Month: October 2024

Donald Trump on Thursday said he’s open to pardoning Hunter Biden if he’s reelected – a sharp 180 after railing against the “Biden crime family” for the past four years.

BILL MELUGIN: You’ve talked about wanting to unify the country if you’re elected. If you are president again, in the name of unity, would you consider pardoning Hunter Biden?

DONALD TRUMP: Well, I wouldn’t do anything that would be overt in terms of Hunter. It’s a sad situation, but I could have done that with Hillary Clinton. She was “Crooked Hillary,” and I thought, wouldn’t it be terrible to take the president of the United States and put his wife in jail? She was Secretary of State. Aside from everything else, you’re going to take the president’s wife and put her in jail? I tempered that down; you saw when they were going to “lock her up.” I went “nice and easy.” People don’t remember that.

But wouldn’t that be terrible? I found out that when I came in over nothing, I got two impeachments and I won. I’m winning all the cases. How about the case in Florida? The big case was the one in Florida; I won that case. What they’ve done is use the FBI and the Department of Injustice to go after their political opponent, and it has never been done in this country.

People ask if I’m going to do that, and the answer is no. I don’t want to do that; it’s so bad for the country. The precedent they’ve set is so bad for our country. But I could have done it with Hillary, and certainly, you could do it with Hunter or whatever, but I don’t want to do it with Hunter either. I’ll bet you the father probably pardons him; let’s see what happens. But he’s a bad boy, there’s no question about it.

I don’t want to hurt people; I really don’t. The country has to heal; it has to get better. There’s tremendous anger in this country from the stupidity that we’re watching—four years of gross incompetence, four years of stupidity, and she’s worse than he is. I believe I watched CNN last night; I watched her performance on a town hall or whatever you want to call it. She’s not even coherent, and we’ve had that for four years. We’re not going to be able to survive another four years; we’re not going to be able to take it for four more years.

*  *  *

“I wouldn’t take it off the books,” Trump also told radio host Hugh Hewitt when asked if he would consider pardoning Hunter.

HH: Will you pardon Hunter Biden?

DT: I wouldn’t take it off the books. See, unlike Joe Biden, despite what they’ve done to me, where they’ve gone after me so viciously, despite what, and Hunter’s a bad boy. There’s no question about it. He’s been a bad boy. All you had to do is see the laptop from hell. But I happen to think it’s very bad for our country. I was, I think you know this, but most people don’t, because most people aren’t of your talent. I could have gone after Hillary. I could have gotten Hillary Clinton very easily. And when they say lock her up, whenever they said lock her, you know, they’d start, 30,000 people, lock her up, lock her up. What did I do? I always say take it easy, just relax. We’re winning. Take it easy. Take it easy. I could have had her put in jail. And I decided I didn’t want to do that. I thought it would look terrible. You had the wife of the president of the United States going to jail. I thought it would be very bad if we did that. And I made sure that didn’t happen, okay? I thought it would be bad. What I didn’t know is that they were going to play dirty with me. Who thinks that? Who would have…

President Trump is asked, “Will you pardon Hunter Biden?” and replies, “I wouldn’t take it off the books,” when asked by radio host Hugh Hewitt in an interview Thursday.

“See, unlike Joe Biden, despite what they’ve done to me, where they’ve gone after me so viciously, despite… pic.twitter.com/0c2WLxV4sX

— RedWave Press (@RedWave_Press) October 24, 2024

By Elwin de Groot, head of macro strategy at Rabobank

“We can’t rely on tax revenues to keep flowing – we need economic growth”, was German Finance Minister Lindner’s response to the latest estimate of the expected tax take for the German federal government for the five years up till 2028. This tax estimate – compiled twice a year by a broad working group – now looks to be some EUR12.6bn smaller than when it was estimated back in May. Speaking at the sidelines of the IMF meeting in Washington, Lindner’s second point was that, the country will “have to consolidate further”.

