It looks like China’s unstoppable default tsunami is about to claim its latest corporate victim…and thanks to lax oversight that allowed the company to get away with what appears to be a staggering accounting fraud, thousands of unsuspecting investors might be left holding the bag.
According to Bloomberg, Kangmei Pharmaceutical Co., one of China’s largest listed drugmakers, revealed on Tuesday that it had overstated its cash holdings by $4.4 billion. Unsurprisingly, the revelation, which immediately exposed the company to be teetering on the brink of insolvency, sent its shares and bonds tumbling. Its shares, which are a constituent of MSCI’s global index, plunged by the 10% daily limit. Its 2.4 billion yuan ($356 million) notes due in 2022 dropped by as much as 60 yuan (about $9).
It’s just the latest example of why investors must be wary of Chinese companies due to lax regulations, even as its equity and bond markets are becoming increasingly internationalized. The company’s revelation came four months after it revealed that Chinese authorities had launched an investigation into the company.
One of BBG’s sources said the restatement is ‘unprecedented’ in the history of Chinese security markets.
The immense size of Kangmei’s restatement, described by one securities lawyer as unprecedented for China, puts a spotlight on disclosure practices in a country where companies are defaulting at a record pace and several instances of questionable accounting have emerged in recent months. The issue has become increasingly important for global investors and securities firms as they gain unprecedented access to China’s gargantuan stock and bond markets.
“Investors have to be more careful about Chinese firms’ reporting,” said Andrew Lam, a director at BDO, an international accounting firm. “They will have to do real homework, examining closely companies’ financial reporting for any potential irregularities.”
The China Securities Regulatory Commission, which in recent years has been pushing the nation’s stock exchanges to delist companies that provide inaccurate disclosures, didn’t immediately reply to a faxed request for comment. The Shanghai Composite Index rose 0.5 percent at 1:36 p.m. local time.
Though the company could face de-listing over the fraud, it said it will try and raise more capital to meet an upcoming bond obligation due Sept. 3. All of this is happening after Beijing’s decision to start allowing companies to fail led to a record number of Chinese corporate defaults.
Kangmei, based in China’s southern Guangdong province, said it faces forced delisting if the CSRC classifies its behavior as a major legal violation, according to a company notice on risks related to its ongoing CSRC investigation. The drugmaker’s upcoming bond maturities include a 750 million yuan note due Sept. 3. Kangmei plans to sell as much as 20 billion yuan of bonds to replenish working capital and repay debt, the firm said in a filing on Tuesday.
Other companies that have faced similar scrutiny from regulators include Kangde Xin Composite Material Group Co., which defaulted on a bond in January after reporting cash levels just four months earlier that were enough to pay the debt 15 times over. The CSRC began investigating Kangde Xin in October.
But as one analyst points out, this isn’t the first time a Chinese company has displayed a high cash balance while selling bonds, then the cash just disappeared.
“We have seen a number of Chinese companies with high cash balances still seek funding from investors, and later on the cash just disappears,” said Raymond Chia, head of credit research for Asia excluding Japan at Schroder Investment Management Ltd. “We should really question borrowers.”
While investors will be watching the CSRC, one of China’s most powerful securities regulators, to see how it handles the case, whatever the result, one investor said the Kangmei will likely ‘struggle to win back the confidence of investors’ – which sounds to us like the understatement of the century.
Investors will watch the CSRC for more details on what went wrong at Kangmei, according to Guo Feng, head of the wealth management department at Northeast Securities Co. Whatever the result, the company may struggle to win back investor confidence, said Shen Chen, a partner at Shanghai Maoliang Investment Management.
“This scandal could narrow their refinancing channels as investors flee,” Shen said.
Though BBG reported that this was the largest cash discrepancy on record, a bankruptcy from earlier this year suggests that this might not be true.
Back in January, the bankruptcy of Jiangsu-based Kangde Xin Composite Material Group, took investors by surprise when it failed to pay a 1 billion yuan ($148 million) local note due Jan. 15 due to a liquidity crunch, according to the company. The shocking punchline? As research analyst Tim Yup pointed out, as of end-September Kangde Xin reported that it had 15.4 billion yuan in cash and equivalents, more than double the total amount of its short-term debt, and more than 15 times the amount of debt that it just defaulted on.
Clearly, when it comes to the balance sheets of indebted Chinese companies, no cash balances can be taken as a certainty.
via ZeroHedge News http://bit.ly/2GKkicg Tyler Durden
Another deep state “leak” has hit the tape, and as usual it has gone to the WaPo and NYT almost at the exact same time… but this it’s more laughable than usual.
In what the WaPo breathlessly reports late on Tuesday was a “rebuke” to Attorney General William Barr, special counsel Robert Mueller sent a letter to the AG in late March, just days after Barr sent out his summary to Congress, in which Mueller stated that Barr’s 4-page summary to Congress on the sweeping Russia investigation failed to “fully capture the context, nature, and substance” of Mueller’s work and conclusions, citing a copy of the letter it had obtained using its trusted deep intel sources.
This is what Mueller said to Barr, according to the leaked NSA intercept:
“There is now public confusion about critical aspects of the results of our investigation. This threatens to undermine a central purpose for which the Department appointed the Special Counsel: to assure full public confidence in the outcome of the investigations.”
And if one reads just that, it certainly does not look good for Attorney General Barr, especially just one day before his first official Congressional hearing on the topic of the Mueller report: so bad that even the absolute lunatic fringe of conspiracygate – which had mercifully shut up for the past month with its daily predictions that this member of the Trump clan is going to jail, or that website will be shut down – has roared back into life with the sage assessment that “this is bad.”
Pouring more fuel on the fire, the always pithy Axios adds that “this revelation about Mueller’s dissatisfaction with the characterization of his report will likely escalate the growing rift over Barr’s handling of the special counsel’s investigation. House Democrats, who have expressed distrust in the attorney general, are set to vote on Wednesday to allow House Judiciary Committee lawyers to question Barr at Thursday’s hearing.”
