Month: May 2019

Justice Department Tells Republicans to Hand Over Records on Cindy Yang and Other Chinese-American Supporters

Following a request from congressional Democrats, the U.S. Department of Justice is now subpoenaing records related to the Floridian entrepreneur and small-time Republican donor Li “Cindy” Yang.

The Miami Herald reports that federal prosecutors have sent subpoenas to the Mar-a-Lago Club and to Trump Victory (a fundraising team for Trump’s 2020 presidential campaign, the Republican National Committee, and GOP committees from 11 states), seeking information on contributions and event attendance by Yang, her husband and parents, several former members of her staff, her colleague on the National Committee of Asian American Republicans, and several other Chinese Americans.

Right now, federal investigators don’t know or aren’t letting on much. But the Herald says the case is aimed squarely at “Yang and possibly others close to her,” not the Trump family business or Republican fundraisers.

Yang—who built up and then sold a spa and massage chain in South Florida—had in recent years launched G.Y. U.S. Investments, an endeavor that helped Chinese business owners navigate U.S. regulations and make contacts, investments, and operational inroads here.

As part of this consulting business, Yang sometimes offered clients access to events at Trump’s private club in Palm Beach and to other Republican parties. Prosecutors say some of these events were ticketed fundraisers, meaning someone had to pay for the access—a payment that counts as a political contribution. And non-citizens are prevented from donating to U.S. political campaigns.

Yang herself has been a citizen here for years. But if she brought Chinese nationals who paid her to a paid-ticket party for Trump, she may have run afoul of campaign finance laws. Yang has denied any wrongdoing. She is also suing the Herald for defamation.

Nonetheless, people are already spinning wild tales about what we supposedly know about Yang—that she funneled money from China to Trump, and that she earned her money from human trafficking. The trafficking rumor stems from recent (and rapidly unraveling) prostitution cases against Patriots owner Robert Kraft and others, involving activity at a massage place that isn’t affiliated with Yang. (Yang simply owned a business in the same location years ago.)

And while we may yet find some funny business with her books, all the FBI seems to have right now is receipts on some legal and relatively small donations ($70,000 from Yang and her family to Trump fundraisers since the 2016 election, the Herald reports) and records of contributions from several other Chinese Republicans or massage business owners. It’s not even clear that some of those have any association with Yang.

The new subpoenas demand any documents and communications related to Yang and 11 others, dating back through January 2017. They also seeks information related to “one charity and seven companies affiliated with” Yang, an unnamed “person familiar with the investigation” tells the Herald. The paper adds that the

investigation is being handled by the FBI and the Justice Department’s Public Integrity Section in Washington. While special counsel Robert Mueller’s inquiry into Russian interference in the 2016 election has ended, the new probe examining Chinese money may add to growing concerns over foreign influence heading into the 2020 election.

It seems unlikely to be just coincidence that this story and others hinting about Chinese influence starting sparking so much attention right around the time Special Counsel Robert Mueller’s investigation into Russian meddling and collusion was dying down.

FREE MINDS

The Institute of Electrical and Electronics Engineers (IEEE) can no longer let Huawei scientists serve as editors or peer reviewers for its journals, or else it risks running afoul of the Trump administration’s sanctions on the Chinese company.

Science reports:

The IEEE ban has sparked outrage among Chinese scientists on social media. “I joined IEEE as a Ph.D. student because it is recognized as an International academic platform in electronics engineering,” wrote Haixia (Alice) Zhang of Peking University in Beijing in a letter to IEEE leadership. “But this message is challenging my professional integrity. I have decided to quit the editorial boards [of two IEEE journals] until it restores our common professional integrity.”

FREE MARKETS

Humanitarians offering material assistance to migrants crossing the Sonoran Desert are being prosecuted on federal charges. Arizona geographer Scott Warren is one of them, charged with a felony for offering water, food, and other basic necessities to those passing through.

“In the Sonoran Desert, the temperature can reach 120 degrees during the day and plummet at night,” writes Warren:

Water is scarce. Tighter border policies have forced migrants into harsher and more remote territory, and many who attempt to traverse this landscape don’t survive. Along what’s become known as the Ajo corridor, dozens of bodies are found each year; many more are assumed to be undiscovered.

Local residents and volunteers organize hikes into this desert to offer humanitarian aid. We haul jugs of water and buckets filled with canned food, socks, electrolytes and basic first-aid supplies to a few sites along the mountain and canyon paths. Other times, we get a report that someone has gone missing, and our mission becomes search and rescue—or, more often, to recover the bodies and bones of those who have died.

