Charlottesville car attack driver James Fields, described both as a "gentle giant" by some and "hard-core pro-Hitler" by others who know him, was ordered held without bond Monday as he faces second degree murder and other charges for ramming the grey car into the crowd, killing a 32-year-old woman and injuring 19 others.

As NYDailyNews.com reports, Fields appeared via video in Charlottesville court wearing a black and white collared jumpsuit. No cameras were allowed to film or photograph the proceeding. Mr. Fields was charged with one count of second-degree murder, three counts of malicious wounding and one count of hit and run, according to local police.  His only words were “yes sir” and “no sir” to Judge Robert Downer’s questions.

The 20 year old man was remembered as a quiet student by a school principal and a fellow classmate, but a former teacher said he also espoused white-supremacist views.

“From what I remember, he was a quiet and reserved student,” Michael Wilson, principal at Randall K. Cooper High School in Union, Ky. said in an email. “Our thoughts and prayers are with those in Charlottesville, Virginia. Hatred and violence is never a viable solution to any problem. As educators, we are always using teachable moments and providing guidance to students to create college, career and life ready students to make good and sound choices.”

The Wall Street Journal reports that Mr. Fields joined the Army shortly after high school and reported to basic training in August 2015.

“He was, however, released from active duty due to a failure to meet training standards in December of 2015,” Lt. Col. Jennifer Johnson, an Army spokeswoman, said in an email. She didn’t elaborate on how he failed to meet standards.

 

“As a result he was never awarded a military occupational skill nor was he assigned to a unit outside of basic training,” Lt. Col. Johnson said.

Mr. Fields’s father died in a car accident while Ms. Bloom was pregnant, according to David Young, a former neighbor who said he knew Ms. Bloom and her son in Florence, Ky., when Mr. Fields was a young boy.

Fields' mother, Samantha Bloom, said that her son had told her he was going to a rally, which she thought “had something to do with Trump.”

A high school teacher said Fields was fascinated with Nazism, idolized Adolf Hitler and had been singled out by school officials in the 9th grade for his “deeply held, radical” convictions on race.

As a freshman, the student turned in an assignment to another teacher that expressed views that “the Nazis were good, their policies were good, Adolf Hitler was a great leader,” Mr. Weimer recalled in an interview. “In a nutshell, the white race is superior—that was the general thrust,” he said.

 

During Mr. Fields’s junior and senior years, Mr. Weimer taught him two classes, world civilization and a course on modern U.S. wars. Mr. Fields chose to study the Waffen SS—the military wing of the Nazi Party—for an in-depth research paper, Mr. Weimer said. While Mr. Fields did well on the assignment, it was “hard-core pro-German,” his former teacher said.

 

Mr. Weimer said Mr. Fields would often steer class discussions on topics that had nothing to do with Nazism to “pro-Hitler stuff, pro-white supremacy stuff.”

One high-school classmate wrote in a blog post Sunday that he remembered Mr. Fields as a “gentle giant” who was kind and shy when spoken to.

Mr. Weimer said he had a good rapport with Mr. Fields, who he said tried to marshal facts in support of his arguments and wasn’t combative toward him or Mr. Fields’s classmates.

“I used all these tricks to really ram home how evil and wrong the Nazis were, how we live in the greatest country,” Mr. Weimer said.

 

“I definitely feel like I failed.”

via http://ift.tt/2vxvxQK Tyler Durden

In light of today’s euphoric market reaction, which has seen the VIX plunge by over 3 vols, or 20% lower, to just over 12 and sent both the Nasdaq and S&P higher by 1% on relief that there were no mushroom clouds of the weekend, the jury is out whether last week’s sharp risk off, short-vol mauling will persist or be just another BTFD opportunity. But while last week’s tension may already be forgotten, some disturbing trends persist. As SocGen’s Andrew Lapthorne writes, while the S&P trades near all time highs, the smaller cap Russell 2000 dropped a much sharper 2.7%, leaving this index up just 1.3% for the year and down 5% over the last couple of weeks on what we discussed last week was a growing concern for the US economy and companies who do not have exposure to international revenue.

