Tag: news

An audio recording purportedly from a July conference call suggests that Christine Blasey Ford’s sexual assault accusation against Supreme Court nominee Brett Kavanaugh wasn’t simply a reluctant claim that Diane Feinstein sat on until the 11th hour. 

The recording features Ricki Seidman – a former Clinton and Obama White House official and Democratic operative who advised Anita Hill during the Clarence Thomas hearings, and who was revealed on Thursday as an adviser to Ford by Politico. 

Christine Blasey Ford, the woman who has accused Supreme Court nominee Brett Kavanaugh of sexually assaulting her when they were both teenagers, is being advised by Democratic operative Ricki Seidman.

Seidman, a senior principal at TSD Communications, in the past worked as an investigator for Sen. Ted Kennedy, and was involved with Anita Hill’s decision to testify against Supreme Court Nominee Clarence Thomas. –Politico

“While I think at the outset, looking at the numbers in the Senate, it’s not extremely likely that the nominee can be defeated,” says Seidman. “I would absolutely withhold judgement as the process goes on. I think that I would not reach any conclusion about the outcome in advance.”

What’s more, the recording makes clear that even if Kavanaugh is confirmed, Democrats can use the doubt cast over him during midterms.

“Over the coming days and weeks, there will be a strategy that will emerge, and I think it’s possible that that strategy might ultimately defeat the nominee… whether or not it ultimately defeats the nominee, it will help people understand why it’s so important that they vote and the deeper principles that are involved in it.“

(h/t 100percentfedup)

via RSS https://ift.tt/2Dl4Q82 Tyler Durden

Authored by James Rickards via The Daily Reckoning,

If you’ve ever lived through a life-threatening emergency – whether a car crash, train wreck or a steep fall (hopefully not) – you have noticed that time seems to slow down.

You witness your personal jeopardy in slow motion. A memorable example of this is the film The Matrix, in which the hero, Neo, could dodge bullets since time moved in slow motion for him.

According to the best science, time does not actually slow down for those in jeopardy, nor do their perceptions slow down. What happens is that the stress and novelty of the experience causes the brain to create extra layers of memory, a saturation effect, compared with everyday experiences.

According to researcher David Eagleman, “The more memory you have of an event, the longer you believe it took.” So yes, time does seem to slow down in a crisis, but it’s a cognitive illusion.

That slowing down effect is important to bear in mind as we encounter the 20th anniversary of the Russia-LTCM financial crisis of September 1998 and the 10th anniversary of the Lehman-AIG financial crisis of September 2008.

For investors, those events were the financial equivalent of falling off a tall building or being strapped in during a plane crash. If you lived through them, you’ll recall some hours that seemed like days and days that seemed like weeks.

Of course, investors recall where they were and what they did during the absolute height of the panics — Sept. 28, 1998 and Sept. 15, 2008.

Most investors may not be aware that these peak panic moments had actually been playing out for over 15 months in both cases. Investors who closely observed the early signs of trouble had ample time to get out of the way of the panic itself.

In fact, most investors were oblivious to the early warnings. That 15-month build-up was a real slow-motion event, not an illusion.

The September 1998 Russia-LTCM crisis began in June 1997, 15 months earlier, when Thailand devalued its currency and closed its capital account.

For several years, Thailand had maintained a fixed exchange rate to the U.S. dollar. Money poured into Thai real estate and resorts to earn high yields with an exchange rate guarantee. When some investors started to pull their money out, a run on the bank emerged.

Thailand could not make good on its dollar guarantee and devalued, causing massive losses for U.S. investors. From there the panic spread to Indonesia, Malaysia, South Korea and other nations. There was literally blood in the streets as some were killed in money riots.

Markets calmed down that winter, but the contagion returned in the summer of 1998.

In August, Russia defaulted on its bonds, devalued its currency and closed its capital account. That led to a global liquidity crisis, which caused massive losses at hedge fund Long-Term Capital Management. The Fed and Wall Street banded together to bail out LTCM, but really to save themselves. Global markets were just hours away from complete collapse when the deal was finally done.

The September 2008 Lehman-AIG crisis began in June 2007, 15 months earlier.

HSBC had just reported weaker-than-expected earnings due to higher mortgage defaults in the subprime sector. In July 2007, two Bear Stearns hedge funds collapsed due to an inability to roll over their short-term financing of long-term mortgage securities. In August, the panic intensified and the Fed cut the discount rate, the first in a long series of rate cuts to zero.

