Month: April 2018

As was largely expected ahead of Tuesday’s 1201am deadline, The Wall Street Journal reports that President Trump has decided to postpone decisions about imposing steel and aluminum tariffs on the European Union and other U.S. allies until June 1.

The temporary exemptions extended to the EU, Canada, Mexico, Australia, Brazil and Argentina, which, as we noted earlier, if revoked would throw the global markets into turmoil and international supply chains into a deep well of uncertainty, as the exemptions add up to almost half of the U.S. steel imports.

The U.S. initially imposed world-wide tariffs of 25% on U.S. steel imports and 10% on aluminum in March, but it temporarily exempted several U.S. allies from the tariffs. Monday’s decisions extend that delay.

Extensions for Canada and Mexico were widely expected, but it was uncertain whether the U.S. would proceed with tariffs on Europe May 1 as scheduled.

The extension does not erase the uncertainty that will remain in the interim. It is still unknown if some countries can negotiate limited quotas, make deals on goodwill, or if all countries will be slapped with tariffs.

In addition, WSJ reports that the White House will announce Monday evening that it has finalized a deal to exempt South Korea from the tariffs, mirroring details that have been previously released by the U.S. Trade Representative’s office.

The remaining decisions on tariffs will be decided later, the official said.

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At the end of 2015, just before New York State hiked minimum wages, we warned that the price of food was about to surge as restaurant managers passed through rising wages to end clients. Meanwhile, some restaurants, worried about losing their clients, opted to instead eliminate tipping entirely – that primary source of incremental wages for thousands of food industry workers – while hiking base prices by as much as 30%, with the money going toward higher payroll. Worst of all, many restaurants simply laid off much of their staff who suddenly became unaffordable.

In short, there would be less money for everyone, even as food prices surged, disappointing everyone in the process.

Now, a little over two years later, just as so many libertarians predicted would happen, the NYC restaurant financial situation has turned from merely painful to grotesquely dire for the vast majority of managers as a result of record mandatory wage hikes over the past couple of years, in addition to rising rent, food and other costs.

The result: restaurant owners are demanding that the socialist administration of Bill de Blasio and other City Hall lawmakers allow them to levy a surcharge on all diners to cover their bloated expenses.  Without the surcharge, which could range from 3% to 5% – or more – many restaurant owners said they will go out of business.

As MarketWatch reports, a group representing more than 100 restaurateurs – among them such exclusive venues as Nobu, Tao, Smith & Wollensky, Tribeca Grill and Daniel – drafted a giant letter that was displayed on the steps of City Hall Wednesday. The group claims to have weathered nine mandated wage increases over the past several years. Next up: a minimum wage hike in 2019, to $15.

“Allow us the option of using a clearly disclosed surcharge to generate the revenue to simply survive,” the group said in an open letter to Mayor de Blasio.

Among the complaints the restaurants list are the following:

• We have laid off tipped employees including, servers, bartenders, bussers and runners
• We have cut hours for many employees.
• We have laid off highly compensated employees.
• We have changed our menus to try to control kitchen payroll.
• We have closed restaurants, which will continue closing at an increasing rate.
• We have been forced to increase menu prices. These price increases have not and cannot come close to offsetting mandated wage increases and real estate costs.
• We do not consider opening new full-services restaurants in NYC.

Full letter below:

Yes, it turns that not even Daniel – where prix fixe dinners run in the hundreds – can afford to pay a $15 minimum wage… so what’s left for all other NYC restaurants that charge far less?

Another irony: New York City – with its socialist administration – is the only place in the U.S. that bans such a fee even as it mandates minimum wage increases virtually every year.

While restaurants have been lobbying their direct city regulator, the Department of Consumer Affairs, which bars such a surcharge, for the past two years to no avail the issue is reaching a new urgency now as Gov. Cuomo is considering raising the minimum wage for tipped employees to $15 an hour, abolishing the current minimum wage of $8.65 for tipped employees.

Absent the ability to pass on this price increase to customers, many restaurants would promptly go insolvent.

But why not just raise food prices instead of sticking on an additional surcharge? According to Andrew Rigie, executive director of the New York City Hospitality Alliance, restaurant owners would rather use a surcharge to bring in additional revenue than raise individual menu prices because it is less likely to scare away diners.

