Month: August 2018

For years, in fact for the duration of the US dollar’s use as a global carry currency, Emerging Markets – especially those with a currency peg – were a welcome destination for yield starved US investors who found an easy source of yield differential pick up. All that came to a crashing halt first after the Chinese devaluation in 2015 which sent the dollar surging and slammed the EM sector, and then again in recent months when renewed strong dollar-inspired turmoil gripped the emerging markets, first due to idiosyncratic factors – such as those in Turkey and Argentina…

… and gradually across the entire world, as contagion spread.

And while many pundits have stated that there is no reason to be concerned, and that the EM spillover will not reach developed markets, Morgan Stanley points out that the real pain may lie ahead.

As the following chart from the bank’s global head of EM Fixed Income strategy, James Lord, shows, whereas returns have slumped across EM rates, outflows from the EM space have a ways to go before they catch down to the disappointing recent returns.

One can make two observations here: the first is that despite the equity rout, EM stocks (as captured by the EEM ETF) have a long way to go to catch down to EM bonds as shown by the Templeton EM Bond Fund (TEMEMFI on BBG).

The second, more salient point is that a key reason for the solid growth across emerging markets in recent years, has been the constant inflow of foreign capital, resulting in a significant external funding requirement for continued growth, especially for Turkey as discussed previously.

But what happens if this outside capital inflow stops, or worse, reverses? This is where things get dicey. To answer that question, Morgan Stanley has created its own calculation of Emerging Market external funding needs, and defined it as an “external coverage ratio.” It is calculated be dividing a country’s reserves by its 12 month external funding needs, which in turn are the sum of the i) current account, ii) short-term external debt and iii) the next 12 months amortizations from long-term external debt.

More importantly, what this ratio shows is how long a given emerging market has before it runs out of cash. And, as the chart below shows, if we were investors in Turkey, Ukraine, Argentina, or any of the other nations on the left side of the chart – and certainly those with less than a year of reserves to fund its external funding needs – we would be worried.

So to answer the question posed by the title, which Emerging Markets will run out of funding first, start on the left and proceed to the right.

 

d

via RSS https://ift.tt/2PmYYfz Tyler Durden

As part of his wide-ranging Bloomberg interview which covered everything from cutting capital gains tax, Fed Chair jerome Powell, AG Jeff Sessions, Trump’s desire to withdraw from the WTO, Trump’s rejections of the EU offer to cut auto tariffs, the trade deal with China, social networks and much more, Trump also said that his administration is currently examining how to determine whether countries are manipulating their currencies, while once again accusing China of trying to devalue its currency, and studying whether to finally label China a currency manipulator. 

“It is a formula,” Trump told Bloomberg News in the Oval Office. “And we are looking very strongly at the formula.”

Trump most recently accused China of manipulating its currency lower during a Reuters interview last week, although that accusation conflicts with the findings of his own administration: in the semi-annual report on foreign-exchange policy, the Treasury Department stopped short of naming China, the EU or any other country as a currency manipulator.

However, Trump disagreed and said that China has devalued its currency in response to a recent slowdown in its economic growth.

“They’re trying to make up for lack of business by cutting their currency,” he said. “It’s no good. They can’t do that. That’s not, like, playing on a level playing field.”

While many strategists agree that the recent Yuan devaluation has indeed offset much of the negative impact from US tariffs, where there is disagreement is whether this is due to market forces, or as a result of PBOC policy. To be sure, in recent weeks the Chinese central bank has been aggressively pursuing policies to stabilize the Yuan in the short term – Beijing burned through $1 trillion in reserves in 2015/2016 in trying to defend the Yuan following the surprising August 2015 devaluation which caught everyone by surprise – which however to some are a little too obvious, meanwhile the Yuan has tumbled, recently suffering its fastest monthly drop on record.

Under guidelines established in 2016, the finding is based on whether countries meet three criteria for the designation: a minimum $20 billion trade surplus with the United States, a current account surplus in excess of 3% of GDP, and repeated interventions in currency markets.

