Tag: news

Brazil’s President Michel Temer announced an emergency meeting of government Sunday after deploying troops to the border town of Pacaraima where Venezuelan migrants clashed with residents.

Temer met with key officials at his presidential palace, including those of defense, public security, and foreign affairs, but limited details were disclosed, said the AFP.

The situation in Pacaraima was critical on Saturday, migrant camps were overwhelmed by angry residents following reports that a local restaurant owner had been attacked by a gang of Venezuelans.

There has been growing hostility towards the numbers of Venezuelan migrants entering the Roraima state, Brazil’s northernmost region, in recent months.

Groups of men carrying blunt objects set fire to the camps and other items belonging to the Venezuelans, and more than one thousand migrants fled town back across the border.

“More than 1,200 Venezuelan migrants returned to Venezuela,” after Saturday’s violence, a spokesman for a Brazilian migration task force told AFP.

“The city looks deserted today, it’s very quiet because police reinforcements have arrived and the markets are reopening,” said a local in the town of around 12,000, who did not want to be identified.

Brazil’s public security ministry said it deployed 60 government soldiers to support the police in the area. They are due to arrive on Monday.

Shocking footage of the migrant crisis in Pacaraima was caught on video: 

“Vebezuelanos being expelled from Pacaraima (Roraima City on the border with Venezuela). The state of Roraima no longer supports and the Federal government does @MichelTemer nothing to help, we are collapsing. This is going to turn into a war!” said a Twitter user.

Vebezuelanos sendo expulsos de Pacaraima (Cidade Roraimense na fronteira com Venezuela). O Estado de Roraima não suporta mais e o governo Federal @MichelTemer não faz nada para ajudar, estamos entrando em colapso.
Isso vai virar uma guerra! pic.twitter.com/HSfMFkPfum

— Luiz Gustavo (@luiz_hilario) August 18, 2018

Video of the migrants being expelled from the town.

Revolta da população em Pacaraima na divisa do Brasil com a Venezuela, expulsando os venezuelanos. @BolsonaroSP @jairbolsonaro @BolsonaroSP @Bopressor20 #JairMessiasBolsonaro pic.twitter.com/DG7dKBMOuR

— Robert Prestes (@PRESTESROBERT) August 18, 2018

Brazilians burn items belonging to migrants.

POLÍTICA DE FRONTEIRAS ABERTAS
Quando o Estado fecha o olhos para o problema a população se revolta e toma uma atitude. Após um taxista brasileiro ser agredido por um venezuelano a população decidiu expulsar todos de Pacaraima/RR e fechar a fronteira. pic.twitter.com/wFOhBDnrVm

— Thiago Barroso (@thiagobarroso30) August 18, 2018

Brazilians cheer when a tractor demolishes one migrant camp structure.

@marupita @Sororita @cristalina_agua @TAJODE #18Ag Pacaraima Brasil RR pic.twitter.com/eShZEPzeJe

— Tetê (@Te_Te_9e) August 18, 2018

Migrants running for the hills.

#URGENTE – BRASIL 🇧🇷 / RR
Clima é de tensão na fronteira entre Brasil e Venezuela, no município de Pacaraima, Roraima. Ministério da Segurança Pública diz que situação “está sob controle”
pic.twitter.com/IkM0WiEAOm

— Breaking News [BR] (@BreakingBR_) August 18, 2018

Another view of the chaos.

Venezuelan #migrants run for the hills after border town attacks#Venezuela #Pacaraima pic.twitter.com/MP5BjFEM3y

— Ruptly (@Ruptly) August 20, 2018

“It was terrible, they burned the tents and everything that was inside,” said Carol Marcano, a Venezuelan who works in Boa Vista and was on the border returning from Venezuela. “There were shots, they burned rubber tires.”

Roraima state Governor Suely Campos pleaded with Brasilia over the weekend to send security reinforcements to “face the increase in crime” she associates with Venezuelans in the region, particularly in the capital Boa Vista.

Meanwhile, Caracas, the Capital of Venezuela, called on Brazil Saturday to provide “corresponding guarantees to Venezuelan nationals and take measures to safeguard and secure their families and belongings.”

The uptick in violence came amid surging tensions in Latin America over migration triggered by the economic collapse in Venezuela.

According to the latest figures from the United Nations, more than 2.3 million Venezuelans have fled their country – mostly for Colombia, Ecuador, Brazil and Peru.

UN officials have also reported that 1.3 million of those migrants are now suffering from malnourishment, with food shortages running wild in parts of Latin America.

