Month: August 2018

Steve Bannon says that President Trump should fire Deputy Attorney General Rod Rosenstein within the next 72 hours for “clearly obstructing justice if the DOJ doesn’t coughg up all the documents sought by Congressional investigators.

Trump’s former chief strategist told The Hill on Wednesday: “If he doesn’t do it in 72 hours, he’s fired. I’d fire him.“

House conservatives threatened to impeach Rosenstein last week, only to walk back the threat days later after Speaker Paul Ryan came out against it, and Freedom Caucus co-founder Rep. Jim Jordan (R-OH) announced a bid to replace Ryan after the speakership opens up due to Ryan retiring after this year.

Bannon, a controversial figure who left the White House a year ago and was derided by Trump after the publication of Michael Wolff’s exposé “Fire and Fury,” insisted that there would eventually be a commission set up to look at anti-Trump malfeasance by intelligence agencies during the initial investigations into ties between Russia and the 2016 Trump campaign. 

The president’s allies have long alleged that the investigation has been marked by bias, pointing to examples such as text messages between FBI agents Peter Strzok and Lisa Page. –The Hill

Bannon’s call to remove Rosenstein should not be confused with efforts to fire Special Counsel Robert Mueller – a suggestion tweeted by President Trump on Wednesday when he said “This is a terrible situation and Attorney General Jeff Sessions should stop this Rigged Witch Hunt right now, before it continues to stain our country any further. Bob Mueller is totally conflicted, and his 17 Angry Democrats that are doing his dirty work are a disgrace to USA!”

..This is a terrible situation and Attorney General Jeff Sessions should stop this Rigged Witch Hunt right now, before it continues to stain our country any further. Bob Mueller is totally conflicted, and his 17 Angry Democrats that are doing his dirty work are a disgrace to USA!

— Donald J. Trump (@realDonaldTrump) August 1, 2018

Trump may have been referring to Mueller’s longstanding friendship with fired FBI Director James Comey. As radio host Mark Levin noted last June: 

John Legato is a former deep cover FBI special agent – and he writes that Comey and Mueller –their families have vacationed together, have had picnics together, hours spent at the office together, had a few cocktails after work. So Mueller can’t possibly be impartial here. Not when he’s very close friends with a key witness.

The point is this – he’s not independent

 And as the Weekly Standard wrote in July: 

Mueller fought alongside Comey in Washington’s trenches, the sort of brothers-in-arms political battles that might forge lifelong bonds. Comey has been described as viewing Mueller as the “one person in government whom he could confide in and trust.” But for all that, is theirs “a personal or political relationship” of the sort DoJ regulations count as a conflict of interest?

…

However one describes Robert Mueller’s relationship with James Comey, there is clearly a relationship. And there is no disputing Mueller’s longstanding and career-defining relationship with the FBI. Both Comey and the FBI are central to the investigation into Trump; both have a huge stake in the outcome of that investigation. But it might be asked why the question of conflicts matters now? After all, Mueller’s relationships with Comey and the FBI were clearly known before he was appointed special counsel. Rosenstein must have, at the very least, considered the question before giving Mueller this crucial assignment. Or did he? The appointment of the special counsel all happened very fast and the deputy attorney general may, in his haste, have glossed over the obligations of 28 C.F.R. 45.2. –Weekly Standard

That said, Bannon has nothing but good things to say about Mueller, calling him “a good man, a combat-veteran Marine.” He did agree, however, that the probe should be “brought to a conclusion” since there was “obviously no collusion,” though he thinks Mueller should issue a report prior to midterm elections for public consumption. 

“Let the American people, on Nov. 6, let them decide,” Bannon insisted, referring to the midterm elections. “They are going to say that is too thin a reed to hang anything serious on.” –The Hill

When asked about Trump’s reference to Jeff Sessions in his Wednesday tweet, Bannon said “I think the president’s just expressing his frustration.” 