The U.S. hasn’t officially accused another country of currency manipulation since 1994, but listening to Trump that may soon change.

via RSS https://ift.tt/2LIlsW3 Tyler Durden

Authored by Celine Ryan via Campus Reform,

This fall, University of California, Berkeley students can learn about “white comfort/coddling,” “decolonizing Palestine,” and making research less “isolating” for “marginalized” students.

The courses in question are offered through UC Berkeley’s DeCal program, which the university describes as “legitimate university courses run by students” that qualify for academic credit and can even fulfill graduation requirements.

In one course, titled Deconstructing Whiteness, students will “confront uncomfortable conversations about privilege and positionality” in order to “understand where white bodies have the responsibility to be in movements against white supremacy and in solidarity with marginalized peoples and groups of color.”

The description makes clear that the course “will not be to coddle white fragility, but to deconstruct and relearn whiteness through case studies, speakers, and intense, critical readings.”

The course syllabus outlines questions to be addressed during the class, such as “How does recentering what we see as violent and violence reposition who needs protection?” “What are liberal whites’ roles in colonization of education?” “What does the trope of the ‘Good White Person’ do for allyship and conversations around equality?” and “What is one way that the history of white people as inherently innocent, and their tradition as ‘natural’ and therefore good, be disrupted?”

The course also addresses “Environmental Racism,” arguing that “food practices [have] been gentrified,” as well as units on “White Comfort/Coddling,” “White Emptiness of Culture/Cultural Appropriation,” and “White Entertainment.”

Students can also take a DeCal course on Palestine: A Settler-Colonial Analysis, which will “examine key historical developments that have taken place in Palestine, from the 1880s to the present, through the lens of settler colonialism.”

After gaining a “broad understanding of settler colonialism,” students “will explore the connection between Zionism and settler colonialism, and the ways in which it has manifested, and continues to manifest, in Palestine.” 

They will then draw upon literature on decolonization to “explore the possibilities of a decolonized Palestine, one in which justice is realized for all its peoples and equality is not only espoused, but practiced.”

Yet another course, titled Demystifying the Research Process: Decolonizing Methods in Academic Research, calls for students who seek to “increase representation of marginalized students in grad school and research programs” and to “build a community of researchers of color.”  

The course description explains that “research is an extremely isolating and exclusive process” at UC Berkeley, and during this class, students will work to “dismantle” this reality.  

“In other words,” the course description contends, “marginalized students receive little to no mentorship and access to resources to conduct their research/projects. We exist to bridge this gap.”

The description also includes a warning that students will encounter “triggering course material.”

“Much of the course, particularly the Decolonizing Methods workshop series, will situate research historically as a site of violence and trauma against marginalized communities—much of which will include racial and sexual violence,” the disclaimer states. “In order to prevent additional trauma, you are excused from this class or section of this class. If you feel comfortable doing so, please email or speak to me privately if you need to be accommodated in any way.”

Each semester Berkeley offers over 150 student-facilitated courses, with between 3,000 and 4,000 enrolled students. The university describes these courses as “an excellent way of meeting the University’s minimum unit requirement.”

“The responsibility of such courses rests on the department chair, faculty member, and student facilitator, who all sign a contract of understanding before the DeCal is reviewed by COCI / the Academic Senate. A faculty member sponsors a student’s course as a 98 / 198 section,” the university explains.

The student instructor provides grade “recommendations” to the faculty sponsor at the end of the semester, who then awards “Pass/No Pass” grades to students.

UC Berkeley spokesman Dan Mogulof referred Campus Reform to the student facilitators of the courses for comment, only one of whom has responded.

“We need to restructure and revolutionize the way research is taught in universities,” Istifaa Ahmed, facilitator of the “Demystifying the Research Process” course, told Campus Reform. “What sparked the initial need to make these workshops, which later transformed into this course, is the severe deprivation of research resources, mentorship, and community for students of color on campus” [all emphasis Ahmed’s].

Students of color “don’t see our histories or identities reflected in classroom curriculums or research” except as “subjects” or “objects” of the research, Ahmed explained, noting that “many of my peers and I have had professors who told us our research isn’t valuable because it’s ‘too personal.’”

“Research in universities is taught completely de-politicized and de-historicized. This is dangerous,” Ahmed continued. “Traditionally, Western researchers enter and extract information from marginalized communities, appropriate and commodify this information for their own profit and benefit, and then make this information completely inaccessible to the very communities from which this information was derived from in the first place.”

