Macro Links Nov 20th – Coalition Talks Collapse
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- GERMAN COALITION TALKS COLLAPSE
- MUGABE HOLDS ON
- GOP TAX PLAN
- RUSSIA PROBE
- SAUDI ARABIA
- PUERTO RICO, DISASTER AID
- BITCOIN BOOM-BUST-BOOM
- TESLA TRUCK
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- GLOBAL ECONOMY DATA
- POSITIONING, INFLECTION, MARKET CALLS
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- ENERGY CRUDE OIL, OIL SANDS, SHALE
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- TRUMP WORLD
- ELECTORAL POLITICS
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
- MEDIA, CABLE, SPORTS, ENTERTAINMENT
- AUTOS, ELECTRIC, SELF-DRIVING
- AIRLINES, SHIPPERS, RAIL, TRANSPORTS
- LUXURY, HIGH END, ASPIRATIONAL
- ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
- SCIENCE, NATURE, PSYCHOLOGY
GERMAN COALITION TALKS COLLAPSE
German Chancellor Angela Merkel declared failure in her bid to form a new government, throwing the future of Europe’s longest-serving leader into doubt and potentially pointing the world’s fourth-biggest economy toward new elections.
German Chancellor Angela Merkel’s efforts to form a three-way coalition government that would secure her a fourth term hit a major setback on Sunday after a would-be coalition partner pulled out of exploratory talks, citing irreconcilable differences.
It is the first time a coalition of this kind has been attempted on a national level in Germany, and the four parties remain unlikely bedfellows. Mutual mistrust, particularly between the leftwing Greens and conservative CSU, runs deep.
MUGABE HOLDS ON
Mr. Mugabe’s refusal to go gently into the night after 37 years of despotic rule was bound to be a major immediate disappointment to many of his countrymen. But after a specially convened meeting of the ruling ZANU-PF party expelled him as its leader on Sunday and ordered him to resign by noon Monday or face impeachment, it was all but certain that he would soon be out of office.
Zimbabweans gathered around their TV sets to watch him go, but it didn’t happen.
President Robert Mugabe shocked Zimbabwe on Sunday night with a televised address that failed to announce his highly anticipated resignation, a dramatic twist that means the 93-year-old may face immediate impeachment hearings.
Chris Mutsvangwa, chairman of the influential war veterans’ association, said Mr Mugabe, who has led the country since independence, must “make a decision promptly to leave office [or] we’ll settle the score”.
What one observer called a “slow motion coup” is now playing out in Zimbabwe as the armed forces, led by General Constantino Chiwenga, seek to ease out the old regime and bring in something new. They are trying to do so in a manner that is palatable to regional powers, particularly South Africa, which have made clear they do not consider military coups an acceptable form of regime change.
GOP TAX PLAN
President Trump wants to cut taxes and reduce the nation’s trade deficit, two goals that stand in direct conflict with each other. The connection between tax cuts and trade deficits is not controversial. The mechanics are straightforward: Republicans are proposing to reduce federal revenue through a $1.5 trillion tax cut without a commensurate reduction in federal spending. To pay for the tax cuts, the government will need to borrow more dollars, some of which will come from foreign investors. Foreigners will get those dollars by selling more goods and services to Americans, which will widen the trade gap.
A daylong debate over taxes devolved into an angry shouting match as Senators Orrin Hatch and Sherrod Brown sparred over whether the bill favored the rich.
The tax debate that consumed Congress this week was missing an ingredient Republicans say is essential to any realistic analysis of changes in the tax law: an accounting of the economic growth impacts of an overhaul.
“It is unusual to press so hard to use these scores and then not to have those scores at the time the bill is being considered,” said William Hoagland, a former GOP congressional budget aide who is now an analyst at the Bipartisan Policy Center.
Susan Collins, a centrist Republican from Maine who handed a blow to President Donald Trump by blocking healthcare changes he advocated earlier this year, signalled in interviews on Sunday that she still had a long list of concerns about the Republican tax bill.
Senate Republicans included a provision in the tax proposal that would clarify a policy toward companies that help maintain private aircraft.
A provision in the House and Senate tax bills will change, but not close, the so-called carried interest tax loophole, which benefits wealthy people.
The White House wouldn’t oppose removing from the Senate tax plan a controversial provision to repeal the individual health-care mandate of the Affordable Care Act, budget director Mick Mulvaney said, a move that could help secure the vote of key Republicans.
In small towns and thriving cities, in Republican- and Democratic-leaning states, local leaders are warning that the $1.5 trillion tax legislation moving through Congress threatens to undermine their ability to raise money for government services, including police and schools. The Republican measures would eliminate or severely curtail taxpayers’ ability to lower their federal tax bill by deducting the cost of their state and local taxes. Without that offset, local leaders say, taxpayers will begin to seek relief closer to home, potentially making it more difficult to provide basic services.
U.S. Republicans are not expected to push major tax cuts through Congress this year, according to a majority of economists in a Reuters poll, who in any case were skeptical that the legislation would provide a significant boost to the economy.
Six months into a special counsel’s investigation of Russian interference in the 2016 presidential election, White House aides and others in President Trump’s close orbit are increasingly divided in their assessments of the expanding probe and how worried administration officials and campaign aides should be about their potential legal peril, according to numerous people familiar with the debate.
Some in the West Wing avoid the mere mention of Russia or the investigation whenever possible. Others take solace in the reassurances of White House lawyer Ty Cobb that special counsel Robert S. Mueller III will be wrapping up the probe soon and the president and those close to him will be exonerated. And a few engage in grim gallows humor, privately joking about wiretaps.
Investors and customers of the Trump Ocean Club International Hotel and Tower in Panama City carried deep ties to organized crime and drug trafficking, according to an NBC News and Reuters joint investigation. A Brazilian real estate salesman who partnered with the Trumps to attract condo buyers for the tower told NBC that the Trumps and others connected to the project were unaware that he was attracting shady investors to the project, but that they never asked any questions.
