Month: September 2018

Jon Kyl, once one of the most powerful Republicans in the U.S. Senate, will return to Capitol Hill to succeed the late Sen. John McCain, The Arizona Republic reported. Gov. Doug Ducey is scheduled to unveil the 76-year-old as McCain’s successor at a 1pm ET news conference at the Arizona Capitol, after notifying McCain’s wife, Cindy, and other key political figures of his decision.

“There is no one in Arizona more prepared to represent our state in the U.S. Senate than Jon Kyl,” Ducey said in a statement. “He understands how the Senate functions and will make an immediate and positive impact benefiting all Arizonans. I am deeply grateful to Senator Kyl for agreeing to succeed his friend and college of so many years.

Ducey sought someone who could quickly step into the seat to wrap up McCain’s unfinished business, the governor’s aide said. Kyl brings a depth of knowledge on issues key to Arizona, from water and natural resources to Native American relations.

Kyl, who served alongside McCain during his 18 years in the U.S. Senate, will fly to Washington, D.C., following Ducey’s announcement. He is respected among seasoned Republicans and is leading President Donald Trump’s Supreme Court nominee, Brett Kavanaugh, through the confirmation process. Last year, Kyl was the “sherpa” for Jeff Sessions’ contentious nomination to become attorney general. In 2006, Time magazine named Kyl one of America’s 10 best senators.

He represented Arizona in the U.S. Senate from 1995 through Jan. 3, 2013. There, he served as minority whip, the second-highest position in the Republican conference. Before ascending to the Senate, he served in the House of Representatives from 1987 to 1995.

In a tweet, McCain’s widow, Cindy, expressed support for the appointment. “Jon Kyl is a dear friend of mine and John’s. It’s a great tribute to John that he is prepared to go back into public service to help the state of Arizona,” she wrote.

Kyl retired in 2013 after rising to become the second-highest-ranking Republican senator. He has agreed to serve at least through the end of the year, a representative for Ducey said. If he opts to step down after the end of the session, the Republican governor would be required to appoint another replacement.

After leaving the Senate, Kyl joined the high-powered Washington, D.C., law firm Covington & Burling. As senior adviser, he helps clients on issues ranging from tax, health care, defense, national security and intellectual property.

The governor, who has long called Kyl a mentor, contacted the former senator in the hours following McCain’s Aug. 25 death. The two have forged a close bond and are like-minded, pro-growth conservatives.

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Ducey will submit a certificate of appointment to the U.S. Senate secretary Tuesday. An aide is flying the paperwork to Washington, D.C., and will hand-deliver it to the secretary’s office. Kyl could be sworn in as early as Tuesday night, though Wednesday is more likely, the aide said.

Kyl will return to a chamber where Republicans narrowly hold control and where votes can be unpredictable.

On Tuesday, the chamber began deliberating the Kavanaugh nomination. A Senate committee hopes to vote later this month to send Kavanaugh’s nomination to the full Senate to get him on the bench before the midterm elections.

 

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One week after his Watergate colleague, Carl Bernstein, helped author a widely debunked story alleging that Michael Cohen had evidence that President Trump gave the OK for the infamous June 2016 Trump Tower meeting, Washington Post editor Bob Woodward has strategically “leaked” (to his own newspaper) the first excerpts from his upcoming book about the Trump administration. And if the non-stop coverage enjoyed by Michael Wolff’s “Fire and the Fury” is any indication, Woodward’s book will likely dominate the conversation in Washington for the two months between now and the midterms (just as God, and the Washington Post, intended).

Woodward’s book – aptly titled “Fear” – includes explosive anecdotes about the lengths to which members of the Trump administration reportedly went to stop the president from acting on what they believed to be dangerous impulses. Staffers reportedly went as far as grabbing papers off the president’s desk to stop him from acting rashly. Woodward’s book was reportedly drawn from meeting notes, personal diaries and government documents given to him by administration officials, as well as hundreds of hours of interviews with administration officials and “other principals,” according to WaPo.

A central theme of the book is the stealthy machinations used by those in Trump’s inner sanctum to try to control his impulses and prevent disasters, both for the president personally and for the nation he was elected to lead.

Woodward describes “an administrative coup d’etat” and a “nervous breakdown” of the executive branch, with senior aides conspiring to pluck official papers from the president’s desk so he couldn’t see or sign them.

Again and again, Woodward recounts at length how Trump’s national security team was shaken by his lack of curiosity and knowledge about world affairs and his contempt for the mainstream perspectives of military and intelligence leaders.

The most explosive claims have a common theme: Either senior Trump administration officials expressing their frustration about the president’s behavior, or stories of Trump insulting members of his cabinet and administrative staff.