Furthermore, High Yield Credit also fell sharply. Along with the Russell 2000, HYG has also unwound most of this year’s positive performance in a matter of weeks. As Lapthorne writes, “in our view, high yield credit and the Russell 2000 are all the same trade with different wrappers. Their continued success is highly dependent on asset volatility remaining as subdued and debt markets as generous as they have been, both of which we think is highly unlikely.”

But the most interesting observation made by the SocGen strategist in his overnight report is that the sudden aversion to balance sheet risk is not restricted to US small caps or HYG, “indeed within the S&P 500 ex financials such a strategy remains the most profitable of our US investment styles this year.”

“What might be contributing to this performance trend”, Lapthorne asks rhetorically? Here is the most likely explanation: “share buybacks have slumped by over 20% YoY.” Ominously, this is the sharpest drop in corporate buybacks since the financial crisis effectively shut down bond markets in 2008, as a result of the market no longer rewarding companies that lever up just to repurchase their own stock. 

SocGen’s conclusion: “Perhaps over-leveraged US companies have finally reached a limit on being able to borrow simply to support their own shares.” If so, this is a big problem because as Credit Suisse showed recently, corporate buybacks have been the only source of equity injection since the crisis.

If this phase is now officially over, it is unclear what – if any – new source of capital inflows, central banks notwithstanding, will replace corporations as the main buyers of US equities going forward.

via http://ift.tt/2uHh0za Tyler Durden

via http://ift.tt/2w3KT1a williambanzai7

Canadian lumber stocks are diving this morning following a report from BMO analyst Mark Wilde who writes that “prospects for a near-term settlement of the U.S./Canadian lumber dispute have faded“, prompting him to downgrade the main players in the space. The report has sent the stocks of West Frasier Timber (WFT), Canfor (CFP) and Interfor (IFP) as much as 6%, 4.6% and 6.2% lower, respectively.

What prompted the bold call? As the BMO analyst notes, “our sources report little substantive negotiation between Canadian and U.S. interests and little real movement in positions. Moreover, there appears to be internal divisions on both sides of the border.“

These include differences between U.S. Commerce Secretary, Wilbur Ross, and U.S. Trade Representative, Robert Lighthizer. Ross is reportedly more inclined to take a deal, while the USTR is apparently taking a firmer line in negotiations. There also appear to be differences amongst members of the U.S. Lumber Coalition.

 

On the Canadian side, the divisions are mainly between the East and the West. Large, low-cost Western Canadian producers are more inclined to take a harder approach, pursuing litigation and paying countervailing (CVD)/anti-dumping (ADD) duties in the interim.

So with no near-term resolution to the ongoing lumber dispute between the two NAFTA neighbors, the alternative is a steadily progressing trade war. As a result, as Wilde writes, “we anticipate a period of  countervailing and anti-dumping duties on Canadian lumber imports as well as continued litigation around those duties.” As regards the 3 abovementioned stocks, the analyst notes that at current stock price levels, “we think the big risk is downside disappointments. Thus, we are downgrading West Fraser, Canfor, and Interfor to Market Perform. We are also downgrading Weyerhaeuser and Rayonier ratings to Market Perform. The key issue in timber is continued soft pricing on southern sawlogs. We are not making any changes to our price targets.“

Finally, here are the summary highlights from the BMO report which, if accurate, suggest that even as Trump prepares to launch trade war with China, the ongoing “lumber war” with Canada is set to get worse before it gets better. 

