Month: November 2017

One month after Tesla surprised markets with an unexpectedly low production output of its much anticipated Model 3, delivering just 260 cars far below the 1,500 expected, which according to a follow up report from the WSJ was due to part of the car being made by hand, Wall Street was fearfully looking forward to today’s earnings report despite Elon Musk’s assurance that Tesla had its “all-time best quarter” for Model S and X deliveries. Those fears were justified when moments ago Tesla reported an adjusted, non-GAAP loss of -$2.92, far worse than the expected loss of $2.27, which was more than double the $1.33 loss in the second quarter.

The silver lining is that in the third quarter, Tesla generated revenue of $2.98 billion, slightly better than the $2.93 billion expected, but this was more than offset by the plunge in the Automotive gross margin, which in Q3 was 18.7 non-GAAP, far below the 25.0% in the previous quarter, and worse than expected.

However, the worst news is that in what has become the most sensitive topic for the EV maker, Tesla continued to burn cash, and in the third quarter it outdid itself again, with a record cash burn of $1.4 billion – or roughly $16  million per day: an unprecedented amount. This was higher than the $1.2 billion consensus forecast. In Q3, Tesla’s CapEx was $1.116 billion, a number which is set to continue pressuring its balance sheet as the company continues to ramp up Model 3 production. Tesla announced that capital expenditures are expected to be approximately $1 billion in Q4, “driven largely by milestone payments on Model 3 production equipment, as well as Gigafactory 1, and further expansion of stores, service centers, delivery hubs and the Supercharger network.”

Understandably, the cash burning behemoth was proud to announce that it had more than $3.5 billion in cash on hand at the end of Q3. There is just one problem, and this wasn’t announced in the letter: Tesla also had $3.9 billion in accounts payable and accrued liabilities, a number that was unchanged from the previous quarter, as the company drains all net working capital sources of cash it can find.

In terms of deliveries, there were no surprises: as the company already disclosed, it delivered 25,915 Model S and Model X vehicles and just 222 Model 3 vehicles, for a total of 26,137 deliveries. Combined Model S and Model X deliveries in Q3 grew 18% globally compared to Q2 and 4.5% versus the same quarter one year ago.

And this is where the trouble started, because looking into the future, Tesla revealed a decidely murky picture, warning that due to the the nature of manufacturing challenges during a ramp such as this “makes it difficult to predict exactly how long it will take for all bottlenecks to be cleared or when new ones will appear. Based on what we know now, we currently expect to achieve a production rate of 5,000 Model 3 vehicles per week by late Q1 2018, recognizing that our production growth rate is like a stepped exponential, so there can be large forward jumps from one week to the next.”

This is a problem as previously Tesla projected it would make 5,000 Model 3s in late December. It just pushed that target back.

Additionally, Musk did not say when he expects production to hit 10,000 per week:

 We will provide an update when we announce Q4 production and delivery numbers in the first few days of January. With respect to the timing for producing 10,000 units per week, it has always been our intention to implement that capacity addition after we have achieved a 5,000 per week run rate. That will enable us to make the next generation of automation even better while making our capex spend significantly more efficient.

Musk was quick to blame suppliers for again having to push back the delivery schedule, saying that “to date, our primary production constraint has been in the battery module assembly line at Gigafactory 1, where cells are packaged into modules. Four modules are packaged into an aluminum case to form a Model 3 battery pack. The combined complexity of module design and its automated manufacturing process has taken this line longer to ramp than expected. The biggest challenge is that the first two zones of a four zone process, key elements of which were done by manufacturing systems suppliers, had to be taken over and significantly redesigned by Tesla.”

The company then promised that it has “redirected our best engineering talent to fine-tune the automated processes and related robotic programming, and we are confident that throughput will increase substantially in upcoming weeks and ultimately be capable of production rates significantly greater than the original specification.” Which is bizarre in light of all the recent mass terminations from its Fremont facility.

The bottom line, is that accordint to Tesla, it remains difficult to predict exactly how long it will take for all Model 3 bottlenecks to be cleared or when new ones will appear, although it “continues to make significant progress each week in fixing Model 3 bottlenecks.”

Kicking the can yet again, TSLA said it will provide an update when it announces 4Q production and delivery numbers in the first few days of January.

