Macro Links Mar 12th – New Strongman Era
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- XI ABOLISHES TERM LIMITS
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- BLOCKCHAIN, FINTECH, DIGITAL PAYMENTS
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- GUN CONTROL, POT BOOM, OPIOIDS, PUBLIC POLICY
- TAXATION, WEALTH HAVENS, INEQUALITY
- RUSSIA MEDDLING, RUSSIA PROBE, TRUMP WORLD
- NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
- INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
- VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY, INTERNATIONAL
- POSITIONING, INFLECTION, MARKET CALLS
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- ENERGY CRUDE OIL, OIL SANDS, SHALE
- GEOPOLITICS, CRIME, TERRORISM
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- AUTOS, ELECTRIC, SELF-DRIVING
- SCIENCE, NATURE, PSYCHOLOGY
XI ABOLISHES TERM LIMITS
President Xi Jinping set China on course to follow his hard-line authoritarian rule far into the future on Sunday, when the national legislature lifted the presidential term limit and gave constitutional backing to expanding the reach of the Communist Party. Under the red-starred dome of the Great Hall of the People in Beijing, nearly 3,000 delegates of the National People’s Congress, the party-controlled legislature, voted almost unanimously to approve an amendment to the Constitution to abolish the term limit on the presidency, opening the way for Mr. Xi to rule indefinitely.
The ballot, which was largely symbolic, came two weeks after Communist Party-controlled media announced the proposal. It included other changes designed to put Xi and the party at the very heart of Chinese life. It is the clearest evidence yet that Xi plans to rule beyond the end of this second term, in 2023, taking China back to the era of one-man rule just as it steps up its role in global politics. “It means that Xi is now unquestionably a Leninist strongman,” Steve Tsang, director of the China Institute at SOAS University of London. Xi, unlike his predecessor, is not first among equals but “lord and master of them all.”
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
A French company named Qarnot has released a new home heater called the “Crypto-Heater or QC-1” that heats a room in your home while mining cryptocurrencies. The startup says with the two graphics cards embedded in these home heaters people can “make heating a source of revenue, not an expense.”
In a surprise appearance at the ethereum community conference EthCC in Paris on Friday, ethereum founder Vitalik Buterin presented a scaling solution for Plasma, a system of smart contracts that seeks to increase the computational potential of the world’s second-largest blockchain. Created by Buterin and Bitcoin Lightning Network co-creator Joseph Poon last year, the scaling solution is one of many under development that aims to boost the capacity of ethereum, specifically working by creating a layer of smart contracts that can interact with the main blockchain.
The unnamed hackers launched a ‘phishing’ scheme in early January, in which they purchased domain names that closely resembled binance.com, according to the exchange’s investigation. “Many users fell for these traps and phishing attempts,” Binance said. Once traders unknowingly gave up their login credentials, the hackers created so-called ‘trading API keys’. These keys are essentially passcodes that are meant to allow Binance traders to write computer programs that can directly interact with the trading venue (it would be useful, for instance, in systematic trading). After the keys were created, the hackers went silent and waited “for the most opportune moment to act,” according to Binance.
Wall Street strategist and co-founder of Fundstrat Global Advisors Thomas Lee has developed a ‘contrarian index’ that lets investors know how ‘miserable’ Bitcoin (BTC) holders are based on current prices, CNBC reports. The index is called the Bitcoin Misery Index (BMI) and was designed as a trading tool for investors to take advantage of volatility in BTC exchanges. BMI is calculated on a scale of zero to 100, taking into account factors such as volatility and the number of winning trades out of the total. When the indicator is low, the buying opportunity is at its best, and vice versa.
Crypto investment fund Multicoin Capital has announced that investors including Marc Andreessen are taking part in its flagship fund. When launched in October 2017, the firm announced plans to raise as much as $100 million by the end of the first quarter of 2018. The funding target has now been raised to $250 million, which Multicoin aims to raise by the end of 2018. According to Reuters, the fund has so far amassed $50 million.
The Praetorian Group, referred to as a “Cryptocurrency Real Estate Investment Vehicle,” (CREIV) has filed with the US Securities and Exchange Commission (SEC) on March 6 to register their $75 mln Initial Coin Offering (ICO) as a security offering. If the SEC accepts their registration, the Praeotorian Group will hold the first ever SEC-registered ICO.
A measure to bar public retirement funds from investing in cryptocurrencies is moving ahead in the Tennessee Senate. As previously reported, twin bills filed in January would block the trustees of public, post-retirement benefit funds from making such investments.
One of the Nordic region’s biggest Bitcoin dealers, Prasos Oy, has one lifeline left. Four banks in Finland, where Prasos is based, have already blocked its transactions, Chief Executive Officer Henry Brade said. The company can still access one bank account and now uses that for all its client money flows. There’s no law telling banks in the Nordic nation how to treat cryptocurrency dealers. But there are anti-money laundering rules that stipulate lenders must know their customers and the origins of the funds they handle. One of the selling points of cryptocurrencies has long been the anonymity they offer, which is a red flag for banks.