Woodward illustrates how the dread in Trump’s orbit became all-encompassing over the course of Trump’s first year in office, leaving some staff members and Cabinet members confounded by the president’s lack of understanding about how government functions and his inability and unwillingness to learn.

One of the most scathing quotes was attributed to Chief of Staff John Kelly, who reportedly called Trump an “idiot” adding that he had gone “off the rails” and that “I don’t know why any of us are here.”

White House Chief of Staff John F. Kelly frequently lost his temper and told colleagues that he thought the president was “unhinged,” Woodward writes. In one small group meeting, Kelly said of Trump: “He’s an idiot. It’s pointless to try to convince him of anything. He’s gone off the rails. We’re in Crazytown. I don’t even know why any of us are here. This is the worst job I’ve ever had.”

Kelly’s predecessor, Reince Priebus, was also on the receiving end of some scathing comments from Trump, who reportedly told former staff secretary Rob Porter to ignore Preibus’s orders, describing the then-chief-of-staff as “a little rat” who “just scurries around.”

Reince Priebus, Kelly’s predecessor, fretted that he could do little to constrain Trump from sparking chaos. Woodward writes that Priebus dubbed the presidential bedroom, where Trump obsessively watched cable news and tweeted, “the devil’s workshop,” and said early mornings and Sunday evenings, when the president often set off tweetstorms, were “the witching hour.”

Trump apparently had little regard for Priebus. He once instructed then-staff secretary Rob Porter to ignore Priebus, even though Porter reported to the chief of staff, saying that Priebus was “‘like a little rat. He just scurries around.'”

Commerce Secretary Wilbur Ross was “past your prime.”

Trump told Commerce Secretary Wilbur Ross, a wealthy investor eight years his senior: “I don’t trust you. I don’t want you doing any more negotiations. … You’re past your prime.”

Former National Security Advisor HR McMaster wore tacky suits that made him look like “a beer salesman.”

Few in Trump’s orbit were protected from the president’s insults. He often mocked former national security adviser H.R. McMaster behind his back, puffing up his chest and exaggerating his breathing as he impersonated the retired Army general, and once said McMaster dresses in cheap suits, “like a beer salesman.”

Defense Secretary Jim Mattis reportedly disregarded an order from Trump to assassinate Syrian leader Bashar al-Assad following last year’s (alleged) chemical weapons attack.

After Syrian leader Bashar al-Assad launched a chemical attack on civilians in April 2017, Trump called Mattis and said he wanted to assassinate the dictator. “Let’s fucking kill him! Let’s go in. Let’s kill the fucking lot of them,” Trump said, according to Woodward.

Mattis told the president that he would get right on it. But after hanging up the phone, he told a senior aide: “We’re not going to do any of that. We’re going to be much more measured.” The national security team developed options for the more conventional airstrike that Trump ultimately ordered.

Some of the most withering criticism was reserved for Attorney General Jeff Sessions, whom Trump mocked as “mentally retarded” and a “traitor”.

A near-constant subject of withering presidential attacks was Attorney General Jeff Sessions. Trump told Porter that Sessions was a “traitor” for recusing himself from overseeing the Russia investigation, Woodward writes. Mocking Sessions’s accent, Trump added, “This guy is mentally retarded. He’s this dumb Southerner. … He couldn’t even be a one-person country lawyer down in Alabama.”

Notably, President Trump refused to cooperate for the book, though Woodward made several attempts to contact him (Trump eventually called the veteran reporter in August to say he’d changed his mind, only to be told that the manuscript had already been completed).

The 448-page book was obtained by The Washington Post. Woodward, an associate editor at The Post, sought an interview with Trump through several intermediaries to no avail. The president called Woodward in early August, after the manuscript had been completed, to say he wanted to participate. The president complained that it would be a “bad book,” according to an audio recording of the conversation. Woodward replied that his work would be “tough,” but factual and based on his reporting.

While the claims seem tailor-made for the headlines, it’s worth keeping in mind that many of Wolff’s claims were challenged or debunked (though this didn’t receive nearly as much attention on MSNBC as the original claims). Still, that book did have real-world impact and was widely viewed as the final straw that led to Steve Bannon’s ouster from the West Wing. Given this, we can’t help but wonder: Will Trump use this as an excuse to do some early house cleaning (both Kelly and Sessions have long been rumored to be on their way out).

Trump famously lashed out at Bernstein, calling him a “degenerate fool” and invoking his alleged gambling addiction and widely publicized divorce from ex-wife Nora Ephron. We look forward to seeing what the president has in store for Mr. Woodward.

