Month: June 2018

Wicked Weather: Midwest Jumps From Coldest April To Hottest May On Record

“After an incredibly chilly April, May rebounded significantly, featuring record heat late in the month across the Midwest and while not official yet, May could go down as the warmest May on record nationally thanks to this late-month heat surge.

A plethora or heat records were broken this past weekend, including Minneapolis, MN soaring to 100°F. This broke the record daily record for May 28 and reaching 100°F for only the second time in recorded history. This intense heat has since abated, but more above normal temperatures are expected into early June across a majority of the Plains and Midwest,” explained Ed Vallee, head meteorologist at Vallee Weather Consulting.

“April featured record-breaking cold, particularly across the Upper Midwest, compared to normal. May has rebounded significantly with record heat this past weekend in the Midwest, and above normal temperatures across a majority of the country,” Vallee added.

According to the weather desk of Radiant Solutions, “Memorial Day weekend felt more like the peak of summer for many in the Central US.” Here are some peak highs from earlier this week:

  • Chicago set record highs of 97 and 95 degrees Sunday and Monday, only the second time it has endured back-to-back 95 degree days in May on record.

  • Milwaukee and Toledo established record highs for May of 95 degrees (Sunday) and 98 degrees (Monday), respectively.

  • Omaha and Green Bay, Wis., set record highs on four straight days Friday to Monday.

  • Des Moines set record highs on three straight days Saturday to Monday, including its earliest 99-degree reading on record Sunday.

  • Muskegon, Mich., hit 96 degrees Tuesday, a monthly record.

Jonathan Erdman, a Weather Channel Meteorologist, said over 1,900 daily heat records were tied or broken across the United States in late May.

During the course of May, above average temperatures covered almost the entire Continental United States.

Last week, a preliminary analysis showed that a drought developing in the Southwest could be on par with the Dust Bowl era of the 1930s.

“The epicenter of this drought is where the states of Utah, Colorado, Arizona and New Mexico all come together, but it is also devastating areas of north Texas, Oklahoma and Kansas as well. Portions of seven states are already at the highest level of drought on the scale that scientists use, and summer won’t even start for about another two months.

If we don’t start seeing some significant rainfall, it won’t be too long before massive dust storms start devastating the entire region. The mainstream media is finally beginning to wake up and start reporting on this crisis, and some reporters are choosing to make a direct comparison between this drought and the Dust Bowl conditions during the Great Depression.”

Victor Murphy, a National Weather Service Climate Service Program Manager, said, “the avg. monthly temp for the CONUS for May is 64.6F, thru 5/28. NCEI shows the all-time CONUS record being 64.71F in May 1934. With blast furnace temps across much of CONUS next 2 days, the Dust Bowl era record should fall.”

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China Holds The Cards In Trump’s Trade War

Authored by Tom Luongo,

The Trump administration continues to play hardball games with China on trade.  The latest news has China angry over Trump going forward with 25% tariffs on an array of Chinese goods after having reached a deal earlier over phone-maker ZTE.

As Bloomberg notes, the announcement by Trump, which seemed to tear up an agreement reached only 10 days ago in Washington, is the latest twist in a trade dispute between the U.S. and China that has rattled financial markets for months and could threaten the broadest global upswing in years, according to the International Monetary Fund.

That said, if Bloomberg is upset about this policy from Trump I’m inclined to be sympathetic.  But, that’s just me being churlish.  Reality is that this kind of behavior only adds fuel to the building devaluation fire building in Beijing.

I discuss why China can and should aggressively devalue the Yuan over the next few months to assist its central Asian partners, namely Iran and Turkey, resist aggressive U.S. sanctions policy over at Strategic Culture Foundation:

Secondly, China devalues the Yuan alongside these struggling emerging market countries’ currencies, not to the same degree but enough to still encourage capital inflow into China, to soften the blow and make the Yuan more attractive to procure needed goods in international markets.

And, since Trump doesn’t dare sanction Chinese banks without destroying the U.S. economy, this is just one of the paths available for countries like Turkey, Iran and the EU-27 to circumvent Trump’s aggressive trade war.

China’s moves are bigger than simply the petroyuan.

As I pointed out last week, China is preparing a broad swath of new metals futures contracts through the London Metals Exchange.  This is in addition to the gold futures contract launched last year.

The more alternatives that countries like Turkey, Venezuela and Iran have to keep their supply chains full  the better they can resist the obvious push towards regime change which is what the sanctions are trying to achieve.

These moves are subtle.  They operate below the headlines in the practical world of actual markets, not the avaricious dreams of Certified Crazy People like John Bolton, Mike Pompeo and Nikki Haley.

China’s central bank and its finance ministry are staffed with people who cut their teeth in Western bond and commmodity pits not M.B.A. programs at Ivy League schools.

It’s one of Trump’s real advantages as a President, his real world experience.  But, it’s also one of his failings as well.  He’s never really run a successful deal on people like the Russians and the Persians.  The former see through his nonsense and the latter he hasn’t been allowed to negotiate with because of U.S. policy.

It’s a weakness in that he doesn’t get the cultural imperatives and their sense of history.  They are looking at remaking the world for the next century.  Trump is trying to get through the next election.

*  *  *

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Why Turkey And Argentina Are Doomed, In One JPMorgan Chart

It was all the rage in 2017.

Not long after contrarians like Jeff Gundlach and Russell Clark said to go long Emerging Markets, suddenly everyone was doing it, either as a standalone trade or as part of a pair trade shorting one or more DMs. Of course, maybe all they were doing was indirectly shorting the USD, which was arguably the biggest driver behind EM outperformance. But, in no small part due to the recent surge in the dollar, after outperforming developed equity markets by 20% in 2016-2017, EM is underperforming by 2.5% so far this year.

Of course, it’s not just the dollar, but also interest rates, which until the recent Italian fiasco, were at 4 year, or greater, highs.