China’s top lawmakers have so far given less attention to blockchain than to AI, on which they published an ambitious policy roadmap in July (paywall). Following the political signaling at this year’s two sessions, a similar roadmap for blockchain may well arrive soon.
Following in the footsteps of several major banks globally, the Toronto-Dominion Bank (TD), one of the largest banks in North America, announced in an email statement to customers on Friday, Feb. 23, that it is banning the purchase of cryptocurrency with credit cards, local journal The Globe and Mail reports.
According to Newsome, the lack of a concrete regulatory framework means that institutional investors are still not participating in cryptocurrency markets. Without clear regulations and the resulting injection of “big money”, a burst of the “crypto bubble” remains unlikely, Newsome told Forbes.
“We do not currently recognize Bitcoin and other digital currencies as a tool like paper money, coins and credit cards for retail payments,” Zhou told reporters on the sidelines of the annual parliament session. “The banking system does not accept it.”
While Bitcoin remains the undisputed bellwether for digital currencies, it’s also fair to say that the entire crypto landscape has been changing dramatically over the last year. New coin and token offerings have raised billions of dollars, innovative ideas are capturing the attention of investors, and there are now 20+ cryptocurrencies that have at least $1B in market capitalization.
BLOCKCHAIN, FINTECH, DIGITAL PAYMENTS
The European Union’s banking watchdog set out a “roadmap” on Friday to help plug gaps in how the rapidly evolving financial technology sector is regulated, but urged caution in tackling cryptocurrencies. The watchdog, which helps the bloc flesh out banking rules, will report on its assessment by the end of the year.
While limited in scope, Amazon’s plans are to start with offering checking programs first, then maybe move into the debt product space after. Well, after reporting that, we’ve received information that Amazon is currently looking to hire someone to lead their newly-formed mortgage lending division. Due to non-disclosure agreements, we probably . . .
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
The United States opened the way for more exemptions from its steel and aluminum tariffs on Friday, after pressure from allies and intense lobbying from lawmakers, further diluting the measures just a day after they were formally announced. After Trump opened the door, Brazil, Japan, South Korea, Australia and Europe clamored for special treatment, while Chinese producers called on Beijing to retaliate in kind.
Australia has secured an exemption from metals tariffs announced last week by U.S. President Donald Trump, Prime Minister Malcolm Turnbull told the media. Trump confirmed the exemption in an early Saturday morning call between the two leaders, Turnbull said. He said the conversation also touched on the security alliance between the U.S. and Australia, as well as possible talks between Trump and North Korean leader Kim Jong Un.
The European Union and Japan pressed the U.S. to exempt them from President Donald Trump’s steel and aluminum tariffs on Saturday, as officials seek to avoid a trade war with the world’s biggest economy. U.S. Trade Representative Robert Lighthizer met with EU Trade Commissioner Cecilia Malmstrom and their Japanese counterpart, Hiroshige Seko, in Brussels as part of a trilateral effort to combat unfair trade practices.
As President Donald Trump’s steel tariff prompts concern about retaliation and a trade war, the head of the $19 billion Mahindra Group was quick to highlight India’s fortunate position as the world’s fastest-growing major economy. And one heavily focused on domestic consumption. India is the third-biggest producer of steel, yet only 0.2 percent of the material its mills made found its way to the U.S. in January, according to data from the U.S. government and the World Steel Association.
GUN CONTROL, POT BOOM, OPIOIDS, PUBLIC POLICY
The new Florida law imposes a three-day waiting period for most purchases of long guns, raises the minimum age for buying those weapons to 21 and bans the possession of bump stocks, devices that can make semiautomatic weapons fire like fully automatic firearms. It does not address the demand of many Stoneman Douglas students for a ban on assault weapons.
The $400 million bill imposes new restrictions on firearm purchases and the possession of “bump stocks,” and funds school police officers and mental health services. It was the most aggressive action on gun control taken in the state in decades and the first time Mr. Scott, who had an A-plus rating from the National Rifle Association, had broken so significantly from the group.
TAXATION, WEALTH HAVENS, INEQUALITY
The legislative blitz that rocketed the $1.5 trillion tax cut through Congress in less than two months created a host of errors and ambiguities in the law that businesses big and small are just now discovering and scrambling to address. Companies and trade groups are pushing the Treasury Department and Congress to fix the law’s consequences, some intended and some not, including provisions that disadvantage certain farmers, hurt restaurateurs and retailers and could balloon the tax bills of large multinational corporations.
RUSSIA MEDDLING, RUSSIA PROBE, TRUMP WORLD
The letter, the first known attempt at direct outreach by Trump to Putin, has been turned over to investigators probing Russia’s interference in the 2016 campaign. It is unclear whether Trump’s missive was ever delivered to the Russian president — and if so, whether Putin responded.
President Trump’s wish for a military parade in Washington on Veterans Day has been granted. But it won’t resemble the Bastille Day celebration in France that Trump had leaned on for inspiration. To minimize damage to Washington’s streets, the parade will include only wheeled vehicles — and not the heavy military vehicles, like tanks, that line the streets of Paris on Bastille Day, according to a Pentagon memo released Friday and first obtained by CNN. The parade will also include a “heavy air component,” the memo said, with military planes flying overhead at the end of the parade.