Musk also said that between cash on hand, future cash flows and available lines of credit, believes TSLA says it is well capitalized to accommodate the revised ramp of Model 3 production to 5,000 per week… assuming it ever gets there of course.

Some more on the outlook:

Based on the recent acceleration in order growth, we now expect that Model S and Model X are on pace for about 100,000 deliveries in 2017, an increase of 30% compared to 2016. Notwithstanding these increased deliveries, we plan to produce about 10% fewer Model S and Model X in Q4 compared to Q3 because of the reallocation of some of the manufacturing workforce towards Model 3 production. As a result, inventory level of finished Model S and X vehicles should continue to decline.

 

We expect Model 3 non-GAAP gross margin to reach breakeven by end of Q4, because of increased capacity utilization, and it should improve rapidly in 2018 to our target of 25%. Our recent production challenges may affect short-term costs, but they have no impact on our 25% gross margin target, since there has been no change to our projections for material, labor and overhead costs per vehicle

Finally, some more bad news:

Due to a higher mix of temporarily lower margin Model 3 deliveries in Q4 compared to Q3, we expect non-GAAP automotive gross margin to temporarily decline slightly in Q4 to about 15% and then recover starting in Q1. Gross profit is expected to grow more than operating costs in Q4 compared to Q3, while operating costs are expected to be flat to up slightly in Q4. Between cash on hand, future cash flows and available lines of credit, we believe that we are well capitalized to accommodate the revised ramp of Model 3 production to 5,000 per week. Upon achieving this production level, we expect to generate significant cash flows from operating activities.

Or not:

Capital expenditures are expected to be approximately $1 billion in Q4, driven largely by milestone payments on Model 3 production equipment, as well as Gigafactory 1, and further expansion of stores, service centers, delivery hubs and the Supercharger network.

The worst news, however, is that investors may finally be losing patience and the stock is down as much as 5% after hours, a rare adverse reaction to the company’s increasingly shaky – if extremely ambitious – growth plan.

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According to The Wall Street Journal, President Trump has picked Jerome Powell to be the next Federal Reserve Chair.

The White House has notified Federal Reserve governor Jerome Powell that President Donald Trump intends to nominate him as the next chairman of the central bank, according to a person familiar with the matter.

The president spoke with Mr. Powell on Tuesday, according to another person familiar with the matter who couldn’t describe what they discussed.

Mr. Trump said in a video last week that he had “somebody very specific in mind” for the job.

“It will be a person who hopefully will do a fantastic job,” Mr. Trump said in a video posted to Instagram, adding, “I think everybody will be very impressed.”

Modest reactions for now in USDJPY and gold…

However, WSJ notes that while President Trump had settled on Mr. Powell by Saturday, but people familiar with the process had cautioned that he could change his mind.

WSJ summarizes Powell's views as follows…

On Interest Rates

Mr. Powell, 64 years old, has backed Ms. Yellen’s policy of gradually raising interest rates if the economy improves as projected. In recent public remarks he has sounded an optimistic note, saying he expects inflation to move up to the Fed’s 2% target, economic growth to remain steady and the unemployment rate to fall further. “I would view it as appropriate to continue to gradually raise rates,” he said in June.

On Shrinking the Fed’s Portfolio

Mr. Powell in September voted in favor of beginning the yearslong process of winding down the central bank’s $4.5 trillion portfolio. Like Ms. Yellen, Mr. Powell has said the Fed could resort to new rounds of asset purchases in another crisis if the economy needs more stimulus. Putting new assets on the Fed’s balance sheet should be an option “only in extraordinary circumstances,” he said in February.

On Monetary Policy Rules

Mr. Powell has joined several of his Fed colleagues in warning against relying too heavily on mathematical rules such as the so-called Taylor Rule to guide monetary policy. That could put him at odds with congressional Republicans who have pushed the Fed to adopt such a formula in an attempt to make Fed policy-making more transparent and predictable.

“Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy,” he said February. “I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation.”

On Dodd Frank

Mr. Powell has expressed willingness to ease some of the burdens imposed on financial institutions from the 2010 Dodd Frank law, a position that could appeal to the Trump administration.

Speaking before lawmakers in June, Mr. Powell said he was looking into softening the Volcker rule preventing banks for making overly risky bets with their own money. He also said it might be appropriate to ease some of the annual stress tests that big banks must perform. 

