Month: August 2017

Authored by Patrick Buchanan via Buchanan.org,

Saturday, Kim Jong Un tested an ICBM of sufficient range to hit the U.S. mainland. He is now working on its accuracy, and a nuclear warhead small enough to fit atop that missile that can survive re-entry.

Unless we believe Kim is a suicidal madman, his goal seems clear. He wants what every nuclear power wants — the ability to strike his enemy’s homeland with horrific impact, in order to deter that enemy.

Kim wants his regime recognized and respected, and the U.S., which carpet-bombed the North from 1950-1953, out of Korea.

Where does this leave us? Says Cliff Kupchan of the Eurasia Group, “The U.S. is on the verge of a binary choice: either accept North Korea into the nuclear club or conduct a military strike that would entail enormous civilian casualties.”

A time for truth. U.S. sanctions on North Korea, like those voted for by Congress last week, are not going to stop Kim from acquiring ICBMs. He is too close to the goal line.

And any pre-emptive strike on the North could trigger a counterattack on Seoul by massed artillery on the DMZ, leaving tens of thousands of South Koreans dead, alongside U.S. soldiers and their dependents.

We could be in an all-out war to the finish with the North, a war the American people do not want to fight.

Saturday, President Trump tweeted out his frustration over China’s failure to pull our chestnuts out of the fire: “They do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem.”

Sunday, U.S. B-1B bombers flew over Korea and the Pacific air commander Gen. Terrence J. O’Shaughnessy warned his units were ready to hit North Korea with “rapid, lethal, and overwhelming force.”

Yet, also Sunday, Xi Jinping reviewed a huge parade of tanks, planes, troops and missiles as Chinese officials mocked Trump as a “greenhorn President” and “spoiled child” who is running a bluff against North Korea. Is he? We shall soon see.

According to Japanese Prime Minister Shinzo Abe, Trump vowed Monday he would take “all necessary measures” to protect U.S. allies. And U.N. Ambassador Nikki Haley bristled, “The time for talk is over.”

Are we headed for a military showdown and war with the North? The markets, hitting records again Monday, don’t seem to think so.

But North Korea is not the only potential adversary with whom our relations are rapidly deteriorating.

After Congress voted overwhelmingly for new sanctions on Russia last week and Trump agreed to sign the bill that strips him of authority to lift the sanctions without Hill approval, Russia abandoned its hopes for a rapprochement with Trump’s America. Sunday, Putin ordered U.S. embassy and consulate staff cut by 755 positions.

The Second Cold War, begun when we moved NATO to Russia’s borders and helped dump over a pro-Russian regime in Kiev, is getting colder. Expect Moscow to reciprocate Congress’ hostility when we ask for her assistance in Syria and with North Korea.

Last week’s sanctions bill also hit Iran after it tested a rocket to put a satellite in orbit, though the nuclear deal forbids only the testing of ballistic missiles that can carry nuclear warheads. Defiant, Iranians say their missile tests will continue.

Recent days have also seen U.S. warships and Iranian patrol boats in close proximity, with the U.S. ships firing flares and warning shots. Our planes and ships have also, with increasingly frequency, come to close quarters with Russian and Chinese ships and planes in the Baltic and South China seas.

While wary of a war with North Korea, Washington seems to be salivating for a war with Iran. Indeed, Trump’s threat to declare Iran in violation of the nuclear arms deal suggests a confrontation is coming.

One wonders: If Congress is hell-bent on confronting the evil that is Iran, why does it not cancel Iran’s purchases and options to buy the 140 planes the mullahs have ordered from Boeing?

Why are we selling U.S. airliners to the “world’s greatest state sponsor of terror”? Let Airbus take the blood money.

Apparently, U.S. wars in Afghanistan, Syria, Iraq, Yemen and Somalia are insufficient to satiate our War Party. Now it wants us to lead the Sunnis of the Middle East in taking down the Shiites, who are dominant in Iran, Iraq, Syria and South Lebanon, and are a majority in Bahrain and the oil-producing regions of Saudi Arabia.

The U.S. military has its work cut out for it. President Trump may need those transgender troops.

Among the reasons Trump routed his Republican rivals in 2016 is that he seemed to share an American desire to look homeward.