The long-running talks blur the line between family, business and politics in ways that lack precedent: Both Mr. Trump and Mr. Kushner, the president’s senior adviser and son-in-law, retain financial interests in their family businesses. The Trump Organization’s outside ethics adviser has raised questions about a potential deal — one reason the two-year-long discussions have not been completed.
The case of the adult film actress, Stephanie Clifford, who uses the stage-name Stormy Daniels, may not get past even the first considerable obstacles. But if her court case proceeds, Mr. Trump and his longtime personal lawyer, Michael D. Cohen, may have to testify in depositions, several lawyers said in interviews on Thursday. Ms. Clifford’s suit could possibly also provide evidence of campaign spending violations, which would bolster a pending Federal Election Commission complaint against Mr. Trump’s campaign.
President Donald Trump’s personal attorney used his Trump Organization email while arranging to transfer money into an account at a Manhattan bank before he wired $130,000 to adult film star Stormy Daniels to buy her silence. The lawyer, Michael Cohen, also regularly used the same email account during 2016 negotiations with the actress — whose legal name is Stephanie Clifford — before she signed a nondisclosure agreement, a source familiar with the discussions told NBC News. nd Clifford’s attorney at the time addressed correspondence to Cohen in his capacity at the Trump Organization and as “Special Counsel to Donald J. Trump,” the source said.
Those two things together — that a Trump Organization email address was used to facilitate the payment and that the payment was linked to the campaign — would constitute a legal violation. The email from the bank to Cohen does not prove that company funds were used to pay Daniels, which Noble told us last month would itself be illegal. Just using that email address is its own problem.
President Trump is in discussions with a veteran Washington lawyer who represented Bill Clinton during the impeachment process about joining the White House to help deal with the special counsel inquiry, according to four people familiar with the matter. The lawyer, Emmet T. Flood, met with Mr. Trump in the Oval Office this past week to discuss the possibility, according to the people. No final decision has been made, according to two of the people.
Feeley, 56, flew home from Panama on Friday, capping almost three decades as a diplomat under Republican and Democratic administrations. In the past year, he said, he realized he was working for a president whose policies and tone he could no longer promote or even explain. “As a junior foreign service officer, I signed an oath to serve faithfully the president and his administration in an apolitical fashion, even when I might not agree with certain policies,” he said in his Dec. 27 letter to President Trump, first reported by Reuters and confirmed by Feeley as his words. “My instructors made clear that if I believed I could not do that, I would be honor bound to resign. That time has come.”
Putin told NBC News in an interview that the U.S. was refusing to work with Russia on cybersecurity and “instead throws 13 Russians to the media.” “Maybe they are not even Russians, but Ukrainians, Tatars or Jews, but with Russian citizenship, which should also be checked,” Putin said.
NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
Inside the Oval Office late Thursday, President Donald Trump interrupted South Korean officials as they analyzed an offer to meet from North Korean leader Kim Jong Un and outlined possible diplomatic options. “OK, OK,” Mr. Trump said, cutting short the discussion. “Tell them I’ll do it.”
The White House’s muddled message highlighted the confusion sowed by Mr. Trump’s on-the-spot decision to meet Mr. Kim. Having built its North Korea policy on sanctions and threats of military action, the administration must now learn the language of engagement. It also served as a reminder of how many hurdles lie ahead before Mr. Trump’s spontaneous decision on Thursday afternoon leads to a meticulously staged meeting between the American president and the dictator who rules the world’s most reclusive country.
President Donald Trump has got the support of former NBA star and “Celebrity Apprentice” contestant Dennis Rodman as he prepares for a high-stakes meeting with North Korean leader Kim Jong Un. Rodman is “behind the president 100 percent,” a spokesman, Christopher Volo, said in an email. “We believe talks with Regime will do great things for both nations.”
“This move is vanity over strategy,” said Mr Medeiros. “It validates and advances Kim’s goal of being recognised as a de facto nuclear state. You don’t give away a presidential meeting for nothing. What did we get for this? Nothing.” Even though those concerns were echoed in several capitals, both China and Japan — the two regional powers who, along with South Korea, have the most at stake in the stand-off — said they welcomed the summit, which is to be held by May.
The news shocked Washington, Seoul and everywhere in between. But inside the White House, the president — whose exchange of taunts and threats with Kim has set Northeast Asia on edge over a potential military confrontation for months — was said to be reveling in his big reveal, which overshadowed the growing scandal surrounding his alleged affair with a pornographic film star and concerns with tariffs he announced earlier in the day. What the whirlwind evening at the White House also illustrated was that in his unorthodox presidency, which centers so singularly on his force of personality, Trump has little worry about a dearth of qualified staff because he considers himself to be his own diplomat, negotiator and strategist.
INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
U.S. mortgage rates have hit their highest level since 2014, a new challenge for a housing market that has been central to the economic recovery but remains vulnerable to even modest headwinds. The rate for a 30-year fixed-rate mortgage rose to 4.46%, the highest in more than four years and the ninth consecutive week of increases, according to data Thursday from mortgage-finance giant Freddie Mac . At the start of the year, the average rate was 3.95%
Investors shrugged off trade skirmishes and signals of fading monetary stimulus as they rewarded some of Europe’s most leveraged companies, putting the latter on track for their best weekly advance since December 2016. Stocks with the weakest balance sheets gained 4.5 percent this week, compared to 3.1 percent for their less-indebted counterparts, according to a Bloomberg analysis of Morgan Stanley data.
Household debt grew in the fourth quarter at the fastest rate since the fourth quarter of 2007, reflecting in large the boom in auto sales after damaging hurricanes. The Federal Reserve reported a 5.2% annual growth rate, as consumer credit jumped 7.8% and mortgage debt grew 3%. The Fed also reported that household net worth rose by $2.08 trillion to $98.75 trillion, as the value of corporate equities rose by $1.3 trillion and the value of real estate increased by about $500 billion.
Just because China’s financial regulators are cracking down on cryptocurrencies doesn’t mean they’re souring on the idea of digital money. People’s Bank of China Governor Zhou Xiaochuan made that clear at a press conference in Beijing on Friday, saying physical cash may one day become obsolete. Zhou said the PBOC is looking into digital currencies as it pursues faster, cheaper and more convenient payment methods, even as he warned that cryptocurrencies like Bitcoin — more often used for speculation than payments — don’t serve the economy.
The country is expected to have the widest deficit of any emerging market this year. The scale of Turkey’s debt — at 28 per cent of gross domestic product — is not big compared with peers. But the government, financial and corporate sectors all rely on funds from countries with whom Turkey is on increasingly unfriendly terms. Short-term portfolio inflows, which the country relies on, turned into outflows in the last two months of 2017.
VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
Billionaire philanthropist Bill Gates is optimistic about the future of the U.S., but he does believe the country will have another financial crisis. When Gates was asked on a Reddit forum if, in the near future, the U.S. will have another crisis similar to the one in 2008, he offered a blunt response: “Yes. It is hard to say when but this is a certainty.” He added, “Fortunately, we got through that one reasonably well. Warren has talked about this and he understands this area far better than I do.”
With the synchronized global growth upturn in the rearview mirror, the downturn is no longer a forecast, but is now a fact. The chart below shows that quarter-over-quarter annualized gross domestic product growth rates in the three largest advanced economies — the U.S., the euro zone, and Japan — have turned down. In all three, GDP growth peaked in the second or third quarter of 2017, and fell in the fourth quarter. This is what the start of a synchronized global growth downswing looks like. Still, the groupthink on the synchronized global growth upturn is so pervasive that nobody seemed to notice that South Korea’s GDP contracted in the fourth quarter of 2017, partly due to the biggest drop in its exports in 33 years.
Alarm bells should start ringing when so many countries are performing so well at once. Synchronised growth creates an “adding up” problem. What might be possible for one country to achieve economically when others are relatively weak may become more difficult to sustain when others are stronger. This might seem counter-intuitive — after all, export prospects are better when others are doing well — but the evidence suggests that economists and policymakers too often fail to recognise the three main “costs” of global economic success.
European Central Bank President Mario Draghi turned a spotlight on banks’ riskiest assets when he said they need to reduce their holdings of hard-to-value investments. A decade after the financial crisis, lenders in the region are still sitting on billions of dollars of illiquid holdings that could include the kind of mortgage-backed bonds and bespoke derivatives that sank lenders in the 2008 credit crisis. While they’re dwarfed by the pile of non-performing loans across the region, clearing out such assets would help pave the way to a more unified banking system in Europe and allow lenders based there to better compete with U.S. rivals.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
With the departures of Hope Hicks and Gary Cohn, the Trump presidency is entering a new phase—one in which Trump is feeling liberated to act on his impulses. “Trump is in command. He’s been in the job more than a year now. He knows how the levers of power work. He doesn’t give a fuck,” the Republican said. Trump’s decision to circumvent the policy process and impose tariffs on imported steel and aluminum reflects his emboldened desire to follow his impulses and defy his advisers. “It was like a fuck-you to Kelly,” a Trump friend said. “Trump is red-hot about Kelly trying to control him.”
The agreement to talks is, in itself, a reward. North Korea is close to achieving what it has long craved: a meeting with the US on equal terms. Far from being crazed, the Stalinist state’s nuclear programme has long rested on rational foundations. The fearsome project grants the isolated country diplomatic leverage. For Kim, the lesson of the fall of Saddam and Gaddafi is that tyrants pay a price for relinquishing their arms. The threats from the US have strengthened the regime by reinforcing a siege mentality.
Whether the high-stakes gamble ultimately pays off, no one can know. Given two unpredictable and highly combustible leaders, it seems just as likely that the meeting will never take place. If it does occur, the challenges are so steep, the gulf so wide and the history so fraught with misunderstanding, suspicion and broken promises that the prospect of an enduring resolution to the impasse seems remote. But Mr. Trump has staked his reputation as a deal maker on the presumption that he can personally achieve what no other president has before him.
