Month: October 2024

Authored by Michael Wilkerson via The Epoch Times,

What is a rich country? In relative financial terms, it is a country whose net investment position is positive. The net investment position reflects how much one country owns of all other countries’ assets, less how much those countries own of it.

Throughout most of the 20th century, the United States’ net investment position was not only positive but also the highest in the world. Those days are over. Today, foreign governments, corporations, funds, and wealthy individuals own tens of trillions more of U.S. stocks, bonds, real estate, and other assets than we own of theirs.

The U.S. Bureau of Economic Analysis (BEA) recently released information revealing that the United States’ net international investment position, the difference between U.S. residents’ foreign financial assets and liabilities, hit an all-time low of negative $22.5 trillion in the second quarter of 2024.

Breaking it down, U.S. entities and individuals owe other countries $58.5 trillion. These countries will earn interest, dividends, and capital appreciation over time on those assets. That represents future income and wealth accumulation potential that is flowing out of the United States into other’s hands, way too much to be offset by the $36 trillion in foreign assets U.S. residents hold. We are, in effect, transferring our children’s inheritance to strangers, impoverishing future generations of Americans so that we can consume more ourselves today.

The decline in American wealth is accelerating rapidly.

On the eve of the global financial crisis (2007), the U.S. net international investment position was negative $1.2 trillion, having turned negative just a few years before.

A dozen years later, on the eve of the COVID-19 pandemic (2019), this deficit had grown by $10 trillion to negative $11.7 trillion. Since then, the negative gap has grown by an additional $10 billion in just five years. Of this amount, $6 trillion has been lost in the last two years alone. Let that sink in.

The cause is obvious. As a nation, we are consuming more than we produce, and borrowing to do so. This is true of our government, our corporations, and our households. Each of these groups is over-leveraged and living beyond its means through excessive borrowing enabled by incontinent monetary and fiscal policies alike. We are borrowing from our futures and that of the nation, with no obvious means of repayment.

The cure is as simple as the cause, though painful to follow through on. It requires substantial changes to our economic policies and regulatory framework. First, we must close the over $1 trillion annual trade deficit. Free trade isn’t free if it isn’t fair, and many of our trading partners have not treated the United States fairly. For years now, the United States has been subject to currency manipulation, industrial espionage and IP theft, state subsidies of foreign national champions, artificially low lending rates enabled by foreign central banks, and the closing off of foreign domestic markets to U.S. exports. China, which in recent years has represented between more than a quarter and nearly a half of the U.S. trade deficit, is the most visible example of these problems.

We must rebuild our domestic manufacturing capability.

We cannot keep consuming if we do not produce goods and services that the market demands. This is not an easy or quick process, but an appropriately targeted and structured system of tariffs, along with a sound industrial policy favoring reshoring, would help substantially.

Debt-based money isn’t the source of wealth; production and creativity are.

Americans’ ability to consume should be based not on the availability of cheap credit but on successful U.S. production and sale of something of value for the marketplace. Income produced by prior production and sale works its way into workers and investors pockets alike, enables demand fulfillment, and creates wealth.

At the same time, we must unleash our domestic energy capabilities. There is no such thing as an energy-poor “rich” country. We have abundant natural resources and domestic energy productive capability, but it has been hamstrung by an ideologically driven regulatory regime. Our domestic oil and gas, coal, nuclear, and other resource companies have the ability to energize and empower the world, and to generate substantial national wealth in the process. Let them do their jobs.

Finally, we must balance our budget. We must find a way to exit the deficit–debt–inflation doom loop that has enabled our government to print money at will and spend over $2 trillion a year that it doesn’t have. With $35.4 trillion of national debt, not including liabilities such as Social Security and Medicare, each growing by the trillions each year, the process cannot continue forever. At some point, foreign buyers of U.S. Treasuries will decide they have had enough, as the credit risks are simply too great.

This appears to be a train wreck in slow motion, and it must be averted at all costs. We must not put our heads in the sand and ignore what is happening. It is not too late to change course. But we must accept the gravity of the situation, and unify our national resources around sensible policy objectives, if we have any hope of stopping and then reversing this rapid outflow of our future prosperity.