Yet, today, our relations with China and Russia are as bad as they have been in decades, while there is open talk of war with Iran and North Korea.

Was this what America voted for, or is this what America voted against?

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Content originally published at iBankCoin.com

Do not worry about anything you’re about to read. In fact, close out your browsers now and go to sleep — since it’s late and you must be really sleepy.

Charlene Chu from Autonomous Research is out with a note warning about Chinese credit expansion. Before we delve into the details, let’s have a gander at said ‘credit expansion.’

Wanton amount of credit cards

Total credit is expected to rise to 223t yuan ($33t) from 196t yuan by the end of 2017 — an increase of ~13%, which is down from the 19% gain in 2016.

Progress.

Chu’s estimates are measurably higher than the lies out of Beijing, who offered guidance of 167t yuan, which she says is bereft of local govt bond issuance and off balance sheet lending.

“It’s imperative that they start acting now, rather than continuing to push this to the future,” said the former Fitch Ratings Ltd. analyst, who made her name warning of risks from the country’s debt binge.

 
By her back of the envelope estimates, institutions stand to lose a potential 38t yuan — implying a nonperforming credit ratio of 25%.

Read that again: twenty five percent.

The Chinese banking regulator, who must be doped up on Mongolian opiates, is estimating just 1.74%. What an arb!
 

“The overarching issue for China is that there’s a ton of credit that’s not in bank loan portfolios,” said Chu.

 
Yeah, I’ll say.

Under this doomsday scenario of tumult, Chu is estimating the entirety of the Chinese banking sector to be cracked asunder, drowned in the blood of roguish oriental banksters. She posits a state bailout in the magnitude of 21t yuan will be needed in order to keep the savages at bay and the economy running at minimum efficiency.

In May, Moody’s slashed China’s credit rating, citing a ‘material rise’ in a pan Chinese state debt burden that might just explode.

Over the past few years, Chinese companies have leveraged up, sashaying the globe in search of plunder — making acquisitions worth in excess of $343 billion.

Overall household, corporate and and government debt in China rings in at an astonishing $28 trillion, or 258% of GDP. Of that, $17 trillion is laden on corporate balance sheets — who’ve used said credit to make expensive acquisitions. Due to this unrelenting credit expansion, the IMF is estimating that GDP will contract to +5% from 6.9% by 2021. If the country falls prey to one of those pesky financial meltdowns, analysts feel economic growth could fall below 3%.

Under this scenario, rest assured, all of your left v right bickering will be for nought — as we’ll all be dead — eaten alive by zombie hordes.

The subsequent result of credit expansion growing at 2-3x that of GDP has led to a zombification of the economy — strewn with failed companies kept afloat by cheap credit. A reckoning is coming and there will be little choice but to batten down the hatches and run for cover when the deleveraging begins.

In China, you’re literally not allowed to fail. Credit defaults were just 0.1% last year — compared to 2% in the US. Premier Li Keqiang said China must “ruthlessly bring down the knife” — but they’ve done very little, or anything for that matter, to stop the profligate behavior embedded in the corporate sector.
 

“We need to see bankruptcies, lots of them,” says Michael Every, head of financial market research at Rabobank Group in Hong Kong.

 
If matters couldn’t get worse, the Chinese property sector is now frothier as a percentage of GDP than the US housing market in 2006. Similar to the behavior witnessed during the US housing bubble, Chinese investors and flipping homes and buying and selling without even moving in — a blue dream floating amidst unicorns and anime cartoons.

Pan China, there are upwards of 50 million units which have been purchased, but remain unoccupied.

All of this sounds dreadful, and then there’s the unregulated, unwatched, $10 trillion Chinese shadow banking system. I suppose none of this matters when markets are at record highs. Maybe we should just forget about this nonsense and see about that nap now.

The Shanghai is +11.5% over the past 12 months.

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Content originally published at iBankCoin.com

Do you recall when Debbie Wasserman Schultz threatened the US Capitol Police chief for seizing a computer from her IT personnel, who was Imran Awan? Let’s refresh your memory.

