Macro Links Dec 19th – “No Purpose”
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- GOP TAX PLAN
- US NATIONAL SECURITY STRATEGY
- AMTRAK CRASH, ATLANTA AIRPORT OUTAGE
- RUSSIA PROBE
- SOUTH AFRICA, VENEZUELA, PUERTO RICO
- UBER UGLY
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- POSITIONING, INFLECTION, MARKET CALLS
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- TAXATION, WEALTH HAVENS, CAPITAL SHELTERS
- COMMODITIES BASE METALS, MATERIALS
- POLLUTION, CLIMATE & ENVIRONMENT
- GEOPOLITICS, CRIME, TERRORISM
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- PROPAGANDA, CORRUPTION, AUTHORITARIANISM
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
- MEDIA, CABLE, SPORTS, ENTERTAINMENT
- AUTOS, ELECTRIC, SELF-DRIVING
- ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
- SCIENCE, NATURE, PSYCHOLOGY
One of the hottest cryptocurrency investments of 2017 comes from a software startup that doesn’t plan to sell any software and describes what it is selling—something called a digital token—as having “no purpose.” The company, block.one, has raised about $700 million and counting. That is larger than all but 10 of the 195 U.S. initial public offerings this year.
As newly launched derivatives contracts draw pros into the bitcoin market, a short seller still sees a massive inefficiency — and a chance to profit off naïve traders. The Bitcoin Investment Trust, a publicly traded vehicle whose bitcoin holdings are worth $1,601 a share, nonetheless trades at a price more than double that amount, according to data compiled by Bloomberg.
A savvy trader could in theory mint money by betting that gap will shrink. Futures contracts introduced over the past week by Cboe Global Markets Inc. and CME Group Inc. provides a way to do that: Buy the futures, short sell the Bitcoin Investment Trust.
That’s precisely what Andrew Left, a short seller at Citron Research, is doing, a fact he reiterated via tweet on Monday morning. “Citron would not be pounding table if not appropriate,” he wrote. “Thank you for the 70 percent profit.”
Financial data firm Bloomberg has added three new cryptocurrencies – ethereum (ether), Ripple (XRP) and litecoin – alongside bitcoin on its Terminal service.
According to a Fortune report, sources said the addition of the new price data is aimed at forex traders seeking to explore the new instruments. They also suggested that Bloomberg terminal data for the new cryptocurrencies is being provided by Luxembourg-based exchange Bitstamp.
Riot Blockchain has soared about 375% since the company announced in early October that it was pivoting toward buying cryptocurrency and blockchain businesses. It was previously named Bioptix and focused on making diagnostic machinery for the biotech industry. “Full mania,” Citron’s Twitter account said on Monday.
“No reason to short any stocks now that even have business while the market has given us stocks like $RIOT. Starting short position here. The bar for finding good shorts has been lowered.”
Approval for such an ETF would be a U-turn for the Securities and Exchange Commission, which in March refused to approve a fund proposed by twins Cameron and Tyler Winklevoss citing concern that “significant markets for bitcoin are unregulated”.
But the launch of bitcoin derivatives by two big exchanges has encouraged potential ETF providers to push for approval of funds that would track bitcoin futures instead of the underlying cryptocurrency.
ETFs could give bitcoin a makeover. Investors spooked by numismatic nerdery would happily buy the funds. The cash-settled futures could become easy for managers to trade too. Unlike bitcoin — the base asset of the Bitcoin Investment Trust — they are regulated.
A bomb in a gift box is still a bomb. Cryptocurrencies are speculative assets that lack a legitimate function. The SEC will have to balance that against two arguments. First, that adults do not need nannying. Second, that adults want the funds.
To get an idea of how comically difficult it is to get out of bitcoin, read this chain of tweets from a Google engineer whose screen name is @TedOnPrivacy.
“I had to send pictures of my driving license and passport to some random website, which for all I know could be about as trustworthy as MtGox,” he wrote. “I had enough time to eat lunch while waiting for the transaction to confirm, though, so this was nice, I had roasted avocado with an egg.”
It took him days. “Is it really money if you can’t use it nor convert it to anything else,” he lamented.
Bitcoin trading expanded faster this year in emerging markets than developed ones — and quickest of all in places where authorities tried to crack down. Somewhere, Satoshi Nakamoto is smiling. After all, avoiding bank and government oversight, and sidestepping the eroding effects of inflation, was what Nakamoto had in mind when he (or she, or they) created bitcoin in 2008.
Peer-to-peer bitcoin trading in major developing nations outpaced the U.S., the world’s biggest market, according to data from LocalBitcoins. Demand surged in China and Russia, where central banks put a stop to local exchange trading; in Venezuela, where authorities cracked down on bitcoin mining even as hyperinflation drove up demand; and in Brazil and Colombia, where citizens heard dire warnings of cryptocurrencies’ risks.
“The strong interest from emerging-market countries could be reflective of relatively less stable local currencies or a byproduct of greater exposure to financial and economic crises that makes an alternative system like bitcoin relatively appealing,” Spencer Bogart, head of research at Blockchain Capital LLC in San Francisco said.
Fintech plus cryptocurrency equals about $7 billion. That’s how much the value of LongFin Corp. surged to after the microcap’s stock rocketed by as much as 2,600 percent since debuting Wednesday. Most of the gains came since Friday, when the company issued a press release saying it bough Ziddu.com, “a blockchain-empowered global micro-lending solutions provider” that transacts only in cryptocurrencies.
“It’s an emotional product,” Peterffy said of bitcoin on Monday. “It has no rhyme or reason for having the price that it has. But it could be, there’s a small probability, it could become very popular.” Peterffy has said he’s not opposed to trading the cryptocurrency, but he’s been wary of linking it with the “real economy” through products such as futures.
The fund hasn’t bought other cryptocurrencies yet, Miller said, and plans to stay focused on bitcoin. “Most of those cryptocurrencies, if monetary history is any guide, will be worthless.”
Investors will closely watch how CME’s contract fares because the more than 100-year-old exchange runs several of the world’s most liquid futures markets in interest rates, currencies, equity indices and commodities. Futures listings tend to be a winner-takes-all business.
By Monday morning in Chicago 847 January-expiry bitcoin futures contracts had traded on CME and the price of the future was $19,050. That compared with a price per bitcoin immediately on cash exchanges of about $18,890. Each CME contract is for five bitcoins. At Cboe the January-expiry contract was $19,020 per bitcoin, while volumes had exceeded 3,000 contracts of one bitcoin each.
GOP TAX PLAN
Lawmakers scrambling to lock up Republican support for the tax reform bill added a complicated provision late in the process — one that would provide a multimillion-dollar windfall to real estate investors such as President Donald Trump.
The change, which would allow real estate businesses to take advantage of a new tax break that’s planned for partnerships, limited liability companies and other so-called “pass-through” businesses, combined elements of House and Senate legislation in a new way. Its beneficiaries are clear, tax experts say, and they include a president who’s said that the tax legislation wouldn’t help him financially.
US companies are expecting sharp increases in earnings next year as Republicans in Congress remove the final obstacles to their overhaul of the US tax system, with a bill likely to be passed into law this week.
Analysts and executives expect corporate earnings to be boosted by an average of about 10 per cent, with some companies set to see significantly higher benefits of up to 30 per cent, thanks to the proposed reduction in the main rate of US federal corporate tax from 35 per cent to 21 per cent.
Steven Mnuchin, US Treasury secretary, told Fox News on Sunday that he had “no doubt” that the “terrific” tax bill would be passed this week. He added that tax cuts should start in February “because we have the IRS [Internal Revenue Service] already working on new tax tables”.
Companies with relatively high tax rates and mainly US-based revenues, which are not hit by the new charge on overseas assets, will gain the most from the new code. Oil refiners, railroads, airlines and banks are expected to be among the biggest beneficiaries.
A day before Republicans are expected to begin voting on their $1.5 trillion tax cut, the big question was not whether it would pass but why the lone Republican Senate holdout, Bob Corker of Tennessee, suddenly flipped his position to support a bill he once said was fiscally irresponsible.
The theories varied from political to financial. Some suggested Mr. Corker, who has said that he will not seek re-election to the Senate, may be rethinking his political future, while others claimed he was bought off by a late-added provision that would benefit people with large real estate holdings, including him.
In an interview on Monday, Mr. Corker dismissed those theories and said he faced a wrenching decision as a Republican lawmaker with deep concerns about the country’s mounting debt and a strong desire to overhaul the tax code. In the end, he said, he put his fiscal principles aside on the assumption that the nation would be better off with the tax cuts than without.
Republican leaders finalized their plan for a sweeping set of tax cuts for businesses and individuals Friday evening as two key GOP senators backed the plan — all but guaranteeing a major policy victory for President Donald Trump.