Trump’s former chief strategist also commented on some of Rudy Giuliani’s antics on various TV networks, saying “I love me some Rudy but I understand Rudy has good appearances and some maybe that are not of the [same] Rudy quality.” 

On former Trump attorney Michael Cohen – who appears to be in the process of flipping on Trump, Bannon said he had “known Michael for years,” but not well. 

“When I first took over the [Trump] campaign, I was pretty direct with him that there couldn’t be any involvement in the campaign, and he really shouldn’t be down on the 14th floor,” said Bannon, in reference to the campaign’s headquarters within Trump Tower. He says he did this to avoid “intermingling” between Trump’s presidential campaign and the Trump organization. 

And finally, on the question of whether Trump knew about the infamous Trump Tower meeting in advance, Bannon said “No, not at all,” before insisting that people should focus on Rosenstein and the DOJ. 

“There is a cover-up right now,” said Bannon. 

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Everything’s awesome, right? There’s just one thing (well two…)

Everything really is awesome according to the Atlanta Fed’s GDPNOW model is forecasting a 4.95% GDP growth in Q3…

Except, despite the hopeful forecasts for US economic growth, the housing segment is collapsing…

As Gluskin Sheff’s David Rosenberg notes:

“The Fed could get away with using the term “strong” three times in the opening paragraph and five times throughout because it conveniently missed discussing the housing market!”

Oh, and the fact that Consumer Confidence measures are flashing a very loud “late-cycle” warning…

And, once again, Rosenberg notes:

“The gap that has opened up between consumer confidence for the present and future is so classically late-cycle. As in, no more pent-up demand. Consider this a near-2 SD event. Take out the umbrella!”

As Rosie concludes: ” the average lag time is 8 months, and the median is 6, with respect to that chart of the present/future delta from the consumer confidence report. Nowhere near what some of you were thinking. The cycle’s on a short leash (lease?).“

* * *

So, apart from the housing market collapse and the vast un-reality gap between now and the future, everything is really awesome.

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Authored by Michael Snyder via The American Dream blog,

Before televisions and computers were invented, Americans didn’t spend any time staring at television and computer screens. They worked hard, raised their families, personally interacted with their communities (remember that?), and generally tried to make the world a better place.

But now for many of us, the “virtual world” actually seems more real than the “real world” does. In fact, as you will see below, average Americans now spend most of their waking hours staring at a screen. We have willingly connected ourselves to “the matrix”, and the amount of time spent connected is rising with each passing year. A report that was just put out by Nielsen found that we spend an average of 11 hours per day interacting with media…

Americans now spend most of their waking hours watching TV, listening to music, using apps on their smartphones, or otherwise consuming media, a new study finds.

US adults are spending more than 11 hours a day on average—or about two-thirds of their waking time—consuming media in some form, Nielsen showed in its first-quarter 2018 report on US media consumption today (July 31). It measured, based on its representative panels of TV, radio, and digital households and consumers, activities like watching TV and DVDs, listening to the radio, visiting apps on a smartphone or tablet, and using the internet and game consoles.

No wonder we don’t have time to do anything else.

The time Americans spent interacting with various forms of media was up 19 minutes over the previous quarter, and here is how it broke down…

• Watching live television: 4 hours, 10 minutes

• Watching time-shifted television: 36 minutes

• App/Web on a smartphone: 2 hours, 22 minutes

• App/Web on a tablet: 47 minutes

• Internet on a computer: 39 minutes

• Listening to the radio: 1 hour, 46 minutes

• Internet connected device: 26 minutes

• Game console: 14 minutes

• DVD/Blu-Ray device: 6 minutes

It really surprised me how little time Americans spend watching DVDs. I suppose that since everything is going digital that DVDs will someday be relics of a bygone age, but we aren’t there quite yet.

