Tag: news

Almost 17,000 people have signed a petition in New York City to rename the street in front of Trump Tower after former Barack Hussein Obama II.

 A MoveOn petition is gaining traction over the weekend would rename the stretch of Fifth Avenue between 56th and 57th streets to be “President Barack H. Obama Avenue.”

The petition would force President Trump to change the address of his Trump Tower building, where Donald Trump 2020 presidential campaign will be headquartered on the 15th floor, said The Hill. 

As of Sunday afternoon, the petition had approximately 16,878 signatures, a 390% jump in signatures since Friday morning. 

“We request the New York City Mayor and City Council do the same by renaming a block of Fifth Avenue after the former president who saved our nation from the Great Recession, achieved too many other accomplishments to list, and whose two terms in office were completely scandal-free,” the petition states.

A stretch of highway in  Los Angeles was recently renamed after the former commander in chief.

“The City of Los Angeles recently honored former President Barack Obama by renaming a stretch of the 134 Freeway near Downtown LA in his honor,” the petition notes.

For the roadway to be renamed, the New York City Council would have to approve the bill and Mayor Bill de Blasio would have to sign off on it.

Last month, the council voted to name a city street after the hip-hop group Wu-Tang Clan.

According to NPR News, the council voted 48-0 during its last meeting of 2018 to co-name the street and several more after the group and other notable musicians, such as Notorious B.I.G. (born Christopher Wallace), Woody Guthrie and poet Audre Lorde.

The move to rename the street in front of Trump Tower seems very far-fetched, but with the council on a tear renaming streets after legendary hip-hop stars, it would not shock us if Trump Tower one day is sitting on “President Barack H. Obama Avenue.”

via RSS http://bit.ly/2SF8yMR Tyler Durden

Authored by Andrew Moran via LibertyNation.com,

Generation Z is already learning from the millennial generation’s mistakes…

For years, millennials have scoffed at the notion of fixing someone else’s toilet, installing elevators, or cleaning a patient’s teeth. Instead, they wanted to get educated in lesbian dance theory, gender studies, and how white people and western civilization destroyed the world. As a result, student loan debt has surpassed the $1 trillion mark, the youth unemployment rate hovers around 9%, and the most tech-savvy and educated generation is delaying adulthood.

But their generational successors are not making the same mistakes, choosing to put in a good day’s work rather than whining on Twitter about how “problematic” the TV series Seinfeld was. It appears that young folks are paying attention to the wisdom of Mike Rowe, the American television host who has highlighted the benefits and importance of trade schools and blue-collar work – he has also made headlines for poking fun at man-babies and so-called Starbucks shelters.

Will Generation Z become the laughing stock of the world, too? Unlikely.

Z Is Abandoning University

A new report from VICE Magazine suggests that Generation Z – those born around the late-1990s and early-2000s – are turning to trade schools, not university and college, for careers. Ostensibly, a growing number of younger students are seeing stable paychecks in in-demand fields without having to collapse under the weight of crushing debt.

Because Gen Zers want to learn now and work now, they are abandoning the traditional four-year route, a somewhat precocious response to the ever-evolving global economy.

Cosmetologist, petroleum technician, and respiratory therapist are just some of the positions that this generation of selfies, Snapchat, and emoticons are taking. And this is an encouraging development, considering that participation in career and technical education (CTE) has steadily declined since 1990.

David Abreu, a teacher at Queens Technical High School, told a class of young whippersnappers at the start of the semester:

“When you go out there, there’s no reason why anyone should be sitting on mommy’s couch, eating cereal, and watching cartoons or a telenovela. There’s tons of construction, and there’s not enough people. So they’re hiring from outside of New York City. They’re getting people from the Midwest. I love the accents, but they don’t have enough of you.”

While students feel the pressure of attaining a four-year degree in a subject that offers fewer employment opportunities, the blue-collar jobs are out there to be filled. It is estimated that more than one-third of businesses in construction, manufacturing, and financial services are unable to fill open jobs, mainly because of a skills shortage and a paucity of qualifications.

This could change in the coming years.

The Future Of College

Over the last decade or so, the college experience has turned into a circus. At Evergreen College, the inmates ran the asylum. The University of Missouri staff requested “some muscle over here” to suppress journalists. Harvard University has turned into a politically correct institution. What do all these places of higher learning have in common? They’re losing money, whether it’s from fewer donations or tumbling enrollment.