US markets chopped around today after yesterday’s risk off tape as Geopolitics remain the focus, and while Chinese stocks rallied,  Goldman Sachs trading desk noted that for the first time in a week they’re seeing more balance in their China flows:

“Seeing both HF and LO sell tickets today across the complex.”

Certainly didn’t slow the upward trajectory for now (remember China is closed for Golden Week)…

Source: Bloomberg

On the US side, things were quieter… Small Caps lagged, Nasdaq led the gains but the majors traded in a narrow range (which is unexpected given the drop in gamma)…

We note that the S&P 500 is back within the post-Powell spike range…

Mag7 stocks are back down into the post-Powell squeeze range…

Source: Bloomberg

But the vol market readying itself for chaos on Friday as payrolls prints…

Source: Bloomberg

Bear in mind that ‘seasonally’, shit’s about to get real for vol markets…

Source: Goldman Sachs

Treasury yields were higher across the board today with the long-end lagging (2Y +3bps, 30Y +6bps). All yields are higher on the week…

Source: Bloomberg

The dollar extended its rebound, back up to the post-Powell spike on FOMC day…

Source: Bloomberg

…as JPY weakened, erasing all of Friday’s election panic bid…

Source: Bloomberg

Gold ended marginally lower on the day…

Source: Bloomberg

Crypto was monkeyhammered again with Bitcoin dumped back to FOMC-Day levels ($60,000)…

Source: Bloomberg

Crude prices pumped and dumped amid inventory data, further escalations in Israel/Lebanon, and OPEC+ headlines…

Source: Bloomberg

Finally, despite the fact that we have crossed the month-/quarter-end rubicon, the plumbing in the financial services sewage remains a little clogged…

Source: Bloomberg

The last time this happened, the repo market blew up… just saying.

Authored by Edward Ring via American Greatness,

It’s election season, and because California is a one-party state, we don’t see very many campaign ads for Kamala Harris. But ballot initiatives are another story. One hotly contested ballot initiative, Proposition 33, if approved by voters, will enable California’s cities and counties to impose rent control. How the rent control advocates make their case is typical. Greed and oppression against hapless, helpless, innocent victims. But the government is here to help!

Ads in favor of Prop. 33 are masterpieces in emotional imagery. One after another, a diverse collection of beleaguered tenants appear on the television screen, each of them repeating the phrase “The rent’s too high.” Another ad promoting a yes vote on Prop. 33 follows the same pattern, but this time, one after another, a collection of forlorn tenants asks, “Where will I live?” while superimposed on the screen is written, “Average Rent, $2,800.”

In both cases, viewers are advised to “vote for rent control.”

The naked dishonesty of these ads is lost on most Californians. They have been conditioned to believe that high home prices and high monthly rents are the result of price gouging by greedy landlords when in reality there is a housing shortage because the Democratic majority in the state legislature has passed countless laws that make it almost impossible to get permits to build homes. No wonder the median price for a home in California is $904,000.

Vote for Kamala Harris and the machine she represents, and watch this happen to the whole country.

If there were a competitive market for housing in California, such as there still is in most so-called red states, housing would be affordable for middle-income people to rent or buy. But it is government greed and overreach, not only at the state level but in every city and county, that has created the housing shortage.

The same phenomenon occurs with gasoline in California, where more than a third of the price per gallon goes to cover taxes, almost all of them for state programs. But instead of backing off of its regulatory war on refineries and in-state producers, the governor is holding hearings on “price gouging” by the refineries, alleging that they engage in deliberate shutdowns for maintenance in order to create shortages and high prices. Never mind that California’s gasoline price fluctuations track in precise alignment with fluctuations in the price of crude oil.

In every essential sector of California’s economy—starting with the fundamentals of energy, water, food, transportation, and housing—out-of-control government regulations have paralyzed investment and innovation. They have rendered the state unaffordable for low and middle-income households, and in response, the state expanded its aid programs and subsidies.

