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Things are, simply, a disaster for Tesla’s Autopilot right now. The Autopilot team at Tesla seems to be not far behind.  

By now it is hardly probably news at all that another executive has left Tesla. And you’re probably not even surprised that this executive was working on the Autopilot team. After all, we have been covering countless numbers of executive departures at Tesla over the last couple of weeks, including the company’s main liaison with safety regulators, while at the same time reporting on no less than three NHTSA and NTSB investigations being opened into Tesla vehicle accidents.

What should maybe come as a surprise is that more and more of these Tesla executives are leaving to go to competition in the autonomous driving space. Today’s executive departure is that of Sameer Qureshi, who was a Senior Autopilot engineer, who has reportedly left to go work at Lyft. Electrek, which is usually a Tesla-friendly blog, reported:

Sameer Qureshi is one of those engineers with experience since he has been “responsible for the entire Autopilot software stack across all of Tesla’s cars and platforms” for the past year and a half.

 

Now Electrek has learned that he left the automaker this month to join Lyft.

Qureshi was a veteran software engineer at Intel when he joined Tesla’s team in 2014 to oversee the software stack of the Model X, a program led by Sterling Anderson at the time, ahead of the vehicle’s launch.

After transitioning projects at Tesla, it appears that Qureshi sees greener pastures at Lyft, working for Luc Vincent, who is the former Google executive that founded the wildly successful “Google Street View” on Google Maps. Electrek continues:

After the launch of the Model X, Anderson became the Autopilot program director, a post that he left in controversy in December 2016 to found his own autonomous driving startup.

At that time, Qureshi became “responsible for the entire Autopilot software stack across all of Tesla’s cars and platforms”, according to his LinkedIn profile.

He held the position throughout the entire rollout of software updates on the new Autopilot 2.0 hardware suite.

We now learn that he left to join Lyft’s Level 5 team as Director of Product this month.

The team was launched last summer as the ride-hailing company’s autonomous driving division at their Level 5 Engineering Center in Palo Alto.

This comes after Tesla’ VP of Autpilot, Jim Keller, also left the company, as we reported in late April. 

Even more recently, Tesla lost two additional executives, including their main liason with safety regulators, Matthew Schwall, who left for Waymo. After this, both Arch Padmanabhan, the product director for Tesla’s stationary storage unit, and Bob Rudd, from Solar City, were both reported to be leaving the company – bringing the two month total of executives to no less than 5.

The list of executives who have departed the company over the last few years has been running at a relatively steady clip that usually winds up chalking up a couple of names every month or so – that looks to be accelerating. Bloomberg reported on two additional departures earlier this week:

Tesla Inc.’s energy unit has lost two major executives as CEO Elon Musk promises to reorganize the electric-car maker’s management team, according to people familiar with the matter.

Arch Padmanabhan, the product director for Tesla’s stationary storage unit, and Bob Rudd, a former SolarCity vice president who led North American commercial and utility sales, have both left the company, said the people, who asked not to be identified because they aren’t authorized to speak publicly. Tesla didn’t immediately comment on the departures. Padmanabhan said he’s working on a new venture and declined to elaborate. Rudd couldn’t be reached for comment.

Not unlike Doug Field, one of the only four executives listed on the company’s proxy who has apparently taken a leave of absence, Padmanabhan as also mysteriously left to “work on a new venture”. But recently executive departures have been happening at an astonishing rate:

Matthew Schwall, Tesla’s primary contact with U.S. regulators, left to join Waymo, the self-driving-car company started by Google. Jim Keller, head of the driver-assistance system Autopilot, left last month for Intel Corp. Two top financial executives left in March, and sales chief Jon McNeil defected to Lyft Inc. in February. Musk told employees in an email on Monday that he’s “flattening” Tesla’s management structure to improve communication.

But Electrek, not to leave a bad taste in Elon’s mouth, did their best to make excuses for the most recent defector to Lyft by saying “there’s many more examples” of Autonomous driving companies poaching each others’ executives:

There’s a ton of money flowing into the space and recruiters are working double time to secure talent and Tesla’s Autopilot team is a popular target.