With another emerging markets-style crisis developing, the weakest currencies in Latin America (Argentina, Brazil, Venezuela, etc..) have been some of the ones with the most external hard currency borrowing, political turmoil, and/or the highest current account deficits, second to Turkey.

The role of the US in this crisis should also not be underestimated, as the steady increase in dollar interest rates and quantitative tightening by the Federal Reserve have led to a “currency tantrum” in the emerging markets.

Fed Balance Sheet versus iShares S&P Latin America 40 Index

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Authored by Charles Hugh Smith via OfTwoMinds blog,

Nothing is as permanent as we imagine – especially super-complex, super-costly, super-asymmetric and super-debt-dependent systems.

Check which signs of Imperial decline you see around you: The hubris of an increasingly incestuous and out-of-touch leadership; dismaying extremes of wealth inequality; self-serving, avaricious Elites; rising dependency of the lower classes on free Bread and Circuses provided by a government careening toward insolvency due to stagnating tax revenues and vast over-reach–let’s stop there to catch our breath. Check, check, check and check.

Sir John Glubb listed a few others in his seminal essay on the end of empires The Fate of Empires, what might be called the dynamics of decadence:

(a) A growing love of money as an end in itself: Check.

(b) A lengthy period of wealth and ease, which makes people complacent. They lose their edge; they forget the traits (confidence, energy, hard work) that built their civilization: Check.

(c) Selfishness and self-absorption: Check.

(d) Loss of any sense of duty to the common good: Check.

Glubb included the following in his list of the characteristics of decadence:

— an increase in frivolity, hedonism, materialism and the worship of unproductive celebrity (paging any Kardashians in the venue…)

— a loss of social cohesion

— willingness of an increasing number to live at the expense of a bloated bureaucratic state

Historian Peter Turchin, whom I have often excerpted here, listed three disintegrative forces that gnaw away the fibers of an Imperial economy and social order:

1. Stagnating real wages due to oversupply of labor

2. overproduction of parasitic Elites

3. Deterioration of central state finances

War and Peace and War: The Rise and Fall of Empires

To these lists I would add a few more that are especially visible in the current Global Empire of Debt that encircles the globe and encompasses nations of all sizes and political/cultural persuasions:

1. An absurdly heightened sense of refinement as the wealth of the top 5% has risen so mightily as a direct result of financialization and globalization that the top .1% has been forced to seek ever more extreme refinements to differentiate the Elite class (financial-political royalty) from financial nobility (top .5% or so), the technocrat class (top 5%), the aspirant class (next 15%) and everyone below (the bottom 80%).

Now that just about any technocrat/ member of the lower reaches of the financial nobility can afford a low-interest loan on a luxury auto, wealthy aspirants must own super-cars costing $250,000 and up.

A mere yacht no longer differentiates financial royalty from lower-caste financial Nobles, so super-yachts are de riguer, along with extremes such as private islands, private jets in the $80 million-each range, and so on.

Even mere technocrat aspirants routinely spend $150 per plate for refined dining out and take extreme vacations to ever more remote locales to advance their social status.

Examples abound of this hyper-inflation of refinement as the wealth of the top 5% has skyrocketed.

2. The belief in the permanence of the status quo has reached quasi-religious levels of faith. The possibility that the entire financialized, politicized circus of extremes might actually be nothing more than a sand castle that’s dissolving in the rising tides of history is not just heresy–it doesn’t enter the minds of those reveling in refinement or those demanding more Bread and Circuses (Universal Basic Income, etc.)

3. Luxury, not service, defines the financial-political Elites. As Turchin pointed out in his book on the decline of empires, in the expansionist, integrative eras of empires, Elites based their status on service to the Common Good and the defense (or expansion) of the Empire.

While there are still a few shreds of noblesse oblige in the tattered banners of the financial elites, the vast majority of the Elites classes are focused on scooping up as much wealth and power as they can in the shortest possible time, with the goal being not to serve society or the Common Good but to enter the status competition game with enough wealth to afford the refined dining, luxury travel to remote locales, second and third homes in exotic but safe hideaways, and so on.

4. An unquestioned faith in the unlimited power of the state and central bank.The idea that the mightiest governments and central banks might not be able to print their way of our harm’s way, that is, create as much money and credit as is needed to paper over any spot of bother, is unthinkable for the vast majority of the populace, Elites and debt-serfs alike.

That all this newly issued currency and credit is nothing but claims on future production of goods and services and rising productivity never enters the minds of the believers in unlimited state/bank powers. We have been inculcated with the financial equivalent of the Divine Powers of the Emperor: the government and central bank possess essentially divine powers to overcome any problem, any crisis and any conflict simply by creating more money, in whatever quantities are deemed necessary.

