Tag: news

Oil’s Perfect Storm Lays At Trump’s Feet

Authored by Tim Daiss via OilPrice.com,

It’s becoming painfully clear that the way forward for global oil markets is going to be bumpy, very bumpy, particularly as we head into next year. Much of this uncertainty, even blame, is being increasingly leveled at a person that has surprised, flabbergasted and even shocked political opponents, allies and adversaries alike since he took office – President Donald Trump.

A growing line of thought surmises that while Trump uses the presidential bully pulpit, in this case Twitter, to put pressure on long-time ally and de facto OPEC leader Saudi Arabia to get ready to pump more oil to keep (both oil and gas) prices from spiraling out of control, much of the blame for higher prices actually belong to Trump.

The argument makes perfect sense.

If Trump would ease back on both his heated rhetoric toward Iran, though that case could be made over much of Trump’s dealings with China, the EU, Canada and others, and if Trump would revisit his decision on re-imposing sanctions on Iran, then oil markets would benefit.

Why? A softer line on Iran would reduce the worry or even fear that a loss of some 2.7 million barrels per day (bpd) of Iranian crude would roil oil markets so much that the Saudis would have to pump an unprecedented amount of oil, perhaps as much as 12.5 million bpd, eating up all of its spare capacity.

The Saudi’s have never pumped more than around 10.7 million bpd of oil, a level reached in June, and has for more than 50 years kept at least 1.5-2 million bpd of spare capacity for oil market management.

Under such a worst-case scenario, global oil markets would be dangerously exposed to any oil demand/consumption increases as well as geopolitical developments that always take aim at global oil markets. A recent Bloomberg article articulated the problem well. It said that “the simple truth is that there isn’t enough spare capacity in the world to replace the complete loss of Iranian exports.”

“Saudi Arabia can boost output to 11.5 million bpd immediately,” the report added, citing a 2016 interview with Saudi Crown Price Mohammed bin Salman. It can also go to 12.5 million in six to nine months, Bloomberg added, but the prince has said nothing since then to suggest the figures have changed.

Trump’s thinking called into question

However, all of this seems to be lost on Trump. With mid-term November elections approaching and decisive House and Senate seats in contention, much of the second half of the president’s term could be jeopardized if higher gas prices (amid higher oil prices) eat into voters’ pocket books and they take their frustration out at the polls. Trump’s only plan appears to put undue, perhaps geopolitically damaging pressure on the Saudis to make up for anticipated lost barrels when the Saudis likely can’t do it alone.

It’s also apparent that Trump has taken an emboldened stance with the Saudis since its Riyadh who was instrumental in Trump’s decision to re-impose Iranian sanctions.

With oil production problems persisting in Libya and in Venezuela and with those problems likely to carry into the fall election season and beyond, Trump is playing a dangerous game and could find his back against the wall. Voter angst in November would also spill over into the upcoming 2020 presidential election season. Consequently, the often-used campaign slogan of presidential incumbents, “Re-elect the President” may fall on deaf ears.

Two weeks ago, Hootan Yazhari, head of frontier markets equity research at Bank of America Merrill Lynch, said Trump’s push to disrupt Iranian oil production could cause oil prices to hit $90 per barrel by the end of the second quarter of next year. Others have forecasted even higher prices, breaching the $100 plus per barrel price point.

The only option, alluded to at the top of this piece, would be for Trump to re-engage with America’s European allies over Iranian nuclear development and other concerns. This would tone down oil market worries and perhaps even open the door for re-negotiation with both the EU and in time Tehran – in essence, cooler heads and diplomacy would prevail. However, there is little chance that the president would, or even could at this point, change his mind without losing immense political face. Something, thus far, he has been unwilling to do.

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Watch Live: Peter “We’ll Stop Trump” Strzok Grilled By House Judiciary Committee

Despite President Trump hearing rumors that the “FBI loverbirds” were getting cold feet, FBI agent Peter Strzok is finally appearing to publicly testify before the House Judiciary Committee. The hearing begins at 10 am ET.

Strzok, who has been accused of committing “treason” by Trump, is expected to be grilled about his anti-Trump text messages sent to his then-mistress, former FBI lawyer Lisa Page, during the 2016 campaign. In one text message, Strzok told Page they would “stop” Trump from becoming president. After the text messages came to light, Strzok was removed from Special Counsel Robert Mueller’s team, and reportedly put on desk duty.

