Macro Links Jan 18th – Bring It On Home
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- APPLE CASH REPATRIATION
- SHUTDOWN THREAT
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- TAXATION, WEALTH HAVENS, INEQUALITY
- RUSSIA PROBE
- NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- POSITIONING, INFLECTION, MARKET CALLS
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- COMMODITIES PRECIOUS METALS
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- DACA, TRAVEL BAN, IMMIGRATION, WALL
- GEOPOLITICS, CRIME, TERRORISM
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- PROPAGANDA, CORRUPTION, AUTHORITARIANISM
- TRUMP WORLD
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- AUTOS, ELECTRIC, SELF-DRIVING
APPLE CASH REPATRIATION
Apple has pledged to invest more than $30bn to expand its American operations in the wake of last month’s US tax cut, even as it makes an estimated $38bn one-off tax payment on the repatriation of its overseas profits. The iPhone maker said the investments — including a brand new US campus, data centres and more than 20,000 new jobs — would help it make a $350bn “direct contribution” to the US economy over the next five years.
Apple said it would pay a one-time tax of $38 billion on its overseas cash holdings and ramp up spending in the U.S., as the world’s most valuable public company seeks to emphasize its contributions to the American economy after years of criticism for outsourcing manufacturing to China.
The iPhone maker will begin issuing stock grants to most employees worldwide in the coming months, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The move comes on the same day Apple said it would bring back most of its cash from overseas and spend $30 billion in the U.S. over the next five years, funding an additional technical support campus, data centers and 20,000 new employees.
Republicans and Democrats laid the groundwork to blame each other for a potential government shutdown this weekend as partisan crossfire intensified and negotiations for an immigration deal made little headway.
House Republicans do not have enough votes to avoid a government shutdown before money to keep the government functioning runs out on Friday at midnight, congressman Mark Meadows of North Carolina, leader of the Freedom Caucus, said on Fox News Wednesday.
House GOP leaders scrambled to round up the votes for a short-term spending bill, faced with opposition from defense hawks clamoring for billions more for the Pentagon. In the Senate, immigration activists pressured Democrats to oppose the bill.
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
The air has been swiftly leaking out of the virtual currency bubble. For a time on Wednesday, the price of Bitcoin dipped below $10,000 — taking it down to about half what it was at its peak last month. The falling prices have been serious enough to prompt online posts with suicide hotlines for virtual currency investors in despair.
The Lunar New Year, which marks the first day of the year in the Chinese calendar, is being cited by some as contributing to Bitcoin’s slump as Asian traders cash out their cryptocurrencies to travel and buy gifts for the holiday that starts Feb. 16 this year. The festivity is celebrated not just in China, but in other Asian countries including Singapore, Indonesia, Malaysia, Korea and Thailand.
Bitcoin dipped below $10,000 Wednesday, extending a rout that has sliced $443 million from the net worth of each brother, leaving them with $739 million apiece, at least on paper, according to the Bloomberg Billionaire Index.
Bullion dealer Sharps Pixley, a subsidiary of Europe’s largest precious metal coin and bar outlet, regularly sees trades north of a million pounds, while sales of gold coins at Frankfurt-based CoinInvest jumped fivefold as the largest digital asset collapsed after surging 1,400 percent last year, according to Director Daniel Marburger. “Yesterday was a hell of a crazy day,” he said from Frankfurt. “Emails and phones did not stand still with customers asking how they could turn their crypto into gold.”
The U.S. Treasury views virtual currencies such as Bitcoin as an “evolving threat” and is examining dealers to make sure they aren’t being used to finance illegal activities, the undersecretary for terrorism and financial intelligence said.
Regulators have warned that investors who rush to buy freshly created digital tokens could end up holding worthless tokens. The creators of a cryptocurrency launched last July pretty much promise that. “Seriously, don’t buy these tokens,” Useless Ethereum Token announces on its website. “You’re going to give some random person on the internet money, and they’re going to take it and go buy stuff with it.”
TAXATION, WEALTH HAVENS, INEQUALITY
US telecoms group Verizon on Wednesday said the biggest American tax overhaul in decades will drive a one-time reduction in net deferred income tax liabilities of about $16.8bn and boost its fourth quarter earnings. For the year ending December 31, 2017, the impact of the tax reform to Verizon’s earnings per share is estimated to be about $4.10.
US authorities are poring over hundreds of newly uncovered payments from Russian diplomatic accounts. Among them are transactions by former ambassador Sergey Kislyak 10 days after the 2016 presidential election and a blocked $150,000 cash withdrawal five days after the inauguration.