The bill would cut the corporate tax rate to 21 percent in 2018 — and temporarily cut rates for individuals as well. Other temporary changes, which would last through 2025, would boost the standard deduction and child tax credits and modify state and local tax deductions and the mortgage interest deduction.
As a bonus for Republicans, the measure would repeal the individual mandate that requires individuals to purchase insurance — a measure imposed by the Obamacare law. Repealing that Democratic legislation has been among the party’s long-sought goals.
Republicans, confident they’ve found the votes to pass a massive tax overhaul, entered the next phase of their effort Sunday, attempting to sell the plan to a public that polling suggests is deeply skeptical.
GOP leaders argued that the tax bill — the final version of which was unveiled Friday — is aimed primarily at helping the middle class, brushing aside nonpartisan analyses that show the bulk of the legislation’s benefits would go to the wealthy and to corporations.
These expirations and delays hide $570 billion to $725 billion of potential further costs, which could ultimately increase the cost of the bill to $2.0 trillion to $2.2 trillion (before interest) on a conventional basis or roughly $1.5 trillion to $1.7 trillion on a dynamic basis over a decade. As a result, debt would rise to between 98 percent and 100 percent of GDP by 2027.
Ferd Hoefner, senior strategic advisor for the National Sustainable Agriculture Coalition, says only farms with around $1 million in annual sales are in a high enough tax bracket to benefit from the lower rate. That amounts to about 4 percent of US farms. Hoefner adds that the tax break for the largest farms provides yet more incentives for farmers to scale up.
“We thought that there was this disciplined group of Republicans, who would never go for what some people are saying is a budget bust,” Cramer said on “Squawk on the Street.” “They folded like a cheap suit. I mean it’s really rather amazing.”
“They better be right,” Cramer added, referring to reports the tax bill would boost the economy and increase investment in the U.S.
While most U.S. businesses would pay lower taxes under congressional Republicans’ proposed tax overhaul, some of the world’s richest technology companies might actually see their rates rise.
Tech executives and industry groups largely support the tax package, partly because it promises a one-time tax at a discounted rate for the estimated $2.6 trillion in profits American businesses have accumulated overseas—a rate of 15.5% on liquid cash or 8% on illiquid assets, including factories and equipment. Companies currently pay as much as 35% to bring back some of that cash to pump into operations or return to investors.
But tech giants could be pinched by provisions in the new tax code aimed at curbing the use of low-tax foreign jurisdictions. “Those firms that have been the world leaders in avoiding taxes will find their tax rates going up,” said Edward D. Kleinbard, a former U.S. tax official who is now a tax professor at the University of Southern California law school.
The average American who itemized his or her tax bill in 2015 claimed more than $27,000 in deductions. While taxpayers have until Jan. 15 to pay the final installment of their 2017 taxes, Tom Holly of the accounting firm PwC said he received dozens of calls over the weekend from concerned clients eager to pay sooner.
Five financial institutions that endured huge losses in the crisis would be forced to take writedowns totalling almost $50bn if the planned US tax rewrite passes, denting profits at Citigroup and requiring taxpayers to inject new funds into Fannie Mae and Freddie Mac.
Under current tax laws, some of the biggest names in corporate America, including Bank of America and the insurer AIG, have been able to cut their tax bills significantly because they can use past losses to offset future profits. However, Republican plans to cut the corporate tax rate from 35 per cent to 21 per cent would reduce the expected financial benefits sharply, and force the institutions to rewrite down the value of their “deferred tax assets”.
The U.S. renewable energy industry expressed relief after a compromise Republican tax bill released late on Friday preserved key tax credits that had been at risk of being removed, but it raised concerns about a provision that may threaten investment in the sector.
As Mr. Levine sees it, Livingston, a fairly affluent town with a population of about 30,000, could become even less affordable as residents face rising tax bills and falling home values. They could be left with less disposable income to spend in the local stores, setting off a “domino effect” that could derail the town’s economy.
It is a dire forecast, but not a radical one. Livingston sits on the western edge of Essex County, which Moody’s Analytics, a company that provides economic research, placed at the top of its list of places whose housing markets would suffer the most under the Republicans’ plan. According to Moody’s, the tax proposal could carve as much as 10.5 percent off the projected value of homes in Essex County in two years. Six other New Jersey counties made the top 10 on Moody’s list.
The task is monumental. While processing tens of millions of tax returns for 2017 under the current rules, the I.R.S. would also have to figure out how to interpret and explain a new system and put it into practice.
“Beware,” said John A. Koskinen, who retired last month as I.R.S. commissioner. “If the budget keeps being cut and the agency keeps being given more things to do, the I.R.S. is simply not going to work.” Either the information technology will fail, forcing the filing and refund systems to collapse, he warned, or enforcement and audits will become so scarce that fewer people will be inclined to pay the taxes they owe.
A key provision in the Republican tax plan could dim the appeal of living in high-tax states like New York in favor of low-tax states like Florida. But research on the subject suggests high-tax regions won’t see a sudden or mass exodus. That’s because taxes are only one of the many factors that play into where individuals choose to live.
US NATIONAL SECURITY STRATEGY
Donald Trump described China as a strategic “competitor” in his first national security strategy, as he accused the Chinese government of maintaining a “repressive vision” and pursuing economic aggression designed to weaken America.
While the national security strategy released on Monday outlined a range of threats, the report reserved most of its criticism for China and Russia, which are described as “revisionist” powers trying to “shape a world antithetical to US values and interests”.
“This strategy recognises that, whether we like it or not, we are engaged in a new era of competition,” Mr Trump said after the release of the NSS. “We . . . face rival powers, Russia and China, that seek to challenge American influence, values and wealth.”
The disconnect between the president’s speech and the analysis in his administration’s document attests to the broader challenge his national security advisers have faced, as they have struggled to develop an intellectual framework that encompasses Mr. Trump’s unpredictable, domestically driven and Twitter-fueled approach to foreign policy. The same confusion has confronted foreign governments trying to understand Mr. Trump’s conflicting signals.
The National Security Strategy, a congressionally-mandated mission statement, is supposed to guide an administration’s priorities for global engagement, economic bargaining and demonstrations of military strength.
While it is viewed as an important policy document, its release is usually a low-key affair and Trump is believed to be the only U.S. president to present the plan with a speech, an aide said. At times Monday, Trump seemed as intent on revisiting his electoral victory as he was on defining a new national security strategy for the country.
AMTRAK CRASH, ATLANTA AIRPORT OUTAGE
At least three people were killed and scores more injured when an Amtrak train on its inaugural trip on a new route derailed south of Seattle on Monday morning while crossing a bridge above a busy highway, authorities said. Officials said 13 cars jumped the tracks. A spokeswoman for the Washington State Patrol confirmed three deaths and said all the cars had been searched.
Trooper Brooke Bova, the spokeswoman, said that about 100 people had been injured. A total of 77 people were sent to hospitals, according to CHI Franciscan Health, which operates numerous hospitals in Western Washington. Some patients are in critical conditions, a spokesman said.
On the train, passenger Chris Karnes said the car he was riding in began to rumble, then passengers felt a jolt. “Our car fell down an embankment, and I heard crumpling—a crumpling noise—and you could hear the cars piling up behind each other,” he said. “People were thrown all over the place.”
The train’s lead locomotive had plowed down the hill and onto the highway. Some of the passenger cars derailed on the trestle itself, falling to the highway below.
Washington State Trooper Brooke Bova said three people were dead, and that “all the cars, including the dangling cars, have been checked.” She said there were a number of people with critical injuries.
Five cars on the highway were struck in the derailment, as were two semitrailer trucks, she said.
Monday’s deadly Amtrak train derailment may have been caused by the train striking something on the railway, according to an unconfirmed Associated Press report.
A preliminary investigation suggests maintenance problems are unlikely to blame because the incident took place on brand-new tracks, a government official told the AP on condition of anonymity.
At least three people were killed and the death toll is expected to rise, the Associated Press reported.
“The train accident that just occurred in DuPont, WA shows more than ever why our soon to be submitted infrastructure plan must be approved quickly,” Trump said in a tweet. “Seven trillion dollars spent in the Middle East while our roads, bridges, tunnels, railways (and more) crumble! Not for long!”
Electricity has been restored to Hartsfield-Jackson Atlanta International Airport late Sunday, hours after an outage unleashed havoc on travelers around the country, leading to hundreds of flight cancellations during one of the most hectic travel periods of the year.
The power went out at Hartsfield-Jackson—the busiest airport in the world by passenger traffic, with an average of 275,000 passengers daily—shortly after 1 p.m. Sunday, according to airport officials.
A power failure at Hartsfield-Jackson Atlanta International Airport on Sunday disrupted operations at the busiest airport in the world, forcing the cancellation of more than 1,150 departing or arriving flights and stranding travelers on planes on the tarmac for hours, the authorities and passengers said.