Or maybe not, and perhaps the WaPo/NYT report is not “so bad” if one actually reads it, because once the breathless WaPo finally does come up for air, we get to paragraph 13 – a point by which most readers have turned out – to read the following real punchline in the WaPo report:
When Barr pressed Mueller on whether he thought Barr’s memo to Congress was inaccurate, Mueller said he did not…
So, Mueller felt there was confusion… but he did not think the memo was inaccurate. Wait, what’s going on here? Well, if we read the rest of the above sentence, we find the true object of Mueller’s anger:
[Mueller] felt that the media coverage of it was misinterpreting the investigation, officials said.
Which means that, as the WaPo itself reports, what Mueller was really angry with was the coverage of his report by media such as… the WaPo and the NYT?? The irony, it burns. .
But wait, because if one reads even further – and yes, we know most Russiagaters have troubles getting beyond sentence one so they are excused – we find that throughout a subsequent 15 minutes telephone conversation between the special counsel and the attorney general, Mueller’s main worry was “that the public was not getting an accurate understanding of the obstruction investigation.”
This goes back to what Mueller’s letter requested: “that Barr release the 448-page report’s introductions and executive summaries, and made some initial suggested redactions for doing so, according to Justice Department officials,” the WaPo writes.
What happened then? A few weeks later Barr did just that, and absent occasional redactions – some of which apparently revealed that Russia had taped Bill Clinton having phone sex with Monica Lewinsky – he did just that.
So if Mueller thought Barr’s memo was not inaccurate, and his ire was instead targeted at the media for “misinterpreting the investigation” – although it remains unclear just how they did this, after all Mueller does not dispute that there was no collusion (yes, Russiagaters, that means you) and did not dispute Barr’s conclusion of no obstruction – then what is the point of these two rather confused pieces? Well, as noted above, tomorrow Barr is scheduled to testify on Wednesday before the Senate Judiciary Committee about the investigation, and the entire article is meant to focus on the headlines of the WaPo (and NYT) article, and certainly not on paragraph 13 which, not only refutes the prevailing tone that Barr did something wrong, but in fact exonerates him. But that won’t have any impact on tomorrow’s hearing which is now assured to be a complete kangaroo court.
As for tonight’s really big, if unspoken, story – if this is the best leak Mueller has to defy Barr and the president, then Trump has indeed won.
via ZeroHedge News http://bit.ly/2vs1FEP Tyler Durden
When all else fails with Donald Trump try flattery. That’s exactly what Iranian Foreign Minister Javad Zarif did on Sunday. Because for Iran and North Korea that is, honestly, all that is left.
First it was North Korea, saying talks could resume but only if President Trump’s staff were no longer around.
This weekend Iran took to the airwaves with an interview on Trump’s favorite network, Fox, likely the only thing he’s allowed to watch along with CNN. Good cop/bad cop as it were.
Zarif made his way around the Sunday talk show circuit to make his case to the U.S. establishment. These appeals were to Trump himself to come out from behind his staff and broker honestly with both countries.
“They have all shown an interest in dragging the United States into a conflict. I do not believe that President Trump wants to do that, I believe President Trump ran on a campaign promise of not bringing the United States into another war. But I believe President Trump’s intention to put pressure, the policy of maximum pressure on Iran in order to bring Iran to its knees so that we would succumb to pressure, is doomed to failure.”
At the same time Iran and North Korea both understand that if Trump doesn’t do this they are moving on with their lives regardless of what the U.S. does next.
Russia is openly preparing for war if need be.
Since the beginning of the Trump administration there has been almost zero interaction between U.S. and Iranian foreign offices. The lack of diplomacy and professionalism of the Trump administration has been quite evident from the beginning.
Any attempt to engage in diplomacy was roundly rejected by Trump himself. Why do you think Rex Tillerson was fired? It wasn’t because he called Trump an “Idiot.” Though Rex was right about that.
He was also a supporter of the JCPOA, knowing that that deal was as good as it would get until the U.S. stopped all regime change activities around the world. And that was the breaking point.
It was time for the neocons, specifically Sheldon Adelson, the Saudis and the UAE, to push for a new foreign policy. They had to stop Trump from making a deal of substance with North Korea because it would undermine the goal of destroying Iran.
Peace might have broken out in the Middle East and U.S. troops might have come home. The Horror. The Horror.
Remember North Korea and Iran are linked in the minds of the Israelis, Trump and the Neocons because of North Korea’s nuclear weapons program.
Iran just test-fired a Ballistic Missile capable of reaching Israel.They are also working with North Korea.Not much of an agreement we have!
These are the most important 140 characters Donald Trump has written in the past two years. It underscores and puts paid why he is so dead set on pushing the situation with North Korea and Iran to its crisis point.
Readers of this blog know that myself and Halsey English have been saying for months that Iran and North Korea divided up their nuclear weapons ambitions between them. This way they could adhere to the letter of their international agreements while violating the spirit of them.
Pompeo and Bolton were installed to rein in Trump and accelerate the antagonism of Iran on behalf of Israel. They were installed to scuttle Korean reunification and make unreasonable demands on every one of Israel’s enemies — Lebanon, Syria and Iran — to ensure non-compliance and justify sanctions.
This is why the JCPOA was the ‘worst deal ever.’ It didn’t preclude the outsourcing of the two halves of the nuclear weapon — the warhead developed by North Korea and the ballistic missile developed by Iran.
This is why Benjamin Netanyahu wants to cripple Iran’s ballistic missile program. And why he is so obsessed with ‘proving’ the Iranians are still making a warhead.
There is no solution to the intractable mess of this situation if the U.S. is dead set on unilateral ultimatums of the kind Bolton and Pompeo only seem capable of.
This is why it is so significant that first Kim Jong-un and now Javad Zarif are trying to cleave Trump away from his advisors handlers and appeal to him directly to de-escalate the situation.
Last week Kim sat down with Russian President Vladimir Putin and affirmed a close relationship while elevating Putin to that of equal partner in any future talks between the U.S. and North Korea.
Putin understands that North Korea would “rather eat dirt” than give up their nukes at this point. They know what happens to countries that negotiate with Americans like John Bolton.
