Tag: finance

Authored by David Stockman via The Daily Reckoning,

While the Imperial City is frozen in the Second Coming of Comey, it doesn’t mean that the Washington spending machine is on pause. In fact, the Treasury’s cash balance yesterday stood at only $153 billion — down by $130 billion just since the tax season peak was reached on April 25th.

Uncle Sam has been burning cash at a rate of $3.2 billion per calendar day since then and has no more room to borrow. That’s because the public debt ceiling is frozen at its March 15th level ($19.808 trillion) and the mavens at the Treasury Building have run out of borrowing gimmicks.

The countdown to the mother of all debt ceiling crises is now well underway — with the nation’s net debt sitting at $19.69 trillion. That figure, in turn, is up nearly $500 billion since FY 2016 ended on September 30 with the net debt at $19.22 trillion.

We itemize this torrent of red ink not merely to lament the nation’s dire fiscal plight, but to document a practical point. It will be impossible to pay Uncle Sam’s bills in full after Labor Day unless the debt ceiling is raised well the $20 trillion mark.

Exactly 36 years ago, Washington stood on another symbolic threshold — that is, raising the debt ceiling over the $1 trillion mark for the first time.

Back in October 1981, however, the Gipper was in the Oval Office at the peak of his popularity. He got the debt ceiling over the symbolic barrier at that time because he could still credibly promise that the budget would be balanced within three years. That was after his already enacted tax cuts became fully effective and the already enacted spending reductions took hold.

The nation’s balance sheet then was relatively pristine compared to what it is at present. Even at $1 trillion, the public debt amounted to just 30%of GDP — a far cry from the 106% ratio presently.

Before Capitol Hill gets bogged down in a sweaty August slog desperately looking for votes to raise the debt ceiling by several trillion dollars, it will have mid-year budget updates. They won’t be encouraging.

As my colleague Lee Adler has pointed out, Treasury tax collections have slowed to a crawl. Overall collections are barely even with prior year, and even withholding payments are now coming in at barely 2% on a year/year basis. That is far below the built-in spending growth rate of about 4% — and says nothing to the big increases for defense, law enforcement, border control and infrastructure being sought be the Trump White House.

The four week moving average of withholding collections — about as accurate a real time measure of the US economy as exists — is running below the average wage rate gain of about 2.6% per annum. That means real wage growth is turning negative — not accelerating like the “escape velocity” narrative being peddled by Wall Street.

The Donald’s odds of leading Washington over the $20 trillion threshold are not even a tiny fraction of the Gipper’s at the time of the $1 trillionbarrier. The latter’s job approval rate was over 60%, whereas the Donald’s will soon dip into the low 30s as the RussiaGate prosecution gathers full force.

Back then it was still possible to pass a clean debt ceiling increase because there was always an end in sight. That is, the fiscal projections always showed a balanced budget or surplus a few years down the road that enabled the illusion of “one and done.”

No more. There is $10 trillion of new deficits built-in over the next decade — even with the Congressional Budget Office’s (CBO) rosy scenario economic forecast, and the deficit path widens, rather than narrows, over the ten year period. By 2027, in fact, the CBO baseline deficit is back above 5% of GDP.

The long and short of it is straightforward. The Democrats are not about to bail-out the Donald when they believe they have him on the ropes. At the same time, there is no GOP majority for any meaningful deficit reduction plan that could be attached to a debt ceiling increase bill as a legislative quid pro quo.

When the Senate GOP committee now working on an alternative health care bill reaches a consensus — if it ever does — there will be virtually no Medicaid cuts left. The so-called moderates have insisted that the Obamacare expansion must stay in place at least for the next five years or no dice.

At the same time, the Donald has boxed himself in with his reckless promise to ring-fence Medicare and Social Security. But when you set those two giant entitlements aside, along with Medicaid, you have taken $2 trillion per year off the table; and that quickly mushrooms to nearly $2.5 trillion per year when you add in $200 billionfor Veterans, the earned income tax credit and retirement checks for former military and civilian employees of the Federal government.

Yes, the Congressional GOP could perhaps agree to a 10% cut ($7 billion) in the $70 billionfood stamp program and a few billion more from some of the lesser low-income entitlements. But self-evidently that’s a rounding error in the scheme of things.

So when foreseen is not a tale of a Trump Fiscal Stimulus, but a Fiscal Bloodbath, take it to mean just that. And unlike the saves which were put together at the 11th hour in August 2011 and October 2015 by President Obama and Speaker Boehner, this time there will be absolute legislative paralysis.

It seems abundantly clear that Speaker Ryan is not ready to quit, and the Freedom Caucus has no intention of voting for a so-called “clean” debt ceiling increase.

Instead, Washington is heading for the unthinkable. That is, the need for the US Treasury to prioritize and allocate spending based on the available inflow of revenues.

That will come as a giant shock to those on Wall Street who fail to understand that Washington is in the midst of triggering the 25th amendment, and that the system will soon be ungovernable.

The prospect of allocation will also mean that debt service, social security checks, military expenditures, law enforcement, Federal payrolls and other high priority payments can be met from current receipts for an extended period of time, thereby prolonging the stalemate even further.