Watch the testimony live below:

In a report released earlier this year, the DOJ’s inspector general found no “documentary of testimonial evidence” to suggest that political bias impacted the investigation, though Trump has repeatedly pointed out that the details of the IG investigation seem to contradict the conclusion. Lawyers for Page said Thursday that she would also comply with the subpoenas.

According to his prepared testimony, Strzok will blame everything on, who else: Vladimir Putin: “today’s hearing is just another victory notch in Putin’s belt and another milestone in our enemies’ campaign to tear America apart.”

Here are some other excerpts:

“In the summer of 2016, I was one of a handful of people who knew the details of Russian election interference and its possible connections with members of the Trump campaign.”

“This information had the potential to derail, and quite possibly, defeat Mr. Trump. But the thought of exposing that information never crossed my mind.”

Strzok: “Let me be clear, unequivocally and under oath: not once in my 26 years of defending my nation did my personal opinions impact any official action I took.”

The reporting on those remarks has raised some interesting questions.

In a letter,  Strzok’s attorney reportedly said his client may not be able to answer some questions about the Russia probe because he and his client were unable to get a meeting with the FBI and the Hill to discuss which topics would be off limits. Meanwhile, House Democrats are calling on House Republicans to release Strzok’s closed-door testimony, and have released some statistics about the questions that Strzok was asked.

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TSA Screeners Can’t Be Sued for Abuse, Federal Court Rules

Transportation Security Administration (TSA) screeners cannot be held liable for abuse claims under the Federal Tort Claims Act (FTCA), a federal court ruled Wednesday.

The 3rd U.S. Circuit Court of Appeals upheld a dismissal of a lawsuit filed against the TSA by Nadine Pellegrino and her husband. According to The Hill, Pellegrino was upset after she “was randomly selected for additional screening” at Philadelphia International Airport in July 2006.

As USA Today recounts, Pellegrino asked for a private screening, though she took issue with the way the officers treated her bags. When the officers were done searching her luggage, she took her larger bag and started to leave, but not without incident. According to USA Today:

The bag struck one of the TSA officers in the stomach, according to the officers. Pellegrino said an officer stood in her way as she tried to retrieve her smaller bag, and the bag hit him in the leg as she left, according to the officers.

Pellegrino was detained, and two TSA officers decided to press charges. Though she was acquitted in 2008, Pellegrino and her husband sued the TSA in 2009 for “false arrest, false imprisonment and malicious prosecution,” Reuters reports.

In a 2-1 ruling, the 3rd Circuit said TSA officers are immune to abuse claims from passengers like Pellegrino. The court reasoned that agency employees are not classified as “investigative or law enforcement officers” under the FTCA, which is the law that enables people to file claims against federal employees.

In his dissent, Judge Thomas Ambro argued that the FTCA’s definition of “investigative or law enforcement officers” includes people with the “legal authority” to carry out searches looking for violations of the law. Ambro also noted that it will now be very difficult for victims of TSA abuse to get the justice they deserve. “By analogizing TSA searches to routine administrative inspections, my colleagues preclude victims of TSA abuses from obtaining any meaningful remedy for a variety of intentional tort claims,” he wrote.

Writing for the majority, Judge Cheryl Ann Krause noted that the court was “sympathetic to the concerns” the ruling may raise, and recognized that “individuals harmed by the intentional torts” of TSA officers “will have very limited legal redress.”

Pellegrino, who said she’s reviewing the court’s ruling, could take several different courses of action.

“If I were the plaintiffs, I’d get new counsel with a proven track record of winning cases at the Supreme Court and appeal this decision,” Patrick Eddington, a policy analyst who studies civil liberties at the Cato Institute, told Reason. Eddington said Pellegrino and her husband could “make this an issue” in their local House race, which might put the ruling on Congress’s radar.

“There’s nothing to stop the House member representing the plaintiffs from filing impeachment articles against all involved TSA employees,” Eddington says. “Just filing the impeachment resolution might be enough to make TSA give the implicated screeners the boot.”

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Stormy Daniels Arrested at Ohio Strip Club After Undercover Cop Claims Butt Was Touched: Reason Roundup

“They are devoting law enforcement resources to sting operations for this?” Adult film star and locus of national scandal Stormy Daniels was arrested last night at Sirens, a strip club in Columbus, Ohio. The stop was part of a tour Daniels is taking across the country, which included a visit to D.C. Monday and Tuesday nights.