Another surprising thing from the report was the difference in behavior between the generations. According to Nielsen, older Americans actually spend the most time consuming media…

Though older generations generally spend the most time with media (adults 35-49 spend over 11 hours a day on it, while adults 50-64 do so at a nearly 13-hour clip), younger generations are at the forefront of TV-connected device and digital usage.

But young adults spend more time than anyone else consuming media on smartphones…

Young adults 18-34 spend 43% of their time consuming media on digital platforms. Almost a third of their time spent with media (29%) comes from apps/web on a smartphone—the most of any measured generation.

If it seems like young people are constantly on their phones, that is because they are. Smartphone use is at an all-time high, and it keeps going up every year.

Sadly, it isn’t just in our free time that most of us are willingly connecting ourselves to “the matrix”. A different study discovered that the average office worker in America spends 1,700 hours in front of a screen each year…

We’re often told to limit the amount of screen time in our daily lives, but for many of us, we don’t have much of a choice. A new study finds the average office worker spends nearly 1,700 hours in front of a computer screen over the course of a year.

According to a survey of 2,000 office workers by contact lenses manufacturer Acuvue, office workers spend about 6.5 hours a day sitting in front of their computer.

So when you add the amount of time we spend staring at screens at work to the amount of time that we spend staring at screens at home, for many of us it pretty much takes up almost all of our waking hours.

Is this good for our society?

And we should talk about who controls all of this media that we are consuming. Today, approximately 90 percent of the programming that comes through your television is controlled by just 6 giant media corporations. Of course those 6 giant media corporations are ultimately owned by the elite of the world.

So if you spend several hours watching television each day, you are allowing “the matrix” to fundamentally shape what you think, what you believe and how you view the world.

At least on the Internet there has been more diversity of viewpoints, but now there is a massive effort to censor alternative voices. The elite are attempting to become gatekeepers in the digital world just like they are with every other form of media.

In 2018, major alternative voices are being “shadowbanned”, censored or having their accounts terminated altogether by the tech giants. Some large conservative websites have seen their traffic from social media fall by over 90 percent, and many of them have seen a dramatic drop in revenue. For example, WND has seen revenue decline by about 60 percent over the last two years…

WND and the rest of the independent media are feeling the heat from the Internet Cartel, which controls traffic, revenue, search power, hosting and distribution of news and information through social media, not to mention retail sales of all books.

It’s a scary time of rapidly shrinking traffic and revenues. WND, for instance, has seen drops in revenue from more than $10 million in 2016 to $6 million last year to perhaps as little as $4 million in 2018.

All other forms of media are already completely dominated by the elite, and so we must not allow them to take full control of the Internet.

If you want to change society, it won’t do you any good to go out to the street corners or to the marketplaces because nobody will listen to you.

If you want to change society, you have to go online, because that is where the people are.

Right now we are in an information war, and the future of our country is hanging in the balance. So let us fight this information war as hard as we can, because losing is not an option.

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It was exactly two weeks ago that Dennis Gartman urged readers of his newsletter to “prepare for a breakout in the Dow above 30,000.” Why? Because “the past 6 ½ months has been nothing more than a massive consolidation phase in what is still a bull market, consolidating the gains earned over the course of the bullish run that began in early ’16 when the Dow traded down to 15,700.” As a result “huge gains, perhaps sufficient to carry the Dow to 30,000+… as exaggerated and as stunning as that may sound… is technically possible.”

Well, no more. As he writes in his latest note, today “has the “opportunity,” if we can call it that, to become a very, very ugly day in the global capital markets with the dollar trading higher and thus putting pressure upon foreign shares right from the start.”

He explains:

US stock index futures are trading slightly for the worse as we write, with “earnings” still at the fore and with most of the earning’s surprised coming to the upside rather than to the down. But even these vaunted earnings shall take a very second seat to what is happening and what has just happened in China; US shares cannot and will not withstand the broadside hits from China today.