Three major money market funds sponsored by BNP Paribas closed their doors and suspended redemptions. Bank-sponsored off-balance-sheet special-purpose vehicles could not obtain short-term funding.

Again, markets calmed down in the winter as sovereign wealth funds pledged billions of dollars of new money to prop up U.S. banks.

But the panic returned in the spring with the failure of Bear Stearns in March 2008, followed by the collapse of Fannie Mae and Freddie Mac in June. The panic turned into a global liquidity crisis and reached an apex with the bankruptcy of Lehman Bros. on Sept. 15, 2008, and the subsequent insolvency of insurance giant AIG.

Wall Street was facing a sequential collapse of other banks, beginning with Morgan Stanley when the Fed and Congress stepped in with trillions of dollars of guarantees, swaps and bailout money.

Both of these panics — 1998 and 2008 — began over a year before they reached the level of an acute global liquidity crisis.

Investors has ample time to reduce risky positions, increase cash and gold allocations and move to the sidelines until the crisis abated. At that point there were bargains galore for those with cash. An investor with cash in 2008 could have preserved wealth during the crisis and quadrupled his money since then by buying the Dow Jones index at 6,550 (today it’s around 26,000).

Relatively few investors did this. Instead they suffered from “fear of missing out” as markets rose until the panic began. They persisted in the mistaken belief that they could “get out in time” if markets reversed, not realizing that reversals happen much faster than rallies. They held onto losing positions hoping they would “come back” (they did after 10 years) and so on.

Simple behavioral biases stand in the way of doing the right thing almost every time.

Are we in another slow-motion meltdown? Are markets telling us that another global liquidity crisis is on the way in 2019?

It’s impossible to know, yet the signs are not encouraging.

Venezuela is an economic and human rights tragedy. Turkey, Argentina and Indonesia, all major emerging-market economies, are in complete meltdown. India, Malaysia, Brazil and Mexico are in the midst of currency collapses. South Africa is in recession. China’s growth is slowing and its debt is unsustainable. The trade war between the U.S. and China is starting to take its toll and will get worse.

Then there are geopolitical hotspots like the South China Sea, North Korea, Syria, Iran, Ukraine, Taiwan and others that could turn into shooting wars in little or no time.

Investors do not have to take an all-or-none approach. They can keep a hand in the stock market while increasing their allocations to cash and gold. Lower yield on those assets will more than pay for itself if a new liquidity crisis emerges and as bargain prices appear.

The point is to act now and not wait until reality catches up to the slow-motion perception.

via RSS https://ift.tt/2pvtclv Tyler Durden

Ten years after the crisis, demands for leveraged loan offerings is once again off the charts. Portfolio managers who are seeking rising yields as the Federal Reserve hikes rates have shown unprecedented demand for recent deals, despite repeated warnings that they may be buying “at the wrong time.”

Leveraged loans are a type of debt that is offered to an entity that may already have significant amounts of leverage or a poor credit history. As rates move higher, the loans – whose interest rates reference such floating instruments as Libor or Prime – pay out more. As a result, as the Fed tightens the money supply, defaults tend to increase as the interest expenses rise and as the overall cost of capital increases.

Gershon Distenfeld, co-head of fixed income at AllianceBernstein LP and a longtime “skeptic of bank loans” told Bloomberg that a good way to gauge the risk in the loan market is to look at returns when loans price too high. Currently, the average outstanding loan is priced at about 98.5 cents on the dollar. According to Distenfeld’s research of market prices between 1992 and 2018, when priced at this level, annual returns are about 2.8% for the following two years – lagging both behind 5 year treasuries and high yield bonds. And yet investors are piling in, hoping for even more generous payments, and oblivious of whether the underlying credit will be viable in a higher interest rate environment.

Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC kept it simpler: “It’s not a good time to be buying bank loans,” he stated. He also noted something we have demonstrated on numerous prior occasions: lender protections are worse than usual and there’s a smaller pool of creditors to absorb losses, and as covenant protection has never been weaker.

But that hasn’t fazed money managers who have been hungry for these leverage loans. For instance, this week, Blackstone Group tapped the loan market to borrow $9.25 billion in the US and Europe in order to buy out part of Reuters’ financial terminal business. The company was inundated with orders “far in excess of supply” for one of the biggest leveraged loan financings of the year.

Carlyle Group experienced similar demand, cutting rates twice on $6.4 billion of loans in order to make its recent acquisition of AkzoNobel Specialty Chemicals, due to a similar influx of demand. These deals help top off a record year for United States leveraged loans: a market now over $1 trillion.