President Donald Trump has started paying his own legal bills related to the Russia probe, rather than charging them to his campaign or the Republican National Committee, and is finalizing a plan to use personal funds to help current and former White House staff with their legal costs.
One of the many mysteries of the Trump/Russia story is how Clovis fit into the Trump campaign’s pro-Russian tilt and indeed why Russia was so central to the campaign so early. According to the plea agreement unsealed earlier this month in the Mueller probe, soon after agreeing to serve as a Trump foreign policy advisor, George Papadopoulos was told by Clovis that “a principal foreign policy focus of the Campaign was an improved U.S. relationship with Russia.”
The Russian invitation to the Trump campaign that the Senate says Jared Kushner didn’t disclose involved a Russian banker accused of links to organized crime.
The Trump administration is looking at ways to quickly strengthen Saudi Arabia’s missile defenses and disrupt the flow of advanced Iranian-made weapons across the Middle East as concerns grow over a destabilizing new crisis in the region.
Authorities in Saudi Arabia are widening a corruption probe that has reached the upper echelons of the royal family and entangled prominent businessmen who are now being asked to surrender assets in exchange for their freedom.
Saudi authorities are striking agreements with some of those detained in an anti-corruption crackdown, asking them to hand over assets and cash in return for their freedom, sources familiar with the matter said.
PUERTO RICO, DISASTER AID
The chief executive of Puerto Rico’s troubled public electric company stepped down on Friday amid a two-month island-wide blackout and weeks of bruising public outcry over a costly contract to restore service.
Two months after the hurricane, more than half of the island is still without power and about 10 percent of residents lack access to running water, according to the government.
Lawmakers from both parties said the White House’s latest request for emergency disaster-relief funds falls far short of what is needed to recover from this year’s devastating storms, and braced for a political fight over how to pay for it.
“In many countries in Africa, there are far more cellphones than bank accounts,” said Manuel Valente, co-founder of La Maison. “For bitcoin, all you need is a phone.”
Zimbabwe, where the price of bitcoin spiked to double the international rate after this week’s military takeover, shows Jamie Dimon, Axel Weber and other cryptocurrency skeptics where the real-world use of bitcoin, and possibly its future, lies. It’s becoming the preferred way for residents of failing economies to transfer money without dealing with banks, protecting their savings from political turmoil, and avoiding the local currency when its value declines due to inflation.
There’s no data on how much digital money leaves industrialized nations for the developing world. Part of the allure of electronic cash is the ability to transfer it anonymously. But as events in Zimbabwe have confirmed, bitcoin, the world’s most popular cryptocurrency, is most attractive when confidence in institutions falls.
Bitcoin topped $8,000 for the first time, as investors set aside technology concerns that had derailed its advance earlier this month.
UBS Group AG, the world’s largest wealth manager, isn’t prepared to make portfolio allocations to bitcoin because of a lack of government oversight, the bank’s chief investment officer said.
The ability to go long and short paves the way for investors to “take advantage of bitcoin’s significant price swings,” said Garrick Hileman, research fellow at the University of Cambridge. “The lopsided cryptocurrency investment playing field, historically slanted in favor of long positions, is about to be leveled.”
Some people think that cryptocurrency initial coin offerings (ICOs) are a bit of a gamble. Here is one that is 100% gambling: Dragon Corp. tells Business Insider it is raising $500 million (£377 million) in an ICO that will give its buyers cryptocurrency coins that can be exchanged for non-negotiable gambling chips in a yet-to-be-built casino that will float at a dockside in Macau. Buyers won’t get equity in the casino. Just gambling chip tokens.
Commercial truck makers trying electrification initiatives have largely focused on smaller trucks for short-run duties, arguing the battery range, weight and cost of long-haul electric trucks makes them impractical. With the Semi, unveiled this week and due out in 2019, Mr. Musk is promising a vehicle that can travel 500 miles on a single charge—enough to cover most regional freight deliveries—and is cheaper to operate than diesel trucks.
While Tesla has weathered its share of production hiccups, the company maintains appeal by offering high-end performance cars in a sexy package. Mr. Musk further appealed to enthusiasts this week by unveiling the Semi alongside a small $200,000 roadster that he says will be the quickest production car ever to hit roads.
Tamberrino sees Tesla’s stock plunging roughly 34% to $205 per share over the next six months. And as he mentioned above, a big part of his bearish argument is that the Tesla’s already-trimmed Model 3 forecasts still don’t reflect just how much trouble the company will have meeting production targets. In late October, the company said that it was behind on its planned ramp-up for the Model 3, having only produced 260 sedans in the third quarter after targeting 1,500 for September alone.
That’s a big if, given Tesla’s current inability to meet manufacturing targets on the mass-market Model 3 electric car. But if the company really can deliver a battery-powered big rig with a 500-mile range and lower lifetime costs than diesel vehicles, then a big chunk of future oil demand growth is in peril.
Tesla Inc.’s plans to roll out an all-electric big rig have given a fresh jolt to the outlook for battery metals that will go into powering the truck founder Elon Musk is calling “The Beast.”
Banks including Goldman Sachs Group Inc., UBS Group AG and Bank of America Corp. are already forecasting a surge in demand for battery metals like nickel as sales of electric cars ramp up over the next decade. Usage could jump even higher if trucking firms start switching diesel fleets for battery-powered ones.
“The point of this is just to give a hardcore smackdown to gasoline cars,” Mr Musk said. “Driving a gasoline sports car is going to feel like a steam engine with a side of quiche.”
Yet another blue-sky project adds to the hype, but also the headaches. Let’s acknowledge that if Tesla produces a truck with those specs and cost-advantage, and a charging network that clean and powerful, at mass volume, then it would be a game-changer.
