Macro Links Oct 2nd – Catalonia Chaos
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- CATALONIA VOTE
- TRUMP HUMILIATES TILLERSON
- PUERTO RICO DEVASTATION
- TRUMP HATE-TWEETS PUERTO RICANS
- GOP TAX PLAN
- NFL PROTESTS
- FACEBOOK, GOOGLE, EQUIFAX
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- GLOBAL ECONOMY DATA
- POSITIONING, INFLECTION, MARKET CALLS
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- FOREX, CRYPTOCURRENCY, EXCHANGE IMPACTS
- FINTECH, BLOCKCHAIN, DIGITAL PAYMENTS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- ENERGY RENEWABLES, NUCLEAR
- POLLUTION, CLIMATE & ENVIRONMENT
- FRONTIER MARKETS
- CANADA, AUSTRALIA, NEW ZEALAND
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- TRUMP WORLD
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
- MEDIA, CABLE, SPORTS, ENTERTAINMENT
- AUTOS, ELECTRIC, SELF-DRIVING
- ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
- HEALTH, PRODUCTIVITY AND WELLNESS
Voters face off with riot police as they try to access polling stations across the Spanish region.
Hundreds are injured as riot police, some firing rubber bullets, disperse voters, Catalan officials say. Dozens of police officers also also hurt.
People took to social media to praise the fire officers for stepping in to ‘protect the public’ from the violence seen since polling stations opened on Sunday morning. Days before the referendum was due to take place hundreds of firefighters gathered along the roof of Catalonia’s history museum with a banner saying ‘Love democracy’.
Spain stepped into the unknown Sunday after Catalan separatists, inflamed by some heavy-handed Spanish policing, vowed to push ahead with independence on the back of a chaotic but determined referendum.
Despite Prime Minister Mariano Rajoy‘s assurances that the country remains strong and united, and his refusal to acknowledge that any vote on self-determination had taken place, Spain’s constitutional order is under threat.
Catalan regional President Carles Puigdemont declared on Sunday night that his followers had “earned the right to be an independent state,” setting the stage for a unilateral declaration of independence that will challenge Spanish democracy and test the solidarity of EU capitals, who have so far supported Madrid.
The results of a controversial and chaotic referendum in the Catalonia region of northeast Spain on Sunday showed landslide support for independence for the restive but affluent area, a lopsided vote sure to be vigorously challenged by the constitutional court and central government in Madrid as illegitimate and illegal.
According to the Catalan government, 90 percent of the ballots cast were for independence — with 2,020,144 voting yes and 176,566 no.
Minutes after the first few thousand votes were posted, the regional president and leading secessionist, Carles Puigdemont, appeared on stage to announce that Catalonia had won “the right to independence” and called on Europe to support its split from Spain.
Since Spain’s constitutional court ruled that the referendum was illegal, many Catalans say that the turnout and result matter less than the symbolism of the day, and the extent to which the violence that marked it serves further to stoke separatist sentiment.
After the clashes with police, voters on the streets of Girona expressed frustration but also something resembling a sense of relief — that in their eyes the Spanish government had at last shown itself for what it was. It felt, for some, like a decisive turning point, the moment the cord was finally cut.
‘At this time I can tell you, with full clarity, what you all know and what we have seen today,’ he said. ‘Today, we have not had a referendum for self-determination in Catalonia. ‘Today, all the Spaniards have seen that our state rule of law keeps its strength and reality, and restricts those who wish to subvert the state of law.’ Rajoy then praised the Spanish police for responding with ‘firmness and serenity’ to the referendum.
Catalan officials say more than 800 people were injured in clashes with Spanish riot police during the referendum, which has pitched the country into its deepest constitutional crisis in decades and deepened a rift between Madrid and Barcelona.
He said the door had been opened to a unilateral declaration of independence. Catalan officials later said 90% of those who voted backed independence in Sunday’s vote. The turnout was 42.3%. Spain’s constitutional court had declared the poll illegal and hundreds of people were injured as police used force to try to block voting.
TRUMP HUMILIATES TILLERSON
We’ve never seen anything like this before. Trump’s tweet, undercutting Tillerson’s diplomatic efforts, comes a day after Tillerson acknowledged for the first time that the administration was in direct communication with North Korea.
“Humiliating for Tillerson, but worse, renders him useless. He’ll resign, today or after a brief face-saving interval,” predicted former Obama administration ambassador and National Security Council official Dan Shapiro, one of many foreign policy experts who tweeted about Trump’s Sunday comments, sent from his New Jersey golf club.
“I told Rex Tillerson, our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man,” Mr Trump tweeted on Sunday morning. “Save your energy Rex, we’ll do what has to be done!”
In a second tweet later in the day, he added: “Being nice to Rocket Man hasn’t worked in 25 years, why would it work now? Clinton failed, Bush failed, and Obama failed. I won’t fail.”
President Trump undercut his own secretary of state on Sunday, calling his effort to open lines of communication with North Korea a waste of time, and seeming to rule out a diplomatic resolution to the nuclear-edged confrontation with Pyongyang.
PUERTO RICO DEVASTATION
By Saturday, 11 days after Hurricane Maria crippled this impoverished U.S. territory, residents scrambled for all the staples of modern society – food, water, fuel, medicine, currency – in a grinding survival struggle that has gripped Puerto Ricans across social classes.
For days now, residents have awoken each morning to decide which lifeline they should pursue: gasoline at the few open stations, food and bottled water at the few grocery stores with fuel for generators, or scarce cash at the few operating banks or ATMs. The pursuit of just one of these essentials can consume an entire day – if the mission succeeds at all – as hordes of increasingly desperate residents wait in 12-hour lines.
“Sometimes we don’t know what’s going to happen until the storm actually hits,” Lt. Gen. Jeffrey Buchanan said in an interview published on Saturday with PBS NewsHour’s Monica Villamizar. “And this is the worst I’ve ever seen.”
Buchanan surveyed the damage on the island this weekend. He said during the interview he’s neither a Republican or a Democrat; he is a soldier and is there to help people. Now, he said, Puerto Rico is having the biggest problems in the interior of the island.