He has also called for revisiting new supervisory requirements imposed on bank boards of directors after the crisis. In his view, a board’s role “is one of oversight, not management.” That, he said in a 2015 speech, means boards should not be saddled with “an ever-increasing checklist.”

On Fannie Mae and Freddie Mac

Mr. Powell has called on Congress to overhaul the housing finance system, saying he’d like to see the country’s two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech in July.

Although the Fed isn’t responsible for housing finance, it supervises some of the country’s largest lenders who frequently sell their loan to the two agencies. “No single housing finance institution should be too big to fail,” he said.

*  *  *

Jerome Powell will be the first former investment banker to become Fed Chair (and first non-economics PhD in 40 years).

Powell, a Princeton graduate, was a lawyer in New York before he joined the investment bank Dillon Reed & Co. in 1984. He stayed there until he joined the Treasury Department in 1990. After he left Treasury, he became a partner in 1997 at The Carlyle Group (CG), the private equity and asset management giant. He left Carlyle in 2005.

He will also likely be the richest Fed head ever – Powell's assets are worth between $21 million and $61 million, according to financial disclosures which require officials to give a range in the value of their various holdings.

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Amid Capitol Hill hearings and rising concerns over regulation, Facebook crushed expectations in Q3 – beating top- and bottom-line dramatically and better-than-expected user growth – sending the stock price higher after-hours to new record highs.

• 3Q revenue printed $10.33 billion, beating estimate of $9.84 billion (range $9.52 billion to $10.18 billion)
• 3Q EPS printed $1.59, smashing estimate of $1.28 (range $1.16 to $1.44)
• 3Q monthly active users (MAU) printed 2.07 billion – better than the estimated 2.04 billion.
• 3Q daily active users (DAU) printed 1.37 billion – better than the estimated 1.35 billion.

However, after FB shares jumped immediately, they quickly turned back lower…

If investors wonder why the shares aren't screaming more aggressively higher, perhaps it is this comment from CEO Mark Zuckerberg…

"We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits."

Additionally, Facebook reports:

Mobile advertising revenue – Mobile advertising revenue represented approximately 88% of advertising revenue for the third quarter of 2017, up from approximately 84% of advertising revenue in the third quarter of 2016.

Capital expenditures – Capital expenditures for the third quarter of 2017 were $1.76 billion.

Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $38.29 billion at the end of the third quarter of 2017.

Headcount – Headcount was 23,165 as of September 30, 2017, an increase of 47% year-over-year.

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Record highs for stocks, 10 year lows for the yield curve…

 

Small Caps were in risk-off mode today (having oscillated this week) as the S&P, Dow hugged the unchanged line and Nasdaq was modestly bid ahead of tonight's earnings…

 

The moves post-FOMC were marginal…

 

The S&P dipped out of the gate to unchanged and then VIX was clubbed like a baby seal to get it green again…

 

FANG Stocks rallied ince again ahead of tonight's earnings…

 

Notably, stock that would benefit most from corporate tax reform have notably underpeformed ahead of tomorrow's tax plan release…

 

High Yield bond prices tumbled below key technical support…

 

Treasury yields were mixed today with the long-end outperforming – notably moving after the refunding news this morning…

 

The yield curve continues to collapse…

 

To new 10 year flats…

 

The Dollar Index managed very minor gains today but traded in a very narrow range…

 

All commodities are higher on the week with silver leading…

 

WTI/RBOB sank after DOE data disappointed compared to API – despite more OPEC jawboning from UAE…

 

We also note that copper futures continue to rebound and remains massively – and oddly – decoupled from raw industrial commodity prices…

 

Finally, Bitcoin surged to another new record today above $6600…up 15% since Friday…

 

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U.S. auto sales for the month of October came in mostly mixed with Fiat and GM being the biggest losers relative to street estimates and Ford beating on strong truck and fleet sales.  GM forecasts that the overall SAAR for the month ended up around 18mm units, versus 17.5mm expected, as sales remain elevated due to hurricane-related replacements.  Here’s more from Detroit News:

General Motors Co. and Fiat Chrysler Automobiles NV on Wednesday reported sales declines in October, while Ford Motor Co. saw sales jump 6.2 percent compared to the same month a year ago thanks to strong truck and fleet sales.

