Macro Links Dec 28th – Loopholes Uber Alles

Macro Links Dec 28th – Loopholes Uber Alles

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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)

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BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS

Bitcoin extends losses, falls below $14,000

The cryptocurrency fell to a low of $13,300 on Friday, down almost 33 per cent from its record high of $19,666 on Sunday. Bitcoin recovered a touch to trade at $14,155 in the afternoon in Asia or 9.3 per cent lower on the day.

17Z28 - BITCOIN SLIDES 30PCT FROM RECORD

Bitcoin Resumes Slide After Biggest Rally in Two Weeks – Bloomberg

The relatively quiet day for bitcoin comes on the heels of a five-day slump that reached 44 percent at its depths and took the coin below $11,000 on Friday. Just four days earlier, it rose within striking distance of $20,000 after a torrid advance that started in early December.

How One Mysterious Startup Is Riding the Bitcoin Wave – Bloomberg

With hardly a year of operations under its belt and scant results to show for it– UBI Blockchain Internet is riding buzzwords to a stock boom.

It’s become one of the most valuable publicly traded companies in the bitcoin universe — second only to LongFin Corp. The stock surged almost 1,000 percent this year, valuing UBI Blockchain at $1.2 billion. Now, the Hong Kong-based company has registered to sell an additional 72.3 million shares owned by executives including Chief Executive Officer Tony Liu, regulatory filings show.

But persuading would-be shareholders to wager on an untested business model could prove challenging for a company with 18 employees, no revenue and whose regulatory filings list a disconnected phone number. The volatility of bitcoin, considered a proxy for companies that rely on blockchain technology, isn’t helping either.

“The profile of this company is scary,” says Charles Lee, a professor of management and accounting at Stanford University. “Blockchain is right at the apex of saliency right now. But you have this problem because it’s hard to verify anything — the technology, the fact that it’s in China. You certainly don’t want to own this stock.”

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FOREX, CARRY TRADES, EXCHANGE RATES

Traders Bent on Bludgeoning Dollar Ignore Bond Market Signals – Bloomberg

The dollar is ending the year down about 12 percent against the euro, even after three interest-rate increases by the Federal Reserve took the spread between two-year U.S. and German note yields to near its widest in nearly two decades. Traders who have long taken their cue from interest rates are focusing instead on a macro outlook that shows Europe’s economy revving into high gear as the U.S. cycle begins to age.

It may take a lot more persuasion for the market to stop beating up the U.S. currency. The euro is seen extending its run against the dollar next year even though the European Central Bank isn’t expected to abandon near-zero rates until 2019.

“This year we can make a very clear case that the Fed has been raising rates and the ECB has been adding to quantitative easing and the interest rate differentials favor the U.S.,” said Alessio de Longis, a New York-based money manager at OppenheimerFunds Inc., which oversees more than $246 billion in assets under management globally. “Nonetheless the euro has appreciated. The relationship between currencies and interest rate differentials has been very weak.”

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TAXATION, WEALTH HAVENS, INEQUALITY

World’s Wealthiest Became $1 Trillion Richer in 2017 – Bloomberg

Amazon.com Inc. founder Jeff Bezos added the most in 2017, a $34.2 billion gain that knocked Microsoft Corp. co-founder Bill Gates out of his spot as the world’s richest person in October. Gates, 62, had held the spot since May 2013, and has been donating much of his fortune to charity, including a $4.6 billion pledge he made to the Bill & Melinda Gates Foundation in August. Bezos, whose net worth topped $100 billion at the end of November, currently has a net worth of $99.6 billion compared with $91.3 billion for Gates.

George Soros also gave away a substantial part of his fortune, revealing in October that his family office had given $18 billion to his Open Society Foundations over the past several years, dropping the billionaire investor to No. 195 on the Bloomberg ranking, with a net worth of $8 billion.

American land barons: 100 wealthy families now own nearly as much land as that of New England – The Washington Post

In 2007, according to the Land Report, the nation’s 100 largest private landowners owned a combined 27 million acres of land — equivalent to the area of Maine and New Hampshire combined. A decade later, the 100 largest landowners have holdings of 40.2 million acres, an increase of nearly 50 percent. Their holdings are equivalent in area to the entirety of New England, minus Vermont.

17Z28 - WHO OWNS THE USA

More than $500 million recovered by tax authorities worldwide following the Panama Papers – ICIJ

More than $500 million has been recouped by tax authorities worldwide after the Panama Papers revelations, first published in April 2016.

Spain alone collected $122 million after an investigation into the affairs of tax residents who had stockpiled money offshore. Among the countries represented in the Panama Papers data, a total of 15 – on three continents – have publicly commented on the amount of taxes recovered by tax authorities.

This number could keep growing with several countries still conducting audits on the basis of the Panama Papers information. In Canada, 123 audits are underway and several criminal investigations are ongoing, according to the Canada Revenue Agency. South Korea also reported having recouped $1.2 billion in taxes this year, though it is not clear what percentage is directly connected to the Panama Papers.

The Tax Plan Could Change How Wall Street Works – Bloomberg

Publicly traded partnerships, including private equity firms Apollo, Blackstone Group LP and Carlyle Group LP, are taxed differently than corporations. So should they take advantage of the overhauled tax rules to pay less in taxes? Or should they use this chance to change to an Inc. from an LLC or LP, which would increase tax bills but allow them to attract investments from mutual funds that have previously been out of reach?

“We’re still analyzing,’’ Black told the Goldman Sachs U.S. Financial Services Conference Dec. 6. “It’s an uncertain outcome.’’

Either way, it’s most likely a money-making outcome. The tax changes are a boon for firms such as Apollo, where Black is chief executive officer. The new lower corporate rate has made it possible for bigger publicly traded partnerships to consider the change. As it is, management fees, which typically account for 30 percent or more of their earnings, are already taxed at the corporate rate. That will drop. The legislation scarcely touched the 23.8 percent rate paid on incentive fees, also called carried interest, which incur no additional levy when paid out to shareholders.

