Macro Links Sep 27th – Triple Independence
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- PUERTO RICO DEVASTATION
- SHEER STUPIDITY
- NORTH KOREA
- TAX PLAN, HEALTHCARE DEFEAT
- EQUIFAX, SEC, DELOITTE HACKS
- KURDISTAN, CATALONIA INDEPENDENCE
- SAUDI ARABIA LETS WOMEN DRIVE
- RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- USA ECONOMY DATA, CITIES AND STATES
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- ENERGY CRUDE OIL, OIL SANDS, SHALE
- COMMODITIES AGRICULTURE & SOFTS
- POLLUTION, CLIMATE & ENVIRONMENT
- FRONTIER MARKETS
- EMERGING MARKETS
- CANADA, AUSTRALIA, NEW ZEALAND
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- DACA, TRAVEL BAN, IMMIGRATION, WALL
- PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
- PROPAGANDA, CORRUPTION, AUTHORITARIANISM
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- MEDIA, CABLE, SPORTS, ENTERTAINMENT
- AUTOS, ELECTRIC, SELF-DRIVING
- AEROSPACE, MILITARY & DEFENSE
- ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
PUERTO RICO DEVASTATION
Gov. Ricardo A. Rosselló of Puerto Rico said on Monday that the island was on the brink of a “humanitarian crisis” nearly a week after Hurricane Maria knocked out its power and most of its water, and left residents waiting in excruciating lines for fuel. He called on Congress to prevent a deepening disaster.
Stressing that Puerto Rico, a United States commonwealth, deserved the same treatment as hurricane-ravaged states, the governor urged Republican leaders and the federal government to move swiftly to send more money, supplies and relief workers. It was a plea echoed by Puerto Rico’s allies in Congress, who are pushing for quick movement on a new relief bill and a loosening of financial debt obligations for the island, which is still reeling from a corrosive economic crisis.
“Puerto Rico, which is part of the United States, can turn into a humanitarian crisis,” Governor Rosselló said. “To avoid that, recognize that we Puerto Ricans are American citizens; when we speak of a catastrophe, everyone must be treated equally.”
Tales of devastation continue to flow out of Puerto Rico, one of the islands tragically struck by Hurricane Maria. Millions are without cell service or power. Some are being discovered, days after the storm, in “near-death conditions,” according to San Juan’s mayor, Carmen Yulín Cruz.
“Just yesterday, we have been canvassing one by one all of our elderly homes, finding our elderly ― and I’m not kidding ― we [had] to transfer 11 of them in near-death conditions, no food, no water, no electricity and really the sanitary conditions were deplorable,” the mayor told CNN’s “New Day” on Tuesday.
The storm’s devastation here in the central mountains outside San Juan was among Puerto Rico’s worst, and the bridge collapse was an added insult. Now thousands of residents are sequestered in their toppled town, away from local officials, federal help, food, fuel, water and medicine.
The only way out of the residential neighborhood is to swim across the river or drive at least three hours around a mountain, a near-impossibility because of the scarcity of gas. Residents tied a fallen cable wire across the river in an attempt to send food and water across. As of Monday afternoon, it hadn’t worked.
A nursing home in San Juan made desperate pleas for diesel as its power generator ran low. An elderly man was carried out on a stretcher after going a week without dialysis. Children wearing nothing but diapers camped out on balconies to stay cool.
A new poll of 2,200 adults by Morning Consult found that only 54 percent of Americans know that people born in Puerto Rico, a commonwealth of the United States, are U.S. citizens. (Because Puerto Rico is not a state, they do not vote in presidential elections, but they send one nonvoting representative to Congress.)
“These are two different topics,” Cruz told CNN. “You don’t put debt above people, you put people above debt.”
“It’s very, very tough because it’s an island,” the president said, asserting that his government received “A+” marks for responding to storms in Texas and Florida. “The difference is this is an island sitting in the middle of an ocean — and it’s a big ocean, a really, really big ocean.”
President Donald Trump defended his attacks on football players who have knelt during the national anthem and said his dispute with the NFL didn’t distract him from responding to hurricane damage in Puerto Rico.
“It makes no sense whatsoever. In fact I wonder if there wasn’t some sort of mistake made,” John Campbell, a former US ambassador to Nigeria, told BuzzFeed News. “It’s an insult. What really gets to me is the apparent sheer stupidity of it.”
On Monday Chad’s government said it was “astonished” and “baffled” to find its citizens blacklisted by Trump. Local press reported that the US ambassador was summoned to meet with the prime minister on Monday.
“They had a lot of modifications,” said Steve Snider, an acoustic sales consultant with the company, who worked with the agency on its order earlier this summer. “Their main goal was they wanted essentially a secure phone booth that couldn’t be breached from a data point of view or from someone standing outside eavesdropping.”
No previous EPA administrators had such a setup.
Members of both major political parties take a dim view of Mr. Trump’s use of tweets to talk to Americans, a Wall Street Journal/NBC News poll this month found. Overall, 66% of Americans in the survey disapproved of the president’s “use of Twitter to communicate with the American people,’’ compared with 23% who approved.
Democrats and independents overwhelmingly disapproved of Mr. Trump’s Twitter use as a communications tool. Among Republicans, a plurality of 46% disapproved, with 36% approving.
Rarely do you see someone close to the president just come out and admit how unsophisticated he is as a consumer of information. That’s what Stephen K. Bannon did Monday night, though not quite in so many words. While chatting with Fox News’s Sean Hannity, the former White House chief strategist suggested that Trump was essentially duped into supporting appointed Sen. Luther Strange (R-Ala.) in Tuesday’s Alabama special-election runoff. And it wasn’t really all that subtle.