It undoubtedly resulted in some poaching, like Xinlai Ni, a former senior Autopilot software engineer and now Chief Architect at Baidu, and Junli Gu, a machine learning expert on the Autopilot team and now Vice President of Autonomous Driving at Xiaopeng Motors, but it’s important to note that Tesla’s Autopilot team has still managed to retain many key engineers.

For example, it goes both ways. Tesla poached data scientist Gabor Szabo from Lyft almost 2 years ago and he has been leading the Autopilot Maps team ever since.

The same thing happened with Baidu. Before Xinlai Ni was poached to join Baidu’s team, Tesla hired their machine learning expert Sanjeev Satheesh to work on Autopilot.

Our conclusions are slightly different. 

We’re sure that nothing surprises you anymore when it comes to Tesla, especially given the last couple months that the company has had. However we believe significant attention should be paid to the fact that not only are people leaving, but they are moving to other major players in the autonomous driving space. It is just one more notch higher on the pressure cooker which has been running on full blast for Elon Musk over the last couple months.

via RSS https://ift.tt/2rVrNpl Tyler Durden

Authored by James Rickards via The Daily Reckoning,

June 12 is just three weeks away.

That’s when the Federal Open Market Committee, FOMC, the Fed’s interest rate policy arm, will in all likelihood raise interest rates another 0.25%, the seventh such rate increase since the “liftoff” in interest rates in December 2015.

The market is currently putting the odds of a rate hike at 95%.

This is the most aggressive tempo of rate hikes of any major central bank and puts U.S. policy rates significantly higher than those in the U.K., Japan or eurozone.

The issue for investors is whether the Fed is raising rates too aggressively considering the strength of the U.S. economy. Higher rates imply a stronger dollar, imported deflation and head winds to growth.

If the U.S. economy is on a firm footing, then the rate hikes may be appropriate, even necessary to head off inflation.

But if the U.S. economy is vulnerable, then the Fed’s actions could trigger a recession and stock market sell-off unless the Fed reverses course quickly.

My view is that the latter is more likely.

The Fed is tightening into weakness and will reverse course by pausing rate hikes later this year.

When that happens, important trends in stocks, bonds, currencies and gold will be thrown into reverse.

Outwardly, the Fed is sanguine about the prospects for monetary normalization. Both Janet Yellen and new Fed chair Jay Powell have said that interest rate hikes will be steady and gradual.

In practice, this means four rate hikes per year, 0.25% each, every March, June, September and December, with occasional pauses prompted by strong signs of disinflation, disorderly markets or diminution in job creation.

Lately job creation has been strong. And inflation has picked up. But it’s been spotty. The Fed still faces head winds in achieving its inflation goal.

The Fed is targeting a 2% annual inflation rate as measured by an index called PCE core year over year, reported monthly (with a one-month lag) by the Commerce Department.

That inflation index has not cooperated with the Fed’s wishes, and despite recent gains, hasn’t been able to hold consistently above 2%.

This has been a persistent trend and should be troubling to the Fed as it contemplates its next policy move at the FOMC meeting on June 12-13.

I’ve warned repeatedly that the Fed is tightening into weakness. The Atlanta Fed is projecting a 4.1% growth rate for the second quarter. But it’s known for its rosy projections that are almost always revised downwards once the data come in,

It had to lower its estimate of first quarter growth from over 5% to 1.8%. You can pretty much bet they’ll have to significantly reduce this projection as well.

The economy has been trapped in this low-growth cycle for years. The current economic recovery shows none of the 3% to 4% growth that previous recoveries have shown.

Meanwhile, the Fed is plowing ahead with its policy of quantitative tightening (QT), or cutting into its balance sheet.

Balance sheet normalization is even more on autopilot than rate hikes. Now, the Fed will not dump its securities holdings. Instead, it refrains from rolling over maturing securities. When the Treasury pays the Fed upon the maturity of a Treasury note, the money simply disappears.

This is the opposite of money printing — it’s money destruction. Instead of QE, we now have QT, or quantitative tightening. It’s like the Fed is burning money.

The Fed has been transparent about the rate at which they will run off their balance sheet this way, although transparency should not lead investors to complacency.

The Fed wants you to think that QT will not have any impact. Fed leadership speaks in code and has a word for this which you’ll hear called “background.” The Fed wants this to run on background.