 

Fiat Chrysler reported a 13 percent drop compared to the same month a year ago, due to a 43 percent decline in fleet sales compared to last year. GM sales fell 2.2 percent due largely to slumping Buick and Chevrolet deliveries; only the automaker’s GMC brand saw a bump in sales last month, up 4.6 percent.

 

But overall, analysts expect a relatively strong sales month due to buyers in the Texas and Florida replacing storm-damaged vehicles, and generous sales incentives being offered by carmakers.

 

GM reported it sold 252,813 vehicles last month, with pickups up 9 percent to 84,902, and crossover sales were up 12 percent. Fiat Chrysler sold 153,373 vehicles in October. Retail sales fell 4 percent, though the company’s Ram and Jeep brands had strong months, according to the automaker. Ford sold 200,436 vehicles; 93,248 of those were trucks.

Of course, more important than the headline numbers, which are skewed by the recent hurricanes, is the fact that incentive spending continues to rise despite abnormally strong demand and production cuts already implemented earlier this year.

“Although the headline shows a small decline in sales, October looks relatively strong for the industry, as evidenced by the nearly 18 million (seasonally adjusted annual rate),” said Tim Fleming, analyst for Kelley Blue Book.

 

Fleming said some of the strength can be attributed to replacement demand that continues in Texas and Florida due to hurricanes. Perhaps more importantly, he said, higher incentive-spending by carmakers is playing a role: “Even with production cuts this year, incentives are on the rise and have reached 11 percent of average transaction prices. This is an indicator that new-vehicle demand is still contracting, and production cuts could be on the horizon to prevent oversupplies.”

 

Analysts at Edmunds forecast a steeper year-over-year decline at 3.5 percent. But the automakers will still see a lift from vehicle recovery sales due to hurricane season.

 

“While replacement demand in Houston was higher in September, we anticipate that hurricane recovery efforts will continue to supplement October vehicle sales in the market,” said Jessica Caldwell, Edmunds executive director of industry analysis. “In Florida, far fewer vehicles were lost to flood damage, but we expect to see an incremental boost in vehicle sales primarily from shoppers who may have delayed their purchases due to the storm.”

Meanwhile, despite the best hopes of wall street that recent hurricanes would help solve GM’s inventory problem, the company’s inventory days actually crept up in October compared to the previous month.

And here are more highlights from Stone McCarthy Research on the breakdown of car/truck sales mix for the month:

Car sales and truck sales are both coming in below expectations so far. Part of the reason for last month’s strength in car sales was due to fleet sales, so we expect to see some of the replacement sales after Hurricanes Irma and Harvey showing up more in this month. Given their sales figures, domestic light vehicle sales for October look to be at about 13.8 million units, below that of the 14.1 million selling pace of September.

 

General Motors domestic car sales came in below our expectations, and were down over 23% from last year. Domestic light truck sales for GM in October were in line with our estimate, and were up 3.5% from last year.

 

Domestic car sales were also weaker than we expected for Ford, though they saw the smallest year over year decline of the big three. Ford’s domestic light truck sales were a bit stronger than we expected. Their 12.3% year over year rise was the largest of the big three.

 

Chrysler domestic car were also a bit lower than we expected, and were also down about 23% year over year. Their light truck sales saw a decline of over 10% from last year, just as we expected them to.

 

Honda, Toyota, and Volkswagen sales all came in below our expectations.

 

Including the Detroit Three, we project the selling pace for domestic cars in October to come to 4.71 million units (saar) versus 4.91 million in September. We expect car sales to decline 6.6% from last October. We look for the selling pace for October light trucks to reach a 9.07 million unit selling pace (saar), compared to September’s 9.15 million selling pace, a 0.1% decrease in light truck sales from last October.

So what say you?  Still time to buy the hurricane/incentive/subprime-fueled demand surge in auto sales or time to move on?

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Amid rising speculation whether Catalonia will adopt some cryptocurrency should it follow through with plans for independence, and in the context of articles such as this from Vice that “Russia is going all in on bitcoin“, one country appears to be preparing to accept bitcoin as digital legal tender: Iran.

In an interview published last week with the Farsi newspaper Shargh, the Iranian Deputy Minister of Information and Communication Technology, Amir Hossein Davaee said that”The ministry of communications and information technology has already conducted a number of research studies as part of efforts to prepare the infrastructure to use Bitcoin inside the country.”