Kim knows like Putin does that “Presidents change, policy doesn’t.” And the U.S. policy on subjugating its adversaries is not open for discussion.
So any agreement between Trump and Kim isn’t likely to last a decade. This is the consequence of Trump’s tearing up every treaty he can get his hands on he doesn’t like.
At some point, like it or not, you honor your agreements or accept that there are no deals possible.
Kim rightly refuses to be treated like an underling and now will only deal with other heads of state. Zarif knows that Trump watches Fox News and so does Fox’s executives who allowed this interview.
The fact that both Kim and Zarif have to go through these channels to get their message across is beyond embarrassing. And not for them.
They both come across here as statesmen while Pompeo continues to look like a buffoon, blundering his way around preparing the world for the Rapture he so clearly thinks is necessary.
Zarif understands that the moves made in the past couple of weeks by Trump through Bolton have the potential for outcomes Trump himself doesn’t want.
Trump wants to win the hand and get his Middle East deal of the century across the finish line. If Bolton has sold him on the notion that the only way to stop Iran and save Israel is to invade and destroy them then the die has been cast and we’d better get out the body counters.
As Scott Ritter points out in the American Conservative the move to nominate the IRGC as a ‘Foreign Terrorist Organization’ was a de facto declaration of war against Iran which makes thousands of U.S. troops vulnerable in Iraq and Syria where they fight side-by-side against ISIS.
It is well past time for Trump to decide who runs his administration and what his legacy is going to be. Zarif appealed to candidate Trump, a man no longer in existence, who sold his presidency to the neocons to stay in power back in 2017 when he doubled down in Afghanistan.
He’ll never have more political capital to break free of Bolton et.al. than he does now with RussiaGate over and the Democrats in disarray.
San Francisco Bay Area homes declined last month on a y/y basis for the first time in seven years, according to CoreLogic.
The median price paid for an existing home in the nine counties (Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma) was $830,000, down 0.1% compared with March 2018.
The last time prices fell on a y/y basis was March 2012. After that, the Federal Reserve injected several more rounds of quantitative easing that sent home prices soaring for 83 consecutive months. In March 2018, the median home price gained 16.2% over March 2016.
In 2H18, the appreciation rate dramatically slowed due to quantitative tightening, mortgage rate increase, and the start of a synchronized global slowdown.
“It’s not that surprising that we hit the wall, at least in terms of a pause,” said Andrew LePage, a CoreLogic analyst, wrote in a release.
Glen Bell, a real estate broker with BetterHomes and Gardens Reliance Partners in the East Bay region, said home sales and prices tend to accelerate between February and March as buyers prepare to move before the summer months. He said there was a slight pick up in activity, “but not as strong as last year.”
“It reflects a trend that began in mid-2018 when home sales slowed and inventory grew, forcing sellers to be more competitive,” LePage said.”The year-over-year increase in the region’s median sale price was 16.2% in March last year. But after that, the gains in the median gradually decreased each month and fell to the 2 to 3% range early this year and then disappeared this March.”
Sales of homes in the nine counties were 15% lower in March when compared with last year. It was the lowest March in terms of sales in 11 years. Sales have been slowing on a y/y basis for the last 10 months – an ominous sign that not just the top is in, but a quick reversal in price is immient.
Santa Clara County noticed the most significant y/y median home price declines, falling 10% to $1.08 million in March. It was one of the hottest markets on the West Coast, if not the entire country last year – has fallen into a dangerous slump where prices are crashing.
“We’ve definitely seen some softness and some slowing,” said Michael Repka, chief executive and general counsel of DeLeon Realty in Palo Alto.
The total number of homes sold in the nine counties hit 6,124, up 39% from Feburary, but down 14.8% y/y, CoreLogic reported.
The slowdown in home sales and a decline in price last month “mainly reflect buyers purchasing decisions in Feburary,” LePage said in the press release. In early 1Q19, the market was recovering from a slowdown in the economy and a volatile stock market from Christmas.
Since Feburary, stock market volatility has dropped, mortgage rates are much lower, and since mid-March, IPOs have been debuting, which could bring more buyers to the market in the coming months.
Jason Nelson, an agent with Alain Pinel/Compass in Mill Valley, said that in Southern Marin, “there might be a slowdown in the market especially on the higher end.”
S&P Dow Jones Indices published S&P CoreLogic Case-Shiller Indices Tuesday, indicating that the decline in home prices wasn’t just centered in the San Francisco Bay Area, but rather seen across the entire US.
via ZeroHedge News http://bit.ly/2UVNKRO Tyler Durden
Prominent Australian/British WikiLeaks activist Somerset Bean has launched a GoFundMe with the simple goal of circulating 1,000 giant posters throughout Australian cities in the lead-up to our May 18th elections calling for Julian Assange to be brought home. The posters urge Australians to contact their representatives and put political pressure on them to stand up for one of our nation’s best and brightest stars.
Bean writes the following:
The goal is to print and paste up a thousand of these #BringAssangeHome giant (A0 size) posters in prominent locations in Australian cities during May 2019.
With every $500 raised, another 100 posters can go up. We need to get printing and distributing right away to capitalise on the pre-election weeks.
Saving Julian Assange should be an election issue. Politicians need a push to wake up on this issue and #BringAssangeHome. Can you help use this opportunity to highlight Julian’s plight? Please share the Gofundme page with your networks on social media and by email and donate what you can. Use the hashtag #BringAssangeHome. Thanks for your support and please get in touch if you can help in any other way.
The GoFundMe, which has been endorsed by the Defend Assange Campaign on Twitter, is as of this writing more than halfway towards its goal of $5,000. Printing and posting is already well underway.
— Defend Assange Campaign (@DefendAssange) April 29, 2019
Bringing Assange home would indeed be one of the best things that could possibly happen to Australia, because it would necessarily mean coming together in the name of national sovereignty and standing opposed to the US-centralised imperial blob that is constantly sucking us into stupid foreign wars and preventing us from functioning as a real nation. The path toward bringing Assange home also happens to be the path toward ceasing to have our fate as a nation defined by our existence as a giant US military/intelligence asset.
