Macro Links Dec 8th – 40 Percent in 40 Hours
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- BITCOIN MELT-UP, FUTURES DEBUT
- CALIFORNIA WILDFIRES
- GOP TAX PLAN
- RUSSIA PROBE
- GOVERNMENT SHUTDOWN THREAT
- AL FRANKEN RESIGNS
- SEXUAL HARASSMENT
- JERUSALEM, SAUDI ARABIA
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY DATA
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- ENERGY COMPANIES, NOCs, INDUSTRY
- ENERGY NATURAL GAS, COAL
- ENERGY RENEWABLES, NUCLEAR
- FRONTIER MARKETS
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- AUTOS, ELECTRIC, SELF-DRIVING
- LUXURY, HIGH END, ASPIRATIONAL
- SCIENCE, NATURE, PSYCHOLOGY
BITCOIN MELT-UP, FUTURES DEBUT
Even for bitcoin, which is notoriously volatile, the upward lurch was jarring, astounding outsiders and thrilling those who have piled into the digital currency in recent weeks. The rally has been sparked by the collision of bitcoin’s sudden faddish reputation and the anticipation of institutional investors entering the market for the currency for the first time.
The run-up in price comes as bitcoin enthusiasts prepare to reach a new landmark. On Sunday, a bitcoin product will trade for the first time on a U.S. financial market, making it almost as easy to bet on the virtual currency as oil, corn or the euro.
In one wild 20 minute period, the price of bitcoin soared $2,000 per coin to more than $19,000 only to drop to $15,000 on the Coinbase trading venue. The frenzied demand left other exchanges struggling to cope, and the difference in prices quoted on other venues for the same bitcoin asset was as much $4,000.
“People are looking at a video game as a regular market. And it’s clearly not, otherwise it wouldn’t be where it is already,” said Walter Zimmermann, technical analyst at ICAP TA. “It’s beyond abnormal, it’s unprecedented. Every other commodity has natural sellers.”
The world’s largest bitcoin exchanges by trade volume are reporting significantly varying prices as the cryptocurrency’s price soars to new all-time highs, market data shows. In some cases, the differences amount to more than $2,000 in value, particularly among some of the most voluminous exchanges.
The cryptocurrency’s eye-popping rally would have triggered so-called circuit breakers on seven of the past 10 days, pausing or even halting trading to ensure an orderly session, based on rules planned by exchanges.
More than $70 million worth of bitcoin was stolen from a cryptocurrency-mining service called NiceHash following a security breach, causing the company to halt operations for at least 24 hours.
In a patent awarded by the U.S. Patent and Trademark Office on Tuesday, the second-largest bank in the U.S. outlined a potential cryptocurrency exchange system that would convert one digital currency into another. Further, this system would be automated, establishing the exchange rate between the two currencies based on external data feeds.
The patent describes a potential three-part system, where the first part would be a customer’s account and the other two would be accounts owned by the business running the system. The user would store their chosen cryptocurrency through the customer account.
The second account, referred to as a “float account,” would act as a holding area for the cryptocurrency the customer is selling, while the third account, also a float account, would contain the equivalent amount of the cryptocurrency the customer is converting their funds to.
As fires raged out of control across Southern California, a new blaze erupted in the Bel-Air neighborhood of Los Angeles, near iconic landmarks like the U.C.L.A. campus and the Getty Museum, home to old masters paintings and ancient Roman statues.
It burned up to the edges of the 405 freeway, the nation’s busiest highway carrying about 400,000 vehicles a day, where the northbound lanes were closed for much of the day and commuters drove through a shower of ash with flames rising in the horizon.
Forty miles to the northwest, the largest of several fires underway had consumed 90,000 acres by Wednesday night and at least 150 structures — probably hundreds more, fire officials said — and threatened 12,000 others in the city of Ventura and neighboring communities, and was 5 percent contained. Other major fires were burning in the northern San Fernando Valley and the rugged region north of Los Angeles.
Tens of thousands of people fled their homes, running from fires without any idea of when they could return or what they might find when they do. They grabbed pets, clothes and mementos before hurrying off in search of shelter.
Veteran firefighters described some the blazes — at least five separate fires in the region — as unlike anything they had ever encountered. Thousands of firefighters and other first responders fanned out to save lives, protect homes and shepherd people to safety, joined by reinforcements that flocked in from other parts of the country.
More than 200,000 people in Los Angeles and Ventura Counties have been told to leave their homes. The city of Ojai, nearly surrounded by blazes, was evacuated on Thursday. And hundreds of schools were closed and roads were blocked. With well over 100,000 acres scorched, residents were on edge, watching the news footage of hills and canyons going up in smoke.
