Via Judicial Watch,

Weeks after the chief law enforcement official in New York State issued “legal guidance” to help municipalities provide sanctuary for illegal immigrants, nearly a dozen have followed through with the attorney general’s order to skirt federal law. The goal, according to New York Attorney General Eric Schneiderman, is to provide local governments with a tool to “protect their immigrant communities, regardless of new federal enforcement practices.” Those that have followed Schneiderman’s directive range from sleepy towns like Newburgh to larger cities such as Rochester as well as Albany, the state capital.

Schneiderman issued the decree in response to the Trump administration’s proposed immigration enforcement policies. The document states that its purpose it to describe the legal landscape governing the participation of local authorities in immigration enforcement and to “assist local authorities that wish to become sanctuary jurisdictions by offering model language that can be used to enact local laws or policies that limit participation in immigration enforcement activities.” Utilizing so-called “model language” has become a key tool for sanctuary cities, counties and states that want to avoid losing federal funds under new Trump administration measures that punish local governments for not cooperating with federal authorities. Just last month Judicial Watch reported on a California town that found a creative way to implement a stealth sanctuary policy with “model language” that avoids using certain trigger words.

New York stands out because it’s the only state in which the top law enforcement authority, a veteran elected official, is actively encouraging and assisting local governments to violate the law. Some have faced resistance from citizens, though the majority have passed stealth sanctuary measures with little opposition since Schneiderman launched his campaign to protect illegal aliens in the Empire State. In the upscale town of Irvington, situated about 20 miles from Manhattan, the Board of Trustees issued a Statement of Tolerance days after the 2016 presidential election to guarantee that people of all races, religions, orientations and countries of origin are safe within its boundaries. “It seems there are many in our nation who are not currently feeling welcome nor safe,” the statement reads. “We want everyone to know that the Irvington Board of Trustees will never tolerate discrimination of any kind in our Village.” The city lists a phone number of the local police and encourage anyone who witnesses “any form of discrimination or intimidation” to call immediately.

Last month Irvington unanimously passed a resolution making it a sanctuary city and lawmakers credit the attorney general’s legal guidance. Now the mayor and several trustees are used as propaganda by the attorney general’s office to promote more illegal alien sanctuaries in the state. In a statement issued by the attorney general, Irvington Mayor Brian Smith says this: “We relied on the guidance of the AG’s office in crafting the wording of the resolution, which has the complete support of our police department. Irvington proudly stands as the first Westchester municipality to pass such a resolution and looks forward to having others step forward.” Under the new measure, which reportedly will soon be adapted by other communities in the county, Irvington will not honor detainer requests from federal immigration enforcement agencies.

One Irvington resident who continues challenging the sanctuary measure is an attorney who argues that the village is protecting criminals and endangering the lives of citizens. Her name is Lauri Regan and she reminds Irvington lawmakers in writing about a recent Maryland case in which two illegal immigrants raped a 14-year-old girl in a high school bathroom. Immigration and Customs Enforcement (ICE) had issued a detainer for one of the rapists but, because Montgomery County offers illegal immigrants sanctuary, it was ignored. Regan fears the same will occur in her hometown of Irvington. In one electronic mail Irvington Mayor Brian Smith tells Regan that he fails to see a link between the Maryland case and the new Irvington policy and in another he writes that “we do not want undocumented immigrants to fear interacting with our police department.”

via http://ift.tt/2oOVR48 Tyler Durden

While the market has been generally euphoric over Trump’s proposed fiscal agenda (even if in recent weeks it increasingly looks its implementation will be indefinitely delayed), one adverse side effect which has largely been ignored by the market is the impact of rising interest rates not only on sovereign debt, but on record corporate debt loads. Conveniently, this was one of the more notably topics covered in the latest Global Financial Stability report released by the IMF on Wednesday.

According to the IMF writes, as corporate leverage has risen, and is now at the highest level since the start either the financial crisis or the dot com bubble, depending on which metric one uses…

… so too has the proportion of income devoted to debt servicing, notwithstanding low benchmark borrowing costs. And while the absolute level of debt servicing as a proportion of income is low relative to what it was during the global financial crisis, the 4 percentage point rise has brought it to its highest level since 2010, which leaves firms vulnerable to tighter borrowing conditions. The average interest coverage ratio—a measure of the ability for current earnings to cover interest expenses— has fallen sharply over the past two years.