If $1 trillion in fresh currency will do the trick–no problem! $10 trillion? No problem! $100 trillion? No problem! there is no upper limit on how much new currency/credit the government and central bank can create.

That there might be limits on the efficacy of this money-creation never enters the minds of the faithful. That pushing currency-credit creation above the limits of efficacy might actually trigger the unraveling of the state-central bank’s vaunted powers never occurs to believers in the unlimited reach of central states/banks.

The possibility that the central state/bank’s powers are actually quite limited is blasphemy in an era in which the majority of the Elites and commoners alike depend on the “free money” machinery of the central state/bank for their wealth and livelihoods.

It is instructive to ponder the excesses of private wealth and political dysfunction of the late Roman Empire with the present-day excesses of private wealth and political dysfunction. As Turchin and others have documented, where the average wealth of a Roman patrician in the Republic (the empire’s expansionist, integrative phase) was perhaps 10-20 times the free-citizen commoner’s wealth, by the disintegrative, decadent phase of imperial decay, the Elites held wealth on the scale of 10,000 times the wealth of the typical commoner. Elite villas were more like small villages centered around the excesses of luxury than mere homes for the wealthy and their household servants. Here is a commentary drawn from Turchin’s work:

“An average Roman noble of senatorial class had property valued in the neighborhood of 20,000 Roman pounds of gold. There was no ‘middle class’ comparable to the small landholders of the third century B.C.; the huge majority of the population was made up of landless peasants working land that belonged to nobles. These peasants had hardly any property at all, but if we estimate it (very generously) at one tenth of a pound of gold, the wealth differential would be 200,000! Inequality grew both as a result of the rich getting richer (late imperial senators were 100 times wealthier than their Republican predecessors) and those of the middling wealth becoming poor.”

Following in Ancient Rome’s Footsteps: Moral Decay, Rising Wealth Inequality(September 30, 2015)

We can be quite confident that these powerful elites reckoned the Empire was permanent and its power to secure their wealth and power was effectively unlimited. But alas, their fantastic wealth vanished along with the rest of the centralized, over-extended, complex and costly Imperial structures.

There is a peculiarly widespread belief that Elites are so smart and powerful that they always manage to evade the collapse of the empires that created and protected their wealth. But there is essentially no evidence for this belief when eras truly change.

Yes, Elites have proven to be adept at shifting with the political winds; thus the guestbooks of French chateaux were filled with the names of Nazi dignitaries during the German occupation of France, and with the names of Allied bigwigs after the war ended the 1,000-year Reich.

But the complete collapse of the financial system and centralized power is not a war or financial crisis–these are storm waters which the Elites have the wherewithal to survive. But when a tsunami disintegrates the entire structure and carries it out to a nameless sea as flotsam and jetsam, there is no transfer of wealth from the Old to the New.

The Roman Elites did not become Barbarian elites who just so happened to own the same villas and vast estates they did when they wore togas and dined on super-refined delicacies. They were pushed aside along with everything that supported their wealth and power.

Nothing is quite as permanent as we imagine–especially super-complex, super-costly, super-asymmetric and super-debt-dependent state/financial systems.

*  *  *

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.

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In his most vitriolic interview yet with regard the markets, Reuters reports that (to the establishment’s horror) that he was “not thrilled” with The Fed hiking rates imploring that Jay Powell should “do what’s good for the country,” (which is presumably keep rates low and extend all asset bubbles)…

…he believed the U.S. central bank should be more accommodating.

“I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said in the interview.

“I should be given some help by The Fed.”

Additionally, Trump said that while he believes in Fed independence, he would continue to criticize The Fed if it continues to raise rates.

Trump also accused China and Europe of manipulating their respective currencies.

“When US puts tariffs on China, China artificially lowers the price of the yuan.”

“China is manipulating its currency, Europeans are manipulating the euro too…”

And finally Trump commented on the social media censorship occurring:

It is “very dangerous” when companies like Twitter and Facebook self-regulate content on their platforms.

Details to follow…

Additionally, as the headlines hit, The White House (not President Trump) tweeted the following…“My pledge to each and every one of you is that my Administration will not rest until you have the resources, the tools, and the authorities you need to do your job and do it properly and do it strong.”

.@realDonaldTrump: “My pledge to each and every one of you is that my Administration will not rest until you have the resources, the tools, and the authorities you need to do your job and do it properly and do it strong.” pic.twitter.com/EDMmxB5b7X

— The White House (@WhiteHouse) August 20, 2018

 

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Less than a month after the WSJ reported first that Tesla was quietly asking suppliers for “cash back” on existing and future projects, describing the request as “essential to Tesla’s continued operation” and characterizing it as an investment in the car company, investors quickly sold off the stock sending it back under $300, amid growing fears of a liquidity crisis at the electric automaker.