Barclays and Shell warn of billion-dollar hits from Trump tax reform

Some of Europe’s biggest companies have warned investors to expect a multibillion-dollar hit from US president Donald Trump’s tax reform, which will reduce their ability to deduct past losses against future tax bills.

Both Shell and Barclays said that while they were likely to to benefit over time from the reduction in the US corporate tax rate from 35 per cent to 21 per cent, they expected to take hefty non-cash charges in their fourth-quarter results.

IRS Sets Conditions for Deducting 2018 Property Taxes This Year – Bloomberg

Taxpayers can deduct their 2018 state and local property taxes on their 2017 returns if they pay those tax bills before the end of the year — and only if the taxes were assessed before 2018, the Internal Revenue Service said in a news release.

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RUSSIA PROBE

Mueller probe outgrows its ‘witch hunt’ phase

Even if the new lines of inquiry don’t result in additional indictments — something unknowable at this point — the new material all but guarantees the Mueller investigation will stretch on for months, if not years, likely provoking Trump to revisit his decision not to fire the special counsel.

And if the president does take that step, many lawmakers and legal veterans say, it will cause a political explosion unlike any the capital has seen in decades. “It will be cataclysmic,” said Richard Ben-Veniste, a former Watergate prosecutor who lived through the so-called Saturday night massacre when President Richard Nixon fired special prosecutor Archibald Cox. “It will create a constitutional crisis.”

Trump legal team readies attack on Flynn’s credibility – The Washington Post

President Trump’s legal team plans to cast former national security adviser Michael T. Flynn as a liar seeking to protect himself if he accuses the president or his senior aides of any wrongdoing, according to three people familiar with the strategy.

The approach would mark a sharp break from Trump’s previously sympathetic posture toward Flynn, whom he called a “wonderful man” when Flynn was ousted from the White House in February. Earlier this month, the president did not rule out a possible pardon for Flynn, who is cooperating with special counsel Robert S. Mueller III’s investigation into Russian interference in the 2016 election.

State AG Says ‘We’ll Do Whatever We Can Do’ if Trump Shuts Down Mueller | Law & Crime

While President Donald Trump insists that he won’t get rid of Special Counsel Robert Mueller during the Russia investigation, one man is prepared to take action in case that happens. New York Attorney General Eric Schneiderman said in a New York Times interview that while he hopes this does not occur, “If that happens, we’ll do — as I think would be a genuine sentiment around the country — we’ll do whatever we can do to see that justice is done.”

Schneiderman has never been shy about engaging in legal battles with Trump or other Republicans in Washington. His office conducted a criminal probe of money laundering allegations against former Trump campaign head Paul Manafort, stepping aside when Mueller’s investigation headed into that territory. Schneiderman also recently filed his one hundredth action against the current government by moving to sue the FCC over its repeal of net neutrality policies. The New York AG’s office also fought against all three of President Trump’s travel ban orders.

Mueller is reportedly investigating whether the Trump campaign coordinated voter outreach with Russian trolls

Mueller is reportedly considering the possibility that the Trump campaign and the RNC coordinated their voter outreach in swing states using Russian-acquired information. “Investigators have been looking into whether Russia provided the campaign with voter information stolen by Russian hackers,” Bertrand explained, “and whether the Trump campaign helped Russia target its political ads to specific demographics and voting precincts.”

Brad Parscale, the head of the Trump campaign’s digital team, has said that the idea of coordination with Russia is “a joke,” but Bertrand notes that Parscale did not exactly deny having interactions with a “foreign government or foreign actor” in a response to a letter he received earlier this month from congressional investigators.

Mueller questions RNC staffers about 2016 digital operations – Business Insider

Special counsel Robert Mueller has begun to question Republican National Committee staffers about the party’s 2016 campaign data operation, which helped President Donald Trump’s campaign team target voters in critical swing states.

Two sources told Yahoo News that Mueller’s team is examining whether the joint RNC-Trump campaign data operation — which was directed on Trump’s side by Brad Parscale and managed by Trump’s son-in-law Jared Kushner — “was related to the activities of Russian trolls and bots aimed at influencing the American electorate.”

Federal prosecutors in N.Y. requested Kushner Cos. records on Deutsche Bank loan – The Washington Post

The Washington Post reported details of the loan in June. Under the deal, Kushner Cos., which in 2015 had purchased four mostly empty retail floors of the former New York Times headquarters in Manhattan, entered into an October 2016 refinancing agreement with Deutsche Bank. The loan was part of a refinancing deal that gave Kushner’s firm $74 million more than it had paid for the property.

The loan was secured while Kushner was the head of the company and was playing a leading role in running the presidential campaign of his father-in-law, Donald Trump.

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RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS

Flattening U.S. Yield Curve Nears Decade Lows in Final 2017 Push – Bloomberg

The spread between the yields on 2-year and 10-year Treasuries narrowed to just 50.6 basis points Wednesday, close to the decade low reached on Dec. 6. While a small part of the more than six-basis-point narrowing is a function of the market shifting to a new benchmark 2-year note, the move is nonetheless one of the biggest single-session shifts of 2017. Indeed, the gap between rates on 5-year and 30-year debt has also shrunk as long bonds stage their biggest advance since September.

17Z28 - THE FINAL FLATTENER

Yield-Starved Investors Giving In to the Demands of Bond Sellers – WSJ

Rampant demand for leveraged loans is allowing private-equity firms to water down legal safeguards for investors. Many lawyers and bankers increasingly worry that such changes could result in higher losses for investors during the next downturn, as creditors find themselves with less protection.

The move to more borrower-friendly terms has come in both the U.S. and Europe. But the most dramatic shift has been in Europe, where the imbalance between loan supply and demand is most acute. Investors are clamoring for leveraged loans as years of low interest rates and central banks’ bond buying have pushed down returns elsewhere. Trillions of dollars of sovereign debt, primarily in Europe, continue to sport negative yields, meaning investors pay to lend governments money.