Meanwhile the IMF warns that earnings have dropped to less than six times interest expense close to the weakest multiple since the onset of the global financial crisis.

Historically, deterioration of the interest coverage ratio corresponds with eventual widening in credit spreads for risky corporate debt. Here, the IMF is surprised to note that the market pricing of corporate risk has decoupled from the decline in interest coverage ratios, suggesting more mispricing of risk due to central bank intervention:

Declines in the interest coverage ratio have been concentrated mostly in smaller firms, which may have less access to capital market financing than their larger counterparts. Under what the IMF dubs an adverse scenario, an “unproductive fiscal expansion” could lead to a sharp rise in borrowing costs. Such a sharp rise in interest rates amid tepid earnings growth could further compromise the ability of firms to service their debt.

Under this scenario, the combined assets of challenged firms could reach almost $4 trillion, the IMF calculates.

The IMF then warns that the number of firms with very low interest coverage ratios — a common signal of distress — is already high: currently, firms accounting  for 10% of corporate assets appear unable to meet interest expenses out of current earnings:

This figure doubles to 20%  of corporate assets when considering firms that have slightly higher earnings cover for interest payments, and rises to 22% under the assumed interest rate rise.

The stark rise in the number of challenged firms has been mostly concentrated in the energy sector, partly as a result of oil price volatility over the past few years. But the proportion of challenged firms has broadened across such other industries as real estate and utilities. Together, these three industries currently account for about half of firms struggling to meet debt service obligations and higher borrowing costs.

As the FT notes, this stark warning warning about potential US risks resulting from a sharp rise in interest rates, came alongside what was otherwise a relatively cheery assessment of the broad state of global financial stability, which the IMF said had been improving since last year.  Besides the possibility of US policy mis-steps the IMF said China’s credit boom continued to pose a major risk to the global economy as authorities there struggled to rein in credit growth, repeating what has increasingly become a regular warning from the fund.

The IMF also reiterated a well-known warning about China’s financial system, whose assets are more than 3x greater than China’s GDP (more on that later), as well as bringing attention to the European bank sector, where “persistently weak profitability is a systemic stability concern.”

As for the biggest risk denoted by the IMF, the threat of mass defaults should interest rates spike making debt service impossible for up to 22% of US corporations, perhaps it was this that Gary Cohn explained to Donald Trump ahead of the president’s recent interview with the WSJ in which he admitted that he suddenly prefers lower interest costs. That said, it remains to be seen if the “unproductive fiscal expansion” envisioned by the IMF can be avoided.

* * *

Finally, here are two useful panels from the IMF depiting the evolution of corporate leverage and the credit cycle in the US…

… as well as the full visual explanation of linkages between debt service, interest coverage ratios and corporate vulnerability resulting from higher interest rates.

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

Following API's surprise gasoline build (and small crude draw), DOE confirmed concerns with a surprise build in gasoline inventories. Crude inventories drew down for the 2nd week in a row. WTI prices slipped though as production rose to its highest since Aug 2015.

API

• Crude -840k (-1.4mm exp)
• Cushing -672k
• Gasoline +1.374mm (-2mm exp)
• Distillates -1.8mm

DOE

• Crude -1.034mm (-1.4mm exp)
• Cushing -778k (+175k exp)
• Gasoline +1.542mm (-2mm exp)
• Distillates -1.955mm (-1mm exp)

Crude inventories dropped for the second week in a row but gasoline saw the first build in 9 weeks…

 

Crude Production continues to trend higher with lagged rig counts. Production is now at its highest since Aug 2015.

At this rate of growth, the U.S. could set a new weekly production record shortly after OPEC next meets to discuss its output deal.

WTI/RBOB bounced back (in the face of a rising dollar) after tumbling on API last night but ahead of the DOE data began to roll over. Algos went wild on the DOE print but the trend was lower in WTI and RBOB…

As Bloomberg's Javier Blas notes, the bulls really, really, really need stronger gasoline demand growth pronto. If not, the U.S. will enter the key driving season with too much gasoline on storage. Over the last four weeks, motor gasoline product supplied averaged over 9.3 million barrels per day, down by 0.7% from the same period last year. Refineries are running very hard to clear the crude glut, and the risk is creating another glut down the chain.