So the Wall Street casino may well shrug off the Comey hearing on the grounds that he did not deliver a red hot smoking gun after all.

But that will prove to be just one more chance to get out of harm’s way. What comes next is a debt ceiling Fiscal Bloodbath that will remove all doubt.

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

This is wonderful. We’re moving past the stage of Russian hacking into John Podesta’s email account, since it has garnered very little traction. Plus, no one can actually prove that the Wikileaks changed votes, just innuendo. All of the ‘collusion’ the deep state and the left have been trying to pin on Trump just got blown up during Comey’s testimony, most likely thanks to Trump’s mention of the possibility of tapes. Had Trump not done that, there is a very good chance that Comey would’ve went all the way with his lies.

Alas, Bloomberg is now reporting, six months after the Presidential elections, that 39 states were hacked by fucking Russians. Here is a delicate snowflake reporting. Check the venom in his cadence and the hatred in his eyes.

Where is the proof, you ponder?

Here it is.

In Illinois, investigators found evidence that cyber intruders tried to delete or alter voter data. The hackers accessed software designed to be used by poll workers on Election Day, and in at least one state accessed a campaign finance database. Details of the wave of attacks, in the summer and fall of 2016, were provided by three people with direct knowledge of the U.S. investigation into the matter. In all, the Russian hackers hit systems in a total of 39 states, one of them said.

There it is, folks. Details of the ‘wave of attacks’ were provided by 3 people, who have direct knowledge on the matter. Those 3 people, anonymous of course, told Bloomberg that it happened; therefore, it happened.

Bloomberg continues.

The new details, buttressed by a classified National Security Agency document recently disclosed by the Intercept, show the scope of alleged hacking that federal investigators are scrutinizing as they look into whether Trump campaign officials may have colluded in the efforts. But they also paint a worrisome picture for future elections: The newest portrayal of potentially deep vulnerabilities in the U.S.’s patchwork of voting technologies comes less than a week after former FBI Director James Comey warned Congress that Moscow isn’t done meddling.

What details? Did I miss something?

According to this new, groundbreaking report, Russian hackers broke into the systems inside 39 states, but never tried to disrupt the vote. They posit the American warnings were enough to scare the rascals off, or perhaps, according to an anonymous source, the hackers failed to access the voting systems.

So then what are we talking about here?

Ah, the Russians are planning another attack.

One former senior U.S. official expressed concern that the Russians now have three years to build on their knowledge of U.S. voting systems before the next presidential election, and there is every reason to believe they will use what they have learned in future attacks.

Here is the smoking gun.

An anonymous part-time contractor who works for the state board of elections in Illinois claims hackers accessed the state’s voter database and compromised 90,000 records.  In other words, about 0.75% of their 15 million registered voters records had been ‘compromised’, according to this part-time worker at the board of elections in Illinois. As to how they were compromised, we may never know.

Bloomberg reports the government then used digital signatures to prove it was the Russians, the very same signatures that cybersecurity expert, John McAfee said was complete horseshit.

The signatures were then sent through Homeland Security alerts and other means to every state. Thirty-seven states reported finding traces of the hackers in various systems, according to one of the people familiar with the probe. In two others — Florida and California — those traces were found in systems run by a private contractor managing critical election systems.

In Illinois, investigators also found evidence that the hackers tried but failed to alter or delete some information in the database, an attempt that wasn’t previously reported. That suggested more than a mere spying mission and potentially a test run for a disruptive attack, according to the people familiar with the continuing U.S. counterintelligence inquiry.

In summary…

In many states, the extent of the Russian infiltration remains unclear. The federal government had no direct authority over state election systems, and some states offered limited cooperation. When then-DHS Secretary Jeh Johnson said last August that the department wanted to declare the systems as national critical infrastructure — a designation that gives the federal government broader powers to intervene — Republicans balked. Only after the election did the two sides eventually reach a deal to make the designation.

With all of this evidence of obvious Russian hacking of the elections, how can we simply sit here and let Trump occupy the White House?

via http://ift.tt/2s6inqw The_Real_Fly

Picking up where he left off last week, when Bill Gross told Bloomberg that U.S. markets are at their highest risk levels since before the 2008 financial crisis “because investors are paying a high price for the chances they’re taking”, in his latest monthly investment outlook, the Janus Henderson bond manager says that investors should be wary as low interest rates, aging populations and global warming which inhibit real economic growth and intensify headwinds facing financial markets:

Excessive debt/aging populations/trade-restrictive government policies and the increasing use of machines (robots) instead of people, create a counterforce to creative capitalism in the real economy, which worked quite well until the beginning of the 21st century. Investors in the real economy (not only large corporations but small businesses and startups) sense future headwinds that will thwart historic consumer demand and they therefore slow down investment.

Lamenting the onset of the new normal era, Gross says that “because of the secular headwinds facing global economies, currently labeled as the “New Normal” or “Secular Stagnation”, investors have resorted to “making money with money” as opposed to old-fashioned capitalism when money and profits were made with capital investment in the real economy”

… instead of making money by investing in the real economy, savers/investors increasingly are steered toward making money in the financial economy – making money with money. And that, thanks to nearly $8 trillion of QE asset purchases from major central banks and the holding of short-term borrowing rates near zero or even negative, has made this secular shift in monetary policy extremely profitable.