The infernos spread quickly and mercilessly, burning through untold numbers of buildings and creating scenes of apocalyptic destruction in Ventura and Los Angeles counties. Entire communities were emptied as tens of thousands of people grabbed what they could and fled.
GOP TAX PLAN
The new MarketWatch Corporate Tax Calculator shows tax rates for all S&P 500 companies and sectors. Here are the median effective annualized income-tax rates for the largest five companies that are publicly traded in the U.S., by market value as of Dec. 1.
Some of President Trump’s wealthiest New York friends have launched a last-minute campaign to pressure him for changes to the GOP tax bill, telling the president personally that the current plan would drive up their taxes and hurt his home state.
Family-owned businesses including grocery stores, craft shops, small manufacturers and others are worried tax legislation in Congress could leave them at a disadvantage to big corporations and other competitors.
At issue for these businesses is their structure as trusts, established to preserve an enterprise for succeeding generations, protect against estate taxes or a divorcing spouse or other claimants who might try to seize a stake. Some family-owned firms say the Senate version of the tax bill holds risks for them because it excludes trusts from a new tax deduction.
The British publicist who arranged the June 2016 meeting with Russians and Donald Trump Jr. sent multiple emails to a Russian participant and a member of Donald Trump’s inner circle later that summer, multiple sources told CNN, the first indication there was any follow-up after the meeting.
The emails raise new questions for congressional investigators about what was discussed at Trump Tower. Trump Jr. has for months contended that after being promised he would get dirt on Hillary Clinton, the brief meeting focused almost exclusively on the issue of Russian adoptions, saying there was no discussion with the participants after that session.
Testifying in a closed session before the House Intelligence Committee, Mr. Trump claimed that his conversation over the summer with his father, two days after The New York Times disclosed the June 2016 meeting at Trump Tower in Manhattan, was protected under attorney-client privilege because lawyers for both men were on the call.
What, if anything, Donald J. Trump knew about the Trump Tower meeting as a presidential candidate — and his role in drafting a misleading statement about it once he was president and it became public — are key questions for the special counsel, Robert S. Mueller III, who is investigating Russian interference in the election.
FBI Director Christopher A. Wray defended his agency’s integrity and independence in response to skeptical questioning Thursday from Republicans who repeatedly suggested its personnel are biased against President Trump.
Wray spent the morning being grilled at a hearing of the House Judiciary Committee about how FBI personnel — particularly a senior counterintelligence agent now the subject of an internal ethics investigation — handled sensitive probes of Trump and his former political rival, Hillary Clinton.
GOVERNMENT SHUTDOWN THREAT
On Wednesday, S&P Global analysts said a shutdown would cost the economy about $6.5 billion per week, or about 0.2 percent of gross domestic product growth in the fourth quarter of 2017, as the impact of furloughing federal employees ripples across the country.
“If a shutdown were to take place so far into the quarter, fourth-quarter GDP would not have time to bounce back, which could shake investors and consumers and, as a result, possibly snuff out any economic momentum,” the report says. “The timing could not be worse.”
The deal does not resolve numerous debates over domestic spending, immigration and funding for the military that brought the government to the brink of partial closure, leaving party leaders with a new Dec. 22 deadline to keep the government open.
Congress passed a two-week extension of federal funding that averts a government shutdown this week but defers decisions on spending levels for defense and domestic programs.
A potential U.S. government shutdown late this week could come with a sensitive wrinkle: U.S. troops who are deployed in combat zones would continue to do their jobs, but they might not receive pay until the shutdown is over, along with other federal employees.
AL FRANKEN RESIGNS
The Democratic senator of Minnesota announced his plans to resign, a day after a sixth woman accused him of misconduct and dozens of his colleagues called for him to step down.
The former rising Democratic star used his resignation speech to take aim at President Trump and Alabama Republican Senate candidate Roy Moore, who have not been forced aside despite facing arguably more serious allegations of sexual misconduct.
Franken’s resignation Thursday removes Comcast’s biggest and loudest critic in the Senate even as the company is now stalking its latest target: acquiring part of 21st Century Fox Inc., which also would face antitrust regulatory reviews.
Morgan Stanley has fired former congressman Harold Ford Jr. as a senior adviser to the firm after investigating a claim of inappropriate conduct.
The founder of biotech’s largest and most powerful hedge fund has for years perpetuated a toxic culture of sexual harassment, former employees told STAT.