“If he were for example detained in China for this period of time, and ill-treated, there would be a hue and cry, not only on the part of the government, but the Australian media,” Barnes told 60 Minutes. “Because it’s the United States, we seem to think there’s some form of exception.”
Assange’s father John Shipton gave a spirited defence of his son throughout the segment, accusing the Ecuadorian government of handing the WikiLeaks founder over to the clutches of the US empire in exchange for an IMF bank loan and rightly dismissing the absurd list of accusations leveled against him as “smears”. The segment concluded with a wish from Shipton for Assange to be able to live freely in his home country and spend time with his family.
“It would be really nice to sit there with the kids and the occasional person saying ‘Good on ya, mate’ or ‘Welcome home’. That would be tops,” Shipton said.
“Do you think it’s going to happen?” asked Tara Brown, who’d maintained an oppositional and antagonistic posture throughout the segment.
“I hope so, yes,” replied Shipton.
Despite loading the segment with obnoxious fact-free smears about feces on embassy walls and calling Assange a “self-proclaimed journalist”, as well as giving plenty of screen time to Australian war whore Senator Jim Molan to explain to the audience why Assange is a “villain”, a 60 Minutes AustraliaTwitter poll released after the segment aired maintained overwhelming support for bringing Assange home. A total of 11,539 votes responded 85 percent “Yes” and 15 percent “No” to the question “Julian Assange’s father is urging Australian authorities to step in and stop Assange’s extradition to the US, and ultimately, finally bring him home. But does he deserve our support?” These numbers remained consistent from the very beginning of the poll, with the same percentages revealed when I screenshotted it just two hours after it went up with only 616 votes.
Julian Assange’s father is urging Australian authorities to step in and stop Assange’s extradition to the US, and ultimately, finally bring him home. But does he deserve our support? #60Mins
A World Socialist Web Site article titled “Growing popular support for Julian Assange in Australia” describes some more reasons to feel hopeful that Australians are beginning to wake up to the importance of protecting Assange from the talons of the US war machine. My own conversations with Australians indicate that despite the virulent, war propaganda-like smear campaign that has been waged against Assange’s reputation across the entire political spectrum throughout the western world, when they are asked to think about it it remains an obvious, commonsense perspective among most of my countrymen that he is one of our sons and ought to be protected from hostile outsiders who wish to punish him for publishing truth. This is good, because it means we’ve still got the kind of inner compass necessary for navigating ourselves out of our abusive relationship with empire and into a solid sense of who we are as a nation.
We Australians do not have a very clear sense of ourselves; if we did we would never have stood for Assange’s persecution in the first place. We tend to form our national identity in terms of negatives, by the fact that we are not British and are not American, without any clear image about what we are. A bunch of white prisoners got thrown onto a gigantic island rich with ancient indigenous culture, we killed most of the continent’s inhabitants and degraded and exploited the survivors, and now we’re just kind of standing around drinking tea as the dust settles saying, “Hmm… well, we’re not stuck-up like the Brits, and we’re not entitled like the Yanks.”
I went to a community theater with my family a while back to see Spring Awakening, an English-language musical set in Germany. For no apparent reason, the actors on the stage spoke in American accents. They were Australians playing Germans, not Americans; there was no reason whatsoever for that to happen. But that sort of thing is so commonplace here the only person who pointed it out was my American husband. It seemed perfectly normal to me.
But it isn’t normal. It isn’t normal for a nation of people to be so neurotic and ashamed of their own nationality that they put on a foreign accent rather than their own for no reason. It isn’t normal that we have such a head-down, subservient society that most of our homegrown talent leaves Australia forever because we’ve got a weird slave-culture habit of cutting down the “tall poppies” whenever anyone is perceived to have risen above their station. It isn’t normal that we feel so ashamed of standing tall and shining bright in the world.
Nowadays the closest non-Aboriginal thing you ever see to a display of Australian identity typically involves Southern Cross tattoos, thuggishness, Islamophobia, and a desire to continue the cruel warehousing of human beings on Manus Island. That is plainly gross, and the Aboriginal people now hold their culture secret and close to their chests for completely understandable reasons, so what else is there? What else could there be that could begin to unite us as a people so we can begin to develop a little collective pride and cease allowing ourselves to be used as a tool of sociopathic imperialists?
Well, there’s Julian Assange. He’s something positive that we can all fight for, a clear force of good in the world that we can unify around as we begin a slow, sloppy, completely necessary divorce from the cancer of empire.
Every country has its flavor. In my country, we grew up valuing innovation. Most Australians my age can reel off a list of Australian inventions, from the Hills Hoist to the postage stamp to the bionic ear to wifi. I didn’t even have to go and google that just now, that’s how much a part of our national conversation and our education is our pride in our use of insight for practical problem-solving.
There are some fundamental values that myself and others of Assange’s generation grew up with as seventies children in Australia. There was the value of “do the right thing,” the value of “giving everyone a fair go”, and the value of “keeping the bastards honest.” These were key and oft-repeated phrases in my childhood during the seventies and eighties. I was a baby when there was a CIA/MI6 coup in our country and my parents were implored by the ousted Prime Minister Gough Whitlam to “maintain the rage” at the unforgivable attack on our democratic sovereignty. That’s in my living memory. When Julian and I were small, anti-establishment sentiment was at its loudest in Australia.
We have an inbuilt distrust of authority and a deep hatred of empire which probably stems from our convict roots, and then from the ongoing waves of refugees who were running from famine, wars and despotism. Aside from the indigenous population, we are a country full of people who were forced by empire to come here in one way or another. So we don’t like authority much and we instinctively cut people down before they get too powerful. This is why the unions are still relatively strong and social programs are such a natural fit for us. We like things to be fair. We like everyone to have a say.
Julian Assange’s work is an embodiment of all those values. The initial innovative use of technology to create WikiLeaks, the belief in openness and transparency, the desire to democratise information for the good of the whole, and the joy in keeping the bastards honest — all of that is very Australian. Very me. Very us.