And, as JPM’s Michael Cembalest writes in his latest “Eye on the market” note, investor fears are predictably focused on the impact of rising US interest rates and the rising US dollar on EM external debt, and on rising oil prices.

And yet, despite the occasional scream of terror from EM longs who refuse to throw in the towel, a closer look shows that the market reaction has been orderly so far, with two exceptions: Argentina and Turkey, which are leading the way down. However, as the JPM Asset Management CIO shows below, the collapse in these two countries has been largely a function of state-specific/idiosyncratic reasons.

The chart below, courtesy of Cembalest, shows each country’s current account (x-axis), the recent change in its external borrowing (y-axis) and the return on a blended portfolio of its equity and fixed income markets (the larger the red bubble, the worse the returns have been). This outcome looks sensible given weaker Argentine and Turkish fundamentals. And while Cembalest admits that the rising dollar and rising US rates will be a challenge for the broader EM space, most will probably not face balance of payments crises similar to what is taking place in Turkey and Argentina, of which the latter is already getting an IMF bailout and the former, well… it’s only a matter of time.

Below, Cembalest lays out his concise justification why while both Turkey and Argentina appear to be doomed, one should not extrapolate their unique problems to the rest of the EM complex:

  • On Turkey (0.9% of the MSCI EM Index), President Erdogan lost a battle with markets when he finally agreed to  higher interest rates to defend the lira. The big risk, (as we noted earlier in the wee)k, is the inadequacy of Turkish international reserves to cover its short term external debt, particularly since some reserves could evaporate if it looks like capital controls will be imposed. There’s also $80 bn in Spanish bank exposure to Turkish borrowers. Turkey looks like an unstable EM economy of the 1980’s and 1990’s, and is a country whose problems should not be over-generalized. This goes double for Argentina.
  • With Argentina dominating EM headlines again, let’s remember what country we are talking about here and not overgeneralize its problems. As shown above, Argentina spent the last 3 years borrowing an enormous amount of money; it has defaulted on its international debt 7 times since its independence in 1816; and spent most of the last decade in investment purgatory (it was jettisoned from the MSCI EM Equity index into the MSCI Frontier Equity Index alongside countries like Lebanon and Kenya).

Putting Argentina in context, JPMorgan’s cluster model illustrates how risky the Latin American country has been for investors. In the chart below, the closer countries are to each other, the more similar they are with respect to competitiveness, regulation, investor protections, labor markets and ease of doing business. Like Bangladesh and Zimbabwe, Argentina lies at the outer edge of this known universe, far from other EM countries like China, Peru, Indonesia and Mexico and Vietnam, and lightyears away from the developed world. Only in a world of financial repression by central banks could a country like this issue an oversubscribed 100-year bond.

And speaking of Argentina’s ill-fated 100-year bond issued less than a year ago, it is already down 20% from its December peak with what JPM says are “are echoes here from 2001, when Argentina issued new debt just a few months before defaulting on it.”

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Malaysia’s Mahathir’s Reforms Could Put Saudi, UAE On The Spot

Authored by James Dorsey via The Turbulent World of Middle East Soccer blog,

Newly elected Malaysian Prime Minister Mohammed Mahathir is adopting policies that could reshape the Southeast nation’s relations with powerful Gulf states.

A series of anti-corruption measures as well as statements by Mr. Mahathir and his defense minister, Mohamad (Mat) Sabu, since this month’s upset in elections that ousted Prime Minister Najib Razak from office, are sparking concern in both Saudi Arabia and the United Arab Emirates.

Mr. Mahathir, who has cautioned in recent years against widespread anti-Shiite sectarianism in Malaysia, has questioned together with Mr. Sabu Malaysia’s counterterrorism cooperation with Saudi Arabia.

Mr. Mahathir has also reinvigorated anti-corruption investigations of Mr. Razak,  whom Qatari media have described as “Saudi-backed.”

Mr. Razak is suspected of having syphoned off billions of dollars from state-owned strategic development fund 1Malaysia Development Berhad (1MDB). The fund as well as Saudi and UAE entities allegedly connected to the affair are under investigation in at least six countries, including the United States, Switzerland and Singapore.

Apparently anticipating a possible change in relations, political scientist Abdulkhaleq Abdulla, whose views are often seen as reflecting UAE government thinking, disparaged Mr. Mahathir and the Malaysian vote days after the results were announced.

Mr. Abdullah focused on Mr. Mahathir’s age. At 92, Mr. Mahathir is the world’s oldest elected leader.

Mr Abdulla also harped on the fact that Mr. Mahathir had been Mr. Razak’s mentor before defecting to the opposition and forging an alliance with Anwar Ibrahim, Mr. Mahathir’s former deputy prime minister and an Islamist believed to be close to the Muslim Brotherhood, whom he helped put behind bars.

UAE Crown Prince Mohammed bin Zayed is known for his intense opposition to political Islam, including the Brotherhood.

“Malaysia seems to lack wise men, leaders, statesmen and youth to elect a 92-year-old who suddenly turned against his own party and his own allies and made a suspicious deal with his own political opponent whom he previously imprisoned after fabricating the most heinous of charges against him. This is politics as a curse and democracy as wrath,” Mr. Abdulla said on Twitter, two days after the election.

Similarly, Malaysian officials have signalled changing attitudes towards the Gulf. Seri Mohd Shukri Abdull, Mr. Mahathir’s newly appointed anti-corruption czar, who resigned from the Malaysian Anti-Corruption Commission (MACC) in 2016 as a result of pressure to drop plans to indict Mr. Razak, noted that “we have had difficulties dealing with Arab countries (such as) Qatar, Saudi Arabia, (and the) UAE.”

Those difficulties are likely to recur.

