!
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A federal judge appointed by former President Barack Obama after contributing heavily to his campaigns has blocked the Trump administration from reallocating $2.5 billion to construct border barriers, according to the Daily Caller.
US District Judge Haywood Gilliam expanded on a May 24 order, forbidding the Trump administration from breaking ground on specific border wall projects in California, Texas, Arizona and New Mexico. He also turned his previous order into a permanent injunction, according to the Caller‘s Kevin Daley.
After declaring a national emergency at the southern border, the administration announced it would reprogram $600 million from the Treasury Department’s forfeiture fund, $2.5 billion from Defense Department counter-narcotics activities, and $3.6 billion from military construction projects to finance construction of the wall. The $2.5 billion for counter-drug efforts were at issue in Friday’s case.
The plaintiff in Friday’s case is the Sierra Club, an environmentalist group that claims “recreational and aesthetic interests” in habitats near the border, like “hiking, birdwatching, photography and other professional, scientific, recreational, and aesthetic uses.” A border wall will inevitably restrict their access to those habitats, the plaintiffs say, thereby diminishing their quality of life. They also fear heightened racial tensions and environmental damage. –Daily Caller
“Congress considered all of defendants’ proffered needs for border barrier construction, weighed the public interest in such construction against defendants’ request for taxpayer money, and struck what it considered to be the proper balance — in the public’s interest — by making available only $1.375 billion in funding, which was for certain border barrier construction not at issue here,” reads Gilliam’s order.
As the Epoch Times noted last month, “U.S. District Court Judge Haywood Gilliam Jr. was confirmed in 2014 after being nominated by Obama and receiving a recommendation by Sen. Dianne Feinstein (D-Calif.).”
Gilliam also donated tens of thousands of dollars towards electing and reelecting Obama.
According to federal election records, Gilliam donated $6,900 to Obama’s campaign for president—$4,600 to Obama for America and $2,300 to the Obama Victory Fund.
Gilliam donated additional funds to Obama’s re-election campaign, sending $13,500 to Obama for America and Obama Victory Fund 2012. He also donated $4,500 to the Democratic National Committee. From 2012 to November 2014, he sent $3,100 to the Covington and Burling LLP PAC. –Epoch Times
“Congress was clear in denying funds for Trump’s xenophobic obsession with a wasteful, harmful wall” said ACLU staff attorney Dror Ladin, who argued the case. “This decision upholds the basic principle that the president has no power to spend taxpayer money without Congress’ approval. We will continue to defend this core principle of our democracy, which the courts have recognized for centuries.”
Gilliam denied the Trump administration’s request to stay his ruling pending appeal to the 9th US Circuit Court of Appeals.
via ZeroHedge News https://ift.tt/2Ym1AiK Tyler Durden
Yesterday, Federal District Judge Haywood Gilliam of the Northern District of California issued two rulings against President Trump’s effort to reallocate military funds to build his proposed border wall. The decisions conclude that Trump lacked the authority to transfer those funds without additional authorization by Congress. The rulings address lawsuits against the border wall brought by the Sierra Club and other groups, and by the states of California and New Mexico, respectively.
These decisions come as no surprise because they largely build on the reasoning of Judge Gilliam’s earlier decision to issue a preliminary injunction against the use of these funds for wall-building projects in areas of the border covered by the lawsuit in question. I analyzed it here. The principal differences are that the new rulings establish permanent injunctions against the use of the funds, not just a temporary injunction, and that they apply to wall-building in several more parts of the border area than the earlier injunction covered. Judge Gilliam explains that this is because there is now a more extensive record on what the federal government proposes to do in these additional areas.
I agree with Judge Gilliam’s analysis of the main issues in these cases, and explained the reasons why in my post on his earlier ruling (which has much more detail on the legal issues). The administration’s attempted diversion is a threat to separation of powers and would set a dangerous precedent if upheld by the courts. Conservatives who may cheer Trump’s efforts now won’t be so happy when the next Democratic president uses similar shenanigans to reallocate funds to projects favored by the political left.