 

It never seemed right, the manner in which she targeted him with venomous animus. It was not the cadence, or computation, of an innocent person. Fast forward to today and we have a full blown scandal on our hands, with charges that her IT personnel, Awan, had access to the emails of every single member of Congress — and sold that information to person’s unknown. Rep DeSantis joined The Foundation for Accountability and Civic Trust (FACT) in calling for an investigation into Wasserman Schultz, who employed Awan during and time as DNC chair — dating back to 2005. Source: Politico

Awan and his relatives worked as shared employees for more than two dozen House Democrats in the past several years. After the Capitol Hill investigation came to light in early February, most lawmakers fired the other staffers in question.   But Wasserman Schultz retained Awan, even though he has been barred from accessing the House IT network since February. FACT maintains there’s no way Awan could have performed IT duties for Wasserman Schultz over the past six months, despite staying on the Florida Democrat’s payroll.   “House staff are compensated with taxpayer funds, and members are directly responsible for ensuring their staff are only paid for official public work, work that has actually [been] performed and at a rate commensurate with the work performed,” Matthew Whitaker, FACT executive director, wrote in a letter to the OCE.   “It was, therefore, contrary to the House ethics rule for Wasserman Schultz to continue to pay Awan with taxpayer funds even after he was barred from the House computer system and could not perform his duties, and was also under criminal investigation.”

Awan was arrested by the FBI last week attempting to leave the country, after wiring $300,000 to his home country of Pakistan. Previous to attempting flight, his wife left the country and he had been frantically liquidating real estate holdings.   Here’s Rep. DeSantis discussing the issue with Tucker Carlson, calling for an investigation.

“It’s extremely odd. We knew in February about the cash. We knew about the smashed hard drives. What’s the explanation for this behavior?”

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Authored by Chris White via The Daily Caller,

Australian scientists at the Bureau of Meteorology (BOM) ordered a review of temperature recording instruments after the government agency was caught tampering with temperature logs in several locations.

Agency officials admit that the problem with instruments recording low temperatures likely happened in several locations throughout Australia, but they refuse to admit to manipulating temperature readings. The BOM located missing logs in Goulburn and the Snow Mountains, both of which are in New South Wales.

Meteorologist Lance Pidgeon watched the 13 degrees Fahrenheit Goulburn recording from July 2 disappear from the bureau’s website. The temperature readings fluctuated briefly and then disappeared from the government’s website.

“The temperature dropped to minus 10 (13 degrees Fahrenheit), stayed there for some time and then it changed to minus 10.4 (14 degrees Fahrenheit) and then it disappeared,” Pidgeon said, adding that he notified scientist Jennifer Marohasy about the problem, who then brought the readings to the attention of the bureau.

The bureau would later restore the original 13 degrees Fahrenheit reading after a brief question and answer session with Marohasy.

“The bureau’s quality ­control system, designed to filter out spurious low or high values was set at minus 10 minimum for Goulburn which is why the record automatically adjusted,” a bureau spokeswoman told reporters Monday. BOM added that there are limits placed on how low temperatures could go in some very cold areas of the country.

Bureau Chief Executive Andrew Johnson told Australian Environment Minister Josh Frydenberg that the failure to record the low temperatures at Goulburn in early July was due to faulty equipment. A similar failure wiped out a reading of 13 degrees Fahrenheit at Thredbo Top on July 16, even though temperatures at that station have been recorded as low as 5.54 degrees Fahrenheit.

Failure to observe the low temperatures had “been interpreted by a member of the community in such a way as to imply the bureau sought to manipulate the data record,” Johnson said, according to The Australian.

 

“I categorically reject this ­implication.”

Marohasy, for her part, told reporters that Johnson’s claims are nearly impossible to believe given that there are screen shots that show the very low temperatures before being “quality assured” out. It could take several weeks before the equipment is eventually tested, reviewed and ready for service, Johnson said.

“I have taken steps to ensure that the hardware at this location is replaced immediately,” he added.

 

“To ensure that I have full ­assurance on these matters, I have actioned an internal review of our AWS network and associated data quality control processes for temperature observations.”

BOM has been put under the microscope before for similar manipulations. The agency was accused in 2014 of tampering with the country’s temperature record to make it appear as if temperatures had warmed over the decades, according to reports in August 2014.