“It’s a consumer perception issue,” Rigie said, because apparently diners are so stupid they don’t realize they will still end up paying more, only instead of knowing the hit in advance, they will only see it in the final bill.

Already Hollywood stars like Sarah Jessica Parker are throwing their considerable influence into the debate, framing it as a social justice issue. Parker is headlining a May 21 gala fundraiser for One Fair Wage, which seeks to abolish the tipped employee minimum wage. It gets better: tips lead to sexual harassment, the group claims.

Veteran restaurateurs like Drew Nieporent, owner of Nobu and Tribeca Grill, said if Cuomo does away with the lower minimum wage — and the city doesn’t allow a surcharge to cover the added expense — it will be “disastrous” for restaurants.

Meanwhile, other liberal bastions such as Seattle and California, where wages have grown fast, are increasingly turning to surcharges to defray their costs. Translated: restaurant price are rising at a roughly 5% clip each year.

Los Angeles eatery Bestia, for example, adds a 4% charge to all checks, according to its menu “to benefit our back of the house employees.” Soon, such “benefits” are coming to every restaurant near you, unless of course NYC’s socialist administration refuses. In which case, watch as the liberal dream of constantly rising wages translates into a nightmare for New Yorkers, where only the most exclusive and expensive restaurants can operate as the lower and medium tiers go out of business, proving once again that socialism is always a terrible idea.

 

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One of the vexing problems that has emerged this earnings season is why, despite blockbuster earnings, do most stocks fail to rise, or in many cases sink promptly after reporting stellar numbers.

According to Morgan Stanley’s Chris Metli, executive director in the bank’s Institutional Equity Division, the answer is as follows: on one hand, the the dollar has begun to move higher alongside yields which suggests rates are getting to a point where they could limit further upside, and stocks didn’t rally much on good earnings suggesting expectations are already high.

But while that reason explains the prevailing grind in the market, and the recent lack of momentum and direction, the real reason for the lack of rallies on strong earnings is that “hedge funds remain very crowded in the same positions (i.e. Tech) and there are fewer marginal buyers left.”

But before we get into details, here are some more reasons why Morgan Stanley believes that the best the market can hope for here is a slow, painful grind higher:

A grind higher is consistent with what last week’s price action tells us: the dollar has begun to move higher alongside yields which suggests rates are getting to a point where they could limit further upside, and stocks didn’t rally much on good earnings suggesting expectations are already high.

That’s a problem because according to the MS trader, a grind may disappoint some investors hoping for a quicker snapback – option market flows have had a bullish tilt lately and the market implied probability of a 5% gain is greater than a 5% decline over the next 3 months.

Investors should consider taking advantage of this pricing while positioning for a grind higher by overwriting longs or buying calls spreads or call ratios.

Taking a step back, what is positioning and recent price action telling us here? Here is Metli’s response:

Macro shifts are a headwind as yields are rising alongside the dollar.  This partly reflects the better US growth outlook vs the rest of world, but the follow on is that it could tighten financial conditions – meaning less potential equity upside.

• This feedback mechanism is why equities tend to become more correlated to bonds when interest rates become more correlated to the dollar (see chart below)
• Macro correlations measured over the last several months don’t show any shifts – but over the last week the stronger dollar has come alongside higher yields, particularly real yields – if this continues, it is a headwind for stocks
• For now higher yields are more of a headwind than a negative catalyst
• But any increase in stock-bond correlation does raise the specter of risk parity fund selling, which have not delevered as much as other systematic funds.

 

This brings us to the key observation, namely that stocks are not rallying on strong earnings, and here is the paradox in a nutshell: 80% of SPX names have beat earnings vs 67% historically, but the SPX is down 1.3% since earnings started and importantly the market could not hold on to the Thursday post-close rally

Here is the reason “why” according to Morgan Stanley: 

Very simply HFs remain very crowded in the same positions (i.e. Tech) and there are fewer marginal buyers left.  The MS PB Content team has noted that HF gross exposures remain elevated, and from conversations with investors this positioning was driven by optimism over 1Q data.

