Zero Hedge

Exxon To Win FTC Approval For $60 Billion Pioneer Deal, Creating Energy Supergiant

Exxon To Win FTC Approval For $60 Billion Pioneer Deal, Creating Energy Supergiant

Having adversely intervened in virtually every other M&A deal in the past 3 years, the Biden FTC will reportedly allow Exxon's $60 billion purchase of Pioneer to go through after the companies agreed to minor concessions, Bloomberg reported citing people familiar with the matter. The announcement of the deal will likely come any moment, and the resulting deal will make Exxon - a company which Biden once said makes money money than god - far and away the biggest oil and natural gas producer in the Permian Basin, North America’s largest US oil field, and also the biggest energy company in the US.

Pioneer shares that had been down more than 2% on the day reversed those losses and were trading up as much as 0.9% on the news. Hess Corp, the target of a takeover bid by Chevron, also climbed 0.9% although the probability of that deal passing is far lower especially in light of the ongoing arbitration with Exxon over Guyana.  Chevron, Occidental and Chesapeake are among companies with large pending takeovers that are undergoing in-depth reviews before the FTC.

The Pioneer deal will combine two fast-growing Permian operations, lifting Exxon’s production in the basin to the equivalent of about 2 million barrels a day by 2027, up from about 600,000 last year.

More than 50 lawmakers - obviously mostly communists, pardon, democrats - urged the FTC in March to increase scrutiny on concerns a $230 billion wave of consolidation in would increase energy prices for consumers, squeeze suppliers and suppress wages. In short: enforce more Soviet-style central planning and crush conventional capitalism. As a result, investors had feared the agency, which has become more a ruthless enforcer of authoritarian anti-capitalism under Democrat admin puppet Lina Khan, would stand in the way of several large deals, especially in an election year when the Biden administration is seeking to prove its climate credentials and contain gasoline prices at all cost.

In response to the ruling communists, oil executives have claimed the deals will benefit shareholders, consumers and the environment. Exxon CEO Darren Woods said the Pioneer deal would lower its cost of production, making US barrels more competitive in the global market, and provide a strong platform for growth, which would ultimately benefit consumers. Exxon also pledged to reduce climate-warming emissions from Pioneer operations to net zero by 2035, accelerating the prior target by 15 years.

The Biden administration has constantly been at odds with the oil industry, but easing through what many executives see as necessary consolidation is likely to improve relations. With domestic crude prices up roughly 14% this year and tensions rising the Middle East, the administration is vulnerable to Republican attacks on measures that hurt the oil industry and raise fuel prices.

 

Tyler Durden Wed, 05/01/2024 - 16:14

Taper 'Tantrum-ette' - Stocks Pump'n'Dump As Fed 'Eases' Balance-Sheet Pressure

Taper 'Tantrum-ette' - Stocks Pump'n'Dump As Fed 'Eases' Balance-Sheet Pressure

Powell to traders today...

h/t @ForexLive

The bigger than expected QT taper announcement juiced markets (stocks and bond prices up, dollar down) into Powell's press conference, then got spooked lower as he admitted "inflation has shown a lack of further progress... and gaining confidence to cut will take longer than thought."

But that dip didn't last long and yields puked, stocks soared, gold rallied and the dollar puked...

Source: Bloomberg

The market shrugged off Powell's comments about "whether rates are at their peak will depend on data" which opened up the path of possible rate-hikes, but he dd add that "he doubts next move will be a hike."

CNBC's Steve Liesman asked the big question that everyone should be asking: you are 'sort of easing' by reducing QT while holding rates flat because you're not confident that inflation is under control - wassup with dat?

Powell replied with some words that meant nothing, stating that they have long planned on tapering QT and claimed that 'reduction in balance sheet run-off is not policy-easing'.

"This is not the easing you're looking for..."