Marohasey claimed at the time that BOM’s adjusted temperature records are “propaganda” and not science. She analyzed raw temperature data from places across Australia, compared them to BOM data, and found the agency’s data created an artificial warming trend.

Marohasey said BOM adjustments changed Aussie temperature records from a slight cooling trend to one of “dramatic warming” over the past century.

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Mining bitcoins is a notoriously electricity-intensive process better suited for areas where resources are subsidized by the government (like the mountainous Northern China, where a cluster of some of the world’s largest mining pools are located), or are at least exceedingly cheap. Cities like New York, are, of course, not ideally suited for the task of mining. But then again, if you’re not paying for the electricity, then it may as well be free, right?

NYC Department of Education headquarters

That, essentially, was New York City teacher Vladimir Ilyayev’s plan when he started mining bitcoin on his work computer, running the software during the evening while monitoring it from home, according to CoinDesk, which discovered paperwork relating to Ilyayev's hearing before the BOE's Conflicts of Interest Board.

“According to a recently published disposition from the City of New York Conflicts of Interest Board, department employee Vladimir Ilyayev admitted to mining bitcoin between for a period of several weeks between March and April 2014. Bitcoin mining is an energy intensive process by which new transactions are added to the blockchain, generating new coins with every block that is created.”

In the disposition, Ilyayev admits that “beginning on March 9, 2014, at times when I was required to perform work for DOE, I made several attempts to install bitcoin mining software on my DOE computer without DOE authorization. After being thwarted five or six times by DOE’s security software, I circumvented the DOE security software and successfully installed bitcoin software on my DOE computer.”

Ilyayev succeeded in concealing his scheme for barely a month; the software was quickly discovered by BOE employees and disabled.

“I ran bitcoin mining software from my DOE computer from 6 p.m. until 6 a.m. every night from March 19, 2014 until April 17, 2014, when my bitcoin mining software was shut down by DOE’s Division of Instructional and Information Technology. During that time, I monitored the progress of my bitcoin mining software from my home computer using remote access software.”

The conflicts board sanctioned Ilyayev for violating city statutes relating to using city time and resources for financial gain. Still, once his $611 restitution was paid, Ilyayev likely pocketed at least a few hundred dollars, maybe more.  

Unsurprisingly, public records show that Ilyayev isn’t the first BOE employee to try and mine bitcoin using city resources, as Coin Desk pointed out.

“Public records indicate that Ilyayev's case isn't the first time that a New York Department of Education employee was investigated for using their work equipment to mine bitcoins.

 

According to a Conflicts of Interest Board letter from April 2015, a network engineer reportedly tried to run mining software on his Department of Education computer. However, the engineer was ultimately cleared as "there is no evidence that [he] successfully obtained bitcoin."

 

In January, an employee of the Federal Reserve Board of Directors was fined $5,000 and placed on probation after he was caught mining bitcoins on a server owned by the US central bank.”

You can read Ilyayev’s disposition below:

2014-440-ilyayev by zerohedge on Scribd

 

 

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Authored by Mike Shedlock via MishTalk.com,

Reader “IB” an India businessman, writes about the crackdown on cash and tax evasion by Prime Minister Narendra Modi.

“IB” is very concerned about recent events, as well he should be.

Background for this story started on November 8, 2016, when Modi stunned the country with an announcement that 500-rupee ($7.30) and 1,000-rupee notes, which account for more than 85 percent of the money supply, would cease to be legal tender immediately. For details, please see Cash Chaos in India, 86% of Money in Circulation Withdrawn; Cash Still King in Japan.

The crackdown on cash has hurt the poor the most, and likely the richest the least. Nonetheless, Modi has widespread popular support.

Modi’s latest set of mandates has small businessmen caught in the crossfire. Let’s tune into to an email from “IB” (India Businessman) for some details.

Hi Mish,

 

I am writing from Mumbai, India. I have been running a small business for a decade now. Since the business has been profitable we have also been paying tax as applicable. But with the introduction of Goods and Services Tax (GST) in India from July 1, 2017, it looks like business might start experiencing difficulties soon due to its plethora of rules, some of which are mind-bogglingly inane.

 

More than the tax rates, it is the implementation and the draconian measures that have been taken by the Government that has made me come to this conclusion.