Furthermore, what two weeks ago was consolidation to push the market to 30,000 is now a game of musical chairs that is ending:

So, we fear that the great game of investment “musical chairs” may be ending; we fear that the “music” has stopped and we fear that everyone shall be dashing for that last available seat with injuries along the way. The “reversals” to the downside we had noted last week are still extant; the “gaps” to the downside in the US markets former leaders such as Twitter, Facebook, Netflix, Tesla et al are open and ominous. Protection of capital is now the first order of the day.

And what was until mid July a floor, is now resistance:

We hope… we sincerely hope… that we are wrong about the serious effects upon European and North American stocks that are to be derived from what has happened in China today and that they can be avoided. We hope… we do indeed very sincerely hope… that the virtual collapses in China can be insulated, isolated and over-come, but we very seriously doubt that to be so. A movement below 2,775 in the S&P futures shall be a serious breach of technical support; a movement below 25,000 in the Dow futures would be the same and so too a movement below 7200 in the NASDAQ futures. Keep those levels very, very much in mind; the future of the markets depends upon those levels holding.

Of course, the above may explain this headline:

• NASDAQ 100 ERASES 0.7% DROP; S&P 500 PARES DECLINE TO 0.2%

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And just like that, Nasdaq’s losses were gone…

It seems the open of the US equity markets is a massively bullish ‘event’?!

Apple buybacks rescuing the world with Johnny 5…

AAPL tops $204 (remember $207.05 makes it a ONE TRILLION DOLLAR company).

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While headline factory orders rose 0.7% MoM (as expected), ex-transports, it rose just 0.4% in June (admittedly the 12th monthly rise in a row). Final durable goods data was all revised lower on the month.

 

Durable Goods Orders final for June was revised down from +1.0% to +0.8% (but has rebounded from the 0.3% drop in May).

Capital Goods New Orders (ex-defense, ex-aircraft & parts) rose just 0.2% MoM (dramatically revised down from the preliminary 0.6% rise in June) suggesting the tax-cut-driven capex-spike was not as large as expected.

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Authored by Pater Tenebrarum via Acting-Man.com,

Capital Flight vs. The Effect of QE

Mish recently discussed the ever increasing imbalances of the euro zone’s TARGET-2 payment system again in response to a few articles which played down  their significance. He followed this up with a nice plug for us by posting a comment we made on the subject. Here is a chart of the most recent data on TARGET-2 available from the ECB; we included the four largest balances, namely those of  Germany, Italy, Spain and the ECB itself.

The most prominent (largest) TARGET-2 imbalances in the euro area have reached new record highs this year. Is or isn’t this a reason for concern?

TARGET-2 is a settlement system without a settlement mechanism – which is a major difference between the euro-system and the Federal Reserve system, which settles internal payment imbalances by transferring gold certificates. In our comment posted by Mish we inter alia explained the mechanics of TARGET-2, so there is no need to rehash them here.

Just one additional remark on the structure of the system: TARGET-2 claims and liabilities of National Central Banks (NCBs) are against the euro-system, not directly against each other.

During the euro area sovereign debt crisis the growing imbalances served as a very good barometer of capital flight from the periphery (and demonstrated how it was surreptitiously “funded”, or rather, masked). We concede that those who say that these imbalances don’t matter are at least partially correct as long as the euro zone does not break apart. Just like stock market overvaluation or the growing corporate debt-berg, it is one of the many things that don’t matter until they do.

The euro area’s narrow money supply M1 has more than doubled in the past decade. A large part of this expansion is the direct result of QE. This is why we say that the assertion that TARGET-2 liabilities that are created in the course of QE “don’t matter” is not entirely correct even if one assumes that the euro area will remain intact. After all, it can hardly be expected that printing such vast amounts of additional money will be without consequences.

If Italy were to leave the currency union and readopt the lira, it is said that the Bank of Italy would be forced to immediately settle its liabilities with the ECB. We are not quite sure how it would be expected do so in practice and how it can actually be forced to do so. Last we looked, the ECB didn’t have an army, so it cannot possibly threaten to invade Italy for a spot of retaliatory plundering.