Not only are these places of higher learning metastasizing into leftist indoctrination centers, their rates for graduates obtaining employment are putrid. And parents and students are realizing this.

With the trend of Gen Zers embracing the trades, the future of post-secondary education might be different. Since colleges need to remain competitive in the sector, they will have to offer alternative programs and eliminate eclectic courses, and the administration will be required to justify their utility.

A pupil seeking out a STEM education will not be subjected to the inane ramblings of an ecofeminism teacher or the asinine curriculum of a queer theory course.

Moreover, colleges could no longer afford to spend chunks of their budgets on opulent settings. A student interested in the trades is unlikely to be attracted to in-house day spas, luxury dorms, and exorbitant gyms. They want the skills, the tools, and the training to garner a high-paying career without sacrificing 15 years’ worth of earnings just so they could enjoy lobster for lunch twice a week.

Generation Smart?

Millennials are typically the butt of jokes, known for texting in the middle of job interviews, demanding complicated Starbucks beverages, and ignoring their friends at the restaurant. Perhaps Generation Z doesn’t want to experience the same humiliation and stereotypes. This could explain why they are dismissing the millennial trends and instead adopting common sense, conservatism, tradition, and anything else that is contrary to those who need to be coddled.

The next 20 years should be fascinating.

In 2039, Ryder, who prefers the pronoun “xe,” is employed as a barista, a position he claims is temporary to pay off his student debt. He lives on his friend’s sofa, still protests former President Donald Trump, and spends his disposable income on tattoos. In the same year, Frank operates an HVAC business, owns his home without a mortgage, and has a wife and three children who enjoy their summer weekends at the ballpark with the grandparents.

One went to college for feminist philosophy, the other went to trade school. You decide who.

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Two icons of distressed investing – Bruce Richards and Lou Hanover, who together run the $15 billion Marathon Asset Management – gave a lengthy interview to Barron’s last week, in which they laid out their views for 2019, and perhaps surprisingly had a generally sanguine “best case” outlook for the asset class that makes up their bread and butter, namely junk bonds, saying that “high yield should do pretty well, contrary to what most people think. Because growth rates are at 2% and earnings are still improving, default rates will remain low. Spreads are blowing out already; now you’re getting paid 7-7.5% yield. You may not earn the full 7, 7.5%, but we think you’ll earn 3 to 5.”

The distressed duo also noted their preferred investment for 2019, saying that while emerging markets are the most volatile of all the credit markets, their “top expected return for this year is playing Argentina” which based on how much it backed up last year, “it’s offering very, very good value.”

It’s not until you have some more certainty around Macri and this election [in October] that you want to start to deploying capital aggressively. Right now, for a trade, we’re beginning to buy.

That said, there are distinct risks to their outlook, with Richards and Hanover noting the following four major risk factors:

• No. 1: Is the Fed moving too aggressively?
• No. 2, inflation expectations.
• No. 3, will negotiations with China turn into an all-out trade war, where the impact to the economy could be at least 50 basis points of GDP.
• No. 4, Europe: is it hard Brexit? Is it Italian recession? Is the transition from Merkel going smoothly? In the latest quarter, German GDP really slowed. Will the yellow jackets in France gain prominence and try for political change? Then there is Mario Draghi and the ECB: one of our top expectations for next year is that European investment grade and high yield become considerably cheaper because the ECB moves from QE to a neutral stance when they begin raising rates. Europe needs an easy policy, but the zero rate environment is creating some other issues, like bubbles in some of the sovereigns.

Also, following the recent rout in investment grade bonds, which have “gotten clobbered” Marathon likes it, even if they remain concerned about the BBB-tranche “There was $760 billion of BBB U.S. corporate bonds in year-end ‘07. Today, that’s $3.15 trillion.”

As a result, Marathon is starting to set up a basket of shorts in BBBs, in bonds, and CDS: “We’re focused on investment grade, the most highly leveraged single-names.”

Meanwhile, while generally sanguine on High Yield, Marathon lays out a laundry list of key concerns involving high yield bonds, starting with the fact that the vast majority of debt nowadays is covenant lite. And, as a result of this prepondrance of  covenant-lite debt, Richards forecasts that default rates will stay well lower than prior distressed cycles, largely as a result of reduced negotiating leverage that creditors have, however, once defaults do hit eventually, the result will be far lower recovery rates “because they’ve eaten away a lot of value.”