But right now, it’s just a claim backed by a couple of demonstration models. In particular, the touted per-mile cost advantage lacked important details, like the price of the truck or even the size of the battery.This might matter less if Tesla were delivering on the Model 3, the mass-market car on which its prospects of getting anywhere near self-funding rest entirely.
Instead, Tesla will be lucky to produce even 5 percent of its original target for the second half of this year. So it’s odd to now be pushing into the even more challenging task of electrifying semis. While it makes for a great show, it actually exacerbates Tesla’s growing credibility problem.
Musk unveiled one flashy strategy for generating cash during the launch event Thursday for the Semi truck, surprising the audience with a prototype of a new generation of the Tesla Roadster. Musk promised the Roadster will be the fastest production car available. The first 1,000 cars will cost $250,000 each, paid in full upfront, with later models starting at $200,000.
Those deposits would put $250 million into Tesla’s cash drawer today for a car that is likely to go into production in 2020.
“Elon Musk just figured out a way to avoid banker fees for a several hundred million dollar capital raise,” Brad Erickson, a KeyBanc Capital Markets analyst, wrote in a report to clients Friday. The Roadster “looked incredible and should be a meaningful force to raise some incremental capital for the company,” offsetting about a month’s worth of cash burn, he said.
The features of Tesla Inc.’s new Semi truck steamrolled Wall Street expectations, with an estimated 500-mile driving range that was almost double what analysts had modeled. However, Thursday’s new product event — where Tesla also unveiled a new high-end car — broadened the rift between bulls and bears on the stock. Several analysts cautioned about the lack of pricing details, the lack of a production partner and the ever-growing shopping list of things Tesla needs to spend money on.
Michelle Krebs, executive analyst for Autotrader, warns that Tesla will have to fend off challengers who have already won trust and loyalty from commercial customers. Tesla only has a track record with passenger vehicles, and is known for delivering months late. That does not impress industrial buyers. “The priority for truck drivers and fleet operators is reliability and uptime,” she wrote by email.
Ian Wright, a former vice president of vehicle development at Tesla and founder of electric truck company Wrightspeed, says Tesla is now entering a fundamentally different business that sidelines many of Tesla’s advantages in the car market. “The people who buy big rigs are not doing it to make a fashion statement, they’re doing it to make money,” he wrote by email. “They’re very sensitive to capital costs, operating costs, and payload… It’s got to do the job and ultimately pay for itself—that’s what they care about and that what you’ve got to prove.”
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
Emerging market bonds are showing signs of stress, fresh evidence that investor interest in some of the world’s riskiest debt may be cooling down after a long rally.
“We’re seeing huge outflows from mutual funds and ETFs, so it’s triggering this domino effect,” said Stephen Ketchum, managing partner at Sound Point Capital Management. Bondholders’ recent skittishness marks a sharp turn from most of this year, when yield-hungry investors plowed billions of dollars into emerging-market bonds, driving a record rally that has enabled even the poorest nations and indebted companies to borrow at low interest rates.
Lurking in the shadows of every bull market run are fears it will suddenly come crashing to a halt. All through 2017, a stellar year in which many strategies have made money, investors have been looking for signs of “the turn” — and this week a few came into view.
All kinds of asset classes have experienced jitters — from junk bonds and US stocks to commodities — which are arousing various measures of market volatility. Such angst, however, has been registering across emerging markets a good deal longer. Once more the catalyst appears to be China, the engine for which so much of EM depends.
The repercussions of China wobbles have duly registered in commodities because of its vast consumption of raw materials — hence this week’s falls in iron ore, copper, nickel and oil. When China sneezes, other EMs — many of them big commodity producers — are quickly exposed to contagion.
Investors retreated from high-yield bond funds last week as selling pressure intensified across the $1.3tn asset class and spurred the fastest pace of outflows in more than three years. Funds that invest in junk-rated corporate bonds suffered withdrawals of $5.1bn in the week to November 15, the largest single week of outflows since market turbulence around the Russian invasion of Ukraine in August 2014, according to data from EPFR.
“The peak yield on the 10-year Treasury should roughly approximate where the final level of fed funds settles out, so that to us implies a flat yield curve if we assume the Fed will do two or three hikes in 2018,” Mark Vaselkiv, chief investment officer of fixed income at T. Rowe Price, said at a press briefing. In his eyes, the Fed will likely stay the course, and the difference between short- and long-term debt could reach zero as soon as the second half of next year.
Rating agency S&P Global warned Viacom on Friday that it had placed the company’s investment grade rating on review for a possible downgrade, as debts at the owner of the MTV and Nickelodeon television networks remain elevated.
It may be in their name, but Venezuelan-dedicated hedge funds aren’t so dedicated to Venezuela anymore. Even the boldest money managers are losing hope that the oil-rich nation can keep servicing its debt.
Central banks have spent around $11tn in emergency support measures since the global financial crisis in 2007, providing a powerful tailwind that has helped raise asset prices worldwide.
But investors have in reality been “borrowing returns from the future”, according to JPMorgan Asset Management’s latest projections for asset markets over the next 10 to 15 years. The study, designed as a framework to help asset allocation decisions, indicates that investors should expect significantly weaker returns in dollar terms over the next decade than those achieved historically.
China is opening its financial firms to more foreign ownership. The opportunity might seem tempting. But developed-world buyers should beware — it’s possible that it’s a trap.
The chance of a Chinese financial crisis may really be in the works this time. And if the country’s leaders are worried about an imminent crash, it seems like a smart thing to do would be to execute a preemptive bailout. And the cheapest way to bail out finance companies is with an injection of foreign money.