What has happened in California is going to happen to the entire nation if Kamala Harris is elected president, because she is a quintessential example of someone who is a product of the state’s Democratic political machine. What has happened in California is an alliance of unionized state bureaucrats with politically connected businesses seeking government subsidies. Other special interests also benefit—environmentalist lobbyists, social justice activists, public service NGOs, trial lawyers—but the core relationship is a partnership between a government that serves itself and crony businesses that have the economies of scale to withstand the punitive regulations and thrive on the subsidies.

The only honest assertion that proponents of a rent control initiative make in their campaign ads is the fact that rent is too high in California. But rent control will make things even worse. As it is, most developers will not do business in California. Why try to build a subdivision in Silicon Valley, where the permits may take 10-20 years to get approved, when they can go to Texas and get plans approved in 10-20 weeks? Why build anything in a state where at any moment another environmentalist organization can file a lawsuit that will take millions of dollars and several years to resolve?

If Prop. 33 passes, developers of multi-family housing will have to contend with the fact that rental income will not be permitted to keep pace with market rates, something that will not only discourage buyers but also disincentivize any ongoing investments in maintenance and upgrades to the properties. Rent control will make California’s housing shortage worse.

How California has coped with its housing shortage so far is an object lesson of how the government steps in to solve a problem it created and then makes the problem worse. When combining state and local funding, California has easily spent more than $30 billion of taxpayer money on “permanent supportive housing” for the state’s homeless, only to see the population of unsheltered homeless hit 186,000 this year, a new record. The money has passed into the hands of developers, bureaucrats, and service NGOs, and after everyone has taken their cut, the construction costs average over $500,000 per unit, with perpetual costs for management and services for the tenants.

California’s “affordable housing” projects have consumed even greater quantities of state and local tax revenue. Nobody has ever come up with a precise estimate but it’s well beyond the $30 billion spent for the homeless. Estimated spending for affordable housing just in 2023 is over $18 billion. In just one year. This spending comes in the form of subsidies and tax incentives granted to developers who cannot possibly build homes or apartments that people can afford and still make a profit. Then the tenants themselves receive additional taxpayer funds in order to afford their monthly rent.

And yet, this is Harris’s explicit, often stated, “holistic” solution to unaffordable homes and rents. More subsidies to developers to construct “affordable housing” and more subsidies to tenants to pay the monthly rent. Deregulating the industry would quickly end America’s housing shortage, cost taxpayers nothing, and restore the American dream of owning a home. But that wouldn’t benefit the bureaucrats or the cronies that control the one-party machine.

California’s cities may not be quite as bad, at least not everywhere, as conservative critics claim, but they’re undeniably a mess. The City of Oakland is a poster child for local government dysfunction. Losing both of their professional sports teams is a high-profile example of failed leadership. They just lost the Oakland A’s after 57 years of residency. And since 2020, the Oakland Raiders have been the Las Vegas Raiders. Losing these iconic teams is just a symptom of a systemic collapse. The city of Oakland is falling apart. Crime is rampant. The city faces a budget crisis. And meanwhile, they are pioneering payments for “universal basic income” and “universal basic mobility.”

In general, California’s major cities are controlled by social justice activists who don’t have even a remote understanding of how to govern. They attract massive political contributions from the public employee unions representing the workers they’re supposedly going to oversee. And as long as they rubber stamp every wage and benefit demand these unions make, they’re free to pass as many ridiculous ordinances as they wish. After all, the more repressive these cities get on their march towards utopia, the more public servants will be necessary for enforcement.

Such is life in Kamala’s California. State directives now intrude into trivial details of daily life. If you refuse to put your kitchen scraps in your “organics” bin instead of the trash bin, you are a climate denier, and you will be fined. After all, all that discarded broccoli and chicken bones in a landfill might make methane, a greenhouse gas! Similar approbation will fall upon you if you object to the recent ban on plastic bags, and never mind their utility or the fact that almost everything in the civilized world is made out of plastic.

But reality isn’t real in California. Their current attorney general, Rob Bonta, has just sued Exxon for “deceiving the public on recyclability of plastic products.” For Bonta, already salivating over his chances to become California’s next governor in 2026, this is a publicity stunt that may yield a profitable settlement for his agency. But for the rest of us, it is yet another example of a one-party state government that engages in relentless harassment of its productive citizens and companies. California’s Democratic politicians are determined to micromanage every aspect of the economic life of the state’s businesses and households.