17Z28 - PERCENTAGE OF COVENANT LITE LOANS

Municipal-Bond Supply Dries Up After Setting a Record December – Bloomberg

States and cities are set to issue about half the amount of debt at the start of 2018 compared with a year ago. The dearth of supply comes as states and localities sold a record $55.6 billion of debt this month through Dec. 22 as they accelerated their offerings to avoid potential changes from the federal tax-overhaul bill.

The decline means fewer bonds for investors to choose from in early 2018. That may help generate gains in the tax-exempt market, which advanced each January for the past six years, according to Bloomberg-Barclay’s Municipal Bond Index.

17Z28 - MUNI WAVE ROLLS BACK

Smart beta funds pass $1tn in assets

Most notably, Rob Arnott, chief executive of Research Affiliates, which developed some of the world’s first smart beta indices, has raised concerns. Last year, he warned that some products could go “horribly wrong” and said the industry “must make every effort to avoid being duped by historical returns”.

Nevertheless, analysts think smart beta’s stellar growth will continue.

BlackRock and Vanguard dominate the field of providers with each having more than $100bn in smart beta products, but more asset managers want to get in on the act, said Marc Knowles, an ETF specialist at KPMG.

“Smart beta is absolutely something they’re looking at,” he said, adding that many providers had been influenced by the industry-wide shift away from active towards more passive strategies. “They look at that and are compelled to address that.” Goldman Sachs, Franklin Templeton and Fidelity International have all recently launched further smart beta funds.

China share pledges soar as founders seek new borrowing tools

Chinese stockholders are ramping up borrowing against shares, driving revenue for securities houses but creating risk of a chain reaction in the event of a sharp market downturn.

Shareholders in 317 Shanghai and Shenzhen-listed companies had pledged shares worth at least 40 per cent of those companies by December 18, up from 224 companies on the same date a year earlier, according to Wind Info.

Share-pledging is especially common for small and mid-cap companies, where a single shareholder often owns a large stake. Controlling shareholders sometimes reinvest the proceeds into company projects or buy additional company shares on the secondary market to boost the share price.

“Companies use ‘market-value management’ to push up the share price, pledge the shares to brokers and then take the money and run,” said Hao Hong, head of research at Bocom International in Hong Kong.

17Z28 - CHINA SHARE PLEDGING

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MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS

In a Complex Tax Bill, Let the Hunt for Loopholes Begin – The New York Times

It was supposed to be a tax cut for manufacturers. Then it got out of control. World Wrestling Entertainment took it for producing wrestling videos. Regional gas stations claimed it because they mix ethanol with base fuel. Grocery stores asked for it because they spray their fruit so that it ripens. Pharmacies could take it because they have booths that print photos.

Republicans in Congress passed that deduction more than a decade ago, and they repealed it in the tax bill signed on Friday by President Trump. It is a lesson in the abundant creativity of American business in interpreting the tax code.

The latest overhaul could play out the same way. Already, lawyers and accountants are eyeing several provisions that investors and companies could potentially exploit.

The Great Corporate Cash Shell Game – Bloomberg Gadfly

There’s a mystery hidden on the balance sheets of Corporate America: These companies have a record amount of cash and they’re more deeply indebted than ever before.

This seems paradoxical and kind of silly. Why raise money from bond investors when you already have the liquid assets on hand? As Bloomberg News reported Thursday, non-financial companies’ liquid assets, which include foreign deposits, currency as well as money-market and mutual fund shares, reached a record of almost $2.3 trillion in the second quarter. That’s an increase of nearly 60 percent since mid-2009.

This cash cushion also appears sort of comforting; companies can do whatever they want. They’re rich. But in reality, it is neither silly nor overly comforting. First of all, a disproportionate amount of the cash is held by the biggest companies, such as Apple Inc., Microsoft Corp., Alphabet Inc. and General Electric Co., and it is mostly held in overseas accounts. These corporations can’t bring that cash back without incurring steep tax bills, so they’ve been keeping it offshore. When they need money, they simply raise dollars by borrowing from the bond market at record-low rates.

So yes, Corporate America has a lot of cash. But companies also have a lot of debt, and to the extent they’re using their money, it hasn’t been to create the virtuous cycle of economic investment that many have been hoping for. These stockpiles of liquid assets shouldn’t allay investor concerns about credit markets.

17Z28 - CORPORATE DEBT LOADS

China’s ancient strategies create a new challenge to the west

The US decision to label China a “strategic competitor” confirms what could no longer be concealed: the world’s two most powerful countries are locked in a fervent rivalry. The question now is how damaging the tussle may become both for the two adversaries and the rest of the world.

Some see the contest inevitably bearing out the deadly prophesies of the “trap” first identified by ancient Greek historian Thucydides, who described how the rise of Athens instilled a fear into Sparta that made war unavoidable. The past five centuries have seen 16 cases in which a rising power threatened to displace a ruling one and in 12 of these cases the result was war, says Harvard professor Graham Allison.

But a deeper view of China’s power accretion reveals strategies that are often more oblique than confrontational. Some of them appear faithful to the guileful lineage of the Chinese “36 stratagems”, a list of political, diplomatic and military tactics that date from around the same time that Thucydides was chronicling the Peloponnesian war in the fifth century BC.

Several of the stratagems emphasise the value in avoiding direct challenges to a stronger competitor while seeking to undermine it through “proximate strategies”, the best known of which is “replacing their beams with rotten timbers”. This describes disrupting an adversary’s structure by changing the rules they are used to following. The aim was to achieve victory while avoiding the seemingly inevitable war.

Saudi Arabia’s reform drive is bold, yet fraught with risk

Saudi Arabia’s radical attempt to fire up its economy with private investment and wean it off dwindling oil revenue is a story with huge implications. There is no doubting the ambition and energy with which MbS, licensed by his aged father, King Salman, is propelling economic and social reform; or how important it is, for the region as well as the kingdom, that he succeeds.