Over the years, humanitarian groups and local residents navigated a coexistence with the Border Patrol. We would meet with agents and inform them of how and where we worked. At times, the Border Patrol sought to cultivate a closer relationship. “Glad you’re out here today,” I remember an agent telling me once. “People really need water.” In a town as small as Ajo, we’re all neighbors, and everybody’s kids go to the same school. Whether it was in the grocery store or out in the field, it was commonplace for residents and volunteers to run into Border Patrol agents and talk.

Those kinds of encounters are rare these days. Government authorities have cracked down on humanitarian aid: denying permits to enter the Cabeza Prieta National Wildlife Refuge, and kicking over and slashing water jugs. They are also aggressively prosecuting volunteers. Several No More Deaths volunteers have faced possible imprisonment and fines of up to $10,000 on federal misdemeanor charges from 2017 including entering a wildlife refuge without a permit and “abandonment of property”—leaving water and cans of beans for migrants. (I face similar misdemeanor charges of “abandonment of property.”)

More here.

QUICK HITS

  • Must read of the day:

  • Rep. Nancy Pelosi intensifies her crusade against Facebook, declaring yesterday in response to a doctored video it didn’t take down: “I think they have proven—by not taking down something they know is false—that they were willing enablers of Russian interference in our election.” (As Cato’s Julian Sanchez comments, “that is just a bizarre non sequitur.”)
  • An Illinois Newsroom investigation into prison library book removals finds “a majority of the books removed from the program’s library are about race.”
  • Government is just another word for…

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Serbian Troops On “Combat Alert” After Deadly Kosovo Police Raid On Serb Enclave

Serbian troops have reportedly been placed on “combat alert” early this week after police in the breakaway Republic of Kosovo, which has never been recognized by Serbia following its 2008 independence declaration (though backed by the US and 100 nations), raided Serb-populated regions to arrest close to two dozen as part of an “an anti-smuggling mission”.

Belgrade has accused the ethnic Albanian-majority Kosovo police force of targeting Serbs in the region who still pledge allegiance to the Serbian state. The Serbian president charged Kosovo police with “bursting” into the region with armored vehicles and wounding “unarmed Serbs”.

Members of a Kosovo special police unit near the village of Cabra, northwestern Kosovo, during police raids, via the AP.

According to Reuters:

At least 19 people were arrested and a Russian U.N. official detained in the operation. Five police and six Serb civilians were wounded in fighting, Kosovan official said.

The incidents signaled rising tensions in four Serb-majority municipalities in northern Kosovo, parts of which remain largely outside control of Pristina and pledge allegiance to Belgrade.

The UN mission in Kosovo has appealed for calm on all sides and said it was “concerned” over the detention of two of its staff members by the Kosovo police, one of which is of Russian nationality. 

Russia also expressed outrage, with Alexander Chepurin, the Russian ambassador to Belgrade, saying on Twitter that Moscow is “revolted by the provocation”. Serbian President Aleksandar Vucic declared in statements that Serbia’s military was prepared to defend Serbs in Kosovo.

However, Kosovo’s prime minister Ramush Haradinaj, on the other hand, defended the operation, which involved heavily armed SWAT police: “I confirm that the operation is about law enforcement and nothing else. I call Serbs in the north to stay calm and respect the law,” the prime minister said.

Though there are conflicting details of precisely how the shootout began, statements in Reuters suggest a large-scale armed confrontation in a busy Serbian enclave:

In Pristina, police chief Rashit Qalaj said a total of 19 Kosovan police officers had been arrested on suspicion of smuggling goods into the country. Eleven were ethnic Serbs, four ethnic Albanians and four were Bosniaks, he told a news conference.

Law enforcement officers had faced “armed resistance”, Qalaj said. Five policemen were wounded, one from a gunshot. Six Serb civilians were also hurt, he said.

Other Kosovo officials described it as a fight against “organized crime” amid accusations that cross-border smuggling has seen a significant uptick recently. The Kosovo government has enacted a 100 tariff on all Serbian goods following last year’s controversial maneuver by Serbia to have Pristina blocked from joining Interpol. 

On Wednesday Kosovo’s prime minister resisted EU calls to revoke or suspend the tariff on Serb goods, saying it would remain in effect until Serbia formally recognized Kosovo’s borders. 

In 1999 US and NATO intervention controversially wrested Kosovo – Serbia’s medieval heartland – from Belgrade’s control, bombing Yugoslavia in a multi-month air campaign that directly killed somewhere between 400 and 500 plus Serbian civilians, possibly many more, along with decimating infrastructure like bridges, hospitals, and government buildings. 

In total, the 1998-1999 war for Kosovo claimed more than 13,000 lives according to most estimates. Tensions have remained high ever since, spilling over into internecine ethnic violence and destruction of religious buildings in the years that followed up to today. 

via ZeroHedge News http://bit.ly/2Z2FSjP Tyler Durden

Italian Yields Jump As Salvini Threatens To Crash Government

Clearly emboldened by the EU Parliamentary results, where the League won a plurality of the vote in Italy, Matteo Salvini on Thursday sent BTP yields higher by threatening to crash the Italian government if the Five Star Movement doesn’t back his tax-cut plan.