Not only are money managers hungry for these deals, but retail has also been allocating capital to fund these loans. There was $282 million of inflows into ETFs and mutual funds that buy these deals during the week ending September 12. According to Cannaccord, pension funds have also been big buyers of credit products this year. Collateralized loan obligations have also been setting records, with $84 billion worth of them being sold this year.

There is a reason for this demand: so far this year, buying loans has been a great trade. So far in 2018, leveraged loans have gained 3.8% including price movements and interest, compared with a loss of 2.6% for investment-grade U.S. corporate debt and a 2.4% gain for junk bonds. A key driver behind the outperformance are the Fed’s rising rates.

And speaking of rates, they will continue going up: next week, the Fed is estimated to continue raising rates. At these times, investors seek out financial products whose prices don’t fall as the Fed’s monetary policy tightens. These loans are attractive to investors because they are generally higher up on capital structures than corporate bonds or, obviously, equity. This means they could be the first to get repaid in any type of liquidation scenario. 

There is just one problem with this:  LCD recently looked at the debt cushion of outstanding loans – the amount of debt in a borrower’s capital structure that is subordinated to the senior loan – and found that, increasingly, today’s cov-lite deals have little or no debt cushion beneath them. This is important because the lack of a debt cushion significantly lessens what an investor will recover on a loan, if that credit defaults.

Nonetheless, the optimists – who usually work for banks with a loan syndicate – are still there. Goldman’s Amanda Lynam wrote in a report this week that the market doesn’t seem to be too overextended. Some managers are pushing back on deals when they are too aggressively priced and borrowers have reduced debt levels – two signs that, according to her, the market isn’t overheating.

She told Bloomberg: “The risks in the leveraged loan market, broadly, are manageable and not close to an inflection point.”

However, just like with any credit cycle, that doesn’t mean that risks aren’t piling up. Moody’s highlighted in July that some borrowers were eliminating loan covenants, a move that could ultimately result in fewer recoveries during the next recession. Moody’s predicted that average U.S. first-lien term loan recoveries could fall to 61%, versus their 77% long-term average. For second lien loans, recoveries could be 14%, compared with a 43% historical average.

As a reminder, during the last crisis, it was the hedge funds themselves that became second-lien lenders as many banks were unwilling to take on the credit risk. Some hedge funds even went further down the cap structure, going so far as 3rd liens.

Meanwhile, the biggest risk is that companies have taken on record levels of debt during this credit cycle – a fact that should come as a surprise to nobody. According to Tom Mansley, investment director at GAM Investment, this means that first lien recoveries could drop to as low as 50 cents on the dollar. 

He told Bloomberg: “There’s a tremendous supply in the marketplace and at the same time, we’ve definitely seen deteriorating fundamentals. That’s going to lead to low recovery rates going forward.”

Other industry experts like Neil Desai, portfolio manager at Highland Capital Management, agree. By year end, he predicts an “…inflection point where the decreased loan issuance pipeline could start to slow down the CLO machine.”

And since, in its purest form, loan issuance is a ponzi that only works as long as maturing debt can be rolled into new issuance, such a slow down – or worse, hard stop – could have dire consequences for what is rapidly become the riskest corner of the corporate debt market.

via RSS https://ift.tt/2pscqUt Tyler Durden

Authored by Graham Summers via Gains, Pains, & Capital,

The Powell Fed has set one goal and one goal only for its policy…

Hitting the “neutral rate of interest.”

The neutral rate of interest is when the Fed has rates equal to the pace of inflation. While this is technicallywhat the Fed is SUPPOSEDto be doing, NO Fed (or any other Central Bank for that matter) has done it in over 30 years: the Greenspan, Bernanke, and Yellen Feds were all notorious for running “accommodative” policy in which rates were kept well BELOW the rate of inflation.

Indeed, if you had to summate Fed policy from 1987 to 2018, the best word would be “accommodative.” It is not coincidental that this time period coincided with serial bubbles in the financial markets. This was done intentionally by Alan Greenspan, Ben Bernanke, and Janet Yellen.

Not Jerome Powell.  During his July Q&A session with Congress in July, Fed Chair Powell emphasized that the most important focus for the Fed under his leaderhsip would be “a neutral rate of interest.”

In answering a question [concerning the yield curve flattening] from Senator Pat Toomey of Pennsylvania, Powell said that, in his view, “What really matters is what the neutral rate of interest is.” And perhaps longer-term Treasury yields send a message about that rate.