For allies who have long looked to the United States to provide security and stability, it was a dizzying jolt of drama that injected fresh uncertainty into strategic calculations in the region, where China is seeking to supplant the United States as the major power. “This is without question a big opportunity for China,” said Ian Bremmer, the president of the Eurasia Group, a New York-based research firm that forecasts global risks. “The United States has become a less certain partner for a while now.”
During the election of 1928, Republican candidate Herbert Hoover promised US farmers protection from foreign competition to boost depressed farm prices. However, he was appalled by the breadth of the tariff bill that special interest groups had pushed through Congress, denouncing the bill as “vicious, extortionate, and obnoxious.” But he signed it into law under intense political pressure from congressional Republicans. The tariff triggered a deflationary spiral that had a deadly domino effect. Other countries immediately retaliated by imposing tariffs too. The collapse of world trade pushed commodity prices over a cliff. Exporters and farmers defaulted on their loans, triggering a wave of banking crises. The resulting credit crunch caused industrial production and farm output to plunge and unemployment to soar. In my narrative, the depression caused the stock market crash, not the other way around as is the popular belief.
On the question of who wins, “the easy answer is to say that no one wins a trade war,” said Marc-William Palen, a professor of history at the University of Exeter in Britain and the author of “The ‘Conspiracy’ of Free Trade,” which examines trade rivalry between the United States and the British Empire in the 19th century. “But the more I reflect on it, it seems the winners are those nations that don’t take part.”
“That’s one of the most painful aspects of the economic decline of these manufacturing centers: They get hit twice,” said Enrico Moretti, an economist at the University of California, Berkeley. “First, they lose the factories. But second, and most importantly, they lose everyone who was supportive of those factories.” It’s that second hit that increasingly matters nearly four decades since U.S. manufacturing employment peaked. Without a foundation of white collar jobs, it becomes difficult for these areas to reinvent themselves in an era when the economy more and more requires specialized knowledge and technological skill.
The problem isn’t imports. It’s technology. It’s always technology. “Big steelmakers everywhere are finding that the economies of scale that helped them prevail since Andrew Carnegie’s day no longer favor them,” I wrote in February 1993, noting that some expected Nucor, the leading minimill, to replace U.S. Steel as the nation’s largest producer by 2000. Nucor did become the largest U.S. steelmaker, and the entire industry has become less labor-intensive. The Associated Press reported this past week that U.S. steel producers require only 1.5 person-hours to make a ton of steel, down from more than 10 in the 1980s.
Manufactured products today contain so many inputs from around the world, true self-sufficiency is virtually impossible. Tires, including on military vehicles, are made with a grade of steel wire rod that “cannot be supplied in the volume and under the quality necessary for military and civilian applications by domestic producers,” according to the U.S. Tire Manufacturers Association. It asked for an exemption from the tariff which, if granted, would further illustrate the porosity of the “national security” definition.
Jennifer Hillman of Georgetown University, who has been both a commissioner on the United States International Trade Commission and a judge on the WTO’s appellate body, finds the national-security justification particularly questionable given that most of the steel imports come from Canada, the European Union (EU), Mexico and South Korea. The steel tariffs will barely scrape China, the Trump administration’s greatest trading—and putative military—foe. Adding to the sense that the national-security argument is a sham is the fact that the tariffs on aluminium—where imports from Russia and China matter more—are less than half what they are on the steel made by allies.
The Canadian city’s fortunes are under severe strain from the steel and aluminum tariffs that President Trump formally announced on Thursday. Although he gave Canadian and Mexican steel makers a reprieve, the exemption is seen here as giving breathing room rather than lasting relief. The exemption leaves open the possibility that Mr. Trump can impose the tariffs at any point, for vaguely expressed reasons.
President Trump has threatened to blow up global trade rules. Robert Lighthizer is the one who knows where to plant the explosives. Mr. Lighthizer, 70, grew up in a well-off family in a Midwest town that did not share his fortune. Ashtabula, Ohio, a port town on the shores of Lake Erie, saw its surrounding steel mills shutter and decline as factories automated and moved abroad. The decimation of local manufacturing shaped his views on trade, friends said, hardening his approach and leading him to become a skeptic of globalization.
At first blush, President Trump’s aluminum and steel tariffs, imposed Thursday, have little to do with the cutting-edge technologies being built in the United States’ innovation hub. But some Silicon Valley executives fear that the protection of an old-school industry, one that accounts for just 2 percent of global trade, could be a prelude for a much broader clash with China over the theft of technologies that are driving the future of the global economy. Such a conflict would have a profound impact on how Silicon Valley does business with a critical, if elusive, trading partner.
The world today consequently looks very different than the world of 2003 to 2007, when foreign demand for Treasuries by and large exceeded net issuance (American investors were selling Treasuries to the world and investing in riskier assets that offered a bit more yield for much less safety, creating the foundation for the financial crisis). And different from 2009 to 2013—when foreign investors and the Fed snapped up much of the net supply of Treasuries associated with ongoing U.S. fiscal deficits.