By the close, all of Powell's pig-kissing lipstick had been wiped off (see below for the coordinated crypto/nasdaq take-down) as stocks saw solid gains erased in the hour after Powell stopped speaking... Small Caps and The Dow managed to hold on to the gains but Nasdaq and S&P closed nearer the day's lows...

'Most Shorted' stocks saw a massive squeeze (+5%) on the FOMC headlines, before the late day selling pressure hit...

Source: Bloomberg

MAG7 stocks ended the day unchanged after giving back their post-Powell gains...

Source: Bloomberg

Treasury yields plunged 6-8bps across the curve on the day, with the short-end outperforming, dragging all yields lower on the week...

Source: Bloomberg

The 2Y Yield snapped back below 5.00% once again...

Source: Bloomberg

The yield curve (2s30s) jerked flatter initially, then steepened dramatically back to flat on the week...

Source: Bloomberg

The dollar tumbled on the non-easing 'easing' (but bounced back a bit after Powell finished speaking)...

Source: Bloomberg

Gold surged back above $2300 on the non-easing...

Source: Bloomberg

Bitcoin bounced back on the FOMC statement, recovering some of last night's bloodbathery, but somebody did not want it back to $60,000 and that smackdown dragged stocks down with it...

Source: Bloomberg

Oil prices ignored all the fuss around The Fed and fell for the third day in a row (its biggest daily drop since early Jan) with WTI back below $80 at six-week lows...

Source: Bloomberg

Finally, rate-cut expectations (hawkishly) rose on the day with one-or-two cuts in 2024 now 50-50 and two-or-three cuts more in 2025 around 50-50 also...

Source: Bloomberg

And, also Powell explained that he "doesn't see the stag or the 'flation" in markets... well this should help Jay...

Source: Bloomberg

We can't help but feel like Powell is awfully eager to 'loosen' policy... but he made it clear that the 2024 election "just isn't a part of the Fed's thinking."

So, that's that then!

Tyler Durden Wed, 05/01/2024 - 16:00

China Crossed Biden's Red Line On Ukraine, So What?

China Crossed Biden's Red Line On Ukraine, So What?

Authored by Mike Shedlock via MishTalk.com,

It’s ridiculous to have red lines if you are not going to do anything when they are crossed. So what should Biden do?

China Has Crossed Biden’s Red Line on Ukraine

A Wall Street Journal Op-Ed moans China Has Crossed Biden’s Red Line on Ukraine.

President Biden warned China two years ago not to provide “material support” for Russia’s war in Ukraine. On Friday, Secretary of State Antony Blinken conceded that Xi Jinping ignored that warning. China, Mr. Blinken said, was “overwhelmingly the No. 1 supplier” of Russia’s military industrial base, with the “material effect” of having fundamentally changed the course of the war. Whatever Mr. Biden chooses to do next will be momentous for global security and stability.

Mr. Biden can either enforce his red line through sanctions or other means, or he can signal a collapse of American resolve by applying merely symbolic penalties. Beijing and its strategic partners in Moscow, Tehran, Pyongyang and Caracas would surely interpret half-hearted enforcement as a green light to deepen their campaign of global chaos. Mr. Xi sees a historic opportunity here to undermine the West.

What sanctions? On Who? On What? For How Long?

Op-ed writer Matt Pottinger provided no details, he just wants action. He needs to explain what sanctions make any sense at all, and how they would work.

Numerous US sanctions on Russia, China, Iran, all failed. Hell some of them on Russia and China not only failed they backfired.

How China Gets Around US Sanctions on Semiconductors

On February 18, 2024, I explained How China Gets Around US Sanctions on Semiconductors

How Russia Makes a Mockery of US Sanctions in One Picture

Unprecedented US and EU sanctions against Russia have had no impact on Russia’s oil exports or revenue. Who’s the beneficiary?

On December 29, 2023 I noted How Russia Makes a Mockery of US Sanctions in One Picture

On September 19, 2023, I commented Lesson of the Day: Sanctions Don’t Work Because They Create New Markets

Why Sanctions Fail
  • Someone always has an incentive to break sanctions.