The biggest hurdle is, of course, record low interest rates: “since cash yields nothing, and in fact depreciates in value day to day given even low 1%-2% inflation, savers/investors exchange cash for alternative choices involving less liquid, longer maturity, and in some cases more risky assets. A bank deposit that earns interest but offers ATM accessibility in measured amounts would be a first step. The available yield – more than 0% but hardly attractive given bank fees and the like – would be a first example of making money with available cash.“

Gross’ broader point is that – as he has said repeatedly before – capitalism, as we know it, now longer works:

 Zombie corporations are being kept alive as opposed to destroyed as with the Schumpeterian/Darwinian “survival of the fittest” capitalism of the 20th century. Standard business models forming capitalism’s foundation, such as insurance companies, pension funds, and banking, are threatened by the low yields that have in turn, produced high asset prices. These sectors in fact, have long-term maturities and durations of their liabilities, and their assets have not risen enough to cover prior guarantees, so we see Puerto Rico, Detroit, and perhaps Illinois in future years defaulting in one way or the other on their promises to constituents. Faulty finance-based capitalism supported by the increasingly destructive monetary policy begins to erode, not support the real economy.

Gross explains that his point is “that making money with money is an inherently acceptable ingredient in historical capitalistic models, but ultimately it must then be channeled into the real economy to keep the cycle going.” However, in a world in which central banks have pumpted $8 trillion in liquidity that is no longer possible, worse as he notes it is only a matter of time before the paradigm of “making money with money” no longer works:

Capitalism’s arteries are now clogged or even blocked by secular forces which when combined with low/negative yielding “safe” assets promise to stunt U.S. and global growth far below historical norms. Ultimately investors must recognize this risk along with increasingly poorly hedged liabilities and low growth resulting from “New Normal” secular headwinds in developed economies. Add global warming to this list, and you have the potential for low asset returns in which the now successful strategy of “making money with money” is seriously threatened. How soon this takes place is of course the investor’s dilemma, and the policymakers’ conundrum.

His advice on how money will be made, “or at least conservatively preserved” in the current environment, is “by acknowledging the exhaustion of “making money with money”. Strategies involving risk reduction should ultimately outperform “faux” surefire winners generated by central bank printing of money. It’s the real economy that counts and global real economic growth is and should continue to be below par.”

His conclusion is a familiar one: “don’t be mesmerized by the blue skies created by central bank QE and near perpetually low interest rates. All markets are increasingly at risk.“

Full note below:

How to Make Money

 

Because of the secular headwinds facing global economies, currently labeled as the “New Normal” or “Secular Stagnation”, investors have resorted to “making money with money” as opposed to old-fashioned capitalism when money and profits were made with capital investment in the real economy.

 

How is money made with money? Think of it simply as an extension of maturity and risk – all beginning with those $20 or maybe $100 bills in your purse or stashed safely in the cookie jar at home. Since cash yields nothing, and in fact depreciates in value day to day given even low 1%-2% inflation, savers/investors exchange cash for alternative choices involving less liquid, longer maturity, and in some cases more risky assets. A bank deposit that earns interest but offers ATM accessibility in measured amounts would be a first step. The available yield – more than 0% but hardly attractive given bank fees and the like – would be a first example of making money with available cash.

 

But capitalism, or should I say finance-based capitalism, requires more return in order to be profitable for its savers/investors. The next step, for individuals and institutions alike, might be a 6-month CD or a 90-day Treasury bill where yields suddenly approach 1% (at least in the U.S. In Euroland and Japan they are negative but that’s another story). But 1% will not pay the bills for most savers or financial institutions where investors demand compounding returns of 6%, 7% or 8% +, so alternative assets further out the risk/liquidity/maturity spectrum come into play. Corporate bonds, stocks, and private equity are legitimate extensions from non-yielding cash that are part of modern day finance-based capitalism. Savers/investors make money with their money (cash) as long as economies grow and inflation stays reasonably conservative. There is nothing new in all of this, but it helps to outline the fundamental process to understand why today’s economy is so different from that of decades ago and why it induces risks that were not present before.

 

Those differences and risks primarily are a result of secular headwinds whose effects are difficult to observe in the short run – much like global warming. “New Normal” high debt, aging demographics, and deglobalization along with technological displacement of labor are the primary culprits. Excessive debt/aging populations/trade-restrictive government policies and the increasing use of machines (robots) instead of people, create a counterforce to creative capitalism in the real economy, which worked quite well until the beginning of the 21st century. Investors in the real economy (not only large corporations but small businesses and startups) sense future headwinds that will thwart historic consumer demand and they therefore slow down investment. Productivity – which is the main driver of economic growth and long-term profits – slows down. Productivity in fact, in the U.S. and almost everywhere in the developed world has flat-lined for nearly five years now and has increased by only 1% annually since 2000 and the aftermath of the Dot-Com recession.