He went on saying the crypto currency has two aspects: Economic and infrastructural. “We as the main center in Iran dealing with the country’s technology developments have taken very seriously the issue of preparing the infrastructure for the new currency.”

Quoted by the Iran Front Page, the Iranian official went on to say that such digital infrastructure is part of the soft power of each country and said entrance of the currency into Iran will end up in the general interests of the country. “Arrangements are being made with the related organizations to put together the infrastructure as early as possible.”

One reason for Iran’s eagerness to escape a dollar-denominated world is that as part of the original sanctions against the country four years ago, SWIFT removed Iran from its network, cutting off the country’s banking system from global networks and making dollar-denominated transactions impossible, in the process crippling Iran’s oil exports which only came online following Obama’s nuclear deal. Being locked out of US dollar commerce, Iran’s economy suffered for many years from financial sanctions which crippled the ability of local exporters and importers from working with international counterparts.

With US President Donald Trump taking a hostile approach to the Islamic republic, and with the Nuclear deal on the verge of collapse due to disagreements over the country’s nuclear and ballistic missile programs, it should come as no surprise that Iran is testing how to bypass possible new financial sanctions using Bitcoin, beyond merely local use.

* * *

Meanwhile, speaking at a Russia and China heads of government meeting on Wednesday, Russian Prime Minister Dmitry Medvedev said that the international financial system needs to balance which is why there is no place for a dominant currency, referencing the US dollar.

“The balanced system of financial relations should be based on the use of various reserve currencies, various forms of settlement. There should be no domination of any one currency,” Medvedev said, adding that no matter how strong the American economy, it also faces problems from time to time. “As a result, the entire financial world is shaken. A more balanced international financial system is better for everyone.”

According to Medvedev, Russia was pleased with the growing role of the Chinese yuan in global settlements, as it represents one of the world’s largest economies. In May, Russia and China established an investment fund worth 68 billion yuan ($10 billion).The countries also plan to extend the bilateral currency swap agreement for another three years. In 2014, Russia and China agreed on a 3-year ruble-yuan currency swap deal of up to $25 billion.

China has been pushing for a greater use of the yuan in oil settlements. As the country has become the largest oil importer overtaking the United States, it can now dictate rules, experts note. The chief economist and managing director at High Frequency Economics Carl Weinberg has predicted that “Chinese [oil] demand will dwarf US demand,” and Beijing is likely to “compel” Saudi Arabia to sell crude oil in yuan, a move to be followed by others. We discussed this last week, when we noted that China is expected to roll out a yuan-denominated oil contract, i.e. a “Petroyuan”, within the next two months.

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Back in 2014, a scandal erupted when media reports confirmed what many had previously speculated about China’s banking system: namely that much of China’s staggering loan issuance had been built (literally) upon air and that trillions in loan collateral had been “rehypothecated” between two, three or many more debtors – or never even existed – forcing banks to accept that they would never recover much if any of the pledged collateral – in most cases various commodities – if the economy were to suffer a hard-landing resulting in mass defaults. The most famous example involved collateral fraud at China’s 3rd largest port, Qingdao, where numerous borrowers were found to have “pledged” the same collateral of steel and copper to obtain funding from various banks.

For those unfamiliar there is an extensive selection of stories covering the topic, which peaked three years ago, and then quietly faded away as China did everything in its power to deflect attention from what some have said is the biggest threat facing its economy: a giant hole . Below we link to some of our more comprehensive articles on the topic:

• China’s “Evaporated” Collateral Scandal Spreads To Second Port
• What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?
• China Faces “Vicious Circle” As Commodity Collateral Collapses
• China Scrambling After “Discovering” Thousands Of Tons Of Rehypothecated Copper, Aluminum Missing
• Copper Plunges Most In 3 Months As “Rehypothecation Evaporation” Concerns Grow
• Western Banks Scramble As China’s “Rehypothecation Evaporation” Goes Global
• BIS Warns About Rehypothecation Threats
• How China’s Commodity-Financing Bubble Becomes Globally Contagious
• China’s Collateral Rehypothecation Fraud Is Systemic

To be sure, the story briefly resurfaced in May when we reported that “Some Chinese Banks Suspend “Interbank Business” As Regulator Demands That Collateral “Actually Exists”, although it then quickly fizzled again, for two reasons: i) China watchers assumed that Beijing no longer had a “collateral problem” which had been somehow fixed after all the noise rehypothecation stories from in 2014, and ii) China now seemingly has even bigger problems on its hands, such as finding the right balance between maintaining the latest housing bubble, keeping capital outflows in check and its currency stable at a time when China’s debt (well over 300% of GDP) was downgraded by Moody’s (and later S&P) for the first time in 28 years, while its gargantuan shadow debt powder keg is one big red headline away from a $9 trillion shadow bank run.