CBS News White House and senior foreign affairs correspondent Margaret Brennan reports FBI agents made a trip to Bannon’s home last week, in what became a heated exchange with the agents. It’s unclear if Bannon had an attorney on retainer at that point. The agents delivered a subpoena for Bannon. That subpoena has become a moot point now, since Bannon has agreed to speak with investigators, CBS News Katiana Krawchenko confirmed.
Federal agents have issued a subpoena to former presidential adviser Steve Bannon, who plans to fully cooperate with special counsel Robert Mueller’s investigation into Russian meddling in the 2016 election, a person close to Mr. Bannon said.
NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
For the White House, the budding détente scrambles its strategy of pressuring the North, with sanctions and threats of military action, to give up its nuclear arsenal. This latest gesture of unity, the most dramatic in a decade, could add to fears in Washington that Pyongyang is making progress on a more far-reaching agenda.
U.S. President Donald Trump complained on Wednesday that Russia was helping North Korea to evade international sanctions, signaling frustration with a country he had hoped to forge friendly relations with after his 2016 election win.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
“The fact that the fear is gone is the main reason why we should be worried,” Joachim Fels, a global economic adviser at Pimco, told Bloomberg TV on Wednesday from Newport Beach, California. “That means most investors are now pretty fully invested and that means they will want to get out if the markets start to correct — exacerbating the downdraft.”
China and Japan’s combined share of Treasuries fell to about 36 percent of all foreign-held U.S. government debt in November, the lowest level in about 18 years. China, the biggest foreign holder of U.S. bonds, notes and bills, saw its total drop 1.1 percent to $1.18 trillion from the previous month, according to Treasury Department data released Wednesday. Japan’s holdings dropped 0.9 percent to $1.08 trillion, the lowest in more than four years.
Big purchases of Treasury bonds by the United Kingdom helped offset selling out of Asia in November, according to data released by the US Treasury Department in Washington on Wednesday.
A slump in Chinese government debt may worsen, with inflation picking up as breweries, dairies and others raise prices, and energy costs climb amid a government crackdown on coal.
Chinese billionaire Wang Jianlin, faced with a quarter of his $2 billion in Dalian Wanda Commercial Properties Co.’s overseas debt coming due in March, is selling off the majority of his global hotel and development projects.
The fate of thousands of workers hung in the balance on Wednesday after the collapse of Carillion, a major construction and services company that has a vast network of subcontractors and reaches deep into many facets of British life. The demise of Carillion, which entered liquidation on Monday, poses a political as well as economic challenge to the Conservative government of Prime Minister Theresa May, which declined to bail out the company.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
Since coming back from New Year’s vacation, the US stock market has become a gong show. The mad rush into stocks has more resemblance to a cafeteria food fight than a regular functioning market. After a few decades of staring at markets, I can tell you one thing for certain – when the strategists are biting the pillow to stop themselves from screaming in joy, it’s time to think about going the other way. There can be no denying that we have hit the “just get me in stage” of this rally.
For years, the likes of Apple Inc. and Microsoft Corp. have stashed billions of dollars offshore to slash their U.S. tax bills. Now, the tax-code rewrite could throw that into reverse. The implications for the financial markets are huge. The great on-shoring could prompt multinationals — which have parked much of their overseas profits in Treasuries and U.S. investment-grade corporate debt — to lighten up on bonds and use the money to goose their stock prices. Think buybacks and dividends.
Cryptocurrencies are wildly popular in South Korea. So much so that buyers of bitcoin here pay premiums of more than 20 per cent compared with international rates. A recent survey found that more than 60 per cent of respondents “had experience investing in virtual currency.” But, unlike in neighbouring Japan – which has embraced crypto with all its quirks – South Korean officials are not down with the craze. They call it “irrational”. They liken it to gambling. They think it will get the kids involved in drug-trafficking. Seriously.
The persistent weakness of the US dollar is forcing global central bankers to step up their efforts in warning about the cost of currency appreciation on their economies. The dollar’s decline has extended into 2018, with the index measuring the currency against its leading peers touching a three-year low. The decline in the global reserve currency matters greatly for other economies that have rebounded thanks to stronger exports, such as Europe and Japan.
China bulls are confronting an uncomfortable new reality. Everyone now agrees with them. As the Year of the Dog approaches, the level of worry about China’s seemingly unsustainable growth pattern is as low as at any time since the financial crisis almost a decade ago. All this said, there is a nasty possibility that people have stopped worrying about China just in time for things to turn ugly on them.
Donald Trump ran for president as a bipartisan deal-maker. But if there’s one thing he’s proved after a year in office, he’s better at killing bipartisan deals than clinching them. Lawmakers find it difficult or impossible to negotiate when the president changes can’t seem to stick to a position for more than a few hours.
