Macro Links Dec 22nd – Jerusalem Rebuke

Macro Links Dec 22nd – Jerusalem Rebuke

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JERUSALEM REBUKE

Rebuking Trump, U.N. General Assembly Condemns U.S. Decision on Jerusalem – The New York Times

A majority of the world’s nations delivered a stinging rebuke to the United States on Thursday, denouncing its decision to recognize Jerusalem as Israel’s capital and ignoring President Trump’s threats to retaliate by cutting aid to countries voting against it.

In a collective act of defiance toward Washington, the United Nations General Assembly voted 128 to 9, with 35 abstentions, for a resolution to demand that the United States rescind its Dec. 6 declaration on Jerusalem, the contested holy city.

The resolution is nonbinding and therefore largely symbolic, but the lopsided vote indicated the extent to which the Trump administration’s decision to defy a 50-year international consensus on Jerusalem’s status has unsettled world politics and contributed to America’s diplomatic isolation.

U.N. resoundingly rejects U.S. decision on Jerusalem in pointed rebuke – The Washington Post

The vote in a rare emergency session was a public reproach of an administration that stands alone in the world in recognizing Jerusalem as Israel’s capital, a status other governments say should be left undecided until the final stage of talks between Israelis and Palestinians.

The nonbinding resolution on “illegal Israeli actions in occupied East Jerusalem and the rest of occupied Palestinian territory” declared actions that predetermine Jerusalem’s fate “null and voided.” Even countries that abstained offered explanations that distanced themselves from President Trump’s Dec. 6 decision.

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GOP TAX PLAN

Ryan Pushes Trump to Follow Tax Win With U.S. Welfare Revamp – Bloomberg

Republicans want to channel momentum from the GOP’s victory on taxes into a push to overhaul the nation’s welfare programs, though some of President Donald Trump’s advisers prefer a less controversial infrastructure plan at the top of his agenda.

House Speaker Paul Ryan regards 2018 as a chance to fulfill the ambitions he brought to Congress 20 years ago: reshaping the social safety net for the poor and disabled, as well as programs including food stamps and Medicaid. He said Wednesday he’s focused on getting people from welfare to work.

For Heavily Indebted Firms Like Dell, Tax Bill Delivers a Downside – WSJ

The tax overhaul expected to become law soon will limit the tax deduction that companies take for the interest they pay on their debt. With the change, Dell Technologies Inc. won’t be able to deduct a big chunk of the roughly $2 billion it pays yearly in interest on its debt—and that tax bill could rise further a few years from now.

A Dell representative says it is still analyzing the impact of the bill. The company’s deal to buy EMC Corp., aimed at establishing a one-stop shop for information technology sold to business, was forged on the assumption that the interest expense on Dell’s debt would remain deductible, said a person familiar with the matter.

Other highly indebted companies with speculative-grade credit ratings also face the prospect of having much of their interest payments taxed. Full deductibility of interest has long made borrowing more attractive for companies when they needed money, instead of raising capital through selling equity. Some observers say the change could help make companies safer, if it steers them away from more debt.

Koch Political Network to Spend Millions Selling Tax Overhaul – Bloomberg

The political network backed by billionaire industrialists Charles and David Koch is planning a “multi-million dollar” effort in 2018 to promote the tax overhaul legislation passed this week by Congress that so far is polling poorly with American voters.

The network says the campaign will try to demonstrate to Americans that the legislation, which President Donald Trump is expected to sign into law soon, is pro-growth and will improve their lives. Seminars, workshops, town-hall style events, phone banking and door knocking are planned, in addition to targeted advertising on television, radio and digital platforms.

Hedge fund chief Dalio questions value of tax cuts

Ray Dalio, founder of Bridgewater Associates, the hedge fund, wrote in a blog post that the tax plan would “have some minor positive longer-term impacts”. However, he added: “By and large it doesn’t deal with the impediments that are holding back investment and productivity in the US economy”.

The Major Tax Changes in the Republican Bill

Congressional Republicans fulfilled one of their biggest and most long-awaited goals: an overhaul of the tax code. Their bill—which awaits President Donald Trump’s signature—cuts corporate taxes permanently and provides temporary cuts for individuals.

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17Z22 - TAX CHANGES 2

17Z22 - TAX CHANGES 3

17Z22 - TAX CHANGES 4

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NORTH KOREA, UGANDA, CATALONIA

US making plans for ‘bloody nose’ military attack on North Korea

America is drawing up plans for a “bloody nose” military attack on North Korea to stop its nuclear weapons programme, The Telegraph understands.

The White House has “dramatically” stepped up preparation for a military solution in recent months amid fears diplomacy is not working, well-placed sources said. One option is destroying a launch site before it is used by the regime for a new missile test. Stockpiles of weapons could also be targeted.

The hope is that military force would show Kim Jong-un that America is “serious” about stopping further nuclear development and trigger negotiations.

North Korean Soldier Defects Through DMZ, and Gunfire Erupts – The New York Times

A North Korean soldier defected to South Korea on Thursday through the heavily guarded demilitarized zone separating the two countries, leading to gunfire on both sides of the border, the South Korean military said.

Uganda Lifts an Age Limit, Paving the Way for a President for Life – The New York Times

After months of heated, sometimes violent debate, Uganda’s Parliament voted late Wednesday to lift the age limit for the presidency, setting the stage for President Yoweri Museveni to rule the country indefinitely.

Mr. Museveni is in his fifth presidential term, which expires in 2021. By then, he will be 77 — two years past the age limit for a president set by Uganda’s 1995 Constitution.

Tensions high as millions of Catalans turn out for decisive vote

Pro-independence parties in Catalonia were on track to win an absolute majority in regional elections on Thursday in a blow to Mariano Rajoy, the Spanish prime minister, that threatens to escalate the already acute tensions between Barcelona and Madrid.

With 96 per cent of the votes counted, and amid a record turnout, the three separatist parties were set to win 70 seats in the 135-seat assembly, passing the 68-seat threshold required to form a government.

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RUSSIA PROBE, SANCTIONS, URANIUM ONE DIVERSION

Mueller Is Looking Into a U.S. Foundation Backed by Russian Money

The foundation, called the Human Rights Accountability Global Initiative (HRAGI), offers a window into Russian efforts to influence U.S. politics before the presidential election. It was financed by $500,000 in donations, mostly from wealthy Russians with ties to Petr Katsyv, deputy director of Russian Railways and a longtime acquaintance of Prosecutor General Yuri Chaika. Rather than a nonprofit helping unite Americans with Russian adoptees, the foundation was a lobbying vehicle against sanctions.

“This whole organization is a sham and a front to pursue the Russian government’s objectives,” said Bill Browder, a U.S.-born fund manager whose accountant, Sergei Magnitsky, died in a Russian prison after accusing Russian officials of fraud. Browder, founder of Hermitage Capital Management, persuaded the U.S. to pass the Magnitsky Act sanctioning Russian officials implicated in his death. He also got other countries, including the U.K. and Canada, to pass variations of it.

Mueller’s Silence Cuts Through Noise of Trump Russia Inquiries – Bloomberg

Through all the controversy, threats and noise surrounding the Trump-Russia investigation, one person has been conspicuously silent: Special Counsel Robert Mueller.

The former FBI director hasn’t uttered a single word in public since he was appointed in May to lead the probe into Russian meddling in the U.S. election despite increasingly combative attacks by Republicans and their allies on the FBI, the Justice Department and the integrity of his probe.

It’s an intentional strategy meant to convey the investigation’s credibility and seriousness in an age of 24-hour noise, amplified by cable news shows and Twitter, according to current and former U.S. officials who know Mueller personally or who have followed his work.

Russia’s elite faces nervous wait for US to reveal sanctions list

Even if the Trump administration, which has been notoriously ambivalent in its stance on Russia, opts to impose no new sanctions, Moscow’s elite is rattled. The fear is that simply being mentioned in the US report will affect business ties, fundraising and their standing in the west.