Now, if you have less money to spend, you have to, well, spend less money. Right? And of course, one would like to avoid a situation where investors would start to doubt the sustainability of the country’s government finances. But with a public debt ratio of just 63%, Germany, arguably, is a long way from that. And Germany is neither a company nor a household. That former Chancellor and ‘powerwoman’, Angela Merkel regularly invoked the thrifty schwäbische Hausfrau only strengthens the point: German frugality may well have been the reason why it is now where it is. So, unless there is reason to think that some of the current money isn’t being spent well or efficiently, curbing spending is likely to have consequences for growth. Indeed, the cure could well prove worse than the disease, seen against a backdrop of the strategic challenges (read: need to invest) Germany is facing.

So an important question is what Lindner thinks is necessary to revive growth in the economy. If his answer is “more dynamism” (words he used yesterday) by revving up the German export engine, he may find that this business model risks crushing into a wall of protectionism anytime soon. There is at least one US presidential candidate out there who believes there are too many German cars in the US. And stable demand from China nowadays is far from certain.

[And speaking of American growth and deficit, just one chart]

This is probably why Chancellor Scholz, escorted by a business delegation, arrived in Delhi yesterday for a three-day visit of the country and PM Modi. The Chancellor is looking to strengthen business ties, open up new markets for its exporters but also to discuss India’s potential to supply skilled labor for German companies who are facing a rapidly ageing and declining work force over the next decades. This suggests Germany is looking to diversify its export markets but is also keen to keep with its export-oriented model. Key example here is its aim to sell India six (co-produced) submarines (instead of building them for its own fleet).

But if the doctor’s diagnosis is that the German economy needs a ‘strategic injection’ of reforms, setting new priorities, raising innovation and reducing its raw material dependencies, without losing the support of its population and workforce – to name a few things, then it is questionable whether that can be achieved with belt-tightening. For what often happens is that all spending ministries are expected to share the burden, as prioritizing is politically much more difficult to achieve. (This certainly seems to hold right now with the German coalition looking fragile, although POLITICO argues that a Trump victory may actually force parties to cling together).

And if Lindner thinks that the answer should be to strengthen German (or European) domestic demand, one could also question whether belt-tightening is the right response at this juncture. Unless the German leadership suddenly believes that this task falls upon the ECB! In any case, it surely is not what the pundits are currently advising the Chinese government to do in order to stabilize its real estate sector and to stimulate the economy. Case in point is the cold reception of China’s recent stimulus plans by central bankers and other policy makers at the IMF gathering this week, with Treasury Secretary Yellen saying the measures so far announced fail to tackle overcapacity and weak Chinese domestic demand. China’s reluctance to announce big fiscal stimulus right now may also depend on the US election outcome.

Both of these factors have also been weighing on markets and perhaps also on business sentiment lately. Which brings us to the PMI’s. Although the German PMI surveys came in somewhat higher than expected for October, this was overshadowed by a weaker survey for France. As a result, the Eurozone manufacturing PMI manufacturing turned out a little better (45.9 compared to 45.1 consensus), whilst the services PMI came in a tad weaker at 51.2 (compared to 51.5 consensus). The gap with the US survey widened again, with the US services PMI up a notch (+0.1) and manufacturing up 0.5 points (but also remaining below the neutral 50-mark).

As we have noted before, a repeat pattern has slipped into the Eurozone services PMI since 2021 and this means that index tends to fall from April/May until the last months of the year, after which it rebounds. This doesn’t mean that yesterday’s surveys were ‘good’, but the hard data so far (which, for most sectors, is still only available up to July) appear to be holding up better. That said, manufacturing remains in the doldrums whilst growth in services may only just offset this.

The UK’s output PMI fell to an 11-month low at 51.7, driven by declines in both manufacturing (50.3) and services (51.8). While this still indicates expansion, it’s at a much more moderate pace than in previous months. Historically, this aligns with a growth rate of about 0.1-0.2% per quarter. Survey respondents attribute this to pre-Budget uncertainty and gloomy government rhetoric. The upcoming US election is also an important factor.

As our UK strategist argues:

“the broad contours of what Chancellor Reeves will announce on October 30 are now clear: she plans to raise taxes on capital to fund higher day-to-day spending, while altering fiscal rules to allow for more borrowing for capital projects. It could ‘free up’ some GBP 50bn compared to unchanged fiscal rules. The speed at which this money is deployed will be crucial (e.g. in the Netherlands we have learnt that this is easier said than done) but we believe the overall effect of Reeves’ budget will be slightly looser, not tighter. This should support future growth and does not signal a return to austerity.”