Iran’s much-touted test launch of a new medium-range ballistic missile last Friday which prompted an angry response from President Donald Trump was a fake, it was reported on Monday.
The Iranian government on Friday released video footage of the supposed launch just hours after it displayed what it claimed to be a new type of missile at a military procession in the capital Tehran. But the footage of the launch was more than seven months old, two US officials told Fox News on Monday.
Longtime Trump adviser Roger Stone said ahead of congressional testimony that his interactions with an online entity the U.S. said was used by Russia to meddle in the 2016 election were “limited” and “benign.”
It is the fifth consecutive day that Trump has attacked football players who kneel during the national anthem.
Donald Trump said on Tuesday the US would take the military option against North Korea “if we have to” as he urged global leaders to unite in a bid to cut off Pyongyang’s economic lifelines. “We are totally prepared for the second option. That’s called the military option. If we have to take it we will,” the US president warned.
The Treasury Department blacklisted eight North Korean banks and 26 individuals in a further drive to choke North Korea’s access to global finance.
It’s been almost half a century since North Korea shot down a U.S. military aircraft. These days its generals might find it even
In 1969, a North Korean pilot shot down a U.S. military aircraft over international waters, killing its entire crew, in a Cold War episode that holds lessons today, both for Pyongyang’s capacity for confrontation and for Washington’s limits on options.
The outreach began before the current eruption of threats between the two leaders but will probably become only more urgent as Trump and Kim have descended into name-calling that, many analysts worry, sharply increases the chances of potentially catastrophic misunderstandings.
China announced in February that it had suspended all coal imports from North Korea following UN sanctions, so it was not immediately clear why the data showed shipments had resumed. A customs official said she would investigate the matter.
The United States seemed to have disclosed the flight route of the bombers intentionally because North Korea seemed to be unaware, the report said.
The U.S. has gamed out four or five different scenarios for how the crisis with North Korea will be resolved, and “some are uglier than others,” National Security Adviser H.R. McMaster said as tensions remain high between the two countries.
Years of sanctions against North Korea have done little to slow its nuclear-weapons program, so much so that its missiles now threaten the continental U.S. Yet many analysts still promote sanctions as the best way to deal with the threat from Kim Jong Un’s regime. Some even speculate that unilateral U.S. sanctions, imposed by President Donald Trump on Sept. 21, have a better chance of working than most of what’s come before.
As one observer put it, Trump’s executive order effectively allows the U.S. to impose a full trade and financial embargo through the use of secondary sanctions, which target non-U.S. banks, companies and people who do business with North Korea. In other words, these sanctions may have real teeth.
Pyongyang is anxious to avoid a war it can’t win, according to some analysts, and is careful to leave itself a rhetorical way out when it makes threats.
“I hear fear in their voice,” said Shin Won-sik, a three-star general who was the South Korean military’s top operational strategist before he retired in 2015. “They can’t fight a war with the Americans when their fighter jets don’t even fly far because of lack of fuel and fear of crashing.”
Russia’s armed forces in the country’s far east have kicked off a large air drill near borders with China and North Korea that will culminate with a practice air bombing, state news agency Itar-Tass said Tuesday.
TAX PLAN, HEALTHCARE DEFEAT
Just 28 percent of respondents in a new survey support President Trump’s tax plan.
The “Big Six” group of Republicans negotiating tax reform details have agreed on reducing the number of tax brackets from 7 to 3.
Senator John McCain of Arizona is laying down the same marker on tax legislation as he did on health care, demanding regular order and support from both parties — a stance that has proved pivotal in thwarting Senate Republican efforts to undo Obamacare.
Senator Mitch McConnell, the majority leader, said Republicans would not move ahead with a vote on the latest plan to repeal the Affordable Care Act.
The Senate won’t vote this week on the latest Republican health bill, multiple GOP lawmakers and aides said Tuesday, effectively ending the party’s bid to topple the Affordable Care Act before a key deadline.
A growing number of senators want a health-care measure attached to the 2018 budget bill, threatening not only its passage, but also chances for a tax overhaul.
EQUIFAX, SEC, DELOITTE HACKS
Mr. Smith faced intense criticism for a data breach that exposed the personal information of up to 143 million people, as well as Equifax’s response to the crisis.
Lawmakers criticised Mr Clayton, the top US market regulator, for not disclosing enough about the 2016 attack and peppered him with questions that he said he could not answer at a hearing of the Senate banking committee on Tuesday.
Deloitte has confirmed that hackers accessed data on an email platform, forcing the ‘big four’ accounting firm to contact clients potentially affected by the cyber attack as well as government authorities.
KURDISTAN, CATALONIA INDEPENDENCE
As jubilant Iraqi Kurds celebrated their vote Monday on independence from Iraq, shooting off fireworks and parading in cars festooned with Kurdish flags late into the night, their neighbors conducted military exercises on the region’s borders, raising the threat of military intervention if it secedes.
Iraq’s prime minister on Tuesday, angered by a vote on independence by his nation’s Kurdish minority, gave the country’s Kurdish region until Friday to surrender control of its two international airports or face a shutdown of international flights.
Carles Puigdemont, Catalania’s president, could be removed from office if he continues to push ahead with a referendum on independence this weekend, the Spanish government’s representative in Barcelona has warned.
Enric Millo said on Tuesday that he would “keep hoping until the last minute that the Catalan government has a change of heart and calls off the referendum”, set for Sunday.