• Comments by high-ranking Canadian government officials and some U.S. corporate executives have fed hopes that a negotiated settlement is close at hand. Our sources report little substantive negotiation between Canadian and U.S. interests and little real movement in positions. Moreover, internal divisions exist on both sides of the border. On the U.S. side, there appear to be differences between U.S. Commerce Secretary, Wilbur Ross, and U.S. Trade Representative, Robert Lighthizer, as well as amongst members of the U.S. Lumber Coalition. On the Canadian side, the divisions are between Eastern and Western Canada.
• Continued uncertainty on the trade issue isn’t good for lumber stocks. Moreover, the combination of continued countervailing and anti-dumping duties during 2018 and a strengthening Canadian dollar are both apt to put pressure on FY18 earnings estimates. In our view, it’s hard to see the stocks pushing much higher in the near term in the face of that headwind. For that reason, we are downgrading West Fraser, Canfor, and Interfor to Market Perform from Outperform.
• To be clear, we aren’t arguing the cycle is over for lumber producers. The “medium term” looks much more constructive. Over the next three-five years, we think the combination of reduced lumber supplies from Canada, improving lumber demand, and continued low southern sawlog prices could produce a period of abnormally rich margins for southern sawmills. We may be entering something of a Golden Age for southern sawmills. The three largest Canadian lumber producers have been increasing the proportion of their production in the southern U.S. and should benefit from the sawlog cost/lumber price arbitrage.
• The timeline on recovery in southern sawlog prices remains unclear. A decade of subpar demand and improving forest productivity has created significant inventory build in southern plantation forests. That “overhang” has southern sawlog prices at ~60% of 2005 levels – in nominal terms – and threatens to dampen/delay a recovery in sawtimber pricing across many parts of the south. Indeed, after a modest price recovery, southern sawlog prices have declined for the past seven quarters. In private conversations, we’re encountering an increasing sense of caution – and even, skepticism – about the recovery among timber investment professionals. As such, we are downgrading WY and RYN to Market Perform from Outperform.

via http://ift.tt/2hYoADC Tyler Durden

While the moves in equity (VIX) and credit (CDX, ITRX) protection costs last week shocked many out of their recent coma of complacency, former fund manager Richard Breslow warns it was the lack of reaction across markets broadly that investors should be more worried about.

Via Bloomberg,

We really need to stop using the expressions “risk-on” and “risk-off.” Or if that’s too much to ask, how about a short holiday while we collect our wits. We grossly over use them to the point of rendering them meaningless and trivial. And reliance on these crutches is just a way of avoiding thinking about what might actually be going on. The markets’ perception and appetite for risk isn’t something that can be measured on an hour by hour basis. A few random basis points isn’t a measure of anything.

And the reality that markets remain laughably correlated on a short-term basis means they are all just reflecting the same factor signal not giving independent confirmation of where we might be headed.

The S&P 500 had its highest close of all-time last week before crashing to levels not seen in over three weeks. That’s not risk-off. It wasn’t wealth destruction on a mass scale. If you think that was a disaster, you may be in the wrong line of work. Or at least, you may want to give some thought about what you would do when there is a proper setback. Maybe call that “risk-offest?”

 

It’s a mistake to analyze serious geopolitical risks by jumping up and down about minuscule moves in emerging market currencies or credit spreads that have little value to begin with. People were actually comparing the size of the South Korean economy to that of Iraq to try to convince us that this war would be a really bad one. No comment.

 

The yen has been rallying since the Fed went dovish at the last Congressional testimony by Chair Yellen. The first 400 pips versus the dollar were the good news on rate hikes that propelled the last leg up in equities and helped trash Treasury yields. The cross didn’t fall on last week’s news from 114.50, it did so from 110.50. And that was with the help of yet another CPI miss.

 

It would be an enormous mistake not to take the North Korean problem very seriously or not be concerned. It’s also misguided to think the markets are addressing the issue by widening Italian spreads to Germany by a few basis points from YTD tights. That’s called knee-jerk reaction, not prudence.

 

If you want to be concerned and confused by how traders responded to this news do so based on how little anything moved, not by how much.

 

During that entire “sell-off” asset prices were quite decidedly showing a firm risk-on bias.

And one glance at overnight futures (and VIX) suggests it’s BTFAONW dip deja vu all over again…

via http://ift.tt/2uUUZw1 Tyler Durden

Authored by Jeff Deist via The Mises Institute,

via http://ift.tt/2uGU7vW Tyler Durden

Picking up on something we first noted over a month ago, and following last week’s VIX fireworks, this morning Goldman’s Ian Wright looks at the rapid changes in the volatility landscape – beyond just last Thursday’s near historic surge in the VIX which shot up from single digits to over 17 in 48 hours – and points out something that has never been observed before: the ratio of VVIX to VIX, or the vol of vol relative to implied volatility as per the VIX, just hit the highest level on record, while the VVIX itself spiked to the highest level since the August 2015 ETFlash crash.

The also confirmed something else we observed in mid-July when we showed that the price of VIX convexity had hit an all time high, when we said that the market has never trusted the VIX as little as it did then.

