Macro Links Mar 29th – Quant-Style Crash
You are viewing the Macro Links delayed archive. The real time Macro Links, posted each trading day, are available via the Mercenary Research Suite. To see how it works, click here.
MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- TECH STOCKS, AMAZON, TESLA, FACEBOOK
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- BUDGET, INFRASTRUCTURE, HEALTHCARE, IMMIGRATION
- RUSSIA MEDDLING, RUSSIA PROBE, TRUMP WORLD
- KOREAN PENINSULA, MIDDLE EAST, NUCLEAR WEAPONS
- INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
- VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY, INTERNATIONAL
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- ENERGY COMPANIES, NOCs, INDUSTRY
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- SCANDALS, LAWSUITS, FINES, REGULATORY
- MEDIA, CABLE, SPORTS, ENTERTAINMENT
- AUTOS, ELECTRIC, SELF-DRIVING
- SCIENCE, NATURE, PSYCHOLOGY
- HEALTH, PRODUCTIVITY AND WELLNESS
TECH STOCKS, AMAZON, TESLA, FACEBOOK
The clobbering that tech shares have taken in recent days has magnified not only how influential these companies have become in people’s everyday lives, but how much sway they have gained in global stock markets. Investors are concerned that the tech giants have grown so much and so fast in recent years that they now carry outsize weight. Combined, the five largest U.S. technology and internet companies account for more than 14% of the S&P 500 index’s weighting. Their rapid gains have come alongside heavy inflows into passive funds that track indexes like the S&P 500, leaving millions of investors susceptible to greater downside.
Investors piled into hot technology stocks last year and reaped outsized gains. Now the sector’s sharp reversal stands to have the opposite effect. High-flying companies including Microsoft Corp., Alphabet Inc., and Facebook Inc., were among the most widely held last year by institutional equity strategies, such as pension funds and endowments, according to eVestment data.
The Amazon decline — the shares fell as much as 7.4 per cent earlier in the session, or $53bn in market value — came after a report on the Axios website said Donald Trump was looking for ways to “go after” the company, quoting an unnamed friend of the president. Jeff Bezos, Amazon’s founder and chief executive, owns the Washington Post, a paper that the president frequently labels as “fake news”.
The disruptors are getting ditched as tech fear spreads well beyond Facebook. The Nasdaq 100 Index’s gauge of one-month implied volatility is exceeding the S&P 500 Index’s by the most in over 13 years on Wednesday, a signal that fear is firmly focused on the technology behemoths that until recently had been fueling a series of all-time highs in U.S. equities.
Apple CEO Tim Cook called for privacy regulation, saying consumers should have more visibility into not only what personal information they share online but how companies stitch together that information to better understand their users. “We’ve never believed that these detailed profiles of people that have incredibly deep personal information that is patched together from several sources should exist,” Mr. Cook said during a taping of an MSNBC show slated to air April 6. He said he is generally averse to regulation, “however, I think we’re beyond that. It’s time for a set of people to think about what can be done.”
“He’s obsessed with Amazon,” a source said. “Obsessed.” Trump has talked about changing Amazon’s tax treatment because he’s worried about mom-and-pop retailers being put out of business. A source who’s spoken to POTUS: “He’s wondered aloud if there may be any way to go after Amazon with antitrust or competition law.” Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen. Trump’s wealthy friends tell him Amazon is destroying their businesses. His real estate buddies tell him — and he agrees — that Amazon is killing shopping malls and brick-and-mortar retailers.
Asked about the report at the White House daily press briefing, Sanders responded, “We have no announcements and no specific policies or actions that we’re currently pushing forward or considering taking.”
“In a nutshell, the FANG names and the Beltway continue to be on a ‘collision course’ in the eyes of the Street,” said Daniel Ives, chief strategy officer at GBH Insights LLC. “With Facebook and regulatory worries swirling around tech names, the last thing nervous tech investors wanted to see today was news that Trump is targeting Bezos and Amazon over the coming months.”
While China slams the brakes on buying trophy properties and the retail apocalypse draws nigh, something less sexy but striking is going on in real estate. These are not the sleepy warehouses of old. Distribution centers today are hives of activity. As e-commerce companies race to get that Original EggMazing Easter Egg Decorator Kit to your doorstep ever faster, they need sophisticated equipment to assemble orders and a swelling workforce to manage it all.
Moody’s Investors Service downgraded Tesla’s debt on Tuesday afternoon, citing persistently negative cash flow and continued production issues with the Model 3 mass-market sedan. Moody’s is keeping a negative outlook on the credit due to “the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall.” Tesla’s bonds due in 2025, issued just last summer, were quoted near 90 cents on the dollar after hours. Meanwhile, the stock is down 23% in about a month, making equity more expensive. There are plenty of reasons that Tesla’s magic touch with the capital markets is fading fast.
After a spate of fresh setbacks in the past week, including a fatal Tesla crash and a credit-rating downgrade, bondholders are asking hard questions about whether Musk can deliver on his bold promise to bring electric cars to the masses before the company runs out of cash. On Wednesday, Tesla’s notes plunged to a low of 86 cents on the dollar, the clearest sign yet creditors aren’t totally sure the company will be money good.