Attorney Michael Avenatti, who is representing Daniels in her lawsuit against Donald Trump, tweeted early Thursday morning that Daniels was arrested while “performing the same act she has performed across the nation at nearly a hundred strip clubs. This was a setup & politically motivated. It reeks of desperation. We will fight all bogus charges.”

At the D.C. show I saw Monday night, Daniels got up close and personal with the audience, but in a clearly theatrical way. This seems to have continued in Columbus, where Daniels was arrested for allegedly allowing a customer to come in contact with her in a non-sexual manner, according to Avenatti on Twitter.

Ohio prohibits any touching—sexual or otherwise—between nude or semi-nude performers and members of the audience at “sexually oriented” establisments. According to the police report, Daniels, while “topless and wearing a G-string,” touched an undercover police officer “in a specified anatomical area.” Specifically, she is accused of putting “both hands on officers buttocks” and “then put her breast in officers face.”

“Are you kidding me?” Avenatti tweeted early this morning. “They are devoting law enforcement resources to sting operations for this? There has to be higher priorities!”

Higher priorities for local cops than getting to take in naked ladies for a few hours and then assert their authority over the most famous of them? Avenatti can’t be that naive.

Daniels was officiall charged with three misdemeanor counts of touching a patron at a sexually-oriented business. She’s slated to be arraigned in the Franklin Municipal Court Friday morning. She will plead not guilty, according to Avenatti.

In a statement, Daniels announced that she would have to cancel her second scheduled night of Columbus performances. “I deeply apologize to my fans in Columbus,” she said.

FREE MARKETS

Trump continues boorish and bizarre behavior at NATO summit. The president announced that NATO allies will increase spending, as he desires, but offered little in the way of details. French President Emmanuel Macron has since denied Trump’s claim.

FREE MINDS

Kansas govenor censors campus art. The Kansas governor and secretary of state are demanding that the University of Kansas remove a work of art from the school’s “Pledge of Allegiance” exhibit, part of a nationwide public art series from New York nonprofit Creative Time. The offending flag, Josephine Meckseper’s “Untitled (Flag 2),” is “a collage of an American flag and one of my dripped paintings which resembles the contours of the United States,” said Meckseper.

Here’s a good roundup from FIRE of art censorship on college campuses.

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Everyone Is Hoarding Gold

Authored by Tom Lewis via GoldTelegraph.com,

The tiny nation of Kyrgyzstan has big plans. Caught between its giant trading partners, China and Russia,Kyrgyzstan is stockpiling gold. It wants to increase gold from 16 percent to 50 percent as part of its international reserve.

Tolkunbek Abdygulov of the Kyrgyz Central Bank has stated that any currency, whether dollars, rubles, or yuan, has become too vulnerable. The small mountain nation, with a population of 6 million, relies heavily on Russian and Chinese imports. With the possibility of global trades war on the horizon, Kyrgyzstan prefers to protect its financial stability by amassing gold. It suffered during the ruble devaluation in 2015, and it is turning to gold as a hedge against any renewed economic upheaval.

Kyrgyzstan is merely following in the steps of other, larger nations, such as Russian, India, and Turkey, who are also increasing their gold reserves. The U.S. and Germany both have reserves that are 70 percent of its central bank holdings. If there is a trade war, countries are prepared.

Gold has traded steadily and unspectacularly for the past decade, but looming tariffs and trade sanctions have pushed gold out of the doldrums and into the stoplight.

Kyrgyzstan, one of the few post-Soviet republics with its currency, has been buying gold since 2014. Abdygulov has kept the nation’s currency, the som, relatively steady and recognizes that stockpiling gold will serve as a hedge against inflation.

Kyrgyzstan is smart to worry. Following President Trump’s promise to institute tariffs on imports, Russian has sold off half of its U.S. Treasury bonds, more than $47 billion, in retaliation. At the same time, Russia’s central bank has increased its gold reserves to 62 million ounces, at a value of $80.5 billion, in an effort to diversify its reserves in view of possible geopolitical unrest. Russian is less interested in increasing return on its investments. The U.S. bonds yield a higher return than gold in 2018, but selling off the Treasury bonds lessens Russia’s dependency on the U.S. dollar. Russian’s hoarding of gold has long been viewed as an attempt to devalue the U.S. dollar as the reigning global currency.