In any case, the surge in the VVIX/VIX ratio prompted Wright to, well, write that the “low vol regime is under threat” from recent events in North Korea.

The Goldman strategist observes that, as a result of tensions involving the US and North Korea, “markets became concerned about potential escalation, which could negatively affect what has been a broadly good macro environment.”  As part of this broad repricing of vol, the VIX spiked roughly 40% on Thursday, and the VVIX, measuring the vol of vol, jumped to its highest level since August 2015.

Is this the turning point in the low-vol regime? Here Wright points to some of his previous observations, when he wrote that “vol spikes often occur after unpredictable major geopolitical events such as wars and terror attacks, or adverse economic or financial shocks.” However, whether a higher volatility regime persists generally depends on recession risks and a slowing business cycle, and perhaps this time also uncertainty over central bank policies (and inflation). “As a result, the key question is whether the current spike spills into the macro or not.“

For now, Goldman believes that last week’s sell-off is a “risk premium move, rather than a move based on growth expectations” so no need to panic just yet. And yet, Goldman admits the market is not nearly as sanguine.

In our view, it is likely that the low volatility regime persists until the growth/rates mix turns more negative. But the ratio of the VVIX to VIX reached its highest level in history last week, suggesting that, although vol has remained relatively anchored, markets are already significantly pricing the more latent risk that the volatility regime shifts.

And while Goldman itself does not quite agree with the market’s take just yet, stating that “we believe it is too early to call the end of the current low vol regime” it does remind clients that “we previously recommended ‘hedges’ such as 97/93 put spreads and gold strangles to protect from sudden vol spikes. We are Neutral equity over 3m and continue to believe hedges like those above make sense.”

via http://ift.tt/2uCb9zi Tyler Durden

 The following article by David Haggith was published on The Great Recession Blog:

August is a sultry month for stocks as markets thin out during the dog days of summer. Everyone leaves investing for a break from the heat. Statistically, August is the worst month for overall stock performance, while September delivers more of whatever August sends its way or brings its own dark surprises. After that, October loves a surprise and is the worst for having the most major crashes.

As markets now slide into their toughest time of the year, they also also face a major war of words that may quickly become more than words. The days of market calm appear now to have ended. $500 billion worth of supposed US market “value” just cascaded into oblivion last week. (Over a trillion worldwide. Of course, it could reappear tomorrow.)

 

Markets crawling under the clouds of war

 

One place where August is living up to its reputation is in volatility. August is usually the most volatile month of the year.

The US stock market’s volatility index (VIX) became eerily placid for many weeks this summer, but this past week the VIX rose 70%. Of course 70% from a position so small and calm is not a lot, but it’s an awakening. And there appear to be many people and institutions now awakening.

PIMCO, as one big example, began loading up on puts to hedge against a market plunge while building up a strong cash position, suspecting the highly unusual calm is the kind that comes before a big storm. PIMCO’s chief investment officer said that Pimco “has been taking profits [a nice way to say selling off its stock holdings] in high-valued corporate credits and built cash balances for when better opportunities arise.” That’s also a cautious way of saying,

 

“We’re getting liquidity higher,” Ivascyn told Reuters in a phone interview. “If we see actual military altercation, markets can go a lot lower. And at the same time, volatility has been so low for so long that it doesn’t take much for markets to get worked up.”

The PIMCO CIO said that although the market has yet to panic, “you will certainly see panic if all of this turns into a sustained military encounter.” (Zero Hedge)

 

So, not everyone in high places sees the market’s languor as good. Now, under the clouds of war with North Korea, the calm is giving way.

 

Trade war with China on horizon

 

Not all wars that can damage an economy or a stock market involve weapons of mass destruction. While Trump and Kim Jong-Un are going nuclear with their rhetoric as well as their actual war footing (“Military solutions are now firmly in place … our nuclear arsenal … now far stronger and more powerful than ever before,” Trump tweeted), Trump has also declared trade war on China, saying such a war will be launched in a week.