The power failure at the airport, a major hub for domestic and international flights, sent a ripple of disruptions across the country, affecting flights in Chicago, Los Angeles and elsewhere. There were signs the problems would linger into Monday, as Delta Air Lines announced Sunday evening that it planned to cancel 300 flights the next day.
The outage forced airlines to halt all outbound flights Sunday at an airport that handles about 2,500 flights a day. Planes heading to Atlanta were held on the ground at their points of origin. Authorities diverted international flights to other airports that have customs and immigration facilities.
FlightAware.com, the flight tracking provider, said there were 1,285 flight cancellations in the U.S. Sunday, and nearly 3,100 delays, many tied to the Atlanta problem. Southwest Airlines Co. , also scrubbed many of its Atlanta flights. For Monday, FlightAware is showing 570 cancellations in the U.S., most of them by Delta.
Kirk Ellis, 25, had expected to be in the Atlanta airport for less than an hour before his connecting flight to New Orleans, but when his flight touched down at around 1 p.m. the cabin crew notified passengers they were having a problem operating the jet bridge. He waited on the plane for two hours until the crew decided to let passengers walk over a 6-inch gap and maneuver through the uneven jet bridge rather than to keep them cooped up on the vessel any longer.
At the end of the dark jet bridge, dotted with cellphone flashlights, alarms blared and frantic travelers desperately tried to make arrangements on the phone.
“It was utter chaos,” he said. “There were literally people everywhere.”
Mr. Ellis said the poor cell service didn’t allow him to contact a taxi-hailing service like Uber and saw hundreds of people on the taxi line. So, he approached random cars in the departure area to ask for a ride. Some drivers agreed, but asked to be paid more than $100.
A sense of foreboding has settled over congressional Democrats, who fear that GOP lawmakers, the White House and conservative media figures are orchestrating a messaging campaign with one logical goal: the firing of special counsel Robert Mueller by President Donald Trump.
A Republican offensive seemingly aimed at discrediting some of the top agents working with Mueller has intensified amid signs his investigation of Russian interference in the 2016 election has crept closer to Trump’s inner circle.
Fox News host Jeanine Pirro, a Trump ally, described the FBI on Saturday as a “crime family” and said some of the agents involved in the Russia probe should be jailed. Rep. Jim Jordan (R-Ohio), who joined her show, called her comments “perfect.” Fox News ran a banner that day questioning whether the probe amounted to “A Coup in America?”
Republicans are refusing to name new witnesses in the congressional investigation into the Trump campaign’s alleged collusion with Russia during the 2016 election and may be prematurely winding down the probe, according to the ranking Democrat in the House Intelligence Committee.
Firing off a nine-tweet thread on Friday, Adam Schiff (D-Cali.) warned he had become “increasingly worried Republicans will shut down the House Intelligence Committee investigation at the end of the month,” before going on to explain that the majority hasn’t lined up anyone to testify after December 22.
For much of the seven months since Robert S. Mueller III was appointed special counsel, President Trump’s lawyers have stressed their cooperation with him, believing that the more they work with his investigation, the sooner the president will have his name cleared.
But in recent weeks, as the investigation has reached deeper into Mr. Trump’s inner circle, that image of cooperation has begun to fracture. Mr. Trump’s lawyers and supporters have significantly increased their attacks on Mr. Mueller, especially as the F.B.I. has handed them fresh ammunition to claim that the agents investigating the president may be biased.
The latest salvos came over the weekend, when a top Republican senator said Mr. Mueller should examine his team’s political leanings, and a lawyer for Mr. Trump sent a letter to lawmakers saying that the special counsel had improperly gotten emails from the presidential transition team.
Randall Eliason, a former federal prosecutor who teaches white collar crime at George Washington University Law School, said it was not at all surprising that Mueller’s team sought Trump transition emails. “It would be almost prosecutorial misconduct for them not to,” he said. He said it was also not surprising that Mueller would ask GSA for emails sent using government accounts.
“It’s not your personal email. If it ends in .gov, you don’t have any expectation of privacy,” he said.
But he said if Trump’s team had a valid legal claim, there is a standard avenue to pursue — they would file a sealed motion to the judge supervising the grand jury and ask the judge to rule the emails were improperly seized and provide a remedy, like requiring Mueller’s team to return the emails or excluding their use in the investigation.
“You go to the judge and complain,” he said. “You don’t issue a press release or go to Congress. It appears from the outside that this is part of a pattern of trying to undermine Mueller’s investigation.”
President Trump has referred to deputy Attorney General Rod Rosenstein, who appointed Robert Mueller as the special counsel for the Russia probe, as “a threat to his presidency,” according to a report in The Washington Post.
Democrat and Republican lawmakers on Sunday defended special counsel Robert Mueller and his investigation amid attempts by conservatives to discredit the probe.
FBI counterintelligence specialists briefed Trump about Russian intentions in late July or August 2016, after he officially became the Republican nominee.
While the president is hearing from the likes of Sean Hannity and Jeanine Pirro that Mueller needs to go, he got different advice on Monday from “Fox & Friends.” The hosts of Trump’s favorite morning show characterized the notion that he might terminate Mueller as nothing more than a Democratic rumor planted in the media to make the president appear suspiciously worried about the probe.
SOUTH AFRICA, VENEZUELA, PUERTO RICO
Cyril Ramaphosa was elected leader of South Africa’s ruling African National Congress on Monday, threatening President Jacob Zuma’s grip on power after the most divisive vote in the party’s history.
After hours of tension at the ANC’s five-yearly congress that included a recount, Mr Ramaphosa, the deputy president, narrowly defeated Nkosazana Dlamini-Zuma, Mr Zuma’s former wife, whom the president had backed.
Mr Ramaphosa campaigned on a promise to root out corruption and rescue the ANC, the party that defeated apartheid under Nelson Mandela’s leadership which is now at risk of losing its majority for the first time at the 2019 election.
His victory could lead to the ANC sacking Mr Zuma as president within weeks.
Large sections of the Venezuelan capital lost electricity Monday around noon, snarling traffic and forcing hundreds to evacuate office buildings, shopping centers and the Caracas subway system.
Blackouts were also reported in neighboring states Miranda and Vargas, leaving Venezuela’s largest international airport without power and grounding several flights. State power company Corpoelec said that a detached cable at a power generating station in Valles del Tuy was the source of the problem and that teams were working to fix the issue.
The governor of Puerto Rico ordered all government agencies to reopen their books and initiate a recount and review of certified deathsthat have occurred since Hurricane Maria, after weeks of reporting by various news outlets pointed to a possible severe undercount of storm fatalities.
The territorial government has attributed 64 official deaths to the storm and its aftermath, but the New York Times and the Center for Investigative Journalism have used vital statistics data to show that the number of deaths in the weeks after the storm far exceeded those of the same time period in previous years. The independent analyses put the death count at probably more than 1,000.
Uber has confirmed that a man held by Lebanese authorities on charges of killing a British government worker in Beirut was a driver for the ride-hailing app.
A Lebanese security official said the man, whom Lebanese authorities identified as “Tariq H”, had a criminal record and confessed to the killing of Rebecca Dykes. The 30-year-old, who worked for the British Department for International Development in Beirut, went missing late on Friday and was found dead along a highway on Saturday morning.
The letter describes an extensive array of alleged covert human intelligence activities, including impersonating taxi drivers, bribing foreign officials, eavesdropping on competitors, and the use of burner phones and non-Uber laptops to conceal users’ identities.
Although the employee who raised the allegations, Richard Jacobs, recently recanted some of the claims made in the letter, which was written by his lawyer, the letter still gives an unprecedented glimpse into Uber’s far-reaching and aggressive intelligence-gathering techniques.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
Investors pulled $1 billion from the world’s biggest high-yield debt exchange-traded fund last week, the biggest redemption since May. That puts it on course for its worst year of outflows on record. Funds that track Treasuries continued to post inflows, showing that traders may be switching from riskier U.S. corporate debt to government bonds.
Federal Reserve Bank of Minneapolis President Neel Kashkari warned Monday that bad things may lie ahead for the economy if his colleagues at the U.S. central bank press forward with interest-rate increases.
“It’s possible we could end the expansion by our own actions,” Mr. Kashkari said in a telephone interview with The Wall Street Journal.
At the heart of the problem are the arbitrary cutoffs set by regulators. Targets can be useful, but as every manager knows, setting targets changes behavior. In the case of banks, regulators have set some very important targets for balance sheet size measured on specific days, involving financial penalties and taxes. Not surprisingly, banks go out of their way to make sure they come in below the cutoffs on those days, with the year-end being the most important.
This always has been a problem, with banks manipulating their lending ahead of the measurement day to meet capital requirements and in some countries lower their tax bills. But it is getting worse thanks to dollar shortages created by stepped-up requirements for the biggest banks.