Selling in Tesla bonds intensified, driving prices to fresh lows, a day after the electric-vehicle manufacturer suffered a credit-rating downgrade. The situation is especially noteworthy, because Tesla’s near-term financial viability depends on its access to the capital markets. The company, investing heavily to bring out its mass-market Model 3 sedan, burned through on average about $1 billion in cash each quarter last year, and analysts expect a similar pace this year until production kicks into a higher gear and generates new revenue.
The crash, which is being investigated by U.S. authorities, adds to Chief Executive Officer Musk’s challenges including concerns that the electric-car maker won’t reach its production targets for the all-important Model 3 sedan. The accident also potentially raises fresh questions about self-driving features after a deadly Uber Technologies Inc. accident that happened days earlier and sent ripples across the broader autonomous-vehicle industry.
Souring sentiment was news of an investigation into a fatal Tesla crash by US officials. But the most important factor is the new Model 3. If deliveries are strong when Tesla releases new numbers next week, it can avert an immediate cash call. If they are weak, the company will find itself tapping investors at an inopportune time. Bond investors, in particular, will take less comfort from that equity cushion.
According to the Bernstein analysts Max Warburton and Toni Sacconaghi, it’s the robots that can’t pump out Tesla’s highly anticipated Model 3s fast enough. The whole process is too ambitious, risky, and complicated. Warburton, who spent his career before Wall Street at the International Motor Vehicle Program — a partly academic, partly commercial organization based at MIT — wrote that “automation in final assembly doesn’t work.” Bernstein adds that the world’s best carmakers, the Japanese, try to limit automation because it “is expensive and is statistically inversely correlated to quality.” Their approach is to get the process right first, then bring in the robots — the opposite of Musk’s.
Facebook Inc said on Wednesday it would end its partnerships with several large data brokers who help advertisers target people on the social network, a step that follows a scandal over how Facebook handles personal information. The world’s largest social media company is under pressure to improve its handling of data after disclosing that information about 50 million Facebook users wrongly ended up in the hands of political consultancy Cambridge Analytica.
New Zealand’s privacy commissioner has accused Facebook of breaking the country’s privacy laws and has deleted his account on the site. John Edwards released a scathing criticism of the social media giant, accusing it of breaching privacy laws after it refused to release personal information held about the accounts of other Facebook users.
“The recent news about Facebook’s alleged mismanagement of users’ data has solidified our decision to suspend our activity on the platform at this time,” the lifestyle company founded by Hugh Hefner said Wednesday. Playboy said it would deactivate the various Facebook pages it manages. More than 25 million Facebook users have engaged with these accounts, the company said. A Playboy spokesman said the privately held company has no plans to return to the platform. Facebook Inc. didn’t immediately respond to a request for comment.
In one of the longest sessions in recent memory, Mr. Wylie made a number of jaw-dropping assertions, most significantly that the company’s exploitation of personal data had swung the results of Britain’s 2016 referendum on leaving the European Union. He also suggested that his predecessor at Cambridge Analytica was murdered. But mostly, Mr. Wylie tried to explain data-mining. He looked like a cerebral skate-rat, which might in other circumstances have undermined his credibility, but in this case it seemed to help. He was polite. He resembled, as one journalist put it, “a patient grandson trying to set up a Skype call with his gran.”
As a start-up called Cambridge Analytica sought to harvest the Facebook data of tens of millions of Americans in summer 2014, the company received help from at least one employee at Palantir Technologies, a top Silicon Valley contractor to American spy agencies and the Pentagon. It was a Palantir employee in London, working closely with the data scientists building Cambridge’s psychological profiling technology, who suggested the scientists create their own app — a mobile-phone-based personality quiz — to gain access to Facebook users’ friend networks, according to documents obtained by The New York Times.
Palantir disputed Wylie’s claims and said although Cambridge Analytica sought to engage on “multiple” occasions, Palantir always shot down the offer. One employee didn’t though. “We learned today that an employee, in 2013-2014, engaged in an entirely personal capacity with people associated with Cambridge Analytica. We are looking into this and will take the appropriate action,” Palantir spokeswoman Lisa Gordon said in an emailed statement to Bloomberg.
Snapchat is building a way for people to use their Snapchat account to connect with third-party apps. The idea, in theory, would let Snapchat users grant outside companies access to their Snapchat data to help personalize other services. If that’s the case — and it looks like it is, based on these screenshots Mashable published on Tuesday — it would mean that Snap is building out the same kind of API that just got Facebook into a whole mess of trouble. You can’t make these things up.
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
Even in a cryptocurrency industry teeming with overnight success stories, Zhao Changpeng stands out. In less than eight months, the founder of Binance has grown his company from an idea into the world’s largest digital-asset exchange by traded value. He has vaulted from obscurity to the cover of Forbes magazine, steered Binance to a $200 million profit in its second quarter of existence, and amassed a personal fortune that he claims is worth as much as $2 billion.