Over time, the past becomes compressed; entire years seem like single flashes of overlapping events. We’re far enough from October 2016 now for the events that led to Trump’s election to all seem like part of one blob of bizarreness. But it’s worth breaking out all of the various things that would lead an astute observer back then to come to the conclusion that it wasn’t worth the risk to publish a loosely corroborated report about a presidential candidate having an affair with a porn star shortly after the candidate’s wife had given birth.
US President Donald Trump’s recent remarks about Haiti, El Salvador, and African countries have confirmed once and for all that his administration’s immigration policy agenda is driven largely by racial animus. The last time the US took such an approach, it was applauded by none other than Adolf Hitler.
It was a life-or-death call. The Chinese government had been systematically picking off American spies in China, dismantling a network that had taken the C.I.A. years to build. A mole hunt was underway, and the former officer, Jerry Chun Shing Lee, was the prime suspect.
It’s conceivable that 10 percent of households are now millionaires. Wolff’s study doesn’t cover 2017, when stocks soared roughly 25 percent. Most gains would have been captured by the rich and upper-middle class, pushing many over the $1 million threshold, because stock ownership is concentrated at the top. The richest 10 percent of Americans own about 90 percent of the stocks.
CENTRAL BANKS & MONETARY POLICY
The Bank of Canada indicated it’s in no rush to pursue aggressive interest rate hikes, citing “important unknowns” such as the future of Nafta as it raised borrowing costs for the third time since July.
Economic activity across the U.S. expanded into 2018, with tight labor markets and modest wage and price growth, according to the Federal Reserve beige book report.
Dallas Fed President Robert Kaplan said he expects the U.S. central bank will need to raise interest rates three times this year and perhaps even more to prevent a robust economy from overheating.
A small shift is taking place in internal discussions among Bank of Japan policy makers, with a minority raising the need to eventually start discussing policy normalization, even though they agree the current stimulus program must continue unchanged for some time, according to people familiar with talks at the central bank.
USA ECONOMY DATA, CITIES AND STATES
Nearly a dozen people were indicted for trafficking heroin and fentanyl throughout New York City. The suspects are accused of distributing heroin laced with fentanyl, a deadly synthetic opioid driving fatal overdoses.
Nationwide, the numbers are small but striking. According to the Bureau of Labor Statistics, suicides at workplaces totaled 291 in 2016, the most recent year of data and the highest number since the government began tallying such events 25 years ago. U.S. suicides overall totaled nearly 45,000 in 2016, a 35% increase compared with 10 years earlier, according to the Centers for Disease Control and Prevention’s National Center for Health Statistics.
POSITIONING, INFLECTION, MARKET CALLS
The Dow Jones Industrial Average closed above 26000 for the first time on Wednesday, sprinting to a fresh 1000-point milestone just eight trading days after toppling the previous one, its fastest run ever. The most recent gains have been powered in part by a sudden hunger for stocks among certain money managers and individual investors who have long been wary of the nearly nine-year bull market.
Taxes drove much of the action. Financials were strong after Bank of America Corp. beat estimates and indicated that it could benefit from the U.S. tax overhaul by reducing pressure to cut future costs. And Apple Inc. climbed after saying that under the rules of the new tax plan it will bring hundreds of billions of dollars back to the U.S. from overseas to invest in jobs and facilities.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
Goldman Sachs posted its first quarterly loss in six years as a dismal showing by its trading unit compounded a one-time charge related to the new tax law. Reporting its fourth-quarter results Wednesday, Goldman said debt-trading revenue fell 50%—the worst three-month showing since 2008 and the latest in a nearly unbroken chain of quarterly declines in the business.
The bank’s per-share earnings and revenue were both higher compared with a year earlier without the tax charge. But the results announced on Wednesday also revealed a decline in Goldman’s trading might, which has been drained by a potent combination of placid markets and quiet clients.
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
Chavez, the bank’s chief financial officer and a former Silicon Valley startup founder, said that part of a spending push has been devoted to analyzing how traders, salespeople and support personnel work, and automating those processes.
Mr. Bain founded his own consulting company, Bain & Co., in 1973. In 1984, he founded Bain Capital, a private-equity investment firm, where he installed Mitt Romney as its top executive. Mr. Bain died Tuesday at his home in Naples, Fla. He was 80 and had been suffering from Alzheimer’s disease.
COMMODITIES PRECIOUS METALS
Gold’s breakneck rally eased this week, but tailwinds in both physical and paper markets suggest it’s got room to run. “I’m always a bit nervous when gold prices rise this much, this fast,” said Mark O’Byrne, marketing director of bullion dealer GoldCore Ltd. “But there certainly is healthy demand from China and the futures market — I think we should break highs above $1,400 later in the year.”