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Less than a month after black Chicagoans called Rahm Emanuel a “con man” as protesters expressed their outrage over the lack of economic development on the South and West Sides of the city, compared to the North Side, as gang violence continues to plague their neighborhoods.

“Rahm Emanuel is a con man. His whole job is to keep black folks divided,” one man told Fox News’ Gianno Caldwell, who covered the march, adding that Emanuel “doesn’t care about anybody” except his own neighborhood and his own family, while another woman said Emanuel seems to care more about illegal immigrants in the city.

“African-Americans, we’re citizens, and our ancestors built this country,” she told Caldwell, whose younger brother survived a shooting last year that killed his best friend.

NBC Chicago reports  that the Chicago mayor will not seek re-election.

In a last-minute press conference, the mayor revealed he would not be seeking a third term after serving since 2011.

“This has been the job of a lifetime but it is not a job for a lifetime,” he said.

Emanuel said he and his wife Amy, who was standing by his side during the announcement, decided to “write another chapter together” as their three children have left for college.

“[Amy] and I look forward to writing the next chapter in our journey together,” an emotional Emanuel said. “I will always be here for the future of this great city. Not as mayor, but in the most important role anyone can play – as a citizen.”

“From the bottom of my heart, thank you, God bless you and God bless the people of Chicago,” he said as he ended his announcement.

The upcoming race began to take shape, with potential candidates already throwing their hats into the ring, including former Chicago Police Supt. Garry McCarthy, who was fired by Emanuel in the wake of the release of video showing the fatal police shooting of Laquan McDonald.

 

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Two weeks after Nomura’s Charlie McElligott noted that he was observing “a multi-month performance disaster for US equity funds”, as a result of hedge funds getting caught offside by yet another vicious short squeeze, coupled with low net leverage and beta exposure, and insufficient exposure to “momentum” stocks, the cross-asset specialist writes today that as part of the call to get long “Momentum” factor in U.S. Equities (which finished August +9.5%), Hedge Fund Long-Short funds have “grabbed” at market exposure, with the bank’s internal metrics showing that L/S funds took up their “Beta to the S&P” to the 100th %ile, in large part thanks to ripping “Momentum Longs”, noting that the “beta to Mo Longs” now 96th %ile, from 44th %ile a week ago.”

At the same time, the broader Asset Manager category has also been “grabbing” at SPX as expected off the multi-month performance drag, adding a monster +$13.9B of S&P futures last week.

This has helped the Hedge Fund HFRX Equity Hedge Index regain some ground in the second half of August, although even with the recent rebound the index is still barely changed YTD and sorely underperforming the S&P500.

And while we noted yesterday that the post-Labor Day period has traditionally meant smooth sailing into the end of the year, with the S&P yet to post a decline in the last 4 months of the year, some are becoming skeptical, and as McElliggott writes, just as the rest of the hedge fund space is levering up for the “momentum” chase, macro funds are are reducing their exposure to “risk-proxies” here:

Equities exposure shows Macro fund “Beta to SPX” at just 4th %ile (cut from 32nd %ile); “Beta to Nikkei” 36th %ile; “Beta to Eurostoxx” at only 1st %ile and “Beta to EEM” at just 1st %ile as well

Macro is also selling the bounce in Crude, with “Beta to CL1” cut to 38th %ile from 50th %ile

Yet having correctly predicted the sharp move higher amid the performance scramble in late August, the Nomura strategist now warns that “due to the massive +++ PNL move in “1Y Momentum,” I am now getting much more tactical”, and makes the following derisking recommendations:

• I have now taken-profits on 1/2 of the trade and will continue to reduce exposure as funds clearly “pre-positioned” into Sep seasonality / “window dressing” phenomenon
• I will likely keep on the “Short Momentum Shorts” leg into the back-half of September, as there is historical weakness in “High Beta” / “Volatility” (while “Low Vol” / “Defensives” rally in the final two weeks of the month)

Last, but perhaps most important, is McElligott’s observation that September has a distinct calendar pattern to it, with equities set-up for a “rally in front half of month, sell off in back half”, as shown in the chart below.

What would catalyze such a move this time? Why the same positional rotation that prompted the furious August rally:

Funds “forced-into” the melt-up at start of month / +++ historic for the first two weeks, just before post-expiry dealer gamma comes off and the “buyback blackout” picks-up for many of the largest S&P sectors.

This is what the seasonal performance for September has looked like over the period 1994-2017.