The vote has been declared illegal by the Spanish courts and Mr Millo’s comments mark a further escalation in Madrid’s attempts to stop the poll from going ahead. Last week Spanish state police, acting on court orders, raided Catalan government offices, arrested senior officials and seized ballot papers, ballot boxes and other electoral material.
Spanish prosecutors also levelled charges of sedition against activists campaigning for independence. But the separatist Catalan government has promised to press ahead with what it says will be a binding referendum on independence.
The president’s remarks mark a departure from the official position of the United States, which, as recently as Monday, was that a planned nonbinding Catalonia referendum Sunday to separate from Spain was an internal matter.
SAUDI ARABIA LETS WOMEN DRIVE
Saudi Arabia announced on Tuesday that it would allow women to drive, ending a longstanding policy that has become a global symbol of the repression of women in the ultraconservative kingdom.
The change, which will take effect in June of next year, was announced on state television and in a simultaneous media event in Washington. The decision highlights the damage that the no-driving policy has done to the kingdom’s international reputation and its hopes for a public relations benefit from the reform.
RATES, LIQUIDITY, SYSTEMIC RISK, BALANCE SHEETS
On a four-week basis, the correlation between the metal and the cryptocurrency is currently more than 0.95, showing prices have moved almost completely in lockstep. The reading matches that of gold and silver and exceeds Apple and the S&P 500.
To explain the near perfect relationship between the two investments, analysts are looking at China. The country accounts for about half of global demand in industrial metals and traders and investors there have become increasingly dominant in the market. The same trend’s now visible in cryptocurrencies.
“A lot of metal speculation comes from China, and most of the recent interest in trading cryptocurrencies has been coming from China,” said Matthew Turner, metals analyst at Macquarie Group Ltd. in London. “The factors that drive Chinese speculation could have an impact on both metals and cryptocurrencies.”
It’s an astonishing comeback for the roughly $70 billion market for synthetic CDOs, which rose to infamy during the crisis and then faded into obscurity after nearly destroying the financial system. But perhaps the most surprising twist is Citigroup itself. Less than a decade ago, the bank was forced into a taxpayer bailout after suffering huge losses on similar types of securities tied to mortgages. Now, many in the industry say Citigroup is responsible for over half the deals that come to market, though precise numbers are hard to come by.
This time, Citigroup says, it’s doing things differently. The deals are tailored in a way that insulates it from any losses, while giving yield-starved buyers a chance to reap returns of 20 percent or more. The market today is also just a fraction of its size before the crisis, and few see corporate defaults surging any time soon. But as years of rock-bottom interest rates have pushed investors toward riskier products, the revival of synthetic CDOs may be one of the clearest signs yet of froth in the credit markets.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
At lunch, I asked Pak, “If your country would be destroyed in a nuclear exchange, why are you really entertaining the idea?”
North Korea, he said, is no stranger to devastation: “We’ve been through it twice before. The Korean War and the Arduous March”—the official euphemism for the famine of the mid-nineties. “We can do it a third time.” The argument is embedded in North Koreans’ self-image. They are taught to see themselves as inhabitants of a land shaped by a history of suffering, a sense of hostile encirclement, and a do-or-die insistence on survival.
But, to state the obvious, I said, risking a premature end to a friendly meal, a nuclear exchange would not be comparable.
“A few thousand would survive,” Pak said. “And the military would say, ‘Who cares? As long as the United States is destroyed, then we are all starting from the same line again.’ ” He added, “A lot of people would die. But not everyone would die.”
President Donald Trump has finally started tweeting about the disaster in Puerto Rico, and his messages show that he — and we as a nation — still haven’t digested the full implications of the post-Hurricane Maria situation. The underlying reality is that the political and economic model for the island just isn’t working any more, and the dream of Puerto Rican economic convergence has been laid to rest once and for all. That in turn says something bad about the rest of this country, namely how quickly we will give up on the possibility of transformational change.
While well versed in Japanese demographics, investors are less acquainted with the nation’s response to this challenge. Japan, simply put, is in the midst of a robotics revolution that will transform nearly every aspect of society and be replicated, in some shape or form, around the world given the ageing populations of Europe, the US and even China.
Far from lagging behind, Japan is leading the way in a world confronting declining birth rates and ageing societies, and the knock-on effects of a dwindling labour force, acute labour shortages and soaring costs for elderly care.
Out of necessity, Japan has been pushing on the robotics frontier for years. As a result, the proliferation and embrace of robots goes well beyond the Japanese factory floor to include schools, hospitals, nursing homes, airports, train stations and even temples.
Some robotic tasks seem frivolous and are in the early stages of development, but no other country in the world has strategically embraced robots as much, with the state’s revised Japan Revitalization Strategy seeking to achieve “a new industrial revolution driven by robots”.
The world may have already produced the most gold in a year it ever will, according to the chairman of the World Gold Council. Production is likely to plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China, Randall Oliphant said in an interview Monday.
“It’s not clear how the whole U.S. political system will play out,” said Oliphant, an industry veteran who’s been an executive at some of the world’s biggest gold miners. “All this uncertainty seems very fertile ground for people to get into gold.”
“I’m a gambler,” Potts says. “A lot of people in the oil field are. They say it all the time when they come in my shop: ‘Lord, just give me one more boom, and this time I promise I won’t piss it away.”
What emboldens China? Its sharpest trading practices fall outside the scope of World Trade Organization rules. The system wasn’t set up with a secretive and centrally directed colossus like China Inc. in mind. Western economies, once optimistic that WTO membership would induce transparency and free-market reforms in China, now have no good defense. Put crudely, China knows it can get away with it.
