Macro Links Jan 4th – “Dumb as a Brick”
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- GLOBAL SECURITY FLAW
- TRUMP TURNS ON BANNON
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- FOREX, CARRY TRADES, EXCHANGE RATES
- RUSSIA PROBE
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY DATA
- POSITIONING, INFLECTION, MARKET CALLS
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- ENERGY COMPANIES, NOCs, INDUSTRY
- ENERGY CRUDE OIL, OIL SANDS, SHALE
- ENERGY NATURAL GAS, COAL
- COMMODITIES BASE METALS, MATERIALS
- COMMODITIES AGRICULTURE & SOFTS
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- PROPAGANDA, CORRUPTION, AUTHORITARIANISM
- TRUMP WORLD
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- AUTOS, ELECTRIC, SELF-DRIVING
- AEROSPACE, MILITARY & DEFENSE
- SCIENCE, NATURE, PSYCHOLOGY
GLOBAL SECURITY FLAW
Security researchers on Wednesday disclosed a set of security flaws that they said could let hackers steal sensitive information from nearly every modern computing device containing chips from Intel Corp, Advanced Micro Devices Inc and ARM Holdings.
One of the bugs is specific to Intel but another affects laptops, desktop computers, smartphones, tablets and internet servers alike. Intel and ARM insisted that the issue was not a design flaw, but it will require users to download a patch and update their operating system to fix.
Computer security experts have discovered two major security flaws in the microprocessors inside nearly all of the world’s computers.
The two problems, called Meltdown and Spectre, could allow hackers to steal the entire memory contents of computers, including mobile devices, personal computers and servers running in so-called cloud computer networks.
There is no easy fix for Spectre, which could require redesigning the processors, according to researchers. As for Meltdown, the software patch needed to fix the issue could slow down computers by as much as 30 percent — an ugly situation for people used to fast downloads from their favorite online services.
Technology companies are racing to plug an industry-wide security hole that stems from a common flaw in chip designs and could expose almost all computer users to the theft of at least some sensitive data.
The problem, described as unprecedented by experts, affects one of the most fundamental architectural elements of all computing systems, making it far more pervasive than the software flaws that are the usual source of computer security failures.
TRUMP TURNS ON BANNON
The dramatic collapse on Wednesday of the shaky alliance between President Donald Trump and his former chief strategist, Steve Bannon, marked perhaps the most vicious falling out between a president and a former aide in modern history.
But the fireworks capped months of tension between the two, who have repeatedly taken veiled shots at each other through the news media but never attacked each other on the national stage.
“Steve Bannon has nothing to do with me or my presidency,” President Trump said in a statement. “When he was fired, he not only lost his job, he lost his mind.”
Lawyers on behalf of President Donald Trump sent a letter Wednesday night to former White House Chief Strategist Stephen Bannon demanding he refrain from making disparaging comments against the president and his family.
President Donald Trump publicly repudiated Steve Bannon, his former senior strategist and onetime campaign chief, after a new book surfaced in which Mr. Bannon made scathing and highly personal criticisms of some of the president’s top advisers, including several family members.
The publication Wednesday of salacious excerpts from a new book on the Trump presidency re-opened a major fissure between the president and his former campaign CEO and chief strategist Steve Bannon.
Michael Wolff’s Fire and Fury appeared, on the surface, to turn Bannon from a pariah to a full-on leper within the Republican Party. After it was reported that Bannon had called the meeting of Trump campaign officials—including Trump’s eldest son—and Russian operatives as “treasonous,” Trump followed suit by saying his one-time consiglieri had lost his mind. Don Jr., former communications director Anthony Scaramucci, and the political operation run by Senate Majority Leader Mitch McConnell (R-KY) all took turns gleefully dancing on the Breitbart chairman’s possible political grave.
Former White House strategist Steve Bannon once called President Donald Trump’s daughter and White House adviser Ivanka Trump “dumb as a brick”, according to the latest excerpt from a book that claims to provide a near-inside view of the tumult within the West Wing during the first year of Mr Trump’s presidency.
Bannon’s comments won’t surprise anyone who’s spoken to him, but as on the record statements they are shocking sources close to the president. The White House was prepared for the Wolff book to be bad for them — and sources there have told me he spent a ton of time in the building visiting with Bannon — but they weren’t prepared for Bannon doing this.
In round one of Trump vs. Bannon on conservative media, the president is pummeling his former advisor.
From Fox News to the Drudge Report, all the way down the spectrum to far-right conspiracy sites like The Gateway Pundit and InfoWars, headlines Wednesday afternoon painted former presidential adviser Steve Bannon as unstable and self-interested, and President Donald Trump as a forceful defender of his family and administration.
Bannon, Wolff reports, has already assembled a “rump campaign operation” for 2020 and is telling people that Trump’s top 2016 backers—specifically Sheldon Adelson, Bob and Rebekah Mercer, Bernie Marcus and Peter Thiel—are now in Bannon’s corner as he travels the country meeting conservative leaders, to “kiss the ass and pay homage to all the gray-beards” as he sets the stage for “when I am president.”
Former White House Chief Strategist Stephen Bannon has reportedly lost the support of billionaire backer Rebekah Mercer after he suggested he might run for president himself.
A person close to Mercer told The Washington Post that she no longer supports Bannon. According to the report, Mercer was frustrated with Bannon’s strategy in the Alabama Senate Race, and pulled her funding after he told other major conservative donors that Mercer would back Bannon in his own presidential bid.
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
Merrill Lynch has blocked clients and financial advisers who trade on their behalf from buying bitcoin, citing concerns over the cryptocurrency’s investment suitability.
The ban applies to all accounts and precludes the firm’s roughly 17,000 advisers not only from pitching bitcoin-related investments but also from executing client requests to trade the Grayscale Investment Trust bitcoin fund, according to a person familiar with the matter. The ban extends an existing policy barring access to newly launched bitcoin futures.
“The decision to close GBTC to new purchases is driven by concerns pertaining to suitability and eligibility standards of this product,” according to an internal memo reviewed by The Wall Street Journal, referring to the Grayscale’s fund’s trading symbol.
Mr Hutchins, the co-founder of Silver Lake Partners, a big technology-focused private equity group, is far more excited by the broader cryptocurrency ecosystem than he is by the bitcoin price smashing records.
Indeed, while Mr Hutchins has sprinkled about $5m from his family office North Island on a series of early-stage investments in companies operating in the cryptocurrency world — and is looking to invest more in the embryonic industry — he says he has yet to buy a single bitcoin himself.
“I just really think [people are] missing the point . . . They should be talking about the companies,” he says in an interview with the Financial Times. “Bitcoin could turn out to be the winner; it also could turn out to be Betamax.”
Bitcoin alternatives are closing the gap with the market leader after names like stellar and cardano became red hot as 2017 was closing. The biggest cryptocurrency’s share of market value has fallen to a record 36 percent from 56 percent a month ago, according to CoinMarketCap prices for coins and tokens. Stellar, designed for cross-border payments, has more than doubled in the first trading days of this year, achieving a record market cap of more than $13 billion.
That kind of move raises questions as to whether speculators will drive up second-tier digital coins at the expense of bitcoin, even though they have different purposes. The paper value of all cryptocurrencies combined has more than doubled to almost $700 billion in the past month.
The report also asserts that the market for cryptocurrency mining is here to stay, arguing that there currently exists an at least $4.2 billion market for bitcoin mining equipment with an additional $350-$450 million for other ASIC-mined cryptocurrencies like bitcoin cash and another $1.9 billion market for GPU-mined coins like ethereum and monero.
Notably, the report argues that decentralized technology in its current state is misunderstood and underrated, claiming that cryptocurrencies are becoming better able to handle an increasing number of transactions. In particular, Steves sees the Lightning Network as a tool to enable more than a million transactions per second on bitcoin.
