Month: January 2018

Stocks Tumble On News NAFTA Countries Won’t Issue Joint Statement

With the Montreal round of talks scheduled to end today ending on Monday, there was tentative optimism that North American trade negotiations would progress well. As Canada’s CTV News reported over the weekend, “the single biggest question looming over the current round of NAFTA negotiations was whether the talks might survive the phase where countries started seriously engaging each other on the more bedevilling sticking points.” It added that “Early signs point to: Yes.”

Glimmers of hope have emerged in a round viewed as a litmus test for whether these talks might move beyond an early stage marked by finger-pointing, standoffishness and threats of a U.S. withdrawal, and turn into real back-and-forth, give-and-take bargaining.

Several officials said the nearly completed week-long round in Montreal has been more constructive than gatherings of previous months, with countries diving into conversations about auto rules, dispute resolution, and a five-year review clause.

Negotiators closed a chapter on anti-corruption. They also plan to meet at future rounds in Mexico City and Washington over the next two months. And there’s hope it won’t be quite so hostile this time when the three politicians leading the process meet on Monday.

Unfortunately that optimism quickly fizzled moments ago following a Reuters headline that contrary to expectations, NAFTA countries won’t be issuing a joint statement after the Montreal round of talks ends today, a clear sign that negotiations are hardly progressing in a favorable, cooperative manner:

  • NAFTA COUNTRIES WILL NOT ISSUE A JOINT STATEMENT FOLLOWING MONTREAL ROUND OF TALKS:

Stocks promptly slumped to session lows following the news, with NAFTA currencies getting hit.

 

 

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Dallas Fed: “We May Not Like The Division In The Country But Trump’s Policies Are Working”

Following missed expectations at the Philly Fed, Richmond Fed, Empire Fed, and PMIs; The Dallas Fed manufacturing survey smashed expectations – soaring to 33.4, the highest since Nov 2005.

The January print at 33.4 is above the highest analyst’s estimate of 30.1…

 

Under the covers, things were not quite as exciting with capacity utilization weaker,  weaker, wages weaker, hours worked weaker, and employment weaker.

The index surged on the back of a spike in ‘hope’ as Six months ahead business activity jumped.

 

 

Amid near record-low unemployment, respondents noted that:

Labor is still the largest problem facing our business. We are still unable to find candidates who can perform the basic duties of employment. First and foremost, show up to work, and second, on time.

We are experiencing large volume increases and demand for parts sooner than ordered, predominately in the automotive sector but in other markets as well. We are having difficulty finding new employees and are facing full capacity in the first quarter if sales continue at this level.

Also, we are raising existing production employees’ hourly rates and increasing our starting rate in production in an attempt to keep good employees and attract new ones.

Forcing some to admit reality:

We may not like the way things are communicated and the division in the country, but the policies are improving conditions for the workers and employers. We will be putting our tax savings and costs savings from a reduced regulatory environment back into expanding the business and hiring more people. The U.S. is more competitive internationally, but it’s still far from ideal. We increased salaries and bonuses as a way to retain top talent and hire more quality people. I hope we keep reducing burdensome regulations and start reducing waste, debt, corruption, ineffective programs and the overall size of the government.

 

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Grammys Have Time for Hillary Clinton, But Not Lorde, To Perform?

As the Drudge Report wants you to know in ALL CAPS, last night’s Grammy awards telecast was a “crash and burn” affair, and possibly the “lowest rated” ever. Deadline Hollywood’s Dominic Patten writes,

With a 12.7/21 in metered market ratings, the Recording Academy’s big hootenanny was also way down from the early numbers for the LA-based February 13, 2017 59th annual show. By way down, I mean a just over 20% decline from last year to what looks to be an all-time low for the ceremony.

Right-wingers already have a ready explanation for this: the politicization of allegedly once-pure “entertainment” events.