Commodity Futures Trading Commission Chairman J. Christopher Giancarlo has blown up on Twitter recently, gaining tens of thousands of followers almost overnight after enthusiastically testifying in February to Congress about digital currencies. The balding, bespectacled 58-year-old regulator now has 49,000 Twitter followers and is regularly lauded in memes that call him “Bitcoin Jesus” and “one of us! one of us!” He’s even embraced the slightly dorky hashtag given to him by the Bitcoin masses: #cryptodad.
Steven Seagal – actor, Zen master, musician, director, martial arts instructor and now crypto ambassador – has reportedly walked away from the Bitcoiin project, along with its anonymous founders, after closing out an ICO that may or may not have raised its targeted $75 million. No one knows, really, and that seems to be a recurring problem with ICOs, highlighting the danger of celebrity-sponsored coins that seem exciting but offer no protection from potential fraud.
The social media platform, a popular gathering spot for crypto enthusiasts, last week disabled the option to pay for its premium membership with Bitcoin as it watches how Coinbase Inc.’s Coinbase Commerce platform develops and after there were glitches in the system. The move suggests that some merchants may disable Bitcoin payments before deciding whether to switch to Coinbase’s service. It also highlights how Bitcoin continues to struggle to gain mass adoption for payments, as even one of the first adopters bails.
Bitcoin advocate Thomas Lee is leaning on his years of experience as a stock analyst when warning cryptocurrency investors that they need to be patient in the wake of this year’s more than 40 percent decline. “Market timing is generally discouraged in traditional equity investing,” Lee, the former chief equity strategist at JPMorgan Chase & Co., wrote in a note Wednesday. “If an investor missed out on the 10 best days (for S&P 500) each year, the annualized return drops to 5.4 percent (ex-10 best), from 9.2 percent. In other words, the case for buy and hold in equities is the opportunity cost of missing out on the 10 best days.”
Nearly a quarter of South Koreans in their twenties want to invest in cryptocurrencies, according to a new poll conducted by Bank of Korea. Yonhap News reported Tuesday that the bank’s survey examined cryptocurrency awareness among 2,511 Korean residents, with the age of the respondents ranging from people in their twenties to their seventies. Notably, the survey found that roughly 30% of people in their twenties and 40% of those in their thirties are familiar with cryptocurrencies, while only 21.6% of the overall group was aware of the tech.
Interest in cryptocurrency-related jobs has declined in parallel with a slump in cryptocurrency prices, according to employment search engine Indeed.com. According to a new report released Wednesday, cryptocurrency-related searches on the site climbed from June through mid-December of 2017, peaking at 39 searches per million for the term “bitcoin” and 46 searches per million for the term “cryptocurrency.”
Using publicly available sources, Satis Group LLC classified initial coin offerings (ICOs) with market capitalizations of at least 50 million USD by quality, following an ICO’s evolution from white paper, fundraising, to eventual trading online. Their findings include the eye-popping claim that 80% of ICO’s are scams, and only 8% managed to trade on a exchange.
The Kakao-backed cryptocurrency exchange Upbit has launched a system to reward users for identifying fraudulent multi-level schemes related to cryptocurrencies. The exchange has already identified and reported 20 such schemes to the police.
Crypto-related activities are now considered legal in Belarus. The presidential decree “On the Development of the Digital Economy” came into force on March 28. The country aims to become a global IT hub luring entrepreneurs from around the world with a business-friendly environment.
Litecoin creator Charlie Lee also twitted out a personal mea culpa on his part, saying: “Like everyone else, we got too excited about something that was too good to be true and we optimistically overlooked many of the warning signs. I am sorry for having hyped up this company and vow to do better due diligence in the future.” Despite this honest message, a large part of the LTC community is apparently not quick to forgive him, with top ranked social media posts questioning Charlie’s leadership and status in the wake of this debacle.
The organizations have created the Eurasian Association of Blockchain in order to create a fund to support and formulate the lawsuit. According to local news outlet RIA Novosti, Pripachkin said that anyone interested can “chip in” to the crypto fund. Pripachkin added that a claim will also be filed against the companies’ shareholders if they have crypto wallets.
The donation, which OmiseGO contributed together with Ethereum cofounder Vitalik Buterin, will see GiveDirectly continue an experimental scheme aimed directly at refugees, providing 12,000 grants to families in Uganda. A pilot scheme has already seen 4,400 families receive $650, TechCrunch reported Tuesday, with the cryptocurrency experiment increasing the self-sufficiency of the process and reducing reliance on intermediaries.
The BOK’s survey showed that 21.6 percent of the 2,511 respondents are aware of digital currencies. Within this 21.6 percent, the percent of awareness for respondents in their 20s and 30s, increased to 29.4 percent and 40.3 percent respectively. Going further, the percent of those who are eager to invest in crypto was 24.2 for those in their 20s, and 20.1 percent of respondents in their 30s.