Voters in America should understand that this national election is not just about social issues. They are of vital importance, but must not overshadow what else is at stake: our economic freedom. A Harris administration will impose California’s soft tyranny on the entire nation while her cronies laugh all the way to the bank.

The OPEC+ joint ministerial monitoring committee meeting (JMMC) concluded on Wednesday, with the ministers refraining from making any changes to production policy, maintaining the plan to start raising output in December. 

“The JMMC emphasized the critical importance of achieving full conformity and compensation. Furthermore, the Committee will continuously assess market conditions,” OPEC said in a post-meeting statement, according to Charles Kennedy of OilPrice.com. Once again, ministers cautioned cartel members who continue to produce above quota. 

OIL MARKET: The OPEC+ Joint Ministerial Monitoring Committee puts the emphasis (again!) on cheating (compliance, on the cartel’s speak). Iraq, Kazakhstan and Russia claim they fully met their quotas in September (count my as skeptical). #OOTT pic.twitter.com/ZeqwkVEreZ

— Javier Blas (@JavierBlas) October 2, 2024

The WSJ reported on Wednesday that Saudi Energy Minister Prince Abdulaziz bin Salman allegedly warned OPEC+ ministers that if some members insisted on continually violating their quota agreements, oil prices could drop to $50 per barrel. Iraq and Kazakhstan are the most often cited violators of the output-cut agreement. While both countries have reported that they were in compliance in September, the official numbers will not be available to verify until next week, according to Reuters. 

This is part of the escalating Saudi threat to raise its price target and regain market share it has given up by bearing the heaviest burden of oil output cuts. The Kingdom has been going above and beyond to restrict supply to the market for more than a year. Apart from its share of the OPEC+ cuts in force since last summer, Saudi Arabia is also voluntarily keeping another 1 million barrels per day (bpd) off the market. It has been strictly sticking to its plan to produce “around 9 million bpd”—it has been consistently in line with its targeted oil output over the past year.

However, shortly after the report, OPEC itself took the unprecedented step of refuting the WSJ article, claiming that “the article falsely reported that a conference call took place in which the Saudi Arabian Energy Minister allegedly warned OPEC+ members of a potential price drop to $50 per barrel should they fail to comply with agreed production cuts. It also attributed an alleged quote to the Minister, stating: “Some better shut up and respect their commitments toward OPEC+.” These claims are entirely unfounded.”

OPEC secretariat stresses that no such conference call occurred last week, nor has any call or video conference taken place since the last OPEC+ meeting on September 5. The alleged statements, attributed to unnamed sources, lack any credibility and are completely fabricated.

With reference to the Wall Street Journal (WSJ) article, dated 2 October 2024, titled “Saudi Oil Min Said Prices May Fall to $50/B if Others Cheat, Sources Say,” the OPEC Secretariat categorically refutes the claims made within the story as wholly inaccurate and misleading.

The…

— OPEC (@OPECSecretariat) October 2, 2024

The denial prompted some to speculate if the Biden admin was pretending to OPEC members and leaking fake news to Reuters, WSJ and FT.

So the Biden admin is now pretending to be “OPEC sources” and rotating Reuters, FT and WSJ to leak fake news that hammer oil.

— zerohedge (@zerohedge) October 2, 2024

Total OPEC+ output cuts currently represent 5.86 million bpd. 

In December, OPEC+ is planning to increase output by 180,000 bpd and it unwinds cuts

By John Gallagher of FreightWaves

President Joe Biden broke his silence on the labor dispute between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) by accusing employers of hoarding profits.

“Ocean carriers have made record profits since the pandemic and in some cases profits grew in excess of 800 percent compared to their profits prior to the pandemic,” Biden said in a statement issued by the White House on Tuesday, after the ILA went on strike at 14 ports on the U.S. East and Gulf coasts, halting container and roll-on/roll-off operations at 36 marine terminals.

“Executive compensation has grown in line with those profits and profits have been returned to shareholders at record rates. It’s only fair that workers, who put themselves at risk during the pandemic to keep ports open, see a meaningful increase in their wages as well.”