Mr. Sabu, the new defense minister, noted in a commentary late last year that Saudi (and UAE) wrath was directed “oddly, (at) Turkey, Qatar, and Iran…three countries that have undertaken some modicum of political and economic reforms. Instead of encouraging all sides to work together, Saudi Arabia has gone on an offensive in Yemen, too. Therein the danger posed to Malaysia: if Malaysia is too close to Saudi Arabia, Putrajaya would be asked to choose a side.”

Putrajaya, a city south of Kuala Lumpur, is home to the prime minister’s residence and a bridge with four minaret-type piers that is inspired by Iranian architecture.

Mr. Sabu went on to say that “Malaysia should not be too close to a country whose internal politics are getting toxic… For the lack of a better word, Saudi Arabia is a cesspool of constant rivalry among the princes. By this token, it is also a vortex that could suck any country into its black hole if one is not careful. Indeed, Saudi Arabia is governed by hyper-orthodox Salafi or Wahhabi ideology, where Islam is taken in a literal form. Yet true Islam requires understanding Islam, not merely in its Quranic form, but Quranic spirit.”

Since coming to office, Mr. Sabu has said that he was reviewing plans for a Saudi-funded anti-terrorism centre, the King Salman Centre for International Peace (KSCIP), which was allocated 16 hectares of land in Putrajaya by the Razak government. Mr. Sabu was echoing statements by Mr. Mahathir before the election.

The opening of the centre was twice postponed because Saudi Crown Prince Mohammed bin Salman cancelled his planned attendance. Malaysian officials said the kingdom had yet to contribute promised funds for the centre.

Shahriman Lockman, an analyst with the Kuala Lumpur-based Institute of Strategic and International Studies cautioned that Malaysia would have manoeuvre carefully.

“Whether we like it or not, whatever we think of them, Saudi Arabia is a major player in the Muslim world and in the Middle East. Their administration of the haj makes it crucial for Muslim-majority countries to get along with them,” Mr. Lockman said.

The fact that Mr. Mahathir’s election has sparked hopes that he will move Malaysia away from Mr. Razak’s embrace of Saudi-inspired ultra-conservative Islam as a political tool, despite the prime minister’s history of prejudice towards Jews and past anti-Shiite record, is likely to reinforce Saudi and UAE concern that his moves could favour Iran.

Mr. Mahathir has vacillated in his statements between banning Shiism to avert sectarianism and calling on Sunni Muslims in Malaysia to accept the country’s miniscule Shiite minority as a way of avoiding domestic strife.

What is likely to concern the Saudis most is the fact that Mr. Mahathir has said that  accepting Shiites as fellow Muslims was necessary because of the growth of the Iranian expatriate community in Malaysia. Analysts say the presence has sparked a greater awareness of Shiism and Sunni animosity because of Mr. Razak’s divisive policies.

Saudi and UAE worries about the reinvigorated anti-corruption investigation are rooted in the potential implication in the scandal of a Saudi commercial company, members of the Saudi ruling family, and UAE state-owned entities and officials.

The investigation is likely to revisit 1MDB relationship’s with Saudi energy company PetroSaudi International Ltd, owned by Saudi businessman Tarek Essam Ahmad Obaid as well as prominent members of the kingdom’s ruling family who allegedly funded Mr. Razak.

It will not have been lost on Saudi Arabia and the UAE that Mr. Mahathir met with former PetroSaudi executive and whistle blower Xavier Andre Justo less than two weeks after his election victory.

A three-part BBC documentary, The House of Saud: A Family at War, suggested that Mr. Razak had worked with Prince Turki bin Abdullah, the son of former Saudi King Abdullah, to syphon off funds from 1MDB.

UAE-owned, Swiss-based Falcon Bank has also been linked to the scandal while leaked emails documented a close relationship between Yousef al-Otaiba, the UAE’s high-profile ambassador to the United States and confidante of Prince Mohammed bin Zayed, and controversial Malaysian financier Jho Low, a 27-year-old Wharton graduate who helped Mr. Razak run 1MDB.

The Wall Street Journal, citing not only emails, but also US court and investigative documents, reported last year that companies connected to Mr. Otaiba had received $66 million from entities investigators say acted as conduits for money allegedly stolen from 1MDB.

The UAE embassy in Washington declined to comment at the time but admitted that Mr. Oteiba had private business interests unrelated to his diplomatic role. The embassy charged that the leaked emails were part of an effort to tarnish his reputation.

Khaldoon Al Mubarak, an adviser to the government in Abu Dhabi who has also been implicated in the scandal, was reportedly detained in 2016 without charges and has been held in jail since.

Bank statements and financial documents reviewed by The Wall Street Journal suggest that Mr. Al Mubarak facilitated the purchase by UAE deputy prime minister Sheikh Mansour Bin Zayed Al Nahyan’s brother of a $500 million yacht with 1MDB funds.

“The impact of this election will reverberate far beyond Malaysia’s borders,” said Asia director of the Centre for Humanitarian Dialogue Michael Vatikiotis.

Mr. Vatikiotis was looking primarily at the fallout of Mr. Mahathir’s victory in Southeast Asia and China. His analysis is however equally valid for Saudi Arabia and the United Arab Emirates, where it could also prove to be embarrassing.

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Comey Grilled As Feds “Seriously” Consider Charging McCabe In Criminal Referral

Federal investigators from the D.C. U.S. Attorney’s office recently interviewed former FBI director James Comey as part of an ongoing probe into whether former FBI #2 Andrew McCabe broke the law when he lied to federal agents, reports the Washington Post.

Investigators from the D.C. U.S. Attorney’s Office recently interviewed former FBI director James B. Comey as part of a probe into whether his deputy, Andrew McCabe, broke the law by lying to federal agents — an indication the office is seriously considering whether McCabe should be charged with a crime, a person familiar with the matter said. –Washington Post

What makes the interview particularly interesting is that Comey and McCabe have given conflicting reports over the events leading up to McCabe’s firing, with Comey calling his former deputy a liar in an April appearance on The View. 