  • Sanctions create new markets.

This is how Russia sells oil and how China gets access to equipment and parts.

In the case of chips, the US has forced China into a path to self-sufficiency. Hooray?!

Matt Pottinger wants sanctions. He should name some. Nah, what he really wants is to promote his book “The Boiling Moat: Urgent Steps to Defend Taiwan.”

What Color Are Biden’s Red Lines?

On March 10, I asked Are Biden’s Red Lines to Netanyahu Really Yellow or Green?

Presumably you know the answer now, but if not, please consider this idle threat: Biden Threatens Sanctions on Israeli Soldiers Yet Wants More Money for Israel

If you are going to have red lines, I suggest they should be red.

Israel vs China Red Lines

In the case of Israel, there was an easy remedy. Biden could have withheld aid. Instead, when Israel repeatedly crossed lines, Biden stepped up the aid further emboldening Netanyahu.

In the case of China, there are no sanctions or policy actions that make any sense, so there should not be any red lines.

Attempting to set foreign policy for the world is a huge mistake. And setting red lines you cannot or will not do anything about makes one look silly.

Tyler Durden Wed, 05/01/2024 - 15:40

Starbucks On Brink Of Worst Crash Since Dot Com After "Stunning" Earnings Miss 

Starbucks On Brink Of Worst Crash Since Dot Com After "Stunning" Earnings Miss 

Starbucks shares plummeted by 16% during the early cash session, approaching the -16.2% level last seen during the Covid crash. If intraday losses surpass 16.2% and remain above this level at closing, it would mark the company's worst single-day loss since the Dot Com crash in early 2000.

"Starbucks reported what's perhaps the worst set of results of any large company so far" this quarter, analyst Adam Crisafulli of Vital Knowledge wrote in a note. William Blair downgraded the coffee chain, citing last quarter's "stunning across-the-board miss on all key metrics."

Starbucks reported a 4% drop in same-store sales in the second quarter compared with the same period last year, while analysts tracked by Bloomberg were expecting growth. In China, same-store sales plunged 11%. The company's top geographic segments are showing a pullback in consumer spending. 

On Tuesday evening, CEO Laxman Narasimhan started the earnings call with investors by clarifying his unhappiness with last quarter's results. 

"Let me be clear from the beginning. Our performance this quarter was disappointing and did not meet our expectations," Narasimhan said. 

He said major headwinds originate from a "cautious consumer," adding, "A deteriorating economic outlook has weighed on customer traffic and impact felt broadly across the industry." 

Here's a snapshot of the second quarter's earnings results (list courtesy of Bloomberg):

  • Comparable sales -4%, estimate +1.46% (Bloomberg Consensus)

  • North America comparable sales -3%, estimate +2.05%

  • US comparable sales -3%, estimate +2.31%

  • International comparable sales -6%, estimate +1.36%

  • China comparable sales -11%, estimate -1.62% 

  • Adjusted EPS 68c, estimate 80c 

  • Net revenue $8.56 billion, estimate $9.13 billion

  • Operating income $1.10 billion, -17% y/y, estimate $1.35 billion

  • Adjusted operating margin 12.8%, estimate 14.5%

  • Operating margin 12.8%, estimate 14.4%

  • North America operating margin +18%, estimate +19.5%

  • International operating margin 13.3%, estimate 15.2% 

  • Channel development operating margin 51.7%, estimate 43.6%

  • Average ticket +2%, estimate +2.41% 

  • North American average ticket price +4%, estimate +4.15%

  • International avg. ticket -3%, estimate +0.1%

  • North America net new stores 134, estimate 144.33

  • International net new store openings 230, estimate 429.23

  • Comparable transactions -6%, estimate -0.27% 

  • North America comparable transactions -7%, estimate -1.86%

  • International comparable transactions -3%, estimate +1.37%

Goldman analysts Eric Mihelc and Scott Feiler told clients, "Expectations were for a clear sales miss and a modest EPS miss, but both came worse than the lowered bar." 