The bank then looks broadly across investor types, and asks, rhetorically, “who is left to buy?” Here is its unsatisfactory answer:

• Retail has been selling (passive funds saw the biggest outflows since 2009 over the last 3 months, see charts below) and likely remain on the sidelines due to the increase in volatility
• Likewise systematic investors are unlikely about to buy too strongly as volatility remains elevated
• HFs have hung on to their positions over the last few months as they have benefited from a positive ‘performance cushion’ with the average fund up 1 to 2% YTD per the MS PB Content team.  But recent returns of the MS Momentum baskets suggests performance is struggling (MSZZMOMO for fundamental-like sector-biased / MS00MOMO for quant-like sector neutral – see chart below).  And MS Equity Strategist Mike Wilson has written about the lack of leadership in US equities (see Leadership in Transition; Buy Energy and Fins; Sell Semis and Retail, April 23 2018) which could challenge consensus positions further (see chart below).
• Corporates will start to re-enter the market as earnings season draws to a close, but these flows argue more for less downside than explosive upside as buybacks are a drip not a flood
• Asset managers and more macro-focused investors could provide some demand but their flows have been choppy  (selling in Feb and March has turned to very modest buying in the last week) and they remain a wild card

Given the above, Metli believes that “the path forward will likely be one of continued chop around a grind higher.  The chop is driven by P/E volatility as investors debate how close the economy is to the end of the cycle, with the grind driven by a continued steady rise in forward EPS.“

Finally, some suggestions on how to trade the “chop”, which is challenging for directional users of options in that the choppiness raises option prices in this environment, but does not necessarily widen the range of the market to the same degree. 

* * *

So while Morgan Stanley’s quants view near-term volatility pricing as roughly fair from a dynamic hedging perspective, “if buying options to benefit from price movement they are a little rich – hence the view to overwrite or play the upside via call spreads.”

Longer-term, however, the bank remains bullish on volatility given the nearing turn of the cycle – but for directional users of options it is better to wait until there is a catalyst for a crack in earnings, which will drive a true break of the range.

Morgan Stanley’s suggested trades: Investors should consider call spreads on SPX, or overwriting the higher volatility NDX:

• Buy SPX May month-end 2725 / 2775 call spreads for ~50 bps, 2.9x max risk-reward
• Sell QQQ June 170 calls for 76 bps (5% OTM)

The main near-term risks to these limited-upside trades is a trade war de-escalation after Mnuchin’s visit to China or geopolitical progress in Korea – investors more positively inclined on the outcome of those events may consider waiting for them to unfold before playing the more structural themes above.

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The peso is down over 1% today, not helped by remarks from a co-founder of the party led by leading presidential candidate Andrés Manuel López Obrador has sparked controversy by advocating the expropriation of companies that refuse to cooperate with an AMLO administration if he wins the July 1 election.

“If businesses won’t cooperate, expropriate…”

As MexicoNewsDaily.com reports, prominent writer Paco Ignacio Taibo II, currently the art and culture secretary of the Morena party’s national executive committee, made the remarks while speaking at an event attended by party supporters earlier this week.

“. . . One day after taking power, I imagined Andrés Manuel in the [presidential residence] Los Pinos, right? Then he welcomes a committee of the powerful men of Mexican finance: [Carlos] Slim is there, the owner of the Modelo brewery is there, to tell him: ‘Careful, Andrés, because if you move in that sense [expropriation], we’ll take the factories to Costa Rica,” he said.

“[I will be surprised] if that same day, at that same time, we are not two or three million Mexicans in the street saying: ‘If they want to blackmail you, Andrés, expropriate them, fuck them, expropriate them,’” Taibo continued in a video currently circulating on social media.

AMLO, left, and Taibo, center: expropriation advocated. AMLO, left, and Taibo, center: expropriation advocated.

The writer, who is reportedly close to the “Together We Will Make History” coalition candidate, then went on to assert that the social mobilization of the Mexican people will be essential to achieving significant change in the country.

Just what America needs, further social unrest in Mexico to pile on the drug cartel war.

Read more here…

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Authored by Alex Deluce via GoldTelegraph.com,

China has developed a craving for consumer goods, the more luxurious, the better. Along with most other countries, China’s credit boom and spending spree are being followed by out-of-control debt.