The former doctor for the U.S. women’s gymnastics team was sentenced to 60 years in federal prison on child pornography counts, an effective life term that prosecutors requested to reflect admitted decades of sexual abuse against dozens of young girls, ranging from family friends to decorated Olympic athletes.
Sen. Tim Kaine (D-Va.) is asking the Senate to turn over information about the number of sexual harassment claims and settlements against upper chamber members and their staffers in a letter sent the same day Sen. Al Franken (D-Minn.) announced his resignation amid allegations of sexual misconduct.
JERUSALEM, SAUDI ARABIA
For Mr. Trump, the status of Jerusalem was always more a political imperative than a diplomatic dilemma. Faced with disappointing evangelical and pro-Israel backers like Mr. Adelson, or alarming allies and Arab leaders while jeopardizing his own peace initiative, the president sided with his key supporters.
Mr. Trump conceded the provocative nature of his decision. But as he has before, whether in pulling the United States from the Paris climate accord or disavowing the Iran nuclear deal, the president on Wednesday seemed to relish playing a familiar role: the political insurgent, defying foreign policy orthodoxy on behalf of the people who elected him.
President Donald Trump’s announcement on Wednesday that he will recognize Jerusalem as Israel’s capital followed a sustained push by evangelical Christians that began before he was in office.
Palestinians clashed with Israeli forces in the West Bank and along the border with Gaza on Thursday, as widespread predictions of unrest were realized a day after President Trump took the high-risk move of recognizing Jerusalem as Israel’s capital.
Mr. Trump’s decision ignited other protests across the region, from the Palestinian refugee camps in Lebanon to Tunisia. Hundreds of Jordanians protested outside the United States Embassy in Amman and called for its closing, chanting, “America is the head of the snake.” At a news conference in Baghdad, Moqtada al-Sadr, an influential Iraqi Shiite cleric, called for a unified “Arab Spring” against Israel. Jihadist groups from Somalia to Syria and from Yemen to Afghanistan issued venomous statements about Mr. Trump’s decision.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
Corporate America has a mound of money that begs the question: Where will it go? Non-financial companies’ liquid assets, which include hard currency, foreign deposits, money-market and mutual-fund shares, reached a record $2.4 trillion in the third quarter, Federal Reserve data showed Thursday. Flush with cash, businesses now also stand to gain from a reduction in the corporate-tax rate to 20 percent, if a tax-overhaul plan in Congress gets signed into law. They could use the money toward investment, hiring, acquisitions, share buybacks and dividends, or just hoard it.
The 9.9 percent annualized increase in revolving debt, which includes credit cards, shows Americans carried bigger balances heading into the holiday-shopping season. While incomes are rising and home and stock values have boosted household net worth to a record, consumers with fewer assets may find it difficult to boost their spending as their debt burdens mount.
China’s banks should increase their capital buffers to protect against any sudden economic downturn following a credit boom, the International Monetary Fund said.
In its first comprehensive assessment of China’s financial system since 2011, the IMF recommended “a gradual and targeted increase in bank capital.” In a worst-case scenario, IMF stress tests suggested the country’s lenders would face a capital shortfall equivalent to 2.5 percent of China’s gross domestic product — about $280 billion in 2016 — together with ballooning soured loans.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
As Mueller’s probe has gotten closer to Trump’s inner orbit, speculation has risen over whether Trump might find a way to shut it down. The Flynn deal may make that harder. For one thing, it shows that Mueller is making progress. “Any rational prosecutor would realize that in this political environment, laying down a few markers would be a good way of fending off criticism that the prosecutors are burning through money and not accomplishing anything,” says Samuel Buell, a former federal prosecutor now at Duke Law School.
The Flynn plea also makes it difficult for Trump to fire Mueller without inviting accusations of a cover-up and sparking a constitutional crisis, says Michael Weinstein, a former Department of Justice prosecutor now at the law firm Cole Schotz. “There would be a groundswell, it would look so objectionable, like the Saturday Night Massacre with Nixon,” Weinstein says, referring to President Richard Nixon’s attempt to derail the Watergate investigation in 1973 by firing special prosecutor Archibald Cox.
Even if Mueller goes, his team is providing tools that other prosecutors or investigators can use to continue inquiries. Flynn’s deal requires him to cooperate with state and local officials as well as with federal investigators. That includes submitting to a polygraph test and taking part in “covert law enforcement activities.” Mueller also has provided a road map to state prosecutors interested in pursuing money laundering charges against Trump’s former campaign chairman, Paul Manafort.