Less than 20% of all loans a dozen years ago were covenant-lite, and 80% had strong covenants. Today’s the reverse. [Covenants] get you to the negotiating table. In the next distressed cycle, for that exact reason, we expect the default rate will only go to 7 instead of 10. Default rates measure trailing 12 months. At some point, a deferment will lead to restructuring, and that might lead to lower recovery rates, because they’ve eaten away a lot of value.

Meanwhile, Hanover metaphorically predict that “It’s little lap waves hitting the beach” that will lead to the most damage:

You’ve got a little stress in retail, so you see this in Neiman Marcus and PetSmart: I lend you $100 million to buy that building, and six months later you dividend half of it out to yourself. Who would do a mortgage where you could lose half the collateral? That’s the market funding [PetSmart’s] purchase of Chewy; they dividended 35% of it out. That’s set the stage for a fight with creditors. That was right in the document; that wasn’t even trickery. It’s going to keep happening in different industry verticals.

Finally, comparing what the downside case could look like when comparing the financial crisis and the upcoming distressed cycle, Hanover is quite visually gloomy:

In ‘08, you had the big crash, and pop; this is going to be pain, pain, pain, distress exchanges, rescue financing, and then doing whatever you can do with the [capital] structure: grabbing collateral, making yourself more senior, delaying the day. Maybe some companies recover; a lot don’t. It’s going to roll to one sector after another.

Finally, with regard to when the two see the next distressed cycle finally hitting, their answer: the latter half of 2019 or 2020.

This year we harvest a lot of what we have and let cash start to build up. We’re setting up for a very, very big distressed opportunity, whether it’s the latter half of this year, end of this year, or into the following year.

Read the full interview here.

via RSS http://bit.ly/2LUa9Mh Tyler Durden

Authored by Michael Snyder via The Economic Collapse blog,

34-year-old Casey King is so obese that he can’t work, he has to bathe outside in a trough like a pig, and he has to rely on his father to constantly take care of him. 

He now weighs more than 700 pounds, but he just keeps on eating massive amounts of unhealthy food. 

Just like America as a whole, he has absolutely no self-discipline and absolutely no desire to turn his life around.  On some level he understands that he is literally killing himself with his destructive behavior, but he does not have a desire to change.  Instead, he told TLC that he “will just eat until I am dead”…

Featuring in a TLC TV series called Family by the Ton, Casey said: “I will just eat until I am dead, probably.

“I wake up around 12, figure out something I’m going to eat immediately [then it’s] TV, video games, bed — it’s not a lot of activity.”

Because of the hot weather in Georgia he prefers to skip clothes, wearing only a headset through which he uses to chat to other gamers playing online.

It is easy to criticize Casey for his lack of activity, but he is really not too different from most other Americans.

As I have written about before, the average American spends approximately five hours a day watching television.  We are willingly plugging ourselves into “the propaganda matrix” for thousands upon thousands of hours, and of course that is going to greatly affect our outlook on life and how we see the world.

But of course most Americans don’t watch television and play video games while naked.  But for Casey, clothes have become too restricting and so he just sits on his bed naked all day long…

‘It’s hot in Georgia, and all my clothing is restricting and tight, so I just sit there naked, free as can be and no one bothers me — door’s shut, we’re good,’ he explained.

The gaming community has become a safe space for him because it allows him to escape his everyday life.

‘I’m accepted in all those virtual reality worlds and the gaming world I’m in,’ he said. ‘No one sees me. That is my outside. That is my world that I can be the Casey I want to be, but not be judged on my weight.’

The only reason why Casey is able to live this kind of lifestyle is because his father takes care of him and pays all the bills.

And on a much grander scale, isn’t this what our country is turning into?  Young adults are flocking to socialist ideas because they want the nanny state to take care of them from the cradle to the grave and give them everything for free.

At 34 years of age, Casey should be in the prime of his life, but instead he is utterly dependent on his father as he waits around to die.  He needs a reason to live, and right now he doesn’t have one.  In the end, this is not how he anticipated his life would turn out…

‘I never would’ve thought at 34 I’d be living with my father, and I’d have no job, have no real money, and just be playing video games all day and eating,’ he said.