The European Central Bank (ECB) again championed Blockchain’s potential for transforming securities settlements this week as it completed new research with the Bank of Japan (BoJ), published Tuesday, March 27. In a second summary of findings it prepared as part of its partnership with the BoJ, dubbed Project Stella, the ECB eyed how so-called distributed ledger technology (DLT) could function in various securities transactions.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
The U.S. is taking aim at President Xi Jinping’s strategy to make China a global leader in the high-tech industries of the future. After slapping tariffs on 20th century industries like steel, President Donald Trump is now mulling curbs on 10 strategic industries that Beijing aims to dominate this century. The measures may be announced as early as this week on industries that form the thrust of the “Made in China 2025” plan to boost high-end machinery, aerospace, new-energy vehicles and biotechnology. “These are things that if China dominates the world, it’s bad for America,” U.S. Trade Representative Robert Lighthizer told a Senate committee this month.
BUDGET, INFRASTRUCTURE, HEALTHCARE, IMMIGRATION
The department is aiming to roll back Obama administration attempts to curtail racial, ethnic and income segregation in federally subsidized housing and development projects. The Trump administration is attempting to scale back federal efforts to enforce fair housing laws, freezing enforcement actions against local governments and businesses, including Facebook, while sidelining officials who have aggressively pursued civil rights cases.
The Trump administration has more than tripled the amount of money flowing from an Obama-era transportation program to projects in rural areas, shifting aid to localities that the White House says have been left behind in years of postrecession economic expansion.
Tensions over criminal justice policy have pitted the president’s son-in-law against his attorney general, and resulted in a seesawing approach to prisons. On Capitol Hill, a wholesale reconsideration of American sentencing laws and prison policies has bipartisan support. Dozens of senators have sponsored a bill to change mandatory-minimum sentences and ease drug laws that have been used to seek lengthy sentences for nonviolent offenders. The bill also includes provisions to expand education, worker training and drug rehabilitation programs in prison. Mr. Kushner, administration officials say, supports such sweeping change. Mr. Sessions is adamantly opposed. The two men reached a compromise in recent months: Mr. Kushner could push for the prison changes, but Mr. Sessions would position the administration strongly against a broader overhaul.
Orange County officials on Tuesday voted to condemn parts of California’s approach to immigration, aligning themselves with the Trump administration as the state increasingly stakes out an oppositional role. At a packed public hearing, the county’s board of supervisors—all Republicans—also voted to support a federal lawsuit against California’s so-called sanctuary state law, which strictly limits when and how local authorities can cooperate with federal immigration authorities.
RUSSIA MEDDLING, RUSSIA PROBE, TRUMP WORLD
The Russian foreign ministry on Wednesday accused the British government of “disinterest […] in finding out the true motives and establishing the perpetrators” of the attack. This behaviour “leads us to the idea of a possible involvement of the British special services. If the Russian side is not provided with convincing evidence to the contrary, we will assume that we are dealing with an attempt on the lives of our fellow citizens as a result of a huge political provocation,” it said.
Donald Trump’s deputy campaign chairman Rick Gates was in direct communication with a person he knew was a Russian spy in the weeks ahead of the 2016 election, according to court documents filed by special counsel Robert Mueller Tuesday. The documents reveal Gates was in contact with a former officer in Russian military intelligence in the months leading up to Trump’s win. Crucially, Gates was aware of this person’s ties to Russian intelligence, the filing adds, calling the 2016 conversations “pertinent to the investigation.”
The special counsel, Robert S. Mueller III, is investigating numerous contacts between President Trump’s advisers and Russia-linked individuals and entities leading up to and after the November 2016 election. The document, filed in Mr. Mueller’s name, stated that the communications between Mr. Gates and the individual were “pertinent to the investigation.”
A lawyer for President Trump reportedly discussed the possibility last year of the president pardoning his former national security adviser Michael Flynn and former campaign chairman Paul Manafort.
President Trump’s lawyer told attorneys representing Paul J. Manafort and Michael Flynn last year that the president might be willing to pardon his former aides if they faced criminal charges stemming from an investigation into Russia’s election interference, according to three people familiar with the discussions.
The talks suggest that Mr. Trump’s lawyers were concerned about what Mr. Flynn and Mr. Manafort might reveal were they to cut a deal with the special counsel, Robert S. Mueller III, in exchange for leniency. Mr. Mueller’s team could investigate the prospect that Mr. Dowd made pardon offers to thwart the inquiry, although legal experts are divided about whether such offers might constitute obstruction of justice.
A lawsuit accusing President Trump of violating the Constitution by refusing to divorce himself from his businesses cleared a critical hurdle Wednesday when a federal judge in Maryland refused the Justice Department’s plea to dismiss it. Although the case could still be thrown out on other grounds, the judge’s ruling adds to the president’s growing legal troubles.
A federal judge’s ruling is the first to suggest that the president can be sued for the alleged violation of the Constitution. Messitte cited examples of government clients — including Kuwait and Bahrain — patronizing the Washington hotel, possibly to the detriment of competitors and taxpayers. He wrote that Maryland and the District had sufficiently argued that Trump’s hotel “has had and almost certainly will continue to have an unlawful effect on competition.”
KOREAN PENINSULA, MIDDLE EAST, NUCLEAR WEAPONS
China said on Wednesday it won a pledge from North Korean leader Kim Jong Un to denuclearize the Korean peninsula during a meeting with President Xi Jinping, who pledged in return that China would uphold its friendship with its isolated neighbor. After two days of speculation, China announced on Wednesday that Kim had visited Beijing and met Xi during what the official Xinhua news agency called an unofficial visit from Sunday to Wednesday. The trip was Kim’s first known journey abroad since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the United States.