With power failures and communications outages still widespread nine days after Hurricane Maria, much of Puerto Rico has become a cash-only island.
In parts of Utuado, landslides have ruined homes and roads. Many people have little food or water. Nearly two weeks after Hurricane Maria, residents are getting desperate.
Trump did hold a meeting at his golf club that Friday with half a dozen Cabinet officials — including acting Homeland Security secretary Elaine Duke, who oversees disaster response — but the gathering was to discuss his new travel ban, not the hurricane. Duke and Trump spoke briefly about Puerto Rico but did not talk again until Tuesday, an administration official said.
In contrast to dire reports from the island, White House homeland security adviser Tom Bossert sent West Wing colleagues an unusually upbeat update — leaked to Axios — that points to a rapid recovery no one on the ground is witnessing.
President Donald Trump cast doubt Friday on whether Washington would lend a hand to repair the island, and a spokesman for the Federal Emergency Management Agency told NBC News that administrators want to assess the damage before committing to fixing public infrastructure in the ravaged U.S. territory.
TRUMP HATE-TWEETS PUERTO RICANS
President Donald Trump dedicated the nation’s victory in Presidents Cup golf Sunday afternoon to victims of recent hurricanes in Puerto Rico, Texas and Florida.
While in the midst of hate-tweeting officials in Puerto Rico and accusing the island’s population of being unwilling to help itself, President Donald Trump played a round of golf this weekend, an official familiar with the president’s schedule tells The Daily Beast.
The leisurely golf came on Saturday at the president’s Bedminster, New Jersey, golf resort, before Trump’s scheduled conversations with officials from Puerto Rico and the Federal Emergency Management Agency. And while White House Press Secretary Sarah Huckabee Sanders refused to confirm that Trump was indeed on the links, she wouldn’t deny it. The schedule of Trump’s tweets also suggest that he went golfing, with a conspicuous 6 hour absence in his posting on the social platform.
When Hurricane Maria destroyed the infrastructure of Puerto Rico, it turned the mayor of its capital city into a spokeswoman for a stranded people. Carmen Yulín Cruz Soto told the world of the “horror” she was seeing as she waded through San Juan’s flooded streets. And the desperation on the island, parts of which may remain without power for months.
Until then, Cruz had not been a well-known politician outside the island. But after she criticized Washington’s response to the hurricane this week — “save us from dying,” she pleaded on cable network — President Trump took direct aim at her on Twitter.
“The Mayor of San Juan, who was very complimentary only a few days ago, has now been told by the Democrats that you must be nasty to Trump,” the president wrote on Twitter. “Such poor leadership ability by the Mayor of San Juan, and others in Puerto Rico, who are not able to get their workers to help.”
President Donald Trump on Sunday scoffed at “politically motivated ingrates” who had questioned his administration’s commitment to rebuilding Puerto Rico after a pulverizing hurricane and said the federal government had done “a great job with the almost impossible situation.”
GOP TAX PLAN
Trump administration officials pushed back Sunday against criticism that the emerging GOP tax plan would provide its biggest benefits to the wealthy. Treasury Secretary Steven Mnuchin and White House budget director Mick Mulvaney said on Sunday news programs that key details of the plan remained undecided and thus it was too early to know how individuals would benefit. But they said the plan is designed, above all, to cut taxes for middle-income earners and businesses.
“The entire purpose of this is to lower middle-class taxes,” Ryan said in an interview on CBS’s “Face the Nation.” “So yes, people are going to get tax cuts. How big are those tax cuts? That depends on the individual.”
Ryan’s explanation is part of a broader attempt to build support for a tax proposal that is viewed by many in the GOP as the only chance to pass any major legislative priorities this year. Republican leaders are under intense pressure from voters and President Trump to fulfill their pledge on taxes after the dramatic failure of their promises to repeal and replace the Affordable Care Act.
But GOP leaders are already battling criticism from outside groups and Democrats who say that top earners stand to benefit most from the tax cuts included in last week’s outline. They also face concerns from within their own party that the cuts would lead to a ballooning deficit.
Treasury Secretary Steven Mnuchin on Sunday refused to explain how President Donald Trump will support his claim that he won’t personally benefit from the outlined tax proposal the White House released last week.
National Economic Council Director Gary Cohn said Sunday that the Trump administration’s proposed tax on offshore profits would be in the “10 percent range.”
When asked by a high school student in Wisconsin whether he considered health care a right or a privilege, Senator Ron Johnson (R-WI) compared access to health care to access to food and shelter, arguing that all three should be considered “privileges” for those who can afford them.
“I think it’s probably more of a privilege,” Johnson said in response to the question. “Do you consider food a right? Do you consider clothing a right? Do you consider shelter a right? What we have as rights are life, liberty, and the pursuit of happiness. We have the right to freedom. Past that point, everything else is a limited resource that we have to use our opportunities given to us so that we can afford those things.”
Health and Human Services Secretary Tom Price resigned over his extensive use of private jet and military flights, ending a rocky tenure during which the Trump administration failed in its push to get Congress to repeal the Affordable Care Act.
U.S. Treasury Secretary Steven Mnuchin said on Sunday he does not regret using a government plane to travel to Kentucky in August with his wife to view the solar eclipse and speak to business leaders, calling it “completely justifiable.”
Interior Secretary Ryan Zinke and his aides have taken several flights on private or military aircraft, including a $12,000 charter plane to take him to events in his hometown in Montana and private flights between two Caribbean islands, according to documents and a department spokeswoman.
Add EPA Administrator Scott Pruitt to the growing list of Trump administration officials who have used private planes for government duties. The EPA confirmed to CNN Wednesday that Pruitt used a private plane and military jet to travel for government duties instead of flying commercial for trips over the summer.
Three Miami Dolphins players knelt for the American national anthem before their NFL game in London on Sunday, after U.S. President Donald Trump had said the previous day that it was “very important” that players stood.
Baltimore Ravens players kneeled before the national anthem on Sunday to pray for “unity, kindness and justice for all Americans.”
Oakland Raiders running back Marshawn Lynch was surrounded and covered by team staffers as he sat during the national anthem. He was the only player sitting during the Star Spangled Banner and no photo opportunities were allowed, according to Michael Gehlken of the Las Vegas Review-Journal.