 

Given that the incumbent government has been winning elections despite steps like demonetization and the opposition is in complete disarray (Modi is a great orator), they have been emboldened to introduce measures that would be viewed as draconian by normal standards. In this context, I have to mention Modi has been able to mesmerize voters to an extent that he can make even pain appear as something that is pleasurable and he has been able to conquer state after state and has an invincible aura about him now. Such acts always bring Goebbels to my mind.

 

I am attaching an article that highlights three steps (of the many) that have been introduced in GST that I feel would impact businesses negatively.

 

Thanks for your time.

Regards,
IB

New Rules

“IB” emailed a lengthy document describing new rules. What follows is a short list of three key points that I condensed from the document.

1. The government will not allow Input Tax Credit on GST paid to vendors if the vendors do not pay their own taxes. The issue here is the Modi is forcing the role of tax-enforcement on businesses who buy goods for resale.
2. Tax payments are required every month. For all cash businesses, there is no problem. There is a huge problem for those who have to pay taxes on receivables, in advance, when the business owners might not even get paid. Liquidity will kill many small businesses.
3. Modi now wants three tax filings every month plus an annual tax return making it 37 overall. Currently, businesses file service tax returns twice in a year while they pay their taxes every quarter. Now with GST, small businesses have to file 3 returns every month, month on month, year on year, with fines stipulated for non-compliance.

All Hail Modi

The Economic Times reports PM Narendra Modi steps up assault on Congress, eyes Indian supremacy

Prime Minister Narendra Modi’s ruling alliance is stepping up its assault on the opposition Congress party as it looks to expand its national dominance and moves closer to securing a majority in the upper house of parliament.

How to Destroy an Economy

This is the path that populist fools take to gain control and destroy economies.

When tax collections actually go into reverse as businesses fail, Modi will come up with another set of ill-advised reforms, perhaps a total ban on cash.

All it takes is a Congressional majority and Modi can and will do what he wants.

In all likelihood, Modi’s enemies will soon be silenced for the “good of society”.

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In a troubling sign for the president, who over the past several days has threatened to end “bailouts” for insurers and, according to Rand Paul, is contemplating executive action to pursue his quest of repealing Obamacare, some Senate Republicans are now openly defying Trump’s directives.

As The Hill reports, Sen. Lamar Alexander (R-Tenn.), head of the Senate Health, Education, Labor and Pensions Committee, announced Tuesday that he will hold hearings and would work with his Democratic colleagues to “stabilize and strengthen” the individual insurance market under the Affordable Care Act, which the president has urged the Senate to keep trying to repeal. Alexander also urged the White House to keep up payments to insurers that help low-income consumers afford plans, which Trump has threatened to cut off.

The hearings will give Democrats, particularly Sen. Patty Murray (Wash.), the committee’s ranking member, a seat at the negotiating table on healthcare for the first time, opening up a process that until now had been tightly controlled by Senate Majority Leader Mitch McConnell, who however suffered a major loss last week when he failed to pass repeal following the holdout vote of John McCain.

Openly defying Trump, who suggested he’ll let ObamaCare implode, Alexander – in working with Democrats – is actively trying to prevent that from happening. “We need to put out the fire in these collapsing markets wherever these markets are,” Alexander said at the beginning of a Senate Health, Education, Labor and Pensions Committee hearing on nominations.

According to press reports, committee staff members are hitting the ground running, beginning to prepare for the hearings this week. The panel wants to hear testimony from insurance commissioners, patients, insurance companies, governors and healthcare experts. Time is of the essence for Alexander:

Insurers must sign contracts with the federal government at the end of September saying they’ll sell plans on the exchanges. They’ve been pleading with Congress and the administration for long-term certainty that they’ll continue to receive crucial payments compensating insurers for subsidizing out-of-pocket costs for certain consumers. But Trump has threatened to withhold those payments, which the administration has been making on a month-to-month basis. Kellyanne Conway, a White House adviser, said on “Fox News Sunday” that Trump would decide this week if he’ll cut off the payments.