Still, scalability, along with government intervention and the creation of more sophisticated wallet hacking techniques, was identified as one of the key risks facing the ecosystem.
The People’s Bank of China outlined the plan Wednesday at a closed-door meeting, according to the people, who asked not to be identified because it wasn’t public. They didn’t detail how authorities plan to enact the curbs.
Chinese officials are concerned that bitcoin miners have taken advantage of low power prices in some areas and affected normal electricity use in some cases, the people said. Local officials have been asked to investigate the high consumption associated with the industry, they said. The curbs will also involve other regulators such as the National Development and Reform Commission, which oversees the power supply.
FOREX, CARRY TRADES, EXCHANGE RATES
An early Brexit transition deal and positive economic data surprises could boost sterling’s fortunes and even drive a Bank of England interest-rate hike in the first half of the year, according to Viraj Patel, a foreign-exchange strategist at ING Groep NV, which sees the currency gaining to $1.53 by year-end. The Dutch bank isn’t the only positive one on the pound, which tops the buy list of Bank of America Merrill Lynch and Nomura International Plc.
“Even if you thought that this was not treasonous, or unpatriotic, or bad sh*t, and I happen to think it’s all of that, you should have called the FBI immediately,” Mr Bannon is quoted as saying.
According to the account, Mr Bannon also said he expected Mr Mueller to focus on money-laundering allegations as a way to target people close to Mr Trump and to create a path towards the president.
“Their path to f***ing Trump goes right through [former Trump campaign manager] Paul Manafort, Don Jr and [Mr Trump’s son-in-law] Jared Kushner,” Mr Wolff reportedly quotes Mr Bannon as saying. “It goes through Deutsche Bank and all the Kushner sh*t . . . They’re going to roll those two guys up and say play me or trade me.”
Former White House chief strategist Stephen Bannon said there was “zero” chance that President Trump was not aware of a controversial 2016 meeting at Trump Tower between one of his sons and a Russian lawyer, according to a new book.
According to MSNBC, which tweeted an excerpt from Michael Wolff’s upcoming book, “Fire and Fury: Inside the Trump White House,” Bannon said that it was likely Donald Trump Jr. took lawyer Natalia Veselnitskaya and others up to his father’s office during the meeting.
“The chance that Don. Jr did not walk these Jumos up to his father’s office on the 26th floor is zero,” the excerpt reads.
Rosenstein was spotted entering Ryan’s office, and a spokesman for the speaker confirmed that Rosenstein and Wray had requested the meeting. A second person familiar with the meeting said it was related to a document request issued over the summer by House intelligence committee chairman Devin Nunes.
Nunes (R-Calif) has mounted an aggressive push — with the threat of contempt citations for members of the FBI and Justice Department — to glean more information about how the FBI handled a disputed dossier alleging illicit ties between President Donald Trump and the Kremlin.
It was not immediately clear what Rosenstein and Wray sought from Ryan. But they’ve been increasingly at odds with Nunes over his demands to produce documents related to the Russia probe and the use of the dossier. Nunes is also leading a subset of GOP members of the intelligence committee to investigate the Justice Department, with an eye on what some Republicans in Congress have characterized as corruption and political in its top ranks.
The case faces an uphill climb because Mr. Rosenstein has said publicly that he has specifically approved every significant step that Mr. Mueller has taken in the investigation.
But Mr. Manafort’s strategy is a clever legal maneuver that attempts to force prosecutors to reveal details about the scope of the investigation. By filing a separate lawsuit, Mr. Manafort’s lawyer, Kevin Downing, also creates the possibility of a protracted fight over Mr. Mueller’s authority.
“If the ultimate objective is to continue to try to undermine the credibility of Mueller and his prosecutors, it could have some value,” said Jimmy Gurulé, a Notre Dame law professor who was a senior Justice Department official in the administration of the first President George Bush. “But in terms of a legal strategy, it’s highly unlikely to prevail.”
Democratic Rep. Joaquin Castro (Texas) said Wednesday that he has heard evidence that Trump administration members committed crimes during the 2016 presidential election.
Castro, a member of the House Intelligence Committee, responded to a question from MSNBC’s Joy Reid on whether he believed the information he had seen so far in the committee’s investigation of Russian election interference was evidence of a crime. She specifically referenced hearings the committee had with Fusion GPS, the company behind a salacious dossier with information on President Trump.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
Worldwide data have recently made clear that producer-price increases have picked up steam. That’s led bond buyers to begin wagering that consumer inflation could be soon to follow, with U.S. breakeven rates above 2 percent in many tenors for the first time since March.
The shift represents a sea change for investors who have grown complacent about the threat of rising prices over the past few years, when inflation was subdued by modest economic growth rates, suppressed wages and shifts in technology and demographics. While few are betting on runaway increases anytime soon, even a modest uptick in prices could have an outsize impact on sentiment and change the prevailing narrative.
Ian Harnett, chief economist of Absolute Strategy Research, reckons that the more immediate risk lies in the eurozone, which has already been growing above its long-term trend rate for five years. “Even with an 8.8% unemployment rate, the eurozone is hitting capacity constraints across a wide range of metrics,” he says. “This is a story that is not just limited to Germany, nor to the manufacturing sector. It is much more broad-based than that.”
Mr. Harnett believes that the eurozone may have already closed its output gap—a measure of spare capacity—which has historically led to wage-induced inflation. Core inflation is already picking up across 80% of eurozone economies.
Emboldened by the passage of a landmark tax law, Republicans and the White House are demanding a bump in military spending and funding for President Trump’s promised wall on the Mexican border. Democrats — empowered because the GOP needs them to pass any spending bill — want protections for undocumented immigrants brought to the United States as children and to keep funding in place for social programs.
Unlike the tax law, which was designed to pass with a simple majority, the spending bill requires 60 votes in the Senate, meaning the GOP would need at least nine Democrats. But after a year of partisan acrimony and a tax bill that did not garner a single Democratic vote, negotiators on both sides face challenges to reach a bipartisan accord.
HNA Group Co. has fallen behind in repaying loans it obtained from employees and individual investors on an internet-lending platform, another sign that the Chinese conglomerate is having difficulty meeting some of its debt obligations.
A unit of HNA told employees in an email Tuesday that payments on investment products they previously purchased would be delayed, according to a person familiar with the matter.
UK banks and businesses are tapping debt markets at the fastest rate for eight years, and bankers expect the rush to continue this quarter.
The boom saw November become the busiest month in the UK since October 2009, with net new issuance of bonds and commercial paper of £17.5bn, according to the latest Bank of England figures. That was slightly offset by a £740m net contraction in equity raising.
The US car industry is predicting a second year of contraction in 2018, on the heels of a 2017 that finished with the first annual sales decline since the financial crisis.
Tax cuts and the strong stock market may help buoy sales in 2018 but the prospect of Federal Reserve interest rate rises could still depress 2018 US new vehicle sales to levels below 2017’s level, estimated to be in the 17m region, carmakers and analysts said when announcing monthly results for December last year.
Payment via mobile-phone services such as WeChat is sweeping the country. After gaining a beachhead as a means to buy things online, mobile payments moved on to store purchases and are fast becoming the way many people in China pay for just about everything.
That includes small personal debts. Richard Lau, a young management consultant waiting to get into the historic St. Michael’s Cathedral in Qingdao one recent day, found he had no cash for the 20-yuan admission, so he borrowed it from another man in line and immediately zapped him the amount by phone.
Behind the trend are internet titans Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which are elbowing aside banks to take a growing role in daily commerce. Their success offers a glimpse of a future where technology firms drive innovations in finance just as they have in retailing, autos and the media.
Fierce competition to underwrite debt offerings in Asia’s booming U.S.-dollar bond market is forcing some big global banks to work on deals for next to nothing.