His work is extraordinary. Never has a single innovation shaken existing power structures in such a short amount of time. In an inverted totalitarian system where the ability to suck resources from the people is hidden under a veil of propaganda, the ability to rip through the veil of spin and government opacity is a powerful tool indeed. In just a little over a decade he managed to make himself the most wanted man alive by the most powerful people on earth. That’s how effective WikiLeaks has been in bringing truth to power.
Australians Bring Assange Home! Help the campaign to #BringAssangeHome with 1000 of these giant posters in prominent locations in Australian cities. Julian Assange is an Aussie hero in danger. Donate ($5 per poster printed & pasted): https://t.co/zlTJCjTtdr#auspol#60mins
Bringing Julian Assange home could be the first step to giving ourselves a bright, shining image of who we are and what we stand for. At the moment, Australia is a lifeless vassal state hooked up to the US power establishment with our every orifice and resource being used to feed the corporatist empire. Anesthetized to the eyeballs and in a state of total submission, the return of Julian might just be the little spark we need to get the old ticker pumping for itself again. Finally standing up for ourselves, for what’s right, and for the things that Julian stands for might just be the very thing we need as a nation to discover who we really are.
And of course it’s not a simple task. Of course it will require pushing back against deeply institutionalised capitulations at the core of Australian international relations. Of course it will ultimately require changing how we’ve been operating as a nation in the world. Nobody’s saying it’s a simple task. But it is what’s right, and it’s also the exact direction we need to move in order to begin a transformation into a healthy, sovereign nation.
Bring him home. It’s time.
* * *
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Tomorrow, at 2pm, the FOMC will leave its rates unchanged. As RanSquawk notes, the Fed will not publish new economic projections at this meeting (the next SEP is released in June), although the market will be closely watching whether the Fed outlines conditions that might compel the Committee to discuss lowering rates. There are some risks that the Fed might tweak its statement to reflect stronger growth and softer inflation since the last meeting, although the market has already priced in a “goldilocks” environment. There is also a small possibility the Fed could lower its IOER rate, which has been trading 4 basis points below the Effective Fed Funds rate and is in need of adjustment. Overall, the Committee’s tone is likely to remain one of patience and data dependence.
FEDERAL FUNDS RATE: Money markets have assigned a 97.5% probability that the FOMC will keep rates at 2.25-2.50% this week; there is no chance of a hike, and a very small (but not negligible) probability of a rate cut. Recently, remarks made my Charles Evans (voter, dove) have received attention, after he floated the possibility of cutting rates if inflation and inflation expectations decline further. Accordingly, Powell may be quizzed about the conditions the FOMC would need to see that would compel it to begin discussing rate cuts. Looking ahead, there is an approximately 60% chance of a rate cut this year, according to money markets pricing. Analysts at Citi stress that, as before, it does not think the Fed is planning to cut the FFR in the near-term, but instead, it is building optionality to cut rates should it need to in the future, and the hurdle for such cuts remains very low. “The Fed would mostly aim to ratify recent market pricing, but given the most recent moves there is also hawkish risk if Powell pushes away the possibility of rate cuts this year.”
GROWTH: In its last statement (20 March) the FOMC stated that “growth of economic activity has slowed from its solid rate in the fourth quarter,” and that “recent indicators point to slower growth of household spending and business fixed investment in the first quarter.” But looking ahead, “the Committee continues to view sustained expansion of economic activity… as its most likely outcome.” Last week’s Q1 GDP report saw headline growth surprising to the upside at 3.2% Q/Q at a seasonally adjusted annualised rate (the Fed sees growth at 2.1% for 2019 as a whole), however, it was a result of large contributions from the inventory and trade components, which tend to be volatile; there is also an argument that the build-up of inventories could be seen as a negative. That said, Q1 data has historically tended to be underreported, Pantheon Macroeconomics points out (also noting recent research out of the Cleveland Fed, which suggests it is underreported by around 0.6ppts), and it would still be difficult to argue against the underlying economic momentum, at present, and there are some risks therefore that the FOMC might revise its language to reflect this. “The problem for the Fed,” Pantheon says, “is that if growth continues at anything like this pace, the labour market will tighten much further this year, and the question of rate hikes will be back on the agenda.”
INFLATION: PCE data – the Fed’s preferred measure of inflation – this week fell to 1.6% Y/Y in March (exp. 1.7%); Pantheon says this will not have gone unnoticed at the Fed; the consultancy thinks it is most likely noise than it is a signal, “but the Y/Y rate is unlikely to rise much before late summer and could easily dip further in the meantime,” and “if the Fed hikes this year, it will be because of accelerating wages, not the inflation rate at the time.” The FOMC might acknowledge the recent inflation underperformance, with possible tweaks within the statement. (The Committee’s current view: “On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near 2 percent. On balance, marketbased measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.”). “Financial markets will focus on whether Fed officials are becoming more concerned about inflation undershooting its 2% target despite economic activity rebounding from the start of the year,” NatWest Markets says, “the Fed isn’t likely to react to one month’s low print. But if core PCE inflation continues to undershoot the central bank’s 2% target over the next few months, FOMC officials may consider the need for fine-tuning interest rate cuts to push inflation higher again.” Charles Evans, a dove who votes on policy this year, recently remarked that if PCE inflation fell to the threshold of 1.5%, it should prompt discussions on the Committee about cutting interest rates. Given Evans’ policy stance, it is unlikely to be reflective of the FOMC consensus view, though Chair Powell will be asked about the extent to which this view – as well as other conditions that could compel the Fed to discuss cutting rates – is prevalent on the Committee.