 

As if there weren’t enough geopolitical and social stress points in the world to fill a lifetime of “sleepy, vacationy” Augusts, late on Friday night President Trump spoke to Chinese President Xi Jinping and told him that he’s preparing to order an investigation into Chinese trade practices next week, according to NBC. Politico confirms that Trump is ready to launch a new trade crackdown on China next week…. It is also an escalation which most analysts agree will launch a trade war between Washington and Beijing…. Should Trump follow through, the move will lay the groundwork for Trump to impose tariffs against Chinese imports, which will mark a significant escalation in his efforts to reshape the trade relationship between the world’s two largest economies. In other words, even if there is now conventional war announced with either North Korea or Venezuela, Trump’s next step is to launch a trade war against China. (Zero Hedge)

 

 

The near inevitability of both wars

 

Both wars may be next to inevitable and were certainly not unforeseeable (black swans) when I said the economy would crash this summer. They are those dark clouds among a whole horizon of storm clouds that I’ve been pointing out — the clouds that I’ve been saying have been growing closer to us and would be here by summer, making a summer economic storm almost inevitable, too.

The US government under Obama refused to take military actions against North Korea while it was becoming a nuclear power, so now North Korea is a nuclear power. Surprise! Not really. Who couldn’t see this coming for more than a decade? The now global known reality forces the US to a worse conundrum — wage a war with an unstable nuclear nation run by a lunatic or let an unstable nuclear power with an insane leader achieve a great deal more nuclear capability. (Some might wonder which nation I’m speaking of.) That’s what inaction on tough problems for too long brings you — worse problems. The US kicked the can down the road when there was no real threat of nuclear retaliation; now there is a clear and credible threat of nuclear retaliation.

The same is true with Chinese trade. The US government under Obama turned a blind eye to Chinese trade practices that fly in the face of truly “fair trade,” again kicking the can down the road for years, rather than confronting the problem head on. So, now the US faces the risk of starting a trade war at a time when it may be starting a military war and at a time when it needs China to remain neutral with respect to North Korea if there is a war or to be an ally in getting North Korea to change (an unlikely prospect). Congress and Obama kicked the can down the road with respect to needed economic reforms, Korean nuclear armament, and unfair Chinese trade practices, always preferring to “talk about it,” and each problem has only become far harder to solve.

That, of course, is what I claimed would happen when I started writing The Great Recession Blog: all of the government’s weak-kneed, temporary solutions would push the nation’s economic problems ahead, making them much harder to face in the future. That future is here.

 

President Trump, Secretary of State Tillerson and Defense Secretary Mattis have all made it clear that a nuclear-armed North Korea with ICBMs that can hit the United States will not be allowed.

 

If North Korea persists, this means war with the U.S. There’s only one problem: North Korea thinks we’re bluffing.

 

North Korea believes that the U.S. is bluffing based in part on the prior failures of the U.S. to back up “red line” declarations in Syria over its alleged use of chemical weapons. Their belief is also based on the horrendous damage that would be inflicted on South Korea.

 

China also believes the U.S. is bluffing. (–Jim Rickards in The Daily Reckoning)

 

They probably do … after years of just talking about it or applying a smattering of half-hearted sanctions that were largely ignored by China.

 

This is how wars begin: not because anyone wants a war, but because two sides misread each other’s intentions and stumble into one. Make no mistake — Trump is not bluffing. He’s deadly serious about ending the threat from North Korea. And he has support within the national security community.

 

Trump probably is not bluffing when he threatens “fire and fury like the world has never seen.” If he is bluffing and tries to back away, the military industrial complex will tie a knot in his tail to keep him moving forward; but I think they have already fully won him over.

Said Nikki Haley, the US Ambassador to the UN, “The time for talk is over.”

Flatly stated.

North Korea’s response to all this last week was to telegraph to the US its intentions to shoot nuclear-capable missiles over the heads of people in Guam. If it does so, is there anyone who believes the US military (or president) will wait to see if the missiles are armed or if they change course downward once they are over guam?

As a number of writers noted last week, this is Trump’s Cuban Missile Crisis.

 

A war of words

 

Markets have not priced in war, but they are starting to now, and now they will have to price in congressional war, too, as congress returns from its summer vacation and starts fighting over the debt ceiling, which is thought to be a greater battle than Obamacare. Some prognosticators, like David Stockman, have been saying for months that congress will end up in an inevitable stalemate over the debt ceiling, leading to a full-on credit crisis.