BTP

BTP yields have been moving higher over the past two weeks as Salvini has brushed off Europe’s threats to fine Italy up to €4 billion over its refusal to rein in its debt and deficit-spending plans. This would be the first time the European Commission has fined a member state over violations of its fiscal rules.

But Salvini, who is now indisputably the most powerful political figure in Italy, isn’t backing down. He has remained defiant, even as Italy braces for the EU to initiate another excessive debt proceeding on Wednesday, when reviews of member states’ fiscal compliance are expected.

As the Telegraph’s Ambrose Evans-Pritchard pointed out in a column yesterday, Salvini has revived threats to initiate an Italian parallel currency – the so-called “mini-BOT” Italian Treasury bills that a Forbes columnist once warned was the “biggest threat to the future of the eurozone.”

And with Salvini adding to the political chaos by taking the first tentative steps toward ousting Five Star from the ruling coalition, Italian bond holders will have only themselves to blame if they don’t anticipate more market-rattling political chaos, and position accordingly.

via ZeroHedge News http://bit.ly/2HJ3W5b Tyler Durden

Powell Channels Bernanke: “Subprime Debt Is Contained”

Authored by Lance Roberts via RealInvestmentAdvice.com,

I recently discussed one of the biggest potential “flash points” for the financial markets today – corporate debt.

What I find most fascinating is how quickly many dismiss the issue of corporate debt with the simple assumption of “it’s not the subprime mortgage market.”

Correct, it’s not the subprime mortgage market. As I noted previously:

“Combined, there is about $1.15 trillion in outstanding U.S. leveraged loans (this is effectively “subprime” corporate debt) — a record that is double the level five years ago — and, as noted, these loans increasingly are being made with less protection for lenders and investors. Just to put this into some context, the amount of sub-prime mortgages peaked slightly above $600 billion or about 50% less than the current leveraged loan market.”

Every bubble has its own characteristics. The current bubble is no different, and I would suggest that it has the potential to have more severe consequences than seen previously. The reasoning is that the fallout from the sub-prime directly impacted both lenders and the homeowners. This time a “corporate debt bust” will impact a much broader spectrum of companies which will lead to a surge in bankruptcies, mass job losses, and the subsequent contraction in consumption.

Same effect. Different characteristics.

Remember, in 2007, Ben Bernanke gave two speeches in which he made a critical assessment of the “sub-prime” mortgage market.

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the sub-prime market seems likely to be contained.” – Ben Bernanke, March 2008

“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the sub-prime sector on the broader housing market will likely be limited.” – Ben Bernanke, May 2007

Of course, the sub-prime issue was not “contained,” and all it required was the right catalyst to effectively “burn the house down.” That catalyst was Lehman Brothers which, when it declared bankruptcy, froze the credit markets because buyers for debt evaporated and liquidity was non-existent.

It was interesting to see Federal Reserve Chairman Jerome Powell, during an address to the Fernandina Beach banking conference, channel Ben Bernanke during his speech on corporate “sub-prime” debt (aka leverage loans.)

“Many commentators have observed with a sense of déjà vu the buildup of risky business debt over the past few years. The acronyms have changed a bit—”CLOs” (collateralized loan obligations) instead of “CDOs” (collateralized debt obligations), for example—but once again, we see a category of debt that is growing faster than the income of the borrowers even as lenders loosen underwriting standards.Likewise, much of the borrowing is financed opaquely, outside the banking system. Many are asking whether these developments pose a new threat to financial stability.

In public discussion of this issue, views seem to range from “This is a rerun of the subprime mortgage crisis” to “Nothing to worry about here.” At the moment, the truth is likely somewhere in the middle. To preview my conclusions, as of now, business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm to households and businesses should conditions deteriorate.” – Jerome Powell, May 2019

In other words, corporate debt is “contained.”

The reality is that the corporate debt issue is likely not contained. Here are some stats from our previous report on this issue:

“Currently, the same explosion in low-quality debt is happening in another corner of the US debt market as well. In just the last 10 years, the triple-B bond market has exploded from $686 billion to $2.5 trillion—an all-time high.

To put that in perspective, 50% of the investment-grade bond market now sits on the lowest rung of the quality ladder. And there’s a reason BBB-rated debt is so plentiful. Ultra-low interest rates have seduced companies to pile into the bond market and corporate debt has surged to heights not seen since the global financial crisis.”

Let’s put that into context with the sub-prime crisis for a moment.