As bitcoin’s soaring price has drawn in thousands of new players worldwide, the strange math at the heart of this cryptocurrency has grown steadily more complicated. Generating a single bitcoin takes a lot more servers than it used to—and a lot more power. Today, a half-megawatt mine, Miehe says, “is nothing.” The commercial miners now pouring into the valley are building sites with tens of thousands of servers and electrical loads of as much as 30 megawatts, or enough to power a neighborhood of 13,000 homes. And in the arms race that cryptocurrency mining has become, even these operations will soon be considered small-scale. Miehe knows of substantially larger mining projects in the basin backed by out-of-state investors from Wall Street, Europe and Asia whose prospecting strategy, as he puts it, amounts to “running around with a checkbook just trying to get in there and establish scale.”
Under Jeremy Corbyn, Labour is running at 40 per cent in the polls — neck and neck with Theresa May’s Conservatives. Centrist Labour MPs, battered remnants of the Tony Blair era of third-way social democracy, have tried and failed to topple him. Now they concede he could become prime minister. Young people have flocked to the 68-year-old Mr Corbyn’s cause. The angry mood that led to Brexit could yet give Britain the most leftwing government it has ever seen.
Up until now, Brussels and London could at least agree on what the Brexit talks were failing to achieve. Phase 1 was about the core terms of a divorce decree, still unfinished. Phase 2’s opening round was about a transition deal, also not yet agreed. But as negotiators now turn their focus to the future relationship, there is not even consensus on what they are working toward.
The most plausible theory to emerge so far is that Mr Skripal was the victim of a revenge attack for handing over Russian secrets to the British. There are few other clues to go on. A friend of Mr Skripal’s daughter, Yulia, said he had worked as “a lecturer” but did not disclose where. This would tally with accounts from the security officials that he may have given occasional presentations and talks to UK military and intelligence personnel.
Friday was a good day for the “let it run” folks. The huge gain in the number of people working is a prime example of the kind of good thing that they’ve been predicting might happen if the economy had more room to improve than that 4.1 percent jobless number might suggest. Yes, it would be nice to see paychecks rise faster, but the saving grace of the fact that they aren’t is that it allows the Fed a little more room for patience, strengthening the arguments of the “let it run” faction inside the central bank. Nine years into an economic expansion, jobs reports don’t get much better than this.
The exiled Trump adviser and former head of Breitbart News is on a new mission: to train Europe’s budding populists to do what he did. He sipped sparkling water and described a grand vision for a global populist future. In the United States, Mr. Bannon said, he is working on a project to create a think tank to “weaponize” populist economic and social ideas. He sees that work spreading to Europe, where a proliferation of populist websites in the image of Breitbart News, either owned by him or others, will spread those ideas, under his guidance. As a final component, he wants to train an army of populist foot soldiers in the language and tools of social media.
The e-commerce giant paid zero federal taxes in 2017. And it’s being rewarded with further tax breaks at the state and local level.
That’s remarkable in isolation, but especially remarkable when you consider that Donald Trump’s corporate tax bill hadn’t even gone into effect; Amazon projects it will get an additional $789 million in benefits from the passage of that bill. And it’s even more remarkable given that Amazon was already paying a much lower rate than other companies.
In China’s tech world, cheerleading from the government comes with a lot of benefits—and a lot of money. But Beijing also wants more control and the nation’s internet billionaires can’t exactly say no. Under President Xi Jinping, politics have come to the fore more than in recent decades. More tech entrepreneurs became members of the legislature and the associated advisory body this year than in the past. And they are acting like model representatives. Tencent’s Mr. Ma, China’s wealthiest person, made eight policy proposals ranging from legislation to help a fledgling national parks system to using the internet to upgrade everything from manufacturing to health care. Because China’s legislature is toothless, these proposals serve more as gestures of fealty to the Communist government than real policy initiatives.
The group’s approach to the coffee business amounts to an expensive bet that the U.S. beverage industry is on the cusp of a reorganization that has been half a century in the making, ending an era in which hot drinks only competed against hot drinks and soft drinks against other soft drinks. “JAB wants to become the largest coffee company in the world,” Starbucks Chairman Howard Schultz said at an investment conference last year. In its sights is the industry leader, Nestlé SA .
Rebel snipers are preventing Syrian civilians from leaving the besieged area of eastern Ghouta through a corridor opened this week by the government to facilitate evacuations, a United Nations official said. The official, who entered the area with a relief convoy earlier this week, added that many of those who preferred to leave might nonetheless choose to stay even if the snipers relented. They feared for their safety in government-held territory, he said, and worried that they might never be allowed to return.
CENTRAL BANKS & MONETARY POLICY
“The labour market is getting tighter and tighter, and people who thought they had no chance of getting a job are realising there are companies out there who desperately need workers,” said Harm Bandholz, chief US economist at UniCredit in New York. “Employment gains are much stronger than you would expect at this point in the cycle.”
Norwegian inflation jumped more than estimated in February and is now above target after the government earlier this month lowered the level the central bank needs to aim for. Overall consumer prices rose 2.2 percent in February from a year earlier, far above the 1.8 percent estimated by analysts, and the highest level since April last year. Underlying prices, the central bank’s preferred gauge, also accelerated, rising 1.4 percent over the year, led by rising food and furniture costs.