And while those fears were forgotten after the company’s “strong earnings” a few days later, and then forgotten even more after the tragicomedy involving the Saudi investment, Elon Musk’s take private tweet (with “funding secured” which we now know it wasn’t), the biggest problem facing Tesla’s ongoing profitability, viability and existence, has been liquidity, or the lack thereof.

That problem has also just made a triumphal comeback when in a follow up article, the WSJ reports that some of Tesla’s suppliers are increasingly concerned “about the auto maker’s financial strength after production of the Model 3 car drained some of its cash.”

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

In an interview with the WSJ on Friday, Elon Musk said that “we’re not behind because we can’t pay them. It is just because we’re arguing whether the parts are right.”

Still, while the universe of affected suppliers is small in the context of the entire Tesla supply chain, taken together, the survey, interviews and documents show some suppliers are anxious about Tesla’s ability to pay them back.

Meanwhile, vendors have finally learned that if Tesla goes bankrupt, their claims will be dumped alongside everyone else in the pre-petition file. And they are not happy.

“Regarding Tesla, any time there is uncertainty in the marketplace, it causes concerns for suppliers,“ said Julie Fream, the chief executive of the Original Equipment Suppliers Association, which sent the survey in the past few weeks—a period that encompassed Tesla’s second-quarter earnings and Mr. Musk’s announcement on Twitter that Tesla had secured funding for a plan to go private. “The current dialogue about Tesla ’going private,’ the well-publicized Model 3 manufacturing ramp-up challenges, as well as recently reported contentious purchasing tactics raise concerns for our members.”

In an attempt to regain control of the discussion, and to steer it away far from Tesla’s liquifity, Musk and CFO Deepak Ahuja told the WSJ said Tesla’s financial strength is improving and it remains on track to be cash-flow positive and profitable in the current quarter. They said relations with its suppliers are good.

“If there was any doubt in our suppliers in the first place that should definitely be strongly extinguished, with our commentary and our results and the ramp-up of our production,” Mr. Ahuja said.

But what perhaps is most interesting in the article is the update on Tesla’s current cash pile: as a reminder, on June 30, Tesla reported cash of $2.24 billion, down from $3.37 billion at the start of the year. This number has fallen further, and as of August 12, the company now had just $1.69 billion in cash and equivalents, mostly due to repaying $500 million of a revolving credit line in July.

The good news: the revolver was paid down not because the banks demanded it and according to Tesla, it plans to tap that same amount again later this quarter. Then again, it won’t be the first time the company has lied in recent weeks. That said, it was not clear how high Tesla’s accounts payable had risen in the interim.

Meanwhile, the cash flow that Tesla hopes to generate from an increase in vehicle deliveries in the second half of the quarter, is expected to leave it with several hundred million dollars more in cash at the end of September compared with three months earlier, according to the records.

That may be a stretch: to conserve cash, as the WSJ reported last month, Tesla has asked some of its capital-equipment suppliers in recent weeks for cash back ranging from 9% to 20% of what the company paid dating back to 2016. In one email to a supplier reviewed by the Journal, Tesla asked for help to make “an immediate impact” by providing a rebate on products already purchased.

One parts supplier was asked by Tesla for a 10% reduction on costs across the board going forward, a person familiar with the matter said in an interview. This person said the request was extreme, saying other auto makers typically seek savings of 1% to 2% on individual parts or programs.

The supplier said Tesla indicated it would ask to extend the payment terms to 120 days from 60 days if it didn’t get the price reduction, a length rarer among auto makers than a 90-day term.

As a reminder, no healthy company tries to blackmail its suppliers. And yet to Tesla it is perfectly normal: Ahuja said it is normal for auto makers to ask for better terms as the business improves. Tesla has steadily lengthened its payment terms over the past few years, and more U.S. public companies are extending the amount of time they take to pay their bills.

More troubling is that one of the suppliers said Tesla has stopped making payments to the company since last spring despite numerous promises. This person said he fears insolvency for his own company if he continues to ship products to Tesla and not get paid.

Furthermore, as has been reported on twitter in recent weeks, public records show 16 companies since October have taken the unusual step of filing mechanic’s liens—or legal claims seeking unpaid compensation—against Tesla claiming bills haven’t been paid for supplies and services. Previously, only four liens had been filed against Tesla in all of 2015 and 2016 combined.