“I don’t think there will be any significant sanctions package in February,” said Nikita Kulachenkov, a researcher at Russian opposition politician Alexei Navalny’s Anti-Corruption Foundation. “But mention in that report will be a very big headache for each of those who appear in there.”

Prosecutors ask FBI agents for info on Uranium One deal – NBC News

On the orders of Attorney General Jeff Sessions, Justice Department prosecutors have begun asking FBI agents to explain the evidence they found in a now dormant criminal investigation into a controversial uranium deal that critics have linked to Bill and Hillary Clinton, multiple law enforcement officials told NBC News.

The interviews with FBI agents are part of the Justice Department’s effort to fulfill a promise an assistant attorney general made to Congress last month to examine whether a special counsel was warranted to look into what has become known as the Uranium One deal, a senior Justice Department official said.

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BITCOIN, BLOCKCHAIN MANIA

Iced tea maker soars 500% after pivot to blockchain

The Nasdaq-listed company, which has never reported a profit and two weeks ago struck a distribution deal for cold-pressed juice, said it was “shifting its primary corporate focus towards the exploration of an investment in opportunities that leverage the benefits of blockchain technology”.

This sudden embrace of blockchain — a type of decentralised ledger technology best known for powering bitcoin — makes the company the latest in a string of small US stocks to more than double their value in a day by adding it to their names, a trend reminiscent of the wildest days of the late 1990s technology bubble.

Is Bitcoin in a Bear Market When It’s Still Up 1,500% for Year? – Bloomberg

Bitcoin has yet to redefine the global payments system. But it could raise questions about how to define a bear market.

Stock strategists — and financial journalists — typically use a 20 percent tumble from a high as the trigger for calling a bear market. Bitcoin has met that description this week, according to Bloomberg’s composite price. The low for Wednesday was 20 percent below the record, set way back … on Monday. It has continued to slide.

It marks the first time for bitcoin to drop into bear-market territory since last month. There have now been three bear-market dips for bitcoin just since August.

By contrast, the S&P 500 Index of stocks last saw a bear market in 2009. When Wells Fargo & Co., the American bank with a market capitalization roughly the size of bitcoin, last saw a bear market for its shares the drop took more than a year to materialize — from July 2015 to October 2016.

JPMorgan Dips a Toe Into Analysis of Bitcoin Futures Volatility – Bloomberg

Jamie Dimon may think bitcoin is a “fraud,” but that isn’t stopping JPMorgan Chase & Co. strategists from analyzing volatility for the cryptocurrency. “At a time when volatilities across asset classes have plummeted, this presents us with the oddity of an asset with extreme daily moves,” strategists Matthias Bouquet and Marko Kolanovic wrote in a note to clients Thursday. “Realized vols in BTC are unlike anything we’ve seen in other asset classes.”

Ex-Goldman bankers launch crypto fund for rich US investors

Three former Goldman Sachs employees are launching a fund tracking cryptocurrencies, claiming to be the first to offer wealthy US investors secure, passive exposure to 20 of the hottest coins.

Crescent Crypto Asset Management will launch an index fund on January 1 aimed at “accredited investors”, or those with annual salaries above $200,000 or with net worth of at least $1m, excluding housing. The fund will buy the top 20 coins that meet certain standards of market capitalisation, liquidity and security, rebalancing every quarter.

Goldman Is Setting Up a Cryptocurrency Trading Desk – Bloomberg

Goldman Sachs Group Inc. is setting up a trading desk to make markets in digital currencies such as bitcoin, according to people with knowledge of the strategy. The bank aims to get the business running by the end of June, if not earlier, two of the people said. Another said it’s still trying to work out security issues as well as how it would hold, or custody, the assets.

The move positions Goldman Sachs to become the first large Wall Street firm to make markets in cryptocurrencies, whose wild price swings and surging values have captured the public’s imagination but given pause to established institutions. Already, the bank is among just a few mainstream firms clearing a new breed of bitcoin futures offered by Cboe Global Markets Inc. and CME Group Inc. Citigroup Inc. and Bank of America Corp., for example, have been taking a wait-and-see approach.

Bitcoin Intensifies Pain for Some as Ransom Demands Skyrocket – Bloomberg

There’s been “a massive escalation” in both the number of attempts and the size of demands as criminals scramble for the hot cryptocurrency, said Michael Tanenbaum, an executive vice president at Zurich-based Chubb. “The rise in price of bitcoin correlates,” he said in an interview, declining to specify total costs. Around midyear, top payouts in corporate ransomware attacks began to exceed $1 million, dwarfing the previous maximum of about $17,000, he said.

Bitcoin to Be Included in Code Behind World’s Highest Tax Burden – Bloomberg

As the tax board mulls whether bitcoin trading constitutes speculation, it will probably have noticed that the cryptocurrency has soared more than 1,600 percent this year. This month, there were several days on which gains topped $1,000. On Dec. 19, it dropped more than $1,700. In other words, bitcoin has delivered the kind of sudden moves that a white-knuckled speculator’s dreams are built on.

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FACEBOOK

How Facebook’s Political Unit Enables the Dark Art of Digital Propaganda – Bloomberg

Zuckerberg’s social network is a politically agnostic tool for its more than 2 billion users, he has said. But Facebook, it turns out, is no bystander in global politics. What he hasn’t said is that his company actively works with political parties and leaders including those who use the platform to stifle opposition—sometimes with the aid of “troll armies” that spread misinformation and extremist ideologies.

The initiative is run by a little-known Facebook global government and politics team that’s neutral in that it works with nearly anyone seeking or securing power. The unit is led from Washington by Katie Harbath, a former Republican digital strategist who worked on former New York Mayor Rudy Giuliani’s 2008 presidential campaign. Since Facebook hired Harbath three years later, her team has traveled the globe helping political clients use the company’s powerful digital tools.

In some of the world’s biggest democracies—from India and Brazil to Germany and the U.K.—the unit’s employees have become de facto campaign workers. And once a candidate is elected, the company in some instances goes on to train government employees or provide technical assistance for live streams at official state events.

Israel’s Mossad Spy Agency Turns to Facebook for Recruiting – Bloomberg

The Mossad already has a recruiting website. This month it launched a ”Careers” page on Facebook to reach a wider audience and find the best candidates to fill dozens of positions, the spy agency said in an emailed statement.

“If you want an exciting career change, if you always dreamed but never dared, we invite you to examine the possibility of joining one of our several career paths,” one of the posts on the Facebook page says. “We are looking for quality people from an array of disciplines to fill a variety of fascinating and challenging posts.”

Facebook Job Ads Raise Concerns About Age Discrimination – The New York Times

Although Facebook is a relatively new entrant into the recruiting arena, it is rapidly gaining popularity with employers. Earlier this year, the social network launched a section of its site devoted to job ads. Facebook allows advertisers to select their audience, and then Facebook finds the chosen users with the extensive data it collects about its members.

The use of age targets emerged in a review of data originally compiled by ProPublica readers for a project about political ad placement on Facebook. Many of the ads include a disclosure by Facebook about why the user is seeing the ad, which can be anything from their age to their affinity for folk music.

The precision of Facebook’s ad delivery has helped it dominate an industry once in the hands of print and broadcast outlets. The system, called microtargeting, allows advertisers to reach essentially whomever they prefer, including the people their analysis suggests are the most plausible hires or consumers, lowering the costs and vastly increasing efficiency.

Targeted Facebook ads were an important tool in Russia’s efforts to influence the 2016 election. The social media giant has acknowledged that 126 million people saw Russia-linked content, some of which was aimed at particular demographic groups and regions. Facebook has also come under criticism for the disclosure that it accepted ads aimed at “Jew-haters” as well as housing ads that discriminated by race, gender, disability and other factors.