And while the latter is certainly accurate, the former couldn’t possibly be further from the truth.

That was revealed by a terrific June expose when Reuters reporters went to China to determine the current status of China’s long-standing collateral problem. What they found was that “ghost collateral” continues to haunt countless loans across China’s debt-laden banking system, which is a problem because as we explained in 2014, and as Reuters noted “lax lending practices and overvalued collateral spurred the U.S. financial crisis in 2008. Now, banks in China face risks of their own as fraudulent borrowers and corrupt bankers burden the financial system with loans lacking genuine collateral.“

Fast forward to today, when China’s “ghost collateral” problem has re-emerged with a bang, and this time there is a quantifiable price tag. As Bloomberg reports, the giant agricultural commodities merchant ED&F Man Holdings Ltd., best known for trading sugar and coffee, has taken a major hit of about $80 million “after falling victim to a scam in the metals market.”

The scam, for those who have been following our reports on China’s ghost collateral, will be familiar: ED&F Man’s loss is linked to fraudulent metal-financing that was uncovered at a warehousing firm owned by Glencore Plc earlier this year, said Bloomberg’s sources.  Back in 2013, we published an extensive discussion on the nature of China’s commodity-financing deals, many of which were designed as quasi-legal ponzi scheme, meant to boost liquidity and funding by rehypothecating the underlying collateral on numerous occasions; at the time copper was the preferred underlying asset, however with time this spread to virtually all commodities.

This tale of “missing” collateral comes at a bad time for ED&F Man, which was already nursing a smaller losses at its sugar unit.

The metals issue comes as ED&F Man had a tough year at its sugar business, with the 230-year-old commodities trader last month saying it would cut costs and headcount at the unit amid surplus supplies and low prices. The London-based firm this week said Chief Executive Officer Phil Howell is leaving after three years in the role and more than two decades at the company.

While the impact on the company’s final earnings won’t be clear until ED&F Man releases its annual financial statements, it will be sizable: last year the company reported pretax profit, adjusted for acquisitions, of $100.9 million, which means that China’s fake collateral has cost nearly one full year of net income for one of the world’s best respected independent traders.

Here’s what happened: Glencore’s Access World – one of the world’s biggest provider of LME warehousing and logistics services –  warned customers in January that it found forged warehouse receipts circulating in the market. The announcement, Bloomberg writes “sent shock waves through the commodities-trading industry, reawakening concerns about fraud after a metal-financing scam was uncovered at the Chinese port of Qingdao in 2014.“

Meanwhile, ED&F Man Capital Markets acted as a broker between Australia & New Zealand Banking Group and two Hong Kong-based trading companies in a sale-and-repurchase financing deal. The trade was backed by storage receipts for about $300 million of nickel stored in Access World warehouses in Asia, according to court documents filed by the bank in the U.S in June. However, when ANZ looked to sell the nickel, it discovered that all but one of the 84 storage receipts were likely to have been forged, leaving it with “substantial losses,” the bank said in court filings, which were part of a request for information it could use in lawsuits in other jurisdictions.

There is still some hope that ED&F Man can recover some losses…

Some of ED&F Man’s nickel-related losses could still be recovered when court proceedings are concluded, the people said. The company last month said its brokerage business in general continues to perform well.
Suedzucker AG, Europe’s largest sugar producer, has a 35 percent stake in ED&F Man.