So far, the strategy is working. The economy is on an upswing, propped up by debt but also, for now, defying conventional theories that mercantilism will sap China’s creative vigor. One in three of the world’s “unicorns”—startups worth more than $1 billion—are Chinese, according to McKinsey.
Success reinforces predatory habits. China will soon have more middle-class consumers than the entire U.S. population, giving Beijing huge market power. Donald Trump’s chief trade negotiator, Robert Lighthizer, says he gets “an awful lot of complaints” from chief executives forced to share technology with joint venture partners. But those CEOs are reluctant to go public with their gripes for fear of retaliation in their most promising market.
This isn’t just a hymn to the glory of an oil and gas company, it’s also a paean to the UK’s “greenest government ever”. Thanks to its support, the price of offshore wind energy has dropped by half in less than two years. By the 2020s, it will be as cheap or cheaper than any other form of power generation. It’s just become much cheaper than nuclear, even taking into account the additional costs associated with the wind’s intermittency. And in any case, this is less of an issue at sea where the winds are more constant.
Talking to Poulsen made me realise that we were on the cusp of a quiet revolution. From being the most expensive form of renewable energy, offshore wind was fast becoming the cheapest form of large-scale, low-carbon generation bar none. As Poulsen said: “When you go 10 years into the future and you look back, I think we will look at these years, 2016, 2017, 2018, as the inflection point. I think we’ll look back and say wow … Something happened for wind and solar energy during those years that completely changed the dynamic.” But he also said that “without the UK government and what they have done for the past five or six years, we wouldn’t have been where we are today. I’m glad to see that it’s paying off because we’re creating a lot of jobs right now and building a local supply chain. So they’ll get their rewards, which they should.”
Urban farming itself is not new — people have always grown produce or raised livestock in towns and cities, from necessity, as a hobby or to reduce food miles. Now, however, city agriculturalists are harnessing technologies such as light-emitting diode (LED) bulbs, 3D printers and data analysis to speed up growth and create farms virtually anywhere.
Leaders in Poland, Hungary and the Czech Republic have been banging the drum against the German Chancellor’s open-door refugee policy for more than two years. Does the rise of the anti-immigration AfD from fringe protest group to the German Parliament vindicate them? The Polish interior minister thinks so, saying he hopes Germany and the European Union now learn from Merkel’s “mistake.”
The rift between core EU states in western Europe and newer eastern members is likely to widen after next month’s Czech election, as Bloomberg’s team in eastern Europe reports. The party with an unassailable lead in the polls is fronted by a billionaire who blames refugees for terrorism and wants to run the country more like his business.
Donald Trump-style populism still lurks in Europe. The question is whether Merkel and her allies in western capitals can keep a lid on it.
The most important story of last weekend’s election in Germany was not so much the rise of AfD but the collapse of support for the country’s mainstream political parties, which lost more than 100 seats in the Bundestag, their worst result in the postwar era. Many of these voters moved to the AfD, but other small parties gained as well. And the AfD also picked up significant support from disaffected voters who did not participate in the previous election, suggesting that many of its voters became alienated from politics first, and only later chose to support the party.
Oxford University’s Jane Gingrich and University of Zurich’s Silja Haeusermann wrote in a 2015 paper that left-wing parties began losing their blue-collar support base in the 1990s as the manual working class shrank. Their new base required a new approach. “The postindustrial welfare support coalition is predominantly anchored in the middle class, which tends to prefer social investment and activation policies over traditional redistributive policies,” the paper said.
The German election, like the earlier election in the United Kingdom, leaves the country without a clear direction or mandate. Most of the post-election stories have highlighted the showing of the Alternative fur Deutschland, the rightwing populist party that by winning 13 percent has become Germany’s third largest party. That’s certainly worrisome, but I’d give equal billing to the revival of the Free Democrats (FDP), which could doom any prospect for economic reform in Europe.
The FDP, which was founded in 1948, is West Germany’s free market party. It is anti-tax (it favors a flat tax) and anti-regulation. It favors privatizing the public sector. It has been called “the party of dentists,” dentists being the archetype of the independent entrepreneur. It had fallen into hard times during the last decade, but it gained support as the main opposition to Germany helping Greece with debt relief to remain in the Eurozone. It wanted to kick Greece out of the Eurozone and currently opposes the kind of fiscal reform of the EU that French President Emmanuel Macron and Europe’s Social Democrats favor as a way of reducing the disparity between the prosperous North and the floundering South.
With the FDP in government, it is doubtful that Germany will alter its own economic strategy or embrace any kind of reform of the Eurozone. Reform will have to await another crisis that will pose the stark choice of reform or breakup. That is why the rise of the FDP is so troubling.
Emmanuel Macron made an impassioned appeal to EU leaders to be “bold” against the threat of populism as he presented a cascade of initiatives to overhaul the bloc in the most integrationist speech by a French leader since the creation of the euro.
Among the French president’s numerous proposals were the creation of a “military intervention force” and a common military budget by 2020, a European agency to deal with counter-terrorism intelligence and another to drive “radical innovation” in the economy.
It was crucial, Mr Macron said, to end “civil wars” that had thwarted the EU in the past decade to build an economically “sovereign” powerhouse able to compete with China and the US.
A decade after the onset of the global financial crisis, it seems more than appropriate for central bankers to move the levers of policy off their emergency settings. A world in recovery – no matter how anemic it may be – does not require a crisis-like approach to monetary policy.