Other tech companies also offer employers opportunities to discriminate by age. ProPublica bought job ads on Google and LinkedIn that excluded audiences older than 40 — and the ads were instantly approved. Google said it does not prevent advertisers from displaying ads based on the user’s age. After being contacted by ProPublica, LinkedIn changed its system to prevent such targeting in employment ads.

Facebook and Universal strike music licensing deal

Facebook has struck a multiyear licensing deal with Universal Music Group covering the uploading of songs and music videos to the social network, creating a new source of revenue for the world’s largest music company.

The deal comes after a year of negotiations between Facebook and the major recorded music companies, which have been sending takedown notices when they find their songs posted on the site.

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SEXUAL HARASSMENT

Five Women Are Accusing A Top Left-Leaning Media Executive Of Sexually Harassing Them

Don Hazen, the executive editor of AlterNet, was placed on “indefinite leave” after BuzzFeed News asked his oversight board about accusations that he inappropriately touched employees, sent lewd emails, and showed them explicit photographs. “I deny most of allegations,” Hazen said.

Baseball’s Rainmaker Forced Out After Alleged Misconduct – WSJ

Bob Bowman, long considered one of the most influential executives in media and sports, was pushed out by Major League Baseball after allegations related to his workplace conduct.

‘We’re losing the war for truth’: Franken denounces Trump, GOP in final floor speech – The Washington Post

“As I leave the Senate, I have to admit that it feels like we’re losing the war for truth,” Franken said in his final speech on the Senate floor. “Maybe it’s already lost. If that’s what happens, then we have lost the ability to have the kinds of arguments that help build consensus.”

Theresa May’s Deputy Resigns in Furor Over Porn on Work Computer – The New York Times

Britain’s prime minister, Theresa May, suffered a new and damaging setback on Wednesday when a close and trusted ally, Damian Green, was forced to resign his cabinet post, after an investigation found that he misled the public about pornography found on his parliamentary computer.

Mr. Green, who was effectively Mrs. May’s deputy, is the second cabinet minister to quit after allegations of sexual harassment and other misconduct engulfed British politics in the wake of the scandal involving the American movie producer Harvey Weinstein.

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RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS

House Passes Stopgap Bill to Avoid Government Shutdown Against a Friday Deadline – The New York Times

Congress moved closer on Thursday to avoiding a government shutdown this weekend, after the House voted to keep the government funded into January, a move that would kick fights over issues like immigration, surveillance and health care into the new year.

The bill approved by the House 231-188 would extend government funding until Jan. 19 while also providing a short-term funding fix for the Children’s Health Insurance Program, or CHIP, whose financing lapsed at the end of September. The Senate could give final passage to the measure Thursday night.

Banks Are Worried Tech Systems Could Crash After Introduction of New EU Rules – Bloomberg

Computers crashing, investors frozen out of markets and a heightened risk of fat finger mistakes. That’s the worst-case scenario when the biggest change to European rules for the investment industry in a decade finally come into effect next month.

DoubleLine to Make Its Own Brand of Mortgage-Backed Securities – Bloomberg

DoubleLine Capital is embarking on a plan to originate and securitize mortgages, seeking to fill a niche that has traditionally belonged to banks and brokerage firms.

Fed Study Finds Continued Growth in Credit-Card Payments – WSJ

Americans increasingly relied on credit cards to make payments in 2016, and made more of those payments remotely, according to new data the Federal Reserve.

Subprime Auto Defaults Are Soaring, and PE Firms Have No Way Out – Bloomberg

In the years after the financial crisis, buyout firms poured billions into auto finance, angling for the big profits that come with offering high-interest loans to buyers with the weakest credit. At rates of 11 percent or more, there was plenty to be made as sales boomed. But now, with new car demand waning, they’ve found the intense competition — and the lax underwriting standards it fostered — are taking a toll on profits.

Delinquencies on subprime loans made by non-bank lenders are soaring toward crisis levels. Fresh investment has dried up and some of the big banks, long seen as potential suitors, have pulled back from the auto lending business. To top it off, state regulators are circling the industry, asking whether it preyed on borrowers and put them in cars they couldn’t afford.

“The PE guys sailed into this thing with stars in their eyes. Some of the businesses have done fine and some haven’t,” said Chris Gillock, managing director at Colonnade Advisors, a boutique investment bank. But right now, “it’s about as out-of-favor a sector as I can think of.”

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There’s a Flip Side to Asia’s Dollar Bond Boom – Bloomberg

Asian companies are turning to the dollar bond market like never before, selling record amounts of securities that leveraged investors desperate for yield are scooping up. But there’s a flip side to all that growth: it’s getting easier for funds to sell them short.

With unprecedented numbers of first-time borrowers and concerns about the financial transparency of some issuers, the market is increasingly vulnerable to higher volatility. Traders are already reeling from high-profile meltdowns this year after prices collapsed on bonds from Noble Group Ltd. and Reliance Communications Ltd.

“You will see movements that you won’t have seen before,” even as short selling can help improve market efficiency, said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group Ltd.

One key reason it’s becoming easier to short Asian dollar bonds is that funds are buying more of the securities on borrowed money. The banks that extend that credit hold some of the bonds as security, giving them a greater supply of the notes to lend out to short sellers. On top of that, Chinese and other financial institutions are buying more of the securities themselves in their hunt for yield, driving sales in the region excluding Japan to a record $310 billion this year.

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European Banks’ Post-Crisis Litigation Could Cost $100 Billion

A decade after the financial crisis, European banks’ bill for past misconduct could exceed $100 billion globally, with several lenders still facing cases potentially costing billions of dollars to settle.

The banks have spent at least $81 billion in the past decade to resolve accusations including market manipulation, sanctions violations and the sale of toxic mortgage securities that contributed to the crisis, a Bloomberg tally of disclosed fines, settlements and litigation payments shows.

Analysts at Bloomberg Intelligence say the lenders with the biggest misconduct bills so far could face an additional $33 billion or more in U.S. litigation risk alone.

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MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS

How serious is the North Korean nuclear threat?

A leaked intelligence report suggested North Korea has successfully miniaturised warheads that can be mounted on missiles, but assessments vary. Many experts think the two Hwasong-14 ICBM tests in June indicate North Korea could carry a nuclear warhead with a payload of 400-600kg, probably enough to reach the west coast of the US.

But scientists assess the bigger Hwasong-15 may be able to carry 500-1,000kg, potentially enough to deliver even a hydrogen bomb anywhere in America. “All told, I believe North Korea can hold at risk the entire continental US with an H-bomb and simple countermeasures, once the missile itself has undergone more extensive flight-testing,” says Mr Elleman.

Mr Wright says Pyongyang needs to test the Hwasong-15 on a more realistic trajectory. Mr Hecker says it needs another two years or so of testing to demonstrate that it has a missile that can deliver a small and light enough warhead. Mr Elleman argues Pyongyang needs another three to five ICBM tests to establish even a “political” deterrent. Two dozen tests would be better for an operationally viable deterrent, he says, adding the regime has done no work on accuracy.

The South Will Rise Again Under GOP Tax Plan – Bloomberg

People used to complain about high taxes before, but for the most part, they tolerated them. I suspect that now they are going to do something about it because capping the deductibility of state and local taxes (SALT, as it is known) has the potential to result in a population migration so large that it would result in profound economic and social changes. For starters, the South could become home to some of the nation’s largest cities. Many businesses will flee high-tax states in favor of low-tax states. This has been happening for years, but SALT will accelerate the trend.

Of bigger concern is how the leadership of high-tax states will respond. If individuals and businesses leave, eroding the tax base, states will face a choice between cutting spending or raising taxes. Less spending is hard with existing pension obligations, so there’s a strong possibility that a state like New York or Connecticut could enter a “death spiral” where residents leave, the state raises taxes, more leave, and so on. Since the governments of the high-tax states are nearly all Democratic, I doubt many have the desire to cut services when faced with net migration out of the state.