As I also noted in that post, these decisions are just the start of what will almost certainly be a prolonged legal battle over Trump’s wall-building plans. The government is already appealing Judge Gilliam’s earlier ruling, and there are also numerous other pending lawsuits related to the wall.
Judge Gilliam is the first federal judge to address (some of) the substantive issues at stake in the wall litigation. But, earlier this month, another federal trial court dismissed a wall lawsuit filed by the Democratic-controlled House of Representatives because the judge concluded the House lacked standing to file the claim. I criticized that ruling (which is also likely to be appealed) here.
Even if the standing decision stands up on appeal, it is unlikely to prevent judicial review of Trump’s wall-building plan, because there are many other lawsuits against it brought by parties who clearly do have standing, even if the House does not. The real import of the standing decision is its potential impact on other separation-of-powers disputes between the president and Congress.
To briefly sum up, Judge Gilliam’s decisions represent a notable victory for critics of Trump’s wall-building plan. But this is just the beginning of what is likely to be a lengthy legal battle. Stay tuned!
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Loan forgiveness doubles down on the failed federal policies that led to the $1.6 trillion student loan crisis…
Senators Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts are making headlines with their plans to forgive student loan debt and make public colleges tuition-free.
While many agree removing financial responsibility on the part of the student is bad policy, the 45 million Americans holding student loans undoubtedly see debt forgiveness as attractive.
Burdensome student loan debt is indeed problematic. Studies show it has discouraged desirable economic activity such as starting a business or buying a home. But loan forgiveness will cause more problems than it solves.
Both Warren and Sanders propose to pay for their plans by raising taxes. Why should American taxpayers have to pay off loans that students took on voluntarily?
Two-thirds of Americans do not hold bachelor’s degrees. Their choice not to go to college, whatever the reason may be, in many cases may have involved a desire to avoid the high cost of higher education.
These Americans are statistically less likely to earn as much as Americans who do hold bachelor’s degrees. It is regressive, or taking a larger percentage from low-income earners, to ask Americans who purposely avoided the high cost of college to pay for students who chose to take on mountains of debt.
The occupation of the clock tower at New York City’s historic Cooper Union college to protest the imposition of fees. Students are demanding that the college remain free. Photo by Michael Fleshman, via Flickr.
Loan forgiveness rewards Fiscal irresponsibility.
Senator Sanders proposes eliminating all $1.6 trillion in student loan debt, regardless of student need.
Many students decided to take a frugal path through higher education, which should be encouraged. Perhaps they decided to go to a less expensive school and took on a part time job. If loan forgiveness becomes universal, students who made those smart financial decisions, ensuring they make their loan payments on time, will be given the same benefit as students who went to the most expensive university and have defaulted on their loan payments every month. Why would any student going forward decide to go the responsible route? And why work, knowing taxpayers will pick up the tab?
Not to mention the millions of members of our military who receive tuition-free college as a benefit earned for serving our country. This benefit would be rendered useless if it is granted to everyone.
Loan forgiveness programs already exist, and even these limited programs are extremely problematic.
For example, there’s the Public Service Loan Forgiveness (PSLF) program, which discharges the loans of public sector employees after just 10 years of government employment. The Congressional Budget Office projects this program alone will cost $24 billion over the next 10 years.
The generous terms of PSLF yielded many unintended consequences—one of them being many more students enrolled in the program than originally anticipated and took on far more debt.
“60,000 new borrowers enroll in PSLF every quarter. Other Department statisticsshow that most participants borrowed well in excess of $50,000 in federal loans and one-third borrowed more than $100,000. Such high debt levels indicate that the program is mostly benefiting borrowers with graduate degrees.”
Importantly, borrowers with graduate degrees earn more on average than those with fewer years of education. It seems troublesome that those best equipped to pay off their loans will benefit the most from a student loan bailout.