While household debt is spiraling, the Chinese government is pushing to double the size of the economy by 2020 (setting this goal in 2010). This ambitious project will almost certainly entail more lending and increased debts. There is a question as to exactly how much more debt China can handle.

China’s debt has been rising steadily, from 141 percent of GDP in 2008 to 256 percent of GDP in 2017. This type of rapidly-increasing debt level has frequently been the precursor of a hard economic fall, and the world is watching China carefully.

While countries such as the U.S. and the U.K. also have large debt-to-GDP ratios, the difference is that both are high-income countries, while China has only reached middle-income status, with only $15,400 in household purchasing power. This is a quarter of the household purchasing power of the US. Getting out of debt on China’s low level of income will be far more difficult than in higher-income nations.

Like many global central banks, the People’s Bank of China(“PBOC”) has been injecting lots of cash into the system to try to provide some stability, which is only a temporary fix for a long-term problem. 

Increasing debt without a concurrent economic gain has inevitably led to the economic downfall. Out of 43 countries that experienced an increase of credit-to-GDP of more than 30 percent in five years, 38 of those countries faced a financial disaster. Those statistics do not bode well for China.

China’s economy ranks second globally. It is a leading trader and has the third-largest bond market. Any economic meltdown would have a global ripple effect, with neighboring Vietnam, South Korea, and Malaysia being most at risk. The US economy would feel the effects, as well. China has become an important market for US companies, such as Apple Inc., Intel Corp., and Yum! Brands. For these US companies, China represents a significant market and source of revenues. Intel Corp.’s Chinese revenues increased from 13 percent of total revenues in 2008 to almost double that amount, 24 percent, in 2016. Any financial crash in China would adversely affect the revenues of these and other US companies.

Thus far, China’s household debt has been reasonably leveraged because of easy and available credit. Higher interest rates could curtail this easy credit, but the PBOC has kept the interest rate at 4.35 percent. This inaction regarding interest rates does not mean the Chinese government and Chinese bankers are unaware of the debt problem. The government is encouraging smaller banks to merge to increase capital. Bad loans, however, remain a problem. In 2016, 41 banks wrote off 576 billion yuan in bad loans, up considerably from the 117-billion-yuan bad loan write-offs in 2013.

On the plus side, China has experienced stellar GDP growth, almost seven percent in 2017. This translates into increased profits and higher tax revenues. If this growth is sustained in the next few years, the debt-GDP ratio could remain steady at 290 percent.

China’s economic growth has encouraged widespread home buying and mortgage debts as property prices soar. Mortgage debt has increased by 25 percent in two years. People who have bought during the economic boom are now facing monthly mortgage payments that equal up to half of their monthly income. Household budgets are stretching to the breaking point. This has forced many to curtail spending elsewhere and putting off other necessary big purchase items. This at a time when the government is encouraging greater consumer consumption.

China has traditionally relied on savings as a buffer against financial disaster. However, many younger households will likely use those savings to pay off debt. This could present a problem during times of emergencies, as China’s welfare system and healthcare lag behind other developed nations who have created a more stable safety net. If the central bank does increase interest rates, higher mortgage payments could present genuine problems for homeowners, even though it would help curtail the spiraling debt problem and lavish consumer spending. This is not an easy dichotomy for the Chinese government to handle, and it may put it in a lose-lose situation.

China has grown from an export nation to a nation of consumers, all of whom are eager to stimulate the economy with increased spending. 

Like many other countries, China is on going down a road of unsustainable spending. This may mean that China’s boom may see a dramatic fall, and consumers may be saddled with debts they have no way of repaying.

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Following the deadly Valentine’s Day shooting in Parkland, Fla., banks and credit card companies considered blocking consumers’ gun purchases as corporate America engaged in a marathon virtue-signaling session to prove to their customers that they too care about the lives of students being endangered by gun violence.

Of course, these bans would’ve likely been temporary. Banks could’ve quietly withdrawn the restrictions once the public furor quieted down. However, some banks and credit card companies are now considering a more permanent move that would transform them into foot soldiers in the deep state’s push to create a register of all gun owners. The Wall Street Journal reported Monday that some lenders are now discussing ways to identify purchases of guns through their payment systems. This would effectively transform them into tools of the intelligence services by monitoring virtually all gun sales at sporting goods stores and other merchants that aren’t transacted in cash.