Barclays PLC and Standard Chartered STAN +1.59% PLC were among seven banks that recently helped sell a total of $1.3 billion in dollar-denominated bonds from three state-owned Indian companies, effectively providing their services free of charge. The three Indian companies paid a dollar in underwriting fees to each bank that handled the sales, according to company representatives and people familiar with the matter.
A similar trend is emerging among banks underwriting some Chinese bond offerings, bankers say, particularly in the case of state-owned corporations that have large pools of underwriters to choose from and tend to be stingier with fees.
Banks that agree to arrange bond offerings for ultralow fees are generally hoping to build relationships with corporate clients for future deals. They are also hoping to generate revenue from related businesses, such as fees for setting up foreign-currency swaps or on bond-trading commissions.
Venezuela’s bonds have lost about three-quarters of their value, reflecting a dozen missed payments by the government and the state-owned oil company. But many of their bondholders are still feeling flush.
A number of investors have made their money back and more, thanks to coupon payments topping 13% and large principal payments that typically begin three years before a bond matures.
“This has been extremely lucrative for the people who’ve had the daring to participate in the market,” said Gregan Anderson, a macroeconomic strategist at Bulltick. “They’ve been able to scoop up these bonds at rock-bottom prices and reap huge rewards as the government cut back on virtually every other kind of expense to make those payments.”
India’s sovereign bond market is seeing its wildest swings in a year. Volatility in the 10-year debt has doubled in the past six trading sessions, with investors caught between the attraction of Asia’s second-highest yields and the fear spurred by accelerating inflation and an expanding supply of bonds. The yield on the benchmark traded with a 10 basis-point swing on Wednesday before closing at 7.32 percent.
Berlin’s campaign for fiscal discipline passed a small but symbolic milestone this week: for the first time in more than two decades, Germany’s closely watched “debt clock” is running backwards.
The clock, which despite its name is more of a counter, was reprogrammed on January 1 to take account of new federal and state level budget plans. It is now ticking down at a rate of €78 per second, the first time it has shown the nation’s overall public debt in decline. In 2009, in the wake of the financial crisis, it showed Germany’s debt increasing at a rate of more than €4,400 a second.
Germany’s booming economy means the next government is likely to enjoy a budget surplus of about €30bn over the next four years — prompting political debate over whether the money should be spent on an increase in public investment or tax cuts.
The reversal is reflected on the debt clock only now because its calculations are based on official budget legislation rather than on actual spending and borrowing decisions made by federal and regional finance ministers.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
Lawmakers concerned about President Donald Trump’s mental state summoned Yale University psychiatry professor Dr. Bandy X. Lee to Capitol Hill last month for two days of briefings about his recent behavior.
In private meetings with more than a dozen members of Congress held on Dec. 5 and 6, Lee briefed lawmakers — all Democrats except for one Republican senator, whom Lee declined to identify. Her professional warning to Capitol Hill: “He’s going to unravel, and we are seeing the signs.”
In an interview, she pointed to Trump “going back to conspiracy theories, denying things he has admitted before, his being drawn to violent videos.” Lee also warned, “We feel that the rush of tweeting is an indication of his falling apart under stress. Trump is going to get worse and will become uncontainable with the pressures of the presidency.”
Wolff also writes at length about former Goldman Sachs executive Gary Cohn, who leads the president’s National Economic Council. Cohn has privately disagreed with Trump a number of times in the past year. But an April email that, Wolff writes, circulated around the White House “purporting to represent the views of Gary Cohn” takes this to a new level:
“It’s worse than you can imagine. An idiot surrounded by clowns. Trump won’t read anything – not one-page memos, not the brief policy papers; nothing. He gets up halfway through meetings with world leaders because he is bored. And his staff is no better. Kushner is an entitled baby who knows nothing. Bannon is an arrogant prick who thinks he’s smarter than he is. Trump is less a person than a collection of terrible traits. No one will survive the first year but his family. I hate the work, but feel I need to stay because I’m the only person there with a clue what he’s doing. The reason so few jobs have been filled is that they only accept people who pass ridiculous purity tests, even for midlevel policy-making jobs where the people will never see the light of day. I am in a constant state of shock and horror.”
Most presidential candidates spend their entire careers, if not their lives from adolescence, preparing for the role. They rise up the ladder of elected offices, perfect a public face, and prepare themselves to win and to govern. The Trump calculation, quite a conscious one, was different. The candidate and his top lieutenants believed they could get all the benefits of almost becoming president without having to change their behavior or their worldview one whit. Almost everybody on the Trump team, in fact, came with the kind of messy conflicts bound to bite a president once he was in office. Michael Flynn, the retired general who served as Trump’s opening act at campaign rallies, had been told by his friends that it had not been a good idea to take $45,000 from the Russians for a speech. “Well, it would only be a problem if we won,” Flynn assured them.
Not only did Trump disregard the potential conflicts of his own business deals and real-estate holdings, he audaciously refused to release his tax returns. Why should he? Once he lost, Trump would be both insanely famous and a martyr to Crooked Hillary. His daughter Ivanka and son-in-law Jared would be international celebrities. Steve Bannon would become the de facto head of the tea-party movement. Kellyanne Conway would be a cable-news star. Melania Trump, who had been assured by her husband that he wouldn’t become president, could return to inconspicuously lunching. Losing would work out for everybody. Losing was winning.
Shortly after 8 p.m. on Election Night, when the unexpected trend — Trump might actually win — seemed confirmed, Don Jr. told a friend that his father, or DJT, as he calls him, looked as if he had seen a ghost. Melania was in tears — and not of joy.
From the moment of victory, the Trump administration became a looking-glass presidency: Every inverse assumption about how to assemble and run a White House was enacted and compounded, many times over. The decisions that Trump and his top advisers made in those first few months — from the slapdash transition to the disarray in the West Wing — set the stage for the chaos and dysfunction that have persisted throughout his first year in office. This was a real-life version of Mel Brooks’s The Producers, where the mistaken outcome trusted by everyone in Trump’s inner circle — that they would lose the election — wound up exposing them for who they really were.
There is no wizard behind the curtain — just an old, angry, obnoxiously ignorant man. Seeking hidden plots misses the point. There is no real distinction between the onstage and offstage Trump. He is not acting. The Donald Trump who publicly ranted during campaign rallies about Mexican immigrants and refugees is the same one who, as president, privately ranted on phone calls to the Mexican president and the Australian prime minister about those issues. Even when his staff briefly succeed in getting him to stay on message, he soon flaunts his independence by going “off-script” to reveal that his good behavior was a charade.
He has no ideology besides a half-glimpsed vision of national “greatness.” He has no grand strategy, just a profound need to demonstrate that he is a winner, a dealmaker and an influence wielder. And having suffered few consequences of importance to him for his behavior so far in his short political career, he recognizes few limits to his whims. He will ignore his critics and follow the applause he receives for his reckless behavior as far as he can.
The search for meaning in Trumpism reflects the desire of both his supporters and opponents for Trump to be what he is not: profound, larger-than-life, grandiose. The self-evident pettiness of Donald J. Trump defies those aesthetic sensibilities. Recognizing that there is no greater meaning in the man himself may help us address his challenge. Reflecting on how such a small man ever came to occupy such an office may inspire us to prevent a repeat performance.
Economists and virtual currency experts have given Venezuela’s Petro and the crypto ruble from Russia low probabilities of working in the way the governments seem to anticipate. That’s because Bitcoin and other virtual currencies are decentralized systems with no one in charge, while the Russian and Venezuelan plans would give the leaders of both countries a measure of control over the new currencies.
That runs counter to some of the most basic concepts of virtual currency.
All Bitcoin transactions are recorded on a ledger known as the blockchain, which is maintained by many independent computers. The system was designed that way explicitly to avoid central banks and large financial institutions. Just as email allowed messages to move around without going through a central postal service, the computer network maintaining Bitcoin records allows money to move around without going through any central authority.