As Michael Lebowitz wrote for our RIA PRO subscribers. (Try FREE for 30-days)

“The graph shows the implied ratings of all BBB companies based solely on the amount of leverage employed on their respective balance sheets. Bear in mind, the rating agencies use several metrics and not just leverage. The graph shows that 50% of BBB companies, based solely on leverage, are at levels typically associated with lower rated companies.”

“If 50% of BBB-rated bonds were to get downgraded, it would entail a shift of $1.30 trillion bonds to junk status. To put that into perspective, the entire junk market today is less than $1.25 trillion, and the sub-prime mortgage market that caused so many problems in 2008 peaked at $1.30 trillion. Keep in mind, the sub-prime mortgage crisis and the ensuing financial crisis was sparked by investor concerns about defaults and resulting losses.

As mentioned, if only a quarter or even less of this amount were downgraded we would still harbor grave concerns for corporate bond prices, as the supply could not easily be absorbed by traditional buyers of junk.”

Think about that for a moment. If all of a sudden there is a massive slide in ratings quality, many institutions, pension, and mutual funds, which are required to hold “investment grade” bonds will become forced sellers. If there are no “buyers,” you have a liquidity problem.

Let me just remind you that such an event will not happen in a vacuum. It will occur coincident with a recessionary backdrop where assets are being wholesale liquidated. Which is the problem with Powell’s comments which are all predicated on just one thing – no recession.

“To preview my conclusions, as of now, business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm to households and businesses should conditions deteriorate. At the same time, the level of debt certainly could stress borrowers if the economy weakens.”

Jerome Powell is basing his risk assessment on the assumption of a “Goldilocks Economy” that will presumably persist indefinitely. In other words, “the only risk is a recession.” 

Of course, Ben Bernanke’s mistaken assumption about “sub-prime” was also the belief in a “Goldilocks”scenario.

“We have spent a bit of time evaluating the financial implications of the sub-prime issues, tried to assess the magnitude of losses, and tried to determine how concentrated they are. There is a sense that, although there is always a possibility for some kind of disruption, the financial system will absorb the losses from the sub-prime mortgage problems without serious problems.” – Ben Bernanke, May 2007

Of course, the risk of recession has risen markedly in recent months and the resurgence of the trade war may be just enough to push the economy over the edge. But importantly, as Michael noted above, the real risk is when the recession does come. That risk was also highlighted by TheStreet.com

“Joseph Otting, who heads the U.S. Office of the Comptroller of the Currency, said in written testimony to the Senate Banking Committee that underwriting standards have declined on these junky loans, meaning investors will likely get less of their money back in the event of a default. That could spell big losses in an economic downturn, since many of the borrowers likely would suffer a sales decline.   

Banks bear ‘indirect risk’ from the junk-lending frenzy because they lend to companies and investors who buy the loans once they’re made, according to Otting.

‘Although less transparent to the federal banking agencies, we will continue to monitor nonbank leveraged lending activity and its potential impacts to the extent possible,’ Otting said. The banks also lend to companies ‘that may have critical suppliers or vendors that are highly leveraged.’ Regulators and banking executives often use the delicate term ‘leveraged’ to describe a company that is highly indebted.”

The risk is also particularly exposed in the ETF market where investors have been crowding over the last several years.

We have previously pointed out the risk of the “passive investing” craze. To wit:

“’There is no such thing as passive investing. While it is believed that ETF investors have become ‘passive,’ the reality is they have simply become ‘active’ investors in a different form. As the markets decline, there will be a slow realization ‘this decline’ is something more than a ‘buy the dip’ opportunity. As losses mount, the anxiety of those ‘losses’ mounts until individuals seek to ‘avert further loss’ by selling.”

However, that “liquidity” risk is magnified when it comes to junk bonds because those instruments can be particularly illiquid and thinly traded. This was recently noted by Evergreen Capital

“While it’s well known that flows into stock ETFs have gone postal during this bull market, less top-of-mind is that the same thing has happened with bond ETFs. Per the charts below, most of the inflows have been into equity ETFs but corporate bond ETFs have increased by 1000% over the past decade.

Moody’s has also observed that ETF investors ‘may be in for a shock during the next sustained market rout’. They opine that this is especially the case with ETFs that hold lightly-traded securities such as corporate bonds and loans. This could lead to a potentially jarring collision between perceptions and reality. ETF investors think they can get out of even junk bond and sub-investment grade bank loan ETFs on a moment’s notice. To a point that’s true. If they hit the sell button at their on-line broker, they’ll be out instantly. But if they do so during another period of mass liquidation, they’ll get a horrible execution price. In my opinion, this is almost certain to happen in the not too distant future, particularly given that corporate bond volumes have contracted so dramatically in recent years. For example, since 2014 junk bond trading volumes have vaporized by 80%. Thus, the bond market is dangerously illiquid these days.