Justice Department Inspector General Michael Horowitz issued a criminal referral for McCabe following a months-long probe which found that the former acting FBI Director leaked a self-serving story to the press and then lied about it under oath. McCabe was fired on March 16 after Horowitz found that he “had made an unauthorized disclosure to the news media and lacked candor – including under oath – on multiple occasions.” 

Specifically, McCabe was fired for lying about authorizing an F.B.I. spokesman and attorney to tell Devlin Barrett of the Wall St. Journal – just days before the 2016 election, that the FBI had not put the brakes on a separate investigation into the Clinton Foundation, at a time in which McCabe was coming under fire for his wife taking a $467,500 campaign contribution from Clinton proxy pal, Terry McAuliffe. 

The WSJ article  reads:

New details show that senior law-enforcement officials repeatedly voiced skepticism of the strength of the evidence in a bureau investigation of the Clinton Foundation, sought to condense what was at times a sprawling cross-country effort, and, according to some people familiar with the matter, told agents to limit their pursuit of the case. The probe of the foundation began more than a year ago to determine whether financial crimes or influence peddling occurred related to the charity.

…

Some investigators grew frustrated, viewing FBI leadership as uninterested in probing the charity, these people said. Others involved disagreed sharply, defending FBI bosses and saying Mr. McCabe in particular was caught between an increasingly acrimonious fight for control between the Justice Department and FBI agents pursuing the Clinton Foundation case.

So McCabe was found to have leaked information to the WSJ in order to combat rumors that Clinton had indirectly bribed him to back off the Clinton Foundation investigation, and then lied about it four times to the DOJ and FBI, including twice under oath. 

McCabe vs. Comey

Investigators from the D.C. U.S. Attorney’s office were likely to be keenly interested in Comey’s version of whether or not he knew about McCabe’s disclosure. 

Comey and McCabe offered varying accounts of who authorized the disclosure for the article. They discussed the story the day after it was published, and Comey, according to the inspector general’s report, told investigators McCabe “definitely did not tell me that he authorized” the disclosure. -WaPo

“I have a strong impression he conveyed to me ‘it wasn’t me boss.’ And I don’t think that was by saying those words, I think it was most likely by saying ‘I don’t know how this s— gets in the media or why would people talk about this kind of thing,’ words that I would fairly take as ‘I, Andy, didn’t do it,’ ” Comey said, according to the inspector general.

During an April appearance on ABC’s The View to peddle his new book, A Higher Royalty Loyalty, where he called McCabe a liar, and said he actually “ordered the [IG] report” which found McCabe guilty of leaking to the press and then lying under oath about it, several times. 

Comey was asked by host Megan McCain how he thought the public was supposed to have “confidence” in the FBI amid revelations that McCabe lied about the leak. 

“It’s not okay. The McCabe case illustrates what an organization committed to the truth looks like,” Comey said. “I ordered that investigation.” 

Comey then appeared to try and frame McCabe as a “good person” despite all the lying. 

“Good people lie. I think I’m a good person, where I have lied,” Comey said. “I still believe Andrew McCabe is a good person but the inspector general found he lied,” noting that there are “severe consequences” within the DOJ for doing so.

Following McCabe’s firing, his attorney Michael R. Bromwich (flush with cash from the disgraced Deputy Director’s half-million dollar legal defense GoFundMe campaign), fired back – claiming that Comey was well aware of the leaks. 

“In his comments this week about the McCabe matter, former FBI Director James Comey has relied on the Inspector Genera’s (OIG) conclusions in their report on Mr. McCabe. In fact, the report fails to adequately address the evidence (including sworn testimony) and documents that prove that Mr. McCabe advised Director Comey repeatedly that he was working with the Wall Street Journal on the stories in question…” reads the statement in part. 

McCabe vs. the DOJ

McCabe may also find himself at odds with the Department of Justice, as notes he kept allegedly detailing an interaction with Deputy Attorney General Rod Rosenstein raise questions about a memo Rosenstein wrote justifying Comey’s firing. While Rosenstein’s memo took aim at Comey for his mishandling of the Clinton email investigation, McCabe’s notes suggest that Trump told Rosenstein to point to the Russia investigation. Rosenstein’s recommendation ultimately did not mention Russia. 

McCabe’s interactions with Rosenstein could complicate any potential prosecution of McCabe because Rosenstein would likely be involved in a final decision on filing charges. McCabe has argued that the Justice Department’s actions against him, including his firing, are retaliatory for his work on the Russia investigation. -WaPo

As the Washington Post notes, lying to federal investigators can carry a five-year prison sentence – however McCabe says he did not intentionally mislead anyone. The Post also notes that while Comey’s interview is significant, it does not indicated that prosecutors have reached any conclusions. 

Lying to Comey might not itself be a crime. But the inspector general alleged McCabe misled investigators three other times.

He told agents from the FBI inspection division on May 9, 2017, that he had not authorized the disclosure and did not know who had, the inspector general alleged. McCabe similarly told inspector general investigators on July 28 that he was not aware of one of the FBI officials, lawyer Lisa Page, having been authorized to speak to reporters, and because he was not in Washington on the days she did so, he could not say what she was doing. McCabe later admitted he authorized Page to talk to reporters.

The inspector general also alleged that McCabe lied in a final conversation in November, claiming that he had told Comey he had authorized the disclosure and that he had not claimed otherwise to inspection division agents in May.

Michael Bromwich replied in a statement: “A little more than a month ago, we confirmed that we had been advised that a criminal referral to the U.S. Attorney’s Office had been made regarding Mr. McCabe. We said at that time that we were confident that, unless there is inappropriate pressure from high levels of the Administration, the U.S. Attorney’s Office would conclude that it should decline to prosecute. Our view has not changed.