That would provide a good way to get around sanctions, which are usually enforced through regulatory and banking disclosure rules.
But some central bankers have said that issuing their own currencies on some sort of blockchain could make it easier for citizens to use the money without going through intermediaries like banks and credit card companies. It could also make the records more resistant to tampering and hacking.
The global energy system is on the cusp of a revolution and investors in the sector risk sleepwalking into a period of momentous change. Most agree that future energy markets are going to look very different from how they look today but there is a real risk that the transition happens faster than many expect — with significant consequences for investors who fail to prepare now.
Energy really matters to investors. The industry has nearly $10tn of invested capital and just two large energy companies providing approximately 20p in every £1 of dividend income from the FTSE 100. We are in the early phases of a transition to a low-carbon future. This marks the third “transition” that energy systems have gone through since the start of the industrial revolution. The first was the rise of coal and the second the rise of oil — this time, it is the rise of renewables.
These transitions historically have had far-reaching and dramatic implications that were underestimated at the time. Some commentators are basing their expectations for the pace of this transition on that of previous energy transitions. However, prior transitions were driven primarily by economics: coal replaced biomass because new technology enabled it to become a fundamentally better energy source — the pace of change was driven by economic merit.
This transition may well be different. Change is not being driven by technology (although it is enabled by it) but by social imperative and government policy. The public is no longer accepting ever-worsening pollution and the unrelenting rise of carbon emissions with the terrible consequences that would result. The pace of change may therefore be a lot faster than historic precedent would suggest.
Son has one vision, outlined in countless interviews: the singularity, a moment when robots with IQs above 10,000 will outnumber humans. This will happen in the next 30 years, he predicts. He is assembling multiple $100 billion investment vehicles to capitalize on this moment through massive tech investments in the companies at the vanguard of his vision. Son launched the first — the Vision Fund — a month after SoftBank’s acquisition of Arm.
At $97 billion, the current Vision Fund is the largest corporate venture capital fund in history.
SoftBank itself has contributed $25 billion. It’s not the fund’s largest investor, but Son’s company is the largest owner. Saudi Arabia’s $45 billion stake includes $17 billion in equity, against which it has borrowed $28 billion. The debt is in the form of preferred units, which received an annual coupon of 7 percent across the fund’s 12-year cycle, with other investment returns apportioned against only the equity. The money comes from the Saudi Arabia Public Investment Fund, which has its own 2030 “vision realization program” and targets returns of between 4 and 5 percent.
Other backers include Apple, Qualcomm, and Sharp, convinced by Son’s reputation as a resolute deal maker and by SoftBank’s returns. Son must deploy $20 billion, or a fifth of the fund, every year for the next five years to meet investors’ terms and their expectations in a market that many already consider overvalued. The Vision Fund’s early investments — cash injections of more than $100 million into a seemingly random range of companies, from co-working-cum-real-estate-company WeWork to Internet satellite company OneWEB to sports retailer Fanatics — have made some wonder if it’s dumb money. Son has already been branded “a one-man bubble maker.”
But there is a method to the Vision Fund’s billion-dollar rainmaking. And it began with Arm.
Son’s idiosyncratic deal-making has confounded admirers and detractors for years. And the latest frenzy has been no exception. In deal after deal, according to people involved, Son pressed to meet founders face to face, encouraged them to take more money than they wanted and wielded his outsized checkbook as a weapon. Along the way, he rattled rivals with his growing influence and changed the game of startup investing — for better or worse.
“There really isn’t a precedent for this,” says Steven Kaplan, a professor at University of Chicago’s Booth School of Business who co-founded its entrepreneurship program. “The jury is still out on whether it will work.”
While some question the wisdom of giving entrepreneurs more cash than they’re looking for, there’s another way to look at Son’s 2017 Blitzkrieg. He’s gotten SoftBank big stakes in more than a dozen of the most prominent startups in the world, including the two most valuable (Uber and Didi). In the process, he’s shown he can help entrepreneurs chase ambitious, expensive dreams with a single check. “For all of the founders I work with, he is now the first name on their list,” says Mark Tluszcz, who co-founded the venture firm Mangrove Capital Partners.
Chris Lane, an analyst with Sanford Bernstein, says about eight in 10 of the investors he talks with are skeptical of Son. They see him as a solid telecom operator who is taking enormous risks with his investments and has demonstrated no special skill in technology investment. Lane sees clear evidence of that disbelief: SoftBank’s stock in Alibaba and other assets are worth more than 19 trillion yen after subtracting all its debt, but SoftBank’s market cap is only 9.8 trillion yen. It’s like your neighbor having a suitcase stuffed with $1 million in cash, but you’ll only pay him $500,000 for it because you think he’ll lose the rest on the way to your house. Critics not only don’t believe Son can pick the next Alibaba; they’re convinced he’s going to squander what he already has.
“If you think of this as a telco making unrelated investments and likely to lose money, then maybe the discount is right,” Lane says. “If you think this is a sophisticated technology investment firm with a strong track record, then this is an unbelievable opportunity.”
Higher asset values are neither permanent nor sustainable. Unfortunately, once asset prices become the focus and instrument of policy, they also can’t be allowed to freely adjust to their true level, because that might threaten the too-big-to-fail banking system, insurers, and pension funds.
Stable instability also distorts capital allocation. Low interest rates allow zombie companies to survive, delaying bankruptcy and preventing capital from being redeployed. Fundamental principles of value — future cash flows, price volatility and inter-asset correlations — are subverted, encouraging the mispricing of risk and distorting investment economics. In functioning markets, investors sell overvalued assets and buy undervalued ones. This strategy fails when interference with the market mechanism means that all assets become artificially overvalued. Investments become premised on momentum — that is, on what other buyers, especially state institutions, are doing.
Direct central bank purchases are especially distortionary. With increasing restrictions on its ability to purchase government bonds, the Bank of Japan has been forced to buy equities. It now owns about 75 percent of all listed Japanese exchange-traded funds and is a top 10 percent shareholder in 90 percent of Japan’s listed equities. The Swiss National Bank has become a major shareholder in many U.S. companies as it invests the proceeds of its currency interventions. These purchases are based purely on artificial formulas (usually index weights) to avoid favoring individual securities, meaning that they largely ignore the fundamentals of risk and valuation.
Stable instability also concentrates power in the hands of unelected central bankers and policy makers, with indifferent records in economic and financial management. Authority is wielded without transparency, with limited oversight and without regard to wider social mandates, thus reducing trust in economic institutions.
For years, China’s leaders predicted that a time would come—perhaps midway through this century—when it could project its own values abroad. In the age of “America First,” that time has come far sooner than expected.
For decades, China avoided directly challenging America’s primacy in the global order, instead pursuing a strategy that Deng, in 1990, called “hide your strength and bide your time.” But Xi, in his speech to the Party Congress, declared the dawn of “a new era,” one in which China moves “closer to center stage.” He presented China as “a new option for other countries,” calling this alternative to Western democracy the zhongguo fang’an, the “Chinese solution.”
In concrete terms, why does it matter if America retreats and China advances? One realm in which the effects are visible is technology, where Chinese and American companies are competing not simply for profits but also to shape the rules concerning privacy, fairness, and censorship. China bars eleven of the world’s twenty-five most popular Web sites—including Google, YouTube, Facebook, and Wikipedia—because it fears they will dominate local competitors or amplify dissent. The Chinese government has promoted that approach under a doctrine that it calls “cyber-sovereignty.” In December, China hosted an Internet conference that attracted American C.E.O.s such as Tim Cook, of Apple, even though China has forced Apple to remove apps that allow users to circumvent the “Great Firewall.”