Maybe so, but Republicans have created such stalemates before in the form of government shutdowns and brinksmanship over the debt ceiling, and they might remember it didn’t turn out well for them the last time they created a situation that caused credit agencies to question their resolve to pay the nation’s debts. The nation was not terribly pleased with the resulting credit downgrade, and the market fell off a cliff exactly when I said it would, saved only by the Federal Reserve’s announcement of much more stimulus. As I noted in what seems now like many years ago, the US credit rating would be downgraded because congress knew it wouldn’t take the nation over the cliff of default but no one else knew congress wouldn’t go that far.

More than likely, congress will find a way to kick the can down the road with some stop-gap, ill-conceived measures, as they’ve done throughout the Great Recession; but, in the meantime, a heated war of words will assault the stock market amid many other currently heated wars of words … all in the sultry heat of the market’s worst time of year. It doesn’t bode well for stocks.

Rudy Penner, former director of the Congressional Budget Office said he anticipates a “very scary” fall in 2017. Fiscal issues will come to dominate, disrupting markets.

 

“There are so many politically hard issues and so little consensus on budget and tax policy. I assume we’ll somehow get through this, but not without getting frightened on a regular basis,” Penner said.

 

“Probably the best we can hope for is muddling through the … budget and the debt limit and getting very limited health, tax, and infrastructure legislation. There is not going to be significant stimulus coming out of Washington in the foreseeable future….

 

“The markets don’t seem to have absorbed the reality of Washington yet,” he said. “I have an uneasy feeling this will all end badly–that there will be a very major market correction.” (Zero Hedge)

 

Something wicked this way comes

 

Actually, a lot of somethings.

Even if the wars simmer down, this is August and then comes September and October — all tending to be bad months for the market. This timing comes as market breadth has been narrowing down to fewer and fewer stocks carrying the main bullish action, usually a bearish sign. The action is now extremely narrow.

In the latest part of the Nasdaq’s gains, the number of stocks seeing new lows increased — an even more bearish sign that overall movement is shifting downward.

Finally, while market sentiment has recently been euphoric, in the past week it has started turning openly sour and worried  — usually the last of signs before the market plunges. People start to visibly move toward the exits, and the noise of the crowds starts to grow. Formerly very bullish voices start to worry that something is about to give … because it is.

It’s not panic yet, but the stock market has built up near-record levels of margin debt, and volatility is stirring again at last. The margin departments in brokerages are historically far more likely to give margin calls when volatility is rising, forcing those who have shorted stocks to pony up more collateral, which usually means selling stocks to raise the cash. That forced selling pushes the prices of stocks down further, creating a meltdown. Thatcreates panic! And all the right chemistry is in place.

In the face of all this, the Fed is promising it will unwind its years of money printing, starting in September — something never seen before, which will begin from a height never imagined before the Great Recession. (They may backpedal on that if war gives them cause, or if the market starts to slide badly before they get there because of the growing tensions of nuclear war.)

Then there is this little omen: During the past century, almost all years ending in seven have seen the market plunge at the end of summer or in the fall. While that is merely something that can feed superstition, the market has never been immune to human superstition.

 

Then there is Trump’s failing war on crime

 

The war on white-collar crime is a war that never was … and never was going to be. Just like the battle to lock up Hillary never was going to happen. It was total baloney every time he said it, and he knew it. He said it because it effectively stirred the crowds.

Under Trump and his cabinet full of Goldman Sachs boys and girls, enforcement of financial regulations has plummeted. Regulatory penalties leveled against Wall Street are down by 60% this year from the same period last year and are on track to be the lowest number of penalties assessed in one year since 2008.

Maybe Wall Street has just turned over a new leaf and the boys and girls who gamble in its casinos are behaving better so that fewer penalties are needed. Or maybe things have returned to the same lax deregulation state that helped create the last financial crisis when Greenspan assured congress that banks didn’t need tough regulations because they were naturally self-regulating out of their own self-interest. (Anyone who buys the new-leaf, self-regulating theories, please email me about some land I have for sale on the moon.)

Backpedaling on regulations to where we were during the last economic collapse cannot possibly end up good, but it will take time to develop new critical fault lines of corruption deeply enough into the economy to cause new troubles.