It goes further. People are starting to figure out that an inability to fully deduct property taxes results in lower real estate valuations. If there is more tax on your house, your house is worth less. This is just math. I suspect the market is rather efficient and real estate values will drop in high-tax jurisdictions, and the drop will accelerate as people leave and bids evaporate.

My prediction: Over time, New York City will lose its status as the intellectual and cultural capital of America. The real estate market in California, at stretched valuations, will suffer. Minnesota, Oregon, Iowa, Maine and others will also feel the pain. Florida and Texas will become the new centers of finance and innovation, with real estate values in Austin and Miami — and even Nashville — reaching valuations once reserved for California and New York over the course of a few decades.

In Tax Overhaul, Trump Tries to Defy the Economic Odds – The New York Times

Perhaps more than any other American political leader, Mr. Trump knows that long shots, like his own presidential bid, sometimes pay off. In that vein, he and congressional Republicans are arguing that their bitterly contested and expensive rewrite of the tax code will ultimately create more jobs and raise wages.

If they are proved correct, they will be repudiating not only historical experience, but most experts. From Congress’s own prognosticators to Wall Street’s virtuosos, scarcely any independent analyses project anything like the rosy forecasts offered by the president’s top economic advisers.

“We’re going to easily see 4 percent growth next year,” the National Economic Council director, Gary D. Cohn, said. Steven Mnuchin, the Treasury secretary, declared the tax plan would generate enough growth to more than pay for its $1.5 trillion cost.

But those pronouncements are at odds with estimates from the former employer of both men, Goldman Sachs. The bank projected that the tax bill will add just three-tenths of 1 percent of growth in the next two years, before its impact peters out.

The Most Frightening Aspect of Trump’s Tax Triumph | The New Yorker

Political speeches are rarely occasions for truth-telling. But the good ones combine a description of shared reality with the expression of a vision, or with words of celebration. The mediocre ones consist of platitudes—well-intentioned but lacking the force of inspiration or recognition.

And then there is the genre of the thoroughly insincere pronouncement that is all empty ritual. This is not normally observed in countries with functioning democratic institutions, because hollow words are the very opposite of accountability. These kinds of speeches are usually given in dictatorships: their intended audience is not the public but the tyrant. This is what we observed in Washington on Wednesday, and it’s the scariest part of Trump’s big tax triumph.

“I Have Power”: Is Steve Bannon Running for President? | Vanity Fair

The message is that the world needs saving—but who’s going to save it? Looking around, it’s not hard to see Steve Bannon’s best answer. Four months ago, Bannon was a supporting player, with a whiteboard and telephone. Now he’s made himself the star—not only the chief strategist but in many ways the candidate, the frontman of his own movement. With his motorcade, retinue of advisers, and security men, his Asia trip was a mirror of President Trump’s.

Inside the right-wing echo chamber, Bannon is lionized as a conquering folk hero. Well-wishers flock to snap selfies, press the flesh. At one event I chatted with an elderly man waiting his turn on the receiving line. “If I could ask him one question, it would be, why aren’t you president?’”

That has at least been a passing thought. In October, Bannon called an adviser and said he would consider running for president if Trump doesn’t run for re-election in 2020. Which Bannon has told people is a realistic possibility. In private conversations since leaving the White House, Bannon said Trump only has a 30 percent chance of serving out his term, whether he’s impeached or removed by the Cabinet invoking the 25th amendment. That prospect seemed to become more likely in early December when special counsel Robert Mueller secured a plea deal from former national security adviser Michael Flynn. Bannon has also remarked on the toll the office has taken on Trump, telling advisers his former boss has “lost a step.” “He’s like an 11-year-old child,” Bannon joked to a friend in November.

Republican Control of the Senate Hangs by a Thread – POLITICO Magazine

Beyond the traditional measurements—generic ballots, the president’s approval rating, the state of the economy—there are matters of fate that can and have played decisive roles in who takes the reins of power.

And in a Senate so narrowly divided, those matters loom especially large; everything from a Supreme Court nomination to the future of heath care to the scope of financial and environmental regulation may hang on a single vote.

In recent decades, major votes have broken down consistently across party lines. Not one Democrat voted to repeal Obamacare, or for this week’s tax cuts. Not one Republican voted for Obamacare, or for Bill Clinton’s 1993 budget. Given such near-total partisanship, the loss of one or two senators would shift not just the numerical balance of power, but the balance on issues ranging from judicial confirmations to the funding of the government.

No one but the most fanatical partisan looks at the political horizon in hopes that illness, injury or death removes an opponent from the battle. But neither does it serve a clear-eyed view of politics to ignore how the arrival of the unexpected can radically alter expectations. There have been too many times when a “black swan” has appeared to ignore the possibility—and the consequences— of a sudden twist of fate.

Tech Titans Wage War in China’s Next Internet Revolution – WSJ

In recent years, tech titans Alibaba Group Holding and Tencent Holdings have competed across a range of mobile internet businesses. Now the duopoly that has defined China’s internet is going to war.

“It’s a full-blown war,” says Wu Shichun, founder of early-stage investor Plum Ventures. How this plays out, investors say, is likely to reshape the landscape of China’s business world and affect the lives of Chinese and the destinies of smaller companies.

Just a few years ago, China had three dominant internet powers, collectively known as BAT, with search engine Baidu joining Alibaba and Tencent. Baidu, once as powerful as Google in the age of the personal computer, stumbled when the world moved to smartphones, and its valuation has lagged behind.

“In the past Alibaba and Tencent were mainly engaged in proxy fights [through startups]. Now they confront each other directly,” says an influential investor who knows both Alibaba’s Jack Ma and Tencent’s Pony Ma and has invested alongside them in startups. “It’s a world war now.”

Viktor Orban’s oligarchs: a new elite emerges in Hungary

Anti-corruption campaigners, bankers and opposition politicians say Hungary has shifted to a form of “crony capitalism”, increasingly resembling models found farther east in ex-Soviet republics, where business success is intertwined with political power. Hungary’s government-favoured tycoons may be worth only hundreds of millions, not the billions of dollars of, say, Russia’s oligarch class. But critics say its economic structure is becoming a miniature version of Vladimir Putin’s Russia.

The difference is that Hungary has built this system within the EU — in part, using EU funds. Much of the new Fidesz-linked business elite has achieved its success primarily through state contracts, about 60 per cent of which are funded by the EU.

“Since 2010, going along with the distortion of the whole institutional system, basically Fidesz and oligarchs close to Fidesz have captured the state,” says Jozsef Peter Martin, executive director of Transparency International, the anti-corruption group, in Budapest. “The most worrying thing about Hungary’s development today is cronyism.”

Video Game Creators Seek Out Hollywood for Robust Narratives – The New York Times

In an era of prestige television, high-quality streaming services and indie films that sometimes haul in blockbuster box office receipts, video games are facing stiff narrative competition. So video game creators are increasingly turning to film and television writers to help craft their stories.

Video game fans have long signaled their appreciation for narrative games. Action-adventure games, which typically have more complex story lines, are among the top three genres for PC games, console games and mobile games, according to Newzoo, a video game marketing intelligence company. In April, the Entertainment Software Association released a survey that found that 59 percent of gamers consider the story when buying a title; it was the third-highest influencing factor behind quality of graphics and price.

But writing for a video game can present hurdles for television and film writers. That’s because unlike film and TV audiences, gaming audiences are not passive spectators. With a story-based game, you expect to be able to exercise some agency over how the story unfolds — or at least to experience the story in a way that feels more intimate and personal than a film or television show. Writers have to take that interactivity into account.