China’s effort to extend its reach has been so rapid that it is fuelling a backlash. Australian media have uncovered efforts by China’s Communist Party to influence Australia’s government. In December, Sam Dastyari, a member of the Australian Senate, resigned after revelations that he warned one of his donors, a businessman tied to China’s foreign-influence efforts, that his phone was likely tapped by intelligence agencies. Australia’s Prime Minister, Malcolm Turnbull, announced a ban on foreign political donations, citing “disturbing reports about Chinese influence.”
Across Asia, there is wariness of China’s intentions. Under the Belt and Road Initiative, it has loaned so much money to its neighbors that critics liken the debt to a form of imperialism. When Sri Lanka couldn’t repay loans on a deepwater port, China took majority ownership of the project, stirring protests about interference in Sri Lanka’s sovereignty. China also has a reputation for taking punitive economic action when a smaller country offends its politics. After the Nobel Prize was awarded to the dissident Liu Xiaobo, China stopped trade talks with Norway for nearly seven years; during a territorial dispute with the Philippines, China cut off banana imports; in a dispute with South Korea, it restricted tourism and closed Korean discount stores.
In Beijing’s political circles, some strategists worry that their leaders risk moving too fast to fill the void created by America’s withdrawal from its global role. I dropped by to see one of the city’s wisest observers of America, Jia Qingguo, the dean of the Department of Diplomacy at Peking University. “The U.S. is not losing leadership. You’re giving it up. You’re not even selling it,” he said. “It seems Donald Trump’s view is: if China can take a free ride, why can’t we? But the problem is that the U.S. is too big. If you ride for free, then the bus will collapse. Maybe the best solution is for China to help the U.S. drive the bus. The worse scenario is that China drives the bus when it’s not ready. It’s too costly and it doesn’t have enough experience.” Jia, who has a wry smile and a thick head of graying hair, said that universities have not had enough time to train scholars in areas that China is now expected to navigate: “In the past, the outside world was very far away. Now it’s very close. But the change happened too fast to digest.”
The new Chinese charm offensive is a carefully calculated response to growing doubts in the region about the reliability of the US, as Beijing seeks to alter the balance of power in east Asia.
Along with Taiwan, which enjoys de facto independence but is regarded by China’s ruling Communist party as a province it will one day reclaim, the Philippine and Japanese archipelagos are critical pieces in a US-aligned “first island chain” that Beijing strategists believe has long been used to contain the Chinese military’s ability to project power in the western Pacific.
“There is a sense in Asia that Trump’s election may portend a dramatic power shift,” says Jake Sullivan, the Democratic former foreign policy adviser to Hillary Clinton and Joe Biden.
The softer approach represents a sharp change in tack for Mr Xi. After nearly a decade of increasingly abrasive treatment of its neighbours, especially over territorial disputes in the South China Sea and East China Sea, the new tactics place much more emphasis on diplomacy and economic inducements.
For the first time since Mao Zedong, China has a living personality cult. US-China relations are now in the hands of two gargantuan egos.
That is bad news for 2018. Added to this are two bigger clouds. For the first time since the cold war, the US has an explicit competitor. Mr Xi’s China has set itself the target of becoming the world’s top dog within a generation. Unlike the Soviet Union, China can sustain technological rivalry with the US. America’s dominance in the Asia Pacific is no longer a given. Mr Xi’s aim is to achieve military parity. Second, America’s president thinks in hourly increments. China’s leader plans in decades. The battle between these two egos is one-sided. Mr Xi holds a telescope. Mr Trump stares at the mirror.
The scope for misunderstanding is growing. Too much attention has been paid to the spectre of a nuclear conflict between the US and North Korea — too little to the looming fallout in US-China relations. That is in spite of Mr Trump’s latest tweet boasting that he had a bigger nuclear button than Mr Kim.
The US president still believes China can disarm Kim Jong Un on America’s behalf. No one else thinks that is likely. Last week, Mr Trump said his patience with China was running out. Mr Trump’s advisers have so far curbed his protectionist impulses. But Mr Trump is rarely muzzled for long. His one consistent belief is that the US is being ripped off. China, whom he has repeatedly accused of raping America, tops the list. “If they don’t help us with North Korea, then I do what I’ve always said I want to do,” he told The New York Times. We should expect 2018 to produce US trade actions against China and Beijing to fight them at the World Trade Organization. There will also be more nuclear tweets.
American homeowners share a common conviction: that owning a parcel of land gives them a right to shape the world beyond its boundaries.
The roots of this idea are as old as nuisance laws that have tried to limit how one property owner can harm another. Over the decades, though, homeowners have expanded their claim on the world beyond their lot lines. This means they look out for schools and streets in ways that are vital to American communities. But increasingly it also means the senior affordable housing, the high-rises and the tiny homes — also arguably vital to the larger community — are never built.
The new tax law has raised the possibility that homeownership may be losing some of its privileged status in American society, as the benefits of the mortgage interest and property tax deductions shrink. Those changes could dampen how attractive housing looks as an asset. But it would take much more to alter the belief that owning a home in America today means that you effectively own a neighborhood, too.
That notion didn’t make much sense when most Americans lived on farms, where the neighbors were remote and the value of property came primarily from what happened on it. The boom in city living changed both of these things.
Before the subway, it was by no means a foregone conclusion that New York would become the greatest city on earth. Hundreds of thousands of immigrants fleeing poverty and persecution were arriving on its doorstep every year, but most of them were effectively marooned, herded into dark, squalid tenements in disease-ridden slums. The five boroughs had recently been joined as one city, but the farms and villages of Brooklyn, the Bronx and Queens might as well have been on the other side of the planet from Manhattan’s teeming streets. Bound up in the fate of the city were even larger questions: Would America be able to manage the transition from the individualism and insularity that defined its 19th-century frontiers to the creative collaboration and competition of its fast-growing urban centers? Could it adapt and excel in this rapidly changing world? Were cities the past or the future of civilization? And then came the subway: hundreds of miles of track shooting out in every direction, carrying millions of immigrants out of the ghettos and into newly built homes, tying together the modern city and enabling it to become a place where anything was possible.
It was the arrival of the subway that transformed a seedy neighborhood called Longacre Square into Times Square, that helped turn a single square mile surrounding the Wall Street station into the center of global finance, that made Coney Island an amusement park for the masses. It was the subway that fueled the astonishing economic growth that built the city’s iconic skyscrapers. Other cities had subways, but none threaded through nearly as many neighborhoods as New York’s, enabling it to move large numbers of workers between Manhattan and the middle-class boroughs — a cycle that repeated itself every day, generating ever more wealth and drawing in ever more people.
As New York evolved over the decades, the subway was the one constant, the very thing that made it possible to repurpose 19th-century factories and warehouses as offices or condominiums, or to reimagine a two-mile spit of land between Manhattan and Queens that once housed a smallpox hospital as a high-tech university hub. When the city is in crisis — financial or emotional — the subway is always a crucial part of the solution. The subway led the city’s recovery from the fiscal calamity of the 1970s. The subway was at the center of the rebuilding of Lower Manhattan after the Sept. 11 attacks. The subway got New York back to work after the most devastating storm in the city’s history just five years ago.
The questions we are facing today are not so different from the ones our predecessors faced 100 years ago. Can the gap between rich and poor be closed, or is it destined to continue to widen? Can we put the future needs of a city and a nation above the narrow, present-day interests of a few? Can we use a portion of the monumental sums of wealth that we are generating to invest in an inclusive and competitive future? The answer to all of these questions is still rumbling beneath New York City.
CENTRAL BANKS & MONETARY POLICY
There are “several risks” that could necessitate quicker rate hikes including faster growth, “perhaps owing to fiscal stimulus [tax reform] or accommodative financial market conditions,” the minutes said.
“Participants discussed several risks that, if realized, could necessitate a steeper path of increases” in their benchmark federal-funds rate, according to the minutes. “These risks included the possibility that inflation pressures could build unduly…perhaps owing to fiscal stimulus or accommodative financial-market conditions,” the minutes said.