We anticipate the Bank of England will argue that the Budget has little net effect on the balance between demand and supply, as they don’t want to be seen to ‘thwart’ increased public investment and if a gov’t wants to add debt they could of course also use some lower (real) interest rates. The Bank is already on a path of gradual easing, and based on Bailey’s comments yesterday, it seems likely to continue.

Perhaps as expected, some hawks in Washington are reacting loudly and angrily to continuing reports which say North Korean troops are in Russia preparing for greater involvement in Ukraine. South Korean intelligence and the Zelensky government say that some are already in the fight, invading Ukrainian soil.

Republican Representative Mike Turner of Ohio, the chair of the House Intelligence Committee, has already taken warnings against Pyongyang to the next level. He has urged the United States to consider “direct military action” if it’s confirmed that North Korean troops are sent to fight in Ukraine.

“If North Korean troops were to invade Ukraine’s sovereign territory, the United States needs to seriously consider taking direct military action against the North Korean troops,” Rep. Turner wrote on X.

He also is trying to use this as a ‘told ya so’ moment, repeating his calls for the US to not shy away from supporting Ukrainian long-range strikes inside Russia.

“I have long challenged the Biden-Harris Administration’s unwise position on restricting Ukraine’s use of US weapons against targets within Russian territory,” Turner emphasized. “If North Korean troops attack Ukraine from Russian territory, Ukraine should be permitted to use American weapons to respond.”

Kim Jong-Un is likely to seize on these threats as an excuse to potentially ramp up missile launches or stage military drills. He has over the last months been touting a plan to rapidly expand and modernize North Korea’s nuclear program. Turner’s hawkish remarks aimed at Pyongyang are not going to help the situation, as relations between north and south are already at somewhat of a low point.

White House national security spokesman John Kirby on Wednesday described that the US assesses that at least 3,000 North Korean soldiers arrived at Russia’s Pacific port of Vladivostok. They reportedly arrived by boat earlier this month.

“These soldiers then travelled onward to multiple Russian military training sites in eastern Russia, where they are currently undergoing training,” Kirby said.

“We do not yet know whether these soldiers will enter into combat alongside the Russian military, but this is certainly a highly concerning probability,” he continued. And that’s when he added the warning and threat: should they deploy to fight against Ukraine, “they’re fair game”.

Turner called this a ‘red line’ issue also in an appearance on FOX:

ICYMI: Chairman @RepMikeTurner urged the Biden-Harris Administration to make clear that North Korean involvement in Ukraine is a red line for the United States after it was confirmed that North Korean troops were deployed to Russia.

More from @FoxNews’ @DanaPerino: pic.twitter.com/le0tqwjztb

— House Intelligence Committee (@HouseIntel) October 24, 2024

Yonhap News Agency had previously reported that the country’s main intelligence agency, NIS, assessed that Pyongyang has made the decision to deploy four brigades to Ukraine, which amounts to an estimated 12,000 troops.

In a Tuesday evening address, President Zelensky echoed this figure, saying: “We have information that two units of military personnel from North Korea are being trained – potentially even two brigades of 6,000 people each.” Zelensky has further commented that this is a sign of the war’s growing internationalization in Moscow’s favor. He has demanded that his Western backers respond.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Officials in Arizona’s most populous county warned on Oct. 22 that it may take between 10 and 13 days to tabulate the results of the Nov. 5 election.

County officials are asking “for the community’s patience,” Maricopa County Deputy Elections Director Jennifer Liewer said in a press conference on Oct. 22.

“This year, we do expect that it will take between 10 and 13 days to complete tabulation of all of the ballots that come in,” she said.

“We want to make sure that this is a secure process, but we also want to make sure that it is an accurate process.”

Assistant Maricopa County Manager Zach Schira said at the press conference, “If I have one message for voters here today, it is this: that the longer ballots and higher interest in this 2024 general election will create longer lines on Election Day, and that’s okay.”

Schira said that if people want to avoid the long lines, they are advised to vote by mail or early in person.