He added that “leaks concerning specific investigative steps the US Attorney’s Office has allegedly taken are extremely disturbing.”

Whatever Comey told federal investigators, we suspect it eventually boiled down to “McCabe didn’t tell me,” squarely placing responsibility for the leaks – and the lies, on McCabe’s shoulders. 

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Stefan Molyneux: The War On Tommy Robinson

Authored by Stefan Molyneux via Quadrant Online,

The rule of law is fragile, and relies on the self-restraint of the majority. In a just society, the majority obey the law because they believe it represents universal values – moral absolutes. They obey the law not for fear of punishment, but for fear of the self-contempt that comes from doing wrong.

As children, we are told that the law is objective, fair and moral. As we grow up, though, it becomes increasingly impossible to avoid the feeling that the actual law has little to do with the Platonic stories we were told as children. We begin to suspect that the law may in fact – or at least at times – be a coercive mechanism designed to protect the powerful, appease the aggressive, and bully the vulnerable.

The arrest of Tommy Robinson is a hammer-blow to the fragile base of people’s respect for British law. The reality that he could be grabbed off the street and thrown into a dangerous jail – in a matter of hours – is deeply shocking.

Tommy was under a suspended sentence for filming on courthouse property in the past. On May 25, 2018,  while live-streaming his thoughts about the sentencing of alleged Muslim child rapists, Tommy very consciously stayed away from the court steps, constantly used the word “alleged,” and checked with the police to ensure that he was not breaking the law.

Tommy yelled questions at the alleged criminals on their way into court – so what? How many times have you watched reporters shouting questions at people going in and out of courtrooms? You can find pictures of reporters pointing cameras and microphones at Rolf Harris and Gary Glitter, who were accused of similar crimes against children.

Tommy Robinson was arrested for “breaching the peace,” which is a civil proceeding that requires proof beyond a reasonable doubt. Was imminent violence about to erupt from his reporting? How can Tommy Robinson have been “breaching the peace” while wandering around in the rain on a largely empty street sharing his thoughts on criminal proceedings? There were several police officers present during his broadcast, why did they allow him to break the law for so long?

Was Tommy wrong to broadcast the names of the alleged criminals? The mainstream media, including the state broadcaster, the BBC, had already named them. Why was he punished, but not them?

These are all questions that demand answers.

Even if everything done by the police or the court was perfectly legitimate and reasonable, the problem is that many people in England believe that Tommy Robinson is being unjustly persecuted by his government. The fact that he was arrested so shortly after his successful Day for Freedom event, where he gathered thousands of people in support of free speech, strikes many as a little bit more than a coincidence.

Is the law being applied fairly? Tommy Robinson has received countless death threats over the years, and has reported many of them. Did the police leap into action to track down and prosecute anyone sending those threats?

If the British government truly believes that incarcerating Tommy Robinson is legitimate, then they should call a press conference, and answer as many questions as people have, explaining their actions in detail.

As we all know, there has been no press conference. Instead of transparency, the government has imposed a publication ban – not just on the trial of the alleged child rapists, but on the arrest and incarceration of Tommy Robinson. Not only are reporters unable to ask questions, they are forbidden from even reporting the bare facts about Tommy Robinson’s incarceration.

Why? British law strains – perhaps too hard – to prevent publication of information that might influence a jury, but Tommy’s incarceration was on the order of a judge. He will not get a jury trial for 13 months imprisonment. Since there is no jury to influence, why ban reports on his arrest and punishment?

Do these actions strike you as the actions of a government with nothing to hide?

Free societies can only function with a general respect for the rule of law. If the application of the law appears selective, unjust, or political, people begin to believe that the law no longer represents universal moral values. If so, what is their relationship to unjust laws? Should all laws be blindly obeyed, independent of conscience or reason? The moral progress of mankind has always manifested as resistance to injustice. Those who ran the Underground Railroad that helped escaped slaves get from America to Canada were criminals according to the law of their day. We now think of them as heroes defying injustice, because the law was morally wrong.

The inescapable perception that various ethnic and religious groups are accorded different treatment under the Western law is one of the most dangerous outcomes of the cult of diversity.

Diversity of thought, opinion, arguments and culture can be beneficial – diversity of treatment under the law fragments societies.

The blind mantra that “diversity is a strength” is an attempt to ignore the most fundamental challenge of multiculturalism, which is: if diversity is a value, what is our relationship to belief systems which do not value diversity?

If tolerance of homosexuality is a virtue, what is our relationship to belief systems that are viciously hostile to homosexuality? If equality of opportunity for women is a virtue, what about cultures and religions which oppose such equality?

And if freedom of speech is a value, what is our relationship to those who violently oppose freedom of speech?

Diversity is a value only if moral values remain constant. We need freedom of speech in part because robust debate in a free arena of ideas is our best chance of approaching the truth.

You need a team with diverse skills to build a house, but everything must rest on a strong foundation. Diversity is only a strength if it rests on universal moral values.

Is Tommy Robinson being treated fairly? If gangs of white men had spent decades raping and torturing little  Muslim girls, and a justly outraged Muslim reporter was covering the legal proceedings, would he be arrested?

We all know the answer to that question. And we all know why.

Diversity of opinion is the path to truth – diversity of legal systems is the path to ruin.

If the arrest and incarceration of Tommy Robinson is just, then the government must throw open the doors and invite cross-examination from sceptics. Honestly explain what happened, and why.

Explain why elderly white men accused of pedophilia are allowed to be photographed and questioned by reporters on court steps, while Pakistani Muslims are not.

Explain why a police force that took three decades to start dealing with Muslim rape gangs was able to arrest and incarcerate a journalist within a few scant hours.

Explain why a man can be arrested for breaching the peace when no violence has taken place – or appears about to take place.

To the British government: explain your actions, or open Tommy Robinson’s cell and let him walk free.