The young prince, conscious the clerical establishment remains a centre of reactionary power, and who has cracked down on radical Islamists as well as dissidents, said in October that the kingdom must return to “moderate Islam”, and that 70 per cent of the Saudi population under 30 wanted “a life in which our religion translates to tolerance”.

These are fighting words. If he means them, MbS will need to disempower the Wahhabi establishment, a cornerstone of the House of Saud’s legitimacy since the 18th century. That means cutting off billions of dollars Riyadh has spent exporting the totalitarian Wahhabi creed — which treats all other beliefs as illicit and ideologically fuels contemporary jihadism — and seizing back control of education at home.

MbS’s plans to lure investment — from the planned initial public offering of Saudi Aramco to a new $500bn regional free zone on the Red Sea — will depend on confidence in the rule of law. Absolute power has drawbacks if the perception takes hold the kingdom’s ruler can seize assets at will.

MbS has dynastic politics in his blood. He perhaps thinks with his closeness to Mr Trump and his family, especially son-in-law and princeling Jared Kushner, he has a hand of aces. It looks as likely he is holding jokers.

Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin – Hussman Funds

Delusions are often viewed as reflecting some deficiency in reasoning ability. The risk of thinking about delusions in this way is that it encourages the belief that logical, intelligent people are incapable of delusion. An examination of the history of financial markets suggests a different view. Specifically, faced with unusual or extraordinary price advances, there is a natural tendency (particularly in the presence of crowds, feedback loops, and potential rewards) to look for explanations. The problem isn’t that logic or reason has failed, but that the inputs have been distorted, and in the attempt to justify the advance amid the speculative excitement, careful data-gathering is replaced by a tendency to confuse temporary factors for fundamental underpinnings.

While true psychological delusions are different from financial ones, a similar principle is suggested by psychological research. Delusions are best understood not as deficiencies in logic, but rather as explanations that have been logically reached on the basis of distorted inputs. For example, individuals with delusions appear vulnerable to differences in perception that may involve more vivid, intense, or emotionally-charged sensory input. While those differences might be driven by neurological factors, the person experiencing these unusual perceptions looks to develop an explanation. Maher emphasized that despite the skewed input, the delusions themselves are derived by completely normal reasoning processes. Similarly, Garety & Freeman found that delusions appear to reflect not a defect in reasoning itself, but a defect “which is best described as a data-gathering bias, a tendency for people with delusions to gather less evidence” so they tend to jump to conclusions.

The reason that delusions are so hard to fight with logic is that delusions themselves are established through the exercise of logic. Responsibility for delusions is more likely to be found in distorted perception or inadequate information. The problem isn’t disturbed reasoning, but distorted or inadequate inputs that the eyes, ears, and mind perceive as undeniably real.

Which Nation Does the World Trust Most? (Hint: Follow the Dollar) – The New York Times

A provocateur like Mr. Trump will trigger strong opinions, but opinions are flighty. A president’s character is indeed likely to affect America’s soft power — its cultural and diplomatic influence — while he is in office. It is less clear, however, that any erosion of soft power under Mr. Trump represents a permanent threat to America’s hard power, including its measurable economic and financial strength.

Even before Mr. Trump, the declinists cited data showing China gaining a greater share of the global economy at America’s expense, a trend that is easy to exaggerate. America’s current 24 percent share looks much diminished compared with 30 percent in 2000 but about the same as the 26 percent share in 1980. It’s simple to cherry-pick a start date that makes American decline look bad, but the reality is that China is gaining global economic share at the expense mainly of Europe and Japan.

America is a tested economic superpower, having survived 21 recessions and a Great Depression since 1900. China remains untested, having suffered not one outright recession since its modern renaissance began around 1980. It has yet to be seen just how well China will weather such a test, which is inevitable for any large economy.

Serious money does not equate America with Mr. Trump, and those obsessed with American decline ignore the state of its rivals. The euro was introduced 19 years ago, ambitious to become a reserve currency, but its youth and the recurring fears of a eurozone breakup have limited the world’s willingness to trust it. Aging Japan’s long stagnation acts as a permanent cap on the yen’s popularity. And outsiders remain even more wary of the renminbi, owing both to China’s debt troubles and the standing threat that Communist rulers pose to free flows of capital.

On the other hand, confidence in the dollar reflects longstanding faith in American financial and political institutions and effectively ignores both the recent advent of Mr. Trump, who as a candidate threatened to reduce United States debt payments, and the dysfunction in his White House.

Chef Gives Up a Star, Reflecting Hardship of ‘the Other France’ – The New York Times

It is like giving up your Nobel, rejecting your Oscar, pushing back on your Pulitzer: Jérôme Brochot, a renowned and refined chef, decided to turn in his Michelin star.

He is renouncing the uniquely French distinction that separates his restaurant from thousands of others, the lifetime dream of hundreds. But Mr. Brochot’s decision was not a rash one, born of arrogance, ingratitude or spite. Rather, it was for a prosaic, but still important, reason: he could no longer afford it.

It is a drastic step that says everything about the crushing reality of “the other France” — the provinces where on average more than 10 percent of storefronts are vacant, the old jobs have gone, and the cafes are empty on cold mornings. Even in a region famed for its culinary traditions, this declining old mining town deep in lower Burgundy could not sustain a one-star Michelin restaurant. Mr. Brochot, a youthful-looking 46, had gambled on high-end cuisine in a working-class town and lost.

In November, the chef wrote to the Guide Michelin, the fat red gastronome’s bible in Paris that bestows the honor, to say he wanted out. He could no longer make ends meet at his bright orange hotel-restaurant Le France, he said. He could no longer pay for the personnel, produce and precision that go into charging one-star prices.