In short, once people start having to go without just for the planet to keep maintaining this most excessive and exuberant of luxury asset classes, the obvious absurdity of the creation will cause the bow to break. How that realisation comes about nobody can be sure of at this point. But the two most worrying paths come via an inflationary surge brought on by the hypothetical purchasing power imparted on the global system by all those freshly minted billionaires, or — more likely — via the liquidity constraints which will be imposed upon the rest of the system through having to accommodate bitcoin risk.
Until then, as Zimmermann notes, there’s nothing to stop asymmetrical interest from pushing the valuations ever higher in the style of a video game that has absolutely no boundaries.
Coinbase has been at the center of the speculative frenzy driving up the value of Bitcoin — which topped $13,000 on Wednesday — and similar currencies. While there are many Bitcoin exchanges around the world, Coinbase has been the dominant place that ordinary Americans go to buy and sell virtual currency. No company had made it simpler to sign up, link a bank account or debit card, and begin buying Bitcoin.
The number of people with Coinbase accounts has gone from 5.5 million in January to 13.3 million at the end of November, according to data from the Altana Digital Currency Fund. In late November, Coinbase was sometimes getting 100,000 new customers a day — leaving the company with more customers than Charles Schwab and E-Trade.
The company faces challenges that are a reminder of the early days of now-mainstream online brokerages, which suffered through untimely outages and harsh criticism from traditional finance companies and government regulators. And Coinbase’s missteps make it clear that the virtual currency industry is still young, with little of the battle testing that other financial markets have faced.
What would dampen a buyer’s enthusiasm for Bitcoin, the cryptocurrency whose uncharted, speculative price bubble has eclipsed history’s tulip manias and gold rushes? Three things come to mind: a security breach or theft, a major retailer warning against its patchy record as a method of payment, and a cooling of Wall Street’s already frosty view of the coin.
So far this week, all three have happened. Yet Bitcoin simply doesn’t care. Its price has now crossed the $15,000 threshold, double where it was trading only a month ago. What does this tell us?
Talk of fundamental value is beyond parody at this point. Everyone is throwing around bombastic price targets, from $40,000, to $400,000, to more than $1 million. If people want to buy something whose supply is structurally and speculatively capped, whether by rules or by people who hoard most of what they collect, then you can expect all sorts of prices in future. But if the herd panics and sells, prepare for pain.
In the end, it’s a political decision, not a scientific question. We can’t really level the mountains or dam the winds. We seem unable to halt the push of urban sprawl. Not unlike mass shootings, we seem to be willing to accept the occasional if rising violence as a cost of how we live. It all merges into a numbing background noise. And what was once a California quirk is becoming a national norm. Such fires are spreading and the damages they inflict are worsening. They now range from Fort McMurray, Canada, to Gatlinburg, Tennessee.
It’s tempting to lay much of the blame on climate change, which is disrupting and lengthening fire seasons. But global warming is only one expression of the deeper consequences of how a fossil-fuel civilization occupies landscapes and what can happen when those settings are, like California’s, prone to eruptive fire.
Opinion polls show Vladimir Putin is already a shoo-in to win a fourth presidential term. But a ban on Russia taking part in the Winter Olympics is likely to make support for him even stronger, by uniting voters around his message: The world is against us.
With ties between the Kremlin and the West at their lowest point for years, the International Olympic Committee’s decision to bar Russia from the 2018 Pyeongchang Games over doping is seen in Moscow as a humiliating and politically tinged act.
At a recent financial technology conference at Michigan Law School, regulators and academics estimated that computers are now generating around 50-70 per cent of trading in equity markets, 60 per cent of futures and more than 50 per cent of treasuries. Increasingly, machine learning and artificial intelligence are being added to the mix, to analyse data, trade securities and offer investment advice.
What we are seeing, in other words, is the rise of self-driving investment vehicles, matching the auto world. But while the sight of driverless cars on the roads has sparked public debate and scrutiny, that has not occurred with self-driving finance.
As with self-driving cars, there is a catch: technology is moving faster than politicians (or voters) understand, and outstripping the legal and regulatory frameworks. Nobody yet knows how to assign liability if a self-learning financial program goes haywire. “How are we supposed to think about intent?” asks Yesha Yadav, a law professor at Vanderbilt University.
For nearly two years, he’d wandered the streets of occupied Mosul, chatting with shopkeepers and Islamic State fighters, visiting friends who worked at the hospital, swapping scraps of information. He grew out his hair and his beard and wore the shortened trousers required by IS. He forced himself to witness the beheadings and deaths by stoning, so he could hear the killers call out the names of the condemned and their supposed crimes.