China is another country that would like to see the U.S. dollar replaced on the global financial market. If China were to sell off its $1.18 in U.S. Treasury bonds, it could go a long way in accomplishing that goal.

Russia’s increase in gold holdings has made it a global gold powerhouse. It has triple the gold as a percent of GDP, or 5.6 percent of the world’s available precious metal.

This is a thought-out, long-term plan for Russia, and U.S. trade sanctions are only a part of the picture. With large gold reserves and a relatively small international debt, Russia has positioned itself as a strong global financial force. It not only wants to strengthen its own currency, the ruble, but it is preparing itself for the collapse of the U.S. dollar. The future won’t be the dollar vs. the ruble. It may very well be East against West, and East is in an extremely favorable battle position.

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May Delivers “Real Blow” To UK Banks In Brexit White Paper

After a handful of her political allies quit their posts to express their dissatisfaction with a Brexit plan agreed to last week that was widely seen as too soft, this morning – and just hours before Donald Trump’s arrival – UK Prime Minister Theresa May released a long-awaited White Paper outlining her government’s approach to Brexit, entitled “The Future Relationship Between The United Kingdom and European Union” (link).

Critics assailed the paper for proposing to keep the UK closely tied to the EU single market. The plan is essentially a proposal for a new “UK-EU free trade area” with closely linked customs regimes to ensure there are no tariffs. However, the UK services sector – most notably its banks – would suffer significant disruptions thanks to the “regulatory freedom” envisioned by May.

More notably, the White Paper revealed that May has accepted that the UK’s banks will need to leave the European banking union. Instead, she’s set her sights on “regulatory equivalence” agreements with the EU that have applied to countries outside the trading bloc. While UK banks would lose their unfettered access to EU markets, May hopes that a new “treaty-based” process would allow them to achieve an enhanced version of equivalence where the EU would commit to maintaining long term access for UK banks.

“This new economic and regulatory arrangement would be based on the principle of autonomy for each party over decisions regarding access to its market,” the paper said.

The policy chairman of the City of London, where the UK’s financial sector is based, said the proposals outlined in the White Paper would be a “real blow” to the UK banking sector. Looser ties to Europe would mean the financial and professional sector won’t be as able to create jobs and support growth across the wider economy.

Additionally, the white paper proposes that the UK continue to abide by the EU’s common rulebook for regulation and product standards for goods, to protect “just-in-time” supply chains.

May proposed a joint EU-U.K. committee to determine whether an EU rule change would apply to the association agreement. UK parliament would then have the right to decide to continue to abide by EU rules “recognizing there could be proportionate implications” for trade between the two if MPs rejected it.

The proposed relationship would require continued close cooperation with the EU, including “regular dialogue between U.K. and EU leaders.” The white paper acknowledges that as the arbiter of the EU’s regulations, U.K. courts must make reference to the European Court of Justice, but stipulates that an independent arbiter should settle any disputes between the U.K. and EU.

Of course, there’s no guarantee that the EU will accept her proposals, however if the UK pushes back hard, the most likely outcome would be a hard Brexit as May’s cabinet will likely topple.

The EU has said all along that “mutual recognition” of each side’s financial regulations would be unacceptable due to Britain’s unwillingness to adhere to the rules of the single market. May’s proposals for a post-Brexit immigration regime would be set out in more detail in another white paper to be released later this year.

Read the full white paper below:

 

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Are Congressional Republicans Ready To Fight Trump’s Tariff Madness?

President Donald Trump doubled down on his trade war Wednesday and members of Congress finally took their first tiny steps toward containing the economic damage.

Markets fell Wednesday as the White House announced a new round of 10 percent tariffs on $200 billion of Chinese products, a move that will force American consumers and businesses to pay higher taxes for imported goods including refrigerators, cotton, electronics, and fish. The Trump administration said the tariffs were a response to China’s decision last week to place tariffs on $34 billion worth of American exports, which was itself a retaliatory move aimed to strike back at the Trump administration for placing a 25 percent tariff on the same amount of Chinese goods on July 6.

As the trade war between the world’s two largest economies escalates, we still don’t know what the White House hopes to gain from the confrontation. American and Chinese trade officials told The Wall Street Journal on Wednesday that there are no negotiations scheduled between Washington and Beijing.