Independent central banks were not designed to win popularity contests. Paul Volcker knew that when he led the charge against raging inflation in the early 1980s. But the approach taken by his successors, Alan Greenspan and Ben Bernanke, was very different – allowing financial markets and an increasingly asset-dependent economy to take charge of the Fed. For Janet Yellen – or her successor – it will take courage to forge a different path. With more than $6 trillion of excess liquidity still sloshing around in global financial markets, that courage cannot be found soon enough.
CENTRAL BANKS & MONETARY POLICY
Today I will discuss uncertainty and monetary policy, particularly as it relates to recent inflation developments. Because changes in interest rates influence economic activity and inflation with a substantial lag, the Federal Open Market Committee (FOMC) sets monetary policy with an eye to its effects on the outlook for the economy. But the outlook is subject to considerable uncertainty from multiple sources, and dealing with these uncertainties is an important feature of policymaking.
Key among current uncertainties are the forces driving inflation, which has remained low in recent years despite substantial improvement in labor market conditions. As I will discuss, this low inflation likely reflects factors whose influence should fade over time.
But as I will also discuss, many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent. My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.
In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability.
Increasing inequality in income and wealth, including the widening gulf between the fortunes of people in urban and rural areas, threatens to limit U.S. economic growth, warned the Federal Reserve’s Lael Brainard.
“Much of the gains in employment, income and wealth since the end of the recession, and more broadly over the past few decades, have accrued to workers and families in larger cities,” Fed governor Lael Brainard said, citing data to be released Wednesday in the central bank’s latest Survey of Consumer Finances.
Federal Reserve Chairwoman Janet Yellen defended the central bank’s projection for a gradual path of rate increases over the next few years, but said the Fed could consider a slower pace if low inflation proves persistent.
The Federal Reserve may have overstated the strength of the labor market and the rate of inflation, which could lead to monetary policy ahead that will be easier than previously thought, Fed Chair Janet Yellen said Tuesday.
In a speech delivered to the National Association for Business Economics in Cleveland, Yellen admitted that trends in employment and wage and price pressures have shifted from what central bank forecasters expected.
The result would be an even more dovish Fed when it comes to removing the historically aggressive policy accommodation in place since the financial crisis.
Federal Reserve chair Janet Yellen said policymakers ought to be careful of “moving too gradually” on monetary policy despite “significant uncertainties” over inflation.
Ms Yellen, speaking on Tuesday at the annual meeting of the National Association for Business Economics in Cleveland, Ohio, acknowledged that “some key assumptions underlying the baseline outlook could be wrong in ways that imply that inflation will remain low for longer than currently projected”.
USA ECONOMY DATA, CITIES AND STATES
E-commerce is setting off a scramble for industrial real estate near urban centers, giving landlords of once-unglamorous properties a chance to push up rents to record levels.
Amazon.com Inc. and other online retailers, as well as fulfillment companies such as FedEx Corp. , increasingly are seeking out “last-mile” locations in urban areas to feed consumer demand for ever-faster delivery of their purchases. That, in turn, is giving landlords of such facilities pricing power they have never enjoyed before.
Home prices in 20 U.S. cities climbed more than forecast in July, reflecting solid demand against a backdrop of modest listings of properties, figures from S&P CoreLogic Case-Shiller showed Tuesday.
Buyers are competing for a limited number of for-sale homes, allowing sellers to boost asking prices. Property values are consistently outpacing wage growth, helping explain why the share of first-time buyers of previously owned homes in August was at a one-year low. At the same time, owners’ equity as a share of total real-estate holdings climbed in the second quarter to the highest level in 11 years.
The S&P CoreLogic Case-Shiller National Home Price Index for July was released today. The not-seasonally-adjusted index jumped 6% year-over-year, by far outrunning growth in wages and household incomes, which it has done for years. The index has surpassed by 5% the crazy peak (I mean, the normal base) in July 2006.
While real estate is subject to local dynamics, monetary policies have a massive impact, particularly in places where the money flows to, which creates local housing bubbles. If enough local bubbles balloon at the same time, it becomes a national housing bubble.
U.S. consumer confidence fell in September and home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma, supporting the view that the storms would hurt economic growth in the third quarter.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
Intercontinental Exchange, the parent company of the New York Stock Exchange, said Tuesday it will launch a new futures contract based its new NYSE FANG+ Index. The term “FANG” refers to the quartet of Facebook, Amazon.com, Netflix, and Google (whose parent company is now called Alphabet).
Only ICE’s contract will be a bit broader than that. It will also include Apple — which is often bundled together with the FANG foursome — as well as Alibaba Group Holding, Baidu, Nvidia, Tesla and Twitter. The contract will start trading on Nov. 8, subject to regulatory review, ICE said in a statement.
There is an already an exchange-traded fund with the ticker “FNG” that aims to track the FANG stocks and their close relatives in the tech and new media sectors. Investors can also get exposure to the FANG bunch by simply buying shares in the four companies directly. But ICE’s new contract would be the first futures contract tied to the FANG concept, according to an ICE spokesman.
Institutional investors, governance advisers and boards themselves are increasingly blocking directors from joining multiple boards, saying the practice spreads the executives too thin.
The company’s operation in Michigan reveals how it’s dominated the industry by going into economically depressed areas with lax water laws.
A slimmer, revitalised Caesars emerges from bankruptcy in the next week valued at perhaps $25bn, not far from its sale price in 2008. In the end, the debtholders held all the aces, although the private equity firms will be allowed to keep a piece of the action. But, for all the wrangling and lawsuits, the fortuitous outcome is a result of the less flashy work of repairing an underlying business.