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May Payrolls Preview: It’s Finally Time For A Solid Beat

While the world suddenly has a whole lot of other risks on its plate to worry about, be it Italian and Spanish politics – with both nations set to welcome new, controversial governments – with Trump launching tariffs against some of America’s closest allies and a potential China trade war looming just two weeks away, the last thing traders need right now if even more stress about yet another potential surprise in tomorrow’s payrolls report, the biggest macro event of the week and arguably, the month. And, as the chart below shows, after two consecutive and not immaterial misses,  and 6 misses in the past 8 months, it’s about time for a solid payrolls “beat”, even if nobody cares anymore about the number of part-time waiter and bartender jobs created and the only thing that matters is wage growth, or the lack thereof.

So what does Wall Street expect in tomorrow’s report? Courtesy of RanSquawk, here is a full breakdown:

  • Non-farm Payrolls: (Exp. 188k, Prev. 164k)
  • Unemployment Rate: (Exp. 3.9%, Prev. 3.9%)
  • Average Earnings Y/Y: (Exp. 2.7%, Prev. 2.6%)
  • Average Earnings M/M: (Exp. 0.2%, Prev. 0.1%)
  • Average Work Week Hours: (Exp. 34.5hrs, Prev. 34.5hrs)
  • Private Payrolls: (Exp. 183K, Prev. 168k)
  • Manufacturing Payrolls: (Exp. 20k, Prev. 24k)
  • Government Payrolls: (Prev.-4k )
  • U6 Unemployment Rate: (Prev. 7.8%)
  • Labour Force Participation: (Prev. 62.8%)

LABOUR MARKET TRENDS: Last month, the US added 164k nonfarm payrolls, easing from the recent average pace; over the last 6-months, payroll growth has averaged 198k, slightly firmer than the 12-month pace of 190k. The 3-month average has been easing over the last quarter, and is currently running at a clip of 208k.

ADP PAYROLLS: The latest national employment report from ADP reported that 178k nonfarm payrolls were added to the US economy in May, missing expectations of 190k. “What’s not clear, though, is whether the below-trend numbers for April and, it seems, May, are due to a softening in labor demand, perhaps triggered by all the talk of trade wars, or are due to the shortage of qualified staff,” Pantheon Macroeconomics said, “If the problem is on the demand side, we don’t know if it will las t; most of the business surveys softened in April, but the regional reports available for May so far have rebounded strongly.” Accordingly, Pantheon is inclined to suggest that the overall landscape of the labor market has changed little in the month. Pantheon forecasts 200k payroll additions in the official employment situation report, though says that even if the number is closer to 175k, that’s still more than enough to keep the  unemployment rate trending down.

EARNINGS GROWTH: Moody’s chief economist Zandi has suggested that US job growth trends are strong, but slowing, with business unable to fill a record number of open positions. Zandi said that, as a result, wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem.”

LAY-OFFS: Challenger reported job cuts stood at 31,517 in May – the lowest monthly total since October 2017 – down over 12% versus April, and around 5% lower versus May 2017. Challenger did note that on average, job cuts are at their lowest in May and June, and companies typically make their staffing moves at the beginning of the year or in Q4. Elsewhere, it added that so far in 2018, employers have announced around 208k job cuts, 6.2% more than the approximately 196k announced through the first five months of 2017.

UNEMPLOYMENT CLAIMS: Weekly unemployment claims data fell to 221k (versus 234k the prior week) and the four week average standing at 222,250, lower than the 228,250 heading into last month’s payrolls data. Analysts have been encouraged by the recent trend, and suggest that the trend rate has now fallen into the low 220,000s, which would be a record low as a percentage of the employed work force.

BUSINESS SURVEYS: Note, ahead of this month’s employment situation report, we have not had the monthly ISM surveys, which contain employment sub-indices – these are on the docket for release post the NFP data. We did,  however, get PMI data from Markit, with the data compiler saying that a “solid rate” of employment growth was  maintained in May, linked to long-term business expansion plans and upbeat projections of client demand in the months ahead.

* * *

Finally, via Goldman, here are some bullish, bearish and neutral considerations ahead of tomorrow’s report:

Arguing for a stronger report:

  • Jobless claims. Initial jobless claims fell to a new cycle low during the four weeks between the payroll reference periods (214k vs. 232k for April and the previous cycle low of 225k). Additionally, continuing claims resumed their downtrend, falling at their fastest pace in three years (-92k, survey week to survey week). While jobless claims have a mixed track record of predicting the employment report, we note that sizeable declines in continuing claims are associated with strong payroll gains, particularly since 2012 (claims data in the 2009-2011 period was heavily affected by benefit expirations and eligibility changes). As shown in Exhibit 1, monthly payroll growth has exceeded 200k in each of the nine instances since 2012 when continuing claims fell by 75k or more during the payroll month (and payroll growth has averaged +267k in these instances). The 92k decline in continuing claims in May also suggests scope for further declines in the unemployment rate in coming months.
  • Manufacturing-sector surveys. Manufacturing-sector surveys were particularly strong in May across both their headline and employment measures. Our manufacturing employment tracker rose 0.9pt to an elevated level of 59.2, and our headline aggregate jumped 2.8pt to a new cycle high of 60.5. This strength echoes commentary in the May Beige Book indicating production activity “shifted into higher gear.” Manufacturing-sector payrolls rose 24k in April and have increased 28k on average over the last six months.
  • Job availability. The Conference Board labor market differential—the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get—rose 3.9pt to +26.6 in May, a 17-year high. Relatedly, the JOLTS report showed job openings rising to a new cycle high at the end of March.
  • Weather. NOAA weather-station data indicate that snowfall was unusually high in both March and April (on a population-weighted basis), and we believe this likely contributed to the weaker-than-expected job gains in both months. With weather returning to normal in May (temperatures rose 16 degrees survey week to survey week, nsa), we expect job growth to firm in tomorrow’s report. Relatedly, we note that April payrolls were flat in the Midwest and Northeast regions on net, suggesting scope for reacceleration in those regions.