And some more details on why September is a “tale of two halves”: “Risk on” from 9/1 TO 9/15 before seeing a defensive reversal over the final two weeks of September:

Finally the “1Y momentum” algos also appear to be aware of this September calendar quirk, and have traditionally exploited the performance:

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Confirming the old adage that people love ‘free stuff’, in the month since Fidelity unveiled the first no-fee index fund, the massive asset manager has seen its new funds flooded with $1 billion in AUM.

On August 1st, the closely-held Fidelity announced it would offer two new index funds to individual investors with a zero expense ratio. The funds, which will track indexes Fidelity created, will give investors exposure to the total U.S. stock market and an international benchmark.

One month later, things have started well, as  Bloomberg reports  that the Fidelity Zero Total Market Index Fund attracted $753.5 million through Aug. 31, while the Fidelity Zero International Index Fund gathered $234.2 million, according to Fidelity’s website.

“A billion in a month is a great showing when you consider that the funds are available only to retail investors,” said Ben Johnson, head of global ETF research at Morningstar Inc.

Incidentally, since inception, the Total Market Index Fund has outperformed the S&P 500 in August…

While Fidelity, which manages $2.5 trillion, is best known for its actively-managed funds, in the past few years it has aggressively gone after rivals in the “passive” index arena, and now has about $400 billion in index mutual funds according to Bloomberg.

Russel Kinnel, director of manager research at Morningstar, said the zero-price funds might attract new business. “Fidelity has lots of ways to make money from customers once they are in the door,” he said. “This could work for them.”

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President Trump renewed his attack on “Fake News” coming from the mainstream media, suggesting that NBC’s license to broadcast should be challenged due to their “fumbling around” and “making excuses” for killing the Harvey Weinstein story, which Trump called “probably highly unethical,” adding “Look at their license?“

NBC FAKE NEWS, which is under intense scrutiny over their killing the Harvey Weinstein story, is now fumbling around making excuses for their probably highly unethical conduct. I have long criticized NBC and their journalistic standards-worse than even CNN. Look at their license?

— Donald J. Trump (@realDonaldTrump) September 4, 2018

And while there wasn’t a specific reference to the FCC, Trump seemed to be suggesting that federal regulators review the network’s license after trading barbs with former correspondent Ronan Farrow – who said Monday night: “The story was twice cleared and deemed ‘reportable’ by legal and standards only to be blocked by executives who refused to allow us to seek comment from Harvey Weinstein”  

pic.twitter.com/8vBcYvsl52

— Ronan Farrow (@RonanFarrow) September 4, 2018

Weinstein notably hired a private firm run by former Israeli Mossad agents in a failed attempt to silence his accusers and prevent The New York Times and The New Yorker from publishing allegations of sexual harassment, assault and rape – according to an explosive New Yorker article by Farrow. The firm, US-based Black Cube, was referred to Weinstein by former Israeli Prime Minister Ehud Barack, and promotes itself as “a select group of veterans from the Israeli elite intelligence units.” 

Meanwhile, former NBC News producer Rich McHugh took a swipe at the network, advocating for an independent investigation of what happened. 

Following his remarks to the New York Times last week that NBC News committed a “massive breach of journalistic integrity” in not running Farrow’s Weinstein reporting, ex-NBC Investigative Unit producer Rich McHugh took another strong swing at his old employer late Monday. In a tweet, McHugh advocated an “independent investigation” of what happened,  saying that “the release of an internally drafted report without a complete investigation and transparency for participants only raises more questions than answers.” –Deadline

NBC recently published a memo and “fact sheet” from Andy Lack regarding their handling of the Harvey Weinstein sexual assault story that was never aired. Here is my response: pic.twitter.com/H9RbsW78jB

— Rich McHugh (@RichMcHughNBC) September 4, 2018

What’s more, one of Weinstein’s accusers, Emily Nestor, backed Farrow – saying late Monday that she was “immensely disappointed in, but not surprised to read NBC’s recent comments.” 

This isn’t the first time Trump has suggested NBC’s broadcast license should be called into question. Last October, Trump lashed out after the network “made up a story” that he wanted a “tenfold” increase in the US nuclear arsenal, which he called “pure fiction.” 

With all of the Fake News coming out of NBC and the Networks, at what point is it appropriate to challenge their License? Bad for country!

— Donald J. Trump (@realDonaldTrump) October 11, 2017

“That was just fake news by NBC, which gives a lot of fake news lately,” Trump said Wednesday during a brief interaction with the White House press pool ahead of a meeting with Canadian Prime Minister Justin Trudeau. “It’s frankly disgusting the way the press is able to write whatever they want to write. And people should look into it.” –Politico 

And while last October’s outburst was in response to unfavorable coverage, Trump’s Tuesday tweet takes aim at the network shutting down an unfavorable report on Weinstein, who posted $1 million bail after his arrest in late May. 