 

So instead of making money by investing in the real economy, savers/investors increasingly are steered toward making money in the financial economy – making money with money. And that, thanks to nearly $8 trillion of QE asset purchases from major central banks and the holding of short-term borrowing rates near zero or even negative, has made this secular shift in monetary policy extremely profitable. Bank margins have been lowered but their stocks and almost all other stocks have soared here in the U.S. and globally. Investors have discovered that making money with money is a profitable enterprise and have exchanged the support of central banks for the old-time religion of productivity growth as a driver of their strategy. The real economy has been usurped by the financial economy. Long live the financed-based economy!

 

But asset prices and their growth rates are ultimately dependent on the real economy and, the real economy’s growth rate is stunted by secular forces which monetary and even future fiscal policies seem unable to reverse. In fact, as I have mentioned many times in prior Investment Outlooks, monetary policy may now be a negative influence in terms of future economic growth. Zombie corporations are being kept alive as opposed to destroyed as with the Schumpeterian/Darwinian “survival of the fittest” capitalism of the 20th century. Standard business models forming capitalism’s foundation, such as insurance companies, pension funds, and banking, are threatened by the low yields that have in turn, produced high asset prices. These sectors in fact, have long-term maturities and durations of their liabilities, and their assets have not risen enough to cover prior guarantees, so we see Puerto Rico, Detroit, and perhaps Illinois in future years defaulting in one way or the other on their promises to constituents. Faulty finance-based capitalism supported by the increasingly destructive monetary policy begins to erode, not support the real economy.

 

My point in all of this is that making money with money is an inherently acceptable ingredient in historical capitalistic models, but ultimately it must then be channeled into the real economy to keep the cycle going. Capitalism’s arteries are now clogged or even blocked by secular forces which when combined with low/negative yielding “safe” assets promise to stunt U.S. and global growth far below historical norms. Ultimately investors must recognize this risk along with increasingly poorly hedged liabilities and low growth resulting from “New Normal” secular headwinds in developed economies. Add global warming to this list, and you have the potential for low asset returns in which the now successful strategy of “making money with money” is seriously threatened. How soon this takes place is of course the investor’s dilemma, and the policymakers’ conundrum. But don’t be mesmerized by the blue skies created by central bank QE and near perpetually low interest rates. All markets are increasingly at risk.

 

Money will currently be made, or at least conservatively preserved, by acknowledging the exhaustion of “making money with money”. Strategies involving risk reduction should ultimately outperform “faux” surefire winners generated by central bank printing of money. It’s the real economy that counts and global real economic growth is and should continue to be below par.

via http://ift.tt/2snH9Wh Tyler Durden

For the first time in 3 years, Core Producer Prices have risen at a faster pace than The Fed's mandated 2% target. May PPI (ex food and energy) rose 2.1% year-over-year, the highest since May 2014, as goods prices tumbled (gasoline, motor vehicles, fresh fruit) while services costs (retailer and wholesaler prices, and residential lending) jumped.

May 2014 was the last time that Core PPI (Ex Food and Energy)…

The breakdown shows a notable drop in Energy prices MoM with good prices tumbling as service costs jumping…

Final demand goods: Prices for final demand goods moved down 0.5 percent in May, the largest decrease since a 0.6-percent drop in February 2016. Most of the May decline can be attributed to the index for final demand energy, which fell 3.0 percent. Prices for final demand foods decreased 0.2 percent. In contrast, the index for final demand goods less foods and energy edged up 0.1 percent.

 

Product detail: The May decrease in the index for final demand goods was led by an 11.2-percent drop in gasoline prices. The indexes for fresh and dry vegetables, jet fuel, fresh fruits and melons, motor vehicles, and home heating oil also fell. Conversely, the index for pharmaceutical preparations rose 0.6 percent. Prices for beef and veal and for electric power also increased.

 

Final demand services: Prices for final demand services rose 0.3 percent in May following a 0.4-percent advance in April. The May increase can be attributed to the index for final demand trade services, which moved up 1.1 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) In contrast, prices for final demand services less trade, transportation, and warehousing fell 0.1 percent, and the index for final demand transportation and warehousing services declined 0.5 percent.

 

Product detail: About half of the May increase in the index for final demand services can be traced to margins for fuels and lubricants retailing, which rose 16.1 percent. The indexes for apparel, footwear, and accessories retailing; machinery and equipment wholesaling; residential real estate loans (partial); automobiles and automobile parts retailing; and food wholesaling also moved higher. Conversely, prices for guestroom rental decreased 5.2 percent. The indexes for airline passenger services and food retailing also moved lower.

Is this the well-timed excuse for a rate-hike tomorrow, despite collapsing macro data since the last Fed rate hike?

via http://ift.tt/2sjixx9 Tyler Durden

Nearly four months after Donald Trump signed an executive order calling for a review of Wall Street regulations, the administration has laid out part one of its plans for reforming the system in a detailed report released by the Treasury Department late Monday.

Some of the more notable proposals in the highly-anticipated report – the first in a series that will detail the administration’s thinking on how it plans to proceed with paring back post-crisis regulations in the financial services industry – include: adjusting the annual stress tests, easing trading rules (i.e., gutting the Volcker Rule), and paring back the power of the watchdogs  – like the Consumer Financial Protection Bureau.