Arguing for a weaker report:

  • Labor supply constraints. We see the labor market as at or a bit beyond full employment, and at some point, diminished slack should exert downward pressure on job growth. In past research, we found that labor supply constraints are particularly likely to weigh on job growth during the late-Spring hiring season. At the same time, the sizeable drop in continuing jobless claims this May suggests employers successfully targeted pockets of labor market slack (in order to fill job openings).

Neutral factors:

  • Service-sector surveys. Service-sector surveys improved meaningfully on net in May, and our non-manufacturing employment tracker rose 2.0pt to 57.0. While the employment components edged down 0.1pt on net, they too remain at a healthy level (55.1). Service-sector job growth slowed to 115k in March and 119k in April, compared to the 12-month average of 143k.
  • ADP. The payroll processing firm ADP reported a 178k increase in May private payroll employment, 12k below consensus. In past research, we’ve found that large surprises in the ADP report tend to be predictive of the subsequent nonfarm payroll surprise. Given the relatively modest downside in the May ADP report, we see little incremental information relevant for tomorrow’s payroll data. ADP job growth had also been running above the BLS measure in recent months, and the softer May report may have reflected mean-reversion in the ADP model (as opposed to a slowdown in job creation among ADP’s customer base).
  • Job cuts. Announced layoffs reported by Challenger, Gray & Christmas edged up 6k to 37k in May (SA by GS), on the lower end of its 12-month range. On a year-over-year basis, announced job cuts fell 2k.

Finally, here is Goldman’s take on tomorrow’s all important wage growth number:

We estimate average hourly earnings increased 0.2% month over month, reflecting unfavorable calendar effects. The survey week ended on the 12th of the month, and this is historically associated with below-trend growth in average hourly earnings. To the extent that winter storms reduced hours worked in March and April, this would also argue for potential downside in tomorrow’s wage growth numbers, given the return to normal weather in May and the tendency for earnings to be “stickier” than hours. Taken together, we look for a 0.2% month-over-month gain that leaves the year-over-year rate unchanged at 2.6%.

 

 

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Japanese Stocks Jump, Yen & Bonds Dump As BoJ Tapers Its Bond-Buying Program

As if the market needed something else to spur volatility, The Bank of Japan chose tonight to cut the size of its purchases of 5-to-10 year JGBs (from 450bn to 430bn yen). While yen initially strengthened, it is now tumbling and Japanese stocks absurdly rallying, presumably because yields on the bonds are rising.

So just to clarify – Bank of Japan tapering is causing Treasury selling (10Y +1.5bps), which is pushing the dollar higher, thus sending yen tumbling…

And stocks jumping… Look what you have done Mr Kuroda.

Bloomberg’s Mark Cranfield notes that the BoJ’s timing coincides with the contract trading near the top end of its range for this year, which suggests net market positioning had been skewed long.

As one veteran trader noted: “this would be the perfectly bad timing to cause a JGB VaR shock: just as Italy and Spain get anti-establishment govs, as Trump declares trade war on the world, and as US payrolls looms.”

But on the bright side, he added, “at least we will get some volume in JGB markets tonight.”

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The Rise Of Mass Knife Attacks Around The World Shows The Problem Isn’t Guns. It’s People

Authored by Daisy Luther via The Organic Prepper blog,

In China, where firearms are tightly restricted, it’s probably no surprise that those who want to hurt people found another way to do it. The dramatic rise of knife attacks around the world shows that the problem these days isn’t with guns. It’s with people.

Mass knife attacks have become so common over the years that a Chinese police department recently released a video to teach citizens how to defend themselves against knife-wielding assailants and it has gone viral, with 16 million views in just a few days. It has subtitles and some great advice that even I would be able to follow.

All humor aside, some folks in the US who want to do away with the Second Amendment are probably saying smugly, “Well, knife attacks are bad, but only people with GUNS can kill dozens of victims quickly.”

Those folks would be wrong.

For example…

This tells me that it isn’t really a problem with guns. It’s a problem with people.

Instead of school shootings, they have school knifings.

While in the United States, school shootings have become shockingly commonplace, what many don’t know is that in China, where gun control is strict, school knife attacks are a frequent threat. On the very same day as the Sandy Hook shooting in the United States, a man with a knife injured 22 children and one adult at a school in Chenpeng village in the southern province of Guangxi.

Knife attacks at schools in China are common. Last year, a man climbed over the wall of a kindergarten and attacked 11 students. None suffered life-threatening injuries.

In 2016, a man in the southern province of Hainan stabbed 10 children before killing himself, authorities said. And another man killed three students at a school in 2014 before jumping off a building.

Perhaps the worst spate of stabbings occurred in 2010 when attackers targeted schools on three consecutive days. (source)

Just last month, a man wielding a knife killed 9 children and injured 10 others outside a middle school where he says he was bullied.

This isn’t just a problem in China

There have been mass knife attacks all over the world.

In the UK, there has been a deadly knife attack every third day of 2018. In 2017, Met Police recorded 37,443 recorded knife offenses and 6,694 gun offenses. The problem is so bad that a judge has suggested banning the sale of large kitchen knives and that those who already have kitchen knives should file them down to avoid stabbings.

In 2016, two soldiers were attacked by a man with a knife in Belgium, and a few days ago, a prison inmate on day leave stabbed two police officers then took their guns and shot them.

Four people were injured and one was killed when a knife-wielding assailant attacked them in Paris last week.

These are just a few examples and I haven’t dug any further than the first page of Google. I could go on and on, but I think you get the point.

What happens if you take away guns

In each of these cases, something different was blamed.

  • Some of the attackers were shouting “Allahu Akbar” as they stabbed their victims.