“The casino business has this mathematical beauty to it. But nobody was using it,” explained Gary Loveman, who went from a Harvard Business School professor who consulted for Caesars in the 1990s to being the company’s chief executive.
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
The hedge fund run by Louis Dreyfus Holding BV will close by the end of 2017, joining a wave of commodity-investment vehicles that have shut in recent years.
All funds and investments run by Edesia Asset Management BV will be wound down by Dec. 31 as the agricultural-commodities giant focuses on its main business, the company said in a statement Tuesday. The investment firm founded in 2008 manages more than $1.4 billion, it said. That’s down from $2.7 billion in August 2013, according to the parent company’s website.
The swaggering macro manager who flamed out at Fortress Investment Group LLC is starting a $500 million hedge fund to invest in cryptocurrencies, initial coin offerings and related companies. Novogratz will put up $150 million of his own money and plans to raise $350 million more by January, mainly from family offices, wealthy individuals and fellow hedge fund managers, said a person familiar with his plans.
At that size, the Galaxy Digital Assets Fund would be the biggest of its kind and signal a growing acceptance of cryptocurrencies such as bitcoin and ether as legitimate investments. For Novogratz, 52, the fund marks a comeback to professional money management after humbling losses at Fortress and almost two years of self-imposed exile from Wall Street.
“This is going to be the largest bubble of our lifetimes,” Novogratz said. “Prices are going to get way ahead of where they should be. You can make a whole lot of money on the way up, and we plan on it.”
ENERGY CRUDE OIL, OIL SANDS, SHALE
One of the world’s biggest commodities traders says the “lower for longer” era of low oil prices is nearing an end, as Brent crude approaches a more than two-year high of near $60 a barrel.
Ben Luckock, co-head of group market risk at Trafigura, said the oil market was turning a corner and a belief by some market players that prices would remain within a tight $40 to $60 a barrel range would not play out. “We are nearing the end of ‘lower for longer’,” Mr Luckock said in a presentation to the annual Asia-Pacific petroleum conference on Tuesday. “This theory may have had its best days.”
The final price prediction from Andy Hall — the oil trader known to many in the industry as “God” — seems to have come true. Not that it does his investors any good.
Hall, who shot to fame after pocketing $100 million from a single year’s trading back in the 2000s, quit the oil market and returned money to investors on Aug. 31, just as prices really started to take off. In a farewell letter to his clients, he said, with a hint of irony, that his conversion from a long-term bull into a bear could be signal to buy.
He was right. Brent crude has climbed to a two-year high since Hall decried the worsening outlook for a “frustrating” market. The legendary trader’s fund dropped 30 percent in the first half, but evidently he hadn’t lost all of his insight.
COMMODITIES AGRICULTURE & SOFTS
The U.S. for the first time dropped from the top spot in a global ranking of how well countries can feed their own people, as concerns about agricultural research spending and government policy trends may make the world’s top food exporter a less-certain place to get a meal.
Ireland is the world’s most “food-secure” nation, improving its food affordability, availability, quality and safety while the U.S. has stagnated, according to a copy of the sixth annual Global Food Security Index compiled by the Economist Intelligence Unit scheduled for release Tuesday.
Worldwide, food security fell for the first time in five years, largely because of increases in the number of refugees, weather disasters and a decline in global political stability. The examination, commissioned by Dupont Co., this year added metrics based on climate and natural-resource risks. Adjusting for those factors, the U.S. fell to fourth place, with Austria and France moving ahead.
The state’s citrus industry, beset by a disease killing off groves plus hurricanes and international competition, is banking on producing a genetically engineered orange that is years away from being ready for sale.
POLLUTION, CLIMATE & ENVIRONMENT
An enormous Antarctic glacier has given up an iceberg over 260 square kilometres in size, the second time in two years it has lost such a large piece in a process that has scientists wondering if its behaviour is changing for the worse.
Three-quarters of the world’s food today comes from just 12 crops and five animal species and this leaves supplies very vulnerable to disease and pests that can sweep through large areas of monocultures, as happened in the Irish potato famine when a million people starved to death. Reliance on only a few strains also means the world’s fast changing climate will cut yields just as the demand from a growing global population is rising.
Zimbabweans are using equities as a refuge as the central bank prints hundreds of millions of its new so-called bond notes. They’re worried inflation will spiral and want to preserve their wealth. Going to the bank to withdraw cash isn’t an option because most lenders are short on U.S. dollars, which has been the main currency in use since Zimbabwe scrapped its own worthless dollar in 2009.
So they’re buying what they can electronically—appliances, cars, gold, property or, for those with limited resources, shares like those of African Distillers Ltd. that go for $1.70 each after more than doubling this month. The benchmark equity index has tripled since the first batch was issued in November, including a 62 percent jump in September as 300 million worth of bond notes were released into the money supply.
General Electric Co. is in danger of losing one of its largest industrial contracts after a political shake-up in India, highlighting the risk of the conglomerate’s chase to win business in far-flung markets by investing heavily in local operations.
GE won a $2.5 billion deal in 2015 to sell diesel locomotives to Indian Railways—delivering 1,000 of the machines over 11 years—using a structure the company said would be a model for the future. In exchange for a massive order from one of Asia’s biggest economies, GE would agree to build the locomotives in a remote corner of the Indian countryside, boosting employment and the local economy.
But a new railways minister, Piyush Goyal, stunned GE leaders earlier this month by declaring that India would pull out of the deal and instead seek to transform its massive rail network to use electric locomotives exclusively. GE executives met with Mr. Goyal last week, according to people familiar with the meeting, to try to keep the deal together.