Source: Bloomberg

I initially thought this was Powell playing to Congress (for 30+ years Fed Chairs have simply told Congress what it wanted to hear during their testimony). However, since that time, the Powell Fed has made it 100% clear that it did in fact WANT neutral rates.

Last month, Dallas Fed President Robert Kaplan outlined this in no uncertain terms.

The neutral rate of interest is the federal funds rate at which monetary policy is neither accommodative nor restrictive. It is a theoretical concept, meaning that it can’t be directly observed—it must be inferred from market and other economic data. Economists’ views on this rate are necessarily estimates and inherently uncertain. However, while theoretical, estimates of the neutral rate are critical to assessing and making decisions regarding the stance of monetary policy.

My own view, informed by the work of my colleagues Evan Koenig at the Dallas Fed as well as John Williams of the New York Fed and Thomas Laubach at the Federal Reserve Board, is that the longer-run neutral real rate of interest is in a broad range around 0.50 to 0.75 percent, or a nominal rate of roughly 2.50 to 2.75 percent.

With the current fed funds rate at 1.75 to 2 percent, it would take approximately three or four more federal funds rate increases of a quarter of a percent to get into the range of this estimated neutral level.

At this stage, I believe the Federal Reserve should be gradually raising the fed funds rate until we reach this neutral level. At that point, I would be inclined to step back and assess the outlook for the economy and look at a range of other factors—including the levels and shape of the Treasury yield curve—before deciding what further actions, if any, might be appropriate.

Source: Dallas Fed

The key items in the above quote are the fact that a Fed President is OPENLY calling for neutral rates (all but unheard of). Moreover, Kaplan is basing his view on the work of NY Fed President John Williams. Williams is Vice-Chair for the Fed (Powell’s right hand man). He, like Powell, is also a voting member of the Fed Board.

Put a different way… the above quote is effectively Fed leadership broadcasting to the world that its current line of thinking is that the Fed will be hiking rates until it reaches a neutral rate.

Doing this is going to create a SERIOUS issue for the financial markets. As we noted earlier this week, already globally numerous markets ranging from China to Germany have entered corrections, if not outright bear markets as a result of the Fed’s hawkishness.

Eventually this mess is going to spill into the US markets. When it does, the bursting of the Everything Bubble will have officially hit US shores.

via RSS https://ift.tt/2NYEdtE Tyler Durden

If this latest revelation from the New York Times doesn’t drive President Trump to fire Deputy Attorney General Rod Rosenstein, then we can’t imagine what would.

In a shocking report citing a bevy of anonymous DOJ officials, the NYT recounted on Friday an aborted mutiny attempt organized by Rosenstein, who allegedly tried to organize members of Trump’s cabinet to invoke the 25th amendment to oust Trump from office. In an attempt to persuade the clearly reluctant members of Trump’s cabinet, Rosenstein suggested that he had taped Trump “to expose the chaos” he said was engulfing the West Wing.

Mr. Rosenstein made the remarks about secretly recording Mr. Trump and about the 25th Amendment in meetings and conversations with other Justice Department and F.B.I. officials. Several people described the episodes, insisting on anonymity to discuss internal deliberations. The people were briefed either on the events themselves or on memos written by F.B.I. officials, including Andrew G. McCabe, then the acting bureau director, that documented Mr. Rosenstein’s actions and comments.

None of Mr. Rosenstein’s proposals apparently came to fruition. It is not clear how determined he was about seeing them through, though he did tell Mr. McCabe that he might be able to persuade Attorney General Jeff Sessions and John F. Kelly, then the secretary of homeland security and now the White House chief of staff, to mount an effort to invoke the 25th Amendment.

According to the NYT, this all happened during the spring of 2017, shortly after Trump cited a letter that Rosenstein had penned criticizing former FBI Director James Comey’s handling of the Clinton probe as justification to fire Comey. Rosenstein reportedly felt he had been “used” by the president as an excuse to fire Comey.

While Rosenstein and Trump clearly never saw eye to eye, the level of resentment that Rosenstein harbored toward the president has never been exposed to this degree. Unsurprisingly, the story has already fired up speculation on twitter that Rosenstein may have been the anonymous administration official who penned a critical op-ed that was published earlier this month in the New York Times.