In urging USMX to the bargaining table with an acceptable wage offer, Biden also warned the carriers against taking advantage of supply chain disruptions caused by Hurricane Helene.

“As our nation climbs out of the aftermath of Hurricane Helene, dockworkers will play an essential role in getting communities the resources they need. Now is not the time for ocean carriers to refuse to negotiate a fair wage for these essential workers while raking in record profits.

“My administration will be monitoring for any price gouging activity that benefits foreign ocean carriers, including those on the USMX board.”

Among USMX members are foreign-based container ship operators CMA CGM (France), Maersk (Denmark), Cosco (China), MSC (Switzerland), OOCL (Hong Kong) and Evergreen (Taiwan).

The compounding effect of the strike and disruptions caused by the hurricane is raising transportation fears among food producers and retailers.

“There’s never a good time for a strike,” said Food Industry Association President and CEO Leslie Sarasin in a statement on Tuesday.

“Now, the current strike is compounding the horrific situation in the Southeastern United States resulting from Hurricane Helene and parties need to return to the negotiating table.

“This action has already begun to jeopardize food supply chain operations, and the strike has the potential to disrupt the long-term stability of markets and commodities, namely pharmaceuticals, seafood, produce, meat, cheese, ingredients, and packaging.”

White House Press Secretary Karine Jean-Pierre told reporters on Tuesday that the strike is not yet hindering relief and recovery efforts related to the hurricane because emergency supplies had been positioned ahead of the storm.

She said the administration has stood up the Supply Chain Disruptions Task Force, created by the White House in 2021 in the wake of the pandemic, to monitor the situation.

“We are engaged extensively with labor, industry, state and local officials, ocean carriers, rail and truck companies, including multiple meetings with retailers, grocers, manufacturers, and agriculture,” Jean-Pierre said. “We are assessing ways to address any concerns, if necessary.”

On whether that would include ordering the union workers back to work by invoking the Taft-Hartley Act, “We have not used Taft-Hartley and we’re not planning to,” she said.

Via Greg Hunter’s USAWatchdog.com,

Renowned geopolitical and financial cycle expert Charles Nenner has been warning of a huge war cycle. 

The Iran missile attack in Israel that rained down 180 missiles on the Holy land, “is just the beginning,” according to Nenner.

Of course, America and everybody else will be involved in this war, and Nenner says don’t expect America to come out on top.  Nenner says, “I don’t know how big this war is going to be because everybody is going to be involved.”

” Israel is not going to sit on its hands like last time because this cannot continue.  I guess Israel will go for the enrichment of the uranium places and attack Iran whenever they are ready…

I don’t vote in the United States because I am Dutch, but if Trump were in, this would be over in an hour.”

When it comes to the 2024 November election, Nenner says, “I think the media is doing a great job.  So, I am not sure that Trump is going to win.”

”  I really have no mercy for America anymore if they vote for Kamala.  It’s just the end of an empire already.  Even if Trump wins, I don’t think he can fix what needs to be fixed because the Biden government put all kinds of people in positions that are going to be there for a while.  

I watch Congress and see who the Biden Administration brings forward for new judges, and I have no words for it.  It’s ridiculous.  I don’t even know how to fix the United States anymore…

According to the cycles the United States is finished. 

This war now will probably turn into a world war, and the problem is they (US) will have to fight Russia, China, North Korea and Iran, and they have no chance to win…

Nobody will have to invade the United States.  They will just finish them off with rockets from the air.  It is a hopeless situation.”

Nenner famously said several months ago, “If you know winter is coming, you can buy a winter coat.  Trump is the winter coat.” 

So, can Trump still be the winter coat America needs to survive?  Nenner says, “I don’t think he can.  It’s too late.”

On the markets, Nenner thinks there is going to be a stock market crash that will be equal to or greater than the Great Depression market crash in 1929.  Nenner says,

“We are telling our clients to get out of stocks. . . . We have zero stocks.”

Nenner also thinks gold is the place to be for the next three years.  Nenner thinks gold is going much higher. 

On interest rates, Nenner says they are going higher too, and real estate and bonds are going lower.  This is the longer term trend in Nenner’s cycle.