It would be really easy to look down on Casey, but the truth is that our nation is just like him in so many ways.

At this point, we are a nation that completely lacks self-discipline.  Obesity is at an all-time high in the United States, millions of us are addicted to legal and illegal drugs, we have one of the highest rates of alcoholism on the planet, 37 percent of all Americans have eaten fast food within the last 24 hours, and the CDC says that 110 million Americans currently have a sexually-transmitted disease.

But when I first learned about Casey, I didn’t think about any of those things.

Instead, I thought about our exploding mountain of debt.  Like Casey, we just can’t stop ourselves from going back for more.  We have been on the greatest debt binge in the history of the world, but our hunger just keeps growing.

In just a matter of days, the U.S. national debt will hit the 22 trillion dollar mark, but nobody in Washington seems to care.  But if you were to sit down and talk with most of our politicians, they would ultimately admit that all of this debt is an existential threat to our nation.  It is just that they completely lack the willpower to do anything about it.

We know that what we are doing is definitely going to kill us, but we are not willing to change.

Meanwhile, state and local government debt levels are at record highs, public and private pensions are unfunded by trillions upon trillions of dollars, corporate debt has doubled since the last financial crisis, auto loan debt is at an all-time high, credit card debt is absolutely soaring, and student loan debt has roughly tripled over the last decade.

So please don’t be too critical of Casey, because the truth is that he would make a perfect poster boy for what we have become as a nation.

When people point to a modestly good short-term economic number as some sort of “victory”, I just laugh, because the truth is that all of those numbers are fueled by record amounts of debt.

During 2018, we added close to 1.4 trillion dollars to our national debt.  If all of that money was pulled out of the economy and we had only been spending what we had been bringing in, we would be in the worst depression in American history right now.

The only way we can maintain our economic facade is by endlessly gorging ourselves on debt, but in the process we are literally destroying the bright future that our children and our grandchildren were supposed to have.

In the final analysis, what we are doing to ourselves as a nation makes Casey King look like a sharp, disciplined, athletic young man in comparison.

If we keep doing this to ourselves, we have no future, and nobody can argue with that.

via RSS http://bit.ly/2C18RKS Tyler Durden

China has embarked on an ambitious space program – surpassing the United States in orbital launches last year (primarily for satellites), and now landing their own lunar rover on the dark side of the moon, the Chang’e 4. 

The stated purpose of Beijing’s robotic lander is to collect samples and identify what minerals are there. And while the Chang’e 4 is unlikely to find precious metals such as gold, silver or platinum – there may be something up there that could serve as a “lunar fuel station to the stars,” as the South China Morning Post puts it; Helium-3

The primary material on the moon is helium-3, which for now is too expensive to haul back to Earth. In theory, the non-radioactive isotope could be used as fuel for the next generations of spacecraft to explore deeper into space.

Imagine driving from “NYC to LA without gas stations along the way”, said Peter Diamandis, the entrepreneur who founded the XPrize to encourage private spaceships. “If you can get the fuel from space, it reduces the cost.” –SCMP

What’s more, if China does find anything else of value on the far side of the moon, mining it would be far easier than an asteroid because of its gravity and proximity to Earth. 

The next step, of course, would be what every fan of author Robert Heinlein has been looking forward to since they were a kid; A moon base. The United States has been debating whether to send a mission back to the moon as soon as possible, or build a lunar base that would take quite a bit longer to orchestrate. 

“The US thinks in presidential terms,” said University of Notre Dame lunar expert Clive Neal. “China thinks in decades.” 

China may be testing its ability for more sophisticated missions, according to Neal of Notre Dame. That poses the question of why China chose its particular landing place, at one of the moon’s oldest and deepest craters.

The answer could be simple, he said. From the far side of the moon, Chinese scientists can see farther into space because Earth’s radio waves can’t get in the way. –SCMP

Nasa’s top administrator Jim Bridenstine tweeted in late November that the US would be partnering with two companies to return to the surface of the moon, “sooner than you think!”