Yet even as Alexander talks of stabilizing the markets, conservative lawmakers and groups remain opposed to aiding ObamaCare in any way. “The Senate’s inability to produce 51 votes for a piece of legislation that delivers on a seven-year campaign promise to repeal and replace Obamacare is not license for a bipartisan bailout of a failing law,” Michael A. Needham, CEO of Heritage Action, said in a written statement.

After the Senate’s failed vote, Sen. Ted Cruz (R-Texas) suggested the Republican effort isn’t yet over. “No party can remain in power by lying to the American people, and I hope and pray that our party doesn’t try to do that,” Cruz told reporters.

 

And McConnell, who said it was “time to move on” after last week’s failed healthcare vote, on Tuesday left the door open to reviving the legislation. “We’re continuing to score some of the options on healthcare,” McConnell told reporters during a weekly press conference on Tuesday. “There’s still an opportunity to do that.”

Yet with the Senate set to leave town in mid-August, it appears unlikely that healthcare legislation will pass before September – if then – which could create an opening for Alexander to pursue a deal with Democrats.

Some Republicans in the House have already started working across the aisle. The bipartisan Problem Solvers Caucus, consisting of 43 Republicans and Democrats, on Monday unveiled proposals that they said would fix problems with the Affordable Care Act.

Rep. Charlie Dent (R-Pa.), a centrist who voted against the House GOP’s healthcare bill, said he’s already been talking to senators about the proposal.

 

And Rep. Tom Reed (R-N.Y.), a leader of the caucus, said he’s “pleased to see Lamar Alexander taking the lead and beginning to hold hearings on what we’re discussing here.”

Meanwhile, as WaPo adds, “several Republican senators have sought to distance themselves from the president, who has belittled them as looking like “fools” and tried to strong-arm their agenda and browbeat them into changing a venerated rule to make it easier to ram through legislation along party lines.

Some are describing the dynamic in cold, transactional terms, speaking of Trump as more of a supporting actor than the marquee leader of the Republican Party. If he can help advance their plans, then great, they say. If not, so be it.

 

“We work for the American people. We don’t work for the president,” Sen. Tim Scott (R-S.C.) said. He added, “We should do what’s good for the administration as long as that does not in any way, shape or form make it harder on the American people.”

While the fate of Obamacare remains unclear, the growing friction within the GOP underscores the challenge Republicans face headed into the fall. As they seek to move beyond a failed health-care effort in pursuit of an elusive, first big legislative win, the same infighting that has plagued them all year threatens to stall their push to rewrite the nation’s tax laws, which Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday he wants to do in September.

Yet while all these initiatives can be delayed indefinitely, one which can not is the debt ceiling, which looms large with the US expected to run out of cash in late September. 

In a Monday note commenting on this growing threat, Compass Point analyst Isaac Boltansky said he is becoming increasingly concerned fall deadlines for federal government funding and the debt ceiling will prove tougher than the market currently expects “with markets roiled heading into 4Q and Fed’s policy normalization trajectory facing complications.” He notes that the increasingly fragmented legislative landscape may be set to “transition from inaction to dysfunction”, citing such factors as:

• Lawmakers return in Sept. with no clear strategy
• GOP leaders will likely be forced to rely on sizable contingents of Democrats
• Current spending caps for FY2018 are “despised” by both Democrats, Republicans, but for wholly different reasons
• White House’s position remains unclear as Treasury Sec. Steven Mnuchin has repeatedly called for a clean debt ceiling increase, but over the weekend President Donald Trump and OMB Director Mick Mulvaney suggested putting legislative activity on hold until health care is addressed

As a result, Boltansky sees odds of govt shutdown as materially higher than the likelihood of reaching debt ceiling as core components of spending fight (including border wall funding) are “meaningfully more politically complicated” than raising debt ceiling; his base case is for the federal government to face a brief shutdown in early October.

Whether this seemingly impregnable market will respond to an official government shutdown (with many speculating that the market is surging precisely because the US government is already deadlocked, if unofficially so far) in two months, remains to be seen.

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For months now rumors have circulated over who might step forward to lead “The Resistance” for the Democrats and make a run for the White House in 2020.  While many names have been tossed around, two candidates from Obama’s administration, VP Joe Biden and Attorney General Eric Holder, are the only ones to have seemingly taken the next step of directly hinting they would be interested in a run. 