After holding the fed-funds rate near zero for seven years, the Fed has raised it five times since late 2015, most recently in December, to a range between 1.25% and 1.5%. They also penciled in three quarter-percentage point rate increases in 2018 and two more moves in 2019.
The Federal Reserve has entered 2018 without a clear plan for raising its benchmark interest rate and with the added uncertainty of an imminent change in its leadership.
An account of the Fed’s final meeting of 2017, which the central bank published Wednesday, said officials generally agreed that the Fed should continue to raise its benchmark rate in the new year. But Fed officials expressed a range of views about the frequency of future hikes.
Six of the 16 officials on the Federal Open Market Committee predicted during the December meeting that the Fed would raise rates three times in 2018. But six officials predicted two hikes or fewer and four officials predicted the Fed would raise rates at least four times.
The Federal Reserve is getting ready to welcome a new chairman amid doubts and divisions among policy makers about how many times to raise interest rates this year.
Jerome Powell will take over from Janet Yellen in early February, if he is confirmed by the Senate as expected. He will lead a policy-making committee that, judging by a record of its last meeting released on Wednesday, still thinks the gradual pace of tightening it followed last year is correct. But the debate also highlighted a split between officials concerned about low inflation and others pointing to robust growth about to get a further boost from tax cuts.
USA ECONOMY DATA, CITIES AND STATES
The acceleration in bookings indicates production will remain robust in coming months as factories race to limit mounting order backlogs amid declining customer inventories. Increasing export orders underscore improvement in global markets.
The auto industry’s long-running sales party has come to an end. After seven straight years of growth in domestic new-vehicle sales, manufacturers on Wednesday reported a decline of about 1.8 percent in 2017, to 17.2 million cars and light trucks.
Further dampening the mood is the consensus that 2018 will bring an even larger drop. Edmunds.com, an auto-information website, predicts that just 16.8 million light vehicles will be sold this year.
“Over all, you have to be cautious in this environment,” said Adam Silverleib, vice president of Silko Honda, a dealership in Raynham, Mass. “The industry cycle has peaked.”
Some factors that propelled the upward swing are now fading or changing course. Exceptionally low interest rates are turning higher. And quality has improved, customer-satisfaction surveys have shown, so many Americans are keeping their cars longer.
Homeowners, businesses and utilities across much of the United States were keeping a close watch on fuel supplies Wednesday as a record-setting cold snap caused demand for heating oil and natural gas to soar.
With heating units in homes and commercial buildings running furiously to fend off the deep freeze, power companies warned of possible fuel shortages to come. Many utilities turned to coal and oil to generate electricity as the price of natural gas, their usual fuel of choice, surged.
“The sustained cold is requiring round-the-clock usage of some of these oil-fired generators, and some are already running short on fuel,” said Marcia Blomberg, a spokeswoman for ISO New England, which operates a regional grid and wholesale power markets.
Perhaps no place in America was hit harder by the financial crisis than Las Vegas. Unemployment peaked in late 2010 at 14 percent. Home prices, as measured by the S&P/Case-Shiller Home Price Index, fell by an astonishing 62 percent from their 2006 peak. Single-family building permits fell by over 90 percent. Even today, home prices remain 30 percent below their peak, and single-family building permits are still barely half of what they were 20 years ago.
But after a decade of pain and recovery, no place is better poised to boom than Las Vegas in 2018. The Greater Las Vegas Association of Realtors announced that at the end of November, the number of unsold housing units for sale had fallen 30 percent over the past year, representing less than two months of supply. Prices have responded, with Las Vegas joining Seattle as the only two metros with home prices growing by double digits over the past year.
GLOBAL ECONOMY DATA
Germany’s unemployment has reached a fresh record low as the upswing in Europe’s largest economy continues to gather pace.
Officials said there were 183,000 fewer unemployed people registered in December than a year earlier — a decline Rolf Schneider, economist at Allianz, described as “astonishing” in light of the movement of workers within the EU and the large numbers of refugees coming into Germany.
The data underscore the robustness of Germany’s boom. The country’s exports are up on the global economic recovery, tax revenues are surging and a combination of rising real wages and historically low interest rates has fuelled an increase in consumer spending.
POSITIONING, INFLECTION, MARKET CALLS
“As a historian of the great equity bubbles, I also recognize that we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market,” Grantham, the chief investment strategist for GMO in Boston, wrote in a letter to investors Wednesday.
Grantham, 79, is best known for his accurate prediction in 2000 that U.S. stocks would lose ground for the next decade. In today’s letter, he called the current market one of the highest-priced in history.
Grantham cited the recent acceleration of U.S. equity prices, a concentration of leadership in stocks and growing media coverage of events such as bitcoin’s surge and Amazon.com Inc.’s success as signs that the final phase of a bubble could be coming in the next six months to two years.
He warned investors to keep an eye on what is showing on television in restaurants. “When most have talking heads yammering about Amazon, Tencent and bitcoin and not Patriot replays — just as late 1999 featured the latest in Pets.com — we are probably down to the last few months,” he wrote. “Good luck. We’ll all need some.”
Japanese stocks started 2018 with a bang as the Topix had its best trading day in more than one year, pushing the index to its highest since late 1991.
The moves came after positive global sentiment sent all three main US indices to all-time records overnight. The Institute of Supply Management’s US manufacturing index beat expectations on Wednesday, rising to a near 13-year high.
Investors are falling over themselves to get into the first pure-play marijuana ETF to list in the U.S., sending its assets up more than 13-fold in five trading days.
“California legalizing recreational marijuana use has definitely put the spotlight on the sector,” Steve Hawkins, president and co-CEO of Horizons ETFs Management Canada Inc. said in an email. “It has certainly boosted the long-term prospects of cannabis stocks, as well as HMMJ, and we are optimistic this upward trajectory will continue.”
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
Spotify has confidentially filed paperwork with the Securities and Exchange Commission to list its shares on the New York Stock Exchange. The Swedish company has been targeting March or April for its debut, according to people familiar with the matter.
ENERGY COMPANIES, NOCs, INDUSTRY
Russia’s gas exports to Europe rose 8.1 per cent last year to a record level of 193.9bn cubic metres (bcm), despite rising competition and concerns about the country’s dominance of supply.
State-run Gazprom, the world’s largest gas producer, has a monopoly over Russia’s network of pipelines to Europe and supplies close to 40 per cent of Europe’s gas. But it has been forced to lower its prices in recent years to protect its market share in the face of moves by EU member states to buy more gas from the US, Qatar and other producers.
ENERGY CRUDE OIL, OIL SANDS, SHALE
Oil approached $62 a barrel for the first time in three years, surpassing a crucial threshold for spurring new shale drilling.
Wednesday’s 2.1 percent jump in New York-traded futures delivered exactly what the largest cohort of oil executives in a Dallas Federal Reserve survey last month said they needed to justify more shale exploration: prices above $61. If crude continues to climb and crosses the $66 mark, even more corporate chiefs indicated they’re ready to pile in, according to the survey.
OPEC’s crude production held steady in December as the group approached a fresh year of output curbs in full compliance with its supply deal.
ENERGY NATURAL GAS, COAL
Frigid temperatures across much of North America have sparked record natural gas demand — but in a sign of the overpowering supply coming from shale rock, the surge did little to ignite futures prices.
New Year’s Day was the coldest day of the 21st century in the 48 contiguous US states, according to a measure tracked by Commodity Weather Group, which uses temperatures from across the country and gives more weight to areas of high gas demand.
Monday also smashed gas consumption records, with total demand surpassing 140bn cubic feet, said S&P Global Platts. Yet benchmark gas prices have moved mildly, despite forecasts for continuing brutally cold conditions across large parts of the US and winter storm warnings issued as far south as Florida.