The Treasury said its plan was designed to spur lending and job growth by making regulation ‘more efficient’ and less burdensome, according to Bloomberg although in reality it simply caters to the "requests" of Wall Street, which has been limited in its activities since Dodd-Frank, most notanly prop trading, although in most cases banks, like Goldman, have found simply loopholes around the Volcker Rule. Also of note, "unlike the bill passed last week by House Republicans, the report consistently calls for most Obama-era rules to be dialed back, not scrapped."

In a statement released along with the report, Treasury Secretary Steven Mnuchin said that while the administration backs congressional efforts to roll back Dodd-Frank, the report focuses on actions that can be taken without involving Congress. In fact, between 70 and 80% of its recommended reforms can be made unilaterally through federal agencies' independent rulemaking authorities.

As expected, Democrats were quick to criticize the plan with Ohio Senator Sherrod Brown, the ranking member of the Senate Banking Committee, claiming that the reforms would gut the Consumer Financial Protection Bureau, the centerpiece of Dodd-Frank. The report is extremely critical of the fledgling agency, accusing it of being “unaccountable” and possessing “unduly broad regulatory powers.” To rein in the bureau, the Treasury report calls for the president to be able to fire its director for any reason, not just for cause as is now the case, as Bloomberg noted.

“When Wall Street greed goes unchecked, American taxpayers and working families pay the price. Too many hardworking Americans still haven’t fully recovered from the financial crisis, and Washington should be focused on protecting them by holding Wall Street accountable, not doing its bidding,” said Sherrod Brown, the ranking Democrat on the Senate Banking Committee, in his response to the report.

Meanwhile, representatives of the banking industry expressed their support for the report's findings.

“Today’s Treasury report is an important step to refine financial regulations to ensure that they are supporting — not inhibiting — economic expansion,” said ABA President and CEO Rob Nichols. “We applaud Secretary Steven Mnuchin for recognizing that we need regulatory reform to boost economic growth, and we expect this report will serve as a catalyst in that effort.”

As Bloomberg adds, some of the most unpopular regulations that the report asks to re-do, such as the Volcker Rule ban on banks’ proprietary trading, were put together by five different agencies. It was not immediately clear which bank was supervising them.

* * *

In any case, just because the administration has found a way to bypass Congress doesn't necessarily mean that the reforms will be swiftly implemented. Some of the report’s most ambitious recommendations – such as reforming the Volcker Rule ban on proprietary trading – will require the cooperation of numerous separate federal agencies, as Bloomberg noted.

On the Volcker Rule, Treasury outlined several ways that regulators and Congress should consider weakening it, Bloomberg reported. Banks with less than $10 billion in assets should be exempted altogether, the report argued. It also said all lenders should have more leeway to trade and that restrictions on banks’ investing in private-equity and hedge funds should be loosened.

In other words, a return to the way Wall Street was before the financial crisis.

Deregulation, slashing corporate taxes and ramping up infrastructure spending are the three core components of Trump’s economic agenda; without them, it is impossible for the economy to grow at the revised projected 3% GDP growth rate.

"Properly structuring regulation of the U.S. financial system is critical to achieve the administration’s goal of sustained economic growth and to create opportunities for all Americans to benefit from a stronger economy,” Mnuchin said. “We are focused on encouraging a market environment where consumers have more choices, access to capital and safe loan products – while ensuring taxpayer-funded bailouts are truly a thing of the past.”

Full report below (pdf link):

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• The Snowballing Power of the VIX, Wall Street’s Fear Index (WSJ)
• Beneath the Uneasy Peace Between Donald Trump and Janet Yellen (WSJ)
• Senators to Query Sessions on Russia, Comey (BBG)
• U.S. lawmakers to probe Tillerson on Russia, diplomacy budget cuts (Reuters)
• Under pressure to soften Brexit, PM May to meet Northern Irish ‘kingmakers’ (Reuters)
• Russian Cyber Hacks on U.S. Electoral System Far Wider Than Previously Known (BBG)
• North Korea ‘most urgent’ threat to security: Mattis (Reuters)
• North Korean Drone Spied on U.S. Missile-Defense Site (WSJ)
• Kremlin says Russia will not heed U.S. calls to free protesters (Reuters)
• Saudi Arabia Cuts U.S. Oil Exports to Ease Supply Glut (WSJ)
• Inflation fizzle may once again leave Fed rate path in doubt (Reuters)
• Inside the Bold Attempt to Reverse a $55 Million Digital Heist (BBG)
• Soros Protege Makes a $700 Million Gamble (BBG)
• The Recession Scarred Workers Who Kept Their Jobs, Too (BBG)
• Deutsche Bank to Offer Ex-Managers Portion of Bonuses (BBG)
• Comments Welcome at N.Y. Times, With Troll-Blocking Tech Tool (BBG)
• States Rally to Save Public-Health Program (WSJ)
• Rural Jails Are Locking Up More and More Americans (BBG)
• Charting the Lift in U.S. Job Market as Trump Seeks Elevation (BBG)
• Cook Says Apple Is Focusing on Making an Autonomous Car System (BBG)

