A.M. Links: Trump Rescinds Obama Rule on Bathrooms for Transgender Students, Iraqi Forces Recapture Mosul Airport from ISIS, New Poll Says More Americans Trust Media Than Trust Trump

  • The Trump administration has rescinded the Obama administration’s guidelines on bathroom access for transgender students.
  • Iraqi forces have recaptured the Mosul airport from ISIS.
  • “Hundreds of protesters rallied in Anaheim, California, Wednesday night after video surfaced of an off-duty police officer apparently firing a gun during a scuffle with a 13-year-old after kids walked on his lawn.”
  • Sen. Susan Collins (R-Maine), who sits on the Senate Intelligence Committee, says that she is open to the idea of using a subpoena to gain access to Donald Trump’s tax returns.
  • Secretary of State Rex Tillerson is in Mexico to discuss trade, immigration, and other issues.
  • According to a new poll, “a majority of Americans say they trust the media more than President Trump.”

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Fed’s National Activity Index Drops In January

Despite all the exuberant ‘soft’ survey data, The Fed’s National Activity Index dropped in January and missed expectations as 49 of the 85 subcomponents deteriorated.

The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.05 in January versus 0.18 in December.

A reading below zero indicates below-trend-growth in the national economy and a sign of easing pressures on future inflation.

36 of the 85 monthly individual indicators made positive contributions, and 49 of the 85 monthly individual indicators made negative contributions.

This real activity index confirms the decline in the ‘hard’ data post election…

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French Yields Tumble To 1-Month Lows After Macron Alliance

While bookmakers’ odds are unchanged for a Le Pen victory, French bond yields have tumbled to one-month lows as the prospect of a centrist alliance in the country’s presidential election eased market anxiety that far-right candidate Marine Le Pen will win.

French yields are down to one-month lows. As The FT notes, the decision on Wednesday by independent candidate François Bayrou not to stand in the country’s elections, and instead throw his support behind fellow centrist Emmanuel Macron, has helped French bonds snap a three-day losing streak.

“Though the polls continue to suggest that a Le Pen victory is unlikely in the second, decisive round, the tone throughout yesterday’s session was clear in that the market does not wish to be proven incorrect, yet again,” said Lyn Graham-Taylor at Rabobank.

And despite the collapse in German yields, the French spread has also reduced notably… though only to 4 days lows…

“It is increasingly debatable, above all in bond/credit market terms, whether there is another story in financial markets other than the French elections and related market fears,” noted Marc Ostwald, a strategist at Admisi.

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Bitcoin Up 10 Days In A Row – Surges To Record High

As the dollar drops, and fears over US trade action may exaggerate capital outflows in China, Bitcoin has renewed its rally post-Golden Week to new record highs. The virtual currency is up 10 days in a row as we noted previously that the Chinese have discovered a workaround for the PBOC's crackdown on Bitcoin exchanges.

Record highs in USD terms… (not yet record highs in Yuan terms)

 

As we noted previously, China’s central bank has stepped up oversight of bitcoin exchanges this year, leading major trading platforms to impose halts on withdrawals and other checks to appease the regulator. But, as Quartz reports, Chinese traders aren’t playing along—they are apparently flocking to peer-to-peer marketplaces to continue buying and selling bitcoin.

As Yuan trading on bitcoin exchanges has plummeted…

Quartz notes that one of the longest established peer-to-peer marketplaces is LocalBitcoins, which acts as a kind of directory for buyers and sellers to find each other. Users can arrange to meet in person, on chat platforms, or talk on the phone to arrange exchanges involving bitcoin.

Yuan volumes on the marketplace have exploded in the past week. Trading on LocalBitcoins currently accounts for about 6% of the total trading volume in yuan, according to data source Crypto Compare.

 

And Bitcoin prices have practically erased all of the Chinese crackdown losses…

 

It seems the Chinese will not be stopped in their effort to get capital out of the country – even as the PBOC spends billions propping up the currency in the short-term to create the illusion of stability.

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Trump Meets With Top CEOs To Brainstorm “Jump-Starting” US Economy, Creating Jobs

Today at 10:30am, president Trump will summon some of America’s most prominent corporate executives to the White House Thursday, in a roundtable brainstorming session whose purpose is to come up with policy ideas meant to facilitate trade and taxes, boost job creation and generally jump-start the US economy.