BREAKING: We are announcing new Moon partnerships with American companies at 2pm ET this Thursday. The U.S. is returning to the surface of the Moon, and we’re doing it sooner than you think! https://t.co/1vC2NC6OzI

— Jim Bridenstine (@JimBridenstine) November 27, 2018

“We’re going to move towards a day where we commercialize all of low earth orbit to where NASA is one customer of many customers in a robust commercial marketplace,” said Bridenstine, calling the new endeavors a “transformation” of the agency’s culture. “Then we can use NASA resources to do things where there isn’t yet a viable commercial market … We can build the architecture to get to the moon with our international partners.”

“The case we have to make, which is absolutely true, is that the quickest way to get to Mars is to use the moon and to use the Gateway,” he added. “It will reduce risk. It will reduce cost, because anything you can do that ultimately can be tested around the moon is going to lower our cost to go to Mars.” 

In December Nasa announced the “Moon to Mars” program, of which the first step is (you guessed it) – to return to the Moon, where the space agency will commission private companies to deliver small scientific instruments, followed by development of an orbiting “gateway” which will support human missions to the lunar surface – and serve as a base of operations for future missions to Mars and beyond. 

The second phase of missions will confirm that the agency’s capabilities built for humans can perform long duration missions beyond the moon. For those destinations farther into the solar system, including Mars, NASA envisions a deep space transport spacecraft. This spacecraft would be a reusable vehicle that uses electric and chemical propulsion and would be specifically designed for crewed missions to destinations such as Mars. The transport would take crew out to their destination, return them back to the gateway, where it can be serviced and sent out again. The transport would take full advantage of the large volumes and mass that can be launched by the SLS rocket, as well as advanced exploration technologies being developed now and demonstrated on the ground and aboard the International Space Station. –Nasa.gov

The question remains; will China become proud owners of the first gas station in space? 

via RSS http://bit.ly/2Fd2GXj Tyler Durden

The feud between Elon Musk and Azealia Banks first emerged while Musk was under fire for his famous “funding secured” tweet that later led to him being sued by the SEC for securities fraud. Banks was a guest in Musk’s home around the time Musk sent out the Tweet, reportedly invited by Musk’s then girlfriend, Grimes.

Lately, however, Banks had been relatively quiet about Musk – until last Friday.

Shareholders are trying to subpoena Banks as part of a lawsuit against Musk surrounding the “funding secured” fiasco. When Musk’s lawyer, Dean Kristy, filed a motion to argue against the subpoena, the contents of the filing set Banks off again. 

Banks took to Instagram on Friday, posting a picture of the motion and writing “They are still slighting [sic] me like I don’t have plenty more dirt to spill on Elon. This is going to get extremely ugly…Elon will learn very soon who is more powerful of us two.” 

The post has since been deleted. Banks also seemed to allude during a post on Instagram that Musk had hacked her phone, hacked her computer, had a PI follow her and even tried to poison her. 

Shareholder attorneys are trying to place Banks in Musk’s house during the fallout from Musk’s famous tweet. Banks had previously posted in depth about her time staying at Elon‘s home, claiming that while there, Grimes was comforting Musk about “being too stupid not to go on Twitter while on acid”.

So naturally, those suing Musk are trying to get subpoenas for all parties involved: Banks, Grimes and even media names that interviewed both of them about their dispute directly after it happened.

But Musk’s attorneys fired back, stating that “It is evident that this is really more of an effort to sensationalize these proceedings than a legitimate attempt to preserve evidence”. They then stated that Banks has a “history of making bold and sometimes unverified claims”.

Musk’s attorneys also brought up a story about Twitter CEO Jack Dorsey allegedly mailing his shaved beard hairs to Banks, so she could make him an “amulet to protect him from evildoers”, prompting amused questions if this is what goes on in the lives of billionaires and the Hollywood elite in California?

Citing this story, Musk’s lawyers argued that Banks is “…simply not the type of witness, or actual record, that could justify the required finding of exceptional circumstances necessary”.

“I’m now even more angered by the fact that his lawyer is falsely stating I lied after being vindicated in both incidents with Russell Crowe and Jack Dorsey,” Banks responded.

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Via DLacalle.com,

Watch my entire interview at Real Vision here.

For 2019, the key factors that we need to think about are what is going to be the outlook on three levels: monetary, macro, and earnings.

In general, considering where expectations are right now, we are still in a stealth downgrade mode, Industrial production, and ISMs are slowly descending from the  high levels while rising global debt is also an important factor.

Monetary factors are also very important.