Don’t rejoice when China exports ‘bad’ inflation

China’s inflation story is not just down to cost-push dynamics. It is also driven by a large overhang of money that has been injected into the economy since the global financial crisis. The ratio of broad money to gross domestic product surged to 244 per cent at the end of 2016 from 174 per cent in 2008.

Through strict enforcement of capital controls since the end of 2016, Beijing has forced households — and, increasingly, companies — to bottle up their money at home yet again. A recent pick-up in the velocity of money (the speed at which money changes hands in the economy) could be a pointer to an acceleration of inflation in coming quarters.

It’s true that many investors are braced for a debt crisis in China that will lead to it exporting deflation to the rest of the world. That may well happen in the end. But in coming quarters, Chinese inflation is much more likely to be the surprise that financial markets are not pricing in.

That is, of course, unless Beijing really cracks on with its deleveraging campaign in a way that a large chunk of the monetary overhang is destroyed or, by allowing a wave of defaults, it spooks markets and the demand for holding cash jumps.

The Worst Job in Technology: Staring at Human Depravity to Keep It Off Facebook – WSJ

Social media giants hire legions of contractors to hunt for pornography, racism and violence in a torrent of posts and videos. This is one of the fastest-growing jobs in the technology world—and perhaps the most grueling.

Facebook will have 7,500 content reviewers by the end of December, up from 4,500, and it plans to double the number of employees and contractors who handle safety and security issues to 20,000 by the end of 2018. Susan Wojcicki, YouTube’s chief executive, said this month that parent Google, part of Alphabet Inc., will expand its content-review team to more than 10,000 in a response to anger about videos on the site, including some that seemed to endanger children.

No one knows how many people work as content moderators, but the number likely totals “tens of thousands of people, easily,” says Sarah Roberts, a professor of information studies at the University of California, Los Angeles, who studies content moderation.

A Tech-Driven Boom Is Coming; Please Be Patient – WSJ

In the past year I’ve dug into this in columns and articles and concluded there isn’t a paradox: automation hasn’t advanced nearly as far as evangelists claim, and where it has, it’s often created more jobs than it’s destroyed. But that’s the past; what about the future? Forecasts about technology are seldom more than wild guesses, yet a case could be made that the economic payoff may now be coming.

History shows that technological breakthroughs commonly take decades to move the needle on economic growth. Blame it on false starts, costly implementation, human resistance, and simple math: It’s years before a new industry is big enough to make a ripple in what is now an $80 trillion global economy.

Killings in New York Fall to a Record Low as Crime Rate Dives Over All – The New York Times

It would have seemed unbelievable in 1990, when there were 2,245 killings in New York City, but as of this week there have been just 285 in the city this year — the lowest since reliable records have been kept.

In fact, crime has fallen in New York City in each of the major felony categories — murder and manslaughter, rape, assault, robbery, burglary, grand larceny, and car thefts — to a total of 94,806 as of Sunday, well below the previous record low of 101,716 set last year.

If the trend holds just a few more days, this year’s homicide total will be under the city’s previous low of 333 in 2014, and crime will have declined for 27 straight years, to levels that police officials have said are the lowest since the 1950s. The numbers, when taken together, portray a city of 8.5 million people growing safer even as the police, under Mayor Bill de Blasio, use less deadly force, make fewer arrests and scale back controversial practices like stopping and frisking thousands of people on the streets.

“There is no denying that the arc is truly exceptional in the unbroken streak of declining crime,” said William J. Bratton, who retired from his second stint as police commissioner last year.

Californian growers and retailers brace for cannabis competition

California has long been a cannabis pioneer. The state became a hub for the drug-induced counterculture of “turn on, tune in, drop out” of the 1960s, from hash-smoking hippies of Haight-Ashbury in San Francisco to Cheech & Chong driving around the streets of Los Angeles in a van made from weed. California was both the first state to criminalise pot in 1913 and then the first to legalise medical marijuana in 1996.

From Monday, California is set to become the latest — and by far the largest — state to fully legalise recreational use of marijuana by adults. The decision completes a cultural and political shift all along the west coast of the US where the drug has been gradually decriminalised, offering people like Mr Casali a route out of an illegal industry and into a legitimate business.

17Z28 - THE US MARIJUANA MAP

Edelman’s Favorite Investing Chart – The Big Picture

The usual caveats apply — post Great Depression took 25 years to return to breakeven, and Japan circa 1989 still needs the Nikkei Dow to almost double to get back to the high from almost 30 years ago. If you were retiring during those periods you were pretty much hosed. Still, the cyclicality of markets is very worth noting.

17Z28 - SPX 1949-2016

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USA ECONOMY DATA, CITIES AND STATES

U.S. holiday sales set to break records in surprise boon to retail

The U.S. holiday shopping season is on track to break sales records on the back of surging consumer confidence and increased use of mobile devices, presenting an unexpected boon for retailers and the delivery companies they rely on.

Frigid Eastern U.S. Has Spot Power Trading Near 3-Year High – Bloomberg

The eastern U.S. just experienced some of the highest power prices in almost three years as demand surged amid a cold snap. In Chicago, temperatures will probably only reach 9 degrees Fahrenheit (minus 13 Celsius) Wednesday, which is 24 degrees below normal, according to AccuWeather.

17Z28 - SPOT SURGE

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GLOBAL ECONOMY DATA

Global number of IPOs highest since financial crisis

Global exchanges attracted the largest number of listings since the financial crisis this year, with a resurgence of activity in the US and a record number of Chinese deals belying concerns that companies are cooling to the idea of public ownership.

Almost 1,700 companies floated in 2017, an increase of 44 per cent over 2016 and the most initial public offerings since 2007, according to Dealogic. Proceeds rose 44 per cent to $196bn, the largest amount since 2014, which had been boosted by Alibaba’s $25bn listing.

17Z28 - GLOBAL IPO VOLUMES

Growth-blessed Southeast Asia has more to cheer about in 2018 | Bloomberg Professional Services

Southeast Asian nations are riding a global trade boom that’s set to underpin solid economic growth next year, supporting the region as it embarks on monetary policy tightening and braces for a spate of elections.