They added, "The miss was across geography and was as bad, if not worse, than worst fears." 

Other Wall Street analysts shared the same gloom and doom about the coffee chain (list courtesy of Bloomberg): 

Deutsche Bank analyst Lauren Silberman cuts Starbucks to hold from buy 

  • Says the "challenging" results was a sign "headwinds are more pervasive and persistent than we expected, and we have limited visibility into the pace and magnitude of a recovery"

  • Had thought comparable sales deceleration in the US was more transitory and isolated to a specific cohort

  •  However, with the decline in 2Q traffic and what seems to be limited improvement from Lavender and Spicy Refreshers, Silberman sees it being difficult to "underwrite a meaningful reacceleration," which is key to the bull case

William Blair, Sharon Zackfia (cuts to market perform from outperform)

  • After healthy demand over the past three years, Zackfia says the "tide has turned quickly," with Starbucks posting the weakest traffic performance outside the pandemic or Great Recession

  • China now "looks more fragile," with comparable sales down 11%, and even Starbucks Rewards members "took a rare dip," she adds

Jefferies, Andy Barish (hold)

  • There was a "notable" miss on US and international comparable sales as well as EPS, and Barish says there is "no easy fix in sight to reaccelerate SSS near-term"

  • Notes that international comparable sales was "similarly weak," with traffic and comparable transactions both declining; China's comparable sales miss and Middle East volatility more than offset positive comps seen in Japan, APAC and Latin America

  • PT cut to $84 from $94

Citi, Jon Tower (neutral) 

  • Starbucks is "putting a lot of oars in the water to try and paddle" its way back to a stable comparable sales outlook that investors would be willing to underwrite

  • However, Tower expresses concern that there is not enough "coxswain keeping oarsmen working in unison/with accountability"; adds that it ignores the "true leak in the bottom of the boat," flagging broad consumer pushback to cumulative transaction growth and the value equation

  •  Notes China store margins are still in the double digits and the segment is profitable despite top-line declines

  •  PT cut to $85 from $95

Cowen, Andrew Charles (hold)

  •  "We believe 2024 guidance has been derisked as we model 0% NA comps & 3% EPS growth, the high end of the range"

  • Expects shares to be in a "holding pattern" as Starbucks restores credibility while competition and tough macroeconomic conditions present headwinds

  • PT cut to $85 from $100

Bloomberg Intelligence, Michael Halen and Jennifer Bartashus

  • "Starbucks slashed fiscal 2024 same-store sales, revenue and EPS guidance and lacks a cogent plan to boost demand"

  • "We believe several initiatives, including targeting overnight sales, dozens of new products and a four-week mobile- app upgrade cycle are overkill — a distraction unlikely to boost traffic"

On Tuesday, a similar story occurred at McDonald's when the burger chain reported lower-than-expected quarterly sales growth. 

Notably, working-poor consumers are pulling back spending in a period of stagflation (read here & here). 

Tyler Durden Wed, 05/01/2024 - 15:25

The Path Of Least Resistance: Northwestern Reaches Controversial Settlement With Pro-Palestinian Protesters

The Path Of Least Resistance: Northwestern Reaches Controversial Settlement With Pro-Palestinian Protesters

Authored by Jonathan Turley,

Northwestern University has agreed to a controversial settlement with pro-Palestinian protesters encamped on its campus this week, including a commitment for scholarships for Palestinians, Palestinian faculty appointments, and special housing for Muslim students.

The protesters will also be allowed to continue their protests while agreeing to stay in a particular area of campus.  It will also put the students and supporting faculty on bodies to review any university investments and purchases, a major demand from supporters of the Boycott, Divestment and Sanctions (BDS) movement.

Previously, protesters had reportedly prevented some students and faculty from entering buildings and engaged in property damage.