He wasn’t a spy. He was an undercover historian and blogger . As IS turned the Iraqi city he loved into a fundamentalist bastion, he decided he would show the world how the extremists had distorted its true nature, how they were trying to rewrite the past and forge a brutal Sunni-only future for a city that had once welcomed many faiths.
He knew that if he was caught he too would be killed.
He called himself Mosul Eye . He made a promise to himself in those first few days: Trust no one, document everything. Neither family, friends nor the Islamic State group could identify him. His readership grew by the thousands every month. And now, he was running for his life.
There really are only two certainties in life. The first is that Republican politicians will pretend their tax cuts will largely pay for themselves, and the second is that Republican economists will largely indulge them in this.
Although it’s constantly mistaken for cannabis, and it comes from the same plant, hemp is not the same product. While marijuana is bred to include potent amounts of THC, hemp has only trace amounts—it contains less than 0.3 percent of the hallucinogen. “You could smoke a football field of hemp and you wouldn’t get high, you’d get a headache,” is how Dolgin describes it. Still, when it planted its first seeds, JD Farms had to install an armed guard. (Until they’re planted in the ground, hemp seeds are considered a Schedule I narcotic, according to Dolgin.)
For those unfamiliar with the status of hemp these days, Dolgin supplies the 30-second download: “In the ’70s it got caught up with marijuana in the anti-drug laws. It stayed that way for several decades, until the tobacco industry hit rock bottom and states like Virginia realized they need a new crop for farmers. In 2014 the passage of the U.S. Farm Bill allowed states to conduct hemp pilot programs. You could grow hemp if you were certified and licensed.” Because of the government work Dolgin had done, he was able to work closely with state senators and Governor Andrew Cuomo’s office to pass a series of bills that allowed JD Farms to grow hemp. The industry is currently a $688 million business in the U.S.
Rosmann, an Iowa farmer, is a psychologist and one of the nation’s leading farmer behavioral health experts. He often answers phone calls from those in crisis. And for 40 years, he has worked to understand why farmers take their lives at such alarming rates – currently, higher rates than any other occupation in the United States.
“Farming has always been a stressful occupation because many of the factors that affect agricultural production are largely beyond the control of the producers,” wrote Rosmann in the journal Behavioral Healthcare. “The emotional wellbeing of family farmers and ranchers is intimately intertwined with these changes.”
The US farmer suicide crisis echoes a much larger farmer suicide crisis happening globally: an Australian farmer dies by suicide every four days; in the UK, one farmer a week takes his or her own life; in France, one farmer dies by suicide every two days; in India, more than 270,000 farmers have died by suicide since 1995.
The Philippines is prime Facebook country—smartphones outnumber people, and 97 percent of Filipinos who are online have Facebook accounts. Ressa’s forum introduced Duterte to Filipino millennials on the platform where they live. Duterte, a quick social media study despite being 71 at the time of the election, took it from there. He hired strategists who helped him transform his modest online presence, creating an army of Facebook personalities and bloggers worldwide. His large base of followers—enthusiastic and often vicious—was sometimes called the Duterte Die-Hard Supporters, or simply DDS. No one missed the reference to another DDS: Duterte’s infamous Davao Death Squad, widely thought to have killed hundreds of people.
“At the beginning I actually loved it because I felt like this was untapped potential,” Ressa says. “Duterte’s campaign on social media was groundbreaking.”
Until it became crushing. Since being elected in May 2016, Duterte has turned Facebook into a weapon. The same Facebook personalities who fought dirty to see Duterte win were brought inside the Malacañang Palace. From there they are methodically taking down opponents, including a prominent senator and human-rights activist who became the target of vicious online attacks and was ultimately jailed on a drug charge.
USA ECONOMY DATA, CITIES AND STATES
In the days after the horrific shooting at Sandy Hook Elementary School, gun enthusiasts rushed to buy millions of firearms, driven by fears that the massacre would spark new gun legislation. Those restrictions never became a reality, but a new study concludes that all the additional guns caused a significant jump in accidental firearm deaths.
Farmers around the world are producing too much food, keeping prices low and weighing on the economies of U.S. states with a big agricultural sector. Iowa and South Dakota saw their gross domestic product decline in the second quarter.
The U.S. economy is minting new millionaires at an astonishing rate, according to a paper by New York University economist Edward N. Wolff. The number of households with a net worth of $1 million (measured in constant 1995 dollars, or about $1.6 million today) grew from 2.4 million households in 1983 to 9.1 million households in 2016, a growth rate of 279 percent.