USA ECONOMY DATA, CITIES AND STATES
The economy added 313,000 jobs in February, crushing expectations, while the unemployment rate remained at 4.1 percent, according to a Labor Department report Friday that could help quell inflation fears. Economists surveyed by Reuters had been expecting nonfarm payroll growth of 200,000 and the unemployment rate to decline one-tenth of a point to 4 percent.
In all, the nation added 313,000 jobs in February, the most since July 2016, with impressive gains across low-, middle- and high-wage industries. For the fifth month in a row, the jobless rate remained unchanged at 4.1 percent, a 17-year low. And hundreds of thousands of people streamed into the job market, confounding analysts who have insisted that the pool of potential workers has been depleted.
GLOBAL ECONOMY, INTERNATIONAL
February’s job gain comes amid growing uncertainty over the Canadian economic outlook. The country dodged a bullet this week when the Trump administration said Canada and Mexico would be initially spared from its plan to slap tariffs on imported steel and aluminum. However, that exemption is contingent on a successful renegotiation of the North American Free Trade Agreement. Also causing alarm is Canada’s competitiveness in the global market. Analysts say the cut in U.S. corporate-tax rates has tipped the scale in favor of making business investments in the U.S. instead of Canada. Direct foreign investment in Canada last year hit its lowest level in seven years.
Friday’s disappointing report comes a day after another slate of data showed that new industrial orders dropped 3.9 per cent in January, significantly worse than the 1.6 per cent decline that had been expected by economists. The trade figures come at a time of heightened uncertainty over protectionism that was sharpened on Thursday after a move by US President Donald Trump to apply hefty tariffs on imports of steel and aluminium.
POSITIONING, INFLECTION, MARKET CALLS
The Nasdaq blasted through a record high on Friday as traders looking to ride recent momentum piled into Microsoft, Netflix, Amazon.com and other high-performance technology names. Microsoft, Apple and Amazon each rose more than 1 percent and hit or closely approached all-time highs, while the Philadelphia Semiconductor Index surged 1.8 percent to its own record.
The bull market’s resilience was hard to find fault with this week. A constellation of risks that loomed on Monday, from trade tensions to the jobs report that wrecked equities last month, became reasons to buy by Friday afternoon. The S&P 500 Index ended up 3.5 percent on the week, volatility is rapidly abating and technology stocks are back at record highs.
Known by its ticker XLK, the fund has been a go-to bet for buyers looking for cheap and broad tech exposure, charging a low expense ratio of 13 basis points. The fund saw almost $616 million in inflows on Thursday, the most since December 2011, according to data compiled by Bloomberg.
The moves have come amid a resurgence in volatility: The S&P 500 only notched eight daily moves of 1% or more in all of 2017, but the broad index has closed up or down at least 1% on 16 occasions so far this year. Investors can no longer take for granted the backdrop of low interest rates, steady growth and muted inflation that helped stocks extend their multiyear highs into early 2018. “We got so spoiled last year, when you could have practically bought anything and it went up,” said JJ Kinahan, chief market strategist at TD Ameritrade. “This year, there’s no truly safe place to be.”
COLOR, EARNINGS, SENTIMENT, VALUATIONS
Lloyd Blankfein is preparing to step down as Goldman Sachs’s chief executive as soon as the end of the year, capping a more than 12-year run that has made him one of the longest-serving bosses on Wall Street. Mr. Blankfein has often joked he will die at his desk, and his enthusiasm for the job has led many within the firm to believe he might outlast another set of would-be successors.
In a typically wry tweet, sent a few hours after the Journal put up its story online, the Goldman chief executive and chairman said that “it’s the WSJ’s announcement . . . not mine. I feel like Huck Finn listening to his own eulogy.” The tweet is unlikely to dampen talk over the future of Mr Blankfein, 63.
Intel is watching the takeover battle closely and is eager for Broadcom to fail as the combined company would pose a serious competitive threat, the people said. If it becomes apparent that Broadcom is likely to prevail, Intel could step in with its own offer for Broadcom, the people said. Intel has been considering such a move since late last year and is working with advisers, some of the people said. It is far from guaranteed that Intel would ultimately make such a move—one of the people said it is unlikely—and the complexity and size of such a combination would be enormous. Broadcom currently has a market value of about $104 billion.
ENERGY CRUDE OIL, OIL SANDS, SHALE
Short-selling is creeping back into the oil market as fears increase that the U.S. will be awash with oil again. Hedge funds boosted bets on falling West Texas Intermediate crude prices by the most this year after American production surged to record levels. While OPEC this week reaffirmed its commitment to rebalancing the market, U.S. fields are forecast to be gushing 11 million barrels a day by October.
GEOPOLITICS, CRIME, TERRORISM
British authorities investigating the poisoning of a former Russian spy, Sergei V. Skripal, and his daughter visited the graves of Mr. Skripal’s wife and son in the cathedral town of Salisbury, England, on Friday. Dressed in large hazardous-material suits, the investigators began collecting evidence at Mr. Skripal’s house in the town and erected a blue forensic tent around the grave of the son. The police said that they had requested military assistance to “remove a number of vehicles and objects from the scene.”