Unfortunately, while Jerome Powell may be currently channeling Ben Bernanke to keep markets stabilized momentarily, the real risk is some unforeseen exogenous event, such as Deutsche Bank going bankrupt, that triggers a global credit contagion.

The problem for the Fed is that they aren’t starting with a $900 billion balance sheet but rather one over $4 Trillion. Fed funds aren’t at 5% but rather 2.4%, and GDP is running at half the levels of periods preceding previous recessions. In other words, when the next recession comes, which will trigger not on a credit contagion but a mean reverting correction in asset prices, the Fed will have very little to work with.

Of course, this all reminds me of movie “Speed” with Howard Payne talking to Jerome Powell:

“Pop quiz, hotshot. There’s a ‘corporate junk bond’ bomb on a bus. Once the economy slides toward 0%, the bomb is armed. If Deutsche Bank goes bust, it blows up. What do you do? What do you do?”

For our clients, we have already gotten off the bus. We have eliminated our credit risk, shortened our duration and moved substantially higher on the credit quality scale.

What are you doing?

via ZeroHedge News http://bit.ly/2XjcbKM Tyler Durden

Bill Weld: Mueller Shows How ‘Trump Is Not Worthy of the Oval Office’

Rep. Justin Amash (R–Mich.) is not the only self-described libertarian Republican to conclude from Special Counsel Robert Mueller’s two-volume report that President Donald Trump engaged in impeachable conduct.

Bill Weld, Mueller’s former boss at the Department of Justice in the early 1990s, concluded upon the report’s delivery that “It’s time for Trump to resign,” then told me in late April that “it’s very obvious that the evidence goes well beyond what’s required to charge the president with obstruction of justice. It goes well beyond anything President Richard Nixon ever did….If you read Volume Two, it’s very clear that the president committed the offense of obstruction of justice.”

Hours after Mueller’s please-read-my-report press conference Wednesday, Weld, who is scuffling to gain traction in his primary challenge against the president, issued a press release again calling on Trump to resign.

“Today Bob Mueller reminded all Americans of why Donald Trump is not worthy of the Oval Office,” Weld said. “When the subject of an authorized investigation obstructs it or lies in response to it, that strikes at the heart of the criminal evidence gathering process….Volume 2 of Mr. Mueller’s report sets out approximately ten instances where there was evidence that Mr. Trump obstructed the investigation.”

Weld is one of nearly 1,000 former federal prosecutors to sign onto a May 6 statement saying, in part, that “we recognize that prosecuting obstruction of justice cases is critical because unchecked obstruction — which allows intentional interference with criminal investigations to go unpunished — puts our whole system of justice at risk. We believe strongly that, but for the [Office of Legal Counsel] memo, the overwhelming weight of professional judgment would come down in favor of prosecution for the conduct outlined in the Mueller Report.”

The divergent interpretations of the Office of Legal Counsel (OLC) guidance on charging sitting presidents has emerged as a significant if hard-to-parse split between Mueller and his boss, Attorney General William Barr. Judge Andrew Napolitano walked through the OLC dispute on Fox News Wednesday:

(Listen to Napolitano’s explanation for why he thinks Trump obstructed justice in this Reason Podcast from earlier this month.)

Weld, the Libertarian Party’s 2016 vice-presidential nominee, has been juxtaposing his prosecutor-centric, rule-of-law objections to Trump with his conspicuously “social justice“–flavored advocacy for criminal justice reform since even before returning to the GOP in January. He told Reason in 2018 that the phrase “all lives matter” was “nothing but a dog whistle,” claimed to The New Yorker in March that “white supremacists” heard Trump’s “dog whistle loud and clear,” and then ratcheted up the rhetoric still further last week.

“I celebrate that America has always been a melting pot,” Weld declared at the Edward M. Kennedy Institute. “It seems he would prefer an Aryan nation. I know that sounds strong and tough but he’s very interested in bloodlines and it has resonance.”

Given an opportunity to defend his remarks on CNN this week, Weld did not back down an inch.

Weld also said in that interview, “I think a lot of people agree with me and Congressman Amash, whose statement I totally applaud, that the president committed obstruction of justice.” This prompted the Libertarian Party’s national Membership Manager Jess Mears to exult:

There are plenty of other libertarian-leaners, meanwhile, who look upon the same set of Trump/Russia facts and come to a drastically different conclusion. Sen. Rand Paul (R–Ky.) characterized the Mueller report last week as “the antithesis of libertarianism,” arguing that it amounted to “an abuse of intelligence power consistent with what libertarians have been complaining about for a long time.”