If we look at the way in which most investors are positioned right now, the vast majority of us are expecting that the improvement for next year is going to come from central banks not doing what they have said that they will do, which, in general, is a pretty dangerous position to take.

However, even if they did ease, and I believe that they will definitely slow down the pace of normalization, we need to understand that the placebo effect of central bank policy on markets has stopped working as a tool to expand multiples and asset valuations. We have seen it in Japan and in Europe. Despite ongoing easing, it does not transfer into further multiple expansion and financial asset inflation. It only helps yields remain low. It only helps valuations remain where they are.

On earnings, the problem that I see continues to be in the next two years’ estimates because I continue to believe that those have not come down enough. You still see in consensus expectations double-digit EPS growth. That is very, very, very unlikely.

In an environment in which central banks continue to be accommodative, but macro and earnings are not supportive, cycles become very short. So we need to be a lot more active.

The Chinese, Japanese and Eurozone slowdown are all happening in the middle of massive stimuli and deficit spending. We cannot fool ourselves and say that the markets and macro disappointments this year are due to trade wars or the normalization of the Federal Reserve. Those are subterfuges that we use to avoid reality. And the reality is debt saturation. More debt generates less growth and higher risk.

Central banks care a lot about asset prices. The Central Bank of Japan would not be buying equities if they didn’t care about asset prices. Buying equities has absolutely nothing to do with inflation or with unemployment or economic growth. It’s because they care about asset price inflation. However, the Federal Reserve finds itself in a position in which if they care only about asset prices, they don’t build enough tools into a change of cycle. And therefore, they might end up creating a larger problem than the temporary effect on markets. If they revert the policy, they will give a message to markets that they know something that we don’t know, and that that something is truly bad.

The ECB knows that there is no real demand for sovereign bonds at these yields, not even close. We would need to think of double the current levels of sovereign bond yields for marginal investors (not forced buyers) to think of purchasing eurozone sovereign bonds

The eurozone countries have saved themselves about 1 trillion euros in interest expenses. Not bad, but they’ve spent it all. And very few countries in the eurozone are ready for an increase of 10% or 20% of their borrowing costs.

The eurozone is unable to disguise through monetary policy its structural problems, aging of the population, overcapacity, low productivity growth, and at the same time, an extraordinarily high level of unemployment. Those factors are all added to an elevated debt and government spending.

The eurozone has convinced itself that the entire problem was the alleged austerity. There’s no austerity at 40% public spending to GDP. So the solution that they are looking at is further and higher government spending. And government spending is not going to drive productivity growth, improvement in the economy, and the structural changes that the eurozone desperately needs. It’s very likely that the eurozone continues to do what Japan did in the late ’80s. Spend its way to stagnation.

The US economy, with all of its challenges, is much more robust than the European economy. In the eurozone 80% of the real economy is financed by banks, so the contagion effect of financial woes is very high. In the US it is less than 40%. Throughout the years of QE in the United States, the Federal Reserve was never 100% of the demand for sovereign bonds in the market. So it always kept an eye on the secondary market. Even though it was influencing aggressively the yields of sovereign bonds, it is also true that there was always a secondary market moving around. That is not the case in the eurozone. In the eurozone, the European Central Bank is 100% of the demand for sovereign bonds for the majority of the net financing needs of the eurozone countries. As such, there is absolutely no way of understanding where will marginal investors want to buy Portuguese, Spanish or Italian bonds.

My concern is that the way in which governments and central banks are positioned right now, they have no tools to address a much deeper slowdown.

China is already caught in a liquidity trap. China has been posting weakening numbers quarter on quarter for more than two years. I think that China made a mistake when the policy of addressing the increasing debt and the so-called change of model from an industrially intensive to a consumer-driven model was stopped.

Consider this. If you have an economy that is growing at 6.5% healthily with low inflation and low unemployment you do not devalue your currency stealthily and implement a massive stimulus and liquidity injection.  It does not add up. China will likely slow down in the middle of a massive stimulus because it has surpassed its debt saturation limit as well.

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There were a variety of catalysts behind Friday’s “Jumbo”-sized, 747-point surge in the Dow, among which renewed trade talk optimism, a stronger than expected Chinese services PMI, a blockbuster jobs report, and of course Chairman Powell’s dovish reversal from his hawkish Dec 19 FOMC press conference, in which he not only suggested that the Fed will be more “patient” with future rate hikes and will “listen to markets” as inflation appears to be easing off, but also the Fed’s balance sheet reduction is no longer purely on autopilot and may be adjusted depending on the market.