POLLUTION, CLIMATE & ENVIRONMENT
China’s notoriously smoggy capital is experiencing a marked reduction in air pollution after an aggressive government campaign to curb smokestack industries and shift away from coal heating. By several measures, Beijing is experiencing its best air quality in at least five winters, the season when the air is usually the most noxious from coal burning for heat.
BREXIT, SCOXIT, LONDON, UK ECONOMY
After the British Parliament asked Facebook, Twitter and other social media companies last year for information on any Russian efforts to sway the vote, Facebook said in December that it had found no evidence of manipulation. But lawmakers complained that Facebook’s internal research had been inadequate, and on Wednesday, the social media giant acknowledged that its previous investigation had focused only on the Russian-linked accounts already identified by United States intelligence agencies as having been active in the 2016 presidential election.
Mr Macron and Mrs May will strive to mask the impact of the UK’s decision to leave the EU on Anglo-French relations by announcing a flurry of joint defence, economic and cultural initiatives when they meet on Thursday.
China home prices rose in the most cities in six months even as the government prolonged its campaign to curb property speculation. New-home prices, excluding government-subsidized housing, in December rose in 57 of 70 cities tracked by the government, compared with 50 in November, the National Bureau of Statistics said on Thursday. Prices fell in 7 cities from the previous month and were unchanged in six.
A prominent Chinese entrepreneur has set off a social media firestorm and triggered an official investigation after alleging that a local government illegally appropriated land from a ski resort he was developing. Wearing a white snow suit, Mr Mao accuses local government officials in the area of targeting his resort with asset seizures and spurious police investigations while developing a rival business.
DACA, TRAVEL BAN, IMMIGRATION, WALL
In telling lawmakers that Mr. Trump had essentially erred from the start in promoting a wall and by claiming credit for dissuading him, Mr. Kelly appeared to be voicing a sentiment some in the West Wing have heard him express privately — that it is his job to tutor a sometimes ill-informed president who has never served in public office before.
GEOPOLITICS, CRIME, TERRORISM
The risk of political and economic confrontations between major powers, including outright military conflicts, has risen sharply, according to a survey released by the World Economic Forum (WEF) days before its annual gathering in Davos.
Saudi Arabia on Wednesday said it would inject $2 billion into Yemen’s central bank to stabilize the nation’s currency, as international criticism grew over the kingdom’s role in a war that has killed thousands and ravaged the economy.
Russia has offered to host direct talks between the government of Afghanistan and the Taliban as it seeks a larger role in brokering an end to a conflict that has raged for more than 16 years.
Ethiopia’s ambitious $4.2-billion hydroelectric dam project on the Nile River’s main tributary is raising tensions with Egypt over how to share the essential resource, and exposing the rivalry between Cairo and an ascendant Addis Ababa for regional power.
A U.S. plan to turn its Syrian Kurdish allies into a semi-professional border force is stoking new tensions with NATO ally Turkey, which threatened Wednesday to launch an attack on Kurdish areas of northern Syria.
The Pentagon’s first new national defence strategy in four years will adopt a more aggressive military stance against China and Russia as its top priority, according to people familiar with the document.
A wave of looting by hungry mobs across Venezuela has left streets of shuttered shops in provincial towns and pushed some store owners to arm themselves with guns and machetes, stirring fear that the turmoil could spread to the capital Caracas.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
China’s clampdown on the cyber tunnels used to burrow through its Great Firewall may do more than further restrict internet access—it also threatens to make emails and data transmissions by foreign companies more vulnerable to government surveillance, security analysts say.
PROPAGANDA, CORRUPTION, AUTHORITARIANISM
President Donald Trump tweeted out the winners of his “Fake News Awards” on Wednesday night, proclaiming, “And the FAKE NEWS winners are …”, with a link to the Republican National Committee website. There, an unsigned entry opened by saying, “2017 was a year of unrelenting bias, unfair news coverage, and even downright fake news.” Rather than specific awards, per se, the site listed 10 news stories — from a range of mainstream outlets, including CNN, The New York Times, The Washington Post — that Trump viewed as false.
“It is a testament to the condition of our democracy that our own president uses words infamously spoken by Josef Stalin to describe his enemies,” Mr Flake, who is not seeking re-election, said in a searing speech. “When a figure in power reflexively calls any press that doesn’t suit him ‘fake news’ it is that person who should be the figure of suspicion, not the press.”