“The premise of our work in this course threatens the very foundations of this university. We deconstruct this university as a colonial, imperial research institution,” Ahmed added, explaining that the effort to decolonize research is “a movement that reconciles with research (historically) as a site of violence and colonization against marginalized communities, and works to reclaim control over indigenous and communal ways of knowing and being.”

“While the university may support this endeavor, it is superficial at best,” Ahmed concluded. “Most of this work becomes the burden and responsibility of students. This work needs to exist across disciplines and departments. What is the university doing to provide institutional support for underrepresented researchers and hold themselves accountable?”

via RSS https://ift.tt/2wyJz4d Tyler Durden

Americans are experiencing the best economy “EVER,” tweets President Donald Trump. The president’s tendency to selectively take good economic data and widely exaggerate it on Twitter has become his favorite pastime, well, besides playing golf at one of his many resorts.

Since there is only so much hope and hype he can blow up the asses of the bottom 90 percent of Americans until the next economic slowdown, it seems as the structural decay of America’s middle class is full steam ahead.

Take, for instance, Montana, the western state defined by its mountainous terrain ranging from the Rocky Mountains to the Great Plains, now has the highest per capita suicide rate in the country — and limited resources to take on the crisis, reported NBC News.

It is a statistic that many Montanans are familiar with, but based on new data from the US Centers for Disease Control and Prevention (CDC), nearly 26 suicides per 100,000 residents have been reported, sending the state’s suicide rate up 38 percent in the last two decades — and exceeds the national average of 13.5 by a large margin.

According to the Health Resources and Services Administration, the rural state is dealing with a massive shortage of mental health providers. Federal officials said the state has less than 25 percent of the needed mental health personnel to care for its million residents.

“We have a perfect storm when it comes to suicide,” said Karl Rosston, suicide prevention coordinator for Montana’s Department of Public Health and Human Services, in an interview with NBC News. “We have a lot of factors that are all happening at the same time.”

With a projected $227 million budget shortfall, Montana’s Republican-led legislature and Democratic governor made significant cuts to the state’s health department in late 2017, including funding for mental health. As a result of the budget cuts and a major policy error, more than 100 mental health professionals were fired, according to the Behavioral Health Alliance of Montana.

Since the cut, the National Alliance on Mental Illness (NAMI) found that Montana’s mental health budget is severely lagging behind many comparable states.

Montana Gov. Steve Bullock’s office announced plans in the first half of 2018 to restore mental health funding for Medicaid reimbursements and partially restore Medicaid case manager funds, said NBC News. The governor’s office said that those plans, including details on restoration amounts, will be made public in early September.

“Governor Bullock remains committed to fighting for Montanans and the essential services they deserve,” the governor’s office said in a statement. “He will again propose a budget that invests in mental health and ensures vulnerable Montanans have the health care they need. He will continue to engage in statewide partnerships to implement evidence-based programs aimed at reducing suicide in Montana.”

NBC News pointed out that Bullock’s about-face could be a little too late. Mental health care providers said, “it would take years to reopen shuttered clinics and regain the community’s trust.”

In the meantime, with the lack of funding to tackle the public health crisis, Montana’s suicides continue to climb.

In Libby, Montana, the Daily Mail spoke with Amy Fantozzi, a behavioral health employee for its nearly 20,000 residents.

“In Montana there’s a huge amount of stigma that surrounds mental health,” Fantozzi told Daily Mail in a phone interview. “It’s hard for people to reach out for help and there’s not a lot of knowledge in the general community about what mental health is so we’re really pushing to raise awareness.”

She said the town had a clinic run by the nonprofit Western Montana Mental Health Center, the largest healthcare provider in the region, which had 12 clinics serving 15,000 clients. But, after the cuts in 2017, the center closed — firing more than 60 case managers, including the one in Libby. Fantozzi warned that hundreds of patients with severe mental health disorders were left without access to therapy, medication and or a case manager.

Amy Fantozzi is the only behavioral health employee for Lincoln County (Source/ NBC News/ Annie Flanagan)

“It’s just hard,” Fantozzi said. “Everybody is overworked. It’s hard to add one more thing on to their plate.”