COMMODITIES BASE METALS, MATERIALS
A looming shortage of sand – a crucial resource once thought endless – could sink infrastructure projects, including those in China’s Belt and Road Initiative.
Asian countries have been some of the main contributors to sand scarcity as development booms. Beijing’s urban growth quadrupled from 1999 to 2009, while New Delhi tripled its population in 25-years. Singapore increased its territory through land reclamation by 25 per cent over the past 200 years.
More than 70 per cent of total sand mined for construction in 2014 was used in Asia, mainly in China, according to the market-research firm Freedonia Group. “The amount of concrete used by China in the last 4 years is equal to the quantity used by the USA in 100 years,” Peduzzi says.
COMMODITIES AGRICULTURE & SOFTS
Forget the sugar shortages of the past two years. This season’s glut is now forecast to be big enough to completely erase that. Aided by favorable Asian rains, global supply will beat demand by 10.4 million metric tons in 2017-18, 26 percent more than the combined deficits in the past two seasons, according to researcher Green Pool Commodity Specialists. The glut is forecast to be the biggest in five years and compares with an October estimate of 9.8 million tons.
POLLUTION, CLIMATE & ENVIRONMENT
When discussing the storm, some weather forecasters have referred to a “bomb cyclone.” Calling it a “bomb” sounds dire, but those kinds of storms are not exceedingly rare — there was one in New England recently. What makes a storm a “bomb” is how fast the atmospheric pressure falls; falling atmospheric pressure is a characteristic of all storms. By definition, the barometric pressure must drop by at least 24 millibars in 24 hours for a storm to be called a bomb cyclone.
Here is how it works: Deep drops in barometric pressure occur when a region of warm air meets one of cold air. The air starts to move, and the rotation of the earth creates a cyclonic effect. The direction is counterclockwise in the Northern Hemisphere (when viewed from above), leading to winds that come out of the northeast — a Nor’easter.
BREXIT, SCOXIT, LONDON, UK ECONOMY
Theresa May is braced for a possible French raid on Britain’s £8tn asset management industry, amid fears the sector might be the most exposed part of the City after Brexit.
Paris is vying to expand its slice of the European fund management sector along with Frankfurt, Dublin and Luxembourg, raising concerns in the UK government and the Bank of England that this could become the financial front line in Brexit.
When Poland and Hungary joined the EU together in 2004, they rode a wave of optimism about the eastward spread of Europe’s liberal values. But the two countries’ leaders now argue it is western Europe that has lost its way.
GEOPOLITICS, CRIME, TERRORISM
The government took another step on Wednesday to tamp down the uprising, staging pro-government rallies throughout the country and affording them generous coverage on state-controlled media.
But little of the action, either for or against the government, has found its way to the capital.
That stands in sharp contrast to 2009, when millions of middle-class people in Tehran erupted in anger over an election they saw as rigged, churning into the streets for months of anti-government protests that came to be called the Green Movement. But this time, as protests over the poor economy erupted in more than 80 cities over the past week and evolved into a condemnation of the political system and its clerical rulers, Tehran remained curiously muted.
A sleepy tourist town on the shores of Siberia’s Lake Baikal has become an unlikely lightning rod among Russian nationalists after Chinese investors bought up properties on the town’s lakefront.
Russian newspapers have inflamed public opinion over the town of Listvyanka, running headlines about a Chinese “invasion”, “conquest” and even China’s “yoke” — a reference to the Mongol invasions of the Middle Ages.
US president Donald Trump will not certify a landmark nuclear deal with Iran for the second time, according to officials, putting the future of the enfeebled accord in doubt.
“It’s highly unlikely,” said a senior administration official of prospects that Mr Trump will endorse the deal to Congress ahead of a looming January 13 deadline, adding that the president had yet to decide whether to continue to waive nuclear sanctions on which the precarious deal rests and which also fall due next week.
North Korea and South Korea established contact on a hotline that’s been dormant for almost two years Wednesday, a major diplomatic breakthrough following a year of escalating hostility and a move that could pave the way for future talks.
North Korean leader Kim Jong Un gave the order to open the line at 3:00 p.m local time (1:30 a.m. ET), according to an announcement on state media in the hours before the two phone calls to the South took place. According to South Korea’s Unification Ministry, the North Koreans made first contact at exactly the time ordered, and the sides were on the phone from 3:30 p.m. to 3:50 p.m. local time (South Korea is half an hour ahead of North Korea).
The United States, the South’s key ally, views the overture with deep suspicion. For months, it has said that talks with North Korea would make no sense until its leader, Mr. Kim, at least curbs his provocative behavior, or at best agrees to relinquish his nuclear arsenal. Mr. Trump recently has talked about the potential for war, not a diplomatic breakthrough.
Yet the president, so accustomed to being the center of attention, must now watch from the sidelines as these longstanding enemies open a dialogue. The talks at first are likely to focus on North Korea’s potential participation in the Winter Olympics, which are being held next month in the South Korean city of Pyeongchang.
Just 24 hours after President Donald Trump took aim at Pakistan on Twitter, the South Asian nation already appears to be cozying up to the world’s second-largest economy.
A day after the U.S. leader slammed Islamabad for harboring terrorists in a New Year’s Day tweet, Pakistan’s central bank announced that it will be replacing the dollar with the yuan for bilateral trade and investment with Beijing.
The same day, Chinese Foreign Ministry spokesman Geng Shuang defended Islamabad’s counter-terrorism track record, saying the country “made great efforts and sacrifices for combating terrorism” and urged the international community to “fully recognize this.”
The Italian news media called it a “movie-worthy heist.” In just a few minutes on Wednesday, the last day of an exhibition at the Ducal Palace in Venice, thieves made off with a gold brooch and a pair of earrings, easily disarming what had been described as a sophisticated alarm system and then disappearing into the sea of tourists who daily swarm St. Mark’s Square.
The jewels belonged to Sheikh Hamad bin Abdullah al-Thani, a member of the Qatari royal family. They were part of his collection of some 270 Indian and Indian-inspired gems and jewels, some dating from the 16th century, according to a news release for the exhibition, “Treasures of the Mughals and the Maharajas,” which opened in September.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
Ant Financial, the internet finance behemoth controlled by billionaire Alibaba founder Jack Ma, has apologized for roping unsuspecting users into its fledgling but fast-growing credit-score system.
Ant Financial’s Alipay kicked off a free service this week to help users generate a consumption profile based on their shopping history. But buried at the bottom of its landing page was a small box — checked by default — that automatically enrolled users to its Sesame Credit unless they opted out. The subsequent online uproar prompted Ant to change that setting and to call the move “extremely idiotic,” according to a post on its official social media account.
The online outrage highlights growing concerns over a lack of transparency on how companies are gathering and using personal data, even in a country where people are subject to persistent government monitoring and censorship. Tencent Holdings Ltd. this week publicly denied it was storing users’ chat histories after a high-profile entrepreneur questioned whether it was keeping tabs on private conversations.
PROPAGANDA, CORRUPTION, AUTHORITARIANISM
Billionaire venture capitalist Peter Thiel wants to create a new conservative cable news network and his representatives have engaged the powerful Mercer family to help with funding, according to two sources familiar with the situation.
Thiel, a Facebook board member who secretly funded lawsuits to bring down Gawker Media, had originally explored a plan to create the network along with Roger Ailes, the late founder of Fox News, according to a soon-to-be published book by journalist Michael Wolff. But BuzzFeed News has learned that Thiel has continued looking into fashioning a Fox News competitor even after the May 2017 death of Ailes, according to the two sources familiar with the matter.
Attorney General Jeff Sessions appointed Geoffrey Berman, a law partner of White House ally and former New York Mayor Rudy Giuliani, to be the temporary U.S. Attorney in Manhattan, the Justice Department said Wednesday.