CANADA, AUSTRALIA, NEW ZEALAND
“The current state of the dollar is a reflection of our positive economy, and that’s something that we expect as a ramification of doing well,” Morneau said. “But we think that we can continue to be successful with that level of the dollar. It will clearly mean that we’ll have to continue to invest in productivity so that businesses are successful.”
BREXIT, SCOXIT, LONDON, UK ECONOMY
“Every time the clown in the Tory circus that is Boris Johnson opens his mouth and says things like ‘go whistle,’ he undermines our negotiating position,” Labour’s former business spokesman, Chuka Umunna, said in a panel debate organized by the Centre for European Reform late on Monday.
Given the rocky state of the negotiations, Tusk said: “If you asked me, and if today member states asked me, I would say there’s no sufficient progress yet, but we’ll work on it.”
The European Union welcomed U.K. Prime Minister Theresa May’s “more realistic tone” on the Brexit negotiations but said her concessions don’t go far enough, suggesting prospects of starting trade talks as soon as next month continue to fade.
The head of UBS’s investment bank has warned that it needs a Brexit transition deal to be agreed by March or there will be a “significant” shift out of the UK.
“Definitive decisions will need to be made [on moving people out of London] in the first quarter if we don’t have definite guidance on a transition period by then,” said Andrea Orcel.
On Monday, Johnson embarked on a “two-day, three-country European trip,” focusing on “security” during which he will visit Prague, Bucharest and Bratislava, according to the Foreign and Commonwealth Office. Meanwhile, Davis met with Belgium’s foreign affairs minister Monday and traveled to The Hague Tuesday to meet the Dutch foreign minister. Fox met the Dutch minister for foreign trade and business organizations on Monday and headed to Brussels Tuesday to attend a meeting with European Commissioner for Trade Cecilia Malmström.
Petry, despite being one of the AfD’s best-known figures, has been increasingly isolated from her fellow leaders in recent months. Not only have there been fierce personality clashes between Petry and other senior officials; she has also championed a less extreme course that aims to make the party fit for government one day, while more radical party members insist the AfD’s vocation is as an opposition party.
French President Emmanuel Macron’s is laying out his ambitious calls for a deeper union between the euro’s 19 members, trying to influence Germany as Chancellor Angela Merkel starts talks with potential coalition partners.
Two months after vetoing laws to restructure the Polish court system that had drawn sharp rebukes from the European Union and brought thousands of protesters into the summer streets, President Andrzej Duda on Monday offered his own draft versions of the legislation. But his proposals contain provisions likely to upset all sides in the bitter debate.
Since she defied her own party to run for and win the Tokyo governorship in July last year, Koike, 64, has become Japan’s most popular leader, with approval ratings as high as 86 per cent. National politics has bent itself to her presence. Even though she is a member of his party, Koike is the de facto opposition to prime minister Shinzo Abe.
She has done it by running hard against the old guard in her Liberal Democratic party; against her nationalist predecessor Shintaro Ishihara; against the City Hall bureaucracy; and, more generally, against the grey legions of men who pull the levers of power in Japan. If the momentum holds, Koike’s blend of charisma, conservatism and civic populism could yet make her Japan’s next prime minister.
DACA, TRAVEL BAN, IMMIGRATION, WALL
The US Department of Homeland Security (DHS) is expanding the kinds of information that it collects on immigrants to include social media information and search results. The new policy, which covers immigrants who have obtained a green card and even naturalized citizens, will take effect on October 18th.
President Donald Trump plans to set the cap for refugee admissions for the coming fiscal year at 45,000, the lowest in decades, according to people familiar with the discussions.
The number won’t be officially settled until after senior administration officials consult with members of Congress, as required by law, on Wednesday. A decision is due by Saturday, before the next fiscal year begins.
PRIVACY, HACKING, CYBERWAR, SURVEILLANCE STATE
Facebook Inc. will by shut down in Russia next year if it fails to comply with requirements to store user data locally, according to the head of Russia’s state communications watchdog. “The law is mandatory for everyone,” Alexander Zharov told reporters Tuesday. Roskomnadzor will be forcing foreign internet companies to comply or shut down in the country.
PROPAGANDA, CORRUPTION, AUTHORITARIANISM
“Venezuela is moving from an authoritarian state towards a totalitarian one,” says Mr Smolansky, looking shell-shocked and disorientated amid the skyscrapers of New York. “I have no idea where I will settle. Exile is not easy.”
Mr Smolansky is not alone. As part of Mr Maduro’s clampdown, 11 other mayors have been removed from their posts on trumped-up charges. Five are already in jail, says Mr Smolansky, while seven are on the run or in exile.
Corker’s retirement will create what is likely to be a highly contested, ideologically driven Republican primary. It also creates a vacuum among Senate Republicans for leaders on national security issues.
Republicans face a choice between Sessions’s appointed replacement, former state attorney general Luther Strange, and former Alabama Supreme Court judge Roy Moore. But the outcome will determine far more than the career paths of the two men. National conservative groups have moved into the state to fight a proxy war over the leadership of the party in Washington — and over the degree to which President Trump can still direct the movement that swept him into office.
The most serious consequence of a Strange loss would be the further diminution of Trump’s stature and ability to wield power even within the GOP. He is likely to fail on health-care reform and quite possibly tax reform. His ratings are in the cellar. (According to the latest CBS News poll, “His rating for handling health care is the lowest this poll tested — at just 29 percent. Immigration meets just 35 percent approval. His overall approval rating, also now at 35 percent, is one point lower than August, and the lowest it has reached in this poll so far.”) Having achieved no significant legislative victory and proving himself to be electorally impotent in Alabama, Trump would surely be drained of whatever political sway over congressional Republicans he had. They, in turn, will be even less likely to follow his lead and provide cover for his excesses. The result is likely to be more gridlock, more dysfunction and more political defeats.