As WSJ explains, card networks like Visa and Mastercard can request approval for what’s called a merchant category code – or MCC – a protocol that’s governed by a Switzerland-based nonprofit. The code can be applied to gun merchants so that banks can flag new gun purchases using their credit cards.

The lenders are still discussing what types of merchants would receive the new code. Would it be all gun sellers? Or just sporting-goods merchants but not companies like Wal-Mart that primarily sell other products.

One bank has even had conversations with lawmakers about a bill to require merchants to report ALL purchases of certain “gun-related” products.

Currently, card companies, including networks and banks that issue credit cards, have little to no insight into gun purchases. Gun sellers fall into broader categories such as sporting-goods retailers or specialty retail shops. Big-box retailers that also sell guns are often assigned codes that include “variety” or “discount” stores.

An area of discussion, according to the people familiar with the talks: How far reaching a new MCC would be. This code could identify purchases made at gun dealers—but not at merchants that primarily sell other products, such as Walmart Inc.

Some talks have gone further. At least one large U.S. bank has had early conversations with lawmakers about potential legislation to require merchants to share information about specific gun-related products consumers are buying with their cards, according to people familiar with the matter.

As WSJ reminds us, banks have at times blocked purchases of certain items that they believed to be risky, or part of a legal gray area. They also act as the front-line of defense in monitoring payments for suspicious – possibly terrorism-related – activity. And in rare instances, banks have stopped doing business altogether with politically unpalatable groups like the government of South Africa during the apartheid era.

Citigroup has already started restricting purchases of guns using its credit cards to users over the age of 21 (because the last thing these banks want to see is the next mass murderer using a Citigroup-branded credit card to make a fatal purchase).

This would also open up a new can of worms, as banks would encounter similar problems to those facing Facebook, Twitter and other social media companies as they decide how they should handle all the sensitive user data they are collecting.

“A bank could say, ‘We’re not going to do business with gun manufacturers,'” said Jeremy Stein, a former member of the Federal Reserve board of governors who currently is an economics professor at Harvard University. “But when it gets into using the information, you’re getting into the same issues Facebook and others had problems with.”

A dividing line, he added, would be whether banks are monitoring transactions for criminality. “If it’s just a policy objective, even if I liked the policy objective, I’d think it’s worrisome,” Mr. Stein added.

Divisions exist within the financial-services industry, which previously has resisted pressure to restrict purchases of controversial products such as tobacco.

“We don’t think it’s a good idea for banks to decide what products and services Americans can buy,” Wells Fargo CEO Timothy Sloan said at the bank’s annual meeting last week. “It should not be up to me, to us, to decide that. It should be up to folks following the laws and folks making decisions.”

Banks have experienced some political blowback as a result of their relationships with gun owners. The American Federation of Teachers announced it would cut ties with Wells Fargo & Co. over the bank’s relationship with the National Rifle Association, as well as with several gun manufacturers.

But not as much as they would receive if they went ahead with the plan to flag all gun buys. With nearly half of Americans admitting to owning guns, we imagine most customers wouldn’t take too kindly to their shopping habits being recorded and sent to the government.

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Authored by Jeffrey Snider via Alhambra Investment Partners,

The current expansion is already one of the longest on record. With another quarter entering the BEA’s books, it has been 35 since the last declared recession. At +2.3% for the current one, there won’t be another considered anytime soon putting this economy within reach.

Yet, out of those 35 quarters only 10 have contained Real GDP growth meeting or exceeding 3%. In the late nineties, the tail end of the current recordholder, GDP advanced by at least 3% in fifteen consecutive. Now, it’s cause for hyperbole whenever this economy manages just two in a row (as it so rarely has). This is the scale of the current boom, the length of time alone.

There’s the big problem. If you say that the economy has expanded for nine years, it is often just assumed that it is doing so consistent with past expansions. To say nothing of the big contraction in 2008-09, it’s clear the economy struggles with those two problems where the combination of them is the amount of time adding up to only immense imbalances, problems, and vast costs (opportunity most of all).