However, one key catalyst that was generally ignored in recent days, and which may have sparked new life in the market’s animal spirits, came not out of the Marriner Eccles building but from China, and not just the RRR cut which China announced on Friday.

But first a few words on the required reserve ratio cut: As a reminder, after the market closed, the PBOC announced a 1% cut in RRR in January, split evenly on Jan 15 and Jan 25. While expectations were high for such an event, it was not a major surprise to the market, especially since a significant part of the net total interbank liquidity injection of RMB 800bn will go to replace maturing MLF in Q1, while much of the balance will offset the PBOC’s ongoing liquidity drains via reverse repo. 

The central bank also emphasizes that the RRR cut is a way to mitigate seasonal spikes in liquidity demand ahead of the Chinese New Year (falling on February 5th this year), and that monetary policy remains prudent.

As a result, as Goldman notes, “the targeted measures are therefore quantitatively meaningful, but not particularly sizable” especially since the lingering risk that large-scale targeted monetary support could potentially introduce distortions in the system (e.g., under-reporting of loan size) is recognized by the authorities.

So while the RRR cut may have a transitory impact at best on the overall economy – the PBOC said the RRR cut would help the real economy, particularly small/private enterprises – another, perhaps far more important even took place in late December, when the central bank indicated a critical shift in the official monetary policy description at the December Central Economic Work Conference, from “prudent and neutral” to “prudent with appropriate looseness and tightness”. 

While the language sounds fairly similar, the new description is similar to what was adopted in 2015, just as monetary policy eased significantly and ahead of the famous “Shanghai Accord” of late January 2016 when, as the world was careening to a bear market, a coordinated response from G-7 leaders and China sparked a massive rally in stocks as China unleashed another major monetary easing burst which impacted the global economy for the next year. Furthermore, as Goldman adds, “such official policy language, while subtle, can carry important information about the monetary policy stance.”

So while traders were focusing on the latest words out of Fed Chair Powell, is the real “risk-on” catalyst the hint out of China that a new “Shanghai Accord” may be imminent? The answer is most likely yes, especially if the upcoming US-China trade talks fail to yield a favorable outcome, as the alternative would be even more pain for China’s economy.

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Authored by Pater Tenebrarum via Acting-Man.com,

Drain, drain, drain…

“Master!”, cried the punters,

“we urgently need rain!

We can no longer bear

this unprecedented pain!”

“I’m sorry my dear children,

you beg for rain in vain.

It is I who is in charge now

and mine’s the put-less reign.

The bubble dragon shall be slain,

by me, the bubble bane.

That rustling sound? That’s me…

as I drain and drain and drain.”

[ed note: cue evil laughter with lots of giant cave reverb]

– a public service message by the Fed chieftain, rendered in rhyme by yours truly

Money from thin air going back whence it came from – circling the drain of a ‘no reinvestment’ black hole strategically placed in its way by the dollar-sucking vampire bat Ptenochirus Iagori Powelli.

Our friend Michael Pollaro recently provided us with an update of outstanding Fed credit as of 26 December 2018. Overall, the numbers appear not yet all that dramatic, but the devil is in the details, or rather in the time frames one considers.

The pace of the year-on-year decrease in net Fed credit has eased a bit from the previous month, as the December 2017 figures made for an easier comparison – but that is bound to change again with the January data. If one looks at the q/q rate of change, it has accelerated rather significantly since turning negative for good in April of last year.

Below are the most recent money supply and bank lending data as a reminder that   “QT” indeed weighs on money supply growth rates. It was unavoidable that the slowdown in money supply growth would have an impact on asset prices and eventually on economic activity.

Note that in the short to medium term, the effects exerted by money supply growth rates are far more important than any of the president’s policy initiatives, whether they are positive (lower taxes, fewer regulations) or negative (erection of protectionist trade barriers). The effects of changes in money supply growth are also subject to a lag, but in this case the lag appears to be over.

Any effects seemingly triggered by “news flow” are usually only of the very short term knee-jerk variety, and they are often anyway the opposite of what one would normally expect – particularly in phases when news flow actually lags market action (see the recent case of disappointingly weak PMI and ISM data). The primary trend cannot be altered by these short term gyrations.