With a clandestine trip to Beijing this week, North Korean leader Kim Jong Un has taken his first, tentative steps onto the world diplomatic stage. Long shunned as a pariah by the international community, Mr. Kim and his regime have sought legitimacy and recognition as a nuclear-weapons state as the country’s dilapidated economy has faced ever-tougher sanctions.
In an attempt to keep the visit under wraps earlier this week, China censored the characters for “Kim Jong Un” and “North Korea” from its internet — as well as longstanding nicknames for the North Korean leader, such as “Fatty Fatty.” To circumvent the ban, some Chinese people picked other unflattering nicknames, like “fatty on the train” and “the obese patient,” Reuters reported. Others used more diplomatic terms, like “the visitor from the northeast” and “the sibling next door.”
The supreme leader’s comments, reported by China’s Xinhua news agency, are the first confirmation by North Korea of the potentially historic summits, which are planned for the end of April or early May. On Wednesday Donald Trump wrote in a tweet: “Now there is a good chance that Kim Jong Un will do what is right for his people. Look forward to our meeting!”
INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
Wages and benefits for truck drivers are rising in the U.S. as tight freight-hauling capacity falls short of surging demand. The American Trucking Associations, a trade group that represents fleet owners, said annual truck-driver salaries rose between 15% and 18% from 2013 to 2017, with growth varying based on the type of fleet and the nature of the routes.
Slow growth can be managed with the right fiscal policies. This is where it gets worrisome. In the U.S., interest swallowed 8% of federal revenue last year, the highest of all AAA-rated countries. As interest rates return to normal and debt keeps rising, Moody’s thinks it will hit 21.4% in 2027. This severely limits the government’s flexibility to respond to emergencies, whether a financial crisis, a recession, or a war, not to mention longer-term priorities such as education and research. It is “a good proxy of the stress you may see on the prioritization of funds,” says William Foster, an analyst at Moody’s. “As interest is rising, that crowds out other spending.”
Australia needs to be more relaxed about Chinese cash despite the political tensions that come with it, says the head of Australia’s foreign investment watchdog. Chinese investors are boosting their stakes in Australian property and infrastructure, stoking concerns about the world No. 2 economy’s influence Down Under. But their growing presence simply reflects China’s burgeoning power, and Australia needs such capital for its economic development, said Foreign Investment Review Board chief David Irvine.
VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
The Nobel-winning economist Robert Shiller has warned that growing trade tensions between the United States and China could spark the next US economic crisis. Speaking at the China Development Forum in Beijing over the weekend, Shiller said a trade war between the world’s largest economies risked stalling business investment, leading to the potential for an immediate economic downturn. “It’s just chaos — it will slow down development in the future if people think that this kind of thing is likely,” Shiller told CNBC in response to proposed tariffs announced by the US and China late last week.
Strategists from Morgan Stanley to Lazard Asset Management Ltd. have recently stoked worries about the popular quantitative strategy. Their primary concern? That investors piling into the same winners, including lofty technology stocks, had heightened the risk of a rush to the exits. Those warnings, it seems, were scarily prescient. A long-short momentum portfolio, which hedges out greater market movements, is headed toward its biggest two-day plunge in four months, according to data compiled by Bloomberg.
The implosion of a company with ties to South Africa’s wine country has caused a hangover for one of Wall Street’s most opaque businesses. The Steinhoff trade that soured was a margin loan, a popular corporate equity derivative that allows a client to borrow from banks using shares as collateral. Other types that have been used frequently are so-called collar trades, which allow investors to amass stakes while protecting themselves against a decline in stock prices. The business has been lucrative for Wall Street banks because the products are complex, tailored specifically for each client and aren’t traded on exchanges. Yet lenders have been taking risks for less money as competition increased.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
With a dose of mystery and the flair of a showman, North Korea’s young leader, Kim Jong-un, used his debut as an international statesman on Wednesday to present himself as confident, reasonable — and willing to bargain. Mr. Kim’s surprise two-day visit to Beijing, his first known trip abroad since taking power, was effectively a reminder of how much he has set the agenda in the crisis over his nation’s nuclear arsenal — and of what a strong hand he has going into talks, first with President Moon Jae-in of South Korea next month and later with President Trump.
Vladimir Putin’s wealth extraction machine could not operate without our connivance. In contrast to most western democracies, the US and UK permit anonymous ownership. Most democracies legally require the beneficial owner of an asset, such a company or property, to be made known. Not so in the largest English-speaking democracies. Roughly $300bn is laundered in the US every year, according to the US Treasury. Britain and its offshore financial centres take in about $125bn. Most of it goes undetected. The largest foreign share of it is Russian, according to Anders Aslund, a leading specialist on Russia’s economy. Estimates of Mr Putin’s personal wealth range from $50bn to $200bn. Even the lower figure would exceed the gross domestic product of most UN member states. Yet we have taken few steps to disrupt it.