Western capital might be just the dumb money that China’s strained financial firms need. With stocks, real estate and basically every other asset in the rich world looking expensive, developed-country investors are desperate for some yield. China, with its huge market and still-rapid growth, is always a tempting bet, but especially so now that there are few good investment options.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
To call for regional unity on security threats, while making it clear that America will fight for national economic advantage at the expense of its allies, is a difficult message to sell. It will be all the harder when Mr Trump has shown that his instinct is to admire and pander to the region’s strongmen, rather than to stand up to them. A slightly too cordial press conference with Mr Xi is one thing. To take Vladimir Putin’s word over that of US intelligence agencies or to cosy up to Rodrigo Duterte, the murderous Philippine president, is quite another.
All this sends a direct message that the US can no longer be relied on to uphold liberal values or the liberal economic order on which its own prosperity — and that of many in the region — has been built. It is unsurprising that Asian-Pacific governments are drawing their own conclusions and — in trade at least — preparing to go it alone.
Very often, it’s suggested that civilisations collapse, but this isn’t quite right. It is more accurate to say that states collapse. States are tangible, identifiable ‘units’ whereas civilisation is a more slippery term referring broadly to sets of traditions. Many historians, including Arnold Toynbee, author of the 12-volume A Study of History (1934-61), have defined and tried to identify ‘civilisations’, but they often come up with different ideas and different numbers. But we have seen that while Mycenaean states collapsed, several strands of Mycenaean material and non-material culture survived – so it would seem wrong to say that their ‘civilisation’ collapsed. Likewise, if we think of Egyptian or Greek or Roman ‘civilisation’, none of these collapsed – they transformed as circumstances and values changed. We might think of each civilisation in a particular way, defined by a particular type of architecture or art or literature – pyramids, temples, amphitheatres, for example – but this reflects our own values and interests.
States collapsed, civilisations or cultures transformed; people lived through these times and employed their coping strategies – they selectively preserved aspects of their culture and rejected others. Archaeologists, historians and others have a duty to tell the stories of these people, even though the media might find them less satisfactory. And writers who appropriate history for moral purposes need to think carefully about what they are doing and what they are saying – they need to make an effort to get the history as right as possible, rather than dumbing it down to silver-bullet theories.
In recent weeks, alarming new data from the American Foreign Service Association, the union representing diplomats, shows just how far Mr. Tillerson has taken things. Since January, more than 100 senior foreign service officers have left the department, depleting the ranks of career ambassadors, the diplomatic equivalent of four-star generals, by 60 percent, while the number of career ministers (akin to three-star generals) is down 42 percent. The hiring of new foreign service officers has slowed almost to a halt, and the number of young people seeking to take the foreign service exam has fallen to less than half the 17,000 who registered two years ago.
All in all, Mr. Tillerson is disrupting the smooth development of career State Department leaders from entry level to the senior ranks, which will create shortages of experienced diplomats down the road. Not surprisingly, morale has plummeted. By contrast, there have been no comparable recent moves by the military services to suspend the commissioning of officers, and even as the diplomatic corps erodes, Congress just approved a Pentagon budget for next year that would boost troops by 20,000.
As Orwell depicts it in “1984,” Big Brother focuses the public on Goldstein’s misdeeds and the continuing threat he poses: “He was the commander of a vast shadowy army, an underground network of conspirators.” As citizens see Goldstein’s face on a screen, they break out into “uncontrollable exclamations of rage,” followed by a “hideous ecstasy of fear and vindictiveness, a desire to kill, to torture, to smash faces in with a sledge-hammer.”
Orwell’s ominous words suggest that every human heart is vulnerable to that ecstasy. “The horrible thing about the Two Minutes Hate was not that one was obliged to act a part, but, on the contrary, that it was impossible to avoid joining in.” (Think of what happens on contemporary social media.)
For Big Brother, the Two Minutes Hate is shrewd politics. It is a diversion from issues of policy, and from problems that people face in their ordinary lives. It focuses citizens’ attention on a malevolent, even demonic force, who continues to threaten them.
Of course, Orwell was producing a caricature, and Donald Trump, freely elected in a system with checks and balances, is no Big Brother. But politicians on the right and the left, and in both democratic and undemocratic societies, have found it useful, or irresistible, to identify their own Goldsteins, and to initiate a period of Hate – minutes, weeks, months or years.
The folks at the Department of Agriculture laid on a friendly welcome for the Trump transition team, but they soon discovered that most of his appointees were stunningly unqualified. With key U.S.D.A. programs—from food stamps to meat inspection, to grants and loans for rural development, to school lunches—under siege, the agency’s greatest problem is that even the people it helps most don’t know what it does.
Exclusive: How an alleged fraudster in Panama, working with Donald Trump’s daughter, helped make Trump’s first international hotel venture a success. The broker was in business with a money-launderer and two criminals from the former Soviet Union. Then he fled.
The scale is larger than any previous movement of Puerto Ricans to the mainland, including the wave that arrived after World War II, said Jorge Duany, the director of the Cuban Research Institute at Florida International University and an expert on Puerto Rican migration. “It’s a stampede.”
More than 168,000 people have flown or sailed out of Puerto Rico to Florida since the hurricane, landing at airports in Orlando, Miami and Tampa, and the port in Fort Lauderdale. Nearly half are arriving in Orlando, where they are tapping their networks of family and friends. An additional 100,000 are booked on flights to Orlando through Dec. 31, county officials said. Large numbers are also settling in the Tampa, Fort Lauderdale and West Palm Beach areas.
The impact of this latest wave is likely to stretch from schools and housing to the work force and even politics. Puerto Ricans, who are American citizens and tilt Democratic, could sway the electoral results of one of the country’s most pivotal swing states.
“When you have a small number of very powerful customers, you have to have a very small number of powerful suppliers,” says Michael Marks, former chief executive of electronics supplier Flextronics and a former Broadcom director. “Thirty years ago you had 200 computer customers, now you have three. Fifteen years ago you had 20 cellphone customers, now you have two. The hardware sector has consolidated massively over the last 30 years . . . I’m surprised it has taken this long for there to be more consolidation in the semiconductor market.”