“You can have huge networks of people that are totally out of control and are unseen,” said Rosental Alves, a professor of journalism at the University of Texas-Austin. Because WhatsApp is a private, closed messaging service, fake news researchers don’t have much hard data to go on. Ortellado says they’re primarily able to get information by lurking in large WhatsApp political groups or examining context clues, giving analysts “certainly a tiny fraction of what’s going on.”
“He was sitting on the bed, and he was like, ‘Come here.’ And I was like, ‘Ugh, here we go,’ and we started kissing,” she said. She also recalls Trump comparing her to his daughter. “He told me once that I was someone to be reckoned with, beautiful and smart just like his daughter,’’ Daniels said, presumably referring to Ivanka, since Tiffany was only about 13 in 2006.
Two reports this week offered more details about what they described as a sexual relationship between Donald J. Trump and Stephanie Clifford, the pornographic-film actress who was reportedly paid $130,000 in hush money shortly before the 2016 election.
Cardiologists not associated with the White House said Wednesday that President Trump’s physical exam revealed serious heart concerns, including very high levels of so-called bad cholesterol, which raises the risk that Mr. Trump could have a heart attack while in office.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
U.S. President Donald Trump said on Wednesday he would announce a decision soon on whether to slap tariffs on imported solar panels, and quipped that when countries dump subsidized panels in the United States, “Everybody goes out of business.”
Two domestic uranium producers are asking Donald Trump to crack down on imports from Russia and central Asia in the name of US national security, arguing the country has lost its ability to meet the needs of its nuclear weapons stockpile, naval vessels and power plants.
President Donald Trump said on Wednesday the United States was considering a big “fine” as part of a probe into China’s alleged theft of intellectual property, the clearest indication yet that his administration will take retaliatory trade action against China.
After a series of Chinese acquisitions of US assets were torpedoed by the US government in 2017 over national security concerns, Washington cleared its first Beijing-backed takeover of an American company since Donald Trump became president a year ago.
In raising its key rate by a quarter percentage point to 1.25 per cent on Wednesday, the Bank of Canada highlighted not just the strength of the global economy but the prospect of its southern neighbour gaining momentum from Donald Trump’s tax cuts. However, investors and traders paid more attention to a warning about the future of the North American Free Trade Agreement (Nafta), the free trade deal between the US, Mexico and Canada that Mr Trump has vowed to renegotiate.
The Trump administration will create a new conscience and religious freedom division within the Health and Human Services Department to ease the way for doctors, nurses and other medical professionals to opt out of providing services that violate their moral or religious beliefs. Specific details are scheduled to be announced Thursday. But the new policy appears to be broad and aimed at protecting health-care workers who cite those reasons for refusing to take part in abortions, treat transgender patients or participate in other types of care.
Gov. Scott Walker called the results a “wake-up call for Republicans in Wisconsin.” But the alarm has been sounding for the past year — long before a state Senate special election delivered a solidly Republican seat to Wisconsin Democrats on Tuesday.
The next presidential election is nearly three years away, but in the Capitol the race is already unfolding, with no fewer than six senators — Mr. Booker and Ms. Harris, Elizabeth Warren of Massachusetts, Bernie Sanders of Vermont, Kirsten E. Gillibrand of New York and Amy Klobuchar of Minnesota — eyeing the Democratic nomination in 2020, with each angling to get to the left of the others.
SCANDALS, LAWSUITS, FINES, REGULATORY
A former personal assistant to Goldman Sachs Group Inc. Co-President David Solomon faces federal charges that he stole more than $1.2 million of rare wine from his boss. The theft included seven bottles from the French estate Domaine de la Romanee-Conti, a Burgundy widely considered “among the best, most expensive and rarest wines in the world,” according to the indictment. In all, De-Meyer stole hundreds of bottles, prosecutors said.
AUTOS, ELECTRIC, SELF-DRIVING
It is no surprise that share prices of both lithium and cobalt producers have rocketed. Even as demand builds, supply too is surging. Although Argentina and Chile used to make a large proportion of lithium carbonate, that balance will shift. Australia’s contribution is increasing so rapidly that an excess supply of lithium carbonate is likely for the next couple years at least. “It’s our top short idea,” says Vivienne Lloyd at Macquarie.
China’s top nickel supplier aims to boost output of a material used in car batteries by 40 percent this year, joining the ranks of global producers ramping up operations to meet demand from electric vehicles.
Ford Motor Co., the 114-year-old automaker that put the world on wheels, is turning away from its original mission of selling sedans to the masses. The company responsible for launching the modern carmaking era with Henry Ford’s assembly line will pivot away from being a full-line automaker, shrinking its passenger-car lineup and shifting only to low-volume, high-margin models.
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