The Philippines and Vietnam will remain the star performers in 2018, with economic growth projected to exceed 6 percent again, according to the median forecasts of economists surveyed by Bloomberg. Most of the region’s top six economies are set to sustain 2017 momentum, with growth in Indonesia seen mildly firmer at 5.3 percent next year, while Singapore and Malaysia will probably moderate.

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POSITIONING, INFLECTION, MARKET CALLS

Pot Stocks Soar as California Gets Ready to Get High – Bloomberg

The BI Canada Cannabis Competitive Peers index is having its best day ever as Californians prepare to light up, or eat up, marijuana products starting Jan. 1 at 12 a.m. Among those reaching intraday records are Canopy Growth Corp., Cronos Group Inc., and producer Aphria Inc.

Some marijuana companies are creating multinational franchises on the heels of legalization, said RBC analyst Nik Modi this month. Green House Brands North America has a joint venture in Canada with Canopy Growth and Organa Brands, which sought to invest in and acquire cannabis brands in the U.S.

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COLOR, EARNINGS, SENTIMENT, VALUATIONS

A U.S. Private Equity Firm Has Officially Delisted for the First Time Ever – Bloomberg

Japan’s SoftBank Group Corp. has completed its $3.3 billion cash deal for Fortress Investment Group LLC, marking the first time a publicly traded U.S. private equity firm has delisted.

SoftBank, a technology-focused investor, struck the deal to buy Fortress for $8.08 a share in February. The price was 39 percent above the stock’s close the day before the acquisition was announced.

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ENERGY COMPANIES, NOCs, INDUSTRY

All That New Shale Oil May Not Be Enough as Big Discoveries Drop – Bloomberg

Three years after causing an oil-price crash, the shale boom may not be enough to meet rising global demand because the industry has cut back so sharply on higher-risk mega-projects.

Discoveries of new reserves this year were the fewest on record and replaced just 11 percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy. While shale wells are creating a glut now, without more investment in bigger, conventional supply, the world may see output deficits as soon as 2019, according to Canadian producer Suncor Energy Inc.

“Tight rock is not going to solve the global supply-demand issue,” said Adam Waterous, chief executive officer at the Calgary-based Waterous Energy Fund, which invests as much as C$400 million ($265 million). “Its going to take a long time for those mega-projects to come back on.”

Russia’s LNG ambitions no longer a pipe dream

Global demand for LNG has roughly doubled over the past decade to 258m tonnes last year. Its liquefied state means it can be shipped without the need for costly pipelines, and the relatively low levels of carbon the gas emits makes it a popular choice for countries looking to cut down on coal usage.

That has made LNG a threat to Russia’s dominance of the European gas market but Mr Mikhelson and Mr Putin have sought to turn this into an advantage.

Russia has traditionally been a natural gas player owing to Gazprom’s Soviet-era pipelines that have fuelled Europe. The country is now aiming for a 15-20 per cent share of the global market for LNG, which has been dominated by producers in the US, Qatar and Australia.

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COMMODITIES BASE METALS, MATERIALS

Copper prices climb to highest level in 4 years

Copper prices rallied to their highest level in almost four years on Wednesday, putting the metal on track for its best year since 2010, in what was a welcome development for some of the world’s largest mining companies following years of oversupply.

The red metal is set to end the year up more than 39 per cent, helped by strong global economic growth and robust demand in China, the world’s biggest consumer.

Copper has become a favourite metal for global mining companies such as Glencore and Rio Tinto, which now forecast a lack of supply by the end of the decade as old mines come to the end of their lives and are not replaced.

Demand for the metal is also expected to increase from a buildout of charging networks required for electric cars and integration of renewable energy from the wind and sun.

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BREXIT, SCOXIT, LONDON, UK ECONOMY

Goldman Sachs eyes Dublin for European asset management unit

Goldman Sachs has picked Dublin as a post-Brexit administrative centre for its European asset management business and will move about 20 people to the Irish capital, according to two people familiar with the bank’s plans.

The Wall Street group has already signalled its intention to create hubs for its investment bank in Frankfurt and Paris to serve EU clients once the UK leaves the bloc in April 2019.

Port of Rotterdam reveals scale of Brexit challenge

“English ports are not equipped with the same facilities as Rotterdam, which is why most of it comes here,” says Ricardo Rackwitz, the site’s commercial manager, as he watches the porters heave the boxes. “It’s actually quicker to send it here first. Then we put it on pallets and send 10 or 12 per cent of it on to the UK.”

Theresa May’s government says it is progressing on Brexit, after striking an initial divorce deal with the bloc this month. But leaving the EU is not just about negotiation and legislation; it is also about implementation and infrastructure.

Once Britain leaves the EU’s customs union, the UK will no longer be able to rely on the port facilities in Rotterdam or elsewhere in the EU — and will instead have to develop its own, for trade both with Europe and beyond.

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EUROPE

Full Term for Merkel Opposed by Growing Share of Germans in Poll – Bloomberg

German Chancellor Angela Merkel’s public support for another full term dwindled in a poll, with opposition running high in the party she wants as partner for her next government.

A YouGov survey published Wednesday said 47 percent of Germans want Merkel to step down before the end of the four-year mandate her party won in September, up from 36 percent in October. It’s a sign that the political stalemate since the election may be working against the acting chancellor before preliminary coalition talks with the Social Democrats begin on Jan. 7.

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CHINA

China to look at changing its constitution

Analysts said any changes would probably be relatively routine, such as formally adding “Xi Jinping Thought” to the constitution’s preamble or paving the way for the merging of the state and party anti-graft bodies. But the announcement could also stoke speculation that Mr Xi will seek to end a two-term limit on the presidency.