IOER: Analysts note that the premium of the Effective Federal Funds Rate (EFFR) over the Interest On Excess Reserves (IOER) has widened to a record 4bps recently. Goldman Sachs observes that volume in Fed Funds trading has slipped by as much as USD 20bln over the last fortnight, with the bank suggesting it is likely a result of Federal Home Loan Banks shifting some of its lending into repo markets (banks can currently earn higher rates by lending in repo markets rather parking its cash at the Fed and earning a lower IOER rate), and the elevated repo rates have spilled over into the Fed Funds market. There are also other suggestions that it could be indicative of tight dollar liquidity in Asian markets. GS expects some of the fall-off in Fed Funds volumes to reverse, with the EFFR stabilising around 2.42-2.43% before a further erosion in reserves causes a gradual resumption in its drift higher. Goldman therefore assigns a one-in-three chance that the Fed could cut the IOER rate from the current 2.40% if the EFFR remains at 2.44%, with the bank stating that the probability might increase if the rate remained elevated into the FOMC meeting.
FINANCIAL CONDITIONS: Most regional Fed surveys have surprised to the downside in April, UBS points out, and its own model is also expecting a slower growth momentum in April. And on a broad trade-weighted dollar basis, USD is near its all-time highs. UBS says this 1) it highlights that this cycle is different than 2008, 2001; 2) the USD strength has a domestic effect, as it offsets the lower rates guidance for 2019; and if this is becoming an increasing discussion within the Fed, it would most likely appear in the press conference, and buzzword would be any focus on financial conditions.
ON THE HORIZON. It is worth noting that following the rate decision, there are five 2019 policy voters scheduled to speak later in the week — Vice Chair Richard Clarida, Governor Michelle Bowman, NY Fed’s John Williams, James Bullard and Charles Evans – as well as other Fed Presidents. Looking slightly further ahead, the Fed will in June hold its ‘Conference on Monetary Policy Strategy, Tools, and Communication Practices’, a so-called ‘Fed Listens Event’); analysts will be looking for clues on the central bank’s future policy framework, which may see adjustments to the way it targets inflation, a review on the merits of the FOMC’s (infamous) ‘dot-plot’, Fed communications, and perhaps the pros and cons of price level targeting. BofAML think the Fed will soon indicate that it is comfortable with core PCE inflation in the 1.5-2.5% range. “This would allow a late-cycle overshoot, which is necessary for inflation to average 2% in the long run. We think the Fed is also being patient in order to assess downside risks to global growth and determine how last year’s confidence shock and financial tightening will impact growth.”
via ZeroHedge News http://bit.ly/2Vy45Ar Tyler Durden
The clearest of all the laws concerning U.S. intelligence is Section 798, 18 U.S. Code – widely known in the Intelligence Community as “the Comint Statute,” or “the 10 and 10.” Unlike other laws, this is a “simple liability” law. Motivation, context, identity, matter not at all. You violate it, you are guilty and are punished accordingly.
Here it is:
(a) Whoever knowingly and willfully communicates, furnishes, transmits, or otherwise makes available to an unauthorized person, . . . any classified information—
(1) concerning the nature, preparation, or use of any code, cipher, or cryptographic system of the United States or any foreign government; or
(2) concerning the design, construction, use, maintenance, or repair of any device, apparatus, or appliance used or prepared or planned for use by the United States …or
(3) concerning the communication intelligence activities of the United States or any foreign government; or
(4) obtained by the processes of communication intelligence . . .
Shall be fined under this title or imprisoned not more than ten years, or both.
On December 9 and 10, 2016, the New York Times and the Washington Post independently reported that anonymous senior intelligence officials had told them that, based on intercepted communications, the intelligence agencies agreed that Russia had hacked the Democratic National Committee to help Donald Trump win the election. Their evidence was the fact of their access to U.S communications intelligence. A flood of subsequent stories also cited allegations by “senior intelligence officials” that “intercepted communications” and “intercepted calls” showed that “members of Donald J. Trump’s 2016 presidential campaign and other Trump associates had repeated contacts with senior Russian intelligence officials in the year before the election.”
Incontrovertibly, the officials who gave these stories to the Times and Post violated the Comint Statute, and are subject to the “10 and 10” for each count. There is no clearer instance of what the governing law is, of how it was violated, and of the punishment that this incurs.
Consequently, there is no clearer indictment of our legal system than the fact that no one has been prosecuted for these violations, much less punished.
Nor is there any doubt as to who at least two of these “senior intelligence officials” are: Former CIA director John Brennan and former Director of National Intelligence James Clapper.
Beginning in January 2017, Brennan and Clapper made essentially the same statements on national television. The only possible excuse—that their allegations were lies—is irrelevant because the essence of the violation is the revelation that U.S intelligence was monitoring the communications of the Russians in America, and those of the Trump campaign as well. This is true, and that revelation is a textbook violation of the Comint Statute.
The reasons no prosecutions have followed should be plain enough. The offenders are big people, in the permanent government and in the Democratic Party. They have a great many friends in the U.S Justice Department. From the top down, the Trump Administration has been filled by much smaller people. Loud words aside, the president has kowtowed to the intelligence agencies in every way imaginable. No prominent Republican has chosen to challenge the de facto privileged relationship between Democrats in the intelligence agencies and the media.
And so, Brennan and Clapper continue as living proof that the United States has a dual system of justice. The example of their impunity speaks louder than any speech, and reassures their leftist successors in the intelligence agencies that their channel to the Times and Post is as safe as ever.
Politics is not responsible for the non-application of Section 798 to Brendan and Clapper. It is difficult to imagine that the public would not approve massively the straightforward application to prominent men of a law that is so unambiguous, which is the foundation of arguably the main part of U.S intelligence, and which has been applied countless times to ordinary people.
Rather, the absence of real politics—of real competition between opposing sides in American life—is the culprit. What we see is that those in the upper echelons of American life, whether they call themselves Republicans or Democrats, have greater loyalty to the ruling class to which they belong than to any law or institution. The refusal to apply Section 798 to Brennan and Clapper —the fact that they are free men —is simply the most obvious manifestation of the fact that we have a ruling class, that it is coherent, and that it has yet to be challenged in any serious way.
via ZeroHedge News http://bit.ly/2DHot81 Tyler Durden
Advertising fraud online is being called the second largest organized crime scheme globally, according to Digital News Daily. About 3/4 of US fraudulent advertising traffic is now considered “sophisticated” invalid traffic, according to recently released data.