According to press reports, Trump will split the group of executives, among which Johnson & Johnson’s chief executive officer, Alex Gorsky, and David Farr, chairman of Emerson Electric, into four working groups to come up with recommendations on deregulation, workforce training, infrastructure, taxes, and trade. Vice President Mike Pence and White House aides will meet with the individual working groups and compile their recommendations for the president ahead of his meeting with the full group of executives.

According to Axios, which cites a planning document, the participants – and groups – are as follows:

  • Tax and trade team: Treasury Secretary Steve Mnuchin; top economic advisor Gary Cohn and his aides Jeremy Katz and Shahira Knight; top trade advisor Peter Navarro; Michael Dell, the CEO of Dell Technologies; Inge Thulin, CEO of 3M; Kenneth Frazier, CEO of pharmaceutical company Merck & Co.; Mark Fields, CEO of Ford; Alex Gorsky, CEO of Johnson & Johnson.
  • Regulatory reform team: Budget Director Mick Mulvaney; senior policy advisors Stephen Miller and Andrew Bremberg; Lockheed Martin CEO Marillyn Hewson; Whirlpool CEO Jeff Fettig; International Paper CEO Mark Sutton; Emerson Electric CEO David Farr; Harris Corp. CEO Bill Brown; and Campbell Soup CEO Denise Morrison.
  • Infrastructure team: Transportation Secretary Elaine Chao; Gary Cohn will float into this session as well; former Bush Administration official DJ Gribbin; Caterpillar CEO Doug Oberhelman; Corning CEO Wendell Weeks; Nucor Corp. CEO John Ferriola; US Steel CEO Mario Longhi; Veresen Inc. CEO Don Althoff; Archer Daniels Midland CEO Juan Luciano.
  • Workforce of the future: Ivanka Trump; nominee for Commerce Secretary Wilbur Ross; Small Business Administrator Linda McMahon; Dow Chemical CEO Andrew Liveris; United Technologies CEO Greg Hayes; LiveOps CEO Keith Leimbach; Altec CEO Lee Styslinger; General Dynamics CEO Phebe Novakovic; assistant to the President, Reed Cordish; Dana CEO James Kamsickas.

The genesis of the idea comes from Jared Kushner, who originated the concept of working sessions. A key part of Kushner’s job has been outreach to the private sector. He thinks government needs to find innovative ways to work closer with the private sector, Axios adds. Ivanka Trump will also participate in today’s session.

Trump has used previous meetings with companies to encourage corporate leaders to build their products in the U.S., offering tax breaks and lower regulation to bring down costs — and warning that he wants to raise tariffs on products produced overseas. The heads of labor organizations, automotive firms, national retail chains, drug companies, and airlines are all among the groups who have met with Trump in the West Wing in recent weeks.

“As a successful businessman himself, the president knows that if we’re going to get the country back to work, we need to hear directly from job creators what is holding them back and, where appropriate, take steps to remove the barriers,” White House press secretary Sean Spicer told reporters on Wednesday. “As you can tell by the structure of the meeting, the president is expecting these interactions to lead to real action being taken by the administration,” he added.

It wasn’t immediately clear whether Trump would address his plans to overhaul the tax code, which he has said he will deliver within weeks, or a border-adjustment tax proposal under consideration by House Republicans, which would shift the tax burden from exporters to importers. As Bloomberg adds, republican leaders in the House, including Speaker Paul Ryan, argue a border-adjustment tax would benefit American manufacturing while providing revenue to make up for losses from reducing corporate tax rates. Several manufacturers, including Dow Chemical, are actively lobbying for the plan, which Trump has called “too complicated.” Opponents, including net importers like Walmart, oppose it and warn it will raise taxes on American consumers.

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Gold Spikes As Dollar Dumps After Mnuchin Comments

Confirming President Trump's concerns about US national debt levels, and that new policies will likely have limited impact in 2017, Treasury Secretary Mnuchin's comments this morning have sparked buying in bonds, bullion, and marginally in stocks as the dollar gets monkey-hammered.

After the WSJ article overnight provided some USD strength, his comments this morning seemed to dull any strong dollar hype…

 

Which is helping spark gold gains…

 

And Bitcoin back to record highs…

 

But investors are buying both stocks and bonds this morning… (10Y back below 2.40% and 30Y at 3.00%)

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ValueAct’s Jeff Ubben Is Selling On “Overextended Valuations”, Builds $3 Billion Cash Pile

The market’s relentless, grinding levitation to daily all-time highs without a pause, has some of the most prominent investors reacting in very different ways.