The BIS defines Zombie firms as those with a ratio of earnings before interest and taxes to interest expenses below one, with the firm aged 10 years or more. In simple terms, Zombies are those firms that could not survive without a flow of cheap financing. According to the BIS Quarterly Report one out of ten corporations in emerging and advanced countries is a “Zombie”.
Predicting when the next recession will begin is no easy task because the economy doesn’t operate on a set schedule. But there is one market relationship that’s been a reliable indicator over that past 40 years or so — the spread between the two- and the 10-year Treasury yields.
Every recession since the mid-1970s (the shaded regions) has followed an inverted yield curve when the two-year note yields more than the 10-year. The spread has been rapidly closing in recent years and is fast approaching another inversion. Since September alone, the two-year yield has gone from 1.26 percent to 1.85 percent. In that same time, the 10-year yield has gone from 2.05 percent to 2.37 percent. This means the yield curve is getting “flatter” as long-term rates are rising much slower than short-term rates.
Experts predict that the two- to 10-year spread could invert as early as 2018, which could be accelerated by further rate hikes from the Fed. Nothing works always and forever in the markets, but this is a situation economic watchers should pay attention to — just not right away if we use history as a guide.
Puerto Rico has had an awful decade — and it’s about to get worse. First came a brutal 10-year recession and financial crisis that drove businesses from this island and left 44 percent of the population impoverished. Then, in September, Hurricane Maria, a powerful Category 4 storm, shredded buildings, wrecked the electrical power grid and possibly led to more than 1,000 deaths.
Now Puerto Rico is bracing for another blow: a housing meltdown that could far surpass the worst of the foreclosure crisis that devastated Phoenix, Las Vegas, Southern California and South Florida in the past decade. If the current numbers hold, Puerto Rico is headed for a foreclosure epidemic that could rival what happened in Detroit, where abandoned homes became almost as plentiful as occupied ones.
Private equity groups are selling businesses at a faster rate than in the years leading up to the financial crisis as they look to cash in on record-high prices while the global economy remains strong.
Company sales by private equity groups in Europe generated €489bn over the past four years, a third higher than in the peak between 2004 and 2007, according to an analysis of deal volume by the Centre for Management Buyout Research.
The past four years have also experienced the highest prices being paid for assets sold — €254m as an average compared with €151m through the four years to 2007, the analysis found.
“It’s a perfect storm,” said Christian Hess at Investec, the bank that sponsored the survey alongside the British private equity group Equistone. “Anyone that can sell is taking advantage.” The analysis comes at a time when buyout funds are raising record amount of fresh capital as institutional investors come under pressure to deploy money in a low interest world.
HNA, an airlines-to-hotels conglomerate that until a few months ago was aggressively scooping up assets around the world, is now trying to raise cash to pay off debt that helped fund over $40 billion worth of acquisitions since 2015. In recent weeks, the company’s liquidity has come under pressure and some of its borrowing costs have climbed.
HNA has earmarked roughly $6 billion worth of properties for sale, including prime office towers in Midtown Manhattan, London’s Canary Wharf and San Francisco’s Mission District, as well as resorts in French Polynesia and buildings in Australia, according to a person close to the matter.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
Republicans are on the cusp this week of passing a historic overhaul of the U.S. tax system but might also be ushering in a new period of instability in the tax code, because the plan is advancing without bipartisan support and with expiration dates that guarantee it will be revisited for years.
A $1.5 trillion reduction in the overall tax burden over a decade accompanies the most sweeping rewrite of U.S. business and income taxes since the Reagan era, achieving goals long sought by many conservative economists and politicians. But to get the bill through a closely divided Congress, Republicans made many of its pieces time-limited.
Individual tax cuts and a new 20% deduction for millions of businesses are scheduled to vanish after 2025. A corporate-tax-rate cut and international tax rules are permanent to encourage long-run planning, but other business provisions arrive, then disappear.
One-time revenue sources like a $339 billion tax on stockpiled foreign profits pay for long-running tax cuts, making the bill more costly in the future. Key features—including the $2,000 child tax credit and a $10,000 cap on the state and local deduction—aren’t indexed to inflation, eroding their real value over time.
Congress will need to make substantive and technical corrections as problems arise, said Martin Sullivan, chief economist at Tax Analysts, a nonprofit publisher of tax notes.
“It’s just the beginning. It’s a whole new chapter,” he said. “It’s built on unstable financial foundations and on unstable political foundations. And it was built in great haste.”
Last year’s contentious presidential election gave oxygen to hate. An analysis of F.B.I. crime data by the Center for the Study of Hate & Extremism at California State University, San Bernardino, found a 26 percent increase in bias incidents in the last quarter of 2016 — the heart of the election season — compared with the same period the previous year. The trend has continued into 2017, with the latest partial data for the nation’s five most populous cities showing a 12 percent increase.
In addition, anti-Muslim episodes have nearly doubled since 2014, according to Brian Levin, the director of the center, which he said has also counted more “mega rallies” by white nationalists in the last two years than in the previous 20. “I haven’t seen anything like this during my three decades in the field,” he said.
Peppered among these incidents is a phenomenon distinct from the routine racism so familiar in this country: the provocative use of “Trump,” after the man whose comments about Mexicans, Muslims and undocumented immigrants — coupled with his muted responses to white nationalist activity — have proved so inflammatory. His words have also become an accelerant on the playing field of sports, in his public criticism of black athletes he deems to be unpatriotic or ungrateful.
The right-wing commentary and President Trump’s criticism of the FBI are part of a vicious circle. The TV hosts encourage Trump, then Trump supplies sound bites for their shows, and then the hosts are even more emboldened.
With Mueller’s investigation of Russian interference in the 2016 election reaching closer to Trump’s inner circle, Fox hosts like Sean Hannity continue to demand Mueller’s firing. Every night, Hannity tells millions of viewers that Mueller’s probe is a corrupt plot to take down Trump and reverse the outcome of the election. Trump is a big fan of Hannity’s show, and the two men speak on a regular basis.
“The anti-Mueller rhetoric in conservative media right now is part of a feedback loop,” Nicole Hemmer, the author of a book about conservative media, “Messengers of the Right,” told CNNMoney.
“Conservative media personalities know Trump hates the investigation and wants it shut down,” she said in an email. “They bash the investigation and Mueller, and when Trump sees that happening (say, on ‘Fox & Friends’) it reinforces his belief that the investigation is illegitimate and that he should do something to end it. The likely consequence is that this increases the odds of Trump attempting to fire Mueller.”
The project involved six people with an assortment of machines distributed across multiple continents. Each member of the group, several of whom were operating under aliases, contributed shards, or fractions, of an unfathomably big number that will serve as the basis for what is essentially a secret, special cryptographic key. The end result of the clandestine crew’s efforts is a set of numeric parameters that will underpin a data-scrambling scheme capable of concocting a virtual currency with confidentiality at its core.
The work is spread out geographically to ensure that no malicious actor can sabotage the process or obtain the component parts. Traces of the computers’ leftover math—Zooko calls it “toxic waste”—may reside in memory; if salvaged, the material could grant someone the power to counterfeit infinite sums of virtual money.
Powering down just one of the computers should be enough to wipe part of the key’s recipe from the face of the earth. But in such a high-stakes scenario, one can never be too sure. Thus the total annihilation of The Ceremony.
Within a year of that fateful evening in October 2016, the market capitalization of Zcash will swell to just under $1 billion, making it a top 20 cryptocurrency. Its fundamental technology will be added to Ethereum, the decentralized computing network that, alongside Bitcoin, is spurring an exuberant $350 billion boom in crypto coins. And Zcash’s incipient parameters, hatched in the cool shadow of the Rockies, will be adopted by the U.S.’s biggest bank, JPMorgan Chase.
Despite the record-breaking values of Bitcoin and its ilk, most digital currencies have failings that make them problematic as a mainstream medium of exchange. For instance, the transactions are essentially public and easy to track, offering you, the consumer, less privacy than your credit card. Zcash aims to change that. If, one day, businesses and people come to rely on cryptocurrencies, they may have Zooko and his band of ravagers to thank for laying the foundations to make that possible.
In the salad days of bitcoin, venture capital firms bought into the craze in a roundabout way. Instead of simply purchasing bitcoins, they invested in companies like Coinbase, which makes a wallet for digital currencies, or 21.co, which aimed to improve the process of mining coins. Some of these bets were better than others. 21 has changed names and business plans, but Coinbase’s app hit the No. 1 spot on Apple’s App Store this month as the hyperventilation over bitcoin reached an extreme.
Meanwhile, the value of a bitcoin went from about $110 when Coinbase received its first major round of venture funding to $19,000 as of Sunday. “All the money that’s been put into Coinbase, etcetera, would have returned much better if it was put directly into bitcoin,” said Travis Scher, an investment associate at the Digital Currency Group, a bitcoin-centric investment firm.
This realization complicates the basic concept of venture capital.