That’s the reason why movies flop, why the NFL’s audience is shrinking, you name it. It’s that jes’ plain folks are sick and tired of having their safe spaces invaded by politics. Forget larger trends or, in the case of Grammys, savvy counter-programming by other networks. AMC’s mega-hit franchise The Walking Dead had a mid-season debut last night and even network standards such as Shark Tank and Family Guy aired new episodes.

All of which makes sense given that nobody really cares about the Grammys, do they? Certainly not compared to the Oscars or even the Emmys, and even those old warhorse spectacles of self-congratulation don’t pull eyeballs like they used to. That’s especially true with anything devoted to popular music, whose audience was among the very first to be liberated by the cultural proliferation that has vastly increased the ways in which we produce and consume creative expression.

Let’s assume that the Grammys, like the Olympics, the Oscars, the NFL, and other 20th-century televised institutions, no longer command attention and interest the way they used to. It’s less because of politicization and more simply because audiences have more and more freedom to go elsewhere (in the case of the Olympics, the loss of audience is precisely because of de-politicization: the end of the Cold War robbed every archery and ski jump contest of specifically political interest). The more important question for me is whether consumers of art, culture, sports, and entertainment are more or less able to access the fare we want. To borrow the pretzel logic of multiple Grammy-winning band Steely Dan, any major dude with half a heart will tell you, my friend, any minor world that breaks apart falls together again. Music has never been more accessible and varied than it is today. While the “rock star” archetype may well be dead as a meaningful cultural touchstone, there’s more stuff to listen to in any possible genre you can imagine. If the Grammys and boring old fare like it must die for entertainment to live, well, that’s the sort of grave I’m happy to dance on.

But conservatives—who get a hard-on the moment that Kid Rock or some allegedly right-wing rocker or actor just-might-maybe run for office or says something they like politically—shouldn’t mistake shifts in how pop culture is made and consumed for the idea that the silent majority wants its music, movies, sports, and TV free of politics. Something much bigger is going on and pop music, like all pop culture, has always been political in big and small ways. That’s one of the reasons it’s popular. It allows us to engage the very sorts of questions and concerns that define us in particular times and places. For sure, we don’t want or need to be lectured about what politician to vote for, but isn’t part of what makes Dolly Parton, Bob Dylan, and Jay-Z who they are precisely the fact that they’re talking about sexism, Christianity, and blackness the way they do?

Which isn’t to say that the Grammys didn’t go out of its way to bother the majority of Americans who didn’t vote for Hillary Clinton in the 2016 election. For a show that didn’t make time for popular (and political!) artist Lorde to perform despite her being up for the prestigious “album of the year” award, the Grammys still found time to run an explicitly anti-Donald Trump sketch featuring Hillary Clinton reading from Michael Wolff’s Fire and Fury. Because when you’ve got a roomful of musical talent, what you really want to see is a failed politician who spent a good amount of her time in power railing against pop culture.

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This Should Make President Trump Happy

After a disappointing Q4 GDP print – not topping the Maginot Line of 3% growth that has been ‘promised’ – The Atlanta Fed may have just provided the talking-point-du-jour for President Trump’s administration…

Despite consensus GDP growth for Q1 at around 2.5%, The Atlanta Fed’s latest GDPNow forecast for Q1 economic growth has started at an impressive 4.2%…

 

And while we don’t want to steal the jam from Trump’s donut, we do note that the last three quarters have also see The Atlanta Fed’s GDPNow model start with a forecast above 4%…

But this time could be different?

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“We Are Already There”: How Long Before The Bond Selloff Slams Stocks

Back in November 2016, when bond yields were surging in the aftermath of Donald Trump’s election, Goldman, together with SocGen, JPM, RBC and various other banks, answered the question that has once again become especially relevant: how high can 10Y bond yields go before they start to hurt equities?

Over a year ago, Goldman answered that “the equity market is still at a level that can cope with moderately rising bond yields. We estimate that a rise in US bond yields above 2.75% or probably between 0.75-1% in Germany would create a more serious problem for equity markets: at that point we would expect the correlation between bonds and equities to be more positive – i.e., any further rises in yields from there would be a negative for stock returns.”