Last week we reported that Prem Watsa, considered by many as “Canada’s most famous investor”, threw in the bearish towel, when he announced that his investment fir, Fairfax Financial was covering its firm’s equity hedges after suffering a $1.1 billion net loss on its investments in Q4, and $1.2 billion for all of 2016.

Still, despite folding on his well-known bearish stance, Watsa said he expects further volatility in the year ahead during the conference call, telling investors 20-30% fluctuations in stocks prices are “very much possible,” warning that quarterly income will fluctuate “wildly” and investment income “will only make sense in the long term”, but highlighting opportunity in volatile markets, so long as investors are extremely selective stock pickers.

Then, overnight Reuters reported that another prominent hedge fund manager, ValueAct’s Jeffrey Ubben, said that his firm had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash.

“I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth,” Ubben said, speaking at the Reuters “Future of Shareholder Activism” event in New York. He told Reuters that he was not focusing on any particular sector but instead looking for bets on idiosyncratic, mid-sized companies such as spin-offs and “weird” corporate structures.

Among the other highlights from the conference, Ubben joined other hedge fund managers in discussing the Trump administration, saying “everything about Trump I think is inflationary” while citing policies like a potential border tax. But he added that the looming increase in interest rates were more of a concern as a board member.

The activist investor said he got “super lucky” with the Trump administration’s proposed financial deregulation measures, which caused bank shares – including current ValueAct holding Morgan Stanley – to spike. He said he sold some shares in Morgan Stanley following its price increase.

On the coming initial public offering of Snap Inc, Ubben said that he has no problem with shares that do not initially have voting rights as long as they eventually allow for shareholders to have their say.

“I understand it,” he said. “If that’s what it takes to get growth companies public and let the public participate in high-growth companies.”

As we will show shortly, the theme of hedge funds taking advantage of the Trump rally to sell to “private wealth” and retail investors is nothing new, and many of his peers are taking advantage of the current record highs to quietly offload their positions.

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Trump’s Behavior Altering Views of Presidential History: New at Reason

Andrew JacksonAny president can change the future. Donald Trump stands out for his ability to change the past, without even trying.

He’s already altered perceptions of what happened in America decades and centuries ago. We know that because of a new survey of presidential historians conducted by C-SPAN, asking them to rank presidents on various attributes and overall performance.

The latest scorecard, which included responses from 91 historians, is similar in most respects to those compiled in C-SPAN’s first two, in 2000 and 2009. But it holds some surprises that suggest that things look different with Trump in the picture. Steve Chapman explains

View this article.

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Dallas Is About To Go Broke: New at Reason

Dallas could be the next major American city to follow Detroit into the throes of bankruptcy, warns Eric Boehm. Dallas Mayor Michael S. Rawlings said in November that he believes the city is “walking into the fan blades,” in large part because of unsustainable pension promises made to the city’s police officers and firefighters. The fund that is supposed to pay for retired cops and firemen is more than $5 billion in the red, and estimated to be out of money within 20 years.

Municipal bankruptcies, though rare, are bound to happen from time to time, writes Boehm. But they are not supposed to happen in places like Dallas, where the population and the economy are both growing. If poorly designed pension plans are capable of wrecking an otherwise thriving city, it’s time to revise our view of what places are exposed to these risks.

View this article.

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Frontrunning: February 23

  • Trump to Brainstorm on Job Policies With Corporate CEOs (BBG)
  • Border-Adjustment Tax Divides Energy Sector (WSJ)
  • French Bonds Rally After Macron Boosts Presidential Campaign (BBG)
  • Boeing Fighter Jet, Feared Dead, Gets New Life From Trump Tweets (BBG)
  • Treasury Secretary Steven Mnuchin Sees Tax Overhaul by August (WSJ)
  • Why Mexico Is Trump’s First Line of Defense on Immigration (BBG)
  • China military says aware of U.S. carrier in South China Sea (Reuters)
  • Carlos Ghosn Steps Back From Nissan CEO Role (WSJ)
  • Trump Wants a Pro-Business SEC. That Has Some Investors Worried (BBG)
  • Barclays Shares Climb on Capital Boost, Overhaul Progress (BBG)
  • Glencore Returns to Profit on Commodities Boom (WSJ)
  • Iraqi forces storm Mosul airport, military base (Reuters)
  • U.K. Net Migration Hits 2-Year Low in Brexit Boost for May (BBG)
  • Riot police confront banned anti-police protest in Paris (Reuters)
  • Inside Ivanka Trump’s Campaign for a $500 Billion Child-Care Plan (BBG)
  • Landlords Are Taking Over the U.S. Housing Market (BBG)
  • How Hit Team Came Together to Kill Kim Jong Nam (WSJ)
  • Malaysia requests Interpol alert on four North Koreans over airport murder (Reuters)
  • Retail’s Creditors Left Grasping as Brands Are Put Out of Reach (BBG)
  • ValueAct’s Ubben ‘disinvesting’ because of high valuations (Reuters)
  • U.S. Energy Regulator Still Advancing Obama-Era Climate Guidance (BBG)
  • Florida man accused of Clinton Foundation hack to plead guilty (Reuters)
  • Why the Market Rally May Not Need Help From Trump (BBG)
  • Tech breakthroughs take a backseat in upcoming Apple iPhone launch (Reuters)
  • Social Media Is Driving Americans Insane (BBG)
  • Tesla says Model 3 on track for volume production by September (Reuters)