Biden made his most direct expression of interest back in May at the SALT conference when he said “at this point, no one in my family or I have made the judgment to run…I may very well do it.”

Meanwhile, Eric Holder recently raised some eyebrows about his future political aspirations when he told Yahoo News that he was looking “to be more visible.” Here’s more from the Washington Times:

“Up to now, I have been more behind-the-scenes.  But that’s about to change. I have a certain status as the former attorney general. A certain familiarity as the first African-American attorney general. There’s a justified perception that I’m close to President Obama. So I want to use whatever skills I have, whatever notoriety I have, to be effective in opposing things that are, at the end of the day, just bad for the country.”

 

“Now is the time to be more visible.  Now is the time to be heard. … I thought, frankly, along with everybody else, that after the election, with Hillary Clinton as president, I could walk off the field. So when she didn’t win, I thought, ‘We’ll have to see how this plays out.’ But it became clear relatively soon — and certainly sooner than I expected — that I had to get back on the field and be in effective opposition.”

But, while Joe and Eric may be interested in a 2020 bid, we suspect that neither potential candidate will get very far along the campaign trail without the blessings of their former boss.  Unfortunately, according to Politico, Obama seems to have gone all-in on his long-time friend and former Massachusetts governor, Deval Patrick.

Barack Obama is nudging him to run. His inner circle is actively encouraging it. Obama world’s clear and away 2020 favorite is sitting right here, on the 38th floor of the John Hancock Building, in a nicely decorated office at Bain Capital.

 

And Deval Patrick has many thoughts on what he says is Donald Trump’s governing by fear and a dishonest pitch for economic nostalgia, while encouraging a rise in casual racism and ditching any real commitment to civil rights.

 

Obama strategist David Axelrod has had several conversations with Patrick about running, and eagerly rattles off the early primary map logic: small-town campaign experience from his 2006 gubernatorial run that will jibe perfectly with Iowa, neighbor-state advantage in New Hampshire and the immediate bloc of votes he’d have as an African-American heading into South Carolina.

 

Valerie Jarrett, Obama’s close adviser and friend, says that a President Patrick is what “my heart desires.”

 

David Simas, Obama’s political director in the White House and now the CEO of his foundation, used to be Patrick’s deputy chief of staff and remains perhaps his biggest fan on the planet.

 

Obama himself—who is personally close to Patrick, and counts him among the very small group of people whom he thinks has actual political talent—has privately encouraged him to think about it, among others.

Patrick has, up to this point, denied any interest in the White House. That said, in the political world, as we all know too well, those who deny the hardest are usually the most likely candidates.

“I’m trying to think about how to be helpful, because I care about the country, and I’m a patriot first. It’s way, way too soon to be making plans for 2020,” Patrick told me in an interview for POLITICO’s Off Message podcast recorded at Bain headquarters in Boston. “So I’ll just leave it at that.”

 

Patrick fends off any attempts to corner him on the question, avoiding saying anything that could seem either cute or Sherman-esque—“don’t lead me down that path because it turns into something it isn’t, and I don’t want to go there,” he said. “I have no plans to make plans.”

 

But he’s clearly upset with what Trump is doing, on both policy and approach.

 

“The president, I believe, is at risk of diminishing the voice of the presidency because he pops off so often, and so, kind of, carelessly. I think there is a risk both domestically, and internationally for that matter, that we’ll begin to tune him out,” he said.

Who is Deval Patrick?  Here’s a little background on the future contender from Wikipedia:

Deval Laurdine Patrick (born July 31, 1956) is an American politician, civil rights lawyer and businessman who served as the 71st governor of Massachusetts from 2007 to 2015. A member of the Democratic Party, Patrick served as the United States assistant attorney general for the civil rights division under President Bill Clinton. He was first elected in 2006, succeeding Mitt Romney who chose not to run, and re-elected in 2010. He is the only African-American to have served as governor of Massachusetts.

 

Born to and raised by a single mother on the South Side of Chicago, Patrick earned a scholarship to Milton Academy in Massachusetts in the eighth grade. He went on to attend Harvard College and Harvard Law School, where he was president of the Harvard Legal Aid Bureau. After graduating, he practiced law with the NAACP Legal Defense and Educational Fund and later joined a Boston law firm, where he was named a partner, at age 34. In 1994, Bill Clinton appointed him as the United States assistant attorney general for the civil rights division of the United States Department of Justice, where he worked on issues including racial profiling and police misconduct.