As Iraqi officials declared Friday that they had taken the last Iraqi town held by the Islamic State, reducing the group’s self-declared caliphate to a tiny remnant on the Syrian side of the border, they are still trying to comprehend the scale of the group’s horrors.
So far, they have found the sites of more than 70 mass graves, numbers that have overwhelmed the nation’s police and forensics resources as well as the Iraqis’ international partners helping to search for tens of thousands of missing people.
The mismanagement of Sears reflects an ongoing pattern: private equity takeover artists that benefit from hobbling the companies they purchase. Golden Gate Capital and Blum Capital, the two firms behind footwear chain Payless, paid themselves $700 million in dividends in 2012 and 2013, all on the back of the company. Payless filed for bankruptcy this year, closing 400 stores. Toys“R”Us filed for bankruptcy in September, unable to sustain between $400-$500 million in annual interest payments on $5.2 billion in long-term debt. Buyout managers, including Bain Capital and longtime firm Kohlberg Kravis Roberts, stripped out nearly $2 billion in cash while debt levels rose.
This is a robbery in progress. Private equity firms borrow massively to buy companies, and use corporate cash reserves to pay themselves back. Workers who supply the value to the business see nothing; in fact, to service the debt, companies usually cut staff. When the retailer collapses under the borrowing weight, all workers lose their jobs. And even when sales go up, like they have by 5 percent annually in the toy sector over the past five years, dominant toy sellers like Toys“R”Us cannot compete because of the debt burden. The company’s profitability was increasing when it filed for bankruptcy.
He’s been vilified by millions and locked out of the NFL—all because he took a knee to protest police brutality. But Colin Kaepernick’s determined stand puts him in rare company in sports history: Muhammad Ali, Jackie Robinson—athletes who risked everything to make a difference.
In 2013, Colin Kaepernick was on the cover of this magazine because he was one of the best football players in the world. In 2017, Colin Kaepernick is on GQ’s cover once again—but this time it is because he isn’t playing football. And it’s not because he’s hurt, or because he’s broken any rules, or because he’s not good enough. Approximately 90 men are currently employed as quarterbacks in the NFL, as either starters or reserves, and Colin Kaepernick is better—indisputably, undeniably, flat-out better—than at least 70 of them. He is still, to this day, one of the most gifted quarterbacks on earth. And yet he has been locked out of the game he loves—blackballed—because of one simple gesture: He knelt during the playing of our national anthem. And he did it for a clear reason, one that has been lost in the yearlong storm that followed. He did it to protest systemic oppression and, more specifically, as he said repeatedly at the time, police brutality toward black people.
Big oil companies and giant auto makers are teaming up to preserve the internal combustion engine, as tough regulation and electric vehicles put the car industry’s century-old technology at risk. Their secret weapon: high-tech engine oil.
“It’s really important that we are able to squeeze the lemon,” said Andrew Hepher, vice president of global commercial technology at Shell. “The combustion engine has still got a long way to run.”
Trump’s first visit to Soviet Moscow in 1987 looks, with hindsight, to be part of a pattern. The dossier by the former British intelligence officer Christopher Steele asserts that the Kremlin had been cultivating Trump for “at least five years” before his stunning victory in the 2016 US presidential election. This would take us back to around 2011 or 2012.
In fact, the Soviet Union was interested in him too, three decades earlier. The top level of the Soviet diplomatic service arranged his 1987 Moscow visit. With assistance from the KGB. It took place while Kryuchkov was seeking to improve the KGB’s operational techniques in one particular and sensitive area. The spy chief wanted KGB staff abroad to recruit more Americans.
In all of this, there is a spectacular accumulation of lies. Lies on disclosure forms. Lies at confirmation hearings. Lies on Twitter. Lies in the White House briefing room. Lies to the FBI. Self-protective lies by the attorney general. Blocking and tackling lies by Vice President Pence. This is, with a few exceptions, a group of people for whom truth, political honor, ethics and integrity mean nothing.
What are the implications? President Trump and others in his administration are about to be hit by a legal tidal wave. We look at the Russia scandal and see lies. A skilled prosecutor sees leverage. People caught in criminal violations make more cooperative witnesses. Robert S. Mueller III and his A-team of investigators have plenty of stupidity and venality to work with. They are investigating an administration riven by internal hatreds — also the prosecutor’s friend. And Trump has already alienated many potential allies in a public contest between himself and Mueller. A number of elected Republicans, particularly in the Senate, would watch this showdown with popcorn.
What crystallized for me from this and other discussions I had yesterday is that we’re actually in the midst of a digital news media crash, only no one is willing to say it. I’ve noted before that digital news media in the midst of a monetization crisis. But it’s more than that. It’s a full blown crash.
The big picture is that Problem #1 (too many publications) and Problem #2 (platform monopolies) have catalyzed together to create Problem #3 (investors realize they were investing in a mirage and don’t want to invest any more). Each is compounding each other and leading to something like the crash effect you see in other bubbles.
Xometry says its platform connects 6,000 customers, from start-ups to Fortune 500 companies, with about 600 machine shops and small manufacturers. Most of these businesses employ only 10 to 20 people, and they can speedily deliver prototypes or a small number of custom parts.
Randy Altschuler, co-founder of Xometry, says that the platform uses computational geometry and machine-learning algorithms to set the price and lead time for each job, choosing the best provider from its network, and makes money on the spread.
Even big companies such as BMW and General Electric use the platform “when they need three of something”, he says. GE and BMW are also the company’s biggest investors through their venture arms. Xometry has raised $38m in funding since it launched in 2014 and has annual revenues of $20m. Its website says the company is “dedicated to keeping more manufacturing in America by providing an innovative way for customers to easily work with facilities across the country”.