Personal finance budgeting should play an important part in your long-term plans to gain financial stability and into having a clear idea of what you want in future. Part of ensuring your financial stability is ensuring you look into your credit report at least once a year. Credit reports are important pieces of information about you and can affect everything from getting a loan to getting a house or even renting an apartment. (U.S. Air Force photo by Staff Sgt. Steven R. Doty, 47th Flying Training Wing.)
PSLF should serve as a cautionary tale.
Loan forgiveness will undoubtedly cost more than projected and more students will enroll in college who may have otherwise been gainfully employed in the workforce.
To pay for this the Sanders’s plan calls for a tax on Wall Street trading.
Heritage’s Adam Michel argues that, historically, such taxes increase market volatility and do not generate nearly as much revenue as expected. Inevitably, the middle class ends up stuck with the tab, either through tax increases or damage to the economy.
While loan forgiveness sounds attractive, we should focus instead on how we got here.
Federal student loans offer colleges and universities excessive funds that enable them to raise their tuition without fear of losing customers. Instead, Americans should be holding colleges and universities accountable by tightening the purse strings coming from Washington.
Eliminating federal student loans will encourage colleges to step up their game, lower their prices, and maybe even begin teaching marketable skills. Loan forgiveness doubles down on the failed federal policies that led to the $1.6 trillion student loan crisis.
via ZeroHedge News https://ift.tt/2RJA5xd Tyler Durden
Even though unemployment has hit a 49 year low, more than half of Americans are lying awake at night worrying about money, according to MarketWatch.
But we thought jobs were everything?
Instead, a recent report from the Board of Governors of the Federal Reserve System concludes many people are living with wildly fluctuating incomes. In addition, consumer confidence fell to a two-year low in June.
Lynn Franco, senior director at the Conference Board, said: “The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence. Continued uncertainty could “diminish” people’s confidence in the economic expansion.”
Lynn Reaser, chief economist of the Controller’s Council of Economic Advisors said: “A major trade war between the U.S. and China represents our greatest economic risk.”
And the worries are starting to pile up. According to a Bankrate survey of 2,500 people:
78% of adults are losing sleep over work, relationships, retirement and other worries
Over half (56%) of Americans are lying awake at night worrying about money.
The key worries are retirement (24%), health care and/or insurance bills (22%), the ability to pay credit-card debt (18%), mortgage/rent payments (18%), educational expenses (11% versus 26%) and stock-market volatility (5%)
In addition, 40% of people in a separate poll by that site say they feel the next recession has already begun or will begin within the next 12 months. 45% of U.S. workers have a second job to make ends meet and middle aged workers are feeling the pressure too, including 48% of millennials, 39% of Generation Xers and 28% baby boomers.
Many believe a recession to be an inevitability at this point. Oxford Economics predicts that fallout from the next recession could trigger a 30% drop in the S&P 500.
Jesse Colombo, analyst at Clarity Financial said: “Virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies.”
According to the NY Fed’s Yield Curve based model, there remains a 27% probability of a U.S. recession in the next 12 months.
“The last time that recession odds were the same as they are now was in early 2007, which was shortly before the Great Recession officially started in December 2007,” Colombo continued. He sees a 64% likelihood of a recession within the next year.
Colombo continued: “The New York Fed’s recession probability model has underestimated the probability of recessions in the past three decades because it is skewed by the anomalous recessions of the early 1980s. That model was skewed by a then-Federal Reserve Chairman Paul Volcker’s unusually aggressive interest rate hikes that were meant to ‘break the back of inflation.’ Looking at the New York Fed’s recession probability model data after 1985 gives more accurate estimates of recession probabilities in the past three decades.”
The bubbles that Colombo is now watching? Global debt, China, Hong Kong, Singapore, the art market, U.S. stocks, U.S. household wealth, corporate debt, leveraged loans, U.S. student loans, U.S. auto loans, tech startups, global skyscraper construction, U.S. commercial real estate and – stop us if you’ve heard this one before – U.S. housing.
via ZeroHedge News https://ift.tt/2ZV6ELf Tyler Durden
Since the first shot in the US-China trade war was fired in March 2018, markets have gyrated and negotiations have sputtered. Yet few have closely examined the extent of China’s retaliatory tariffs on US exports, and more importantly, what a full-blown trade war could mean for US exports.