2.75% is also the level above which JPM’s head quant Marko Kolanovic said  the 10 Year would begin to cause problems for stocks: “should bond yields continue increasing (e.g. 10Y beyond 2.75%) this will risk an equity sell-off that usually triggers a broader deleveraging of var-based strategies.“

More recently, Jeff Gundlach warned that “if the 10Year goes to 2.63%, stocks will be negative impacted.” As of this morning, the 10Y yield rose as high as 2.725% – a level last seen in early 2014 – before fading some of latest surge.

* * *

So fast forward to today when overnight SocGen’s strategist Kit Juckes rekindles the conversation of how long before the bond selloff morphs into an equity selloff – one which both Bank of America and now Goldman expect will hit over the next three months – by comparing equity investors to frogs who are about to be caught in boiling water.

In his note “How long before the bond sell-off heats up markets?“, Juckes points out he may “as well get an early vote in for ‘boiling frogs in rising yields’ as the next market theme.” Still, contrary to November 2016, the Socgen strategist doesn’t see a critical resistance level beyond which stocks tumble, at least not yet.

A slow-motion rise in bond yields is not, yet, threatening risk sentiment in equities, credit or EM. As long as it doesn’t, yields can rise on a tide of decent economic data and expectations of higher inflation thanks in no small part to rising oil prices. The frog analogy (it doesn’t realise it’s getting boiled until it’s too late to escape) is likely to be popular in 2018. For now, we’re basking in synchronised growth and thinking happy thoughts……

Those thoughts may be far less happy if the market takes a long, hard look at the crashing US savings rate and realizes its broad, deflationary implications for the broader economy, and the fact that the recent, GDP -boosting spending surge is coming to an abrupt end.

And while we were disappointed by Juckes’ lack of a concrete target for a level in the 10-Year which would slam stocks, conveniently his employer put out a table back in November 2016 which answered the question on everyone’s lips: when will bond yields start to hurt equities. Or, as SocGen would say: “we are already there.“

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Proposal For Nationalized 5G Network Triggers Blowback From Regulators, Industry

Last night, Axios dropped a bombshell on the week’s already brimming news cycle when it published a report and PowerPoint deck created by a National Security Council staffer outlining the necessity of building a nationalized 5G network to guard against cyberthreats.

But while the PowerPoint portrayed a nationalized 5G network as essential for national security, Axios said Monday that the report is generating a fair amount of blowback.

 

Axios

According to Axios, those sounding alarm bells range from those who fear it could lead to greater surveillance to those who see it as an unwarranted encroachment on free enterprise. Still others worry that government control of key communications networks could threaten free speech.

Both the FCC and CTIA issued statements this morning opposing the idea. FCC Chairman Ajit Pai opposes the idea.

“The wireless industry agrees that winning the race to 5G is a national priority. The government should pursue the free market policies that enabled the U.S. wireless industry to win the race to 4G.”
– CTIA president and CEO Meredith Attwell Baker via statement

“I oppose any proposal for the federal government to build and operate a nationwide 5G network.”

“The main lesson to draw from the wireless sector’s development over the past three decades-including American leadership in 4G-is that the market, not government, is best positioned to drive innovation and investment.”

“Any federal effort to construct a nationalized 5G network would be a costly and counterproductive distraction from the policies we need to help the United States win the 5G future”
– FCC chairman Ajit Pai

Even if the US government builds and pays for the 5G network, it will need the support of the wireless industry – carriers, equipment vendors and device makers – to make it a reality.

So far, that doesn’t appear likely.

Three of the four major wireless carriers either declined comment to Axios or didn’t return requests for comment. The only one that did speak out, AT&T, said it couldn’t comment specifically on the proposal, but added that private sector work on 5G is “already well down the road.”