Does any of that sound like “draining the swamp?” I stopped believing Trump was going to drain the swamp as soon as I saw him putting Goldman Sachs in charge of everything financial. You don’t drain the swamp by putting the alligators in charge. Now Trump is even making love talk to Janet Yellen, having once derided her for supporting Obama and supporting Hillary’s election with a fake economy created through the Fed’s cheap money.

Now that the cheap money has continued inflating the stock market while he is president (and at an even faster clip), Trump is all for it. Even though he once claimed Obama would wrongly take the credit on his way to the golf course for the economy’s fake recovery under Yellen’s low-interest policies, that hasn’t stopped Trump from taking the credit and claiming the economy is now doing great just because he was elected.

I’m afraid Trump’s war on Washington was all talk as was his war on Hillary and on Wall Street. Talks of those battles was all just campaign puffing and bluffing. Maybe in the same way Trump’s words to North Korea will turn out to be a big military campaign bluff — sounds of fury signifying nothing. Giving him a little more benefit of the doubt, perhaps he is just heightening his rhetoric to get the rest of the world to take the North Korean nuclear problem seriously to try to avoid a military option.

Regardless, the stock market is starting to price in the concern that it has been pretending to be unaware of. War appears almost inevitable now. The clouds are directly overhead, and the rumbles of fire and fury are clearly echoing back and forth between the clouds. Will this be one of those dry summer heat storms without rain or one of those deluges that sweeps away entire markets?

One thing is certain: summer, so far, is shaping up exactly as I said it would at the start of the year. Nothing has proven those predictions entirely true, but everything is lining up as if it is all going to prove true. You might want to prepare a path to the storm-cellar door.

via http://ift.tt/2fEB1nx Knave Dave

Slowly but surely, what we have claimed for the past year – that it is the demand side of the oil equation, not the supply, and especially the “Chinese wildcard” that is the critical factor in setting prices – is starting to emerge and be factored in by markets. And so, just days after we posted “Another Red Flag For Oil? China’s Crude Imports Slump To 7-Month Low” arguably catalyzed by the increasingly full Chinese Strategic Petroleum Reserve, overnight we got another major red flag – once again out of China – when Bloomberg reported that China’s oil refining dropped the most in three years for the month of July, while crude output retreated from the highest this year, “as the world’s largest consumer showed signs of losing momentum.”

According to Bloomberg calculations based on NBS data released on Monday, as shown in the chart below oil processing in July dropped 4.4 percent from the previous month to about 10.76 million barrels a day. While daily refining output typically falls from June to July on maintenance, last month’s fall was the biggest seasonal decline since 2014. Crude oil output fell 3% to 3.84 million barrels a day.

Separate data from industry consultant SCI99 revealed that state refineries in northwest and southern China at the end of July cut runs to 66.9% and 64.68% of capacity, respectively, the lowest since 2014, while independent refiners, known as teapots, were operating at around 58.78% near the lowest since May 5.

The news has pressured oil prices lower all morning despite a generally risk on tone across global equities.

“We’ve been drifting lower in the morning and now are reclaiming some of those losses,” says Ole Hansen, head of commodity strategy at Saxo Bank. “There’s not a lot to get your teeth into today” Hansen said adding that “Libya could have had a bit more a positive impact on a day where we hadn’t had the Chinese product demand news”

The sharp slowdown in Chinese refining comes amid news that the pace of China’s economic expansion slowed last month, as broader data Monday showed factory output and investment moderated amid the government’s push to cool the property sector and reduce leverage. Official figures last week showed crude imports also fell in July, slipping to the lowest in six months, while net product exports jumped 19 percent.

“A weaker macro economy has to some extent also affected fuel demand,” Li Li, an analyst with Shanghai-based commodities researcher ICIS-China told Bloomberg. “Runs are low because teapots have done some additional maintenance as they run down stocks and they also lowered runs amid stringent environmental checks.”

As Bloomberg reported last month, the world’s largest refiner, state-run China Petroleum & Chemical Copr. known as Sinopec, will process about 1 million metric tons a month (about 240,000 barrels a day) less than it previously planned over June to August because of weaker fuel demand growth and competition from teapots.