For comparison, the total number of households grew by just 50 percent over that period, meaning that the population of millionaires grew at more than 5 times the rate of the general population. In 1983 fewer than 3 percent of households had a net worth greater than $1 million in 1995 dollars. By 2016, over 7 percent of households were worth that much.
GLOBAL ECONOMY DATA
The Japanese economy has grown for seven straight quarters, which now registers as its longest expansion since the mid-1990s, following government revisions to previous data released on Friday. A slew of key October indicators suggest that while growth may slow a bit, the GDP expansion will continue in the fourth quarter.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
Investors poured $1.5bn into funds that buy financial stocks in the latest week, continuing a rotation into the sector on optimism about the prospects of lighter regulation and less tax.
Shares in the big banks have moved sharply higher since Donald Trump won the US presidential election more than a year ago, promising a profit-boosting mix of higher interest rates, lower taxes and gentler regulation. Within the past week, the main banks index has gained about 8 per cent, buoyed by tax reform progress on Capitol Hill and moves to rein in Obama-era creations such as the Consumer Financial Protection Bureau.
But not much of that cheer is likely to show up in results for the fourth quarter, say analysts, noting that trading volumes for the October-December period will struggle to match an election-boosted period a year earlier.
Shares in Lending Club dropped as much as one-fifth to a record low on Thursday as it cut guidance for profits, overshadowing the company’s first investor day since a splashy market debut three years ago.
The San Francisco-based company, which set out to disrupt the vast market for unsecured consumer loans in the US, has struggled to overcome the effects of a governance scandal last May, when it booted out its talismanic founder and several senior executives.
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
One of America’s biggest payday lenders has floated on the stock market with a $620m valuation, cashing in on mounting hopes that the Trump administration and Republicans in Congress will ease regulatory restrictions on the sector.
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
This time, the bank’s credit trading desk is caught in the middle of a raging battle among hedge funds over the debt of big U.S. homebuilder Hovnanian Enterprises Inc. The flap was ignited by Blackstone Group LP’s credit unit, GSO Capital Partners, which is trying to convince the builder to accept a bond refinancing package. GSO’s plan would trigger payments on default insurance that it bought in the credit derivatives market.
Goldman’s problem? It could be on the hook for some of that default insurance after accumulating credit-default swaps and bond trades that add up to a roughly $200 million position, according to people with knowledge of the matter. The Wall Street titans are staring each other down as the tussle heads into a crucial stage, each seeking to influence the builder’s next steps.
In the past five years, Elliott has launched activist campaigns at more than 50 companies—19 this year alone—in at least a dozen countries. During that span, the battle with Samsung is the only one that went all the way to a vote, and the only one in which the firm didn’t get what it wanted—a sign of just how effective Elliott is at pressuring management to agree to its demands. At the same time, Elliott’s assets have nearly doubled to roughly $39 billion, including $5 billion it raised in a 23-hour span in May, making it more than twice the size of the second-biggest activist hedge fund, Dan Loeb’s Third Point.
In all his years of giving interviews and taking questions at the company’s marathon annual meeting, Buffett has acknowledged that the board has picked his replacement, but he’s never disclosed the name.
Maybe that’s because doing so would take the spotlight off Buffett, who, at 87, still loves the attention. At the annual meeting, his likeness has adorned Coke cans and sneakers, rubber duckies and underwear. It’s a celebration of capitalism—but also of Buffett. When he walks through the hall where Berkshire’s businesses display their wares, fans throng around him, snapping selfies.
Keeping the successor’s identity a secret also gives the board more flexibility. Circumstances can change, after all, and probably have during the long period Berkshire’s board has been weighing its options. These days, however, most arrows are pointing toward one man.
Like many Berkshire executives, Abel is already very wealthy. He’s collected tens of millions of dollars in salary and bonuses over the years. He also has a 1 percent stake in the business he runs. According to regulatory filings, that holding can be converted into more than $400 million worth of Berkshire stock, a move that would directly align his interests with shareholders if he became CEO. “I would certainly applaud that,” says David Rolfe, chief investment officer of Wedgewood Partners Inc., a money manager that owns stock in Berkshire. “That would not be an unnoticed throwaway line in the press release” on succession.
ENERGY COMPANIES, NOCs, INDUSTRY
The announcement is an acknowledgment that the company has not been properly positioned for where the energy market is headed. Oil and natural gas markets are dealing with a glut of supply and companies like General Electric have been forced to cut prices on their services. The long-term demand for renewable energy is growing globally, even as the American political climate damps its short-term prospects. And G.E. faces a raft of competition from international rivals in all those areas.