A new wave of entrepreneurs, dreamers and hucksters are raising capital through initial coin offerings, where they invent their own currencies, then sell them for cash and trade them on open markets. The service VCs offer to their investors is unfettered access to exciting private companies, whose shares aren’t publicly traded. If ICOs become a durable way for anyone to get a piece of a hot technology—a big “if,” to be sure—where do VCs fit in?
Driven by a combination of enthusiasm and fear, venture firms are developing new tricks to cash in on the cryptocurrency frenzy. Instead of taking an ownership stake in a company, some of the biggest investors in Silicon Valley have begun buying the rights to acquire tokens ahead of an ICO through novel legal agreements. In other cases, they’re adding language to traditional equity deals guaranteeing investors get tokens if the startup ever decides to hold an ICO in the future. “If there’s an exciting new area, and we think a lot of new value will be created, it’s our job to participate in some way,” said Matt Huang, a partner at Sequoia Capital.
Venezuela has been shuddering since its economy began to collapse in 2014. Riots and protests over the lack of affordable food, excruciating long lines for basic provisions, soldiers posted outside bakeries and angry crowds ransacking grocery stores have rattled cities, providing a telling, public display of the depths of the crisis.
But deaths from malnutrition have remained a closely guarded secret by the Venezuelan government. In a five-month investigation by The New York Times, doctors at 21 public hospitals in 17 states across the country said that their emergency rooms were being overwhelmed by children with severe malnutrition — a condition they had rarely encountered before the economic crisis began.
“Children are arriving with very precarious conditions of malnutrition,” said Dr. Huníades Urbina Medina, the president of the Venezuelan Society of Childcare and Pediatrics. He added that doctors were even seeing the kind of extreme malnutrition often found in refugee camps — cases that were highly unusual in oil-rich Venezuela before its economy fell to pieces.
In all of the buzz around these high-profile announcements, one of Iger’s most impressive talents is often overlooked: He is a master at effective capital allocation. At age 37, Iger moved from a career in broadcast sports to lead ABC Entertainment before taking the CEO role at The Walt Disney Company. Since the day Iger took the helm at Disney, earnings have exploded, and the company’s high-value intellectual property assets have increased its economic power dramatically.
What is capital allocation? As a discipline, it has many dimensions, including some that are relatively mundane. For example, a company should borrow when interest rates are low, issue new stock when shares are overvalued, and buy back stock when shares are undervalued.
While at Disney, Iger has had a razor-sharp focus on market selection, an extremely important facet of effective capital allocation. No matter how well a company executes, if it is focused on a fundamentally unattractive market, its initiatives are unlikely to be successful. There are a variety of factors that can contribute to making a market more attractive to a particular company. Is the market sizable, growing, and high-value? Does the company have brand permission to play in the market and any comparative advantages?
Since the hyperinflation of the 1970s, which central banks were right to combat by whatever means necessary, maintaining positive but low inflation has become a monetary-policy obsession. But, because the world economy has changed dramatically since then, central bankers have started to miss the monetary-policy forest for the trees.
The major central banks’ vigilant pursuit of positive but low inflation has become a dangerous delusion. It is dangerous because the policies needed to achieve the objective could have unwanted side effects; and it is a delusion because there is currently no good reason to be pursuing the objective in the first place.
Its government is virtual, borderless, blockchained, and secure. Has this tiny post-Soviet nation found the way of the future?
It was during Kotka’s tenure that the e-Estonian goal reached its fruition. Today, citizens can vote from their laptops and challenge parking tickets from home. They do so through the “once only” policy, which dictates that no single piece of information should be entered twice. Instead of having to “prepare” a loan application, applicants have their data—income, debt, savings—pulled from elsewhere in the system. There’s nothing to fill out in doctors’ waiting rooms, because physicians can access their patients’ medical histories. Estonia’s system is keyed to a chip-I.D. card that reduces typically onerous, integrative processes—such as doing taxes—to quick work. “If a couple in love would like to marry, they still have to visit the government location and express their will,” Andrus Kaarelson, a director at the Estonian Information Systems Authority, says. But, apart from transfers of physical property, such as buying a house, all bureaucratic processes can be done online.
Estonia is a Baltic country of 1.3 million people and four million hectares, half of which is forest. Its government presents this digitization as a cost-saving efficiency and an equalizing force. Digitizing processes reportedly saves the state two per cent of its G.D.P. a year in salaries and expenses. Since that’s the same amount it pays to meet the nato threshold for protection (Estonia—which has a notably vexed relationship with Russia—has a comparatively small military), its former President Toomas Hendrik Ilves liked to joke that the country got its national security for free.
Other benefits have followed. “If everything is digital, and location-independent, you can run a borderless country,” Kotka said. In 2014, the government launched a digital “residency” program, which allows logged-in foreigners to partake of some Estonian services, such as banking, as if they were living in the country. Other measures encourage international startups to put down virtual roots; Estonia has the lowest business-tax rates in the European Union, and has become known for liberal regulations around tech research. It is legal to test Level 3 driverless cars (in which a human driver can take control) on all Estonian roads, and the country is planning ahead for Level 5 (cars that take off on their own). “We believe that innovation happens anyway,” Viljar Lubi, Estonia’s deputy secretary for economic development, says. “If we close ourselves off, the innovation happens somewhere else.”
Jackson is the 42-year-old chief executive officer of Wise Co., a leading brand in survival foods, that is, Mylar pouches of freeze-dried meals such as Savory Stroganoff and Loaded Baked Potato Casserole designed to remain edible on shelves for a quarter century.
Over the past several years, the prepper phenomenon—people geared for imminent disaster—has come out of the backwoods via shows like the National Geographic Channel’s Doomsday Prepper and media reports of the very rich and very worried buying and fortifying luxury bunkers. Jackson’s been positioning Wise to feed the trend. During the call, he felt a rush of conflicting emotions—not so much from the prospect of getting a fat government contract while legions of people suffer, but because the windfall could derail his business strategy. A 2-million-serving order will increase his sales for 2017 about 15 percent but stretch his supply more than he’s comfortable with; his answer to Lee was not an easy yes.
Jackson has filled many emergency orders, including supplies for Ebola victims in Liberia and for people in the Philippines devastated by 2013’s earthquake. Carnival Cruise Line has stocked Wise pouches at its Caribbean ports to feed employees when storms rock the region. Just a few days before the FEMA call, the Salvation Army purchased 100,000 servings of Wise products for Florida shelters near areas affected by Hurricane Irma.
But these last-minute orders aren’t how Jackson wants to define his core business. Since 2013, when he came on as CEO, he’s been trying to move the company beyond the volatile disaster-response industry. “I’m not going to turn down an incredible opportunity,” he says, “but I’m also not after sporadic clients. I want predictability. I want Mr. and Mrs. Smith in Everytown U.S.A. The Walmarts, the Home Depots—those are my golden geese. If a big order from FEMA interrupts our supply to staple customers, that’s a risk I shouldn’t take.”
It looked like Steinhoff International Holdings NV had reached escape velocity from South Africa’s deepening economic gloom: A furniture retailer emulating Ikea’s model and global ambitions, built by men with their own compelling rags-to-riches stories.
Then the debt-fueled rocket stalled and came crashing down. From her office overlooking Cape Town’s waterfront, Sygnia Investment Management Ltd. Chief Executive Officer Magda Wierzycka watched on her computer screen on Dec. 6 as Steinhoff’s shares began a two-day plunge that cut the price by 80 percent and lopped some 10 billion euros ($11.8 billion) from its market value.
“People were expecting an explanation from Steinhoff,” said Wierzycka, whose company oversees about $14 billion, mostly in pension funds. “Instead we got nothing. In the absence of any real information, you tend to assume the worst.”
Wiese’s stellar reputation is in tatters, his $5 billion fortune down to $2 billion. Surrounded by lawyers and advisers, he sounded exhausted when he answered a call on Dec. 11. “Well, I’m alive,” is all he would say. Jooste didn’t respond to calls or text messages. A Steinhoff spokeswoman didn’t take calls or reply to messages.
Growing food has become a troubled business in the U.S. because of mounting international competition and mercurial demand for crops and livestock. Grain prices are near multiyear lows, sparking the deepest farm slump since the 1980s, and Russia, Brazil and other countries are elbowing out American operations.
More farms are becoming mammoth operations to maximize narrowing profit margins. Yet many, especially those like McM that are highly leveraged with rented land, can struggle when markets drop, or a bad season hits.
The McMartin brothers shared many things, including their stoic demeanor and love of the remote prairie. But their approach to farming couldn’t have been more different.
Larry, 50 years old, was at home in the fields, comfortable with fewer acres and less debt. He was a whiz with machinery, and preferred it to managing a roster of employees. He liked working outdoors and heading home for dinner with his family.
Ron, 51, rejected the American Gothic stereotype of pitchfork-wielding Midwesterners on small family farms. Ambitious and driven, he wanted to run a modern business, leveraging economies of scale into big profits.