Two of the people said the senators are concerned that Mr. Berman might be compromised by ties to the administration. The senators are further concerned that Mr. Trump personally interviewed Mr. Berman for the job, the people said.
President Trump on Wednesday abruptly shut down a White House commission he had charged with investigating voter fraud, ending a brief quest for evidence of election theft that generated lawsuits, outrage and some scholarly testimony, but no real evidence that American elections are corrupt.
On Thursday, Mr. Trump called for requiring voter identification in a pair of Twitter posts because the voting system “is rigged.” “Push hard for Voter Identification!” Mr. Trump wrote.
Political reporters and observers have long been accustomed to visiting Gallup’s website every day shortly after 1 p.m. Eastern Time for the latest update in the president’s approval rating. But rather than report public opinion of President Donald Trump’s job performance on a daily basis, Gallup will now offer a weekly approval rating.
What they’re saying: “Every war in history was an accident,” said one administration insider. “You just don’t know what’s going to send him over the edge.”
President Trump used to brag that sleeping with your friends’ wives makes “life worth living,” according to a new book. A passage of author Michael Wolff’s Washington tell-all, “Fire and Fury: Inside the Trump White House,” describes how Trump would devise calculated plots to get the wives of his friends into bed, using jealousy and revenge as bait.
“In pursuing a friend’s wife, he would try to persuade the wife that her husband was perhaps not what she thought,” reads the passage, a copy of which was obtained by the Daily News. Trump would then have his secretary ask the husband to stop by his office. Once the husband got in, Trump would subject him to “constant sexual banter” — all while having the wife listen in on the conversation via speakerphone.
“Do you still like having sex with your wife? How often? You must have had a better f–k than your wife?” Trump would apparently ask friends. “Tell me about it. I have girls coming in from Los Angeles at three o’clock. We can go upstairs and have a great time. I promise.”
President Trump’s bizarre hairdo is the result of scalp-reduction surgery, careful styling held in place by strong hairspray — and too much cheap dye, according to a new book.
Chief of Staff John Kelly imposed the ban, citing security concerns. President Donald Trump has repeatedly complained about press leaks since taking office, but aides said the change isn’t connected to concerns about unauthorized disclosures to news organizations.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
Foreign makers of products including washing machines and solar panels are ramping up shipments to the U.S. ahead of government decisions on whether to erect new barriers, trade data show.
The influx of goods comes after companies including appliance giant Whirlpool Corp. and solar-panel maker Suniva Inc. asked the Trump administration in recent months to use powers under a controversial trade law that gives the president wide discretion on tariffs and quotas.
Former Republican presidential candidate Mitt Romney is reaching out to a couple of trusted advisers now working at his hedge fund, Solamere Capital, to build a campaign apparatus as he moves closer to running for a U.S. Senate seat – and possibly weighs another presidential run, FOX Business has learned.
SCANDALS, LAWSUITS, FINES, REGULATORY
Brazilian state-run oil company Petróleo Brasileiro SA said Wednesday that it would pay one of the highest-value settlements in history to end a class-action lawsuit by U.S. investors who had sought to recoup corruption-related losses.
Petrobras, as the company is known, said it agreed to pay $2.95 billion to resolve claims by investors who bought its U.S.-listed shares or bonds between January 2010 and July 2015. During most of that period, Brazilian courts have since found, Petrobras was spending tens of billions of dollars a year on contracts that were inflated by one of the biggest corruption schemes ever uncovered.
SILICON VALLEY, UNICORNS, STARTUPS, VC
Didi Chuxing, the Chinese ride-sharing company, agreed to acquire full control of 99 — the main Brazilian rival to Uber and a company in which Didi already holds a stake — for around $600 million, according to three people with knowledge of the transaction.
The all-cash deal changes the global competitive landscape for ride-hailing companies, particularly Uber and Didi, the industry’s two biggest players. The companies have been locked in a struggle to be the dominant force in as many regions as possible, with fast-growing markets like South America, and Brazil specifically, seen as huge prizes.
AUTOS, ELECTRIC, SELF-DRIVING
And the prize for America’s best-selling electric car not made by Elon Musk goes to … the Chevrolet Bolt.
General Motors Co.’s plug-in Bolt outsold Nissan Motor Co.’s electric Leaf more than two-to-one in the U.S. last year, data reported by the automakers Wednesday showed. The Bolt capped its first full year of sales with its strongest month, delivering more than 3,200 units in December as employee pricing offers to the public got attention for a car that’s only been available nationally since August.
The Bolt gaining momentum may be a sign that drivers who like plug-in cars increasingly want pure EVs, not hybrids that use a combination of gasoline power and electric drive. The Chevy Volt plug-in hybrid’s sales shorted out last year, falling 18 percent from 2016 levels. Still, even with growing interest in the Bolt and Tesla’s expanding lineup, pure electric cars make up just 0.6 percent of the U.S. vehicle market, according to researcher Cox Automotive Inc.
Tesla delivered just 1,550 of its Model 3 sedans in the fourth quarter, widely missing the 2,917 figure that Wall Street was expecting. The company attributed missed deliveries over the holiday season to a production ramp-up in the final seven days of the quarter, in which it made 793 Model 3s, the company said in a release.
The electric vehicle maker headed by Elon Musk said it would likely build about 2,500 Model 3s per week by the end of the first quarter, half the number it had earlier promised. Instead, Tesla said it now plans to reach its goal of 5,000 vehicles per week by the end of the second quarter.
“This is par for the course for Tesla and Elon Musk, whose history of stating goals and forecasts and not meeting them is pretty well established,” said Karl Brauer, a senior director at Kelley Blue Book, an automotive research company. “That the Model 3 is moving slowly isn’t a surprise. Most independent experts found the production rates he was forecasting were pretty unlikely.”
Chief Executive Elon Musk has proven doubters wrong before, creating a luxury brand with a devoted following that can compete for buyers against BMW and Mercedes-Benz. But Tesla has never produced cars at a large scale; it aims to build a half-million cars a year—about five times more than last year’s total.
The company has blamed “production bottlenecks” for producing a fraction of its promised Model 3s in the past two quarters. Tesla said Wednesday it has made “major progress” fixing its problems and amped up its production rate toward the end of the year. In the final seven working days of December, Tesla said it made 793 Model 3s.
Tesla attributed the lowered delivery guidance “to a focus on quality and efficiency rather than simply pushing for the highest possible volume in the shortest period of time.” The reality of the automobile industry is that the best companies can handle all three of these at once.
Meanwhile, Tesla’s cash-burn issues show no signs of resolution, debt is mounting, and competition from rival auto makers is picking up. Tesla’s business depends on raising fresh money from investors, so keeping the share price high is crucial. CEO Elon Musk will need a new narrative soon if the company’s market value, which exceeds $50 billion, is to be justified.
AEROSPACE, MILITARY & DEFENSE
India and Japan are preparing to fly each other to the moon as two of Asia’s leading economic powers team up to counter China’s growing prowess in space exploration. National space agencies in both countries are planning a joint mission to explore the moon’s polar regions for water that they hope could one day sustain human habitation.
Japan and India have already mounted successful lunar missions, with India’s Chandrayaan-1 impactor hitting the moon in 2008 and Japan’s Selene orbiting from 2007-09. This year, Chandrayaan-2 will deploy a rover, while Japan’s SLIM lander is scheduled to reach the moon in 2019.
SCIENCE, NATURE, PSYCHOLOGY
The first known visitor to our solar system from interstellar space, a mysterious 400-metre-long object that sped past the sun in the autumn, was an asteroid ejected from the planetary system of another star, according to an investigation by astronomers.
The conclusion, published on Monday in Nature Astronomy and Astrophysical Journal Letters, is likely to disappoint those searching for extraterrestrial intelligence who hoped that the cigar-shaped body — named Oumuamua from the Hawaiian word for “messenger” — might be an alien spacecraft.
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