Overnight Media Digest

WSJ

– General Electric Co Chief Executive Jeff Immelt will step aside this summer, ending a 16-year run atop a conglomerate that he significantly reshaped but whose shares have vastly underperformed the stock market during his tenure. on.wsj.com/2rUIoe4

– NBC anchor Megyn Kelly’s plan to air an interview with right-wing provocateur Alex Jones has caused a firestorm to erupt on social media. JPMorgan Chase & Co has asked for its local TV ads and digital ads to be removed from Kelly’s show and from all NBC news programming until after the show airs, according to a person familiar with the matter. on.wsj.com/2rUQ288

– J.Crew Group Inc announced a move it hopes will ease its heavy debt load and give it more time to right its business, as the embattled retailer also reported its 11th consecutive quarter of same-store sales declines. on.wsj.com/2rUPu2p

– The fallout from Uber Technologies Inc’s monthslong investigation into workplace culture extended into the upper ranks of its leadership, as the company pushed out a top lieutenant of Chief Executive Travis Kalanick and installed a new voting board member with no prior ties to the troubled ride-hailing company. on.wsj.com/2rUUofF

– Facebook Inc is building a feature that would allow users to subscribe to publishers directly from the mobile app, according to people familiar with the matter. The feature, long-requested by publishers, is expected to roll out by the end of 2017, three of the people said. on.wsj.com/2rUJ1nW

FT

Brussels chief negotiator Michel Barnier urged Britain to stop wasting time and start Brexit talks “very quickly” or risk crashing out of the European Union in March 2019 without a deal on future relations.

British online grocer Ocado Group Plc plans to raise 350 million pounds ($443.17 million) from issuing bonds and making changes to its credit arrangements to fund expansion of its facilities and develop its automated warehousing technology.

Complaints against payday lenders tripled in the past year as more people fell into debt, the Financial Ombudsman Service said In its annual report.

British business groups, including the CBI, the Institute of Directors, the EEF and Federation of Small Businesses are working together as well as with Greg Clark, the business secretary, with the aim of putting forward a unified list of demands as they spy an opportunity to change UK’s Brexit negotiating stance.

NYT

– Uber Technologies Inc’s senior vice president for business Emil Michael left the company, according to an email sent to Uber employees. His departure followed a series of scandals that have rocked the company this year, forcing its board to call an investigation into Uber’s culture and business practices. nyti.ms/2rUDYEe

– Viking Global Investors, one of the larger hedge funds, notified investors on Monday that the firm’s chief investment officer, Daniel Sundheim, was leaving and that the firm would begin returning some $8 billion to investors. nyti.ms/2rUWjB7

– The Irish government on Monday announced a price range for Allied Irish Banks Plc that could value the bank as high as $14.9 billion when it goes public this month — seven years after it was nationalized. nyti.ms/2rUOGKN

– Ivanka Trump’s fashion brand called off a deal with a major Japanese apparel company after learning that it was backed by the Japanese government, Trump’s company said in a letter made public on Monday. nyti.ms/2rUNYNI

Canada

** The Trudeau government’s decision to greenlight a Chinese takeover of a Canadian high-tech firm that sells satellite-communication systems to the American military jeopardizes U.S. national security, a congressional commission warned on Monday and urged the Pentagon to “immediately review” its dealings with Vancouver-based Norsat International Inc . (tgam.ca/2s5QOxJ)

** Canada’s longest-serving Supreme Court chief justice, appointed by prime minister Jean Chretien in 2000, and to the court by prime minister Brian Mulroney in 1989, announced on Monday that she will retire, effective Dec. 15, nine months before she reaches the mandatory retirement age of 75. (tgam.ca/2s5KztV)

** On Monday, representatives of charitable groups and governments gathered at the Rotary convention in Atlanta and pledged an additional $1.2 billion over three years to fund the Global Polio Eradication Initiative. Canada pledged $75 million as world aims to eradicate polio. (tgam.ca/2s5QOxJ)

NATIONAL POST

** The Royal Bank of Canada expects the loonie to fall to $0.714 from about $0.74 by the end of the year as the Bank of Canada’s interest rate continues to lag behind that of the U.S. Federal Reserve. (bit.ly/2s5JYbp)

** Jean-Pierre Blais, the chairman of Canada’s telecommunications regulator, says he is not reapplying for the role, days before his five-year term comes to a close. (bit.ly/2s5EwW2)

Britain

The Times

* Weir Group is paying 89 million pounds ($112.74 million) to increase its exposure to the Asian oil services market in its first acquisition in two years. bit.ly/2s4imnl

* Land Securities Group PLC, Britain’s largest listed property company, has changed it name to Landsec. bit.ly/2s43h5e

The Guardian

* The future of Uber Chief Executive Travis Kalanick is hanging in the balance after the embattled cab company’s board voted to adopt a portfolio of recommendations to fight sexual harassment in the firm. bit.ly/2rjPWIx

* The number of homes changing hands in London slumped by almost a third year on year in the spring, as changes to stamp duty rates, high prices and Brexit uncertainty slowed the market, according to the latest monthly index from estate agents Your Move. bit.ly/2rk1V9h