FACEBOOK, GOOGLE, EQUIFAX
“For those I hurt this year, I ask forgiveness and I will try to be better,” he wrote in a brief post. “For the ways my work was used to divide people rather than bring us together, I ask for forgiveness and I will work to do better.”
Zuckerberg did not say anything specific, but his mea culpa came in the face of mounting evidence that Russians had used the social-media platform he created more than a decade ago to spread propaganda and influence voter sentiment — all to tip the U.S. presidential election in Donald Trump’s favor.
A Chinese billionaire living in virtual exile in New York, Guo Wengui has riled China’s leaders with his sometimes outlandish tales of deep corruption among family members of top Communist Party officials.
On Saturday, his tales proved too much for one of his favorite platforms for broadcasting those accusations: Facebook. The social media network said it had blocked a profile under Mr. Guo’s name and taken down another page associated with him. Facebook said the content on both pages had included someone else’s personal identifiable information, which violates its terms of service.
Google has become the latest Silicon Valley giant to become entangled in a widening investigation into how online social networks and technology products may have played a role in Russian interference in the 2016 election.
On Friday evening, Google said it would cooperate with congressional inquiries into the election, days after Facebook and Twitter provided evidence to investigators of accounts on their networks that were linked to Russian groups. Google was called to testify at a Senate Intelligence Committee hearing on Nov. 1.
The board of directors at Equifax is reviewing the actions of Chief Legal Officer John J. Kelley in connection with executives’ sales of stock after the company discovered its data security had been breached.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
The lack of price swings has investors mired in a sea of complacency, which has them ignoring potential risks, says Societe Generale. The firm specifically cites the CBOE Volatility Index — or VIX — which is used to track nervousness in the US stock market.
Not only is the so-called fear gauge locked near the lowest levels on record, but hedge funds are betting it’ll decline even further. Their VIX positioning is the most bearish on record, according to data compiled by the US Commodity Futures Trading Commission.
“Compare that with dancing on the rim of a volcano,” a group of SocGen strategists led by Alain Bokobza, the firm’s head of global asset allocation, wrote in a client note. “If there is a sudden eruption (of volatility) you get badly burned.”
Chinese banking regulators have told lenders to crack down on the use of consumer loans to finance home purchases, the latest effort to cool down the overheated property market and rein in financial risk.
Local branches of the China Banking Regulatory Commission and the People’s Bank of China in at least six regions issued notices to banks in recent weeks requiring them to examine whether loans intended to finance consumption, such as university tuition, healthcare or travel, were being diverted into property.
One sign of an ageing credit cycle: weakening investor protection standards that stores up trouble for the high-yield market. The market as a whole is close to its weakest covenant quality score on record — 4.61 in June 2015. Private equity firms have been particularly aggressive in watering down these protections, as they look to deploy a wall of cash in a fresh round of highly leveraged buyouts.
The Fed expects to stop buying new mortgage bonds by mid-2018. By 2025 it expects to have shrunk its MBS portfolio by $1tn. Instead of giving away options, the central bank will soon be buying them back — forcing the private sector to experience the volatility the central bank has been passively absorbing. Fed economists reckon this will raise risk premiums on long-term debt by about one percentage point.
Those forecasts, however, are contingent on what happens to mortgage rates. The New York Fed estimates it would have to spend an additional $300bn if mortgage rates end up being lower than they expect. Higher rates would limit prepayments and keep the balance sheet larger for longer.
Buying mortgage bonds was a clever way for the Fed to encourage risk-taking and boost asset prices. Volatility should return as this process reverses.
The head of the World Trade Organization has warned that the Trump administration’s blocking of the appointment of new judges to hear international disputes risks undermining a system that has kept trade wars at bay for more than two decades.
In an interview with the Financial Times, Roberto Azevêdo, WTO director-general, said the US move to block the filling of two vacancies on the seven-member appellate body was causing a crisis for the body’s most important function. “The dispute settlement system is . . . one of the most important pillars of the organisation,” he said.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
The conflict between Spain and its northeastern region of Catalonia has escalated over the past few years, with Catalan officials holding an independence referendum Sunday that Madrid has declared illegal. But the clash is centuries in the making, including previous failed attempts to declare Catalonia’s independence.
Catalonia was formed as a collection of counties that became independent from the Carolingian empire in the 10th century. Catalonia was first absorbed into the Crown of Aragon and later Spain, but retained its own government, parliament and legal system until 1714, when it unsuccessfully sided against Spain in the Spanish Succession War. Its institutions were abolished and its language repressed.
As soon as democracy reached Spain in 1931, Francesc Macià, a former soldier in the Spanish army, declared Catalonia an independent republic. Madrid made a first attempt to address the problem by giving Catalonia a large degree of autonomy, but Catalan president Lluís Companys made another botched attempt to declare independence three years later.
After the Spanish Civil War, Spain spent almost 40 years under the dictatorship of General Francisco Franco, who executed Mr. Companys and repressed Catalonia.
The Catalan government was again restored in 1977, just a year before the Spanish Constitution was approved with broad support from Catalans. The constitution aimed to keep Spain united by giving the military the right to defend the integrity of the country, but also gave Catalonia many freedoms.
The spirit of that law is now broken, both sides say.
Mr Rajoy faces an extraordinarily difficult task. He is adamant that it is his government’s fundamental duty to uphold the law and preserve the integrity of the Spanish state. Yet the police’s use on Sunday of batons and rubber bullets to disrupt the referendum risks deepening the confrontation and putting off the moment when Madrid and the Catalonian authorities sit down to find a way out of the impasse.
The attitudes of other actors in this drama are also of vital importance. Too much intransigence on the part of Mr Rajoy’s conservative Popular party will strain relations with the liberal and centre-left parties in Madrid that have so far stood by him in opposing Catalan separatism.
Some lawmakers accuse it of being asleep at the wheel. Others are calling for it to be more tightly regulated. Congress’s intelligence committees are hounding Facebook for information and want to call it to a public hearing. Its ad sales are being examined by Robert Mueller, the special counsel investigating possible ties between the Trump team and Moscow. And Donald Trump complained last week that Facebook was against him.