Maricopa County Supervisor Bill Gates said the tabulation may take so long because the ballot is two pages, there are dozens of contests per ballot, and there is heightened interest in the presidential election. He said more than 2.1 million Maricopa voters are expected to cast their ballot for the Nov. 5 contest, noting that 400,000 people so far have voted.

The “top message for voters” on Oct. 22 is “if you want to save time and avoid lines, vote early,” the county wrote on social media platform X. Voters have until Oct. 25 to request an early ballot, it noted.

Early voting data compiled by the University of Florida show that Republicans have a 38,000-vote advantage in terms of early voting in Arizona. Only mail-in ballots have been returned so far, but the data show that 41.9 percent of early ballots have been submitted by Republicans, compared with 36.3 by Democrats. Independent or third-party voters make up about 21.8 percent of the total.

Arizona, considered a battleground state, is again expected to be a close race during the 2024 election. State election officials in 2020 certified the race in Arizona for Joe Biden over President Donald Trump by a margin of about 11,000 votes.

In the aftermath of the 2020 contest, Trump and other Republicans alleged that Arizona’s election was marred by voter fraud, sparking a number of lawsuits against Arizona and Maricopa County officials that were all ultimately dismissed.

For that election, county officials certified the results 17 days after Election Day, according to a statement issued on Nov. 20, 2020. A significant number of voters cast ballots early in person or by mail in the midst of the COVID-19 pandemic and associated stay-at-home and lockdown orders and rules.

Maricopa County, which encompasses the city of Phoenix, is by far the most populous area in Arizona. As of March, it had more than 4.5 million residents, which is more than half the state’s entire population.

Trump is expected to campaign in Arizona on Oct. 24, holding a rally at Arizona State University’s arena in Tempe. Harris visited Arizona near the U.S.–Mexico border in late September.

Before his trip to Arizona, Trump is scheduled to headline a rally in Duluth, Georgia, on Oct. 23 with guests Tucker Carlson and Robert F. Kennedy Jr.

Vice President Kamala Harris is also focusing on battleground states and will be traveling to the outskirts of Philadelphia to participate in a live CNN town hall event with undecided voters from Pennsylvania. An interview she recorded with Telemundo, a Spanish language network, on Oct. 22 is also due to air.

Reuters contributed to this report.

The final data for the UMich Sentiment survey in October surprised bigly to the upside (70.5 vs 69.0 exp vs 70.1 prior), notably above the 68.9 preliminary print as both current conditions and expectations sub-indexes both jumped significantly from their flash prints (but the latter dipped on a MoM basis)…

Source: Bloomberg

Inflation expectations tumbled to 2.7%…

Source: Bloomberg

…more or less in line with the general trend from the Conference Board’s inflation expectations…

Source: Bloomberg

The upcoming election looms large over consumer expectations.

Overall, the share of consumers expecting a Harris presidency fell from 63% last month to 57% in October.

Sentiment of Republicans, who believe that a Trump presidency would be better for the economy, rose 8% on growing confidence that their preferred candidate would be the next president.

In contrast, sentiment declined 1% for Democrats.

As usual, Independents remain in between, with a 4% gain in sentiment this month.

Source: Bloomberg

Regardless of the eventual winner, a sizable share of consumers will likely update their economic expectations based on the results of the election.

The International Data Corporation released a report Friday morning showing that China’s smartphone shipments increased 3.2% year-over-year to 68.8 million units in Q3 2024, marking the fourth consecutive quarter of growth. However, there’s more to the story.

Let’s begin with the good news for Apple: 

“Apple re-enters the Top 5 smartphone companies at second place with the launch of its new iPhone 16 series. Initial sales figures are on par with its predecessor, and the company anticipates that upcoming promotions and the anticipated launch of Apple Intelligence will drive future demand.” 

Turning to less favorable details in the report—and confirming our earlier note (read here) on Apple Intelligence’s dud in the world’s largest handset market—IDC showed Apple’s market share in the country fell to 15.6% in the quarter, down from 16.1% in the same quarter one year ago. This indicates that local brands, such as Huawei, are chipping away at CEO Tim Cook’s global smartphone empire.