 

Overnight Media Digest

WSJ

– The Trump administration formally withdrew Obama administration guidance enabling transgender individuals to use sex-segregated facilities, including bathrooms, of their choice. http://on.wsj.com/2mahEEV

– Two cabinet members arrived for talks here Wednesday to find a defiant Mexican government refusing to accept President Donald Trump’s tougher immigration and deportation policies. http://on.wsj.com/2mabRz3

– A small group of protesters opposed to the Dakota Access Pipeline were arrested as law-enforcement authorities began the evacuation of the main protest campsite so that cleanup efforts could continue. http://on.wsj.com/2maizFq

– Treasury Secretary Steven Mnuchin laid out ambitious goals to secure a tax-code overhaul by August and to deliver economic growth at rates not seen in more than a decade in his first interview in his new job. http://on.wsj.com/2ma5uMa

– Carlos Ghosn is leaving his chief executive role at Nissan Motor Co., a company he rescued from near-collapse and led for nearly two decades, to take a broader oversight role of the alliance that links Nissan with Renault SA and Mitsubishi Motors Corp http://on.wsj.com/2mahOfv

– New developments are bolstering suspicions that the killing last week of Kim Jong Nam, half-brother of North Korea’s mercurial dictator, was a well-orchestrated plot directed from Pyongyang. http://on.wsj.com/2makoC8

– Apple will open its new California campus in April. One of co-founder Steve Jobs’s final projects, the cost of Apple Park is expected to be in the range of $3 billion to $5 billion. http://on.wsj.com/2maeFwi

– An Arizona lab run by Theranos put patients at risk and failed to quickly fix its deficiencies, the main U.S. lab regulator found, triggering a new round of sanctions against the blood-testing startup. http://on.wsj.com/2ma6Kif

 

FT

AO World founder John Roberts steps down as CEO http://on.ft.com/2me5LdV

Unilever to review business following Kraft Heinz bid http://on.ft.com/2me2hb1

Ireland’s Enda Kenny defers detailing future plans until after White House visit http://on.ft.com/2me7OyC

MPs criticise government over Heathrow air quality http://on.ft.com/2mechkP

Overview

AO World Plc’s founder and largest shareholder John Roberts has stepped down as chief executive of the British online electricals retailer but remain on the board in a new executive role, the company said on Wednesday.

Unilever Plc sought to show shareholders it can go it alone on Wednesday just days after rejecting Kraft Heinz Co’s $143 billion bid, with the promise of a swift, far-reaching review.

Irish Prime Minister Enda Kenny told unsettled members of his ruling Fine Gael party that he would conclusively deal with the issue of his leadership after meeting the U.S. president next month, the party’s chairman said on Wednesday.

UK ministers have not done enough to prove that Heathrow airport’s planned expansion will not breach air quality standards or exceed caps on greenhouse gas emissions, according to a report by MPs on the environmental audit committee, published on Thursday

 

NYT

– Valeant Pharmaceuticals has been trading near record low, at around $16 per share, and at levels not seen in seven years. This spells big financial trouble for one of its largest shareholders, Pershing Square Capital <IPO-PERS.L>, the hedge fund company managed by the billionaire William Ackman, whose efforts to salvage Valeant and his reputation as a savvy investor are looking increasingly desperate. Valeant’s collapse has put a serious dent in the publicly traded Pershing Square Holdings’ 2016 performance, which was down 13.5 percent, net of fees. http://nyti.ms/2lsnO1s