As of today, Beijing has taxed $110 billion worth of US goods, prompting many to argue that China can’t keep up the tit-for-tat contest because China only imported $130 billion of US goods in 2017, according to the US International Trade Commission. However, American and Chinese trade statistics exhibit large discrepancies due to different methodologies. Based on China’s Customs data, the United States exported $154.4 billion to China, which means that as far as Beijing is concerned, it can tax an additional $44 billion as retaliation.
The following analysis fully breaks down the $110 billion worth of US goods that Beijing has taxed so far and looks into the $44 billion of additional US exports that could be the potential target of future retaliation.
What China Has Done in the Past 15 Months
First tranche: Imposed 25% tariffs on $50 billion of US goods (Summer 2018).
Second tranche: Imposed 10%, 10%, 5%, and 5% tariffs on four different lists of US goods that totaled $60 billion (September 2018).
Third tranche: Raised tariff rates to 25%, 20%, and 10% on the first three lists and kept 5% on the fourth list of the same $60 billion of US goods (May 2019).
Combined, these five tariff lists consist of 4,159 types of US exports to China, covering 78.5% of a total of 5,299 types of US exports in 2017 (see Figure 1).
The first tranche of tariffs was largely aimed at agricultural and mineral products and automobiles, most of which are easily substitutable goods. The second tranche, whose tariff rates just went up in May, shifted its target to manufacturing sectors, covering machinery and mechanical equipment.
What Could China Still Tariff If Retaliation Escalates?
Option 1: Further raise rates on the list of products that are currently subject to 20%, 10%, and 5% tariffs.
Option 2: Of the current $44 billion of untaxed US exports, impose tariffs on $23 billion worth of exports, including kraft paper, scrap copper, and certain types of retail drugs.
Nuclear Option: Impose tariffs on everything, including $21 billion worth of US exports in chips and airplanes.
A quick break down of the $44 billion of untaxed goods – Option 2 plus the Nuclear Option – reveals that the goods are scattered across 14 industries, with some concentration in vehicles, aircraft, and machinery.
Upon further dissection, one finds that 1,138 items out of the total 1,140 untaxed goods make up more than half ($23 billion) of the $44 billion (see Figure 2). If China were to enact Option 2 as further escalation, goods such as kraft paper, scrap copper, and certain types of retail drugs will be the prime targets.
That leaves just two types of goods that account for 48.5%, or $21 billion, of the $44 billion: airplanes and other aircraft of an unladen weight exceeding 15,000 kg (6-digit HS Codes 880240, $13 billion) and integrated circuits (IC) as processors and controllers (6-digit HS Codes 854231, $8 billion).
Although China has so far exempted these two types of goods from tariffs because substitutes are not readily available, it is not inconceivable that Beijing could impose some tariffs in the event of a Nuclear Option. Take electronic IC (HS Codes 854231) for example. China imported over $100 billion worth of this product every year, but only 8% of those imports originated from the United States. By far the largest source of IC exports to China is Taiwan. So if China imposed tariffs on IC exports from the United States, it could theoretically increase its imports from Taiwan, Japan, and South Korea assuming there is sufficient capacity to accommodate.
In the case of airplanes (HS Codes 880240), the United States (Boeing) has a whopping 57% share of Chinese imports. However, that share has been declining steadily since 2015, as France (Airbus) has gained market share. For instance, during his state visit to France, President Xi Jinping sealed a $35 billion deal of 300 planes with Airbus.
So if President Trump makes good on his threat to tax all Chinese exports, then it’s not unthinkable that Beijing could reciprocate with its own nuclear option that includes taxing $13 billion of US airplanes and $8 billion of chips.
A full list of US exports and their current tariff rates at the 6-digit HS level can be downloaded here.
via ZeroHedge News https://ift.tt/2XIOi2y Tyler Durden