Recently, more than a dozen Lincoln County health officials, law enforcement officers, teachers, community leaders and medical providers held an emergency meeting at Libby’s high school to discuss how to fill the gap left by the budget cuts. Some officials said the city government should create a list of who may be at risk of suicide and deploy case manager volunteers.

“We can’t wait for funding,” said Liz Erickson, who provides faith-based counseling through the Libby Christian Church. “We cannot wait for the grant. We cannot wait for that help. We just have to start the dang thing ourselves.”

While it seems President Trump is only concerned about the stock market, the structural decay of America’s heartland continues. As Montana finds out the hard way that cutting mental health funding has created conditions for the “perfect storm” of suicides.

via RSS https://ift.tt/2PRBKiH Tyler Durden

Authored by Michael Snyder via The Economic Collapse blog,

Did a New Jersey couple go on wild gambling sprees, take exotic vacations and buy a new BMW with the money that the public gave to help get a homeless veteran off the streets?

This article is about a “feel good story” that has gone really, really bad. 

Homeless veteran Johnny Bobbitt Jr. served as an ammunition technician in the U.S. Marine Corps.  After leaving the Marines, Bobbitt worked as a fireman and a paramedic before eventually falling on hard times.  Last October, Bobbitt came across Kate McClure after she had become stranded on the side of I-95 in a bad section of Philadelphia.  Even though he was living on the streets, he used his last 20 dollars to buy her some gasoline so that she could get home.  To thank him, McClure and her boyfriend Mark D’Amico created a GoFundMe campaign to raise money to help Bobbitt get off the streets.  The original goal was to raise $10,000, but the story went mega-viral and the campaign ultimately raised a total of $403,000.

It was the “feel good story” of the holiday season, and it was covered extensively by the mainstream media.  McClure and Bobbitt even made a joint appearance on Good Morning America, and it appeared that this was one news story that truly had a happy ending.

But it didn’t.

McClure and D’Amico never gave Bobbitt the money.  Instead, they took charge of it and bought him the things that they thought he “needed”.

For example, even though the GoFundMe campaign originally touted the idea of purchasing a house for Bobbitt, they bought him a camper instead…

The relationship between Bobbitt and McClure began to deteriorate when she and her boyfriend bought Bobbitt a camper — they originally promised him a house — and parked it in their driveway in New Jersey, where Bobbitt lived until June, Promislo said.

And they also bought a used truck for Bobbitt, but the couple reportedly drove it themselves, and it ultimately broke down…

Bobbitt, a North Carolina native, “had no access to money or food” while living in the camper, Promislo said. “He didn’t have any ability to take care of himself there.”

Promislo said the camper was bought with the money from GoFundMe. McClure and D’Amico also bought Bobbitt a truck, which they drove. The truck ended up breaking down.

Meanwhile, McClure and D’Amico appear to have been living the high life.  In recent months they have taken numerous expensive vacations, purchased a brand new BMW, and even spent some of the money raised for Bobbitt on a gambling spree…

But Bobbitt said he saw troubling signs for the money that thousands had donated to him. McClure is a receptionist for the New Jersey Department of Transportation and D’Amico is a carpenter, according to the Philadelphia Inquirer. But suddenly she had a new BMW, and the couple was taking vacations to Florida and California and Las Vegas, Bobbitt told the Inquirer. He learned of a helicopter ride they took over the Grand Canyon.

And he told the Inquirer that D’Amico has gambled away some of the GoFundMe money. (D’Amico told the newspaper he had used $500 from the account to gamble on a night when he forgot his SugarHouse Casino card, but had “quickly repaid” the money with his winnings.)

The trailer that McClure and D’Amico bought for Bobbitt is now gone, and his lawyer says that Bobbitt is currently addicted to drugs and is once again living on the streets of Philadelphia…

But now Bobbitt says he’s homeless, hungry and addicted to drugs again. His lawyers say the couple has given him a fraction of the money, CNN reports. And Bobbitt fears he won’t benefit from the rest, according to an interview published by The Philadelphia Inquirer.

Bobbitt’s lawyer estimated there should be $300,000 left from the campaign, according to CNN. Chris Fallon said he and another lawyer are working to secure a guardian other than McClure and D’Amico for the balance of the money.