We simply cannot consider it any other way, at least not if we are interested in avoiding the various mysteries that plague so much commentary (where’s the wage growth?) We cannot ignore the first part for the role it may have played in the second. In other words, the conventional view has it that the contraction (the 1st problem) in 2008-09 was somehow completely separate from the lack of recovery (the second problem). Calling it an expansion is just insulting.

It strains all common sense, especially given what happened to cause the contraction and what it is that keeps the current expansion from qualifying for that term in any meaningful way.

We are experiencing our own “L’s” as we bounce between periodic downturns and their limited upturns. The current quarter’s lackluster result continues the same frustrating trend where Real GDP following the near recession in 2015-16 is less than it was preceding it. The economic ceiling appears to be ratcheted downward for each one.

It’s this way for the important underlying components, too. Personal spending, in real terms, was in Q1 2018 the lowest Q/Q growth since 2013. And it continues the trend of “residual seasonality” that we’ve shown several times isn’t residual but is seasonal. The problem isn’t statistical but the “L” nature of this lengthy “expansion.”

Business investment, the necessary supply side addition of capex, also appears to be captured within a lower range post-2016 than it was 2013-14; which was already considerably less than 2010-11. It, too, qualifies as growth or expansion only in the narrowest, technical sense. The further diminishment of the upside if far more relevant than how many quarters might contain a plus sign.

The more extreme case for business investment, at least in terms of GDP components, is inventory. There has been a drastically different reaction to that last downturn, meaning that for two full years afterward businesses have responded to circumstances with far more caution. It is also a complete departure from sentiment surveys that have suggested only great optimism.

When any expansion of any nature comes out so uneven, that’s going to lead to more careful consideration as to economic participation. It’s an elevated sense over the past couple of years because of the growing distance between rhetoric or mainstream projections, and this much different reality.

Economists say everything is picking up, even that the economy itself now risks overheating. They appear unaware that businesses, in particular, have heard this all before – several times now. It’s an almost wait and see attitude at this point, quite appropriate for the circumstances. The boom, such that is, must now actually boom. Yet another positive quarter just doesn’t cut it.

In economic terms, or for GDP, that means a limited upside unless something actually and substantially changes. The latest BEA report merely confirms that nothing has. There isn’t one part that stands out to suggest otherwise. In its own way, it starts to lead us back in the direction of risk and the seeds of the next prospective downturn.

Instead, taken as a whole, everything points in the direction of a continued ratchet effect, these alternating “L’s” that though they haven’t qualified as additional recessions, and therefore the “expansion” remains intact, it works out to a completely different paradigm. This current economy is nothing like it might seem when focused only on positive numbers.

Recall then-Treasury Secretary Geithner’s August 2010 quasi-official announcement of the recovery:

The recession that began in late 2007 was extraordinarily severe, but the actions we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery…

The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years — the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve — were extremely effective in stopping the freefall and restarting the economy.

The 35 quarters of this near-record expansion state otherwise. The economy may no longer be in freefall (and it’s dubious to believe anything done during the crisis period was effective in stopping it) but that just does not mean it has stopped falling. It used to be that way, which meant you were either in recession or out of it, so by assuming the end of the contraction you could necessarily believe it was expansion. Each additional quarter that rolls by only leaves us further behind and in a weaker state (“L”) to deal with the consequences of being wrong about that.

The only number that matters is $4.4 trillion, not $17.4 trillion. The latter is the product of 35 quarters of positive GDP, increasing it in real terms from a low of $14.4 trillion when the last declared cyclical trough ended. Had that actually been a cyclical trough, as Secretary Geithner and all the rest were only expecting, GDP would have been something like $21.8 trillion in Q1 2018. That is an enormous difference, and that gap is the only thing truly growing.

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After more than seven years of civil war, the Syrian regime is armed to the teeth with Cold War-era missile defense systems which, despite their age, still managed to shoot down a large percentage of missiles launched during an assault by a US-led coalition earlier this month on the country’s chemical weapons facilities.

But as the US flirts with taking a more aggressive role in the conflict, two of the world’s most advanced weapons systems – the US’s tomahawk missiles and Russia’s S-400 missile defense system – could end up facing off against each other, the Telegraph reports.