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Bill Weld: Mueller Shows How ‘Trump Is Not Worthy of the Oval Office’

Rep. Justin Amash (R–Mich.) is not the only self-described libertarian Republican to conclude from Special Counsel Robert Mueller’s two-volume report that President Donald Trump engaged in impeachable conduct.

Bill Weld, Mueller’s former boss at the Department of Justice in the early 1990s, concluded upon the report’s delivery that “It’s time for Trump to resign,” then told me in late April that “it’s very obvious that the evidence goes well beyond what’s required to charge the president with obstruction of justice. It goes well beyond anything President Richard Nixon ever did….If you read Volume Two, it’s very clear that the president committed the offense of obstruction of justice.”

Hours after Mueller’s please-read-my-report press conference Wednesday, Weld, who is scuffling to gain traction in his primary challenge against the president, issued a press release again calling on Trump to resign.

“Today Bob Mueller reminded all Americans of why Donald Trump is not worthy of the Oval Office,” Weld said. “When the subject of an authorized investigation obstructs it or lies in response to it, that strikes at the heart of the criminal evidence gathering process….Volume 2 of Mr. Mueller’s report sets out approximately ten instances where there was evidence that Mr. Trump obstructed the investigation.”

Weld is one of nearly 1,000 former federal prosecutors to sign onto a May 6 statement saying, in part, that “we recognize that prosecuting obstruction of justice cases is critical because unchecked obstruction — which allows intentional interference with criminal investigations to go unpunished — puts our whole system of justice at risk. We believe strongly that, but for the [Office of Legal Counsel] memo, the overwhelming weight of professional judgment would come down in favor of prosecution for the conduct outlined in the Mueller Report.”

The divergent interpretations of the Office of Legal Counsel (OLC) guidance on charging sitting presidents has emerged as a significant if hard-to-parse split between Mueller and his boss, Attorney General William Barr. Judge Andrew Napolitano walked through the OLC dispute on Fox News Wednesday:

(Listen to Napolitano’s explanation for why he thinks Trump obstructed justice in this Reason Podcast from earlier this month.)

Weld, the Libertarian Party’s 2016 vice-presidential nominee, has been juxtaposing his prosecutor-centric, rule-of-law objections to Trump with his conspicuously “social justice“–flavored advocacy for criminal justice reform since even before returning to the GOP in January. He told Reason in 2018 that the phrase “all lives matter” was “nothing but a dog whistle,” claimed to The New Yorker in March that “white supremacists” heard Trump’s “dog whistle loud and clear,” and then ratcheted up the rhetoric still further last week.

“I celebrate that America has always been a melting pot,” Weld declared at the Edward M. Kennedy Institute. “It seems he would prefer an Aryan nation. I know that sounds strong and tough but he’s very interested in bloodlines and it has resonance.”

Given an opportunity to defend his remarks on CNN this week, Weld did not back down an inch.

Weld also said in that interview, “I think a lot of people agree with me and Congressman Amash, whose statement I totally applaud, that the president committed obstruction of justice.” This prompted the Libertarian Party’s national Membership Manager Jess Mears to exult:

There are plenty of other libertarian-leaners, meanwhile, who look upon the same set of Trump/Russia facts and come to a drastically different conclusion. Sen. Rand Paul (R–Ky.) characterized the Mueller report last week as “the antithesis of libertarianism,” arguing that it amounted to “an abuse of intelligence power consistent with what libertarians have been complaining about for a long time.”

from Latest – Reason.com http://bit.ly/2W6LCHu
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Trump Slams “Conflicted” Mueller, Confirms Russia Didn’t Help Him Get Elected

One day after Mueller tacitly encouraged Democrats to initiate impeachment proceedings against him, President Trump doubled down on his criticisms of the former special counsel during an impromptu scrum with reporters on the White House lawn on Thursday as he prepared to leave for Colorado to give the commencement address at the Air Force Academy.

Calling Mueller a “true ‘Never Trumper'”, Trump slammed the special counsel for being ‘totally conflicted’ while slamming the Mueller probe as a $40 million boondoggle. He also slammed the “totally conflicted” Mueller, saying the special counsel held a grudge for not being re-appointed to lead the FBI after Comey’s firing.

Trump also appeared to contradict a tweet he had sent just minutes prior, by telling reporters that Russia didn’t help him get elected.

On Thursday morning, Trump tweeted that Russia had “disappeared” from the headlines since Mueller had determined that “I had nothing to do with Russia helping me to get elected.”

Asked by reporters at the press conference whether Russia helped him defeat Hillary Clinton, Trump denied it, and said he deserved all the credit for his victory over Hillary Clinton, adding that, if anything, Russia had tried to help the other side.

“Russia did not help me get elected…you know who got me elected? I got me elected. Russia, if anything, helped the other side.”