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GEOPOLITICS, CRIME, TERRORISM

Assad Must Go, Says Turkey’s Leader, Seeking Leverage as War Winds Down – The New York Times

Turkey’s leader denounced President Bashar al-Assad of Syria on Wednesday as a terrorist mass murderer with no place in that country’s postwar future, scrapping a softened approach that Turkish officials had taken toward Mr. Assad in recent years.

Chinese ships accused of breaking sanctions on North Korea

Last month the US Treasury published satellite photos of ships linked to each other at sea, apparently trading oil. Chosun, the prominent South Korean newspaper, on Tuesday cited people within South Korea’s government saying 30 such hookups had been spotted by spy satellites since October

Egypt and Ethiopia clash over huge River Nile dam

Cairo fears that an Ethiopian plan to build a huge hydropower dam on the Blue Nile, the source of most of the water reaching Egypt, will reduce its access to water. In recent weeks, tensions have risen between Cairo and Addis Ababa.

As the rhetoric escalated, Abdel Fattah al-Sisi, Egypt’s president, said the Nile was “a matter of life and death” for his country and that “no one can touch Egypt’s share of the water”. Ethiopia retorted that the dam was a matter of life and death for it, too. Khartoum suggested Cairo was angry because the dam would enable Sudan to utilise more water from its own agreed allocation instead of allowing it to flow downstream to Egypt.

Fight to Oust Taliban Set to Get Tougher as Afghan Funding Drops – Bloomberg

Boosting Afghanistan’s capacity to fight militants is crucial for security in South Asia, one of the most volatile regions in the world. The U.S. and other international donors pay for about 55 percent of the war-torn country’s national budget of 361 billion Afghanis ($5.1 billion) for 2018 fiscal year, said Khalid Payenda, a deputy finance minister. The government will have a $144 million deficit that will need to be covered by domestic savings, he said.

“Our security agencies are financially reliant on international funding,” said Mohammad Hashim, the deputy head of the National Economic Commission. “That’s ringing alarm bells because a major part of the aid cuts are expected to hinder the government’s efforts to fighting the insurgents.”

Tired of Regional Critics, Venezuela Looks to Russia and China – The New York Times

Venezuela, which a decade ago aspired to be the axis of a new, left-leaning diplomatic and trade alliance in the Americas, is finding itself increasingly isolated in the hemisphere.

Venezuela downgraded diplomatic relations with Canada and Brazil in recent days, after a war of words over the Venezuelan government’s decision last week to ban three influential opposition parties from running candidates in next year’s presidential election.

Ukraine Fighting Pauses, Briefly, for Big Prisoner Exchange – The New York Times

After a sharp escalation in fighting this month between the Ukrainian military and Russian-backed separatists, the two sides took an unusual break from shelling each other on Wednesday to carry out their biggest exchange of prisoners since the conflict began in 2014.

The prisoner swap — involving 73 Ukrainians held captive by the rebels, and more than 200 separatists captured by Ukraine — was carried out without serious incident just days after the Trump administration agreed to provide weapons to Ukraine. That move, Russia says, will only escalate a conflict that has killed more than 10,000 people.

The prompt release of all prisoners was a key part of a 2015 peace agreement brokered by France, Germany and Russia in Minsk, the capital of Belarus. But like many other parts of the Minsk deal, it has gotten bogged down in accusations on each side that the other was not fulfilling its obligations.

Tillerson Discusses Conflict Zones in Call With Russia – WSJ

The U.S. and Russia aired disagreements this week over key world conflict zones, framing differences that spell increasing uncertainties for the start of 2018 in Europe, Asia and the Middle East.

U.S. Secretary of State Rex Tillerson, in a call to Russian counterpart Sergei Lavrov, urged Russia to moderate its stance toward Ukraine, the State Department said Wednesday, while Mr. Lavrov exhorted the U.S. to back away from confrontation with North Korea.

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PROPAGANDA, CORRUPTION, AUTHORITARIANISM

Facebook stops putting “Disputed Flags” on fake news because it doesn’t work – Axios

The tech giant is doing this in response to academic research it conducted that shows the flags don’t work, and they often have the reverse effect of making people want to click even more. Related articles give people more context about what’s fake or not, according to Facebook.

Many Comments Critical of ‘Fiduciary’ Rule Are Fake – WSJ

A significant number of fake comments appear among thousands criticizing a proposed federal rule meant to prevent conflicts of interest in retirement advice, according to a Wall Street Journal analysis.

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TRUMP WORLD

44 percent of Republicans think Trump repealed Obamacare – Vox

Spoiler alert: He hasn’t.

The poll of 1,000 adults shows that 31 percent believe Trump has repealed the Affordable Care Act, 49 percent say he hasn’t, and 21 percent are unsure. Of those who identify as Republican voters, 44 percent say that Trump has repealed Obamacare.

Israeli Minister Wants to Name a Jerusalem Train Station for Trump – The New York Times

In the uneasy days after President Trump recognized Jerusalem as Israel’s capital, some Israelis who cheered the move paid homage — and taunted outraged Palestinians — by posting doctored photos of the Dome of the Rock with the president’s surname plastered across it, as if one of Islam’s holiest shrines had been reduced to the latest gold-plated Trump property.

Now, a powerful Israeli cabinet minister is offering to express his gratitude by putting Mr. Trump’s name on a proposed new train station in the Old City, one that would bring thousands of tourists directly into the Jewish Quarter just a few hundred yards from the Western Wall and the Temple Mount.

Mike Huckabee Says Trump Is Like Churchill. Historians Disagree. – The New York Times

Former Gov. Mike Huckabee of Arkansas drew a swift and intense response with a provocative claim on Tuesday: President Trump, he wrote, is similar to Winston Churchill, one of history’s most iconic leaders.

Poll: Most say US became less respected in the world in 2017 | TheHill

A majority of respondents in a new poll say the U.S. has become less respected in the world over the last year. An Economist–YouGov poll found 52 percent of those surveyed say the U.S. became less respected in the world in the last year, while 21 said they think the U.S. became more respected in the world over the last year. Twenty-six percent think there was no change.