As Bloomberg reports, OPEC Secretary General Mohammad Barkindo sees producers near to re-balancing the market, while the United Arab Emirates Energy Minister Suhail Al Mazrouei says "it’s going to take a long time to reduce inventories." Draining the stockpile is going to take a significant period with supply running below demand. We don't quite seem to be in that position yet.

via http://ift.tt/2pBYW7C Tyler Durden

Authored by Danielle DiMartino Booth via Time.com,

Coulda, shoulda, woulda. How different would the world we live in today be had the Federal Reserve shown restraint and practiced self-control in the current economic recovery? Where would the stock market be if Fed officials had not placated investors every time they threw a temper tantrum, demanding more stimulus?

We will, of course, never know the answers to these questions. But we can hope that the next generation of Fed leaders does have the wisdom and courage to push back against the market’s demands in favor of fostering long-term stability and economic growth.

Soon after ringing in 2014, a hilarious column by one of my closest friends, market analyst Peter Boockvar of the Lindsey Group, made me laugh out loud.

I forwarded “Beer Goggles” to Dallas Federal Reserve president Richard Fisher, who loved it when I shot great metaphors his way.

Not long afterwards, Fisher quoted Boockvar, giving what would become his most famous speech: “QE puts beer goggles on investors by creating a line of sight where everything looks good.”

For his “wine and martini” audience, the National Association of Corporate Directors, Fisher defined the term “beer goggles,” described in the Urban Dictionary as the effect that alcohol has in rendering a person alluring who one would ordinarily regard as unattractive.

“Things often look better when one is under the influence of free-flowing liquidity,” Fisher said. “This is one reason why William McChesney Martin, the longest-serving Fed chairman in our institution’s 100-year history, famously said that the Fed’s job is to take away the punch bowl just as the party gets going.”

Where are we now? Punch bowl, beer goggles. Different eras, same hangover.

Commercial real estate and bonds are more overvalued than at any time in history and stocks are trading at their priciest level save one period, the late 1990s before the dotcom implosion. The beer goggles, it would seem, have blinded investors to the bubble wrap that’s enveloped their portfolios.

There are a few brave souls at the Fed who have raised a red flag. On March 22^nd, Boston Fed President Eric Rosengren warned, “…we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

Wiser words, especially given so few who recall that it was not the decline in oil prices that made the late 1980s such a painful period for the economy, but rather the crash in commercial real estate the energy crunch catalyzed.

Underlying the multiple overheating markets is a persistent underappreciation of financial instability among Fed policymakers. The institution, overladen as it is with PhD economists, has yet to revisit the models that drive its setting of interest rate policy. Had the Fed’s inflation metrics taken into account runaway stock prices in the late 1990s and skyrocketing home prices in the early 2000s, it’s likely they would have intervened to tighten financial conditions much sooner than they did.

Revisiting the wisdom of former Fed chair McChesney Martin is useful:

You always want these technical experts on tap in positions like this, but never on top.

The hope is that President Donald Trump heeds McChesney Martin’s 1970s-era wisdom, that he respects the wishes of those who originally envisioned the Fed as an appreciably more intellectually diverse entity. After all, the original 1913 Federal Reserve Act requires the president to appoint leaders across a diversity of industries.

That is certainly not the case today. Of the 17 leaders on the Federal Open Market Committee, which sets interest rates, 10 are PhD economists and two are lawyers. Few would dispute this makeup is the antithesis of "diversity."

President Trump has few opportunities to make his mark, unheeded by others’ influence. The choice of the Fed’s future leaders is a rare and exceptional place for him to leave his mark to the benefit of generations of Americans to come.

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

“Buy these 50 stocks and that’s all you need” to get rich. That was the early 1970’s as the stock market bounced back from a deep correction to make new highs (point 1 on the chart below).

Those 50 stocks were dubbed the “Nifty 50“ and investing in them felt like a fool-proof plan at the time. Well, today’s stock market is beginning to feel a bit like that. And, in the case of the S&P 500 (INDEXSP:.INX), price is facing a similar line of resistance (point 2). In both instances, long-term channel resistance is being tested (see the chart below).