Think of running on background like someone using a computer to access email while downloading something on background.

This is complete nonsense.

Contradictions coming from the Fed’s happy talk wants us to believe that QT is not a contractionary policy, but it is.

They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy.

They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a major impact.

My estimate is that every $500 billion of quantitative tightening could be equivalent to one .25 basis point rate hike. Some estimates are even higher, as much 2.0% per year. That’s not “background” noise. It’s rock music blaring in your ears.

For an economy addicted to cheap money, this is like going cold turkey.

The decision by the Fed to not purchase new bonds will therefore be just as detrimental to the growth of the economy as raising interest rates.

Meanwhile, retail sales, real incomes, auto sales and even labor force participation are all declining or showing weakness. Every important economic indicator shows that the U.S. economy can’t generate the growth the Fed would like.

When you add in QT, we may very well be in a recession very soon.

Then the Fed will have to cut rates yet again. Then it’s back to QE. You could call that QE4 or QE1 part 2. Regardless, years of massive intervention has essentially trapped the Fed in a state of perpetual manipulation. More will follow.

But what about the stock market?

Despite February’s correction, the stock market remains overpriced for the combination of higher rates and slower growth.

The one thing to know about bubbles is they last longer than you think and they pop when you least expect it. Under such conditions, it’s usually when the last guy throws in the towel that the bubble pops. February’s correction took some air out of the bubble, but the dynamic still applies. It just extended the timeline a bit.

But is this thing ready to pop for real?

Absolutely, and QT could be just the thing to do it. I would say the market is fundamentally set up for a fall. When you throw in the fact that the Fed continues to have no idea what they’re doing and has taken a dangerous course, I expect a very severe stock market correction coming sooner than later.

The Fed is going to find out the hard way that raising rates and reducing the balance sheet will slow the economy. I believe that will ultimately lead to another flip-flop and the Fed will once again loosen.

When the market sees that the Fed has decided to flip from tightening to an easing policy, look for increased volatility — and more corrections.

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The United Nations Human Rights Council (HRC) just issued a stunning rebuke to Israel, voting through a resolution calling on the council to “urgently dispatch an independent, international commission of inquiry… to investigate all alleged violations and abuses… in the context of the military assaults on large scale civilian protests that began on 30 March 2018,” while the UN human rights chief slammed Israel’s “wholly disproportionate response.”

The UN’s top human rights body passed the resolution with 29 votes in favor, two opposed and 14 abstentions. 

The two HRC members in opposition were the United States and Australia (the UK abstained), with Israel condemning the vote, which was proposed by a group of countries including Pakistan. Both the US and Israel criticized the resolution’s language for failing to mention Hamas — the militant group ruling over Gaza — which Israel blames for the scores of civilians killed during the ‘Great March of Return’ protests.

Image via Business Recorder

On Monday 60 Palestinians were gunned down by Israeli live fire as protesters approached the border fence area. The following day U.N. leadership issued a scathing critique of Israel’s actions, with the U.N.’s human rights commissioner identifying women, children, journalists, first responders and bystanders as among the dead. “We condemn the appalling, deadly violence in Gaza yesterday,” said Rupert Colville, spokesperson for the U.N. High Commissioner for Human Rights.

Though the U.N. commissioner acknowledged the Palestinians’ attempt to break down and damage the fence that separates Gaza and Israel, he added that this did “not amount to a threat to life or serious injury and are not sufficient grounds for the use of live ammunition.”

And a day before Friday’s HRC resolution vote Defense Minister Avigdor Liberman urged Israel to withdraw its membership in the United Nations Human Rights Council altogether, arguing that “Israel is under a double attack,” and further that, “A terror attack from Gaza and an attack of hypocrisy headed by the United Nations Human Rights Council.”

By a strong majority vote of 29-2, #UNHRC votes to create #COI into #Gaza bloodshed. US & Australia, oppose, #EU divided. Shame on those who spoke of the need for an investigation … but then failed to support it. pic.twitter.com/rVCqocLay3

— John Fisher (@JohnFisher_hrw) May 18, 2018

Throughout the mass Palestinian protest along the Gaza-Israel border, which began on March 30th, Israel has maintained its stance that Hamas is purposefully provoking the shootings, even to the point of sending children and disabled to the fence near Israeli security positions, and hiding firearms among the crowd. However, the U.N. and a number of nations that have condemned the killings — some like South Africa even recalling their ambassador — aren’t buying this as a valid explanation for the appalling death toll.