Trump then reiterated that Russia would have rather had Hillary Clinton in the White House than him, because “nobody has been tougher on Russia than me.”

Before boarding his helicopter, Trump also appeared to contradict the Navy’s denial of a WSJ report that the White House had asked that the USS John McCain be covered up during Trump’s visit to Japan. Trump merely said he had nothing to do with the decision. “They thought they were doing me a favor.”

While he’s been tough on Russia, Trump insisted that he wanted to get alongwith everybody, including Russia, China and Iran, and that, if Iran wants to talk, “I’m available.”

via ZeroHedge News http://bit.ly/2JNYm46 Tyler Durden

Q2 GDP Revised Lower To 3.0%, As Corporate Profits Tumble Most In Three Years

After Wall Street was stunned when the BEA reported a far stronger than expected first reading of Q1 GDP, which soared to 3.2%, smashing earlier expectations that it would print around 1%, moments ago the Dept of Commerce reported the first revision to the first quarter number, which was revised fractionally lower to 3.1%, which however was still just above the consensus estimate of 3.0%, and certainly better than the 2.2% recorded in Q4.

The revision was due to a modest downward revision in Fixed Investment (from 0.27% to 0.18% of GDP) and Private Inventories (from 0.65% to 0.60%) as well as net exports from just above 1% to just below, offset by a small revision higher in Personal Consumption, which increased from 0.82% to 0.90%. On an annualized basis, consumer spending, which accounts for the majority of the economy, grew 1.3%, topping projections for an unrevised 1.2% though still the slowest in a year. Finally, the government contribution to GDP was virtually unchanged at 0.42%.

Excluding trade and inventories, that gave a boost to GDP, final sales to domestic purchasers increased at a 1.5% pace – the slowest since 2015, though revised from 1.4%. This indicators, seen as a measure of underlying demand, suggests growth in the quarter was weaker than the headline number indicates.

The report may ease some investor concern that the economy is losing momentum and potentially help Trump as he starts his reelection campaign, even as sellside strategists are now expecting a 1% or lower Q2 GDP print. Indeed, as Bloomberg notes, “recent reports suggesting a dimmer outlook this quarter, along with the intensifying tariff conflict, are casting a shadow over an expansion poised to become the nation’s longest on record in July.” Notably, the 3M-10Y curve dipped to session lows of -11bps after the report.

Today’s report also gave the first read on business earnings for the period, suggesting corporate America is facing headwinds from the trade war and the effects of Trump’s tax cut is waning. Pretax corporate profits fell 2.8% from the prior quarter, the biggest drop since 2015, and were up 3.1% from a year earlier, the least since 2017.

 

 

via ZeroHedge News http://bit.ly/2I7eni5 Tyler Durden

Lira Pares Gains As Turkey Mulls Using Russian Missile System In Med Gas Fight

After rallying dramatically this morning (with some suggesting Erdogan’s call with Trump may suggest he is pulling the S-400 deal), the Turkish Lira has given back some gains after a Bloomberg headline reports that Turkey is considering deploying a Russian missile-defense system along the country’s southern coast, near where its warships are accompanying vessels exploring for energy.

Today’s reported threat, according to four people with knowledge of the deliberations, comes just a few days after Turkey’s largest-ever Navy drill rattled sabres across the Med.

Bloomberg reports that the long-range S-400 battery, which might be delivered in weeks, would dramatically enhance Turkey’s military capabilities in the Eastern Mediterranean, where it’s embroiled in a fight with EU member Cyprus over offshore gas exploration, the people said on condition of anonymity as the issue is sensitive.

“Turkey regards the S-400s as a deterrent to defend its energy interests in the East Med where brewing tensions may threaten to bring Turkey’s relations with the U.S. to a breaking point,” said Mehmet Seyfettin Erol, head of Ankara-based research institute ANKASAM.

“It feels increasingly threatened in the Mediterranean by U.S. and Israeli support for Cyprus.”

The European Union has expressed its “grave concern” about the upcoming drilling to be conducted by Turkey in the Exclusive Economic Zone of Cyprus.

Turkey does not recognize the government in Nicosia or its agreements regarding EEZ. Ankara thinks that the right to extract gas should also be exercised by the Turkish Cypriots and also by Turkey in the case of Blocks 4, 5, 6, and 7, through which – according to Ankara – passes the Turkish maritime border (the map below).

EU’s High Representative and Vice President Federica Mogherini recently said that the European Council had “strongly condemned Turkey’s continuous illegal actions in the Eastern Mediterranean Sea.”

Mogherini pledged to “respond appropriately and in full solidarity with Cyprus.”

“The possibility of the S-400s being deployed at Akkuyu is quite strong,” said Abdullah Agar, a Turkish security analyst. “It is a solution that could provide security to the nuclear plant in line with Turkey’s cooperation with Russia and give it an edge in a stiff energy competition in the East Med.”