ENERGY NATURAL GAS, COAL
As nations from the U.K. to Austria plan to exit the dirtiest power plant fuel and investors such as Norway’s sovereign wealth fund, the world’s biggest, pull money out of coal-hungry utilities, the fuel’s future has never looked so bleak. Power producers from Britain’s Drax Group Plc to Steag GmbH and Uniper SE in Germany are already closing or converting stations away from coal at a record pace.
ENERGY RENEWABLES, NUCLEAR
BART isn’t the first regional transit network to go solar. SunPower Corp. last year agreed to provide electricity from a 100-megawatt solar farm to help power the subway system in Santiago, Chile.
It is only recently that Chile began to harvest the formidable power of the Atacama’s sun. Just five years ago, the country produced negligible amounts of renewable energy and was heavily dependent on imports from its unreliable neighbours, suffering from blackouts and some of the highest energy prices in the world.
But this shortage of fossil fuels has stimulated an unprecedented boom in investment in renewable — and especially solar — energy since then, despite a contraction in investment in almost all other sectors during a period of economic stagnation at the end of the commodities boom.
A decade after construction began, Senegal opened a new airport on Thursday, the centerpiece of an ambitious plan to try to catapult the nation to become a top economic player in West Africa.
Mr. Sall is trying to position Senegal to expand its steadily growing economy, which in past years has slowly diversified beyond the peanut farming that the country relied on when it broke free of colonial ties to France decades ago. Besides peanuts, it now grows rice and cotton, and the nation has also developed its fisheries and its mining industry.
BREXIT, SCOXIT, LONDON, UK ECONOMY
Big companies are stepping up their plans in case Britain crashes out of the European Union without a deal as Prime Minister Theresa May struggles to get talks back on track after a major setback. Senior executives in the financial services sector, which accounts for about 12 percent of the economy, told Reuters May’s efforts to secure a transition deal had come too late and they had no choice but to start restructuring.
Big supermarkets such as Tesco and Sainsbury’s have been working with suppliers to identify potential delays, shortages or price rises. They have lined up alternative providers, according to suppliers and sources in the industry.
The U.K. government and the European Union appeared close to a breakthrough on Brexit divorce terms on Thursday night, with EU officials saying British Prime Minister Theresa May could come to Brussels as early as Friday morning.
Germany moved a small step closer to a potential solution to its political crisis after the largest opposition party said it would enter talks with Chancellor Angela Merkel’s conservatives over forging a new government.
The leader of Germany’s Social Democrats has called for EU member states to commit to a “United States of Europe” by 2025, setting out an ambitious European reform agenda as his party agreed to talks with Angela Merkel on the formation of a new government.
The ruling party, Law and Justice, had long discussed changing prime ministers before the end of this year—the midpoint in parliament’s four-year term—in a bid to revitalize its posture ahead of local elections next year and legislative elections in 2019.
GEOPOLITICS, CRIME, TERRORISM
The trial against a Turkish banker accused of laundering money for Iran took a bizarre turn as the U.S. government’s star witness was sued for rape by a man who says he was a fellow inmate in a New York City jail.
Turkey’s president made a landmark visit to Greece on Thursday, but any expectation for diplomacy was quickly deflated by his call for changes to an international treaty that defines the borders between the rivals.
Mr. Erdogan managed to provoke his hosts even before landing in Athens. In an interview published in the Greek daily Kathimerini on Thursday, he suggested an “update” of the 1923 Treaty of Lausanne, which defined Turkey’s borders with neighboring countries after World War I.
He repeated the demand at a tense, televised news conference with his Greek counterpart, President Prokopis Pavlopoulos.
One of China’s biggest state-owned oil companies is suing its Venezuelan counterpart in a US court, in a sign that Beijing’s patience over unpaid debts is running out as the Caribbean nation falls deeper into economic and social chaos.
Ms Fernández, who is now a senator, is accused of covering up Iran’s participation in the 1994 bombing of the AMIA Jewish social club in Buenos Aires, the country’s deadliest terrorist attack, in return for favourable trade deals.
The accusations are based on a case filed by prosecutor Alberto Nisman, whose mysterious death in his apartment the night before he was due to present his arguments before Congress in January 2015 was declared by investigating forensic experts earlier this year to have been murder.