I think the NYT just revealed who anonymous is! https://t.co/YRqalgNp1f

— Trading News (@4xInsight) September 21, 2018

via RSS https://ift.tt/2MMlpJv Tyler Durden

Authored by Patrick Buchanan via Buchanan.org,

By the end of his second term, President Ronald Reagan, who had called the Soviet Union an “evil empire,” was strolling through Red Square with Russians slapping him on the back.

Bliss was it in that dawn to be alive.

And how have we husbanded the fruits of our Cold War triumph?

This month, China’s leader-for-life Xi Jinping stood beside Vladimir Putin as 3,000 Chinese troops maneuvered with 300,000 Russians, 1,000 planes and 900 tanks in Moscow’s largest military exercise in 40 years.

An uncoded message to the West from the East.

Richard Nixon’s great achievement in bringing Peking in from the cold, and Reagan’s great achievement of ending the Cold War, are history.

Bolshevism may be dead, but Russian nationalism, awakened by NATO’s quick march to Russia’s ancient frontiers, is alive and well.

Russia appears to have given up on the West and accepted that its hopes for better times with President Donald Trump are not to be.

U.N. Ambassador Nikki Haley is berating Russia for secretly trading with North Korea in violation of U.N. sanctions, saying, “Lying, cheating, and rogue behavior have become the new norm of the Russian culture.”

Cold wars don’t get much colder than defaming another country’s culture as morally debased.

The U.S. has also signaled that it may start supplying naval and anti-aircraft weaponry to Ukraine, as Russia is being warned to cease its inspections of ships passing from the Black Sea through the Kerch Strait into the Sea of Azov.

The three-mile-wide strait lies between Crimea and Kerch Peninsula. In Russia’s eyes, both banks of the strait are Russian national territory.

With U.S. backing, Ukraine has decided to build a naval base on the Sea of Azov to “create conditions for rebuffing the aggressive actions of the Russian Federation in this region.”

Kiev has several patrol boats in the Sea of Azov, with a few more to be transferred there in coming months. Russia’s navy could sink those boats and wipe out that base in minutes.

Are we going to send our Navy across the Black Sea to protect Ukraine’s naval rights inside a sea that has been as historically Russian as the Chesapeake Bay is historically American?

Poland this week invited the U.S. to establish a major base on its soil, for which Poland would pay two billion dollars, to be called “Fort Trump.”

Trump seemed to like the idea, and the name.

Yet, the Bush II decision to install a missile defense system in Poland brought a Kremlin counter-move: the installation of nuclear-capable Iskander cruise missiles in Kaliningrad, the former German territory on Poland’s northern border annexed by Stalin at the end of World War II.

In the Balkans, over Russian protests, the U.S. is moving to bring Macedonia into NATO. But before Macedonia can join, half its voters have to come out on Sept. 30 to approve a change in the nation’s name to North Macedonia. This is to mollify Greece, which claims the birthplace of Alexander the Great as it own.

Where are we going with all this?

With U.S. warships making regular visits into the Eastern Baltic and Black Sea, the possibility of a new base in Poland, and growing lethal aid to Ukraine to fight pro-Russian rebels in the Donbass and the Russian navy on the Sea of Azov, are we not crowding the Russians a bit?

Are we confident the Russians will always back down?

When Georgia, believing it could kick Russian peacekeepers out and re-annex its seceded province of South Ossetia, attacked in August 2008, the Russian Army came crashing in and ran the Georgians out in 48 hours.

George W. Bush wisely decided not to issue an ultimatum or send troops. He ignored the hawks in his own party who had helped goad him into the great debacle of his presidency: Iraq.

So, what exactly is the U.S. grand strategy with regard to Russia?

What might be called the McCain wing of the Republican Party has sought to bring Ukraine and Georgia into NATO, which would make the containment of Russia America’s policy in perpetuity.

Are the American people aware of the costs and risks inherent in such a policy? What are the prospects of Russia yielding always to U.S. demands? And are we not today stretched awfully thin?

Our share of the global economy is much shrunken from Reagan’s time.

Our deficit is approaching $1 trillion.

Our debt is surging toward 100 percent of GDP.

Entitlements are consuming our national wealth.

We are committed to containing the two other greatest powers, Russia and China.

We are tied down militarily in Afghanistan, Iraq, Syria and Yemen, with the War Party beating the drums for another and larger war — with Iran.

And we are sanctioning adversaries and allies for not following our leadership of the West and the world.

In looking at America’s global commitments, greatly expanded since our Cold War victory, one word come to mind: unsustainable.

via RSS https://ift.tt/2zmQZdn Tyler Durden