Following the latest coalition attack, Russia said it would supply Syria with some of its S-400 systems. A showdown between the S-400 and the US’s tomahawk missiles in Syria would mark the first time that the two systems ever came into conflict.

Russia’s S-400 – the latest generation of its missile defense systems – is the most advanced weapon of its kind in the world. It’s equipped with a sophisticated radar array that allows it to target dozens of missiles and enemy aircraft simultaneously at ranges up to 250 miles.

To be sure, its missile-intercepting capabilities are shorter range, roughly 75 miles, but the missiles can fly at speeds up to a thousand meters per second and hit low-flying targets at just a few meters of altitude.

Meanwhile, the tomahawks – launched from US navy ships – could deliver a 1000 pound (450kg) warhead with pin-point accuracy from ranges of 800 to 1500 miles.

But US military observers say the American forces could overwhelm the Russian air defenses by launching an overwhelming number of tomahawk missiles in a strike that would resemble the one launched against the Shayrat airfield in Syria last April, when President Trump fired 59 of the missiles, destroying Syrian planes and other military hardware.

“The system should have plenty of capacity to shoot down individual missiles. But it is fairly easy to swamp it just in terms of the sheer number of interceptors required,” said Justin Bronk of the Royal United Services Institute.

Of course, if the S-400 does manage to stop most or all of the tomahawks in a scenario like the one described above, it would have serious ramifications for NATO, which would need to revise its expectations surrounding Russia’s aerial-defense capacity.

“The performance of the S-400 would be very significant for Nato. The system is feared in Europe and Kaliningrad. If it was shown to be incapable of stopping significant numbers of Tomahawks it would have implications for Russia’s deterrence capability,” said Mr Bronk.

“That could be why the Russians refrained from intercepting the Tomahawks fired at Shayrat last year – nothing is more terrifying than the unknown.”

Earlier this year, Russian President Vladimir Putin’s unveiled a range of new Russian weapons, including a nuclear warhead that he said could surpass NATO’s missile defenses in Eastern Europe and strike nearly any target on Earth.

With all these new weapons being unveiled, we imagine NATO’s commanders have already been forced to go back to the drawing board again and again to try and work out how best to contain Russia with its new arsenal, which is giving the US a run for its money.

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Authored by Mac Slavo via SHTFplan.com,

Disillusioned by the promises of politicians and convinced that the entire political system is irreparably corrupt,  many Americans will be staying out of the voting booth for the 2018 elections.

This isn’t new, however, as many refused to vote in 2016 as well.

Respondents told poll takers at USA Today and Suffolk University in a recent survey:

“Nearly two-thirds of adult U.S. citizens will stay away from the polls during the coming midterm elections, and they say they have given up on the political parties and a system that they say is beyond reform and repair…

A majority of those non-voters would like to see a third party or multiple parties.” –Suffolk University

Although that number may seem high, in 2016, faced with the prospect of having to choose between Hillary Clinton and Donald Trump, 46.9% of eligible voters didn’t even vote in the presidential election.

Most of those who no longer vote have given up on the “lesser of two evils” fallacy and the irrational belief that somehow the government has our best interests in mind.

The Huffington Post noted, 

“The poll surveyed Americans who aren’t registered to vote or who are registered but say they’re unlikely to cast a ballot. Combined, the two groups include more than 100 million adults, the pollsters note.”

And the corruption in government is becoming apparent to those who choose to opt out of voting. About 68 percent of independent voters and party registered voters who say they are unlikely to vote this year agreed with the statement:

“I don’t pay much attention to politics because it is so corrupt.”

It’s a marked increase over the 54 percent of respondents who agreed to this characterization of politics in the 2012 survey.

The bad news for both major political parties continues too.  According to Truth in Media, around 63 percent of respondents in these categories agreed or strongly agreed with the statement: “I don’t pay much attention to politics because nothing ever gets done – it’s a bunch of empty promises,” which is also up from the 59 percent who said the same nearly six years ago.

Only 22 percent of respondents said the Democratic and Republican parties do a good job of representing Americans’ political views, which is down from 32 percent when the question was asked in 2012.

An increasing number of voters from both sides are beginning to see the corruption and manufactured compassion inherent in most (if not all) politicians.

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