But both the Israel and the United States appear to be shrugging off the stinging rebuke — a formal resolution calling for Israel’s investigation which is somewhat rare for the council —  and both countries have repeatedly accused the 47-member council of anti-Israel bias. Israeli ambassador Aviva Raz Schechter was quick to question the legitimacy of the body, calling the newly passed human rights inquiry “politically motivated and [it] won’t improve the situation on the ground by even one iota.”

The Israeli ambassador further said blamed falls exclusively on Hamas’ shoulders: “The loss of life could have been avoided had Hamas refrained from sending terrorists to attack Israel under the cover of the riots, while exploiting its own civilian population as human shields,” she said, and added further, “It is Israel, certainly not Hamas, which makes a real effort to minimize casualties among Palestinian civilians.” Schechter concluded, “It is regrettable that so many member states allow themselves to be misled by the false narrative of so-called peaceful protests.”

In addition to the 60 killed on Monday, Gaza’s Ministry of Health stated that 1,703 Palestinians were wounded by live fire during Monday’s events, which occurred the same day as the opening ceremony for the new US embassy in Jerusalem was underway, and which corresponded further with both Israel’s ‘Jerusalem Day’ festivities, and the eve of Palestinian ‘Nakba’ day. 

Prior to this week’s events, the UN Office for the Coordination of Humanitarian Affairs reported that by the end of April over 40 Palestinians had been killed and 5,511 were wounded after the first full month’s protest. 

Despite global outrage and demands for justice, the U.N. inquiry will be slow going and is unlikely to satisfy any party to the conflict. What the resolution describes as an “independent, international commission of inquiry” mandated by the council will not produce its final report to be placed before the Human Rights Council until next March — nearly a full year away. 

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Authored by Lance Roberts via RealInvestmentAdvice.com,

An interesting email hit my desk this morning:

“The stock market goes up 80% of the time, so why worry about the declines?”

Like a “bull” – rising markets tend to be steady, strong and durable. Conversely, “bear” markets are fast “mauling”events that leave you deeply wounded at best and dead at worst.

Yes, the majority of the time the markets are “bullish.” It’s the “math” that ultimately gets you during a “bear” market.

The real devastation caused by “bear market” declines are generally misunderstood because they tend to be related in terms of percentages. For example:

“Over the last 36-months, the market rose by 100%, but has recently dropped by 50%.”

See, nothing to worry as an investor would still be ahead by 50%, right?

Nope. A 50% decline wipes out 100% of the previous gain. This is why looking at things in terms of percentages is so misleading. A better way to examine bull and bear markets is in terms of points gained or lost.

Notice that in many cases going back to 1900, a large chunk of the previous gains were wiped out by the subsequent decline. (A function of valuations and mean reversions.)

Recently Upfina posted a great chart on “Bear Market Repo’s” which illustrates this point very well. To wit:

“Many confuse bear markets with being black swan events that cannot be predicted, however, this is a faulty approach to investing. The economy, market, and nature itself move in cycles. Neither a bear market nor a bull market last forever and are actually the result of one another. That is to say, a bear market is the author of a bull market and a bull market is an author of a bear market. Low valuations lead to increased demand, and high valuations lead to less demand.”

The only point I am attempting to make today is don’t “confuse the math.” A 30-50% decline from any level in the market is destructive not only to your current principal value both also your financial goals particularly as it relates to you investing time horizon.

Time is the only thing we can’t get back.

As Upfina concludes:

“The critical discipline to protect your portfolio through bull and bear markets is hedging. Hedging is when you start a position to avoid the risk of another position. The keyword when it comes to investing with the goal of minimizing risk is correlation. You want to buy assets with a low correlation to diversify against bear markets.

A few investments which typically do well in bear markets are cash, long-term U.S. treasuries, the volatility index, gold, shorting the stock market, shorting high yield bonds, and buying safe sectors such as telecommunications and utilities.”