Suggesting that the weakness is broad based, and not simply a one-time event, Bloomberg also notes that China is on pace to produce the least amount of crude since 2009, even as its three biggest oil companies aim to raise combined spending for the first time in four years after the country’s crude production fell at a record pace in 2016. That contrasts with a surge in natural gas production, which is being encouraged by the President Xi Jinping’s government as an alternative to coal. Crude output from January to July averaged about 3.9 million barrels a day, down about 173,000 barrels a day, according to Bloomberg calculations. The International Energy Agency forecasts full-year output may drop by 150,000 barrels a day.

Some additional details revealed in the latest set of data:

• Total crude production in July was down 2.9 percent from the same month last year at 16.25 million metric tons.
• Production in the first seven months of the year totaled 112.79 million tons, down 4.8 percent from same period last year.
• Natural gas output in July rose 14.7 percent year-on-year to 11.7 billion cubic meters.
• Natural gas output in the first seven months is up 8.8 percent to 85.8 billion cubic meters.
• Oil refining in July totaled 45.5 million tons, a 0.4 percent year-on-year rise.
• Refining in the first seven months is up 2.9 percent at 320.71 million tons.

Finally, slamming the longer-term outlook for oil was none other than the world’s (formerly) biggest oil bull, Andy Hall – who as reported last week is shutting down his flagship commodities fund – saying in his August 1 letter that oil market fundamentals for 2018 “have deteriorated”, and adding that OPEC’s talk of extending oil production cuts is a “sign of weakness, not of strength”, while noting that U.S. shale firms can “profitably hedge” extra 2018 output at current prices.

via http://ift.tt/2uH2iYQ Tyler Durden

After learning over the weekend that Trump plans to call for an investigation into China over allegations that the nation violated U.S. intellectual property rights and forced technology transfers, we learn that several Chinese companies may have submitted bids for Fiat Chrysler (FCA) in a deal that would include the company’s iconic Jeep brand.  According to AutomotiveNews, at least one Chinese automaker made a bid earlier this month for FCA at a slight premium to the company’s prevailing market price but it was rejected for being too low.

Representatives of a well-known Chinese automaker made at least one offer this month to buy Fiat Chrysler Automobiles at a small premium over its market value, Automotive News has learned. The offer was rejected for not being enough, a source said.

 

Meanwhile, other sources independently identified executives from other large Chinese automakers conducting their own due diligence on a potential purchase of FCA, including meeting last week with representatives of U.S. retail groups about a potential acquisition. A source said FCA executives have traveled to China to meet with Great Wall Motor Co. And Chinese delegations were seen last week at FCA’s headquarters in Auburn Hills, Mich.

 

It’s unclear which Chinese automaker or automakers are pursuing FCA. Different sources have pointed to involvement by different ones — Dongfeng Motor Corp., Great Wall, Zhejiang Geely Holding Group or FCA’s current joint venture partner in China, Guangzhou Automobile Group. But it is also unclear which company or companies are likely to follow through or succeed.

 

Unsurprisingly, FCA isn’t talking, nor are any of the four Chinese automakers. But if a sale proceeds, the quintessentially American Jeep brand — once owned by the Germans and most recently by the Italians/Dutch — may soon be owned by the Chinese.

According to AutoNews, any sale likely would involve FCA’s highly profitable Jeep and Ram brands, as well as Chrysler, Dodge and Fiat, but would exclude Maserati and Alfa Romeo which would be spun off.

Interest from China comes amid a push by the government to acquire international assets in order to gain further access to markets outside China.

A government directive dubbed China Outbound pushes Chinese businesses to acquire international assets from their industries and operate them “to make their mark,” much as Geely has done since acquiring Volvo in 2010. Bloomberg reported last week that Chinese companies plan to spend $1.5 trillion acquiring overseas companies over the next decade — a 70 percent increase from current levels.

 

“Right now, Chinese automakers enjoy the full support of the leadership in Beijing to go and make it happen,” Dunne said. “That’s something brand new, and it’s really picked up since 2015.”

 

Along with Volvo, Dunne pointed to Italian tire maker Pirelli and German robotics giant Kuka as Chinese acquisitions supported by the China Outbound policy.

Of course, given Trump’s focus on domestic auto production and intellectual property violations by China, something tells us this particular deal will be somewhat ‘complicated’ politically.  That said, FCAU shareholders seem to be somewhat optimistic this morning…

via http://ift.tt/2vBRnRK Tyler Durden