It was 50 stocks back then, just add a “0” today and make it the nifty 500? S&P 500 Long-Term “Weekly” Chart

CLICK ON CHART TO ENLARGE

A clear decisive price move above resistance would be very bullish. But it’s worth noting that several key stock market indices are facing similar long-term resistance… and each has shown weakness at first blush. Worth keeping an eye on in my humble opinion!

This article was written for See It Markets, to see rest of the article and key indices are resistance CLICK HERE

 

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Website: KIMBLECHARTINGSOLUTIONS.COM

 

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Princess Ivanka is “Heartbroken”. America Goes To War

Written by Peter Diekmeyer (CLICK HERE FOR ORIGINAL)

 

 

America’s stunning attack on Syria just days after the Trump Administration signaled tolerance for the Assad regime has left global-macro analysts scrambling to grasp the President’s decision making processes.

 

Reports that Ivanka Trump’s “heartbroken” reaction to a possible chemical weapons attack influenced the impulsive decision suggest a President guided more by emotion than law or rigorous policy analysis.

 

The extent of the President’s daughter’s role in inspiring an act of war without a formal investigating of the incident, Congressional approval, or United Nation’s sanction calls for a total reappraisal of how the Administration is analyzed.

 

Because if the Trump children’s influence overrules traditional checks and balances related to war, then it will also be felt in economic, social, and political matters.

 

America’s drift towards monarchy 

Ironically, the best historical model to use when analyzing the Trump Administration may be a monarchical court, in which the relative powers of princes, princesses, and “hired help” (such as senior advisor Steven Bannon) are often opaque.

 

This may sound like heresy. But there are numerous signs suggest that the United States has been drifting towards de facto monarchy for decades.

 

This can be seen in strong voter support for both the Bush and Clinton families, pressures on Michelle Obama to run for public office, coupled with a plunge in intergenerational economic mobility and the entrenching establishments of various power elites.

 

Donald Trump looks to be positioning his family to continue that trend.

 

The US President has given key policy posts to both Ivanka and his son-in-law Jared Kushner and has positioned US initiatives to funnel cash and free advertising to family holdings (Mar-a-Lago and Trump Tower), run by his sons Eric and Donald Junior.

 

America isn’t alone in its drift towards monarchy, which for most of recorded human history has been the planet’s natural system of governance.

 

Canada’s Justin Trudeau is the son of a former head of state, as are Japanese Prime Minister Shinzo Abe, Korea’s Kim Jong-Un, and slews of third world leaders.

 

Prince “Jared the Debtor”: key to U.S. monetary policy

If you think of the Trump children and relatives as traditional “princes” and “princesses”, then their interests and possible courses of action become clearer.

 

The best example relates to Trump’s son-in-law Jared Kushner, whom, for ease of understanding, we may refer to as “Prince Jared the Debtor” in this article.

 

Prince Jared comes from the Kushner real estate family, which like most investors in the sector, including King Donald himself, are heavy users of debt financing.

 

Analysts who take this into consideration, as we did in our Megatrends 2020 article, can easily chart the course forinterest rates: the Trump Administration Federal Reserve appointments will consist entirely of easy money advocates.

 

The President himself recently confirmed this by uttering favorable comments about Janet Yellen, following harsh condemnation of her policies during the election campaign.

 

Similar clarity about possible Trump Administration moves can be gained by analyzing the relative positions of the remaining Trump children, Eric, Donald and Tiffany, as well as other family members.

 

King Donald the Tyrant

On a more sobering note, analyzing the Trump Administration as a monarchy, with Donald Trump as “King”, provides an excellent framework for understanding how foreign powers will react.

 

James Madison, writing in the Federalist Papers (under the pseudonym Helvetius 1), described a government that initiated acts of war without Congressional approval (as the Trump Administration just did) as a “tyranny.”

 

Americans will not initially pay attention to this analysis or depiction. But foreign powers will.

 

The era of hyperpower politics ended last week.

 

As these words are being typed, any foreign leader with interests that are antithetical to those of King Donald the Tyrant, that has a modicum of common sense, will be seeking a way to get under either the Russian or Chinese nuclear umbrella.

 

A huge opportunity for the Alt-Fin media

Analyzing the power and influence of the Trump children as well as the President’s brothers, sisters and friends provides stunning opportunities for the Alt-Fin media.