The pressure would constitute an emergency even for a company with a long Washington history and scars to prove it. But Facebook is relatively new and struggling to adjust. Not only does it not yet fully understand how its open platform was exploited — and may still be in use — by Russian agents. It does not have the political “muscle memory” of Wall Street or the oil industry, for example, which have been conditioned by multiple showdowns with government, says one tech official.
For those of us who are tolerant of a wide range of ideas and arguments, but would still like deception and misinformation to not have such an easy foothold in society, Mr. Zuckerberg’s comments do not inspire hope. Indeed, people across the political spectrum should be able to agree that not making it so easy, and so lucrative, for fake news to spread widely is better for all of us, since fake news isn’t necessarily a right-wing phenomenon. But since Facebook has no effective competition, we can look forward only to being lectured on being more tolerant of “ideas” we don’t like, and to smug talk of the false equivalency of “both sides.”
What the company’s leaders seem unable to reckon with is that its troubles are inherent in the design of its flagship social network, which prioritizes thrilling posts and ads over dull ones, and rewards cunning provocateurs over hapless users. No tweak to algorithms or processes can hope to fix a problem that seems enmeshed in the very fabric of Facebook.
The world is beginning to draw a straight line from the devastation in Puerto Rico straight to the White House. Trump’s instinct so far is to turn the island’s devastation into another front in culture war politics, a strategy that could help his own political career survive. The rest of us will just have to pray for good luck.
Trump doesn’t know much about governing. But he is very good at channeling every discussion into the same handful of culture war tropes. Shifting the discussion in this direction rather than adopting a tone of humility will, of course, only make substantive recovery more difficult by polarizing the topic in congress and among the public.
We’re witnessing the Trump administration at peak performance and it’s appalling. Bismarck supposedly said that God has a special providence for fools, drunks, and the United States of America. If we’re lucky he’ll be proven right and nothing much else bad will happen for the next three years. If not, buckle your seatbelts.
In our combined 50-plus years at the State Department, neither of us ever witnessed as profound a humiliation as a sitting president handed his secretary of state Sunday morning.
Even if they’re playing good cop-bad cop, this is a shocker: Donald Trump is basically announcing that any negotiations with North Korea are worthless. This not only undercut Tillerson personally, but also undermines U.S. interests and the secretary of state’s sensible decision to talk to the North Korean regime. To make matters worse, all of this is occurring while Tillerson is in Beijing to prepare for the president’s trip to China next month—so the president kneecapped his own top diplomat in front of America’s chief rival in Asia.
North Korea has achieved twin milestones this year, successfully testing long-range ballistic missiles and its most powerful nuclear weapon — a device the regime claims was a hydrogen bomb. Analysts and former officials in South Korea say such developments could fundamentally undermine Washington’s longstanding security commitment to north-east Asia and could spark a nuclear arms race in the region.
“North Korea’s intention is very aggressive. They want to rewrite the regional order to their liking,” says Kim Jae-chun, a professor at Sogang University and a former South Korean government adviser.
“The objective of North Korea is to dismantle the US-Republic of Korea partnership. In this regard, the intercontinental ballistic missile is a game-changer.”
Trump‘s personalization of the conflict has introduced a new playbook that seems almost perfectly engineered to trigger Kim’s paranoia and animosity. Kim responded to Trump’s U.N. speech by calling him a “mentally deranged U.S. dotard,” a comment that drew laughs here for invoking an obscure term. But, to American specialists on North Korea, it was ominous: Kim’s rhetorical blasts are usually sent out by the state media, but Kim personally delivered this message in a video that was broadcast on North Korean television. It was an unprecedented gesture that has staked his name and his stature to his refusal to back down. More than anything else, Kim’s personal rebuttal signals that the two leaders—each a national-security neophyte navigating his first crisis of this scale—are now locked in a war of egos.
Shifting assets to places with lower taxes is one thing. Creating real economic growth is another. Business leaders sometimes confuse the two. Perhaps some of them believe that one will lead to the other. But if you survey the economic landscape, it’s not like there isn’t plenty of money sloshing around. Dealmaking, asset values and corporate debt are at record highs. The money is there. The jobs are not.
I would argue that this is because there is not enough consumer demand. As one emerging market chief executive recently said, he has “given up” on growth in the US, since most demand comes from abroad. In an economy in which consumer spending accounts for roughly 70 per cent of GDP, it is a bit of a problem when it is not maintained at the necessary level. Average Americans have not had a pay rise in real terms since the early 1990s.
Corporate leaders will say: cut taxes, let us bring back our $2.6tn overseas cash hoard on the cheap and we will create jobs and demand. I wish I could believe that. But that would mean ignoring the historical evidence that repatriation tends to be funnelled to shareholders rather than workers.
Defenders of large unpaid-for tax cuts argue that we cannot bring our deficit down without higher growth. Growth has been too low for too long and raising it should be a top priority, but no serious analyst has ever claimed that tax cuts generate enough growth to pay for themselves. Estimates by a wide range of economists and the nonpartisan scorekeepers at the Joint Committee on Taxation have found that the additional growth associated with well-designed tax reform may offset 20% to 30% of the gross cost of tax cuts—not counting dynamic feedback. It is simply illogical to claim that we will make progress on the deficit with a $1.5 trillion tax cut even if the true cost of the tax cut after factoring in account growth is a mere $1 trillion.
“Amazon plays by a different set of rules. It has replaced profits with vision and growth. Typically, tomorrow at some point has to become today in terms of investors’ patience, but we’ve never seen a company with access to capital this cheap in the history of modern business. Amazon can now borrow at a lower rate than China. I believe that every time Amazon makes a mistake and becomes profitable one quarter, Chief Executive Jeff Bezos calls his management team into a room and says, “You screwed up. Greenlight everything.” That’s because they’ve changed the compact with the markets through storytelling. They have never got the markets used to the crack cocaine of profits, because once you go profitable, you take that crack cocaine back away from the addict and he or she—the market—gets very irritable. Amazon never fell into that trap, with amazing storytelling.”