Of course there are always two sides to every story, and McClure and D’Amico insist that they have done nothing wrong.

In fact, they claim that they are holding back money from McClure for his own good…

McClure and D’Amico tell a different story, saying they are withholding a portion of the money for Bobbitt’s own good. They say his problems with drugs have contributed to him wasting some of the money from the campaign that he was given.

“Giving him all that money, it’s never going to happen. I’ll burn it in front of him,” D’Amico told the paper. He indicated the money could be as dangerous to Bobbitt as “a loaded gun.”

And if what they are claiming is true, they may have a point.

According to D’Amico, Bobbitt spent a massive amount of money on drugs last holiday season…

In the NBC interview, D’Amico said Bobbitt spent $25,000 on drugs in 13 days during the holiday season. “Every dollar he ever touched was used for drugs.”

If Bobbitt is going to spend all of his money on drugs, then he definitely needs someone to watch over it for him.

But who is telling the truth?

In the end, Bobbitt is in the exact same place in life as he was before all of this money started rolling in.

He is sleeping under a Philadelphia bridge and spending his days begging for money…

At night, he sleeps under a bridge at the intersection of Callowhill and Second Streets, near an I-95 on-ramp. He spends his days doing exactly what he was doing when McClure’s car stopped in front of him: panhandling.

No matter how much money you throw at a problem, nothing is going to be permanently solved unless someone actually wants to change.

That is true for individuals, and it is also true for the nation as a whole.

via RSS https://ift.tt/2LF30h6 Tyler Durden

Last year the Chinese navy surpassed the United States’ own in size, and now Western military analysts are taking note that a new modernization program of its ships and weapons systems have given China significant and distinctive deterrence capabilities in disputed areas of the South China Sea and around Taiwan. 

A new, detailed New York Times assessment of China’s astronomical recent growth and advancement as a foremost naval power laments this is something that’s “shifted the balance of power in the Pacific in ways the United States and its allies are only beginning to digest”.

The NYT report sounds the alarm that while US naval firepower remains superior if not spread a bit thinner than China’s expanding fleet, American ships can no longer maintain global dominance of Pacific seas with ease: “That means a growing section of the Pacific Ocean — where the United States has operated unchallenged since the naval battles of World War II — is once again contested territory, with Chinese warships and aircraft regularly bumping up against those of the U.S. and its allies.”

This is a trend also recently acknowledged by the new commander of the U.S. Indo-Pacific Command; “China is now capable of controlling the South China Sea in all scenarios short of war with the United States,” Adm. Philip S. Davidson stated as part of his Senate confirmation process in March.

Adm. Davidson explained in written statements submitted to Congress at the time that China is developing “asymmetrical capabilities,” in areas of sophisticated anti-ship missiles and submarine warfare. “There is no guarantee that the United States would win a future conflict with China,” he concluded.

This comes as more detailed reports have surfaced over the past year confirming that China is fast militarizing its rapidly expanding set of man-made islands in the South China sea while using such a “land presence” to lay claim to both international waters and airspace. 

Beijing’s so called “nine-dash line” encircles as much as 90 percent of the contested waters in the South China Sea and runs up to 2,000 kilometers from the Chinese mainland and within a few hundred kilometers of Malaysia, Vietnam, and the Philippines — all within this vaguely defined zone Beijing claims as within its “historical maritime rights”.

The UN estimates that one-third of global shipping passes through the expansive area claimed by China — and crucially there’s thought to exist significant untapped oil and natural gas reserves.

The Chinese Navy has had increased hostile incidents bumping up against Philippines’ forces, and has recently on multiple occasions attempted to warn off US surveillance aircraft under threat of possible attack. 

The NYT describes a couple the most significant naval incidents involving US and allied ships in the area as follows: 

When two American warships — the USS Higgins, a destroyer, and the USS Antietam, a cruiser — sailed within a few miles of disputed islands in the Paracels in May, Chinese vessels rushed to challenge what Beijing later denounced as “a provocative act.” China did the same to three Australian ships passing through the South China Sea in April.

Chinese war games in the area have also been on the rise, which allows the People’s Liberation Army (PLA) to show off a variety of its new and advancing hardware.