When will this market crash come?  Nenner says, “It’s still going to take half a year or a year until everybody realizes how bad the situation is compared to the BRIC countries.”

”  The dollar is not going to be the major currency.  Nixon stopped backing it by gold, and Saudia Arabia stopped backing it by oil.  It is not backed by anything.  So, why would you trust the dollar?

There is much more in the 30-minute interview.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with renowned cycle analyst and financial expert Charles Nenner for 10.01.24.

*  *  *

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As the news cycle on Tuesday centered on Iran’s launch of 180 ballistic missiles, including new hypersonic weapons, tensions also flared up in the Red Sea when Iran-backed Houthis attacked two commercial vessels—one with an explosive-laden drone and the other with a missile.

Houston-based data intelligence firm SynMax, which specializes in maritime and energy intelligence, wrote on X early Tuesday morning, “Two ships targeted by Houthis in the RedSea yesterday—Panama-flagged CORDELIA MOON and Liberian-flagged MINOAN COURAGE—the first such attacks since September.” 

SynMax noted, “Both crews remain safe.” 

AP News provided additional color on the attacks:

The first attack took place some 110 kilometers (70 miles) off the port city of Hodeida and targeted the Panama-flagged oil tanker Cordelia Moon, the multinational Joint Maritime Information Center said. A captain on a ship saw four “splashes” near the vessel, the center overseen by the U.S. Navy said. That likely would have been missiles launched at the vessel that missed.

The drone boat later damaged the Cordelia Moon, which sustained a puncture to one of its ballast tanks in the attack. Those tanks control a ship’s buoyancy. Houthi strikes in the past have targeted ships at their waterline to disable the vessels.

…

Another attack with a missile targeted a separate ship also heading north to the Suez Canal with armed security on board, Ambrey said. The British military’s United Kingdom Maritime Trade Operations center later identified it as the Liberian-flagged bulk carrier Minoan Courage.

Since October 2023, Houthi rebels have launched over 80 attacks on commercial ships in the critical maritime chokepoint in the southern Red Sea, sinking two ships and killing four sailors.

The chaos has sparked global supply chain snarls for the shipping industry as commercial vessels are rerouted around the Cape of Good Hope. 

Even more concerning is the Biden-Harris administration’s failure of ‘Operation Prosperity Guardian’ to ensure freedom of navigation and maritime security in the critical maritime chokepoint.  

The world is on fire because the Biden-Harris team is weak. The world knows it. 

Events this week in the Middle East only suggest the conflict is broadening. Read more about the potential IDF response. 

By Michael Every of Rabobank

As I mused yesterday, the Iranian foreign minister was bluffing when he implied Iran was not going to act in response to Israel’s attacks on its regional proxies. Overnight, around 200 ballistic missiles were again fired into Israel from Iran, most shot down in flight with the help of the US, UK, and Jordan, others hitting open areas near real targets, with only one casualty, a Palestinian. However, thinking this is a repeat of April’s “choreographed” Iranian strike that will be met by a token Israeli response is taking a bold bet.

Back in April, I said we’d revisit that episode with worse consequences; and here we are. For those who hadn’t noticed – that includes Haniyeh and Nasrallah – Israel’s strategic dynamic has changed. It’s no longer trading blow for blow with others within prescribed geography and scale but climbing the escalation ladder to force its enemies to jump off or be smashed. Iran therefore just made a huge strategic error. Indeed, PM Netanyahu, who restored Israeli deterrence while declaring there are no red lines for it in the region cannot now show Iran is off limits. Doubly, when central Israel spent the night before Jewish new year in bomb shelters. Triply, when Iran’s shield of Hamas and Hezbollah are dismantled. Quadruply, when his new coalition member is an Iran hawk and his most potent potential political rival, former PM Bennet, tweets now is the time to strike the head of the Iranian octopus. Quintuply, when western leaders are behind Israel.