– SolarCity, the nation’s leading installer of rooftop solar panels and a renewable energy darling, lets customers sign up to lease a system, where they will make payments to the company every month for at least 20 years. In dozens of cases over the last three years, SolarCity has reached long-term lease agreements with homeowners shortly before or even after they defaulted on mortgages. In at least 14 cases, the homeowners were already in default, or had other liens on the property, by the time SolarCity filed paperwork about the panels with the government. These cases raise questions about how well the company vets customers. http://nyti.ms/2lsrm3I

– Carlos Ghosn is stepping down as the chief executive of Nissan Motor Co, more than 15 years after he took control of the Japanese automaker and helped save it from collapse. Nissan said on Ghosn would remain chairman of Nissan’s board. He will continue to lead the global automobile alliance created during his tenure at Nissan, which also includes Renault of France and Mitsubishi Motors of Japan. http://nyti.ms/2lsycGF

– According to minutes published of the U.S. Federal Reserve’s most recent meeting, on Jan. 31 and Feb. 1, “many participants” wanted to increase the benchmark rate “fairly soon” if the economy continued to grow. The minutes stopped short of suggesting a rate increase was likely at the Fed’s next meeting, in mid-March. They said that a core group of Fed officials remained cautious about the economic outlook, seeing balanced risks of faster and slower economic growth. http://nyti.ms/2lsqWun

 

Canada

** Startup accelerator Expa Labs, which grew out of a company started by Uber co-founder Garrett Camp, launched last year in New York and San Francisco. Earlier this month, it begun recruiting the first group of companies for its Canadian program, which will begin in June. (https://tgam.ca/2l7Sr9U)

** TransCanada said after weeks of discussions with producers, it has rejigged its Canadian Mainline system proposal and has launched a new open season – or a period to determine market interest. But it’s still uncertain whether the offer moves the needle enough to break the impasse. (https://tgam.ca/2l2I2eJ)

NATIONAL POST

** Analysts at Moody’s Investor Service said that global LNG markets are likely to remain oversupplied well into the next decade as Asian demand for the gas weakens and new supplies begin entering the market. (http://bit.ly/2mfmMnU)

** After hosting a lunch with Hunter Harrison and activist investor Paul Hilal, Wolfe Research says there’s a 90 percent chance that Harrison will be installed as chief executive of CSX Corp within five months. (http://bit.ly/2lyoGjJ)

** The Bank of Nova Scotia’s online platform, Tangerine, has a new chief executive at the helm. The company announced on Wednesday that Peter Aceto, who has been its CEO since 2008, will be succeeded by longtime executive Brenda Rideout, effective on March 1. (http://bit.ly/2lyydaj)

 

Britain

The Times

Unilever Plc has begun a strategic review of its business five days after it rejected a 115 billion pound ($143.09 billion) takeover approach from Kraft Heinz Co. http://bit.ly/2mdTnup

Sir Jon Cunliffe, deputy governor of the Bank of England, warned Brussels yesterday that any attempt to seize euro clearing from the City would unravel global capital markets and drive up the cost of finance. http://bit.ly/2me12Zo

The Guardian

Whirlpool Corp, the maker of Hotpoint and Indesit tumble dryers, has changed its advice to the owners of millions of potentially dangerous machines, telling customers to unplug the appliances and stop using them until they are repaired. http://bit.ly/2me027X

The business secretary, Greg Clark, has pledged to outline how the government should respond to foreign takeovers of crucial UK firms in the wake of Kraft Heinz Co’s failed 115 billion pound ($143.09 billion) bid for Unilever Plc.

The Telegraph

The chief executive of Lloyds Banking Group Plc insisted he is committed to the lender as the company posted its biggest profits since the financial crisis, marking the culmination of his dramatic turnaround of the business. http://bit.ly/2me0umF

Theresa May has spoken with the motor industry boss expected to acquire Vauxhall about the government’s continued commitment to supporting the car industry in UK. http://bit.ly/2me0QJN

Sky News

A group of financial institutions has lodged a surprise takeover bid for Fox’s‎ Biscuits, even as the industry faces pressure from rising commodity prices and growing consumer preference for healthier snacks. http://bit.ly/2me4d3s

Volkswagen AG’s top executives from Germany may be summoned to give evidence to British politicians under a plan being discussed by MPs. http://bit.ly/2me9GHB

The Independent

The study from consultancy firm KPMG found that China and India – two countries Prime Minister Theresa May is desperate to secure greater trade with – are set to be the main beneficiaries from the potential exodus

 

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