“…This could be, if they handle it poorly, the moment Facebook goes into structural decline. I don’t think they are owning up to the fact that they are a media company. You produce content. You run advertising against it. You have large influence over society. Boom, congratulations. You’re a media company. The fourth estate has extraordinary influence and, with that, some responsibilities. Facebook seems to be comfortable with the former, not the latter. It looks as if Facebook has been co-opted rather cheaply by Russians. And the notion that they can’t put in place safeguards to check this, such as when an advertising account is paid in rubles? I mean, that is literally a red flag. So they need to get out in front of this issue. Martha Stewart wasn’t put in prison for insider trading. She was put in prison for denying the issue.”
“I believe Google is a modern man’s god. Our species throughout time has needed a superbeing to fill in gaps around huge questions we are unable to answer. However, as a society becomes more affluent and educated, church attendance goes down. So we have this void. Google has filled that void. If we were to look at everything you have ever put in that search query box, we would probably come to the conclusion that you trust Google more than any priest, rabbi, boss, mentor, coach, professor. If something goes wrong with your kid, your whole world stops. You start praying and you look for some sort of divine intervention that sees everything and then sends you back an answer. Will my kid be all right? So you type “symptoms and treatment of croup” into Google. We trust Google more than any other entity. It is our god.”
Many times, journalists come up with overly convoluted explanations for Trump’s behavior (“this seemingly self-destructive emotional outburst is actually a clever political strategy!”) when simpler ones will suffice (“this is a self-destructive emotional outburst.”). In doing so, they violate both Ockham’s razor and Hanlon’s razor — the latter of which can be stated as “never attribute to malice that which is adequately explained by stupidity.” One can understand why journalists who rely on having close access to Trump avoid explanations that portray Trump as being irrational, incompetent or bigoted. But sometimes they’re the only explanations that make sense.
The question for the world is what consolidated one-man authoritarian rule would mean for China’s actions abroad. The Communist Party established norms of succession and the principle of consensus leadership to prevent a repeat of Mao’s disastrous rule, which included attempts to undermine neighboring governments. That has paid off in rising prosperity as China focused on economic development and trade with the world.
Mr. Xi is changing that policy to assert Chinese dominance in the Asia-Pacific, and authoritarian rulers tend to stoke nationalism to create political legitimacy. The growing cult of Xi could shake the world order.
Senior officials say that the closest the EU came to collapse was at the height of the migration crisis in 2015. The arrival of more than one million asylum seekers led to a collapse in public trust in the EU. The flow has since been slowed, with arrivals in Italy and Greece in recent months having diminished to a trickle. But the legacy of 2015 continues to cast a shadow over European politics, as shown by strong support for the anti-immigration Alternative fur Deutschland party in last week’s German elections. EU officials estimate around 200,000 people will attempt to enter the EU illegally this year, in line with the long-term average over the previous two decades, but even this may no longer be politically sustainable. To win back public trust, the EU needs to show it is in full control of its borders.
GLOBAL ECONOMY DATA
The FTCR China Real Estate Index rose for a second straight month to 52.2, but this was the weakest September reading on record. A seasonal spur for the housing market has been countered this year by tightening credit conditions as the authorities seek to contain rising prices.
Growth in Japan’s manufacturing sector rose to a four-month high in September as production and new orders accelerated. The Nikkei-Market Japan manufacturing purchasing managers’ index rose to 52.9 in September from 52.2 in August and remaining above the 50-point level separating expansion and contraction. A preliminary reading for September had come in at 52.6.
Activity at Japan’s major manufacturers grew well beyond expectations in the third quarter to the highest level in a decade, according to the Bank of Japan’s latest Tankan survey.
For years, Singapore has relied on foreign workers in many segments of its economy, luring people with low taxes and world-class infrastructure. The slowdown in the population growth is happening at a time when the local population is aging rapidly, posing a challenge to its economy.
South Korea’s manufacturing sector expanded for the first time in two months in September, with factory output rising for the first time in more than a year as domestic demand helped mitigate a fall in export orders, according to an industry gauge.
POSITIONING, INFLECTION, MARKET CALLS
Wall Street investors have started trying to hedge against a possible deal to cut US corporate tax rates by buying up the stocks of companies that currently pay the highest effective rates, and therefore stand to benefit the most.
Having navigated months of political turbulence in Washington and drawn strength from the global economic upswing, equities will begin the fourth quarter with the agenda dominated by the chance of major corporate tax cuts that helped galvanise the market when Donald Trump won the White House. The Russell 2000 index of small companies, which are seen as big beneficiaries of tax cuts, has outperformed this month.
“What we are seeing now is the potential environment that people were prepared for and equity markets had accelerated to in January — that reflationary trade,” says Michael Underhill, chief investment officer at Capital Innovations. But I do not think you see a wildly speculative flow. It will be more steady and constant.”
Stocks, buoyed by strong earnings and the weak dollar, have managed to prosper, but that masked the trend for high tax-rate stocks, which would do best from a corporate tax cut, to underperform. By the start of this month, the markets’ collective judgment was that the chance of a significant tax cut this year was close to zero.
If Mr Trump can get something done, he will have much more to show his base, and his political capital could be replenished. If not, he would grow far weaker. This could be a watershed moment for him.
As for the markets, it is also a potential turning point. Movements this week saw the dollar index rise above its 50-day moving average, a measure of the short-term trend, for the first time in almost six months. Ten-year bond yields are back above 2.3 per cent, and smaller stocks, which would benefit most from economic expansion, are at record levels. Highly taxed companies have been outperforming.
This shows that markets are moving to price in the chance of a tax cut once more. What impact should it have? A corporation tax cut, by increasing the proportion of earnings that go to shareholders, should directly aid share prices. It would be good for stocks. Beyond that, measures to prod companies into repatriating cash held overseas could also help the dollar, and would also help the stock market because much of the cash is likely to be disbursed to investors.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
It was a bold statement, even for an investor day. “I don’t think we’re ever going to lose money again,” American Airlines CEO Doug Parker said Thursday.