Saipan: The Island Where Chinese Mothers Deliver American Babies – WSJ

This U.S. territory in the western Pacific is known for its epic World War II battle, white-sand beaches and the enduring culture of its indigenous Chamorro people. But for a certain class of Chinese parents, Saipan has become known as the latest hot spot for birth tourism, a place where women can give birth to babies who will automatically acquire U.S. citizenship.

The Northern Marianas, an island chain that includes Saipan, is the only U.S. soil that Chinese can visit without a visa, after a change in immigration policy in 2009 allowed Chinese and Russian tourists visa-free entry for up to 45 days. “It’s just like if God opened a window for you,” said a Chinese father who works as a translator here after coming a few years ago to ensure his child would be born American.

The number of American babies born here to Chinese women who entered as tourists also climbed—to 472 last year from eight in 2009—according to the Northern Marianas government. Last year, for the first time, more Chinese tourists gave birth here than Americans.

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Jakarta Is Sinking So Fast, It Could End Up Underwater – The New York Times

With climate change, the Java Sea is rising and weather here is becoming more extreme. Earlier this month another freakish storm briefly turned Jakarta’s streets into rivers and brought this vast area of nearly 30 million residents to a virtual halt.

One local climate researcher, Irvan Pulungan, an adviser to the city’s governor, fears that temperatures may rise several degrees Fahrenheit, and the sea level as much as three feet in the region, over the coming century.

That, alone, spells potential disaster for this teeming metropolis. But global warming turned out not to be the only culprit behind the historic floods that overran Rasdiono’s bodega and much of the rest of Jakarta in 2007. The problem, it turned out, was that the city itself is sinking.

In fact, Jakarta is sinking faster than any other big city on the planet, faster, even, than climate change is causing the sea to rise — so surreally fast that rivers sometimes flow upstream, ordinary rains regularly swamp neighborhoods and buildings slowly disappear underground, swallowed by the earth. The main cause: Jakartans are digging illegal wells, drip by drip draining the underground aquifers on which the city rests — like deflating a giant cushion underneath it. About 40 percent of Jakarta now lies below sea level.

As Journalist Killings Jump in Mexico, Only War Zones Prove Deadlier – The New York Times

Assassins on a motorcycle shot Cecilio Pineda Birto as he awaited his vehicle at a car wash, hitting him at least 10 times. Gunmen blocked the car of Javier Valdez Cárdenas after he left work, pumping at least 12 bullets into him. Miroslava Breach Velducea, leaving home with one of her children, was shot eight times by an unidentified assailant and died en route to the hospital.

They were among at least six journalists in Mexico murdered in 2017 because of their work in reporting corruption and other crimes, the Committee to Protect Journalists, an advocacy group, said Thursday in an annual compilation of fatalities.

The total was a record for Mexico and made that country the deadliest for journalists this year outside of a conflict zone, the group said, and the third deadliest after Iraq and Syria.

How Tech Companies Own Your Day

Each of us has only 24 hours in a day. As tech companies mature, they’re seeking new ways to generate revenue from each customer, and the battlefield is increasingly your most finite resource: time.

That battle plays out every minute from the time we wake up until we go to bed, and doesn’t look the same for everyone. Weekday activities differ from those on weekends for many Americans. The typical day of a 9-to-5 employee, student, retiree and someone who runs their own business is likely to vary widely. But if you take everyone’s day on average, Americans spend most of their waking hours doing leisure activities (5 hours) and working (3.8 hours). And it’s in these two areas where six of the world’s largest tech companies—Alphabet Inc.’s Google, Amazon.com Inc., Apple Inc., Microsoft Corp., Facebook Inc. and Samsung Electronics Co. Ltd.—have concentrated their products.

The quest for the customer who relies exclusively on one company’s products is blurring the line between hardware makers and software makers. Take Apple, one of the first companies to have tremendous success pairing hardware with its own software. Apple’s core products are its lineup of phones, tablets and laptops. But as growth in those hardware markets is slowing, it is relying on its software to squeeze more sales out of each device by improving the offerings that depend on them.

There’s still room for expansion. Travel time remains a largely unexploited opportunity, and tech giants sense a window to sell further content and services. That’s why so many want to get into the automotive business: a customer in a self-driving car has more time to watch films or shop online, while mobile connectivity in cars increases the opportunity to suggest nearby shops or restaurants, generating ad income.

Law Requires Life-Saving Braking Device. Most Trains Don’t Have It. – The New York Times

On a summer afternoon in Southern California nine years ago, a commuter train blew through a stop signal and ran head-on into an oncoming freight train, killing 25 people.

After investigators determined that the crash could have been prevented by automatic-braking technology, Congress ordered all passenger railroads to install new systems by 2016. Since then, Congress has extended that deadline and trains have kept speeding into preventable disasters, including the Amtrak derailment that killed three people in Western Washington on Monday.

In Amtrak’s case, this is a recurring nightmare. The crash this week was eerily reminiscent of one just two years ago in Philadelphia, where an Amtrak train barreled into a sweeping curve at 106 miles an hour before jumping the tracks and rolling over. Eight people died.

That crash, too, could have been prevented by the technology, known as positive train control. But five months after it happened, Congress gave railroads at least three more years to install it.

“Here we are, almost 10 years later, and that deadline came and went,” said Kitty Higgins, a former member of the National Transportation Safety Board. “The railroads have been slow-walking it and it still is not implemented. It’s absolutely outrageous.”

Death of the American Mall

The rise of online retail and changing consumer preferences have hammered U.S. shopping malls since their heyday in the 1990s. Many of these former engines of commerce and centers of community life are now mere skeletons as they fight for their lives.

A typical large mall in 1995 included 142 stores spread across 1.2 million square feet, according to a Wall Street Journal analysis of data on 458 malls. Many of the centers’ traditional retailers have withered or vanished entirely.

Thousands of traditional anchor stores–generally two- and three-story department stores that drive mall momentum–have disappeared. Macy’s, J.C. Penney and Sears each have closed more than a hundred stores in recent years. Other anchor chains, including Montgomery Ward & Co., Gottschalks, Goody’s Family Clothing and Caldor, filed for bankruptcy protection and no longer exist.

Sbarro pizza chain in 2014 closed 155 of the 400 restaurants it owned in North America to cut costs, and filed for bankruptcy. It blamed its financial woes on what court papers described as an ‘unprecedented decline in mall traffic’ that made it difficult for the chain to service its debt. Mrs. Fields Cookies merged in 1996 with Original Cookie and since has closed many mall locations. Ruby Tuesday has been closing locations in recent years as it struggles with competition and changing consumer tastes in casual dining.

While some malls are dying, many others are changing their makeup. The mall of yesterday leased around 50% of its space to apparel chains. Today, that is moving closer to 30%, according to several mall owners.

The Bananapocalypse Is Nigh – Bloomberg

The bananapocalypse is coming. That’s the likelihood that sometime in the next decade, bananas may disappear, victims of a fungal pathogen known as Panama Disease. The disease is on the march throughout the world, threatening the future of the world’s most popular fruit.

Panama Disease may be the cause of this disaster, but it’s also a symptom of a bigger problem afflicting global agriculture: a failure to diversify. For the past couple of centuries, the tendency has been to adopt a single reputable cultivar and — literally — bet the farm on it.

The most devastating case study in the dangers of monoculture comes from Ireland in the 1840s. After the discovery of potatoes in the New World, the Irish began cultivating them en masse. But while the Incas and other peoples had cultivated thousands of varieties of potatoes, the Irish only grew three kinds, mostly a homely variety known as the “Lumper.”

This particular potato proved remarkably productive. But it was vulnerable to a pathogen known as Phytophthora infestans, better known as potato blight. In 1845, the organism destroyed that year’s crop of Lumpers, and then raged across the rest of Europe. It’s estimated that a million people died of starvation in Ireland alone, with another 2 million people emigrating out of desperation.