The NYT continues:

“The task of building a powerful navy has never been as urgent as it is today,” President Xi Jinping declared in April as he presided over a naval procession off the southern Chinese island of Hainan that opened exercises involving 48 ships and submarines. The Ministry of National Defense said they were the largest since the People’s Republic of China was founded in 1949. Even as the United States wages a trade war against China, Chinese warships and aircraft have picked up the pace of operations in the waters off Japan, Taiwan, and the islands, shoals and reefs it has claimed in the South China Sea over the objections of Vietnam and the Philippines.

In spite of repeat promises going back to the Obama administration that China would not militarize the South China Sea through its series of man-made islands, Beijing officials have recently brazenly admitted to deploying missiles there. 

Last June, upon Defense Secretary Jim Mattis’ to Beijing, President Xi bluntly warned him that China would never yield “even one inch” of territory it now claims as its own.

China’s navy has been rapidly growing since 2000, and compliments an already huge over 2-million strong PLA troop fighting force.

While the sheer size of China’s military was never a pressing concern so long as technology and military hardware lagged behind, that appears to have changed drastically over the past few years. 

The NYT report outlines these advances to include:

• “Carrier killers”: an arsenal of high-speed ballistic missiles designed to strike moving ships. The latest versions, the DF-21D and, since 2016, the DF-26, are popularly known as “carrier killers,” since they can threaten the most powerful vessels in the U.S. fleet long before they get close to China. 
• A second aircraft carrier, with plans for a third: The aircraft carrier that put to sea in April for its first trials is China’s second, but the first built domestically. It is the most prominent manifestation of a modernization project meant to propel the country into the upper tier of military powers. Only the United States, with 11 nuclear-powered carriers, operates more than one.
• Increased power projection with the above new anti-ship warfare capabilities: The Chinese military, traditionally focused on repelling a land invasion, increasingly aims to project power into the “blue waters” of the world to protect China’s expanding economic and diplomatic interests, from the Pacific to the Atlantic.
• More warships in operation than the U.S. Navy: Last year, China counted 317 warships and submarines in active service, compared with 283 in the U.S. Navy, which has been essentially unrivaled in the open seas since the collapse of the Soviet Union in 1991.

No doubt, the world will soon hear about more Pacific seas incidents between the United States and China, as the US both tests China’s resolve, and as the latter continues to stake out its territory. 

via RSS https://ift.tt/2PjfE7S Tyler Durden

Earlier today, EU trade chief Cecilia Malmström surprised pundits and sent shares of European automakers higher when she said that Brussels was willing to scrap tariffs on autos, among all other industrial products, if the US would reciprocate.

“We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis,” Malmström told the European Parliament’s trade committee. Sending the ball in the Trump’s court, she said that “we are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” adding that “it would be good for us economically, and for them.”

As a reminder, while the EU’s car tariff of 10% is higher than the general U.S. auto tariff of 2.5%, America imposes a 25% duty on light trucks and pick-ups.

So with Europe offering a trade olive branch to Trump, what was the US president’s response?

Simple: “It’s not good enough,” Trump told Bloomberg News during his extended interview, in response to the EU proposal. The reason: “their consumer habits are to buy their cars, not to buy our cars.”

Trump then said that the “the European Union is almost as bad as China, just smaller.”

What is odd is that it was Trump who originally proposed a trade policy without tariffs, barriers or subsidies on either side.

The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready – but they won’t!

— Donald J. Trump (@realDonaldTrump) July 25, 2018

On the other hand, as Politico reported earlier, Trump’s rejection is probably not a big surprise, as during a first meeting in Washington last week, an EU proposal for including cars in the discussions was rejected by the U.S.

With Trump’s rejection it is now unclear if there is any de-escalation path available to Europe; furthermore with Trump set to enact $200BN in additional Chinese tariffs, the president may feel especially empowered to press Europe harder, a gambit which has a high probability of failing.  Then again, until something in the market “cracks”, there is no reason to expect Trump to change his negotiating tactic which so far – looking at the S&P at all time highs – has given him the impression that he is winning.

via RSS https://ift.tt/2LFUVIY Tyler Durden