TMS-2 growth (y/y); 12-month moving average of TMS-2 growth; total US bank lending growth (y/y). Current growth rates are at levels last seen at the onset of the 2001 and 2008 busts.

TMS-2, total stock: between October and November, month-on-month growth has ceased entirely.

Instead of total Fed assets, we show a chart of securities held outright this time – which include the “QE” portfolio. The data in the chart are up to 02 January, so this is a slightly more up-to-date figure than the one shown in the table.

Securities held outright by the Fed: interestingly, these peaked only in 2017 – almost three years after the official end of QE3 – total Fed assets already peaked in January 2015.

For a while the S&P 500 Index kept rising while the monetary base was essentially flat-lining with a downward bias (note: portions of the liabilities side of the Fed’s balance sheet are included in base money and inter alia reflect the QE portfolio, mainly in the form of excess reserves).

This has changed again in the course of the recent downturn in stocks, which have now “caught up” with the decrease in base money. Normally one would not expect this correlation to be overly tight, but in this case it actually makes sense, since QE and QT have a direct effect on money supply growth rates. In light of the fact that inflationary bank lending growth remains anemic, QT is currently a major driver of money supply growth (or rather, the lack thereof).

Monetary base vs. SPX

Lastly, here is a potentially useful table from a Nomura research report which we pinched from Zerohedge: it shows the estimated weekly USD amounts of QT drains in 2019. It may be worth paying attention to these dates in order to find out to what extent these drains impact risk asset prices and whether they do so with a lag or immediately.

2019 QT schedule. This may prove useful to traders.

Conclusion

As long as the Fed keeps draining excess liquidity from the system, money supply growth rates are unlikely to recover. Expect elevated market volatility to persist over the medium term, with a downward bias.

 

via RSS http://bit.ly/2QsZmcK Tyler Durden

China’s Huawei Technologies has reprimanded two employees for an embarrassing, New Year’s Eve tweet on the smartphone maker’s official Twitter account using an iPhone, social media sleuths noticed on Dec. 31. Huawei, whose smartphones compete with Apple’s iPhone and which has become the focal point of an ongoing feud between the US and China over “technology transfer”, on New Year’s Eve posted a message to followers saying “Happy #2019″ in a tweet marked sent “via Twitter for iPhone.”

MKBHD first detected Huawei’s New Year’s Eve mistake.

That was fast pic.twitter.com/y6k0FJF7Gq

— Marques Brownlee (@MKBHD) January 1, 2019

The tweet was immediately removed but screenshots of the mistake circulated across social media platforms.

Typically, this would be comical, but yet – not newsworthy. Though here, the recent arrest of a Huawei executive has been a dangerous escalation of President Trump’s economic war with China

“Late last year, Huawei CFO Meng Wanzhou was arrested and detained in a Canadian jail for breaching US sanctions on Iran. This sparked even greater heat between the two tech giants, with companies in China going so far to boycott Apple. Firms have even threatened employees with termination for iPhone use, with most offering subnational discounts on Huawei phones to encourage employees to pick up Huawei devices,” said 9to5Mac.

In an internal Huawei memo dated Jan. 03 seen by Reuters, corporate senior vice-president and director of the board Chen Lifang said, “the incident caused damage to the Huawei brand.”

The memo said the mistake occurred when outsourced social media marketing firm Sapient experienced “VPN problems” with a computer so used an iPhone with a roaming SIM card to send the tweet. Twitter, like many social media platforms, is blocked in China, where the internet is heavily censored. For Sapient to gain access, the social media managers had to use a virtual private network (VPN) connection.

Huawei, which surpassed Apple as the world’s second-largest smartphone manufacturer, declined to comment on the situation when Reuters reached out.

The memo also said the error exposed procedural non-compliance and management oversight issues. It said two employees have been punished and demoted by one rank and their monthly salaries reduced by 5,000 yuan ($728.27). The pay grade of one of its employees, Huawei’s digital marketing director, will stay frozen for at least one year.

Reuters said this is not the first time an Apple smartphone has given cause for embarrassment.

Hu Xijin, editor-in-chief of China’s state-run Global Times, was criticized on social media last year after he used his iPhone when showing support for Huawei and ZTE Corp.

via RSS http://bit.ly/2VARfOP Tyler Durden