 

Zero Hedge, USA Watchdog, RealVision, newsletter writers and the like, many of which have been operating “out of the box” for years, are far better prepared to adapt the new environment than legacy analysts.

 

That’s particularly true of the older Alt-Fin media hacks who followed the Soviet Union during the Cold War, who refined creative techniques for assessing power structures by, for example analyzing the positioning of Politburo members during May Day parades.

 

Conversely mainstream media, think tanks and private sector forecasters – which assess power structures and economic trends based on title, function and flows – are unlikely to have the flexibility to adjust their perspectives outside their silos.

 

That said, the following is a useful tool:

 

Pick the Trump kid, friend, or relative whose motives and actions you want to understand.

 

Now pronounce their name with their appropriate title next to it.

 

“Princess Ivanka the Heartbroken.” “Prince Jared the Debtor.” “Princess Tiffany the Wild.” “King Donald the Tyrant.”

 

Now you get it.

 

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

 

Princess Ivanka is “Heartbroken”. America Goes To War

Written by Peter Diekmeyer (CLICK HERE FOR ORIGINAL)

via http://ift.tt/2pBS6ic Sprott Money

Yesterday, ahead of the London Fix, Gold was monkeyhammered lower on yuuge volume, only to rip back higher.

 

Today, having failed to keep the precious metal down (25,000 contracts dumped in a minute), they went for it again with a $3 billion notional pummeling in futures…

And the dollar is deja vu-ing too…

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

One day after covering its long-standing long dollar call (coincidentally, just one week after former Goldman COO Gary Cohn urged Trump to flip on his own “strong dollar” policy), Goldman has gotten even more cautious and in a note released this morning it warns that “Investors are increasingly concerned about an S&P drawdown.” Here’s why:

The 10% rise in the S&P index since the US election was catalysed by a surge in optimism surrounding US policy. While the hoped-for policy changes now appear less likely, ‘soft’ data have shown continued strength, leaving the S&P index hovering just under 2400 as investors wonder whether economic activity can catch up to sentiment and support another leg higher in asset prices. While opinions on that question remain split, what is clearer is that, as investors continue to wait for the global economy to ‘show me the activity’, they have become increasingly nervous about the prospect of a large, sharp S&P drawdown: the VIX index, which had remained around 12 through much of 2017Q1, now stands close to 15.

However, while the S&P is clearly long overdue for a correction, Goldman cautions that an even greater threat faces emerging markets because “EM assets have not faced a true test in 2017: a
large S&P drawdown and a spike in volatility and investor concern.” Some more thoughts on the potential spillover effects from a US correction on emerging markets from Goldman.

How concerned should EM investors be if the S&P were to see a large reversal of its post-election gains? On the one hand, the ongoing improvement in macro fundamentals has contributed to a surprising resilience of EM assets to a wide range of external shocks in recent months, including fluctuations in US policy perceptions (“Benchmarking the EM asset recovery post the ‘Trump Tantrum’“, Global Markets Daily, February 23, 2017), DM rates and commodity prices. More specifically, Exhibit 2 shows that, in 2017, both EM equity indices and EM currencies have been far less sensitive than usual to shifts in the S&P index.

Exhibit 3 makes clear, however, that EM assets have not faced a true test in 2017: a large S&P drawdown and a spike in volatility and investor concern (the upper-left tip of the S&P’s ‘volatility smile’). Indeed, it has been more than a year since the S&P has seen a 10% drawdown, and volatility (both realised and implied) remained near historical lows for much of 2017Q1. Each of these trends was supported by rising momentum in survey-based measures of activity that – even if ‘hard’ data were to pick up – would be difficult to match in the remainder of 2017.

Goldman’s conclusion:

If the market is forced to wait much longer for a follow-through in activity data, and the VIX continues to rise, EM investors should not be complacent: despite improving macro fundamentals, an S&P drawdown when the VIX index has reached high levels would likely be painful, especially given that investors have continued to build EM positioning. Exhibit 4 shows that the sensitivity of EM assets to the S&P index is, unsurprisingly, far higher when the VIX is elevated.

And with that we shift our attention to the market where we find, surprisingly, that the latest VIX slamdown was just unleashed, and the dollar is rising, making a mockery of yet another Goldman warning.

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