Right Loses It Over CNN Catching Trump Golfing

Far-right defenders of the president went apoplectic after CNN published an “exclusive” video of Trump golfing on Tuesday, outfitted in a red “USA” hat, a white shirt, and black pants. Trump’s most ardent supporters seemed to take issue with the cameras capturing Trump playing golf on a day he claimed would be a time to get back to making “America great again,” with some even arguing that golfing is actually a way to get work done.

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TRADE, PROTECTIONISM, REGULATION, OVERSIGHT

Nafta ‘Unpredictability’ Is Keeping Trudeau Awake at Night – Bloomberg

“There’s a level of unpredictability” in the negotiations, Trudeau said in the interview, which was aired Monday. “We know if the relationship with the U.S. goes sour, we could be doing everything right at home and our economy would still end up suffering.”

The three countries trade more than $1 trillion in goods each year, and Canada and Mexico are the top two buyers of U.S. exports. President Donald Trump has repeatedly threatened to withdraw from the accord, and can do so on six months notice. Talks are scheduled to run through March, and have already been extended once. They resume next month in Montreal after a mini-round in Washington before the holidays saw agreement reached on only a minor annex related to appliances.

“I’m not going to sign any deal at any cost,” Trudeau told Global News. “If it’s a bad deal, I’m going to walk away from it, because no deal is better than a bad deal for Canadians.”

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ELECTORAL POLITICS

Democrats Struggle to Convert Voter Enthusiasm Into Cash Contributions – WSJ

Democrats aim to win back control of Congress and build up their presence in state capitals during next year’s elections, but they begin this ambitious mission with precious little cash to finance it.

The Democratic National Committee had $6.3 million in the bank on Dec. 1, while the Republican National Committee had six times as much, at $40 million, according to documents the parties filed with the Federal Election Commission. In November, the DNC posted its worst fundraising amount for the month in a decade.

Putin May Be Re-Election Shoo-in, but He’s Taking No Chances – The New York Times

That the Kremlin is afraid of Mr. Navalny is in no doubt. His name is taboo on state-controlled television, unless he is being found guilty of fraud, organizing illegal protests or other alleged crimes. Polling organizations linked to the state don’t include his name when they ask people what they think of leading political figures.

What’s confusing, however, is exactly what the Kremlin has to fear.

Allowing Mr. Navalny to compete in March might help Mr. Putin solve one of his biggest problems: how to turn an election that promises to be little more than a tedious coronation into a contest with a frisson of excitement. A low turnout is something the Kremlin desperately wants to avoid.

Ron Paul: Trump may be vulnerable to 2020 GOP primary challenge

Former Texas Rep. Ron Paul says a yearlong economic boom under President Trump is “a bit of an illusion” and that debt, inflation, and inequality could cause turmoil that benefits a “hardcore nucleus” of libertarians.

The libertarian Republican leader told the Washington Examiner that Trump could face a strong challenger in the 2020 GOP primary, especially if “things are really much worse.”

“The big opening for us is the fact that this system is coming apart. We’re on the verge of something like what happened in ‘89 when the Soviet system just collapsed,” he said. “I’m just hoping our system comes apart as gracefully as the Soviet system.”

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CONSUMER TECH, SOCIAL MEDIA, E-COMMERCE, MOBILE

Freed From the iPhone, the Apple Watch Finds a Medical Purpose – The New York Times

In September, Apple announced that the Apple Watch would no longer need to be tethered to a smartphone and would become more of a stand-alone device. Since then, a wave of device manufacturers have tapped into the watch’s new features like cellular connectivity to develop medical accessories — such as an electrocardiogram for monitoring heart activity — so people can manage chronic conditions straight from their wrist.

What’s happening with the Apple Watch is one of the first signs of a leap forward in the utility of wearable devices. Many people had wondered why they would need a smart watch at all when most already carried more powerful smartphones with them. But as the Apple Watch becomes capable of handling more medical tasks on its own, they may now have an answer.

“This is an important step in the evolution of wearables,” said Tim Bajarin, president of Creative Strategies, an advisory and research firm. “The Apple Watch can now be on you all the time doing this type of medical monitoring.”

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AUTOS, ELECTRIC, SELF-DRIVING

Geely Buys Stake in Volvo Trucks, Despite China Restrictions – The New York Times

China’s government has made it harder to move money overseas. It has said it would punish companies for investing in certain sectors. It has told firms to report all cross-border deals. Despite all that, Chinese companies continue to go global.

Zhejiang Geely Holding Group, the Chinese company that bought Volvo Cars in 2010, said on Wednesday that it would acquire an 8.2 percent stake in AB Volvo, a Swedish manufacturer of trucks, from the activist investment firm Cevian Capital. The deal, valued at $3.2 billion based on a New York Times calculation, would make Geely the truck maker’s largest shareholder.

It is the latest sign that Chinese companies are still on the lookout for deals — provided they are in line with the government’s strategic goals.

Tesla’s Model 3 deliveries point to slower ramp up: KeyBanc

The numbers indicate that the electric carmaker may still not be out of its self-described “manufacturing hell” for the production of the $35,000 Model 3 sedan. KeyBanc analysts based their projections after conversations last week with sales people at 18 stores in the United States.

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MISCELLANEOUS

How Aman Shanghai Was Built By Saving an Ancient Chinese Village – Bloomberg

With the help of a passionate Chinese businessman, Aman resorts saved and restored an entire village from the Qing and Ming dynasties. Now you can sleep in it.

If most successful hotels have a sense of place, Amanyangyun’s also has a sense of time. In a feat of preservation spearheaded by Chinese entrepreneur Ma Dadong, the resort consists primarily of 50 historic homes like the one shown here—still in its original location. Most are between 300 and 500 years old, and all have been rescued from an untimely fate.

17Z28 - AMANYANGYUN

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