The Telegraph

* Vincent De Rivaz, the veteran boss of EDF, will step down from the French energy group at the end of October this year. bit.ly/2rjXYRP

* Jaguar Land Rover has invested $25 million in Lyft, making it the latest car giant to pick a side in the increasingly bitter war between the U.S. taxi-hailing app and its arch-rival Uber. bit.ly/2rk0Yh6

Sky News

* Royal Bank of Scotland is closing on a multibillion-pound settlement with a U.S. regulator over the mis-selling of toxic mortgage bonds – a deal that will remove one of the long-standing obstacles to the Government returning the lender to the private sector, according to Sky News. bit.ly/2rk01Fy

* Qatar Reinsurance Company has teamed up with Centerbridge, a U.S.-based investment firm, to attempt to buy Sabre from BC Partners, the private equity firm which has owned it since 2013, according to Sky News. bit.ly/2rjXmvv

The Independent

* A poll of almost 700 business leaders conducted by the Institute of Directors in the immediate aftermath of last week’s general election reveals a dramatic drop in business confidence and major concerns relating to political uncertainty. ind.pn/2rksUBD

* Thousands of UK households face energy bill hikes of almost 200 pounds on average as gas and electricity providers roll customers onto standard variable tariffs. A total of 54 fixed-rate energy deals are set to expire before the end of August, according to research by price comparison site Money Supermarket. ind.pn/2rkeSzP

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Trump wasted little time before launching his opening salvos on Twitter on Tuesday morning, when the President first went after the “Fake News Media” just after 6:30am, accusing the press of publishing false stories.

“The Fake News Media has never been so wrong or so dirty. Purposely incorrect stories and phony sources to meet their agenda of hate. Sad!” Trump lashed out in his first tweet on Tuesday.

The Fake News Media has never been so wrong or so dirty. Purposely incorrect stories and phony sources to meet their agenda of hate. Sad!

— Donald J. Trump (@realDonaldTrump) June 13, 2017

It was not immediately clear which particular story (or stories) prompted Trump’s ire this morning. The president’s latest tweet came hours before Attorney General Jeff Sessions is set to appear before the Senate Intelligence Committee, and shortly after Christopher Ruddy, chief executive of the conservative news site and TV network Newsmax, said during an interview on “PBS NewsHour” that Trump is thinking about firing special counsel Robert Mueller.

As NBC noted last night, it is open to question how reliable Ruddy’s comments are. “He is often described as a close friend of Trump’s, and reporters spotted him leaving the White House on Monday. But a source familiar with the visit told NBC News that any meeting Ruddy was to have had with the president was postponed. Still, his remarks prompted this reply on Twitter from Rep. Adam Schiff of California, the top Democrat on the Intelligence Committee, who said the committee would simply reappoint Mueller and then advised the president: “Don’t waste our time.”

If President fired Bob Mueller, Congress would immediately re-establish independent counsel and appoint Bob Mueller. Don’t waste our time.

— Adam Schiff (@RepAdamSchiff) June 12, 2017

“I can’t manage that they’re going to be crazy enough to go through with this threat,” Schiff said later in an interview on MSNBC’s “Hardball,” adding: “I think it’s just a way of raising doubts about this very good man who’s respected by people on both sides of the aisle.”

Ruddy himself told PBS: “I personally think it would be a very significant mistake, even though I don’t think there’s a justification for a special counsel in this case.”

In a follow up tweet, the president again went after the 9th Circuit Court of Appeals early Tuesday after it ruled against the president’s so-called travel ban.

“Well, as predicted, the 9th Circuit did it again – Ruled against the TRAVEL BAN at such a dangerous time in the history of our country. S.C.”  Trump tweeted, referring to the Supreme Court.

Well, as predicted, the 9th Circuit did it again – Ruled against the TRAVEL BAN at such a dangerous time in the history of our country. S.C.

— Donald J. Trump (@realDonaldTrump) June 13, 2017

As reported on Monday, the San Francisco-based court affirmed in large part the Hawaii District Court ruling blocking parts of the order, which temporarily banned nationals from six Muslim-majority countries from entering the U.S., suspended the entry of all refugees and reduced the cap on the admission of refugees from 110,000 to 50,000 for the 2017 fiscal year. In a unanimous ruling Monday, a three-judge panel on the court said Trump’s revised order does not offer a sufficient justification to suspend the entry of more than 180 million people on the basis of nationality.

Trump earlier this month renewed the debate over his order in the wake of the attack in London. In a series of tweets following the London attack, the president referred to his order as a “travel ban” and insisted it was necessary to keep the U.S. safe.

Separately, a group of 17 Attorneys General filed a motion before the Supreme Court, seeking to prevent a hearing on Trump’s appeal, effectively ending the debate before it has even started.

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Well, so much for OPEC’s production cut.

In OPEC’s latest Monthly Oil Market Report, the oil producing cartel reported that in May – the same month OPEC met to extend its production cuts – crude output climbed the most in six month, since November 2016, rising by 336.1kb/d to 31.139 mmb/d, the highest monthly production of 2017, as members exempt from the original Vienna deal restored lost supply.