Robo-advisers were built on the promise of offering wealth management expertise to the masses. Now those startups are turning their attention to a different — and much wealthier — customer. Betterment LLC, the largest startup in the automated financial advisory market, said Wednesday that it’s adding a tool for some clients to adjust investment allocations in more granular ways. The service is limited to those with at least $100,000 under management by Betterment. The product follows similar moves by two other robo-adviser startups in recent months.
I was surprised when I first heard about Mercer’s sojourns in Lake Arthur, but then I’m used to his surprises. During the two and a half years I’ve covered Mercer, I’ve come to think of him as a hard-right version of that guy in the beer commercials, the Most Interesting Man in the World. There seems to be an inexhaustible supply of incredible-but-true Mercer stories, including his pioneering research that begat Google Translate, his funding of a stockpile of human urine in the Oregon mountains, his million-dollar model train set, and his habit of whistling constantly, even during work meetings. The common threads in these stories are a fierce intelligence, a wide-ranging curiosity, and an utter indifference to the judgment of others. The story of his adventures in Lake Arthur, which hasn’t been previously reported, adds yet another strand. It shows just how far a man of means will go to get something he can’t buy: the right to carry a concealed firearm anywhere in America.
On page 155 of the latest 8th-grade history textbook, students are told that Mr. Orban thinks refugees are a threat to Hungary — and then encouraged to believe he is right. “It can be problematic,” the book concludes, “for different cultures to coexist.” It is a testament to the scope of Mr. Orban’s controversial program for remaking Hungary that part of the far-right leader’s message is now woven into the school curriculum. For the past eight years, Mr. Orban has waged a systemic assault on the hardware of Hungary’s democracy — rewriting the national Constitution, reshaping the judiciary and tweaking the electoral system to favor his Fidesz party. Less conspicuously, Mr. Orban is also trying to recode the software of Hungary’s democracy — its cultural sphere, civil society and education system.
Should we try to stop the increasing complexity of our material world? Many advocate this, but I am not one of them. My research aims to do the opposite, to help create materials and engineering systems that are complex enough that they can sense when they are damaged, and are able to repair themselves. Is it possible, for example, to have a city where potholes get fixed autonomously, before they become dangerous and expensive? The main drivers of such self-healing technology are economic and environmental, and promise to yield cities that are more like forests, in that they are self-sustaining ecosystems.
In an undisclosed strip-mall location, the survivors of the Marjory Stoneman Douglas High shooting—and a few key alumni allies—are building a social-media content studio that just might reform America’s crazy gun laws. This response would not have been possible for the Columbine generation. Today, every high-school kid in America is a content creator, churning out daily posts on Instagram and Snapchat without a thought—or, actually, with a tremendous amount of thought. Most can amuse their friends on Snapchat, but only a few are truly gifted. For the two dozen kids that came together in Cameron Kasky’s living room, content creation isn’t just a social diversion; it’s a way of life.
With ‘Parts Unknown,’ now in its 11th season, Bourdain continues a restless odyssey to understand our global community through food. “Do you know the German word Sehnsucht?” he asks. “It means feeling homesickness for a place you’ve never been.” Bourdain, whom everybody calls Tony, is rapping his fingers against the velvet armchair in which he sits. He fidgets constantly. “What about saudade?” he says. “That’s a great one. It’s Portuguese: a longing, for a place you may get to but will probably never go.” It’s 11:30 a.m. He offers me a beer and starts smoking. “Am I searching, am I seeking, am I always looking for something more? Yes!” he says. “I do this for no other reason.”
USA ECONOMY DATA, CITIES AND STATES
The U.S. economy expanded at a rate of 2.9 percent in the fourth quarter, the Commerce Department reported Wednesday, much better than Wall Street analysts expected and very close to President Trump’s goal of 3 percent growth. The strong growth came largely from Americans opening their wallets to spend more. Consumption accounts for about 70 percent of the U.S. economy, and as more Americans get jobs, they are able to buy more online and at stores. Businesses also boosted their spending at the end of last year, beefing up their inventories as executives expect sales to pick up. There was also more federal government spending, especially on defense, according to the report.
Gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 2.9% annual rate in the fourth quarter, adjusted for seasonality and inflation, the Commerce Department said Wednesday. That exceeded economists’ expectations and was up from a previous estimate of 2.5% growth, and only a little slower than the third quarter’s 3.2% growth and 3.1% growth in the second quarter. Consumer spending was revised higher for the fourth quarter, and private inventories exerted a smaller drag on growth than earlier thought.
GLOBAL ECONOMY, INTERNATIONAL
Germany in 2016 recorded its highest fertility rate since 1973, the Federal Statistics Office reported on Wednesday. The latest figures are part of an upward trend for Germany, Europe’s biggest country by population, which has suffered from low birth rates since the 1970s. But women in Germany are still not having enough babies to ensure the total population stays constant. The new figures do however put Germany near the European average.
Europe’s biggest economy and its public pension system are struggling with a rapid aging of the population. In an effort to boost the birth rate, the government has expanded maternity and paternity benefits as well as childcare in the last decade. Chancellor Angela Merkel’s decision in 2015 to welcome more than a million refugees, mainly from war zones in Syria and Iraq, has also been described as a demographic game changer.