The Daily Northwestern reported the details of the deal and noted

“the University has committed to provide a conduit for students to engage with the Investment Committee of the Board of Trustees. It will also re-establish an Advisory Committee on Investment Responsibility this fall, which will include students, faculty and staff.

...

In addition, the University committed to some support for Palestinian students and faculty in the agreement. NU will ‘support visiting Palestinian faculty and students at risk,’ and will provide the cost of attendance for five Palestinian undergraduates to attend Northwestern.

...

The University also committed to providing an ‘immediate temporary space for MENA/Muslim students’ — a longtime demand from students on campus — and will provide and renovate a house for MENA/Muslims students as soon as possible. The final house is expected to come in 2026.”

It also includes a commitment of the university to intervene with employers to guarantee that students suffer no consequences for participating in protests in their jobs and internships.

Northwestern (my alma mater) has always chosen the path of least resistance when it comes to protesters, including at times surrendering core academic functions. I have been particularly critical of the loss of freedom of speech and academic integrity on campus.

Students previously succeeded in cancelling a speech by former U.S. Attorney General Jeff Sessions. Student Zachery Novicoff embodied the rising intolerance to free speech on campus. He is quoted as saying “There’s a limitation to free speech. That ends at overtly racist old white dudes.”

criticized former Northwestern University President Morton Schapiro for his lack of support for free speech on campus. Schapiro denounced what he called “absolute” free speech positions and endorsed speech sanctions, including treating speech as a form of assault.

During his tenure, the university often seemed a mere pedestrian to mob action taken against dissenting voices. For example, we previously discussed a Sociology 201 class by Professor Beth Redbird that examined “inequality in American society with an emphasis on race, class and gender.”  To that end, Redbird invited both an undocumented person and a spokesperson for the Immigration and Customs Enforcement.  It is the type of balance that is now considered verboten on campuses.

Members of MEChA de Northwestern, Black Lives Matter NU, the Immigrant Justice Project, the Asian Pacific American Coalition, NU Queer Trans Intersex People of Color and Rainbow Alliance organized to stop other students from hearing from the ICE representative.  However, they could not have succeeded without the help of Northwestern administrators (including  Dean of Students Todd Adams).  The protesters were screaming “F**k ICE” outside of the hall.  Adams and the other administrators then said that the protesters screaming profanities would be allowed into the class if they promised not to disrupt the class.  Really?  They were screaming profanities and seeking to stop the class but would just sit nicely as the speaker answered questions?

Of course, that did not happen. As soon as the protesters were allowed into the classroom, they prevented the ICE representative from speaking.  The ICE official eventually left and Redbird canceled the class to discuss the issue with the protesters that just prevented her students from hearing an opposing view.

The comments of the Northwestern students were predictable after being told by people like Schapiro that some offensive speech should be treated as a form of assault.  SESP sophomore April Navarro rejected that faculty should be allowed to invite such speakers to their classrooms for a “good, nice conversation with ICE.” She insisted such speakers needed to be silenced because they “terrorize communities” and profit from detainee labor. Here is the face of the new generation of censors being shaped by speech-intolerant academics like Schapiro:

We’re not interested in having those types of conversations that would be like, ‘Oh, let’s listen to their side of it’ because that’s making them passive rule-followers rather than active proponents of violence. We’re not engaging in those kinds of things; it legitimizes ICE’s violence, it makes Northwestern complicit in this. There’s an unequal power balance that happens when you deal with state apparatuses.”

Last year, the Northwestern student body banned press from meetings to protect students from the harm of media coverage. The students also have previously frozen funds of conservative groups.

The Northwestern journalism faculty is little better.  Steven Thrasher, the Daniel H. Renberg Chair of social justice in reporting at Northwestern, who trashed a reporter who waited for the facts before reporting on a police shooting.

Of course, it is not just conservative speakers that the students want to ban. In 2021, they called for the removal of the President of the Board of Trustees. Despite being a major donor and supporter of the school, J. Landis Martin was denounced as a Republican who donated money to former President Donald Trump.