Despite this object lesson in the dangers of monoculture, farmers planting crops often favored a handful of trusted varieties. This was a rational choice, particularly for growers of crops destined for global markets, where economies of scale tended to privilege homogeneity over diversity. But this choice can end badly.

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CENTRAL BANKS & MONETARY POLICY

Japan’s Central Bank Gives No Hints of Policy Change – WSJ

Bank of Japan Gov. Haruhiko Kuroda poured cold water on speculation that the central bank is preparing the ground for raising interest rates next year amid a global wave of policy tightening by central banks led by the Federal Reserve.

After the Japanese central bank stood its ground on policy earlier in the day, Mr. Kuroda said that consumer prices were the key element in the bank’s decisions on interest rates, implying that no near-term changes were planned. He added that pressure on commercial banks stemming from central-bank policies had been addressed.

But he also left the door open to the possibility of higher rates before the central bank reaches its 2% inflation target, and even further easing if prices slump.

Canadian Inflation Jumps Above Key Level on Gasoline Prices – Bloomberg

Canadian inflation jumped above the Bank of Canada’s 2 percent target as the nation’s red-hot economy begins to show signs of price pressure.

Inflation accelerated to 2.1 percent in November from a 1.4 percent rate in October, Statistics Canada reported Thursday in Ottawa. While the jump was due to a surge in gasoline prices, the increases went beyond energy. A separate report showed retail sales surging in October, adding to evidence the expansion continues to steam ahead.

If the inflation proves sustained, it will pose a challenge for the Bank of Canada. Policy makers have been keen to keep the expansion moving with low interest rates on the expectation price pressures will be muted. The Canadian dollar jumped as much as 0.9 percent as the reports raise the prospect of earlier rate increases by the central bank.

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USA ECONOMY DATA, CITIES AND STATES

U.S. holiday shopping season surging towards a strong finish

A jump in consumer spending in the final stretch of December should build on a strong start to the U.S. holiday season and help the embattled retail industry beat sales forecasts, industry research groups said. The spending boost in December comes ahead of Super Saturday – the last Saturday before Christmas, which often sets the annual record for retail sales and is one of the busiest shopping days of the year along with Black Friday.

Fueled by drug crisis, U.S. life expectancy declines for a second straight year – The Washington Post

American life expectancy at birth declined for the second consecutive year in 2016, fueled by a staggering 21 percent rise in the death rate from drug overdoses, the Centers for Disease Control and Prevention reported Thursday.

The United States has not seen two years of declining life expectancy since 1962 and 1963, when influenza caused an inordinate number of deaths. In 1993, there was a one-year drop during the worst of the AIDS epidemic.

“I think we should take it very seriously,” said Bob Anderson, chief of the Mortality Statistics Branch at the National Center for Health Statistics, which is part of the CDC. “If you look at the other developed countries in the world, they’re not seeing this kind of thing. Life expectancy is going up.”

U.S. Colleges Riding Bull Market to $1 Billion Endowments – Bloomberg

American universities are the richest they’ve ever been, with a record number of schools sitting on endowments valued at $1 billion or more. Generous alumni donations and stellar portfolio performance for the year ending in June was led by schools heavily invested in stocks. At the same time, experts estimate there’s roughly $1.3 trillion of student debt outstanding, raising the question for some of why schools don’t use more of that money to lower tuition and ease the financial burden on those enrolling.

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POSITIONING, INFLECTION, MARKET CALLS

Are There Any Stock Bears Left in America? – Bloomberg

Maybe it’s the Fed, maybe it’s Donald Trump, maybe it’s bitcoin froth seeping into equities. But lately, daring, animal spirits and greed have supplanted fear as the bull market powers toward its ninth year. Bears that once roared at any sign of trouble now seldom make a peep. Too many dire predictions failed to come true.

It’s not just anecdotal. A recent survey by the National Association of Active Investment Managers found that even the most pessimistic mutual fund overseers are fully invested in stocks. Equity exposure rose to the highest level in data going back to 2006.

Numbers illustrate the conundrum for bears. Up 20 percent on the year and 46 percent from its 2016 low, the S&P 500 has gone 71 days without a 1 percent move in either direction, the longest stretch since 1995. Turbulence is nowhere: the Cboe Volatility Index has held below 10 about 20 percent of the time in 2017 as the S&P 500 hit a record once every four days.

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11 Of 19 Bear Market Indicators Have Now Been Triggered: BofA | Zero Hedge

Ok fine, one indicator has been tripped. What about the rest? Well, as BofA reports in its just released Investment Strategy slidepack, its latest list of bear market signposts shows that as of this moment, 11 of 19 signals have been triggered at this point. That’s the bad news; the good news is that at least 80% were triggered ahead of the last seven bear markets.

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COLOR, EARNINGS, SENTIMENT, VALUATIONS

Utilities short-circuited by California wildfires

A devastating rash of wildfires that have hit California over the past few months are casting a long shadow over two of the state’s major utility groups, PG&E and Edison International.

PG&E shares are down nearly 12 per cent on Thursday, a day after the company announced that it was suspending its dividend, citing “uncertainty related to causes and potential liabilities associated with the extraordinary October 2017 Northern California wildfires.” If held, the drop will be the company’s biggest since August 2002, according to Thomson Reuters data.

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DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS

Bankers Begone! Spotify to Get Clearance for an ‘Underwriter-Less’ IPO – WSJ

Spotify plans to list its shares on the NYSE using an unusual method known as a direct listing. Before it can do so, the exchange must win approval from the SEC to change its rules. The NYSE has applied for such a change and the SEC has indicated to Spotify it’s likely to approve, people familiar with the situation said.

The Swedish company was valued at $8.5 billion during a private capital injection in 2015. Its valuation is now closer to $20 billion, based on a recent share swap between Spotify and Chinese internet giant Tencent Holdings Ltd., some of the people said. Spotify has been targeting March or April for its debut, according to people familiar with the matter.

If the debut goes well, it could encourage other highly valued and cash-rich startups like Airbnb Inc. to pursue direct listings, people familiar with the matter have said.

In a direct listing, a company transfers its shares to an exchange without raising money as is done in a typical IPO. Companies have shied away from the unusual process in part because there is a greater risk that the shares could flop since there are no underwriters to set and prop up the price.

Among the draws: Direct listings enable companies to save on the hefty underwriting fees associated with traditional IPOs, and there aren’t restrictions on when insiders can sell shares.

Boeing Confirms Takeover Talks With Brazilian Aircraft Maker Embraer – WSJ

Boeing Co. confirmed it is in takeover talks with Brazilian aircraft maker Embraer, potentially strengthening its hand in the regional jet market and helping it counter a move by Airbus to strike a similar deal with Bombardier.

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FOREX, CRYPTOCURRENCY, EXCHANGE IMPACTS

China’s Yuan Breaks Out of Narrow Range to Hit Three-Month High – Bloomberg

The currency was earlier given a lift by Wednesday’s statement following the annual Central Economic Work Conference, which didn’t repeat language on outright deleveraging from the previous two years. Instead, comments focused on risk in the financial system, signaling that’s where pressure will continue to be applied in the coming year.

Dollar bulls harder to find as 2018 nears

For anyone prepared to bet on a stronger dollar, the critical difference is that the prospect of the European Central Bank tightening policy further in 2018 offers a clear trigger for further euro momentum. Finding one for the dollar is harder.

Didier Saint-Georges, managing director of French asset manager Carmignac, doubts the US tax overhaul will be that trigger. “Its impact on macro growth dynamics is probably overdone,” he says.

This Dollar Shortage Isn’t Likely to Last – Bloomberg

This should be over within two weeks. The main cause is that big banks are trying to shrink their balance sheets by the end of the annual financial reporting period, Dec. 31. In other words, they want to do less lending, as well as less borrowing. Shrinking their balance sheets can reduce the surcharges that regulators impose on them for bigness—on the theory that size equates to risk.