Bay Area real-estate agents say their clients are becoming reluctant to buy fancy homes, for fear of spooking investors wary of distracted or high-living founders. “I had one very successful young guy recently who said he loved that the house looked modest on the outside but seemed much bigger once you were inside,” says Nina Hatvany of Pacific Union, a San Francisco brokerage. “He didn’t want his colleagues or investors driving by and saying, ‘Look, he bought a mansion.’”
A handful of entrepreneurs have bought big—purchases that stand out as the market declines. Evan Spiegel, who heads Snap , the parent company of online messaging service Snapchat, bought a 7,164-square-foot Los Angeles mansion once owned by actor Harrison Ford for $12 million in May 2016, according to listing agent Stephen Shapiro of the Westside Estate Agency.
This plague has been underway for several years, but its familiarity does not diminish the damage inflicted on the economic and the psychic well-being of neighborhoods. One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all. To borrow from Tim Wu, a Columbia University law professor who has examined the issue, “Blight extracts a social cost.”
On one level, there’s just so much the city can do. Online shopping is here to stay, and it takes an inevitable toll on brick-and-mortar stores.
But landlords can be blamed mightily for this blight — the greedy among them who raise rents to stratospheric levels, figuring that some deep-pocketed company will pay top dollar for the space. Speculative behavior has led to boom-or-bust cycles, as on Bleecker Street in Greenwich Village. It was fancy boutique heaven for a while. But how many $400 T-shirts does even the wealthiest New Yorker need? Boutique heaven turned into vacancy hell.
A humanitarian crisis is rapidly deepening in Yemen, where millions of aid-reliant people have been cut off from assistance since Saudi Arabia closed the country’s ports on Nov. 5. Riyadh eased the blockade slightly following international outrage, but humanitarian officials say it’s not enough. Three UN agencies warned Thursday that “the lives of millions” were at risk if aid is not immediately let in. According to Save the Children, 130 children are dying every day.
80 percent of the country is food-insecure. How did one of the poorest countries in the world get to that point? It’s a complicated story, one that involves warring regional superpowers, terrorism, oil and an impending climate catastrophe. But in some ways, it’s also a simple one. Lots of people outside of Yemen are fighting for control and influence. And lots of the people within the country are paying the price.
CENTRAL BANKS & MONETARY POLICY
China’s central bank said that it will keep its “prudent and neutral” monetary policy, “closely” monitor liquidity and expectations, and deepen reforms in the interest-rates and currency market.
Turkish President Recep Tayyip Erdogan signaled an end to his uneasy truce with the new central bank chief, attacking the institution now run by Governor Murat Cetinkaya for its repeated revisions to economic targets and “wrong path” to tackle soaring inflation.
USA ECONOMY DATA, CITIES AND STATES
The U.S. economy is heading into 2018 with strong momentum that’s likely to boost wages and inflation more broadly, requiring the Federal Reserve to raise interest rates four times next year, Goldman Sachs Group Inc. economists said in a research note.
American drivers took gasoline consumption to a new high as the U.S. economy strengthens and adds jobs. Demand for the motor fuel rose to the highest level on record for the month of October, the American Petroleum Institute said in a monthly report Friday. Consumption of distillate fuel, however, declined.
U.S. new-home construction rebounded in October to the fastest pace in a year, partly reflecting recovery efforts in the hurricane-stricken South, government figures showed Friday. A pickup in permit applications for one- family dwellings indicates building will remain firm in coming months.
Nissan Motor Co. is squeezing all it can from its U.S. assembly plants and will need to build an entirely new factory if it keeps growing in the lucrative American auto market, a top executive said.
GLOBAL ECONOMY DATA
Japan’s exports grew by double digits for a fourth straight month in October, continuing the best year-to-date performance since the global financial crisis.
Canadian inflation eased for the first time in four months in October as gasoline prices fell and the economy showed few signs of price pressure, bolstering the view the central bank can afford to wait before it tightens policy further.
POSITIONING, INFLECTION, MARKET CALLS
The S&P 500 and Dow notched back-to-back weekly declines for the first time in 3 months as investors digested a fresh batch of earnings and eyed prospects for tax reform.
Soapmaker and real-estate stocks have taken over a rally that used to be led by social networks and smartphone makers. Companies with stable earnings and dividends have shepherded gains in November, the first time this year that the two best-performing industries are defensive ones.
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
In the last few weeks, several of the world’s biggest telecommunications and media companies have started circling Twenty First Century Fox Inc with an eye to buying a significant piece of Rupert Murdoch’s global media and entertainment empire.
The sudden surge in merger and acquisition activity in media looks to be powered by relatively low asset prices, cheap financing and the prospect of tax cuts. There are also longer-term forces at work: traditional media companies are struggling with more customers canceling pricy cable contracts while Netflix Inc and Amazon.com Inc are spending billions of dollars on making shows and movies.
“The situation brewing around Fox is reflective of an important market reality: the strategic pressures on the financials of traditional TV businesses are accelerating,” said Christopher Vollmer, global entertainment and media advisory leader at PwC, the professional services firm. “Advertising competition is increasing. Content costs in TV and film are increasing. And alternatives to pay-TV are increasing.”
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
This account of Mr. Baker’s long-shot effort to escape to Canada, which has not previously been reported, is based on interviews with him and his family, and with his lawyers, former colleagues and current and former government officials, as well as on thousands of pages of legal documents, internal emails and other records from Mr. Baker’s defunct hedge fund.
Harvard’s peers are making up ground by following a model that’s most closely associated with Yale’s longstanding investing chief David Swensen. While all the schools favor equities over bonds, and have pushed heavily into private investments over public markets, Harvard maintained an internal trading desk and did more direct investing in real estate and timberland. Yale and others sought the best outside fund managers for each asset class.
While that worked under Jack Meyer, Harvard’s investing chief—who, for 15 years, often beat or matched Yale—it didn’t under his successors. Most recently, N.P. “Narv” Narvekar was hired as Harvard Management Co.’s chief executive officer from Columbia University’s endowment. He has been shaking things up, shuttering internal hedge funds and spinning out investing teams as he seeks to halve the endowment’s 230-person staff. He has also targeted compensation, which surpassed all peers despite the middling performance.