SCANDALS, LAWSUITS, FINES, REGULATORY
Ten people involved at the highest levels of college basketball, including four assistant coaches and a senior executive at Adidas, are facing federal bribery, fraud and other corruption charges, prosecutors in Manhattan announced on Tuesday.
SILICON VALLEY, UNICORNS, STARTUPS, VC
Uber faces another legal battle in London after a female driver issued sex discrimination proceedings against the ride-hailing app, saying the way it operates puts women at risk. The sex discrimination case has been brought by the GMB union on behalf of a 44- year-old woman who has not been named by her lawyers. She claims she no longer feels safe driving for Uber at night.
Nigel Mackay, a lawyer at Leigh Day, the firm representing the driver, said: “We believe that Uber’s policies do not do enough to protect female drivers. In particular, if a driver is faced with the threat of assault from a passenger and asks him to leave, she risks complaints and low ratings, with no right of reply, and ultimately may lose her job.”
The lawsuit adds to the wave of litigation against Uber that continues to spill over from the Kalanick regime onto newly appointed CEO Dara Khosrowshahi. Uber is in arbitration over a complaint filed by investors at Benchmark, which accused Kalanick of duping the firm to gain control of three board seats.
There’s big money involved. A midsize addiction treatment center can easily shell out $1 million a month or more for Google AdWords. Fees per click for the most popular addiction keywords have doubled over each of the past three years. To run ads for the term “drug rehab locations,” AdWords suggested in mid-September that marketers place a minimum bid of $187 per click, according to an analysis of Google data from marketing firm Apttus Corp. The suggested starting bid for “drug addiction treatment program” was $106.71; for “drug rehab detox,” it was $93.24.
MEDIA, CABLE, SPORTS, ENTERTAINMENT
Many movie theaters have come a long way from the days of sticky floors and uncomfortable seats. They now provide stadium seating or reclining seats with improved visibility; more extensive food and drink offerings, including, in some cases, beer and wine; and the same technology that is used for 3-D blockbusters or the Metropolitan Opera in HD.
And then, there’s the lower cost. “For meeting professionals, there is a balance between the meeting experience and the investment required to hold the meeting,” said Issa Jouaneh, senior vice president and general manager of American Express Meetings and Events, a joint venture part-owned by American Express. He said there was increasing interest in low-cost alternatives.
Everyone’s talking about the Raiders moving to Nevada. In the meantime, Bill Foley’s $500 million NHL expansion team is practicing its slap shots.
Rotten Tomatoes, which scores movies on its Tomatometer based on the share of critics on the site who gave “good” or “bad” reviews, is the go-to barometer for US films. And Hollywood encouraged it all—until things got rough.
AUTOS, ELECTRIC, SELF-DRIVING
The internal combustion engine’s days may be numbered in California, where officials are mulling whether a ban on sales of polluting autos is needed to achieve long-term targets for cleaner air.
Dyson Ltd., the British technology company known for its high-end vacuum cleaners and ubiquitous hand dryers, said Tuesday that it is developing an electric car to hit roads as early as 2020.
The closely held company’s founder, James Dyson, revealed few details about the vehicle, which would compete against those of electric-car pioneer Tesla Inc., during a news conference at his company’s London store. He said it would be neither a sports car nor a mass-market model.
The giant information and entertainment screens in Tesla Inc.’s cars will be powered by new components from Intel Corp. after the automaker replaced chip supplier Nvidia Corp. for that function, according to people familiar with its plans.
Toyota’s investment in PKSHA, and another Tokyo startup called Preferred Networks Inc., comes as software starts to rival the motor as the most important thing inside a car, and automakers compete with the likes of Google to make vehicles that can drive by themselves. The market for artificial intelligence know-how is so hot that small firms, sometimes with no products, are attracting investment from corporate giants that simply want access to programmers and a pipeline to the latest research.
AEROSPACE, MILITARY & DEFENSE
Elon Musk’s ambitious plan to surround the Earth with thousands of internet-beaming satellites is encountering turbulence from regulators concerned about interference with competing systems.
SpaceX, the rocket startup Musk runs, filed for permission for its constellation of refrigerator-sized satellites late last year. Selling broadband from orbit is a key part of how SpaceX plans to make money beyond its original rocket-launching service.
But the U.S. Federal Communications Commission dealt the project a setback Tuesday with a decision that could force power reductions on SpaceX satellites, and potentially limit the spectrum they can use, making them less effective.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
Instead of a variety of movies, Dreamscape Immersive locations will offer a variety of virtual-reality experiences. Its technology, developed by a Swiss motion-capture firm, allows up to six people to explore a virtual-reality environment at once, seeing fully rendered avatars of one another.
“We were mesmerized by what we saw,” said Adam Aron, chief executive of AMC Entertainment. “Their vision is to change what V.R. has been — away from just a heightened level of video game and toward cinematic storytelling — and we think it’s what consumers have been waiting for.”
The self-piloting electric Volocopter is less noisy and has a smaller physical and environmental footprint than a traditional helicopter. Offering space for two passengers, the 6.5-foot-high copter is topped by a 22-foot-wide hoop studded with 18 rotors. In video of the test, the all-white drone rose, unoccupied, about 650 feet over the sand near Jumeirah Beach Park, flew itself for about five minutes, then gently landed.
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