I asked Zoltan Pozsar, a research analyst at Credit Suisse Group AG, if there was any reason for members of the public to worry about the dollar shortage. His answer was succinct. “No.”

One strong indication that the dollar squeeze is nothing to worry about, says Bank of America’s Cabana, is that other parts of the financial markets are showing no signs of stress. The Chicago Board Options Exchange Volatility Index, or VIX, which is often called the fear index, spiked wildly the last two times there was a big move in cross-currency basis swaps, i.e. in 2008 and 2011. This year the VIX is trending near record lows.

Expect further dollar weakness in 2018

“The dollar is likely to continue drifting lower at an annual pace of 3 per cent to 6 per cent,” says Stephen Gallo, European head of foreign exchange strategy at Bank of Montreal. “We think tax reform drops out of the equation in terms of dollar impact in 2018.”

That is because the package that was signed into law “doesn’t radically alter the US’s relative competitiveness nor should it lead to a wall of repatriation”, adds Mr Gallo. The Canadian bank expects further pressure on the currency. It predicts a 1.5 per cent fall for the dollar index in the first quarter of 2018 and then a 1 per cent drop for each remaining quarter.

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REAL ESTATE, HOUSING, REITS, COMMERCIAL

A Decade After Bubble, Spanish Real Estate a Hot Buy Again – Bloomberg

“It’s basically the year when it’s all come together,” said Ismael Clemente, founder and chief executive officer of Madrid-based Merlin Properties Socimi SA, Europe’s third-largest real estate investment trust. “The Spanish economy is doing well, its banks are healthy, there’s a very investor-friendly legal framework and property is still cheap compared to other European cities.”

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ENERGY RENEWABLES, NUCLEAR

Georgia Officials Approve Funding for Troubled Nuclear Plant – WSJ

Georgia officials voted Thursday to continue building two half-finished nuclear reactors even though construction is more than $10 billion over budget and five years late. The nuclear-power units are the only ones under construction in the U.S. and might be the last ones built for decades.

Nuclear power faces stiff competition from low-cost natural-gas power plants. The substantial cost and time required to build nuclear reactors also make it all but impossible to compete in deregulated power markets. Only in a few parts of the U.S., such as Georgia, does the electric industry remain regulated.

“It is really difficult to imagine new nuclear power being built,” said Allison Macfarlane, a former chairman of the Nuclear Regulatory Commission.

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COMMODITIES BASE METALS, MATERIALS

Trump order on ‘critical minerals’ set to boost US mining groups

The executive order could be used as a pretext to scrap environmental regulations that have held back mining projects, said David Abraham, author of The Elements of Power, a book about critical minerals.

“It will invigorate mining companies,” he said. “The big problem is not finding the financing but the slow pace of permitting. What you’ll see is every junior mining company asking if their material is listed in the report and can they get help from the US government.”

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BREXIT, SCOXIT, LONDON, UK ECONOMY

U.K.’s Secret Brexit Studies Reveal That Airbus Makes Planes – Bloomberg

Lawmakers were unimpressed. “Most of this could be found on Wikipedia or with a quick Google search,” said David Lammy of the opposition Labour Party. “David Davis clearly misled the House and then set his civil servants the unenviable task of coming up with these documents in a couple of weeks. They look like copy and paste essay crises.”

Ireland prepared to rein in surging economy ahead of Brexit

Ireland’s finance minister has warned he may have to rein in the surging economy as part of efforts to minimise risks to the EU member most vulnerable to Britain’s exit from the bloc. Mr Donohoe said he must ensure government spending “doesn’t accelerate economic overheating”, particularly in the context of looming negotiations over Brexit.

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EUROPE

EU prepares Canada-style Brexit deal for UK

The EU is preparing to present Britain with a skeleton, Canada-style trade deal by the early summer if the UK is unable to clarify its demands and remains in “Brexit La-La land”, according to senior European officials.

The fallback plan considered by Brexit negotiators underlines the concern in Brussels, Berlin and Paris over Theresa May’s approach to future relations, which they fear will be too muddled to allow for meaningful negotiations. Such a proposal would fall far short of what Britain is hoping for, with limited access for services, which make up a large part of the UK economy.

Europe Forges a New Defense Club—and the U.K. Isn’t Invited – WSJ

Britain’s looming exit from the European Union has freed the remaining members to deepen military cooperation through a new agreement that will sideline the U.K. But the new EU defense club may discover before long that it needs the muscle of Europe’s top military power more than members currently think.

Switzerland hits out at EU ‘discrimination’ in finance dispute

Switzerland’s president on Thursday accused Brussels of “unacceptable” discrimination intended to undermine the country’s role as a financial centre, in a dispute that has implications for Britain’s relationship with the bloc after Brexit.

The accusation came after the EU, which is taking a tough stance towards Switzerland as Brexit negotiations continue, allowed European and Swiss equities traders access to each others’ markets for just 12 months from January.

“They want to show to the British, if you are a third [party] state, you have no guarantee of being fairly treated,” said Cenni Najy, senior policy fellow at Foraus, a Swiss foreign policy forum.

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GEOPOLITICS, CRIME, TERRORISM

More Than a Dozen Injured as Driver Deliberately Plows Into Melbourne Crowd – WSJ

A man rammed a car into pedestrians and Christmas shoppers in a bustling area of Australia’s second-largest city, injuring more than a dozen people, in an act that police said was deliberate but not likely terror.

Mexico Graft Inquiry Deepens With Arrest of a Presidential Ally – The New York Times

A former deputy in President Enrique Peña Nieto’s party is one of several people suspected in an embezzlement scheme intended to lift the party in state elections.

With future of military prison in doubt, Mattis visits Guantanamo Bay – The Washington Post

Defense Secretary Jim Mattis met with troops at Guantanamo Bay, Cuba, on Thursday, the first time an American defense chief has visited the U.S. naval outpost since scores of terrorism suspects were imprisoned there in 2002. Then-Defense Secretary Donald H. Rumsfeld was among senior officials to visit Guantanamo in January of that year, just as the George W. Bush administration was flying in shackled, hooded suspected militants in the months after the 9/11 attacks.

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PROPAGANDA, CORRUPTION, AUTHORITARIANISM

Wal-Mart Suspends Shoplifting Punishment That Court Called ‘Extortion’ – WSJ

Until recently, a first-time shoplifter caught in any of about 2,000 Wal-Mart stores got a choice: pay hundreds of dollars, complete an education program and all will be forgiven—or don’t and potentially face prosecution.

Corrective Education Co. and Turning Point Justice, Utah-based companies that provide the programs, emerged in recent years as alternatives to the often-overtaxed criminal justice system. They spare law-enforcement resources and hold offenders accountable without leaving the scar of a criminal conviction, their supporters say.

But Wal-Mart Stores Inc., one of the biggest clients of Turning Point and Corrective Education, suspended the programs earlier this month as more local officials questioned the legality of asking people for money under threat of criminal sanctions, though it said it found the programs effective at reducing shoplifting and calls to police.

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TRUMP WORLD

Bannon joked that Trump is like ‘an 11-year-old child’: report | TheHill

Sherman writes that in private conversations, Bannon has said that Trump has just a 30 percent chance of finishing his term, because he may be impeached or removed from office under the 25th Amendment, and that there are rumors that Bannon may run for president in 2020 if Trump does not.

Papa John’s founder steps down as CEO – Business Insider

Schnatter sparked controversy in November when he slammed NFL leadership over players’ kneeling during the national anthem to protest racial injustice and police brutality. Schnatter owns roughly 25% of Papa John’s and will stay on as chairman after stepping down as CEO in January. A press release from the company said he would “pursue his personal passion for entrepreneurship, leadership development, and education.”