His selection ends a process that unnerved Ethiopia’s neighbors and investors, coming nearly two months after the resignation of Prime Minister Hailemariam Desalegn. Mr. Desalegn’s departure presented the world’s fastest-growing economy with its first-ever leadership change that wasn’t precipitated by conflict or the demise of a leader.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
Mr. Begor, who will also join Equifax’s board, will take control of a company that faces mounting challenges. Equifax recently revised higher the number of U.S. consumers whose information was compromised in the hack—its second such revision—bringing the total to 147.9 million. The company is under investigation by federal and state regulators, is a defendant in a number of lawsuits, and is working to regain the trust of the public and its clients, including lenders who are questioning whether to renew contracts with the firm.
ENERGY COMPANIES, NOCs, INDUSTRY
America’s most prolific oil field is now its worst market for natural gas. A pipeline shortage that’s leaving gas trapped in West Texas’ Permian Basin means prices for the fuel there are the lowest of any major U.S. hub, wresting that distinction from Appalachia’s Marcellus Shale. Prices for Permian gas, produced alongside oil in the play, have tumbled 30 percent from a year ago, while output rose to a record. All that production is creating a dilemma for drillers, who may be forced to curtail oil output if they can’t get their gas to market. Producers can burn off some of the gas — a process known as flaring — but state regulators typically won’t allow that to happen indefinitely. And as mild spring weather limits demand for the heating fuel, explorers may be giving their gas away, according to broker Ion Energy Group LLC.
The takeover is the largest in the US exploration and production industry since 2012. It will make Concho the biggest oil and gas producer from shale in the Permian Basin region of Texas and New Mexico, which has been the hottest area for investment in the US oil industry in recent years. However, the initial market reaction was negative for Concho, with its shares dropping by nearly 9 per cent to trade at about $143.09. RSP’s shares were up 16 per cent at almost $45.
POLLUTION, CLIMATE & ENVIRONMENT
Britain’s Communities Secretary rejected plans for a new Northumberland open-pit coal mine, citing climate change concerns. The rejection was the first of its kind to rest on climate change concerns in the United Kingdom. The country has committed to phasing out coal use at power plants by 2025.
Fewer Republicans say they believe that there is a scientific consensus on climate change or that the effects of global warming have already begun, according to a new Gallup poll, which showed a widening partisan gap near record levels. As Republicans moved in one direction, Democrats have moved in the other. An increasing number of Democrats believe that the effects of global warming have already begun and that warming will pose a “serious threat” in their lifetimes. As in earlier surveys, an overwhelming portion of Democrats are worried about climate change and link it to human activities.
BREXIT, SCOXIT, LONDON, UK ECONOMY
The number of finance jobs to be shifted out of Britain or created overseas by March 2019 due to Brexit has dropped by half compared to six months ago to 5,000 roles, firms employing the bulk of UK-based workers in international finance told Reuters. A Reuters survey of 119 firms, following up on a survey published in September 2017, also found that Paris has overtaken Frankfurt as the most popular destination for the new roles.
Theresa May’s 12-month journey to Brexit is strewn with political danger, but the rebels who could alter the course of events have one main opportunity: a parliamentary showdown in the autumn over what the UK prime minister’s team calls simply “the Deal”. The rebels within the governing Conservatives — whose votes the minority government badly needs — are quietly scaling back plans for guerrilla attacks on Mrs May’s position in the coming months. Instead, they are saving their political capital for one final push in the autumn, when she is due to present the details of Britain’s EU withdrawal deal and outline the plans for future ties with the bloc. “That’s the moment of truth,” says Jacob Rees-Mogg, a leading Brexiter Tory MP.
A year before Britain is supposed to formally break away from its nearest neighbors in continental Europe, divisions have only hardened over going it alone. The decision to leave the European Union has dominated the national conversation since a referendum in June 2016. Differences spanning generations, backgrounds, economics and geography have become more entrenched. Bloomberg reporters visited nine locations to talk Brexit, interviewing 133 people in late February for this chronicle of the country’s transition.
GEOPOLITICS, CRIME, TERRORISM
Poland signed the largest arms procurement deal in its history on Wednesday, agreeing with the United States to buy Raytheon Co’s Patriot missile defense system for $4.75 billion in a major step to modernize its forces against a bolder Russia. “It is an extraordinary, historic moment; it is Poland’s introduction into a whole new world of state-of-the-art technology, modern weaponry, and defensive means,” President Andrzej Duda said during the signing ceremony.
SCANDALS, LAWSUITS, FINES, REGULATORY
The so-called ball-tampering scandal has raised the unthinkable specter of cheating, triggering something of an existential crisis across cricket-crazy Australia. Down Under’s “Tom Brady moment” has reverberated all the way to the top. “This has been a shocking affront to Australia,” the country’s prime minister, Malcolm Turnbull, said Tuesday. “How many of us as children, how many of us as fathers and mothers have had children who have looked up to the Australian team, who have looked up to their role models, their idols?”