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Jeff Bezos was already the richest man in world history, but thanks to the surge in Amazon’s share price today – becoming the third company in history to top $1 trillion market capitalization (after Apple and PetroChina) – his net worth is up almost $70 billion in 2018, nearing $170 billion.

After a brief dip on its earnings, Amazon has not looked back, surging above the key $2050.27 briefly ($2050.50 highs) to become another trillion-dollar market cap company…

Amazon reached this milestone almost exactly one month after Apple. Next up – Microsoft or Alphabet?

Do not worry though – Amazon is not a bubble!

Interestingly, few remember that Apple was not the first company globally to ever hit $1 trillion in market capitalization.

The feat was achieved momentarily by PetroChina in 2007, after a successful debut on the Shanghai Stock Exchange that same year.

And as we noted previously, the $800 billion loss it experienced shortly after is also the largest the world has ever seen.

*  *  *

This pushes Bezos’ dominance of the global wealth leagues even higher…

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Submitted by Nick Cunningham at Oilprice.com

Earlier this year, Venezuelan President Nicolas Maduro rolled out his latest scheme to rescue his economy, offer an alternative to the increasingly worthless bolivar, and skirt U.S. sanctions on financial transactions. But Maduro’s cryptocurrency, supposedly backed by Venezuela’s oil reserves, is a very hollow promise.

To be sure, few analysts expected much from the “petro,” Maduro’s hastily launched cryptocurrency. One petro was supposed to be backed by one barrel of oil, and the vast reserves of oil located in a specific part of Venezuela were promised as a backstop for the new cryptocurrency. It was always an odd scheme. After all, what makes the petro any different from the bolivar, Venezuela’s official currency? Isn’t the value of and faith in the bolivar also effectively backed by the country’s oil wealth?

Well, the bolivar is worthless, and Maduro wanted to start anew. Maduro thought the petro would help the government avoid the reach of U.S. sanctions, at least in theory. But the new cryptocurrency has unsurprisingly failed to catch on.

The petro is supposed to be backed by 5 billion barrels of oil located in Atapirire, a small town in Venezuela’s remote savanna in the middle of the country. Reserves in this region are the lynchpin of the petro, and as such, they are intended to underwrite the regime’s plan for economic recovery.

But as Reuters details in a special report, the region is not only lacking in oil production, but there is no visible effort at developing oil in this area at all. The only evidence of an oil presence were old rigs that have clearly been inoperable for a long time, as they are rusted out and covered in weeds. “There is no sign of that petro here,” a local resident told Reuters. Worse, the town suffers from blackouts, hunger, poverty and decrepit infrastructure, an increasingly common plight for the country on the whole.

More broadly, there is “little evidence of a thriving petro trade,” Reuters correspondent Brian Ellsworth concluded, after interviewing dozens of cryptocurrency experts over a period of months. Maduro says that the sale of the petro have translated into $3.3 billion in funds for the government, a claim that is suspect, to say the least.

Even a cabinet minister involved in the project told Reuters that “nobody has been able to make use of the petro…nor have any resources been received,” and that the technology for the digital token is still under development. And unlike other initial coin offerings (ICOs) for startup cryptocurrencies, which can point to digital records of transactions, there is little evidence that supports Maduro’s notion that trading activity of the petro is thriving.

Adding to the monetary confusion is the assertion by Maduro that the bolivar is now pegged to the petro. It’s not even clear what that means in practice, and experts say its “unworkable,” according to Reuters. “There is no way to link prices or exchange rates to a token that doesn’t trade, precisely because there is no way to know what it actually sells for,” Alejandro Machado, a Venezuelan computer scientist and cryptocurrency consultant who has closely followed the petro, told Reuters.

It would all be laughable if the economic meltdown in Venezuela wasn’t so dire and the oppression and mismanagement from the Maduro government didn’t exact such massive a human toll.

Meanwhile, Venezuela’s oil production continues to erode at a rapid rate. Output fell to just 1.278 million barrels per day in July, down roughly 50,000 bpd from a month earlier and down more than 500,000 bpd since the fourth quarter of 2017.

There is almost no chance of improvement for the foreseeable future. Argus Media reported last week that Venezuela’s crude exports could fall by a third in September because of a tanker collision at an export terminal run by PDVSA. The terminal’s capacity could be hampered by around 425,000 bpd for the month. “But this assumes that PdV manages to repair and restart the dock operations by 30 September at the latest,” a PDVSA terminal official told Argus.

Thus, the meltdown continues. Maduro is going to need to come up with something better than a hapless and inept attempt at a new cryptocurrency to resolve the country’s deep depression.

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