Twitter VP Colin Crowell noted that “[n]ationalization of a key resource in the nation’s wireless infrastructure would be a dramatic departure from policies predicated on the free market driving innovation, competition, and consumer benefits.”

But further clarification may be provided in short order. David McCabe notes that David Redl, the top Commerce official on spectrum, is appearing at the State of the Net conference this morning, while FCC chairman Ajit Pai presides over an open FCC meeting on Tuesday – which he always follows with a press conference.

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Fitness Tracking App Accidentally Reveals Secret US Military Bases, CIA “Black” Sites

An interactive online fitness tracking map published in November of 2017 which compiles a running history of the location and routes of 27 million fitness-device users has unwittingly revealed the location, staffing, patrol routes and layout of U.S. and foreign military bases around the world.  

San Francisco based fitness company Strava posted their “global heatmap” to their website, containing two years worth of fitness data across several fitness devices such as Jawbone and Fitbit. The map is not live, rather, it is a composite of overlapping routes. 

In most urban areas such as major cities such as New York, Strava’s map appears as solid neon lights following just about every road on which one might exercise. 

a
New York, NY

Remote locations, however, such as deserts in places like Syria and Iraq are almost entirely dark – aside from clandestine locations where military personnel using fitness trackers are stationed.  Personnel in some of the US government’s most sensitive facilities have been unwittingly been broadcasting sensitive information up to and including underground tunnels. 

At a site in northern Syria near a dam, where analysts have suspected the U.S. military is building a base, the map shows a small blob of activity accompanied by an intense line along the nearby dam, suggesting that the personnel at the site jog regularly along the dam, Schneider said.

“This is a clear security threat,” he said. “You can see a pattern of life. You can see where a person who lives on a compound runs down a street to exercise. In one of the U.S. bases at Tanf, you can see people running round in circles.” –WaPo

Air Force Col. John Thomas, a spokesman for U.S. Central Command, said Sunday that the U.S. military is looking into the issue.

FBI Academy:

a
FBI Academy, Stafford, VA

NSA Headquarters:

a
NSA Headquarters, Fort Meade, MD

(more on that one here)

The man who discovered the phenomenon is Nathan Ruser, who is studying international security and the Middle East. 

“I wondered, does it show U.S. soldiers?” Ruser said, before zooming in on Syria. “It sort of lit up like a Christmas tree.”

Since Nathan’s discovery, dozens of other internet sleuths have taken to Twitter to post their findings. Be sure to click the tweets and check out the replies to see even more; 

More Strava maps:

a
Location unknown

Burning man

a

Chernobyl:

a

Antarctica:

a

Unidentified island:

a

Strava issued a statement effectively telling users to mark their activities private if they don’t want to broadcast locations: 

“Our global heatmap represents an aggregated and anonymized view of over a billion activities uploaded to our platform,” the statement said. “It excludes activities that have been marked as private and user-defined privacy zones. We are committed to helping people better understand our settings to give them control over what they share.”

Talk about first world problems…

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Frontrunning: January 29

  • Global Stocks Start 2018 With a Roar (WSJ)
  • Challenged on all fronts, Britain’s May faces pressure over Brexit law (Reuters)
  • Governments Worry That Cryptocurrencies Could be the ‘Next Swiss Bank Account’ (BBG)
  • U.S. Spending Rises in December; Saving Rate Lowest Since 2005 (WSJ)
  • Trump security team sees building U.S. 5G network as option (Reuters)
  • All Signs Point to Big Democratic Wins in 2018 (BBG)
  • U.S. Companies Brace for Wider Oversight of Chinese Deals (WSJ)
  • The Follower Factory: how celebs buy twitter followers (NYT)
  • U.S. authorities due to make arrests in futures ‘spoofing’ probe (Reuters)
  • North Korea, Under Sanctions Strain, Dials Back Military Exercises (WSJ)
  • First Lady’s Military Flights Before Washington Move Cost More Than $675,000 (WSJ)
  • Why Canada is the next frontier for shale oil (Reuters)
  • SpaceX’s New Beast of a Rocket Is Go for Launch (BBG)
  • Japan raps Coincheck, orders broader checks after $530 million cryptocurrency theft (reuters)
  • How Apple Built a Chip Powerhouse to Threaten Qualcomm and Intel (BBG)
  • AutoNation Just Decided to Stop Caring About Pot Smoking (BBG)
  • London’s Bankers Haven’t Been This Gloomy Since 2008 (BBG)
  • U.N. employees in Gaza hold protest strike over U.S. aid cut (Reuters)
  • Hung out to dry twice, Tennessee city stumped by Trump’s washer tariffs (Reuters)
  • British Lords Get Ready to Disrupt Brexit (BBG)
  • VW faces inquiry call over diesel fumes test on monkeys (reuters)