Looking over IP addresses and blacklists no longer helps companies combat this fraud, according to Guy Tytunovich, CHEQ founder-CEO, and a former Israeli military intelligence officer. He started CHEQ to advocate for free internet. “If we can’t help sustain digital advertising by blocking these fraudsters, then we can’t help sustain the beautiful concept called the free internet,” he said.
He continued: “The industry needs to understand that for the last 10 years, vendors have been talking about different methods for detecting fraud through probabilistic and simplistic approaches. At the end of the day, which I learned working for the defense intelligence in Israel, it’s a cat-and-mouse game. These methods no longer work.”
Tytunovich’s company, CHEQ, continues to build out a military grade ad verification service. Their service has analyzed 4.1 billion ad requests made in the United States across 1.2 million websites between October 2018 and February 2019. This number was up about 20% YOY and about 18% of the online traffic to advertisements was found to be fraudulent.
Of this fraudulent traffic, 77% of it was classified as “sophisticated invalid traffic” (SIVT), which relies on far more advanced malicious methods to defraud the advertising system than “general invalid traffic” (GIVT). While GIVT can be detected by IP and user agent blacklists, SIVT requires sophisticated capabilities, such as operating system and device fingerprinting, bot traps and network behavior analysis.
In its evaluation, CHEQ found “570 million SIVT attacks, each using a triple-lock of interwoven frauds that combines sophisticated domain-masking, invalid-referrals and viewability fraud in a coordinated attempt to evade detection.”
Other techniques that were used included domain spoofing, where scammers create hidden iframes and webpages to run that consumers never see. There have also been various means used to falsify location data. CHEQ found and blocked 743 million instances of combined GIVT and SIVT ad requests.
According to Tytunovich, brands are now losing between $20 billion and $50 billion per year, as a result of ad fraud.
And the fraud isn’t just with ads, he said: “Now there’s a thing called ‘fake news,’ and I’m not even talking about fact-checking Trump. I’m talking about Russian or Chinese hackers trying to influence elections in Democratic countries using cyber-security hacking methods to distribute fake or false news. This didn’t exist 20 years ago before the information highway made it available for rouge countries to behave that way.”
Ad fraud and cyber threats will need to be taken more seriously, Tytunovich said. As we head into a reality where autonomous vehicles become more prominent, cyber threats will become far more pronounced than they have been in the past.
The concern for Tytunovich has turned from groups like Al Qaeda getting their hands on nuclear devices or chemical weapons 15 years ago, to now getting their hands on a keyboard and an internet connection.
via ZeroHedge News http://bit.ly/2LiwNBk Tyler Durden
The US Department of State (DOS) offered a grant opportunity for “Promoting Accountability in Iraq and Syria For Genocide, Crimes Against Humanity, and War Crimes,” on April 16th. The grant has a funding floor of $500,000 and an upper limit of $4,500,000. It expects to award the grant to 3 companies or organizations.
US and Foreign non-profit organizations, as well as for-profit organizations can take part. Private and state institutions of higher education, and public international organizations are also allowed to take part. Meaning that, for example, the British Institute for Statecraft or the Integrity Initiative are eligible for funding, if they decide to take part. The Atlantic Council is also eligible (which is funded heavily by NATO and gulf states like the UAE).
Image source: US Air Force
The grant opportunity was released by the DOS’ Office of Global Criminal Justice (J/GCJ) and he Bureau of Near Eastern Affairs, Office of Assistance Coordination (NEA/AC).
“J/GCJ promotes criminal accountability for abuses and violations in Iraq and Syria, including war crimes, crimes against humanity, and genocide.”
The aim is to track such criminal acts and establish a framework, under which such “pervasive abuses” will face justice.
“The investigation and prosecution of atrocity crimes is a crucial part of holistic transitional justice strategies in which countries must address legacies of pervasive abuses. Criminal trials – whether they occur in the context of an international or regional tribunal, or domestic systems that have jurisdiction – can build adherence to the rule of law, reinforce the unacceptability of the crimes committed, demonstrate that impunity will not be tolerated, and deter future harm by punishing perpetrators. Trials can also help transitional societies come to terms with their own histories and rebuild stable, democratic institutions. Evidence presented in court can help to establish a historical record of atrocities, give victims an opportunity to be heard, and rebut denials by victimizers and their political allies that such atrocities ever occurred. Finally, criminal trials can also help to restore the dignity of victims and their families by providing a public acknowledgment of the gravity of the wrongs done to them.”
Those eligible for funding will have to do on-site investigations and present the facts, so that the justice part of the program can be carried out.
“The Department of State will consider funding programs that include components to develop local investigative and judicial skills; to collect and preserve evidence and maintain the chain of custody of evidence; provide information to national authorities with jurisdiction over crimes, and to conduct other activities that directly support investigations and prosecutions of perpetrators of atrocities in Iraq and Syria. Applicants should be able to demonstrate an awareness of existing work in the field.”
But especially interesting is that the side in both the conflicts in Syria and Iraq recently blamed for high civilian casualties is the US; there is also evidence to substantiate it.
Regardless, Washington has maintained that it does everything necessary to protect innocent lives.
“Since the beginning of the conflict in Syria, more than 500 thousand people have been killed. Despite the fact that the Assad regime is responsible for the overwhelming majority of deaths and destruction, many other participants in the conflict committed murder, torture, sexual and gender-based violence and other offenses,” the State Department noted.
Thus, the funding will primarily be used to blame the civilian casualties on other parties in an attempt to build a narrative in which Washington is not only the “innocent side”, but is also sanctioning others for its forces’ misconduct.
Recently, in February, Syrian state news outlet SANA reported that a coalition led by the United States had committed a crime against humanity by inflicting air strikes on the Al-Baghouz settlement. As a result of the bombing, 16 civilians were killed, another 70 people were injured. Reports of the sort are the norm.
On April 24th, Syrian Defense Minister Mahmoud Shawa called on the dissolution of the US-led coalition in Syria and their departure from the country.
“We demand to stop the illegal presence in our land of foreign troops of the United States, France, Britain, Turkey and disband the so-called international alliance,” the official was cited as saying.