Airlines have reaped the benefits of a plunge in oil prices in mid-2014, raking in record profits. It’s been a sharp turnaround for an industry that has suffered bankruptcies and recessions over the last decade. “The old world was darkness, but now it’s light,” he said. “I know I sound like an evangelist talking about this.”
US regulators have freed AIG from the shackles of “too big to fail” regulation in a landmark moment that reverses an important part of President Barack Obama’s post-crisis crackdown on big finance.
The insurance company, which along with the likes of Lehman Brothers and Bear Stearns came to symbolise Wall Street recklessness when taxpayers bailed it out in 2008, will no longer be considered a threat to financial stability.
The index posted quarterly gains of 4.9 percent its eighth straight quarter of gains for the first time since 1997. The S&P 500 rose nearly 4 percent in the quarter, also its eighth straight quarter of gains. The Nasdaq composite gained almost 5.8 percent for the quarter, its fifth straight positive quarter since 2015.
FOREX, CRYPTOCURRENCY, EXCHANGE IMPACTS
Despite nabbing its biggest weekly gain since February, the DXY dollar index declined for the third straight quarter — its longest quarterly losing streak since the financial crisis.
The euro is set to end its longest run of monthly gains versus the dollar since January 2013 on expectations of higher U.S. interest rates and rising European political risk. Market pricing for a Federal Reserve hike is rising, President Donald Trump’s tax plans are beginning to materialize, while some political uncertainty has crept back into the European Union following the German elections.
FINTECH, BLOCKCHAIN, DIGITAL PAYMENTS
The Chinese government has been clamping down on virtual currency activity at the same time that hundreds of thousands of Japanese have thrown themselves into Bitcoin trading, making Japan’s main Bitcoin exchange, bitFlyer, the largest in the world in recent weeks by some methods of counting.
South Koreans have also shown a sudden interest in virtual currencies, though they have generally opted for Bitcoin competitors like Ethereum and Ripple. Trading has been so popular that two South Korean exchanges, Bithumb and Coinone, have set up storefronts in Seoul that people can visit to buy and sell in person.
Dubai’s government is to launch a cryptocurrency following a partnership between Emcredit, a subsidiary of Dubai’s Department for the Economy (also known as Dubai Economy) and a UK based blockchain start-up called Object Tech Grp.
The new “encrypted digital currency,” called emCash, will be based on the latest blockchain technology, Dubai’s economy department says in a statement, and will be usable through emPay, a wallet launched by Emcredit to support contactless payments.
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
The average hedge fund is up 5.4% through the end of August, while stock-focused hedge funds have gained 8.31%, according to the researcher HFR. Over the same period, the Standard & Poor’s 500 rose 11.9% including dividends, while the traditional 60-40 split of stocks and bonds would have earned 8.9%.
ENERGY RENEWABLES, NUCLEAR
A legal battle over the future of the US electricity system is looming after the Trump administration shocked the industry with proposals for new subsidies for coal-fired and nuclear power plants. If implemented, the plan could mean the most radical shake-up of the market in decades.
Rick Perry, the energy secretary, on Friday sent a proposal to the Federal Energy Regulatory Commission calling for payments for power plants that provide “essential energy and ancillary reliability services” — and defined these in a way that means only coal and nuclear generators are likely to qualify.
POLLUTION, CLIMATE & ENVIRONMENT
The World Health Organization warns a highly infectious, deadly form of pneumonic plague is spreading rapidly in Madagascar and quick action is needed to stop it.
Pneumonic plague, which is transmitted from person to person, has been detected in several cities in Madagascar. This worries the World Health Organization as the disease is highly contagious and quickly causes death without treatment.
H7N9 avian influenza is emerging as the virus most likely to cause the next flu pandemic. The good news: It’s not so adept at spreading from human to human. The bad news: It’s potent, it’s better adapted to our respiratory tracts than the more widely known H5N1 virus and it’s increasingly prevalent in people. Known to be circulating only within China, H7N9 has been mutating in sinister ways this past year, putting scientists on alert as the cold weather approaches and the strain enters its sixth generation.
Large investment groups including BlackRock and Vanguard have stepped up pressure on US energy companies to address the risks associated with climate change, despite the Trump administration’s lack of action to address the threat.
An analysis of shareholder votes at this year’s annual meetings showed investors have taken a more active role in pushing for information on climate risks, often voting for improved disclosure against company board recommendations.
Saudi Arabia’s markets regulator loosened its rules for licensing asset management and other investment firms on Sunday, according to a presentation by senior officials at the Capital Market Authority (CMA).
CANADA, AUSTRALIA, NEW ZEALAND
A lawyer from the Toronto area on Sunday became the first nonwhite leader of a major political party in Canada. The New Democratic Party gave Jagmeet Singh, a son of Indian immigrants and a Sikh, a resounding victory.
BREXIT, SCOXIT, LONDON, UK ECONOMY
It is no secret that the British are divided over Brexit. More than 16 months have passed since the referendum, and both politicians and voters remain deeply polarized. There is a striking lack of consensus about whether the country was right to vote for Brexit and what Brexit should look like.
Trade minister Liam Fox said Britain was working to find a resolution after the United States last week responded to a complaint by Boeing by imposing a 220-percent preliminary duty on Bombardier’s CSeries jets, whose wings are made in Belfast. “We’ve said that we will fight our corner,” Fox told the annual Conservative Party conference. “We’ve been caught in the crossfire of a much larger dispute.”
Asked if the fourth round of negotiations, which concluded on Thursday, would make a difference, Juncker replied: “I’m saying that there will be no sufficient progress from now until October unless miracles would happen.”
Theresa May has announced plans to freeze university tuition fees and an additional £10bn of help for homebuyers, as she launched this week’s annual Conservative party conference with policies aimed at younger voters.
The British ambassador to Burma was forced to stop Boris Johnson mid-sentence as he recited a colonial poem in the country’s most sacred temple, it has been revealed. The blunder came on an official visit to the country earlier this year. Rudyard Kipling’s Mandalay is written through the eyes of a retired British serviceman in Burma and also references kissing a local girl.