While the administration says the trade barriers will force China to stop stealing American intellectual property, it appears more likely that non-Chinese businesses will bear the brunt of the tariffs, according to an analysis by the Peterson Institute for International Economics. Economists say the tariffs are unlikely to force China to change its trade practices, though they could succeed in doing significant damage to the economies of both nations.

The new set of tariffs will be the subject of hearings in late August, and will not take effect until after those hearings have concluded.

Meanwhile, the Senate voted to include a provision in the Farm Bill limiting the president’s power to lay tariffs for national security reasons. An amendment co-sponsored by Sens. Bob Corker (R–Tenn.), Jeff Flake (R–Ariz.), and Pat Toomey (R–Pa.) would require congressional approval before the president could impose tariffs under Section 232 of the Trade Expansion Act of 1962—the authority that Trump has invoked to impose steel and aluminum tariffs, and which he has threatened to use to slap new tariffs on imported cars and car parts.

“This Section 232 provision is being misused,” Toomey said. The delegation of those powers to the presidency were meant to ensure that America’s military could obtain materials necessary for fighting a war, he explained, but Trump has seized on that authoity “as a way to impose tariffs on some of our closest allies, closest friends, and most important trading partners.”

The amendment passed 88-12, with all “nay” votes coming from Republicans.

The nonbinding vote is, for now, mostly meaningless. Still, the bipartisan support for limiting the president’s ability to abuse the Section 232 tariff authority is the first sign that Republicans in Congress might be willing to stand up to Trump as he continues escalating an unnecessary trade war.

In a statement, Corker said he believed support for the proposal would grow as “American businesses and consumers begin to feel the damaging effects of incoherent trade policy.”

That might already be happening. Wednesday’s vote could also signal a shift on trade within the Senate’s GOP leadership: when Corker tried to offer a similar amendment back in June, his colleagues prevented him from doing so.

In the last month, Trump has followed through on the threat to impose tariffs on Chinese imports (those tariffs were not issued under Section 232, however, and would not be subject to the congressional oversight included in Corker’s proposal, which targets the broader steel and aluminum tariffs that took effect in early June). In response to the White House’s bellicose trade policies, several American businesses—including famous motorcycle manufacturer Harley-Davidson—have announced plans to close, move, or eliminate jobs

“This vote represents the strongest and most straightforward message this chamber has delivered against the administration’s abuse of trade authority,” said Flake in a statement. “Imposing tariffs on products from allies that pose no threat to our national security is just plain wrong.”

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On Trade, Trump Is Who He Claims to Be: New at Reason

When it comes to trade, we should take President Trump at his word, writes Veronique de Rugy. This is one policy area where he’s been remarkably consistent over the years. As we embark on a trade war, let’s put this question to rest. Deep down, President Trump is not a free trader. In face, she writes, nothing in what the president has ever said suggests that he’s anything but a diehard mercantilist.

View this article.

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Sorry America: Hope For Income Growth Collapses As Wages Stagnate For Second Month In A Row

‘Hope‘ was never a good strategy…

Since President Trump was elected, expectations for rising incomes soared to its highest level since 2001 in March.

However, as real average hourly earnings growth has subsided, that hope has suddenly crashed back to reality…

So much for those ‘soft’ survey questions!

In fact for the last two months, real average hourly earnings growth has been unchanged on a year-over-year basis.

But it’s not like you didn’t get a pay rise America – Real average weekly earnings up $0.88 from a year earlier to $371.05.

So stop complaining!!

 

 

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Blame AirBnB: CPI Misses After Hotel Prices Drop By Most On Record

Consumer Prices rose less than expected MoM (+0.1% vs +0.2% exp), but on a year-over-year basis, CPI surged 2.9% – the most since Dec 2011.

 

The indexes for rent and owners’ equivalent rent both rose 0.3  percent, but the index for lodging away from home fell 3.7 percent in June after rising 2.9 percent in May.

 

The disappointing MoM print within the CPI report also showed hotel and motel rates fell 4.1 percent in June from the previous month, the biggest decline on record and dragging down the broader index by 0.037 percentage point.

Other gauges of housing costs continued steady gains, with rent of primary residence and owners-equivalent rent both rising 0.3 percent.

Looking further under the hood, Energy Services and Apparel prices dropped MoM, while Fuel Oil prices jumped most MoM.

 

Finally, we note that today’s CPI really puts the entire Treasury market complex into perspective; it’s extraordinarily rare to get a negative real yield (on a spot basis) on the long bond, but we’re getting awfully close.

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