Both brothers made a life in farming. Their differing visions for what that life could be drove them apart at times—before unexpectedly bringing them closer this year, as disaster loomed.
The settlement of the phase one “divorce deal” — covering the financial agreement, citizens’ rights and a fudged accord on the Irish border — now opens up a different set of challenges for Mrs May.
Next Tuesday she will confront perhaps the biggest: reaching agreement with a divided cabinet on what sort of future trade deal
Britain should seek and how to square off the “control” Britain seeks of its laws and borders with access to the single market.
Since nobody in Brussels is certain how Mrs May will resolve this conundrum, she has been given until March to come up with an answer, although “scoping” talks between London and Brussels will start in the meantime.
Mark Rutte, the Netherlands’ prime minister, said it would be “very strange” if the EU were to make a pre-emptive offer to Britain. “We have not asked them to leave the EU,” he said. “So the Brits now have to decide what they want.”
With European Union leaders having agreed at a summit meeting last week to start talks on trade ties after Britain withdraws from the bloc, the country is finally starting to think about what it wants, and that is creating a whole new set of problems.
Some think Britain should be like Norway, outside the European Union but tightly bound to the bloc’s high social and economic standards. Others prefer the model of Canada, which has looser trade ties to the bloc.
There are those in Britain who want their country to break free, cutting taxes and regulation and transforming itself into a European version of Singapore. And there are some who cannot make up their minds, musing on a “Canapore” option, a hybrid of the Canada and Singapore models.
The stakes are high because almost all experts predict that Britain’s departure, known as Brexit, will hurt the British economy more than staying would.
“The U.K. will be economically worse off outside of the E.U. under most trade scenarios,” said Charles P. Ries, vice president at the RAND Corporation and the lead author of a recent report on the economic outlook after Britain’s exit from the bloc. “The key question for the U.K. is: how much worse off?”
Hospitals are struggling to hire doctors and nurses. British universities are failing to attract foreign academics and students. Bankers are looking for jobs in Germany and France. The construction sector last month warned that British infrastructure faced “severe setbacks” if Britain did not train enough workers to stem a shortfall in laborers from European Union countries. About half of all construction workers in London and the South East are foreign-born.
The “Brexodus,” as it is called, is being felt particularly acutely in the agriculture industry, which relies heavily on manual laborers, especially from poor European countries like Romania and Bulgaria. While Europe is experiencing a boom in “disposable” workers who are sent to all corners of the Continent, many appear to be shunning Britain.
Uber already knows how you travel around your city, oftentimes better than than city planners. This dataset is powerful, allowing Uber to watch and predict where millions of people move around cities and neighborhoods around the world. This data can have a real world impact: Uber has already learned to charge wealthy users more per ride and classify riding patterns as one-night stands… the possibilities are nearly endless.
This new spending data will allow them to not only see where you go every day, but what you do once you arrive. Uber will be able to watch various neighborhoods travel into Chinatown for dinner, or into The Mission for al pastor tacos and drinks next door. They’ll know exactly which coffee and dessert places are popular with each demographic. They’ll know exactly which restaurants in every neighborhood get you to spend far too much on pizza, locally-brewed IPAs, and fries dipped in chipotle aioli.
The possibilities are endless when you can predict consumer demand.
Yes, Uber would face steep competition from Amazon and other companies that already have powerful inventory management systems for goods that have a near-infinite shelf-life (e.g. books). Yelp and Foursquare could also compete in this space, armed with years of consumer culinary preferences.
However, none of these competitors have Uber’s last-mile delivery network, a key component for successfully delivering goods that can go bad in minutes or hours. Amazon and Yelp are all investing in their last mile-delivery networks, they aren’t quite there… yet.
Existing food delivery apps like Postmates, Grubhub, and Seamless could also compete. However, their datasets exclude in-house restaurant orders, weakening their predictive models, and their delivery networks are far smaller than Uber’s.
The banker and his firm, specialists in deals within the telecom, media and tech worlds, are poised to gain prominence as those industries are consolidating like never before. (Disney is spending $52.4 billion to buy the bulk of 21st Century Fox last week, and AT&T is willing to pay $85.4 billion in a bid to take over Time Warner.)
But the question Mr. Bourkoff faces is whether he can transform his schmoozing into a business that can outlast him. LionTree, powered by what media and telecom executives describe as Mr. Bourkoff’s nonstop networking, has already claimed a number of advisory assignments, from Charter’s deal for Time Warner Cable to Verizon’s purchases of AOL and Yahoo to helping advise Snap Inc. on its initial public offering. Over all, the firm has advised on more than $350 billion worth of transactions.
The troubles of Mick Davis, a mining executive behind some of the industry’s biggest mergers, epitomize the sector’s cautious mood. Mr. Davis earned the moniker “Mick the Miner” as he engineered the blockbuster tie-ups of BHP and Billiton and Glencore and Xstrata. But this year he had to close a $5.6 billion investment fund, X2 Resources, without a single deal.
The mining industry is slowly recovering from a collapse in commodity prices in recent years that forced many companies to slash jobs and sell assets. Most big mining companies are wary of doing deals, focusing instead on raising cash, shedding debt and delivering meaty dividends to investors.
CENTRAL BANKS & MONETARY POLICY
Japan’s central bank has been the world’s poster child for radical monetary easing. Next year, its stance is poised to change. After pumping about $4 trillion into the financial system over Gov. Haruhiko Kuroda’s nearly five years on the job and dropping rates into negative territory, the Bank of Japan is likely to raise one or more of its key interest-rate targets in 2018, market players say.
Central-bank officials aren’t saying that publicly. But rather than rebuff market expectations, some officials are dropping hints of a new direction for one of central banking’s great experiments.
If it happens in 2018, it would mark a moment of closure after a decade of crisis that began with the global meltdown in 2008. Already, the Federal Reserve is well into its program of raising interest rates, and the European Central Bank and the Bank of England are following the Fed’s lead. Japan, which suffered from deflation and stagnation dating to the 1990s, is the last to stick with radical easing.
A BOJ reversal would bring risks for global markets and the world’s third-largest economy, which has enjoyed a growth streak of seven quarters.
The head of Norway’s central bank said it would likely follow in the footsteps of the U.S. Federal Reserve and increase its key interest rate toward the end of 2018, despite muted inflation and a cooling in the Norwegian housing market.
USA ECONOMY DATA, CITIES AND STATES
The Federal Communications Commission’s abandonment of net-neutrality regulations—which had promised retribution for companies that didn’t treat all internet traffic the same—only reinforces trends that have been in motion for years: Alliances are being forged and dissolved, and companies once known as giants are being swallowed up by even bigger behemoths.
Lawmakers in both parties and the Trump administration are negotiating overhauls of the two companies that could keep them at the center of the U.S. mortgage market for years to come, abandoning long-stalled proposals to wind them down.
Food costs are ticking up after a multiyear glut of many staples. But consumers aren’t paying much more yet because grocers, discounters and online retailers are all holding down prices to win business.
As U.S. drug deaths hit record levels, prosecutors and police are trying a tactic that echoes tough-on-crime theories of the 1990s: charging dealers and even friends or relatives who enabled the addict’s habit.
POSITIONING, INFLECTION, MARKET CALLS
People sometimes talk about “dry powder” with individual investors. According to Morgan Stanley, there isn’t much left, going by unspent money in individual brokerage accounts. Cash as a percentage of assets at Charles Schwab Corp. clients has fallen to 11 percent, the lowest level since at least 1995.
Among professionals, the use of borrowed cash are surging. Leverage among hedge fund managers who speculate on rising and falling shares is approaching its 2007 high, data compiled by Morgan Stanley on its clients show.
“Our call for investor euphoria to appear in 2017 has finally arrived,” Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, wrote in a note earlier. “Never have we witnessed such high gross leverage by long/short equity funds on a delta/beta adjusted basis. Individual investors are also finally getting involved as tax cuts likely becoming reality.”
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
Their focus on maximizing shareholder value helps explain the deal-making boom in the chip industry, which also includes a $105 billion bid by Broadcom to acquire the mobile chip kingpin Qualcomm and the completion of Analog Devices’ $14.8 billion purchase of Linear Technology. While acquisitions in the industry are not new, the slowing sales of many kinds of chips and the stiff costs to develop new ones have led these executives to pursue bigger deals and curtail spending on technology projects that might take years to pay off.
Struggling shares of newly listed Chinese companies in the U.S. are saddling investors with unexpected losses and dealing a setback to other firms from China hoping to go public in New York.
Sixteen companies from China have debuted on the New York Stock Exchange or Nasdaq so far in 2017, making this year one of the busiest of the past decade for Chinese IPOs in the U.S., according to data provider Dealogic. Ten of the newly issued stocks this year are trading below their IPO prices, with some plunging within weeks of listing.