China accused the deal maker who bought the Waldorf Astoria hotel in New York of bilking investors of more than $10 billion. The vast amount of money that officials said the deal maker, Wu Xiaohui, had obtained illegally raised the stakes in a prosecution meant to show Beijing’s resolve to crack down on the titanic borrowing binge of recent years. The Chinese government last month seized Mr. Wu’s company, Anbang Insurance Group, in a move seen as making an example of a firm that piled on too much debt too fast and added risks to the country’s already creaky financial system.
Elaine Wynn said a Wynn Resorts Ltd. in-house lawyer who was told in 2009 about an “alleged rape” of an employee by her former husband, Steve Wynn, called it a “personal” matter. The ex-wife of the company’s founder testified Wednesday for the first time in open court about the allegations of sexual misconduct that led Steve Wynn to step down as chairman and chief executive officer of his casino empire last month. She said at a hearing in Las Vegas that she told Wynn’s general counsel, Kim Sinatra, nine years ago about the alleged rape from four years earlier.
MEDIA, CABLE, SPORTS, ENTERTAINMENT
Facebook and Alphabet Inc.’s Google, the parent of YouTube, have struggled for more than a year with criticism that they disseminate misinformation, publish violent and inappropriate content, and fuel hatred and division. Yet advertisers are paying them anyway and shifting more dollars away from TV networks with problems of their own. “As ratings for TV programming continue to decline, advertiser spending will also continue to see declines, especially in years that do not boast major events such as presidential elections and Olympic games,” said Monica Peart, eMarketer’s senior forecasting director.
AUTOS, ELECTRIC, SELF-DRIVING
Alphabet Inc.’s Google is getting into self-driving cars in a new way. Gradient Ventures, an early-stage venture fund within Google, is leading a $6 million investment in a new company that’s building software to let humans control cars remotely. Scotty Labs, a nine-person startup, works on “teleoperations,” an emerging slice of the autonomous vehicle business that may grow more critical as the field faces closer scrutiny. Scotty Labs (as in “beam me up, Scotty”) has built remote-driving equipment that looks like a souped-up arcade game. It’s also working on faster wireless networking technology so human operators can steer cars with minimal latency, a big outstanding hurdle.
Lior Ron, the co-founder of a self-driving truck company Uber acquired, is leaving the company according to a person familiar with the matter. Ron co-founded Otto, an autonomous vehicle start-up, which Uber bought in 2016, and his LinkedIn profile lists him as the head of Uber Freight. Ron co-founded the start up with Anthony Levandowski, who was at the center of a lawsuit between Uber and Alphabet-owned Waymo.
SCIENCE, NATURE, HISTORY, PSYCHOLOGY
In a study published Wednesday in Proceedings of the Royal Society B, scientists from Sweden and Norway reported that just three new males dramatically reduced inbreeding and produced a generation of more robust offspring in the Helagsfjället arctic fox population. The findings lend support to a disputed conservation strategy called genetic rescue, which involves introducing genetic diversity to boost the survival chances of small, inbred populations, said Jennifer Neuwald, an assistant professor of biology at Colorado State University who was not involved in the new study.
The human body was thought to have 79 organs—until researchers stumbled on a strange phenomenon that could turn medicine and what we thought we knew about the body upside down. The new organ, he explained, was a thin layer of dense connective tissue throughout the body, sandwiched just under our skin and within the middle layer of every visceral organ. The organ also made up all the fascia, or the thin mesh of tissue separating every muscle and all the tissue around every vein and artery, from largest to smallest. What initially seemed to be a solid, dense, connective tissue layer was actually a complex network of fluid-filled cavities that are strong and flexible, yet so tiny and undiscerning that they escaped the attention of the brightest scientific minds for generations.
Scientists have identified a new human organ hiding in plain sight, in a discovery they hope could help them understand the spread of cancer within the body. Layers long thought to be dense, connective tissue are actually a series of fluid-filled compartments researchers have termed the “interstitium”. These compartments are found beneath the skin, as well as lining the gut, lungs, blood vessels and muscles, and join together to form a network supported by a mesh of strong, flexible proteins.
HEALTH, PRODUCTIVITY AND WELLNESS
“I’m somebody who’s gone through at least three or four major depression spells after [Olympic] Games that, you know, I’ve put my life in danger,” Phelps said on David Axelrod’s “The Axe Files” podcast. “… The USOC, in my opinion, hasn’t done anything to help us transition after an Olympics. I think it’s sad. I think it’s unfortunate. It’s something that we’re working towards now.”
A serial entrepreneur, Munk’s ventures ranged from high-end electronics to real estate. But it was as founder of Toronto-based Barrick, the world’s largest gold producer, that he amassed most of his wealth, the bulk of which he pledged would go to charities after his death. “We always lived well,” Nina said. “To my father, deals that went south, share prices that collapsed, companies that went bust were merely blips on the path to success. He never doubted he would make it all back, and then some. So why engage in belt-tightening?”
The Mercenary Trader Macro Links were created by Justice “Jack” Litle, aka Justice Litle / Jack Litle — the founder of Mercenary Trader — to provide a compact summary of daily information flows. They are accessed via the Mercenary Research Suite, the flagship offering of Mercenary Trader, which combines trading education and trading research. To see how it works, click here.