The university issued a statement that “This path forward requires the immediate removal of tents on Deering Meadow, cessation of non-approved use of amplified sound and a commitment that all conduct on Deering and across campus will comply with all University rules and policies. Compliant demonstration can continue at Deering Meadow through June 1.”

The university has long lacked the fortitude to stand up to students engaging in disruptive protests.

The danger of such passivity is evident on our campuses. As Henry David Thoreau warned, “all rivers and most corrupt men follow the path of least resistance.”

Here is the Northwestern agreement.

Tyler Durden Wed, 05/01/2024 - 15:05

Wall Street Reacts To Powell Unleashing His Inner Dove

Wall Street Reacts To Powell Unleashing His Inner Dove

Ahead of today's FOMC statement and Powell presser, we said that the bogey for a dovish interpretation today will come not from the Fed's rate decision, which we knew would be unchanged, but the QT tapering decision...

... and sure enough, the fact that the Fed announced an accelerated QT tapering and it was bigger than expected ($35BN vs $30BN) is why the market is viewing the Fed announcement as dovish and futures are now soaring.

And while we wait for Powell's presser to conclude, here are some other hot takes from Wall Street strategists and thinkers:

David Russell, head of market strategy at TradeStation

“The Fed is still in wait-and-see mode before they get dovish. But the data hasn’t been cooperating. This statement keeps investors data dependent and focused on April numbers like CPI two weeks from now.”  

Audrey Childe-Freeman, chief G-10 FX strategist at Bloomberg Intelligence

“A first glance at the statement brings dollar bears some breathing space as the language adjustment is not as hawkish as may have been feared, though the reference about underwhelming inflation progress entertains a potential new layer of hawkishness at a later stage that could contain dollar downside ahead of the press conference. Muted dollar reaction so far captures this well.

“The language embraced thus far does not signal that the narrative has shifted back to new rate-hike debates, but rather to pushing back the timing on a rate cut. This is probably good enough for near-term euro-dollar relief given the feared hawkish pivot.”

Brian Coulton, chief economist at Fitch Ratings

“With unemployment still low and the labor market still tight, there is only a limited risk to the Fed’s employment mandate from waiting longer before embarking on rate cuts. On the other hand the risk of failing to get inflation down on a sustained basis seems to be rising as each week goes by. Patience is the watchword now for the Fed and the risk of fewer or no rate cuts this year is growing.”

Erica Adelberg, Bloomberg Intelligence’s mortgage-backed securities strategist:

“Making it explicit that any surplus MBS paydowns will be reinvested into Treasuries could adversely affect the MBS/Treasury basis, but at this point MBS paydowns are projected to be about half of the $35 monthly cap on average for the foreseeable future. The average loan rate backing the Fed’s MBS holdings is more than 300 bps below current mortgage rates, so it would take a significant interest rate rally to hit the MBS cap.”

Kathy Bostjancic, Chief Economist at Nationwide:

“We expect Chairman Powell will underscore this hawkish pivot in his press conference and emphasize that the timing of pace of rate cuts will depend highly on the future path of inflation. He likely will indicate the Fed is on an extended pause until inflation resumes its disinflationary trend.”

Ira Jersey, Bloomberg rates strategist:

“His lack of comment about the possibility of a hike is interesting, and I’d be surprised if he’s not asked about the potential for hikes in the press conference. But it seems that ‘on hold’ is his base case for now.”

Bloomberg Economics’ Anna Wong and Stuart Paul:

“For anyone wondering if this year’s hot inflation readings were just a blip, the May 1 FOMC meeting offered a clear answer: Hawkish tweaks to the statement show policymakers have lost confidence that inflation is moving in the right direction. At the same time, the Fed announced it would start tapering its balance-sheet run off in June – a month earlier than we expected — and will reduce the runoff cap by a bit more than we foresaw. That initially comes across as dovish, but the motivation here is key. If it turns out the Fed wants the run-off process to last longer — ultimately boosting the chance that its balance sheet will return to pre-pandemic size – that actually would be hawkish.”