Twitter shares rocketed to their highest level in more than a year on Monday after analysts at JPMorgan upgraded the stock, arguing that the social media site’s financial results will strengthen over the next year.
Together, the two moves — along with Friday’s agreements to partner with Exxon Mobil Corp. on future projects, and to add a production platform to a promising deep-water field — stand as the most significant steps yet in Chief Executive Officer Pedro Parente’s push to raise $21 billion through asset sales and trim the company’s longstanding debt.
“After a number of setbacks, and zero deals during the year, all the announcements ended up concentrated in the past few days,” said Luiz Francisco Caetano, an analyst at Planner brokerage analyst said in a telephone interview from Sao Paulo. “This is extremely positive.”
TAXATION, WEALTH HAVENS, CAPITAL SHELTERS
The European Commission, the European Union’s executive arm, said on Monday that it had opened an investigation into Inter Ikea, one of the retail giant’s two main divisions, amid concerns it may have been given unfair tax advantages by the Netherland, where Inter Ikea is based. The inquiry is part of an intensifying campaign by European regulators to crack down on what they view as sweetheart deals between multinational companies and tax-friendly countries that have sought to draw their business.
The announcement adds Ikea to a list of firms targeted by European officials for using sophisticated strategies in Ireland, the Netherlands and other European Union countries to pay few or no taxes on billions of dollars of profits. Other companies facing similar scrutiny include Starbucks and Apple
The investigation into Inter Ikea is Brussels’ most recent state-aid probe into the structures that allow some multinational companies to cut their taxes in a way that domestic and smaller companies cannot, which the commission deems an illegal benefit, or so-called state aid.
Ikea’s founder, Ingvar Kamprad, created the complex tax structure in the 1980s to escape Sweden’s high tax regime. Mr Kamprad split his flat-pack furniture empire in two and created a franchise system: Inter Ikea would look after the brand and concept while Ikea Group, which is not part of the EU investigation, would be the main retailer.
COMMODITIES BASE METALS, MATERIALS
After prices more than tripled in the past two years, cobalt has become a valuable prize for the handful of miners producing it at scale. The global market has increased from about $4 billion a year at the end of 2016 to about $8 billion now and is roughly equal in size to the tin market.
But cobalt could be set to level out in 2018. BMO Capital Markets sees prices averaging about $68,200 a ton from about $72,000 now as Glencore Plc and Eurasian Resources Group ramp up major new projects in 2018 and 2019.
POLLUTION, CLIMATE & ENVIRONMENT
Conservationists have warned that the Asiatic cheetah is on the threshold of extinction following a UN decision to pull funding from conservation efforts to protect it. Fewer than 50 of the critically endangered carnivores are thought to be left in the wild – all of them in Iran – and scientists fear that without urgent intervention there is little chance of saving one of the planet’s most distinctive and graceful hunters.
More than 30 people were killed and many others were missing after a slow-moving tropical storm spurred floods and landslides in the central Philippines, officials said on Sunday.
Thousands of Christmas holiday travelers were stranded, and 89,000 people were forced to flee to emergency shelters because of Tropical Storm Kai-Tak, according to local news reports. Sofronio Dacillo Jr., a disaster response officer, told The Associated Press that landslides in the island province of Biliran had killed dozens of villagers and left others missing after the storm blew over on Saturday.
GEOPOLITICS, CRIME, TERRORISM
President Vladimir V. Putin called President Trump on Sunday to thank him for the work of the Central Intelligence Agency in helping prevent an Islamic State attack in the northern Russian city of St. Petersburg.
In rare words of praise for the C.I.A., Mr. Putin said the agency had provided information that “helped detain terrorists planning explosions,” the Kremlin said in a statement posted on its website. The attackers planned to strike crowded sites including Kazan Cathedral, a landmark Orthodox Christian church, the statement said.
“The information received from the C.I.A. was sufficient to search for and detain criminals,” the statement said. “The head of the Russian state asked the American president to convey words of thanks to the director of the C.I.A. and the American intelligence officers who received this information.”
The federal police said Sunday that they had arrested an Australian man who was charged with acting as an economic agent for North Korea by trying to help the isolated country sell its missile parts and other military technology abroad.
The man, Chan Han Choi, 59, was arrested on Saturday in the Sydney suburb of Eastwood, where he lives. The police accused him of violating both United Nations sanctions and Australian law by attempting to conduct trade deals on behalf of North Korea — the first time such charges have been filed in Australia.
The arrest comes as tensions in the region have risen over a series of North Korean nuclear and missile tests, which have defied international sanctions aimed at curtailing the weapons programs.
A Saudi airstrike has killed a dozen women in the northern Yemeni province of Ma’rib, the country’s al-Masirah TV said Sunday. The airstrike targeted a wedding procession in the Qaramesh region on Saturday, it said. Locals said the women were simply returning on foot from the wedding when they were targeted. Several other women, who were riding in a car, escaped the attacks, they said.
Militants killed at least 11 officers at Afghan checkpoints in Helmand Province, and a suicide bomber targeted a NATO convoy in Kandahar.
ISIS claimed responsibility for the assault in Quetta that left at least eight dead and 30 injured, raising concerns about the security of Christians in the country.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
The student’s friends think he joined the thousands — possibly tens of thousands — of people, rights groups and academics estimate, who have been spirited without trial into secretive detention camps for alleged political crimes that range from having extremist thoughts to merely traveling or studying abroad. The mass disappearances, beginning the past year, are part of a sweeping effort by Chinese authorities to use detentions and data-driven surveillance to impose a digital police state in the region of Xinjiang and over its Uighurs, a 10-million strong, Turkic-speaking Muslim minority that China says has been influenced by Islamic extremism.
Along with the detention camps, unprecedented levels of police blanket Xinjiang’s streets. Cutting-edge digital surveillance systems track where Uighurs go, what they read, who they talk to and what they say. And under an opaque system that treats practically all Uighurs as potential terror suspects, Uighurs who contact family abroad risk questioning or detention.
The campaign has been led by Chen Quanguo, a Chinese Communist Party official, who was promoted in 2016 to head Xinjiang after subduing another restive region — Tibet. Chen vowed to hunt down Uighur separatists blamed for attacks that have left hundreds dead, saying authorities would “bury terrorists in the ocean of the people’s war and make them tremble.”
PROPAGANDA, CORRUPTION, AUTHORITARIANISM
Since it was posted on Nov. 8, the image has been “liked” by more than 6,000 people on Instagram, the image-sharing site owned by Facebook. What those people probably did not know was that it was created by the Internet Research Agency, or I.R.A., a so-called Russian troll farm that employed hundreds to influence discussions online by stirring debate in comment sections below online stories and creating provocative posts on social media.
Twitter has launched a crackdown on threats of violence and hateful conduct, removing accounts belonging to leaders of far-right political groups including Britain First, the American Nazi Party and the League of the South from the platform.
The messaging platform said on Monday that accounts which affiliate with organisations that use or promote violence against civilians to further their causes will be suspended, with an exception for military entities and people engaging in peaceful resolution.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
The Trump administration’s consideration of a wage freeze for federal employees is one piece of a renewed multifront Republican push to shrink those workers’ pay, benefits and workforce. That effort has been around for years, but it now has an intellectual champion in the White House, and I don’t mean President Trump. Now, with James Sherk — a chief proponent of the notion that federal workers are overpaid — serving as Trump’s labor adviser, the proposals stand their best chance yet of becoming policies that dig deep into federal employees’ pockets.
Fresh off their victory in Alabama’s special Senate election, Democrats now enjoy their largest advantage in congressional preference in nine years, according to the latest NBC News/Wall Street Journal poll, signaling a dangerous political environment for Republicans entering next year’s midterm elections.
Fifty percent of registered voters say they prefer a Democratic-controlled Congress, versus 39 percent who want Republicans in charge.
As she sat with a glass of sauvignon blanc waiting for a women-focused Democratic fund-raiser to begin, Nancy Sharp let loose in a Texas-seasoned drawl why she and so many other onetime supporters of the Bush family were abandoning the Republicans.
“Have you ever heard of a stupider and trashier man than the president of the United States?” asked Ms. Sharp, an interior designer who lives not far from the elegant condominium where about 75 women gathered this month to help the House candidate Lizzie Pannill Fletcher. “Calling a U.S. senator ‘Pocahontas’ in front of God and everyone!”
If Democrats are to claim the House majority next year, their path back to power will go through places like the Huntingdon, a 34-floor high-rise in the River Oaks section of Houston that was once home to Enron’s Kenneth L. Lay, has no fewer than five valets on a busy night and sits in the district of Representative John Culberson, a veteran Republican who may be in for the race of his life.
The Associated Press reports that Moore sent out an email on Friday to his supporters telling them that “this battle is NOT OVER!” and asked them for contributions to his “election integrity fund.” The former judge said his campaign is planning to send “numerous reported cases of voter fraud” to Alabama’s secretary of state, John Merrill.