With everyone seemingly bearish on bonds and the dollar, and bullish on equities and oil, the contrarian in me thinks “hedging” against the “crowd” might be something worth considering.

Such “hedges” could well be the ticket to minimizing the next “bear market repo.”

Just something to think about as you catch up on your weekend reading list.

Economy & Fed

• Legalizing Gambling Won’t Fix Budgets by Steven Malanga via City Journal
• Will The Fed Know When To Quit? by Caroline Baum via MarketWatch
• 3-Reasons To Expect A Recession Soon by Pierre Lemieux via Econlog
• Fed About To Look At Boosting Economy In A Radical Way by Pedro Da Costa via BI
• When Companies Supersize, Paychecks Shrink by Bryce Covert via NYT
• Is “Goldilocks” Back? by Brian Maher via The Daily Reckoning
• Wealth Causes Homelessness? by Alex Berezow via American Council On Health & Science
• Managing Risks Of Rising Dollar by Mohamed El-Erian via Project Syndicate
• Economic Numbers Less Than Meets The Eye by James Rickards via The Daily Reckoning
• Is 1.8% Economic Growth All We Should Expect by Alan Reynolds via IBD

Markets

• What Is Magic Number For Yields? by Tyler Durden via ZeroHedge
• Fed Tightening Cycles Coincide With Crashes by Mike “Mish” Shedlock via MishTalk.com
• Morgan Stanley Knows When Bull Ends by Matt Egan via CNN Money
• Spoiled Rotten: Too Many Funds & ETF’s? by Simon Constable via Forbes
• Dan Niles: Stocks Could Lose 50% Next Year by Stephanie Landsman via CNBC
• Stocks Down 20% By Time Yield Hits 4% by Brian Sozzi via TheStreet.com
• Why The Market Has Its Swagger Back by Mark DeCambre via MarketWatch
• Prepare Your Portfolio For Recession by Edward Harrison via Credit Writedowns
• Making Money In Stocks Is Going To Get Difficult by Ryan Vlastelica via MarketWatch
• No, The Market Isn’t Overvalued by Ed Yardeni via Yardeni Research
• Trump Wants To Roll Back Regulations Meant To Prevent A Crisis by Joe Ciolli via BI
• A Record Number Of People Think Home Prices Will Rise by Akin Oyedele via BI

Most Read On RIA

• Retiree’s Face A Pension Crisis Of Their Own by Lance Roberts
• Don’t Be A Victim Of Recency Bias by John Coumarionos
• The Inconsistencies Lurking In ETF’s by Michael Lebowitz
• No Strategy Works All The Time, 10-Rules That Do by Lance Roberts
• The Greatest Financial Mismatches In History by Richard Rosso
• Kass: The Madness Of Investing Crowds by Doug Kass

Research / Interesting Reads

• Stock Buybacks Soar To Record by Wolf Richter via Wolf Street
• Subprime Chaos & It’s Worse Than 2008 by Adem Tumerkan via Palisade Research
• Stupidity And Greed Will Keep Financial Journalist Employed by Steve Sedgwick via CNBC
• Want To Make Millennials Mad, Talk About Retirement Saving by Alessandra Malito via MarketWatch
• Is The U.S. Becoming Japan 2.0 by Upfina
• U.S. Health Care Is Finally Fixed by Charles Hugh Smith of Two Minds
• Debt Service Is A Function Of Rates & Amount Owed by Danielle Park via JugglingDynamite.com
• Subscriptions For The 1% by Danny Crichton via Tech Crunch
• GDP Linked Bonds? by Robert Shiller via NYT
• The Great Recession vs. The Great Depression by Alex Pollock via Real Clear Markets

“Love risk when making money. Hate risk when investing money.” ― Robert Rolih

via RSS https://ift.tt/2KC1oV8 Tyler Durden

Trump’s top economic advisor, Larry Kudlow (it’s still a shock) did not get the memo that Beijing vocally denied last night’s “fake news” report that it was ready to slash the US trade deficit with China, and speaking to reporters at the White House, the former CNBC commentator said China offered to reduce its trade surplus with the U.S. by “at least $200 billion” in talks to head off a possible trade war, according to Bloomberg.