The causes of the AfD’s success are the subject of fierce debate: some point to Germany’s refugee crisis in 2015, which saw the arrival of more than 1m mostly Muslim refugees from Syria, Afghanistan and other countries. Others highlight the eurozone debt crisis, and the widespread feeling among German voters that they were asked to pay for the fiscal sins of their European neighbours. After four years in which Germany was governed by a grand coalition between Chancellor Angela Merkel’s conservative CDU/CSU and the Social Democrats, a large group of voters also seemed keen to shatter the consensus-driven culture of the Berlin republic.
In conversations in Görlitz and the rest of eastern Germany, however, another theme emerges. Locals speak of a long-simmering sense of frustration, injustice and anger that reaches back to unification — a feeling that Germans in the east were and still are ignored and ridiculed by the richer, politically dominant west. There is talk of neglect, and a lack of respect and recognition.
“In a job you can negotiate with the boss — we can’t do that,” said Mr. Biswas, who had dragged himself on crutches to a demonstration against precarious forms of work recently in central London. “We’re stuck in a perpetually insecure system, where we all get exploited.”
Speaking after a summit of EU leaders in Estonia, the French president said “the dominant actors, the Anglo-Saxon ones especially, do not respect the rules of the game”, citing complex schemes of tax avoidance and tactics to thwart rival start-ups offering innovative services.
Cheers rang out in the City Hall of Berlin’s Schöneberg district on Sunday as two men, who met 38 years ago, when the German capital was a divided city, became the country’s first same-sex couple to legally marry.
GEOPOLITICS, CRIME, TERRORISM
The Jie Shun’s final secret would take months to resolve and would yield perhaps the biggest surprise of all: The buyers were the Egyptians themselves. A U.N. investigation uncovered a complex arrangement in which Egyptian business executives ordered millions of dollars worth of North Korean rockets for the country’s military while also taking pains to keep the transaction hidden, according to U.S. officials and Western diplomats familiar with the findings. The incident, many details of which were never publicly revealed, prompted the latest in a series of intense, if private, U.S. complaints over Egyptian efforts to obtain banned military hardware from Pyongyang, the officials said.
Afghan immigrant children as young as 14 are being recruited in Iran to fight — and die — in Syria, a prominent human rights organization said Sunday.
Thousands of civilians fleeing the Iraqi military’s push to evict the Islamic State from its last major urban stronghold in Iraq now include hundreds of suspected fighters for the extremist group, dirty and disheveled, who arrive at checkpoints claiming innocence and begging for mercy.
French authorities opened a terror investigation Sunday after a man stabbed two women to death around a train station in the center of Marseille. French soldiers patrolling the area shot and killed the man after his rampage near the Saint-Charles rail station, according to a spokeswoman for the Paris prosecutor’s office, which handles terrorism investigations across the country.
Speaking in Marseille, French Interior Minister Gérard Collomb said authorities have launched a national investigation into the stabbing. “This act could be terrorist, but we can’t confirm it right now,” he said.
Outgoing Sen. Bob Corker slammed President Donald Trump after his handling of the racially motivated violence in Charlottesville, Virginia, in August, and he’s standing by those words.
White House Counsel Don McGahn this summer was so concerned about the lack of protocols surrounding meetings between Donald Trump and Jared Kushner, the president’s son-in-law under scrutiny in the Russia probe, that officials feared the top lawyer would quit.
Justices will hear cases on how elections are conducted, on the right to privacy in the digital age and on whether religion can justify discrimination.
The Supreme Court on Tuesday will hear arguments as to whether the contorted voting maps drawn by both parties to cement their power have finally gone too far. Up for challenge is a Wisconsin legislative map.
Kasich has been one of President Trump’s most vocal opponents within the party, and some point to him as a likely primary challenger in 2020. But Kasich seems to be toying with the idea of leaving the GOP entirely — though he said for now he remains committed to trying to change it from within.
SCANDALS, LAWSUITS, FINES, REGULATORY
SILICON VALLEY, UNICORNS, STARTUPS, VC
Mr Kalanick’s sudden move to bolster his power comes as the board was considering a new governance proposal backed by Mr Khosrowshahi and Uber investors including Goldman Sachs. It would have stripped away all supervoting shareholder rights, reducing Mr Kalanick’s control, and would have effectively blocked him from ever returning as chief executive by requiring a two-thirds shareholder vote to appoint any former officer as chief.
Uber said that his unilateral board appointments “came as a complete surprise to Uber and its board”. Mr Khosrowshahi, Mr Kalanick’s successor, was not informed of the move beforehand, according to sources.
As Uber hurtles toward a $10bn investment deal and works to secure its footing in major markets such as London, bitter divisions on its board are threatening to derail the efforts of new chief executive Dara Khosrowshahi to set the company back on the right track.
Uber’s governance challenges erupted into the public spotlight over the weekend when former chief executive Travis Kalanick suddenly announced two new board members, without consulting the rest of the board first.
The move was an attempt by Mr Kalanick to shore up his position ahead of a major governance overhaul, and a reminder that he is still very much a power to be reckoned with at the company he helped create.
In an email to staff, Mr Khosrowshahi said the move was “disappointing” and that Mr Kalanick had not discussed it with him first. “Anyone would tell you that this is highly unusual,” he wrote.
The drama highlights the outsized corporate power wielded by Silicon Valley founders such as Mr Kalanick, and how difficult it is for investors to ever really fire a founder. Mr Kalanick was ousted as chief executive by investors in June, following crises at the company including multiple lawsuits, allegations of sexual harassment, and the departure of many senior executives.
RETAIL APPAREL, SPECIALTY, DINING, BIG BOX
MEDIA, CABLE, SPORTS, ENTERTAINMENT
By now it is a full-blown TV marvel, appointment viewing for the N.F.L.’s legion of fans: an announcer who can predict what play is going to happen on the field before the ball is snapped. He’s that good.
The announcer is Tony Romo, and he was making his broadcasting debut on CBS in that Sept. 10 game. But he was no stranger to fans. Before this gig, he was the star quarterback for the Dallas Cowboys the past 14 seasons.
Lots of former players have moved into the broadcast booth after their playing careers, but none have upended convention and delighted fans as much as Romo has through the first few weeks of this season. More often, the ex-players resort to hackneyed sports jargon and observations that even casual fans consider obvious.