 

Under his governorship, Patrick oversaw the implementation of the state’s 2006 health care reform program which had been enacted under Mitt Romney, increased funding to education and life sciences, won a federal Race to the Top education grant, passed an overhaul of governance of the state transportation function, signing a law to create the Massachusetts Department of Transportation, increased the state sales tax from 5% to 6.25%, and raised the state’s minimum wage from $8 per hour to $11 per hour by 2017. Under Patrick, Massachusetts joined the Regional Greenhouse Gas Initiative (RGGI) in an effort to reduce greenhouse gas emissions, and the planned introduction of casinos in Massachusetts. His second term began on January 6, 2011, and in an interview with The Boston Globe, Patrick declared he would not seek re-election in 2014.[1][2] He is a managing director at Bain Capital[3] and currently serves as the chairman of the board for Our Generation Speaks.

So, to the new DNC Chair, Tom Perez, you now have your marching orders for 2020: time to start undermining the campaigns of all other potential Democratic candidates and rally the support of those superdelegates around Deval Partick, in other words, time for your best Debbie Wasserman Schultz impression. And don’t worry: if you get caught just blame it on the Russians hacking your servers, just make sure the FBI never gets access to them… again.

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Authored by Per Bylund via The Mises Institute,

 

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In a spirited defense of today’s inefficient market, one which is allegedly unimpaired by the relentless metastasis of passive investing, Bloomberg wrote an article using Macro Risk Advisors data, in which it said that “for all the handwringing about how the growth of passive investing strategies is distorting the stock market” it concluded that “there’s virtually no market impact from it. Correlations remain at all-time lows and the amount of shares that are passively managed isn’t affecting single-stock.”

Conventional wisdom has held that as passive investment strategies accumulate larger piles of assets under management — the 14 percent represents an all-time high — it would lead to lockstep moves in stocks, making life harder for traders seeking informational edges by offering fewer opportunities to capitalize on insights into earnings and other signals. Instead, the MRA data show, that any reaction in the market has been muted — if there’s even been one at all.

Bloomberg was referring to these three familiar charts, showing the acute fund flow from passive to active strategies in recent years.

Unfortunately for defenders of the ETF boom, Bloomberg’s assessment is also wrong, because in a separate analysis released concurrently by Bank of America, Savita Subramanian reached just the opposite coinclusion.

BofA looked at the response of stocks which missed EPS estimates, and found two dramatically different outcomes for stocks with high vs low passive ownership. This is how she describes her findings:

Not only can crowding by active managers suggest risk to stocks, but high-passive ownership can matter, particularly during earnings season. Over the past seven quarters (including the 2Q earnings season so far), stocks with high passive ownership that missed on EPS and sales have underperformed those with low passive ownership by 1.5ppt on average during the following day, and the spread has widened significantly during recent quarters. This increased performance spread may be attributable, in part, to lower “true float” in these stocks, which appears to have driven increased volatility.

The increasingly disproportionate adverse reaction of high passive ownership stocks is shown in the chart below: it is most evident in Q2 2017 earnings.

The recent trend of stocks to have a materially more pronounced negative response to earnings misses has been discussed previously, however until now there was no quantifiable explanation.

BofA’s take, which can easily be tested for validation purposes, presents various arbitrage opportunities chief among which is creating a basket of high passive ownership stocks, and betting on sharp declines either through single-name short positions or puts while avoiding low passive ownership names, with expectations of this skewed return profile. One potential hurdle is that this earnings season – which is as of now 66% complete – companies that miss have been relatively few, although if this pattern persists, it should provide significant alpha opportunities during the Q3 earnings season, when the overall quality of earnings is expected to decline substantially as the base effect of last year worst quarter will be in the rearview mirror, while the much anticipated surge in energy earnings will have trouble materializing if oil fails to trade solidly in the mid-$50 range, not to mention the risk of either inflation finally creeping higher or the Fed following through with its balance sheet unwind promise.

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