As a reminder, this is patently false as China’s foreign ministry spokesman Lu Kang politely told a news briefing this morning, flatly stating that “this rumor is not true. This I can confirm to you” adding “the question is about some US officials who said China will cut the deficit. As I understand, the relevant consultations are ongoing and they are constructive.”

Commentary posted bu Xinhua News Agency and People’s Daily overseas edition was less polite and said that the offer to cut China’s trade surplus with the U.S. is “nonexistent” and that reports that China accepted the U.S. demand to narrow the trade gap are “purely a misreading.” also known as fake news.

The article said that China will “never negotiate under the conditions set by the U.S.” and added that “two sides made progress in areas such as the U.S. allowing more exports of technology products including semiconductors, as well as lifting restrictions on energy exports” but stressed that “China won’t make unilateral concessions.”

However, none of these facts bothered Larry, who boldly continued making up stuff: “The number’s a good number,” Kudlow said. “I think just as important, they have to lower their tariff rates, they have to lower their non-tariff barriers. We have to have a verifiable process whereby the technology transfers and the theft of intellectual property stops.”

Then, Larry – who may or may not have been under the influence, once again confirmed the trade surplus offer supposedly made by China – which China explicitly denied – but declined to detail it. “They’re showing us some substance, and that’s a sign of respect. It’s a constructive approach.”

Actually, they said exactly the opposite, but Larry went on:

“China’s come to trade; they are meeting many of our demands,” he said, continuing this fantastically bizarre nonsense.

The one thing that Larry said that was true, was the following: “There’s no deal yet to be sure – it’s probably going to take awhile. It’s a process. But they’re coming to play”, and added hopefully “I believe they want to make a deal.”

Instead of grappling with the futile task of who is the bigger source of “fake news”, China or the Trump administration, we are more curious how many dry martinis Larry had for lunch.

via RSS https://ift.tt/2wRLofP Tyler Durden

Quick guide for all the peasants watching the Royal Wedding tomorrow…

How to spot the monarchy (fwd to 1:35)…

Italy and Emerging Market dominated the market headlines this week.

Italian stocks, bonds, banks, and credit all cratered this week after Five-Star and The League agreed a notably anti-establishment plan…

 

Emerging Market stocks fell modestly on the week (the 3rd drop in 4 weeks) but EM FX and EM Debt collapsed…

 

Small Caps were the week’s best performer (all squeezed), Trannies managed gains, but The Dow, S&P, and Nasdaq all ended red

 

The Dow tumbled to perfectly unchanged today at the close with Small Caps the only winners…

 

In the US, Small Caps managed a 3rd record high day in a row… “Most Shorted” Stocks saw a massive short squeeze into the close last night…

 

It appears Bank stocks don’t like higher yields or steeper curves…

 

FANG stocks stumbled… worst week in two months (FANG also failed to take out the Fed highs before rolling over)

 

And Tesla tumbled…

 

VIX was up on the week but with some notable volatility intraweek…

 

As Specs swung back to anet short vol position for the first time since the end of Jan…

 

With Stocks and Bonds down this week, it was the worst aggregate loss in two months…

 

Treasury yields ripped lower today, ruining all the “record” move headlines for the week (biggest yield jump in 3 weeks doesn’t sound so impressive) –

was this week’s melt-up really all about rate-locks on massive IG issuance? Over $30 billion – Monday $17.38b, Tuesday $6.725b. Wednesday $800m, Thursday $5.200b, Friday $750m

30Y Yields stalled at the 3.20% level once again…

 

With 30Y down over 6bps from yesterday’s highs…

 

 

The yield curve steepened the most in over 3 months this week with 2s30s up 10bps… (though we do note that 2s30s rolled over after tagging its pre-FOMC Minutes level…

 

And while Russell 2000 outperformed notably, Small Cap banks hugely underperformed, catching down to the flattening yield curve…

 

Emerging Market Debt tumbled for the 7th week in a row – back to Pre-Trump levels…

 

The Dollar rose for the 5th week in a row – the longest win streak since 2015 – and the biggest weekly gain since Dec 2016…

BBDXY

 

We do note that The Dollar remains below pre-Trump-election levels still…

 