In market share terms, Huawei is third behind Apple, commanding about 15.3% of the country’s market share. The domestic brand’s smartphone shipments in the country surged 42% year-on-year in the quarter, as its competition with Apple dramatically increased. 

“Huawei has staged an impressive comeback, recording four consecutive quarters of at least double-digit growth. The launch of the world’s first tri-foldable phone is expected to further drive the foldable market development,” IDC wrote in the report.

Huawei’s resurgence puts pressure on Apple in China and other international markets. With Apple Intelligence absent in China, consumers will gravitate more towards Oppo, Huawei, and Honor handsets already equipped with AI features. 

In a separate report earlier today by Canalys, Apple’s China shipments in the third quarter slid 6% year over year compared to the same quarter one year ago. Canalys placed Apple number five in terms of market share. It showed Huawei had the second largest market share, with smartphone shipments in the quarter jumping 24% year over year.

The biggest takeaway is that Apple Intelligence did not unlock what many analysts on Wall Street believed would be an upgrade ‘supercycle’ for the world’s most valuable company. 

Apple’s market capitalization commands $3.5 trillion…

Meanwhile, a new report suggests that weak demand for the Apple Vision Pro mixed-reality headset in US markets could result in a winding down of series production as soon as next month.  

Maybe Apple’s problem is that it charges too damn much for its products in a period of elevated inflation and high interest rates. 

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

The IRS has officially launched a new unit that it states will “more efficiently conduct audits” of entities known as pass-through businesses.

The initiative targets businesses that pay no taxes on their revenue. Instead, the income generated is passed on to owners who then file taxes based on their individual taxation rates. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S-corporations. [Which the Bidens used to avoid up to $500k in taxes]

In September, the IRS stated that it is establishing a unit within the agency’s Large Business and International (LB&I) division focusing on large or complex pass-through entities.

On Oct. 22, the agency announced that the unit “has officially started work.”

The new department will seek to ensure compliance from pass-through entities of every size and form, including S-corporations, partnerships, and trusts. The agency stated that these businesses are being used to evade taxes.

“The establishment of pass-through field operations is a significant step in our goal to increase fairness in enforcement while improving service,” IRS Commissioner Danny Werfel said.

“By using Inflation Reduction Act funding and enhancing our expertise in this area, we will be able to reverse our historically low audit rates for complex arrangements employed by certain high-wealth individuals and large entities.”

Pass-through examinations had been divided between two IRS divisions—LB&I and the Small Business/Self-Employed. The cases were assigned on the basis of entity size.

Revenue agents from the new pass-through unit will be grouped into teams based on geography. They will be tasked with primary examination of returns related to pass-through businesses.

While the IRS claims that funds from the Inflation Reduction Act will be used to go after high-income groups, it earlier admitted that lower-income groups could be targeted if there was a funding crunch.

In such a situation, the agency will be forced to cut down enforcement staff by more than 50 percent in fiscal year 2030, the IRS stated in May. This would “severely” affect the agency’s ability to carry out complex audits.

“Since lower-income taxpayers are more likely to have simple tax returns, this lack of funding will likely translate into a higher share of audits falling on low- and middle-income taxpayers, while examination coverage rates for high-income and large corporate taxpayers will severely decline,” the agency stated.

Pass-Through Deductions

The IRS unit targeting pass-through entities has been set up just as a key tax deduction available to these businesses has come under threat.

In 2017, President Donald Trump signed into law certain tax cuts, including a provision that allows pass-through entity owners to deduct 20 percent of their qualified business income when calculating taxes. The law is set to end in 2025.

That deduction has generated some criticism. A report by the left-leaning Center for American Progress concluded that the measure has “disproportionately benefited the wealthy and has encouraged businesses to game the tax code to maximize qualifying income.”

More than half of all pass-through deductions in 2021 were claimed by tax filers with adjusted gross incomes (AGI) of $500,000 or more, according to the report.

“Moreover, wealthy filers claimed substantially larger average deductions—$1,024,246 for those with AGI of $10 million or more. By contrast, filers with AGI below $100,000 with the deduction—who accounted for 51 percent of claimants—claimed, on average, $1,997,” the organization stated.