Dutch PM Wilders insulted Supreme Leader Khamenei in Hebrew. Even the US stated it will help with “severe consequences” for what Iran just did rather than telling Israel to “take the win,” as reports are the US also backed Israel’s move against Hezbollah. In the second Harris/Walz-Trump/Vance debate, the first question was on the Middle East. Walz said, “Let’s keep in mind where this started,” i.e., October 7, and Israel’s ability to defend itself is “absolutely fundamental.” Vance concurred, “We should support our allies wherever they are when they’re fighting the bad guys.” Walz noted Iran is closer to being a nuclear power, a line Vance could also have used.

The list of Israeli targets proportionate to their escalation vs. Hamas, Hezbollah, and the Houthis is short:

1. Military radar systems would leave Iran open for IDF air attacks.

2. Iran’s nuclear program would require US assistance.

3. The simplest target is oil infrastructure to remove the earnings paying for its and its proxies’ weapons, and to destabilise the regime.

Yet Iranian state Telegram chatgroups, and an Iranian professor of literature(!) interviewed by the BBC, say if their oil is hit, they will burn Saudi, Kuwaiti, UAE, Bahraini, and Azerbaijani oil – an escalation threat we have been flagging as a fat tail risk since immediately after October 7. (Note Qatar, a key supplier of LNG to the EU, is absent from this list despite ostensibly being a major US ally…) As such, the US might also oppose this move: but that doesn’t mean it won’t happen. Of course, Israel hitting Iran too hard could mean war, dragging others in; even so, it likely sees more risk in doing too little with its next strike than doing too much.

For markets, the risk is therefore also around where one’s strikes are placed. Oil went up around 5% yesterday and has only come down slightly since; indeed, the above may still be just a tail risk – a literature professor is after all an expert in fiction – but it’s as fat as they come.

In the Far East, trouble brews too. Japanese PM Ishiba, whom I noted yesterday is a foreign policy hawk who favours an Asian NATO with regional nuclear weapons, is making headlines today for [checks notes] supporting the creation of an ‘Asia NATO’ to deter China, Russia and North Korea with nuclear weapons – American or otherwise(!) This has huge implications.    

The ILA East Coast port strike began, with worrying implications for global supply chains already strained by the Houthis, who hit two ships yesterday. Some consequences being floated by one expert include: shipping firms declaring force majeure and dumping containers around the world; congestion hitting major terminals; ships docked in the US being stuck there; and delays returning empty containers to Asia, so shortages soaring. Ship queues are reportedly already building off the east coast and could soon exceed their Covid peak. In short, this is not “$5bn a day” in a $29 trillion US economy as some bean-counters put it. The knock-on effects are far larger, exponential, and unpredictable. Presumably, the ILA will get a huge pay rise but given this is the most labour friendly US presidency for a long time, and former President Trump just tweeted support of their claims, the union may not be in a hurry to return to work.

But back to the vice-presidential debate. For markets, only three other points were worth noting:

• First, Vance said Trump’s economic plan is “not just a plan, but it’s also a record,” and that said plan is attacked by people who have PhDs but don’t have “common sense.” Walz responded, “Economists, can’t be trusted. Science can’t be trusted. National security folks can’t be trusted. Look, if you’re going to be president, you don’t have all the answers. Donald Trump believes he does. My pro tip of the day is this: if you need heart surgery, listen to the people at the Mayo Clinic in Rochester, Minnesota, not Donald Trump. And the same thing goes with this.” True. Then again, like it or not, part of the debate around this election is that neoclassical economics is wrong; and that science aims to prove things wrong; and that an awful lot of national security people have been very wrong given where we are now.
• Second, on housing, Walz seemed to imply houses are for living in not speculation (perhaps he picked that up on a China visit?); stressed the importance of getting access to mortgages; that giving $25,000 to new home buyers won’t push up the price of new homes by $25,000; and neither does high immigration. Vance, whom the moderator said is proposing building new homes on federal land, couldn’t say where, instead emphasizing the importance of lowering illegal immigration, energy prices, and regulation as the quick solution to cheaper housing.
• Third, Vance underlined the heart of the Trump plan is high tariffs and low taxes for US production, with tariff revenue paying for social spending such as child tax credits. Walz argued tariffs are not a way to raise revenue, and it’s better to get the rich pay “their fair share,” with no details of how. Even neoclassical economists understand that the federal deficit is likely to get larger, not smaller, on that basis.