A truck carrying their exams was hijacked and all the cargo was stolen on Monday, the Brazilian branch of the CFA Institute said in a document obtained by Bloomberg, adding that chances of recovering the material are slim. The robbery affected 140 candidates who paid about $1,000 for the test, Mauro Miranda, the president of CFA Society Brazil, said in an interview.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
“I thought, I haven’t done anything wrong, have I? I’m law-abiding,” recalls Mr. Chen, a wiry 41-year-old. “So I went in. Once I arrived, they wouldn’t let me leave.”
Mr. Chen was locked in a cell for five days, he says. According to the police report, his comment on the WeChat messaging app was deemed “picking quarrels and provoking trouble,” a broad offense that encompasses gang fighting and destruction of public property and is punishable by detention without trial.
Rep. Trent Franks, an Arizona Republican who is among the most conservative members of the House, said he would resign his seat after House officials learned that he had asked two female employees to bear his child as a surrogate.
An average of publicly available polls gives Mr Moore a lead of only 2.3 percentage points. But this estimate suffers from three big sources of uncertainty. The first is that polling for Senate races is especially unreliable: The Economist’s review of historic polling for such races from 1998 to 2014 suggests an average error of six percentage points. Second, many pollsters do not construct rigorously representative samples in Alabama, relying instead on lower-quality methodologies (like focusing on voters with landlines and ignoring those with mobiles). Third, all polls implicitly forecast which voters will show up on election day—something especially hard to do in a low-turnout special election.
SCANDALS, LAWSUITS, FINES, REGULATORY
United Industries, a unit of Caterpillar, admitted that it cheated customers by performing unnecessary repairs to their railcars and agreed to plead guilty to dumping brake shoes and other parts into the ocean to hide evidence, according to court documents.
The new acting head of the U.S. consumer finance watchdog is reviewing whether Wells Fargo & Co should pay tens of millions of dollars over alleged mortgage lending abuse, according to three sources familiar with the dispute.
SILICON VALLEY, UNICORNS, STARTUPS, VC
An exponential increase in the availability of digital data, the force of computing power and the brilliance of algorithms has fuelled excitement about this formerly obscure corner of computer science. The West’s largest tech firms, including Alphabet (Google’s parent), Amazon, Apple, Facebook, IBM and Microsoft are investing huge sums to develop their AI capabilities, as are their counterparts in China. Although it is difficult to separate tech firms’ investments in AI from other kinds, so far in 2017 (see chart 1) companies globally have completed around $21.3bn in mergers and acquisitions related to AI, according to PitchBook, a data provider, or around 26 times more than in 2015.
Along with a seemingly endless string of harassment and discrimination scandals, Silicon Valley’s homogeneity has a more trivial side effect: boring holiday parties. A fete meant to retain all your talented engineers is almost certain to wind up with a rather same-y crowd, made up mostly of guys. At this year’s holiday parties, however, there’ll be a surprising influx of attractive women, and a few pretty men, mingling with the engineers. They’re being paid to.
AUTOS, ELECTRIC, SELF-DRIVING
From Wednesday, some passengers in Boston were able to hail a self-driving car through their Lyft rideshare app as part of a highly anticipated trial of autonomous vehicles in the city.
The pilot in Boston’s Seaport area is the product of a collaboration between San Francisco-based rideshare company Lyft and self-driving car startup NuTonomy. Part of its purpose is to get members of the public acquainted with self-driving cars, NuTonomy says in a press release, and based on their feedback “adapt and improve our system, so that we can deliver an autonomous transportation experience that is extremely safe, efficient, and comfortable.”
LUXURY, HIGH END, ASPIRATIONAL
Crown Prince Mohammed bin Salman of Saudi Arabia, acting though a friend and distant cousin, was the true buyer behind the purchase of Leonardo da Vinci’s “Salvator Mundi” for a record-breaking $450.3 million, American officials and an Arab familiar with the arrangement said Thursday.
SCIENCE, NATURE, PSYCHOLOGY
Just before sunrise on the third night, he found it. Way out at the very edge of the observable universe, there loomed a black hole 800 million times more massive than the sun. The signal had traveled more than 13 billion light-years across time and space to reach Bañados’s telescope.
Mr. Yow isn’t quite on the senior circuit yet. But as he prepares for a run of reunion concerts starting Dec. 8, he has been forced to confront an issue that’s unique to his cohort of aging punk, heavy metal and aggressive rock musicians. If you want to leap around onstage like a maniac while delivering throat-shredding vocals at machine-gun tempos, you will need to hit the gym—hard.
This year, 76 North Korean vessels have washed up, many carrying dead crew. The ghostly armada appears to be disabled fishing boats that drifted on currents.
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