 

Overnight Media Digest

WSJ

– U.S. President Donald Trump extended his threats of action against America’s trading partners, this time hinting at major retaliation against the European Union for what he described as its “very unfair” trade policy toward the U.S. on.wsj.com/2BAOAJM

– A group of activist investors are joining together to call on Avon Products Inc to seek a buyer, in a move that could set up a fight for the company’s board as a key deadline looms. on.wsj.com/2BCLJQQ

– Chinese e-commerce giant Alibaba Group Holding Ltd and Foxconn Technology Group have co-led a 2.2 billion yuan ($348 million) funding round into Chinese electric-vehicle manufacturer Xiaopeng Motors, marking Alibaba’s first big investment in a carmaker. on.wsj.com/2BzDFAf

– In initial disclosures about critical security flaws discovered in its processors, Intel Corp notified a small group of customers, including Chinese technology companies, but left out the U.S. government, according to people familiar with the matter and some of the companies involved. on.wsj.com/2BCJI7e

 

FT

– British construction outsourcing company Carillion Plc attempted to “wriggle out of its obligations” to pensioners for the last decade, according to Parliament’s Work and Pensions Select Committee.

– Russian opposition leader Alexei Navalny was released from police custody late on Sunday after a brief appearance at a rally in Moscow calling for the boycott of a March presidential election that he said would be rigged.

– Commonwealth Bank of Australia named retail banking boss Matt Comyn as its new chief executive officer, to lead the company as it faces challenging trading conditions as well as allegations of massive money laundering system breaches.

 

NYT

– The Los Angeles Times is expected to name Jim Kirk, a veteran journalist and former editor and publisher of The Chicago Sun-Times, as its next editor in chief on Monday, according to two company officials. nyti.ms/2DHgwxI

– A substantial rise in oil prices in recent months has led to a resurgence in United States oil production, enabling the country to challenge the dominance of Saudi Arabia and dampen price pressures at the pump. nyti.ms/2nfUxaT

– The tech companies including Alphabet Inc’s Google, Facebook Inc and Amazon.com Inc are preparing for a stringent new set of data privacy rules in Europe, called the General Data Protection Regulation. Set to take effect on May 25, the regulations restrict what types of personal data the tech companies can collect, store and use across the 28-member European Union. nyti.ms/2Gt2T74

 

Canada

THE GLOBE AND MAIL
** Despite controversy over a “success fee” that it paid for an earlier South African contract, Bombardier Inc is in a strong position to win more business from the same rail project, a senior South African official says. tgam.ca/2BA11G1

** Canada’s Prime Minister Justin Trudeau’s government is refusing to address calls for more transparency around deals some of Canada’s biggest TV providers have struck to accept payments from RT – the Kremlin-controlled news channel described by U.S. intelligence authorities as part of Russia’s “propaganda machine” – in order to guarantee distribution to Canadian viewers. tgam.ca/2BAqEGB

NATIONAL POST
** Canada will keep operating its aging CF-18s jets for another 15 years until 2032. There had been plans to take the jets out of service shortly after 2025. bit.ly/2BA2Hzd