Eight octogenarians currently serve, nearly twice as many as ever before, according to records maintained by the Senate Historical Office. Another handful of senators are at least 75.
For decades, older members of Congress have brushed aside questions about their fitness for office. They have defended their health and faculties, and some have implied that those who inquire are ageists who don’t understand that America is growing older.
But the change in schedule for the tax bill is at least the third time this year that Senate leaders paused action to accommodate ailing colleagues. It is now clear that the large number of older senators in positions of power is taking a toll on the operations of Washington.
A new coalition government was sworn in on Monday in Austria, and for the first time in more than 10 years it includes the far-right Freedom Party, a watershed for the populist movements that unsettled European politics this year.
The return to power of the Freedom Party, which was founded by neo-Nazis after World War II, was concerning enough that Austria’s president, Alexander Van der Bellen, took the exceptional step of eliciting several promises from the new government before he would administer the oath of office.
Those included acknowledging Austria’s commitment to European Union and its responsibility to a Nazi past that tore apart the Continent last century. Mr. Van de Bellen also reminded the new government leaders that they represent everyone in Austria, a rejoinder to a campaign characterized in large part by an antipathy toward immigrants.
SCANDALS, LAWSUITS, FINES, REGULATORY
“This is the best case we’ve ever had against a major distributor in the history of the Drug Enforcement Administration,” said Schiller, who recently retired as assistant special agent in charge of DEA’s Denver field division after a 30-year career with the agency. “I said, ‘How do we not go after the number one organization?’ ”
But it didn’t work out that way.
Instead, top attorneys at the DEA and the Justice Department struck a deal earlier this year with the corporation and its powerful lawyers, an agreement that was far more lenient than the field division wanted, according to interviews and internal government documents. Although the agents and investigators said they had plenty of evidence and wanted criminal charges, they were unable to convince the U.S. attorney in Denver that they had enough to bring a case.
Discussions about charges never became part of the negotiations between the government lawyers in Washington and the company.
“It was insulting,” Schiller said. “Morale has been broken because of it.”
Sen. Bob Corker failed to properly disclose millions of dollars in income from real estate, hedge funds and other investments since entering the Senate in 2007, according to new financial reports filed by the Tennessee Republican.
Mr. Corker late Friday filed a series of amendments showing that his personal financial reports as originally filed included dozens of errors and omissions. The new filings came after The Wall Street Journal asked the senator’s office about some irregularities in his prior financial reports.
RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
MEDIA, CABLE, SPORTS, ENTERTAINMENT
“I have decided that the most important thing I can do right now is to take care of my problem,” he said. “I have disclosed that decision to the company, and we mutually agreed that it was appropriate that I resign.”
AUTOS, ELECTRIC, SELF-DRIVING
After raising more than $1 billion from investors led by Tencent Holdings Ltd., NIO is preparing for its next phase of growth in the world’s biggest electric-car market. In addition to Tesla, the company will be competing against homegrown rivals such as BYD Co., as well as industry giants Volkswagen AG and General Motors Co.
BMW said on Monday it had hit its target of selling 100,000 electric cars this year around the world, benefiting from strong demand in western Europe and the United States for models such as the i3 and the 2-series plug-in hybrid Active Tourer.
Backed by billions from influential investors and armed with global talent, over a dozen Chinese startups want to make dinosaurs of incumbent auto makers. As they start production, their determination is raising the pressure to innovate at traditional auto makers.
“Tesla paved the way, now we’re taking this a step further,” said Padmasree Warrior, who runs the U.S. arm of Shanghai-based NIO, one of the Chinese startups that want to drive the convergence of the automotive and technology industries. “We have a mission to transform mobility.”
Toyota has become the latest car giant to throw its full weight behind electric vehicles, saying every Toyota or Lexus model will come with an electric option by 2025.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
A Chinese tech company pulled offline a virtual-reality avatar depicted as a flirtatious secretary in revealing clothes, hours after The Wall Street Journal asked whether such depictions encourage a view of women as sexual objects in the workplace.
A lump of coal is scooped onto a truck bed in Australia, driven to a port, loaded on a ship, piloted across the ocean to a dock in China, piled into a train car and delivered to power plant. And it would all happen under the watchful eyes of coal traders, if a fleet of new satellite tracking firms can deliver on ambitious promises.
As the quest to master artificial intelligence intensifies, China’s tech trio of Baidu, Alibaba and Tencent have a distinct advantage over their Silicon Valley rivals — data. As Robin Li, chairman and chief executive of Baidu, says: “Baidu knows you better than you know yourself.”
Baidu, Alibaba and Tencent, have embraced AI with alacrity: setting up specialist labs at home and overseas and hiring top engineers. Much like their US peers such as Google, they are using machine learning to push into newer fields of autonomous driving, medical diagnosis, facial recognition for payments and AI-enabled hardware that can be operated by voice.
SCIENCE, NATURE, PSYCHOLOGY
In just the past few years, advances in CRISPR have been happening at a breakneck speed—and companies have sprung up to commercialize the technology. Now, patients in Europe and the U.S. could be treated with CRISPR-based therapies as soon as 2018.
The hope is that CRISPR could be used in a one-time procedure to cure some of the most devastating inherited disorders and cancers, some of which have no or few current treatment options. Scientists want to deploy the technology to fix genetic errors in a person’s DNA, getting at the root of disease.
That might be the dream, but the reality is far different. Already, investigators have delayed the start dates of clinical trials. And the studies slated to start in the next year or two will treat a small number of patients with a few rare diseases. It will probably be years before the technology can be used for more common diseases in more patients.
For years, the program investigated reports of unidentified flying objects, according to Defense Department officials, interviews with program participants and records obtained by The New York Times. It was run by a military intelligence official, Luis Elizondo, on the fifth floor of the Pentagon’s C Ring, deep within the building’s maze.
The Defense Department has never before acknowledged the existence of the program, which it says it shut down in 2012. But its backers say that, while the Pentagon ended funding for the effort at that time, the program remains in existence. For the past five years, they say, officials with the program have continued to investigate episodes brought to them by service members, while also carrying out their other Defense Department duties.
The shadowy program — parts of it remain classified — began in 2007, and initially it was largely funded at the request of Harry Reid, the Nevada Democrat who was the Senate majority leader at the time and who has long had an interest in space phenomena. Most of the money went to an aerospace research company run by a billionaire entrepreneur and longtime friend of Mr. Reid’s, Robert Bigelow, who is currently working with NASA to produce expandable craft for humans to use in space.
Before he was arrested in the brutal scalping death of the mother of his newborn daughter, promising scion Blake Leibel got caught up in a twisted love triangle and developed ties to the decadent poker scene depicted in ‘Molly’s Game.’ As he prepares to stand trial, those who knew Leibel best reveal what could have caused him to break so bad.
Barry Sherman, a Canadian billionaire, generic-drug mogul and philanthropist, once promised that the autobiography he was writing would be a page-turner, packed with stories of intrigue, duplicity and outright corruption by his competition. The last chapter was without doubt the most sensational — and he did not get to write it. It occurred last Friday, when his body was rolled out of his Toronto mansion by the police, together with that of his wife, Honey.
“Fabien Gaglio lied every day for 15 years,” says Diana Benedek, a California-based businesswoman who says Hottinger & Partners stole $20 million from her and her husband. “Why would anyone believe him now?” Another customer, Tilman Reissfelder, who says he lost $12 million, enlisted a white-collar private detective named Andrea Galli to do the forensic accounting work he says Swiss authorities are neglecting. Together, they reject the idea that Gaglio acted alone and that their money is truly gone and suggest a tantalizing alternative: That the banker stage-managed his confession to minimize his punishment and divert attention from a raft of other felonies, including operating a money-laundering ring for criminals and corrupt politicians.
When the Chateau Louis XIV sold for over $300 million two years ago, Fortune magazine called it “the world’s most expensive home,” and Town & Country swooned over its gold-leafed fountain, marble statues and hedged labyrinth set in a 57-acre landscaped park. But for all the lavish details, one fact was missing: the identity of the buyer.
Now, it turns out that the paper trail leads to Crown Prince Mohammed bin Salman, heir to the Saudi throne and the driving force behind a series of bold policies transforming Saudi Arabia and shaking up the Middle East.
The 2015 purchase appears to be one of several extravagant acquisitions — including a $500 million yacht and a $450 million Leonardo da Vinci painting — by a prince who is leading a sweeping crackdown on corruption and self-enrichment by the Saudi elite and preaching fiscal austerity at home.
“He has tried to build an image of himself, with a fair amount of success, that he is different, that he’s a reformer, at least a social reformer, and that he’s not corrupt,” said Bruce O. Riedel, a former C.I.A. analyst and author. “And this is a severe blow to that image.”
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