… however, the odds are slim to none. In fact, what is surprising is that it has taken over three years for the first serious hit from China’s “ghost collateral” to emerge. Or perhaps not: in a time of generally rising prices, few if any traders actually bother to check if their pledged collateral ever exists. The problem emerges when prices decline, which courtesy of China’s bubble machine, has so far not been an issue. However, there are those random occasions when spot checks reveal shocking surprises, as Reuters reminded of over the summer:

The banker at the other end of the phone line was furious, recalled Shanghai lawyer Wang Chaoyu. A pile of steel pledged as collateral for a loan of almost $3 million from his bank, China CITIC, had vanished from a warehouse on the outskirts of the city. Just several months earlier, in mid-2013, Wang and the banker had visited the warehouse and verified that the steel was there. “The first time I went, I saw the steel,” recalled Wang, an attorney at Beijing DHH Law Firm, which represents the Shanghai branch of CITIC.

 

“Afterwards, the banker got in contact with me and said, ‘The pledged assets are no longer there.’”

Now, it was ED&F Man’s turn to make the same shocking discovery. However, with trillions in dollars “guaranteed” by Chinese “ghost collateral” based on various third party estimates, at least the giant commodity trader can find solace in the fact that it will not be the last to learn that “it’s gone… it’s all gone.”

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The grand jury indictments of former Trump campaign executive Paul Manafort and his longtime deputy Rick Gates (as well a billionaire Tom Steyer's World Series Ad pushing for Trump Impeachment) have apparently emboldened another progressive House Democrat to file articles of impeach against Trump, as murmurs about bringing the bill to a floor vote grow steadily louder despite Nancy Pelosi’s desperate insistence that they would risk politicizing the Mueller probe and damaging the Dems during the 2018 midterms.

This time, it’s Rep. Luis Gutiérrez (D-Ill.), who’s leading the charge. Gutierrez, who told the Hill he's planning to file the articles but didn't specify a timeline, is the third House Dem to file articles of impeachment, joining Trump antagonists Brad Sherman (Calif.) and Al Green (Texas) who both filed the articles earlier this year. While none of the proposals are likely to gain traction, Green has taken his the furthest by pushing – unsuccessfully- last month to bring it to the floor for a vote.

By introducing the articles, which also followed the revelation that former Trump policy adviser George Papadopoulos had turned state’s witness over the summer, the Hill says support for a group of renegade Democrats to defy Pelosi and bring the bill to the floor is growing.

As a reminder, here's what an impeachment would look like, courtesy of Statista.

However, Gutiérrez, whom the Hill identified as one of Trump’s sharpest critics, declined to specify what grounds the articles will cite, saying only that the Democrats are working with constitutional scholars to solidify their case. Though it’s not unreasonable to expect that the recent Mueller probe developments will be invoked, even though Manafort and Gates’s criminal behavior had no apparent connection to the campaign.

“I assure you we will not leave you lacking for reason,” he said.

It’s also unclear which Democrats will join Gutiérrez in the effort, though an aide said Rep. Steve Cohen (D-Tenn.) might jump on the bandwagon. Cohen in August announced his intent to introduce impeachment articles, citing Trump’s response to a deadly attack in Charlottesville, but never followed through.

Democratic leaders have sought throughout the year to discourage impeachment efforts against Trump, fearing it could politicize the ongoing investigations into Russian hacking of the 2016 election and potential collusion between Moscow and the Trump campaign. Behind House Minority Leader Nancy Pelosi (D-Calif.), top Democrats are awaiting the outcome of those probes, particularly the one being conducted by Robert Mueller, the special prosecutor appointed by the Justice Department in May.

“I’m in no rush to be first, but I will say this: We have to – we have to bring it to the floor,” Green said.

Green acknowledged that some Democrats might be agitated by the aggressive impeachment push while the Mueller investigation continues. But he’s growing impatient, warning that “history won’t be kind” to those lawmakers who sit idle amid the swirl of controversies surrounding Trump.

Of course the Democrats – never ones to skimp on the sanctimony – tried to frame the impeachment vote as a battle to wind up on the "right side" of history.

“I can’t let my record show this,” Green said. “The people who will probably judge us, probably haven’t been born.”

Gutiérrez seems to agree, and he’s glad to have a growing coalition to help him make the case.

“I appreciate what single members have done,” Gutiérrez said. “I think it’s time to do a group.”

Assuming lawmakers somehow manage to bring the vote to the floor – which is incredibly unlikely considering Republicans outnumber Democrats by 45 lawmakers – the question would then become: Would the impeachment proceedings help the Democrats’ cause of retaking Congress during the upcoming midterm elections? Or would it wreck the Democrats’ credibility in the eyes of the swing voters they’re hoping to court?

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