Turkish President Recep Tayyip Erdogan and President Donald Trump are expected to discuss the missiles on the sidelines of a G-20 summit in Japan next month.

via ZeroHedge News http://bit.ly/2MhJM6G Tyler Durden

Softbank’s Vision Fund Unexpectedly Takes Out $4 Billion Margin Loan Against Uber Shares

In what appears to be an attempt skirt the lock-up on newly listed Uber shares, Softbank’s Vision Fund is planning to borrow $4 billion against its shares of the ride hailing company. The fund is currently in talks with Goldman Sachs to arrange the loan, which would be secured against the fund’s shares of newly-listed Uber. The loan would also be backed by the fund’s shares in Guardant Health and Slack, according to FT. 

As with any margin loan, should these high flying “optimistically priced” companies start to see their valuations fall, the fund will have to put up more cash or will see its shares liquidated.

The loan also raises additional questions about what appears to be a very real need for cash at the Vision Fund. Recall, we reported in early May that SoftBank was considering a $100 billion IPO for the fund. The Japanese telecom conglomerate with what has emerged as the world’s largest VC arm, whose investor presentation include bizarre slides such as this one…

… was also reportedly in talks with the Sultanate of Oman to secure an additional investment in its existing fund. Masayoshi Son had also visited China to discuss potential investments in the fund worth several billion dollars.

So we can’t help but ask: just how much cash does the fund really need, and what, exactly, is going on behind closed doors at the fund?

Since the Vision Fund was founded in 2016 investments made by SoftBank founder Masayoshi Son and the fund’s chief executive, Rajeev Misra, a former Deutsche Bank debt trader, have caught the public’s attention. For the most part, the fund’s transactions have taken place in the private markets, but a wave of recent IPOs over the last few months has given the fund the liquidity necessary to cash out of some of its investments.

And yet, as the FT reports, the fund will look to borrow against its publicly traded shares and use the cash to return capital to its investors. While the move bypasses the traditional lock up for newly listed shares, it prompts questions: why do investors want their capital back now?

Of course, the Vision Fund is the largest shareholder in Uber, which had a less than ceremonious IPO in May, when the stock debuted and instantly was met with selling pressure. Softbank had already sold a small portion of its position in the listing, but it still owns 13% of the company.

Uber is now down about 10% from its initial public offering. It had an equity valuation of around $82 billion when it listed, but despite falling, Softbank is still in the black on its late 2017 investment in the company.

Guardant Health is a blood testing company that the fund owned 30% of at the end of the first-quarter. It went public in October of last year and has a market cap of about $7 billion. Finally, Softbank‘s stake in Slack was valued at about $950 million. Slack will look to pursue a direct listing next month. The value of those stakes should cover the loan more than three times over – as long as the price but for these companies remains inflated frothy as high as it is today.

It was reported that margin loan features will kick in after the final share lock up period ends on the underlying shares expires. Goldman Sachs is one of the banks in talks to provide the loan, which will reportedly bear an interest rate of 150bps over LIBOR. The loan wall formally be closed after Slack’s completed’s direct listing.

Meanwhile, Softbank has about $143 billion of interest bearing debt and nearly double that in total liabilities – both of which far eclipse its market cap, which is around $100 billion. And this isn’t the first time Softbank has taken out one of these types of loans. Last year it took out an $8 billion loan against its stake in Alibaba.

Softbank has favored margin loans because they protect the bank’s other assets, even though the lender can sell the underlying stock if the collateral falls in value. This means that these loans are not factored into the bank’s credit rating, which is a concern since SoftBank already carries junk ratings from Moody’s and S&P.

One lawyer said that margin loans have become ubiquitous as a result of the recent rush of US technology listings. They’re often used as a way for early investors to cash out ahead of lockup periods, he said.

A banker told FT: “Shareholders are considering it more and more as either a way around lock-up, to put on more leverage or to maximize their proceeds.”

Masayoshi Son

As for the Vision Fund’s IPO, it’s difficult to imagine that it would be anything other than a desperate exit strategy for SoftBank, considering recent reports that the firm’s backers in Saudi Arabia and Abu Dhabi have reportedly expressed reservations about Masayoshi Son’s investment strategy, complaining that he had made reckless investments at valuations that many felt were too high. And that was before the Uber IPO disaster. 

The news also comes just weeks after WSJ reported that Masayoshi Son lost $130 million of his personal fortune after buying into bitcoin at the top of the 2017 bubble, then selling while prices were crashing.

If he’s managing the Vision Fund in the same revolutionary and disruptive way, its need for quick cash may make perfect sense.

via ZeroHedge News http://bit.ly/2wq39zU Tyler Durden