  • Some of the attackers cited crippling stress.

  • Some of the attackers said they were bullied or mistreated.

  • Some of the attackers were mentally ill and had a history of psychological problems.

  • Some of the attackers had religious and ethnic differences from their victims.

  • One attacker just didn’t like disabled people.

You can’t fix people who want to harm others for their various reasons by taking away guns. You can only make it harder for the rest of us to defend ourselves against them.

Take away guns, and you get knives. Take away knives and you get improvised explosives. There is no way to take away the yen that some people have to kill others.

And if I am involved in a knife-fight, well, personally, I’d rather take a gun.

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WSJ Asks Why We Should Keep Listening To James Clapper’s “Disinformation Campaign”

Former Director of National Intelligence James Clapper – a central figure in the “Russiagate” spy scandal, has earned quite the reputation for various misstatements, lies and even perjury.

Clapper appeared before the Senate to discuss surveillance programs in the midst of a controversy over warrantless surveillance of the American public. He was asked directly, “Does the NSA collect any type of data at all on millions, or hundreds of millions of Americans?”

There was no ambiguity or confusion and Clapper responded, “No, sir. … Not wittingly.” That was a lie and Clapper knew it when he said it. -John Turley

Since the 2016 election, Clapper has landed a job as a paid CNN commentator while peddling a new book, Facts and Fears – all while trying to shift the narrative on the FBI spying on the Trump campaign and pushing unfounded Russian conspiracy theories.

To that end, the Wall Street Journal‘s Holman W. Jenkins, Jr. asks: Why does a former intelligence chief make claims he can’t back up?

***

Clapper Disinformation Campaign

James Clapper, President Obama’s director of national intelligence, gained a reputation among liberals as a liar for covering up the existence of secret data-collection programs.

Since becoming a private citizen, he has claimed that President Trump is a Russian “asset” and that Vladimir Putin is his “case officer,” then when pressed said he was speaking “figuratively.”

His latest assertion, in a book and interviews, that Mr. Putin elected Mr. Trump is based on non-reasoning that effectively puts defenders of U.S. democracy in a position of having to prove a negative. “It just exceeds logic and credulity that they didn’t affect the election,” he told PBS.

Mr. Clapper not only exaggerates Russia’s efforts, he crucially overlooks the fact that it’s the net effect that matters. Allegations and insinuations of Russian meddling clearly cost Mr. Trump some sizeable number of votes. Hillary Clinton made good use of this mallet, as would be clearer now if she had also made good use of her other assets to contest those states where the election would actually be decided.

Mr. Clapper misleads you (and possibly himself) by appealing to the hindsight fallacy: Because Mr. Trump’s victory was unexpected, Russia must have caused it. But why does he want you to believe that he believes what he can’t possibly know?

There’s been much talk about origins. Let’s understand how all this really began. James Comey knew it was unrealistic that Mrs. Clinton would be prosecuted for email mishandling but also knew it was the Obama Justice Department’s decision to make, own and defend. Why did he insert himself?

The first answer is that he expected Mrs. Clinton to win—and likely believed it was necessary that she win. Secondly he had a pretext for violating the normal and proper protocol for criminal investigations. He did so by turning it into a counterintelligence matter, seizing on a Democratic email supposedly in Russian hands that dubiously referred to a compromising conversation of Attorney General Loretta Lynch regarding the Hillary investigation.

Put aside whether this information really necessitated his intervention. (It didn’t. This is the great non sequitur of the Comey story.) Now adopted, Russia became the rationale for actions that should trouble Americans simply on account of their foolishness.

Think about it: The FBI’s original intervention in the Hillary matter was premised on apparent false information from the Russians. Its actions against the Trump campaign flowed from an implausible, unsupported document attributed to Russian sources and paid for by Mr. Trump’s political opponents.

In surveilling Carter Page, the FBI had every reason to know it was surveilling an inconsequential non-spy, and did so based on a warrant that falsely characterized a Yahoo news article. Its suspicions of George Papadopoulos were based on drunken gossip about Hillary’s emails when the whole world was gossiping about Hillary’s emails.

The FBI’s most consequential intervention of all, its last-minute reopening of the Clinton investigation, arose from “new” evidence that turned out to be a nothingburger.

There is a term for how all this looks in retrospect: colossally stupid. Democrats now have a strong if unprovable case that Mr. Comey changed the election outcome. Mr. Trump has a strong case his presidency has been hobbled by unwarranted accusations. Americans harbor new and serious doubts about the integrity of the FBI.

As an extra kick in the head, its partners in so much idiocy, and perhaps the real fomenters of it, in the Obama intelligence agencies have so far gotten a pass.

If a private informant was enlisted to feel out the Russian connections of a couple of Trump nonentities, this was at least a sensitive and discreet approach to a legitimate question when so many FBI actions were neither.

It was after the election, with the outpouring of criminal leaks and planted disinformation (see Clapper), that a Rubicon was crossed. Consider just one anomaly: Any “intelligence community” worth the name would get to the bottom of foreigner Christopher Steele’s singular intervention in a U.S. presidential election, based as it was on the anonymous whisperings of Russian intelligence officials. Not ours. Our intelligence community is highly motivated not to know these answers because any finding that discredited the Steele dossier would also discredit the FBI’s actions in the 2016 campaign.

It practically goes without saying that all involved now have a stake in keeping the focus on the louche Mr. Trump and threatening him with investigations no matter how far afield from Russia collusion.

You can be a nonfan of Mr. Trump; you can believe he’s peddling a conspiracy theory about FBI and CIA actions during the campaign. But every president has a duty to fight to protect himself and his power. And notice that his conspiracy theory is but the mirror image of the conspiracy theory that his political, institutional, and media enemies have been prosecuting against him since Election Day 2016.

Appeared in the May 30, 2018, print edition.

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