** Ontario’s Progressive Conservative party’s president Rick Dykstra announced his resignation in a post on his verified Twitter account on Sunday night. Dykstra’s resignation follows a major staff shakeup at the party earlier in the day, as well as the resignation of party leader Patrick Brown amid sexual misconduct allegations last week. bit.ly/2BB8F2T

 

Britain

The Times

– Ministers have been urged to force social media companies to crack down on online grooming after police revealed that they have investigated more than 1,300 allegations of children being targeted in breach of a new law. bit.ly/2DJdNb0

– Brexiteers have begun a co-ordinated attempt to discredit Philip Hammond and senior officials days before cabinet ministers see the first economic analysis of different options for exiting the European Union. bit.ly/2DIefCi

The Guardian

– Prime Minister Theresa May is under growing pressure from both wings of her own party to offer more clarity in public about what Brexit deal Britain wants, or face the mounting risk of a no-confidence vote. bit.ly/2Grbkjk

– The BBC will admit this week it has made mistakes in how it has paid on-air stars and reveal it is prepared to work with women who have campaigned for equal pay at the corporation to overhaul its pay structure. bit.ly/2DXhM31

The Telegraph

– Ingvar Kamprad, the billionaire founder of flat-pack furniture retailer Ikea, has died at his home in southern Sweden following a short illness at the age of 91. bit.ly/2GreraD

– Carillion Plc has been accused of trying to “wriggle out” of its pension obligations by a committee of members of parliament. bit.ly/2BzGeCb

Sky News

– Unsecured creditors of BHS, the retailer once owned by Philip Green‎, lodged claims worth almost 1 billion pounds ($1.42 billion)in the aftermath of its collapse, according to a report compiled by the chain’s liquidators.

 

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Some Republicans Open to Legislation Protecting Robert Mueller, Marco Rubio Fires Chief of Staff Over Alleged Misconduct, Anti-Putin Protests in Russia: A.M. Links

  • Some Republicans in Congress say they’re interested in legislation that would prevent President Trump from firing special counsel Robert Mueller.
  • “No, Ivanka Trump didn’t stop José Andrés from getting into a party.”
  • Sen. Marco Rubio (R-Fla.) fired his chief of staff for alleged “improper conduct” with a subordinate.
  • Demonstrators across Russia called for a boycott of the presidential election in March.
  • A proposed law in Poland would prohibit blaming the country or its people for any part of the Holocaust, setting a three year prison term for referring to concentration camps as “Polish death camps.”
  • Sauli Niinistö was re-elected president of Finland in the first round of voting.
  • A French climber was rescued off “Killer Mountain” in Pakistan.
  • Grammys host James Corden and several performers wore white roses to the ceremony in support of Time’s Up.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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Bomb Threats Target 25 Moscow Buildings, Force Evacuations Of Parliament, Stock Exchange

In an incident that recalls the “almost simultaneous” bomb threats across Russia back in September that resulted in the evacuation of 45,000 people, briefly disrupting life in Russia’s largest city, a bomb threat targeting 25 buildings in Moscow prompted mandatory evacuations of Russia’s upper house of Parliament and the city’s stock exchange, according to TASS.

 

Moscow

The threats also targeted hospitals in the city, a source within the city’s security services told TASS.

“We received an anonymous call about an explosive device planted in the building. In line with the security requirements, the staff members were evacuated and checks at the building are underway,” the statement said.

Meanwhile, the State Duma, the lower house of parliament, received two bomb threats over the past four hours, the source said.

Moscow’s famed Bolshoi Theater has also been targeted…

 

 

As we pointed out at the time, a wave of phone calls has swept across Russian cities and towns since September. The anonymous bomb threats targeted more than 4,000 facilities in 215 Russian cities, affecting more than 2.6 million people were evacuated. Emergency services combed through secondary and higher schools, shopping malls, airports, railway stations, hotels and governmental buildings.

As a reminder, Russian stocks just broke to new record highs, despite increasing US sanctions and the infamous “sell signal” from The White House.

 

Moscow

 

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