Emerging market currencies bloodbath’d – not one Emerging Market saw its currency strengthen this week with Argentine Peso, South African Rand, and Turkish Lira suffering the most…

 

EM FX is down 7 weeks in a row and this week was the worst week since Nov 11th 2016 (Trump election)…

 

And while Ethereum ended the week unchanged, Bitcoin Cash crashed 15%…

 

No wonder really, since Meghan Markle appears to be bigger than bitcoin now…

Bitcoin vs Royal Wedding pic.twitter.com/ZcujJ1ADL1

— zerohedge (@zerohedge) May 18, 2018

 

In commodity land, dollar strength weighed heavily on PMs and copper but crude managed gains…

 

Finally, is The Fed about to make a big policy mistake?…

 

 

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Whoever leaked Michael Cohen’s bank information to lawyer Michael Avenatti – something that would’ve required accessing a federal database – their identity likely won’t be a secret for long.

That’s because anyone who accesses the government’s Financial Crimes Enforcement Network will leave a digital trail that will likely lead law enforcement to discover the identity of whoever leaked the information to Avenatti, according to Bloomberg.

The fact that the information was released at all does offer several clues. According to information released in an interview with Ronan Farrow, and the fact that experienced users would likely be aware of the audit trail left by a search of Cohen’s records, it’s likely that whoever it is likely doesn’t regularly use the database.

The individual provided an explanation for the leak in an interview with Ronan Farrow of the New Yorker, who referred to the person as an official and not as a man or woman. The official says that he grew alarmed that he was unable to find two earlier reports made by First Republic Bank about transactions in Cohen’s consulting account and that he feared information was being withheld from law enforcement officials.

Explaining his motivation, he said he knew that leaking the suspicious activity report violated bank secrecy laws but was willing to take the risk out of concern that similar reports involving Cohen had mysteriously disappeared.

According to Bloomberg, more than 10,000 agents, analysts and investigators from more than 350 federal, state and local agencies across the US can access the database, which logs approximately 30,000 searches a day. 

In another sign that Avenatti’s source may not have been an expert, Avenatti’s trove of records included transactions involving other Michael Cohens who weren’t related to Trump’s personal attorney. Whoever it is could face consequences, including legal repercussions.

“Government employees and law enforcement personnel with access to the system are not authorized to publicly disclose SARs,” FinCEN spokesman Steve Hudak said.

There’s perhaps the best reason to believe that whoever leaked Cohen’s records was unfamiliar with the system is that, while they expressed “concern” about the attorney’s vanishing financial reports, they were apparently unaware of several legitimate reasons why these reports wouldn’t appear in the database. For example, they could’ve been restricted because they had become part of an investigation.

If that were the case, investigators wouldn’t want to risk a leak allowing others to access sensitive reports.

“Under longstanding procedures, FinCEN will limit access to certain SARs when requested by law enforcement authorities in connection with an ongoing investigation,” Hudak said.

Of course, as Bloomberg points out, prosecutions involving the disclosures of suspicious activity reports are rare – mainly because leaks of FinCen data are rare. But some people familiar with FinCen’s thinking say whoever leaked the data will almost certainly be charged with a crime.

“The leaker is taking an extraordinary personal risk for greater transparency,” said Duncan Levin, a former federal and state prosecutor who dealt extensively with the FinCEN database.

“Whoever did this has added immeasurably to the public conversation and likely knows full well how much legal risk he or she is now facing.”

Indeed, convictions aren’t unheard of. A former official with Chase Bank in California was convicted in 2011 of wrongfully disclosing a suspicious activity report of a customer suspected of committing mortgage fraud. Frank Mendoza, the bank official who was convicted for the disclosure, used this information to try and shake down a customer whom he suspected was guilty of bank fraud.

In late 2008, Mendoza’s bank filed a suspicious activity report. In 2009, Mendoza approached the borrower, told him about the report that Mendoza’s bank had filed, and said a federal investigation into his business was likely. Alternatively, Mendoza said the customer could pay him $25,000 to help make the problem disappear. 

The borrower instead went to the FBI, which allowed him to play along. Mendoza was then arrested, charged and, following a one-week trial, convicted on three counts of bank bribery and one count of unlawfully disclosing a suspicious activity report. The deliberations lasted 30 minutes.

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