The U.S. Chamber of Commerce is arguing for retaining the tax deduction. It points out that Congress permanently reduced the tax rate on corporate income from 35 percent to 21 percent in 2017, according to a Feb. 14 statement.

The 20 percent deduction for pass-through entities was enacted to ensure that these businesses “weren’t put at a tax disadvantage” against corporations, the chamber stated.

Making this deduction available only to business owners with less than $500,000 in annual income will “result in a tax increase on one of the major sources of jobs in our nation, directly hurting workers and the economy,” it stated.

The chamber urged Congress to make the 20 percent deduction permanent for pass-throughs.

China’s recent monetary and fiscal bazooka will likely fall short of the policy prescription needed to rid the world’s second-largest economy of deflationary risks. The real estate crisis remains unresolved, and iron ore markets are trending lower after a brief spike in late September when Beijing initially announced stimulus. 

Just as the iron ore rally was blasting off, Goldman’s Thomas Evans told clients around Sept. 24 to “fade iron ore rallies.”

“In the long term, steel overcapacity and growing supply in iron ore are the two biggest headwinds to ferrous supply chain, which can’t be fixed any time soon. The indicator to watch is whether, when and how much iron ore production would be cut from junior miners for market to rebalance,” Evans said, adding the market cannot rebalance “until steel capacities are shut down and junior iron ore miners cut production.”

Between Sept. 24 and Oct. 7, iron ore jumped nearly 28% from $89 a ton to $114. By Oct. 8, prices plunged from about $114 to $105 on news that China’s National Development and Reform Commission did not deliver enough stimulus the market hoped for.

We noted:

• Goldman Nails ‘Fade Iron Ore Rallies’ Call As China’s Failure To Deliver Additional Stimuli Sparks Turmoil

Now, with iron ore prices slipping under the $100 a ton level on Friday, Goldman’s Aurelia Waltham, Daan Struyven, and Samantha Dart expect prices to fall back to around $90 amid a much-needed rebalance as port supplies remain elevated:

Iron ore prices have retreated this week, with the 62%Fe index at $99/t today (Oct. 24), down 2% from last Friday. While the price drop appears to stand in contrast to the ongoing rise in consumption, in our view it reflects the broader oversupply in the iron ore market. Specifically, Chinese port stocks remain 40% higher than this time last year, driven by elevated arrivals. With surging shipments from India and Australian volumes in recovery, we expect port stocks to rise further unless prices drop below $90/t, which would remove Indian supply from the market, and allow fundamentals to start rebalancing.We also highlight that, with the market continuing to assess the impact of stimulus on demand, there is the risk of steel prices reversing the gains made since the end of September if stimulus disappoints. This could renew the pressure on steelmakers’ margins and result in hot metal output cuts.

In a separate note, Goldman’s Gerald Tan called the price moves in iron ore: “Too furious ferrous rally.” 

Tan continued:

The roughly 20% rally in iron ore prices following stimulus looks excessive relative to our estimate of a fundamental boost of up to 7%. The significant elasticity of supply around current price levels explains this muted fundamental boost, which may be even smaller in practice given the policy focus on inventory destocking instead of starts. We thus reiterate our view that iron ore prices need to fall below $90/t to rebalance fundamentals.

Back to Waltham’s note, the analysts provided clients with a chart pack that clearly shows oversupplied conditions:

Prices

Fundamentals

Supply

Consumption

Finished Steel

So far, Goldman has nailed the rollercoaster price action in iron ore futures. Lower for longer appears to be the key move for proper rebalancing. 

Preliminary data for October shows that headline US durable goods orders fell 0.8% MoM (slightly better than the -1.0% MoM expected), leaving orders down 2.9% YoY…

Source: Bloomberg

Core orders (ex-Transportation) rose 0-.4% MoM (-0.1% exp)

Orders placed with US factories for business equipment declined in preliminary October data and the prior month’s gain was revised lower, suggesting firms are more guarded about investment.

Source: Bloomberg

However, for the 6th month in the last seven, durable goods orders were revised lower (August revised from 0.0% MoM to -0.8% MoM!)…

Source: Bloomberg

How is The Fed – or anyone – supposed to make ‘decisions’ when the data is revised so aggressively and consistently?