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HEALTHCARE, TAX REFORM, BUDGET

Obamacare Sign-ups at High Levels Despite Trump Saying It’s ‘Imploding’ – The New York Times

The Trump administration said Thursday that 8.8 million people had signed up for health insurance through the federal marketplace, only slightly lower than last year’s numbers when the open enrollment period was twice as long and heavily advertised.

The numbers essentially defied President Trump’s assertion that “Obamacare is imploding” and could re-energize the efforts by both parties for and against President Barack Obama’s signature domestic achievement.

Seema Verma, the administrator of the federal Centers for Medicare and Medicaid Services, reported the total in a Twitter post. She said her agency had done a great job to “make this the smoothest experience for consumers to date.”

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ELECTORAL POLITICS

Cochran’s future in the Senate in doubt – POLITICO

The 80-year-old’s feeble performance has fueled expectations — among senators and aides who’ve witnessed his physical and mental decline firsthand — that Cochran will step down from the Appropriations chairmanship early next year, or resign from the Senate altogether.

“The understanding is that he will leave after Jan. 1,” said a Republican senator who serves on the Appropriations Committee. “That’s what most of us believe will happen.”

Virginia officials will randomly pick winner of tied House of Delegates race on Dec. 27 | Virginia Politics | pilotonline.com

After a recount and a court battle over one irregular, uncounted ballot, Del. David Yancey, R-Newport News, and Democratic challenger Shelly Simonds each have 11,608 votes. The winner will be determined by “drawing lots.” The random drawing will be at 11 a.m. in the West Reading Room of the Patrick Henry Building in Richmond.

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SCANDALS, LAWSUITS, FINES, REGULATORY

JPMorgan ‘Seriously Breached’ Money-Laundering Rules, Swiss Regulator Says – The New York Times

Switzerland’s financial regulator said JPMorgan Chase’s Swiss subsidiary “seriously breached” anti-money laundering rules by completing transactions with a Malaysian government investment fund that is under investigation in at least six countries.

The Swiss Financial Market Supervisory Authority, known as Finma, said Thursday that it was installing a person inside the bank to monitor and review its money laundering policies, “given the inadequacy of the bank’s controls and the serious breaches which have been identified in this case.”

Kobe Steel demotes three executives over cheating scandal

Japan’s third-largest steelmaker was thrown into crisis in October when it admitted to falsifying product data on shipments of copper and aluminium between the start of this year and August.

The scandal quickly spread across other metals divisions and products, ultimately affecting more than 500 companies, including well-known multinationals, that use Kobe Steel materials in their own products including cars, jets, trains, rockets and nuclear plants.

SEC Wins Asset Freeze in Suit Alleging $1.2 Billion Ponzi Scheme – Bloomberg

Shapiro, who lives in Sherman Oaks, California, is accused of swindling 8,400 investors who were promised returns as high as 10 percent from repayments of loans his companies were making to third-party borrowers, the SEC said. He used money from new customers’ to pay earlier ones while using at least $21 million of investor cash to charter planes, pay country club fees and buy luxury items, according to the agency’s complaint filed in federal court in Miami.

“Through aggressive tactics, Woodbridge and Shapiro swindled seniors into a business model built on lies,” Stephanie Avakian, co-director of the SEC’s enforcement unit, said in the agency’s statement.

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SILICON VALLEY, UNICORNS, STARTUPS, VC

Alphabet’s Schmidt to Step Down From Executive Chairman Role – Bloomberg

Google parent Alphabet Inc. said Eric Schmidt is stepping down from his executive chairman role, ending a 17-year run that saw the company grow from a web search engine into an internet giant dominating online advertising and video. Schmidt, 62, will become a technical adviser to Alphabet while continuing to serve as a director, the company said Thursday in a statement. Alphabet expects the board to appoint a non-executive chairman.

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MEDIA, CABLE, SPORTS, ENTERTAINMENT

Movie Theaters Were Already in Trouble. With Disney’s Fox Deal, It’s Double – Bloomberg

America’s movie theaters were jammed in December for the screening of Star Wars: The Last Jedi, a story about the Resistance battling the evil First Order. But with the announcement in December that Walt Disney Co. will acquire much of 21st Century Fox Inc.’s entertainment businesses, theater owners may feel like they’re the Resistance.

Disney’s acquisition of Fox’s film studio will unite some of the most lucrative movie franchises, from Disney’s Star Wars and Marvel series to Fox’s X-Men and Avatar. With control of more blockbusters, not only does Disney gain more leverage over theater chains such as AMC Entertainment Holdings Inc. and Carmike Cinemas Inc., it also wins more films it could distribute exclusively on its upcoming online service—cutting out cinema operators entirely. “Disney is becoming the Wal-Mart of Hollywood: huge and dominant,” says Barton Crockett, a media analyst at B. Riley FBR. “That’s going to have a big influence up and down the supply chain.”

Netflix’s $90 Million Will Smith Movie Gets Ripped by Critics – Bloomberg

Every big movie studio has a critical flop now and then. Now Netflix Inc., which is trying to join Hollywood’s big leagues with the new $90 million fantasy-action film “Bright,” has earned that badge of honor.

The Will Smith vehicle, which mixes “Lord of the Rings”-style mythical creatures into a tale about Los Angeles police officers, has registered 17 percent positive reviews from top critics, according to RottenTomatoes.com. “That old Hollywood standby, the venerable buddy cop movie, may have met its anguished demise this holiday season,” wrote Mark Kennedy of the Associated Press. “Will Smith just killed it.”

The movie will be available on the streaming-video service starting Friday. It’s part of Netflix’s attempt to build its own library of programming of all sorts — big-budget pictures, small documentaries, sitcoms, dramas, reality shows — so it won’t have to rely on shows and films from rivals such as Walt Disney Co.

The company will release more than 80 films in 2018, building on the 50 or so released this year. A handful, like “Bright,” are big and expensive enough to be considered major Hollywood productions.

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AUTOS, ELECTRIC, SELF-DRIVING

Slow Start for Truckers Under New Rule on Logging Hours – WSJ

The mandate, which took effect Monday, is intended to reduce accidents stemming from driver fatigue by increasing compliance with limits on driving time.

Many large trucking companies have used electronic logging devices, or ELDs, for years. But as recently as last month, thousands of smaller fleets and drivers who own their own vehicles were still tracking their hours with paper logbooks, which officials say are easier to falsify.

The transition hasn’t been smooth. Some truckers report delays in getting devices delivered, trouble getting units installed or difficulty logging on to smartphone apps that sync up with the devices. Others said they waited for hours on hold trying to reach customer-service representatives.

Self-driving cars face a new test: snow

Across the northern hemisphere, the first snows of winter are falling on an unprecedented number of autonomous cars as their makers try to teach them to master a skill that remains elusive for many humans. Self-driving cars passed a string of major milestones in 2017 — including the launch of the world’s first fully driverless cars in Arizona in November — and this winter marks another big test.

Beijing’s Electric-Car Push Could Produce a World-Class Chinese Auto Brand – Bloomberg

President Xi Jinping’s determination to rewrite the rules of China’s roads to curb pollution and reduce the nation’s dependence on imported oil may have a side benefit for its automotive industry. Environmental regulations and production incentives could hasten the development of a high-volume leader in electric vehicles that might finally give China a shot at a world-class auto brand.

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MISCELLANEOUS

Australia Finds Wreck of World War I Submarine, Solving a 103-Year Enigma – The New York Times

Nobody knows what caused the AE1 to sink in 1914 — it had not been under attack at the time — though theories include an explosion of one of its torpedoes or a failure of a high-pressure air cylinder. It was one of the first Allied vessels to vanish in the war. The submarine was found south of the Duke of York Islands at a depth of about 1,000 feet.

The Year in Pictures 2017 – The New York Times

Photographs hold the power to clarify in tumultuous times.

17Z22 - MANAGING THE ASSET

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