A separate grant offers between $3 and $4 million to public International Organizations; overseas non-governmental non-profit organizations, who would take part in the Iraq-Syria Land Border Security Program.
“The overall aim is to build the capacity of civilian security forces belonging to the Government of Iraq, including the Kurdish Regional Government, and conduct border security management, including enhanced border screening and interagency coordination, in compliance with UN Security Council Resolution 2396. This funding opportunity seeks to address the porous and weakened state of the Iraq-Syria border in order to deny ISIS remnants cross-border freedom of movement and detect and interdict terrorists, terrorist networks and illicit trade.”
This is further evidence that the US plans on perpetuating its presence in both Syria and Iraq, whether by actual US troops remaining there or through their Kurdish proxies in the region.
via ZeroHedge News http://bit.ly/2IPrjw1 Tyler Durden
In an effort to accomplish President Trump’s environmental goals, his appointees at the Environmental Protection Agency (EPA) and the Department of the Interior – Andrew Wheeler and David Bernhardt – have been focusing on avoiding conflict with enemies in the so-called “deep state,” as Bloomberg Environment puts it. Of note, Bernhardt is a former lobbyists who represented oil and gas companies, fossil fuel trade groups and mining companies, while Wheeler was a coal lobbyist.
According to “attorneys, lawmakers, and even executive branch staffers” who spoke with Bloomberg, Wheeler and Bernhardt “are much more comfortable with the intricacies of crafting policy than their headline-grabbing predecessors were.”
“It was not a modest swing,” said Trump’s former top infrastructure official, DJ Gribbin. “These are quite different leaders.”
One of the main differences between these two and their predecessors—Scott Pruitt and Ryan Zinke—is that both have long backgrounds as attorneys, said Gribbin, who now runs his own consulting firm.
These legal skills could help the administration improve its abysmal record in court defenses of its deregulatory environmental policies.
During the tenures of Pruitt and Zinke, procedural errors with their agencies’ regulatory rollbacks caused them to lose no fewer than 13 lawsuits in federal court, according to data compiled by the New York University School of Law. –Bloomberg
In short – lawyers are now crafting bulletproofed policies instead of sabre rattling. Put another way; swampy guys are good at navigating the swamp.
According to Sen. Lisa Murkowski (R-AK), Wheeler and Bernhardt “are workhorses,” adding “Both of the other secretaries were more essentially big picture. These guys are down in the weeds.”
Attempts were made
Many of the Trump admin’s stumbling blocks were due to simple steps required in administrative law – for example, not giving the public enough time to comment on delaying the implementation of an Obama-era rule cracking down on natural gas leaks – which courts struck down twice due to the oversight.
In another example, the EPA and Army Corps of Engineers were unable to halt the enforcement of an Obama-era rule which broadened the types of water bodies protected by anti-pollution regulation because the process by which new policies are formulated were “short-circuited.”
“A new realization may have set in that spending more time, building strong records, focusing on the kinds of evidence that needs to be in there,” said former George W. Bush administration environmental attorney Jane Luxton with firm Lewis Brisbois.
Environmentalists are worried at the Trump administration’s new, meticulous approach to crafting new policies with greater attention to administrative detail.
That is especially the case for the rewrite of the Obama administration’s waters policy, also known as Waters of the United States, or WOTUS.
The latest Wheeler-helmed proposal to rewrite the WOTUS rule is much more fleshed out than anything Pruitt produced, according to Blan Holman, an attorney with the Southern Environmental Law Center.
But, he told Bloomberg Environment, “even though it’s lengthy and there’s a lot of words in there, I still think it comes up looking very strange.” –Bloomberg
Jo-Ellen Darcy, who worked side-by-side with Wheeler on the Senate Environment and Public Works Committee, praised Wheeler’s intelligence and said he would likely adhere closely to the law. Darcy is intimately familiar with WOTUS, as she was the top civilian official in charge of the Army Corps throughout the Obama era.
“That doesn’t mean I agree with what they’re trying to do. They’re trying to undo a lot of environmental protections,” said Darcy, who added that “now they’re taking a more measured approach that’s more likely to stand up in court.”
Doing it right takes time
One drawback for the Trump administration’s new detail-oriented approach is that doing it right simply takes more time.
As an example, an executive order signed by President Trump just weeks after he took office which directed the EPA and the Corps to rewrite the WOTUS policy is still stuck in limbo, after an initial attempt to pause its enforcement failed to hold up in court. A broader effort to appeal it, meanwhile, is still in the works.
“The fact that it has taken more than two years doesn’t surprise me,” said Darcy. “Along the way, they listened to counsel. You can’t be the bull in the china shop.”
Last month, meanwhile, Bernhardt told the Senate that the Interior Department was probably far away from finalizing a plan which could open up waters in the Pacific and Atlantic coasts to new offshore oil and gas drilling. A draft of the plan was released early this year.
Working with the “deep state”
According to Bloomberg, even working with career staffers within the agencies is another big change – particularly at the EPA, according to litigator Thomas Cmar, who has sued the Trump administration over its attempts to roll back the WOTUS rule.
“Pruitt seemed inclined to go around his own staff,” Cmar, who is with the nonprofit Earthjustice. “Wheeler seems like he wants to consult with his staff.”
This impulse seems to have improved morale at the EPA. Several career staffers at the agency who spoke to Bloomberg Environment declined to criticize Wheeler, even when granted anonymity to speak freely.
Gribbin defended the administration’s secrecy during its chaotic early months, describing it as a natural part of the evolution of any new presidency.
“The new leadership tends to keep information very close to the vest,” he said. “This dynamic changes once relationships are developed.” –Bloomberg
Bush administration veteran, Susan Dudley – a former senior official in the Office of Management and Budget, also noted that Wheeler, Bernhardt and other recent Trump appointees have been vastly different than their predecessors.
Trump “makes big promises as to how he’s going to get rid of regulations without realizing that the steps to do that take time,” according to Dudley.
“They were announcing big policies without doing the hard work of ensuring they had a public record.”
via ZeroHedge News http://bit.ly/2J5x0oP Tyler Durden