Reuters spoke to dozens of current and former analysts who moved to independent research shops or investment firms, joined companies in industries they covered, or have launched new careers or are considering doing so, after nearly a decade of cost-cutting that is likely to accelerate under MiFID.
Major global investment banks have slashed their equity research budgets by more than half, from a peak of $8.2 billion in 2008 to $3.4 billion in 2017, according to Frost Consulting. The top 10 banks are expected to cut those budgets by another 30 percent in the near term, due largely to MiFID, McKinsey projects.
ENERGY CRUDE OIL, OIL SANDS, SHALE
After 10 months of data, the verdict is clear: OPEC and allied nations are serious about curbing output. While heavyweights like Saudi Arabia have led the effort, others like Angola and Qatar have also played an important part. Brunei, a minnow among global producers, slashed supply by far more than it promised. The petrostates gather at the end of the month in Vienna to decide whether to extend their curbs, which currently expire at the end of March.
POLLUTION, CLIMATE & ENVIRONMENT
An enormous new airport outside Mexico’s capital will be a “global reference” for sustainability, the government vows. Others worry environmental errors of the past are being repeated.
Warnings that U.S. withdrawal would unravel the Paris climate accord are coming true at the annual UN conference on global warming wrapping up today in Bonn, Germany.
The U.S.-hosted event was perceived as an affront by many attending the Bonn conference, where envoys are working on a nuts-and-bolts rule book for executing the climate-rescue Paris Agreement adopted by nearly 200 countries in 2015.
BREXIT, SCOXIT, LONDON, UK ECONOMY
Eurosceptic cabinet ministers, including foreign secretary Boris Johnson, have indicated they are prepared to accept, with conditions, an increase to the €20bn offer that the UK has already made. One minister predicted the offer would rise to more than €40bn.
The Dutch parliament has warned its government to start making serious contingency plans for a “no deal” Brexit, highlighting increasing nervousness in some EU countries that stalled negotiations could lead to the UK crashing out of the bloc in 2019.
EU leaders stepped up pressure on UK prime minister Theresa May to make an early and decisive move to unblock Brexit talks by December, as Ireland’s prime minister bluntly warned that he will wait until the new year for “concessions” if needed.
The U.K. government is working on 313 separate programs across all departments to prepare the country for Brexit, according to a study Friday that reveals the extent to which Britain’s divorce from the European Union is taking up civil service resources.
The union representing tens of thousands of staff at UK universities has warned of “chaos” on campuses after plans were unveiled to replace their guaranteed pension benefits with riskier retirement plans.
CasaPound won a seat in a Roman municipal election, raising fears that Italy may be joining the ranks of countries where the far right is rising.
Italy is facing a daunting challenge integrating refugees, with a chronically weak economy, high unemployment and a state bureaucracy that often fails to provide a social safety net even for native-born Italians.
The death of José Manuel Maza in a hospital in Argentina deprives Spain of its top prosecutor in the case against separatist Catalan leaders.
GEOPOLITICS, CRIME, TERRORISM
Three former spy chiefs were accused of paying monthly bribes to Park Geun-hye, the impeached South Korean president. Two of them were arrested Friday.
Insurgent threats to families, along with high-profile attacks that kill many soldiers, have dissuaded Afghans from signing up in crucial recruiting areas.
Southeast Asian countries are cracking down on North Korea’s conduits for doing business in the region, a change for many after months of U.S. pressure, though some remain reluctant participants in the campaign to isolate Pyongyang.
Fleeing what was once Latin America’s richest country, former doctors and engineers, truckers and physiotherapists now work in supermarkets in London or as maids in Madrid, drive Ubers in Miami or paint houses in Bogotá, clear tables in Buenos Aires or wash windows in Barranquilla.
Human Rights Watch found that the raping of Rohingya Muslim women and girls was even more widespread than earlier suspected.
The ARA San Juan, which was on a routine patrol off the cost of Patagonia, has been missing since Wednesday.
South Korean doctors operating on an injured North Korean soldier found parasitic worms crawling in his dietary tract, a symptom of poor hygiene and nutrition.
A Russian cybersecurity firm whose products current and former U.S. officials suspect Moscow has used as a tool for spying was flagged by U.S. military intelligence as a potential security threat as early as 2004.
Last year the Trump Organization reported nearly $9.5 billion in revenues, but public filings by President Donald Trump suggest that the company actually earned between $600 and $700 million in 2016. Crain’s, a leading New York business publication, claimed that the Trump foundation had been reporting an inflated revenue since at least 2010. The publication moved the company from the number 3 spot on the list to number 40.
A day after Mr. Ball downplayed President Trump’s involvement in getting three U.C.L.A. players safely out of China, the president fired back on Twitter.
The president moved Friday to put elephant trophy imports on hold and strongly suggested Sunday he will permanently block the practice.
Steven Mnuchin has fought back against a fair share of criticism since becoming Treasury Secretary, sparring with Democrats who questioned his role in the housing crisis and calling media reports that chastised him “fake news.” But now, he’s embracing attacks.
Trump, through a White House statement, said last week that Moore should step aside if the allegations are true. He still hasn’t said whether he thinks they are, instead passing the decision on to Alabama voters.
“I believe they’re credible. I don’t know who to believe,” White House Office of Management and Budget Director Mick Mulvaney said.
The three biggest newspapers in Alabama have a message for their readers: “Stand for Decency, Reject Roy Moore.”
Steve Bannon has vowed to lead a “season of war” on Washington’s Republican establishment. But donors most likely to fund a disruptive campaign may be hard to win over.
Republican candidate Roy Moore has slipped behind his Democratic opponent in polls of the Alabama Senate race for the first time, as his support erodes following allegations he made inappropriate sexual advances on teenage girls almost four decades ago.