Earlier this week, as police combed the streets of Salisbury piecing together clues of an alleged Russian hit on British soil, former hedge fund manager Bill Browder sat in front of the Commons culture select committee and made a startling admission. “I believe they want to kill me,” the crisply suited 53-year-old businessman told MPs. “If they kill me in a very brazen way and don’t get away with it there will be big repercussions. They haven’t figured out a way yet where they can kill me and get away with it.”
SCANDALS, LAWSUITS, FINES, REGULATORY
In court filings on Friday, the Justice Department and AT&T laid out the arguments that they plan to make in the trial. Regulators will argue that the deal will hurt competition and lead to higher prices. AT&T and Time Warner will counter those arguments by saying that even with a merger, it is an underdog against online giants like Facebook and Google.
Martin Shkreli, a former pharmaceutical executive notorious for sharply increasing drug prices, mounting sneering defenses of his actions and even issuing a bounty for one of Hillary Clinton’s hairs, was sentenced on Friday to seven years in prison after being convicted of fraud last year. Prosecutors had sought a sentence of at least 15 years; the defense had pushed for 12 to 18 months.
SILICON VALLEY, UNICORNS, STARTUPS, VC
Google has confirmed that its technology is being used by the Pentagon to analyse footage captured by drones. A program called Project Maven is utilising the technology to automate the analysis of objects in the enormous amount of images that are captured by the Department of Defence’s surveillance drones – also known as unmanned aerial vehicles (UAVs). Gizmodo reported that some Google employees were “outraged that the company would offer resources to the military for surveillance technology involved in drone operations”.
Since it launched in September, Bird’s app-based rental system has become hugely popular in areas of Los Angeles such as Santa Monica and Venice, where hundreds of scooters are available on the street for anyone to pick up and drop off. Hire of the scooters, which resemble the Razor and Micro kick scooters popular with children but have an electric motor that can go up to 15mph, is charged by the minute, with the devices tracked by GPS. More than half a million rides on Bird were taken in the past 30 days, the company says, doubling over the previous month.
AUTOS, ELECTRIC, SELF-DRIVING
Among the risks to Tesla’s valuation, Jonas lists Amazon, which relies heavily on shipping and recently announced an entry into the business that could compete directly with UPS and FedEx. “Look no further than Amazon’s “fulfillment” and “shipping” expense line items in its income statement,” Jonas said. “In aggregate, fulfillment and shipping was $46 billion in 2017 … We’re in no position to say whether Amazon would be a partner or potential competitor to Tesla in the area of transport, trucking, and logistics, but we point out the scale that large e-commerce players can bring.” Steep competition in autonomous vehicles could also hurt Tesla, Jonas said.
Americans may not be lining up to buy electric cars, but that hasn’t stopped Ford from pushing ahead with plans to spend $11 billion to develop more compelling battery-powered vehicles. Ford’s rising commitment underscores a willingness among big car companies to experiment with the types of sexy electric cars that give Tesla Inc. its appeal.
Look out, truckers. Waymo, the self-driving vehicle unit of Alphabet Inc., is taking its driverless truck tests to Atlanta, and this time they’ll be carrying cargo. Waymo will start testing a fleet of autonomous freight trucks in Georgia’s capital next week that will take deliveries to Google’s data centers. The company has already been conducting road tests for the self-driving Semis in California and Arizona for the past year, but this new pilot lets Waymo expand its understanding of how shippers and carriers will integrate the trucks into their distribution networks.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
AI can pluck images directly from a person’s brain. Given an fMRI scan of someone looking at a picture, an algorithm can reconstruct the original picture from the scan. Though the results aren’t yet perfect, they are still often recognisable and hint at what may be possible in the future.
The billionaire technology entrepreneur said his tunneling startup, Boring Co., will prioritize pedestrians and cyclists in its hyperloop plan. The system “will still transport cars but only after all personalized mass transit needs are met,” Musk wrote on Twitter. “It’s a matter of courtesy and fairness. If someone can’t afford a car, they should go first.” A concept video distributed last year by Musk showed carriages, which the Boring Co. calls sleds, that transport a car from point to point. A new video he tweeted on Friday demonstrated vehicles resembling subway cars carrying groups of people. They would load and unload at street level before descending into underground tunnels.
SCIENCE, NATURE, HISTORY, PSYCHOLOGY
When it’s time for the hairyflower wild petunia to pass its genes to the next generation, it does it with a bang. To reproduce, the plants flings tiny seeds from a small torpedo-shape fruit more than 20 feet through the air. That’s not an easy task. The seeds are discs about a tenth of an inch in diameter — smaller than the circles that fall out of a hole punch — and 1/50th an inch thick, the equivalent of three sheets of paper. “It’s like throwing confetti,” said Dwight Whitaker, a professor of physics at Pomona College in Claremont, Calif. But somehow these seeds slice smoothly through the air.
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