“It’s pretty remarkable, really, that he’s come in and really added a new dimension with some of his abilities to predict plays,” said Cris Collinsworth, an analyst for NBC.
The movie adaptation of Stephen King’s horror novel “It” has surpassed $500 million at the world-wide box office, less than three weeks after its release, Warner Bros. Pictures said Thursday.
The film, directed by Andy Muschietti, is now the highest grossing horror film ever, breaking one of the longest held records in cinema history set by 1973’s “The Exorcist.” Adjusted for inflation, “The Exorcist” made $983 million in today’s dollars at the U.S. box office.
AUTOS, ELECTRIC, SELF-DRIVING
Audi’s conundrum reflects the challenge for auto makers as they plunge into an awkward phase of development years before fully driverless cars are ready: how exactly to pass control back and forth between driver and machine.
Congress is still deliberating how to establish rules governing driverless cars, for now leaving it to a patchwork of state laws. Last week, senators said they reached a bipartisan deal on a draft of a bill that would help speed development, but the outcome is uncertain.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
Elon Musk has unveiled a futuristic vision of intercity rocket-propelled travel, where flights to anywhere in the world would take minutes and cost no more than the price of an economy airline ticket.
In an earthbound offshoot of his dream of interplanetary travel, the SpaceX founder said his next BFR mega-rocket would be able to whisk passengers anywhere in the world in under an hour. The far-sighted entrepreneur, whose main job is running the electric car company Tesla Motors, tweeted: “Fly to most places on Earth in under 30 mins and anywhere in under 60. Cost per seat should be about the same as full fare economy in an aircraft.”
Australia’s fiercely territorial wedge-tailed eagle, known to eat kangaroos, uses sharp talons, aerial combat skills to take out pricey flying machines. ‘It ended up being a pile of splinters.’
Birds all over the world have attacked drones, but the wedge-tailed eagle is particularly eager to engage in dogfights, operators say. Some try to evade these avian enemies by sending their drones into loops or steep climbs, or just mashing the throttle to outrun them.
A long-term solution remains up in the air. Camouflage techniques, like putting fake eyes on the drones, don’t appear to be fully effective, and some pilots have even considered arming drones with pepper spray or noise devices to ward off eagles.
HEALTH, PRODUCTIVITY AND WELLNESS
“As human beings, we’re always looking for that initial effect, right?” Davis said. “We want that initial impact right then, right now. But sometimes, just like anything else, you have to do it over time. You have to do it for a long period of time. Like, maybe taking fish oils. People can’t really see the difference, but over time, you’ll benefit from it. So that’s kind of how it is when it comes to taking care of your body, consuming proper nutrients that you need, having a healthy, active lifestyle. You have to just go from there, one day at a time.”
Si Newhouse, who began work at Condé Nast in 1961 and became its chairman in 1975, had two particularly important mentors. The first was his father, who so loved the world of newspapers that, in 1939, he turned down a chance to buy the New York Yankees and set out to buy newspapers in Syracuse instead. The second was Alexander Liberman, a courtly émigré from Russia by way of Paris, who was both an accomplished artist and a creator of magazines, first as the art director of Vogue and then as the editorial director of Condé Nast. Si took his direction in business from his up-before-dawn, detail-driven father and learned the art of magazine-making from Liberman. He was not averse to risk; he kept a constant eye out for new projects and acquisitions. They tended to pay off. As the head of Condé Nast and, from 1980 to 1998, of the Random House group, he wielded tremendous influence in the media world. As a book publisher, he did not hesitate to suggest a big-ticket author or a subject that captured his interest, like the Rockefellers. Yet he hardly followed the pattern of the self-promoting modern tycoon, and seldom gave interviews to the press.
The difficulty of neurosurgery lies not so much in the operating as in the decision-making. Surgeons must balance the risks and benefits of surgery against the risks and benefits of not operating. These are probabilities, not certainties, and they are easy to misjudge.
Complacency, I have learned, is the worst of all surgical sins. All doctors face the central challenge of balancing professional detachment with painful compassion. You can care too much for your patients and become overwhelmed—because however skillful and diligent you are, some of your patients will suffer and die.
Leonardo’s most distinctive trait was his passionate, playful and occasionally obsessive curiosity. He made lists in his notebooks of hundreds of subjects, both marvelous and mundane, that he wanted to explore, from what causes people to yawn to methods for squaring a circle. He instructed himself to investigate the placenta of a calf, the jaw of a crocodile, the muscles of the human face, the glow of the new moon and the edges of shadows.
Some of his curiosity involved phenomena so commonplace that we rarely pause to wonder about them. “Why is the fish in the water swifter than the bird in the air when it ought to be the contrary, since the water is heavier and thicker than the air?”
Best of all are the questions that seem completely random. “Describe the tongue of the woodpecker,” he instructed himself on one notebook list. It isn’t something that Leonardo needed to figure out in order to paint a picture or to understand the flight of birds. He simply wanted to know. He never outgrew the child’s need not just to admire the beauty of a blue sky but to ask why it is that color.
His curiosity was aided by the sharpness of his eye, which focused on things that the rest of us barely notice. One night he saw lightning flash behind some buildings and for that instant they looked smaller, so he launched a series of experiments to verify that objects look smaller when surrounded by light. When he saw four-winged dragonflies hovering over a moat, he observed exactly how their wing pairs alternated in motion. Water flowing into a bowl? He studied how the eddies formed, and then wondered why.
Today we live in a world that encourages specialization, whether we are students, scholars, workers or professionals. We also tend to exalt training in technology and engineering, believing that the jobs of the future will go to those who can code and build rather than those who can be creative.
But the true innovators tend to be those like Leonardo who make no distinction between the beauties of the arts and the beauties of the sciences. When Einstein was stymied in his pursuit of the field equations for general relativity, he would often pull out his violin and play Mozart. The music, he said, helped to connect him to the harmonies of our cosmos. At the end of many of his product presentations, Steve Jobs would display a slide that showed the intersection of streets labeled “Liberal Arts” and “Technology.” He knew that at such crossroads lay creativity.
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