SILICON VALLEY, UNICORNS, STARTUPS, VC
Analysts have described the bike-sharing boom as just the latest in a string of Chinese tech bubbles. Like other fads, it has seen rapid expansion fuelled by venture capital money, winning market share with lossmaking prices followed by a collapse in funding that kills off firms and leaves a monopoly.
China’s city streets are now packed with shared bikes. Over the past year, at least 11 start-ups began aggressively fundraising and wheeling out GPS-enabled dockless sharing bikes that can be unlocked using a smartphone app.
RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
Showrooms — a retail model popular with bridal designers, car dealers and, recently, online apparel start-ups — are now inspiring mass-market heavyweights like Nordstrom and Urban Outfitters.
In intimate salons, some the size of a cafe, shoppers can examine a limited selection of merchandise and place orders for products to be delivered or collected later. The customer service is often luxurious, but so is the time commitment for shoppers.
This is the antithesis of the standard shopping mall experience, with the overwhelming assortment of products, the glazed apathy of part-time store workers, the disrobed patrons bellowing from fitting rooms for another size.
MEDIA, CABLE, SPORTS, ENTERTAINMENT
Verizon Communications Inc. is close to a new deal with the National Football League for digital streaming rights that would give the largest U.S. wireless carrier the ability to deliver game broadcasts to internet-connected TVs, tablets and phones, according to people familiar with the matter.
NFL commissioner Roger Goodell is in a bitter battle few saw coming, led by Jerry Jones, the league’s most opinionated and powerful owner. Nobody knows how this will end.
The media startup plans to use some of the financing to expand its capacity for data analysis, product development and audience growth, as well as developing new coverage areas and increasing staffing.
AUTOS, ELECTRIC, SELF-DRIVING
GM is taking a methodical approach to reinvention. It’s focusing on the big issue; namely, getting the cost of a mass-market electric vehicle down to a competitive level with traditional cars. And it’s doing so by developing platforms that can be adapted to different markets, especially China and the U.S., and tailored to different brands and models, allowing for a relatively quick expansion of options for the consumer. This is what car companies did to build their industry in the first place.
Various models of Trumpchi cars have been motoring down Chinese roads for the past seven years. But even after the United States elected a real estate tycoon with a similar name as president, the world ignored them. Now the company that makes Trumpchis hopes that will change — and China appears to believe the rest of its auto industry is ready to go global, too.
Volkswagen AG will spend more than 34 billion euros ($40 billion) over the next five years to develop automotive technology for an era of electric robo-taxis.
In the United States, politicians voted on Thursday for a proposal that included repeal of a $7,500 tax credit for buyers of electric cars. In China, auto executives from around the world were gathering to talk about ambitious plans to sell more of those vehicles here.
The politics in Washington have not explicitly pushed carmakers to prioritize China. But the dueling approaches have added to a growing consensus among auto executives — even in the United States, where General Motors and Ford are planning to build more electric vehicles — that China will lead the world in the fast-growing sector.
The U.S. National Highway Traffic Safety Administration said on Friday it was rejecting a petition by Ford Motor Co to delay recalling about 3 million vehicles with potentially defective air bag inflators to conduct additional testing.
AIRLINES, SHIPPERS, RAIL, TRANSPORTS
Business jet operators, already offering double digit raises to attract pilots, could face a labor shortfall in North America as they compete with U.S. airlines for talent, executives and analysts said.
JetBlue Airways and Delta Air Lines are ramping up a turf war in Boston. A diverse economy and high concentration of business fliers are spurring airlines to expand at Boston’s Logan International Airport, which generates outsize revenue for its size.
LUXURY, HIGH END, ASPIRATIONAL
Sales at the three big auction houses this week vaulted above $2bn on the back of the record-shattering $450.3m paid for the last Leonardo da Vinci in private hands, making it one of the most lucrative recent New York sales seasons.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
AT&T Inc. has deployed a drone to act as a “cell tower in the sky” to help provide communication services in hurricane-ravaged Puerto Rico, the first time the technology has been used to reconnect residents after a disaster, the company said.
SCIENCE, NATURE, PSYCHOLOGY
The world’s first human head transplant has allegedly been performed on a corpse in an 18 hour operation which successfully connected the spine, nerves and blood vessels of two people.
Last month, after announcing he had identified nearly 400 stone “gates,” Dr. Kennedy received the invitation of a lifetime from Saudi officials to investigate the hidden structures from a helicopter.
“They are absolutely astonishing,” said Dr. Kennedy, who recently retired from the University of Western Australia. “From 500 feet, you can see the vital details of structures that are invisible in the fuzzy image on Google Earth.”
Max Deutsch, a speed learner who conquered back-flips, Hebrew and perfect pitch, is testing the limits of self-improvement. Next up: the world’s greatest chess player.
Malcolm Young, the AC/DC founder whose driving guitar rhythms and musical direction helped the Scottish-Australian band earn a place among the most successful in rock history with albums such as “Back in Black” and “Highway to Hell,” has died. He was 64.
Salvatore “Toto’” Riina, the unrepentant “boss of all bosses” of the Sicilian Mafia, has died aged 87 in jail where he spent 24 years for leaving a trail of blood across Italy.
Known as “u curtu” or “the short one” for his small stature, he was born in the hillside town of Corleone in 1930. He committed his first murder when he was just 18 and rose to become the undisputed godfather of Cosa Nostra in the 1970s and 1980s.
Through a campaign of violence that was exceptionally brutal even by the standards of Sicilian organised crime, Riina and his fellow “Corleonesi” — including his late wingman Bernardo Provenzano — rooted out the traditional Mafia families from Palermo and launched an assault against politicians and judicial authorities who were standing in his way.
Here are the compass points of a brilliant career, showing the arc of Musk’s ambitions and the practical pitfalls to which even a visionary is vulnerable.
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