From the report:

Preliminary data indicates that global oil supply increased by 0.13 mb/d in May to average 95.74 mb/d, m-o-m. It also showed an increase of 1.48 mb/d, y-o-y. A decrease in non-OPEC supply, including OPEC NGLs represents a contraction of 0.21 mb/d m-o-m but an increase of 0.34 mb/d in OPEC crude oil production, not only offset the decline of non-OPEC supply but also increased overall global oil output in May. The share of OPEC crude oil in total global production stood at 33.6% in May, an increase of 0.3% from the month before. Estimates are based on preliminary data for non-OPEC supply, direct  communication for OPEC NGLs and non-conventional liquids, and secondary sources for OPEC crude oil production

Specifically, Libya pumped 730k b/d in May, up 178kb/d from 552kb/d in April; Nigeria output jumped to 1.68m b/d vs 1.506m b/d, a 174kb/d increase, while even the biggest producer Saudi Arabia, saw its output grow by 2.3kb/d to 9.94mb/d vs 9.938m b/d in April.

Not surprisngly, in an attempt to preserve the “reduction” narrative, in its self-reported figures, Saudi Arabia told OPEC via direct communication that it produced 9.88mb/d in May, down 66.2kb/d from April’s 9.946mb/d, although these figures are looking increasingly suspect.

Perpetuating its existence of forced self-delusion, OPEC predicted that surplus oil inventories would continue to decline in 2H 2017 as their cuts (what cuts) take effect and demand picks up. “The re-balancing of the market is underway” OPEC wrote, conceding that it is taking place “at a slower pace” and adding that “the decline seen in the overhang” in developed-nation stockpiles “is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers.” There was little discussion of the soaring US shale output, which as we wrote last night is expected to hit an all time high next month.

From the monthly report:

The decline seen in the overhang in OECD commercial oil inventories in the first four months of the year – from 339 mb to 251 mb compared to the five-year average (Graph 2) – is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers.

 

 

These trends along with the steady decline in oil in floating storage, indicate that the rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth. In light of these developments, OPEC and the participating non-OPEC countries decided to extend production adjustments for a further period of nine months in recognition of the need for continuing cooperation among oil exporting countries in order to achieve a lasting stability in the oil market.

Additionally, OPEC lowered forecasts for Russia production in 2H by 200k b/d, while the overall outlook for non-OPEC supply in 2H was reduced by 200k b/d, vs pledge of total reduction of ~558k b/d. The surplus in oil inventories in developed nations relative to their five-year average — OPEC’s main measure of the overhang — is down to 251m bbl from 339m at end-2016.

All of this is, of course, moot if Goldman’s forecast for shale production is accurate.

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In Gold we Trust Report: Bull Market Will Continue

The 11th edition of the annual “In Gold we Trust” is another must read synopsis of the fundamentals of the gold market, replete with excellent charts by our friend Ronald-Peter Stoeferle and his colleague Mark Valek of Incrementum AG.

Key topics and takeaways of the report:

– “Sell economic ignorance, buy gold …”
– Many signals suggest that we are about to face a big shift within the financial and monetary system
– 5 reasons why the gold bull market will continue
– Gold’s gains in 2016 dampened due to high expectations of Trump’s growth policy
– Gold still up 8.5% in 2016 and 10.2% since January 2017
– Attempt at normalization of U.S. monetary policy will be litmus test for US economy
– Bitcoin: Digital gold or fool’s gold?

– White, Gray and Black Swans and consequences for gold price
– Exclusive Interview with Dr. Judy Shelton (Economic advisor to Donald Trump) about a possible remonetisation of gold
– Prudent investors should consider accumulating gold and gold stocks now due to excessive global debt, the “gradual reduction of the U.S. dollar’s importance as a global reserve currency” and the high probability that the U.S. is close to entering a recession
– “It is a case of better having insurance and not needing it, than one day realizing that one needs it but doesn’t have it…”
– “We live in an age of advanced monetary surrealism….”

Research can be downloaded here:
In Gold we Trust – Extended version (169 pages) 
In Gold we Trust – Compact version (29 pages) 

News and Commentary

Gold tips lower, while palladium heads for highest finish since 2014 (MarketWatch.com)

Palladium near 16-year high, gold firm ahead of Fed meeting (Reuters.com)

China’s Shandong Gold Mining to seek loans to buy Barrick mine stake (Reuters.com)

Fed set to raise interest rates, give more detail on balance sheet winddown (Reuters.com)

Islamic State calls for attacks in West, Russia, Middle East, Asia during Ramadan (Reuters.com)

Gold Is In A “Long Term Uptrend” Due To Political Turmoil – Cook (Bloomberg.com)

Gold could withstand rising interest rates, unwinding of Fed assets: TD Securities (Platts.com)

Palladium Pandemonium – Short Squeeze Sends Precious Metal Spreads (ZeroHedge.com)

Gold-Stock Inflection Nears – Hamilton (SeekingAlpha.com)

What, Me Worry? says Mauldin (MauldinEconomics.com)

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