The liens were mostly filed this year in Alameda County, Calif., by small subcontractors against Tesla and contractors of the auto maker, primarily for providing work at the company’s Fremont factory. Some of the suppliers have since been paid, and the total outstanding dollar amount of claims is relatively small, totaling nearly $8 million, according to the documents.

Liens filed by suppliers against auto makers are rare, say automotive industry specialists:

“When a customer is having financial issues…suppliers start filing liens to protect their secured position to ensure they are paid,” said Dan Sharkey, a lawyer at Brooks, Wilkins, Sharkey & Turco PLLC who specializes in supply-chain issues.

Here too Tesla vehemently denied it was in trouble: Tesla’s CFO “said it would be wrong to see the liens by subcontractors as a sign of financial distress.”

“It is an issue between the subcontractor and contractor,” he said, adding that it is common practice for subcontractors to name the manufacturer in a lien to create pressure on it.

What about the dwead B(ankwupt) word?

The OEM Suppliers Association survey found that eight of 22 respondents said they are worried about the auto maker filing for bankruptcy. It was conducted between July 26 and Aug. 8, the day after Mr. Musk tweeted about a plan to go private. He has since revealed a deal is far from complete.

In an email on Friday to the Journal, Mr. Musk said, “We are definitely not going bankrupt.”

Of course, this is the same person how two weeks ago tweeted that a Tesla LBO is virtually assured as the “funding was secured.”

A few days later it turned out that Musk lied, and his only goal was to “burn the shorts.” So why not lie again, especially as the shorts are increasingly getting the upper hand. That’s another question the SEC should probably once it finally pays Tesla a visit.

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Ignore the crashing yield curve, slumping rates, disappointing data, and dumping lira… stocks are up bitches…

 

China’s National Team stepped in to save the world overnight…

 

European stocks took China’s lead…

 

US equity markets extended last-week’s gains… (Nasdaq and Small Caps dipped red ahead of the European close) – NOTE stocks closed weak after reports of Trump accusing China of manipulating FX and Fed not being dovish enough…

 

Futures show the Nasdaq dump at the US cash open (and automagic bid back up to unch)…

 

Another day, another short-squeeze – but look where we are closing… (at the open before last Wednesday’s plunge)… Is this dead-cat-bounce over?

 

While the S&P couldn’t quite make it back to its record high, Trannies squeezed higher to new record highs… (NOTE volume has been sliding notably during this rally)

However, as Bloomberg highlights, there is a mystery at center of today’s transportation rally: what’s driving it? The supercomposite railroad and airline indexes are up 3.4%, and 1.1% respectively, the most in a month, amid scant news yet there’s plenty of social media interest in airlines. Truckers are rising today, though they remain a weak spot in the sector.

Talking of transportation, Tesla was smacked hard early on (erasing all the earnings-night gains) but managed a miraculous recovery…

 

But TSLA Bonds ain’t buying it…

 

Cyclicals notably outperformed Defensives on the day…

 

Just as stocks were being bought, Bonds were also bid… squeezing the record bearish bond positioning further…

 

10Y Treasury yields closed near their lowest in 3 months…

10Y Yields hit a 2.81% handle intraday!

 

And the yield curve flattened to new cycle flats… 2s10s back to 22bps!

 

The Dollar Index slipped lower (after tagging Friday stops) for the 3rd day in a row to one-week lows, pressured after leaked comments from Trump about how hawkish Powell is…

 

Offshore yuan rallied back to unchanged on the day, miraculously rallying once again ahead of the US-China trade talks (and a WSJ report that Trump is saying China is manipulating its currency)…NOTE this is the best 3-day rally in yuan since Jan 2016.

 

The Mexican Peso was pummeled back towards 19 as NAFTA auto talks spooked traders…

 

The Turkish Lira tumbled again (NOTE – Turkey is on vacation this week)…

 

The Brazilian Real was routed – dumped to a new cycle low after leftists dominated presidential election polls…(the weakest since March 2016)

 

But The dollar weakened across Asian FX…

 

Cryptocurrencies jumped after Friday’s “close” but have limped lower since with Ripple and Bitcoin unchanged…

 

Silver ended the day lower despite USD weakness but crude, copper, and gold managed gains…

 

Gold rallied for the second day, pushing back up towards $1200 (in futures)… this is gold’s best two-day gain since March.

 

Gold/Silver rallied back above 80x again…

 

Which appears to be a long-term resistance…

 

Finally, it appears – just as we have seen before – that ‘macro-fundamentals’ don’t matter (for now)…

 

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