In terms of the election needle, I suspect it didn’t move much, even as Vance seems to win in some polls. However, it highlighted how much the Republican party has shifted, and that both vice-presidential candidates think, talk, and debate with vastly greater clarity than those at the top of their tickets. This was an actual debate; polite; and even had areas where the two men agreed.     

All of the above sits alongside yesterday’s notably weak employment and prices paid components in the US ISM manufacturing survey even as job openings beat to the upside: that was enough to get people just told “2 * 25” by Powell to talk about “50 – 50” again. Then again, so does everything.

Meanwhile, hedge funds are begging to get into a China bull market and Bloomberg says Chinese property buyers are queueing up to think about home purchases again. Color me cynical, but *if* this is the case, global commodity inflation is going to go a lot higher; and so, OECD interest rates are not going to be able to go a lot lower.

At which point, it won’t just be the ILA on strike, or Eastern German and Austrian centrist politicians who are out of office… 

Kamala Harris’ husband Doug Emhoff reportedly assaulted his ex-girlfriend by hitting her in the face so hard “she spun around”, according to a bombshell new exclusive by the Daily Mail. 

Emhoff allegedly struck the woman, referred to as “Jane,” in the face while waiting in a valet line after a 2012 Cannes Film Festival event, according to the DailyMail.com.

Jane, a New York attorney, reportedly called a friend sobbing in a cab after the incident and told others about the alleged assault at the time. Friends provided photos and documents from 2012 to support parts of the story but chose to remain anonymous, citing fear of retaliation.

Jane’s friends said she received tickets from wealthy connections to attend the exclusive amfAR Gala Dinner at Hotel du Cap in Antibes, France, on May 24, 2012.

The alleged assault occurred after the event, where celebrities like Heidi Klum and Harvey Weinstein were present. Jane, who brought Emhoff as her guest, later called a friend sobbing, saying her date had hit her.

The friend recalled Jane describing how Emhoff slapped her after she offered a valet money to skip a taxi line, which he misinterpreted as flirting.

‘She slapped him back. My impression is that he had a lot to drink. She was sobbing [on the phone afterwards], but she wasn’t slurring her words. She told me that she broke up with him that night,’ one friend told the Daily Mail. 

A second friend, also a New York attorney, said Jane recounted the incident, describing how Emhoff slapped her out of nowhere around 2-3 a.m. after a pleasant evening.

Jane said she was talking to a valet when Emhoff suddenly turned her around and slapped her hard, causing her to spin. Shocked, she slapped him back twice.

‘She said she wanted to go back to the hotel without him. But while she was shutting the door, he forced himself into the car, which she did not want.’ the friend said. 

Jane was embarrassed and described it as a “trailer trash moment,” realizing it revealed his true character.

A third friend said Jane told her the story in 2018, telling the Daily Mail: ‘She had never been hit in her life. [Jane] is a gorgeous, strong woman and you would never expect somebody to hit her.’

Recall, just days ago Jen Psaki swooned over Emhoff on MSNBC in a sit-down interview, stating he was reshaping masculinity and calling him a ‘supportive spouse’. 

“There is also an important, interesting part about how people have talked about your role is how your role has reshaped the perception of masculinity,” Psaki said to Emhoff.

“I’m not sure you planned on that, but you are an incredibly supportive spouse. Has that been an evolution for you? Do you think that’s part of the role you might play as First Gentleman?”

Emhoff responded: “It’s funny. I’ve started to think a lot about this. I’ve always been like this. My dad’s always been like this. To me, it’s the right thing to do, support women. It is mutual with Kamala and I. We support each other, we have each other’s back,”

He continued: “I’ve said many times when we lift up women, we support women whether it’s pay equity, childcare, family leave, and all of these issues in this post-Dobbs hellscape. Women should not be less than. Women should not have less rights and be treated differently. That’s not the American way.”

Ironically, Emhoff also said days ago about Trump: “Make no mistake, where he says I will be the protector of women, that is yet more lies and more gaslighting.”

Or said another way…

Black Eyes Matter https://t.co/U0qHSJ6dz5

— Sean Davis (@seanmdav) October 2, 2024

You can read the full Daily Mail report here.