Moreover, since five countries participating in the TARGET-2 system are not members of the currency union (Bulgaria, Croatia, Denmark, Poland and Romania), why should it not be possible for a country that leaves the currency union to remain a member of the payment system? And if so, why should it settle its TARGET-2 related liabilities?

There is one important aspect of the recent growth of TARGET-2 imbalances we didn’t mention in our comment. Whenever ECB chief Mario Draghi is asked about these imbalances at ECB press conferences, he likes to point out that they are these days largely related to QE or the “asset purchase program” (APP – apparently the euphemism “quantitative easing” was thought to require a euphemism of its own) and hence are no reason for concern.

Dr. Mesmer, currently head of the ECB under the pseudonym Mario the Dragon. OK, maybe he won’t need an army.

Obviously, the chart shown above should immediately make one wonder why the ECB itself is sporting a growing TARGET-2 liability. Does it owe money to itself now, and if so, why?

The ECB is a supranational entity and in terms of the payment system it is treated as if it were a country of its own. Most of the debt purchases under the QE program are conducted by NCBs – in particular, every NCB is tasked with buying sovereign bonds issued by its own country of domicile.

However, the ECB is also engaged in direct bond purchases, and these create TARGET-2 liabilities as they necessarily involve the flow of central bank money from the ECB  to various NCBs in whose jurisdictions it buys bonds. If the NCBs concerned have a positive TARGET balance, total TARGET balances will increase – (The total TARGET-2 balance increases if central bank money flows from a country with a liability to a country with a claim, and decreases if money flows in the opposite direction. By contrast, flows between two countries with claims – or two countries with liabilities – change the composition, but not the value, of the total TARGET-2 balance).

As Draghi notes in his press conferences, roughly 40% to 50% of the purchases under the APP are from non-resident institutions (which may in turn act on behalf of their customers). Most of the trading with such institutions takes place in the largest financial centers in Europe, with Frankfurt in Germany a particularly active one.

Consider for instance a London-based subsidiary of a US bank that settles trades in Italian bonds through a correspondence bank located in Frankfurt. If the Bank of Italy purchases Italian government bonds from this entity, central bank money will flow from Italy to Germany (i.e., from a country with a TARGET-2 liability to one with a claim) and the securities will be delivered to the Bank of Italy. Total TARGET balances will increase, and so will the claims of the BuBa and the liabilities of the Bank of Italy.

Indeed, the chart above shows that TARGET-2 claims and liabilities initially decreased when the crisis subsided after 2012 and started to climb again around the time the APP began. So far, so good – it is certainly fair to assume that the APP is the main driver of the growing imbalances ever since.

One could also say: as long as the APP is underway, it is actually difficult to tell to what extent a rising TARGET-2 balance is driven by QE or by capital flight. For instance, it inter alia seems likely that recent political upheaval in Italy has given fresh impetus to capital flight from there. In fact, the political situation in Italy was fraught with uncertainty ever since the resignation of the Renzi government, and the growth of Italy’s TARGET-2 liabilities has accelerated since then.

However, there is another important point which Mr. Draghi neglects to mention when he insists that growing TARGET-2 imbalances are merely an APP-related technicality.

A call for prayer.

It is certainly true that when the Bank of Italy purchases Italian government bonds in Frankfurt from international banks which access TARGET-2 through the BuBa, the above mentioned effects on claims and liabilities in the payment system will arise – but why do they just continue to grow?

Why are the sellers of these bonds not using the proceeds to purchase other investment assets in Italy? Or putting it differently: What does this represent, if not capital flight?

It seems to us it doesn’t really matter that the purchases are conducted under the APP –  if no offsetting capital flows into Italy take place subsequently, it still means that someone got out of Dodge and decided not to return.

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