Developing

Tyler Durden Wed, 05/01/2024 - 14:51

Watch Live: Fed Chair Powell Walk The 'Asymmetric' Tight-Rope At Today's Presser?

Watch Live: Fed Chair Powell Walk The 'Asymmetric' Tight-Rope At Today's Presser?

As expected, no change in rates from The Fed, and a hawkish bias to the language changes in the FOMC statement.

The bigger than expected QT taper news is noteworthy and Powell will have to explain why they are 'easing' this policy more than expected while inflation remains 'out of control'... and they are not ready to cut rates.

So now it's down to Powell to avoid a faux pas (as we detailed below) over shifts in The Fed's 'asymmetric' response function.

Watch Powell walk that tightrope live here (due to start at 1430ET):

*  *  *

As we detailed earlier, today's Fed meeting had the market feeling (and positioned for) “HAWKISHNESS,” especially after the ECI pile-on yesterday, which didn’t simply “upside surprise,” but re-accelerated to 1.2% after ending 2023 at 0.9%, and showing that persistent wage pressures further add to the risk of keeping inflation “too elevated” for the Fed.

However, according to Nomura MD Charlie McElligott, the largest risk with the Fed today is that there will be no summary of economic projections / no dot plots...

...meaning that outside of the usual statement, it will be Powell’s press conference alone that dictates market behavior... and the backtest on that is a bit dicey, with some historic faux pas in-sample.

He’s gotta find a way to “keep it in the pocket,” where his language simply must message “balance of risks”...

...which means (as we detailed earlier) that he dangerously must “toe the line” on widening out the Fed path away from currently asymmetric “when cut?”-messaging dating back to Dec ’23...

...and instead back to a two-way distribution with both ‘cut’ and honest-to-God ‘hike’ –optionality.

Nomura's rates guru Jonathan Cohn details just how narrow a path it is for Powell:

Powell’s FOMC presser and, in particular, his answer to the inevitable question around potential hikes represents a key risk.

Following meaningful policy path repricing since CPI and reorientation of Fedspeak, the bar for Powell to exceed market hawkishness is high.

Powell, pricing, positioning

What to expect

Statement:

Our economists expect two hawkish changes (see their preview here)

  1. Change “inflation has eased over the past year, but remains elevated” to “inflation remains elevated”

  2. Removal of “greater” in the Fed’s expectation that it would not ease rates “until it has greater confidence that inflation is moving sustainably toward 2%”

Presser:

  • Powell’s FOMC presser will again be highly scrutinized, particularly his answer on whether hikes are in play. Bostic and Bowman flagged hikes as a risk and Williams did not rule them out, inviting a reassessment of two-way risk. Though Powell will likely maintain that policy is restrictive, he will also likely want to retain optionality amid high uncertainty around neutral. The phrasing of that optionality sentiment will be critical.

Is the market ready / priced?

  • How much is priced: The market has repriced a lot, going from 63bp of cuts in 2024 pre-CPI to 28bp currently. Market-implied year-end rates for 2024 and 2025 are well above the median dots, granted the March dot plot had some ‘cuspy’ medians. The repricing owes primarily to sticky inflation arresting progress through H2 last year, though there has also clearly been a reduced ‘recession’ premium as well. In terms of hike appreciation, the market-implied probability of a hike by year-end is now around 15%, double what it was pre-CPI. Given the reorientation of Fedspeak amid this sticky inflation (i.e., less emphasis on cuts this year), there is a higher bar for Powell to exceed market hawkishness.

  • Repositioning: At the front-end, there have been a couple waves of washouts in ‘sell hike’ trades like 1x2 payer spreads in the sell-off. An examination of open interest changes coupled with insights from our futures desk suggests a good deal of positioning post-CPI was rolled into lower strikes, not simply taken off. And with the increase in put OI in 94.625 (no cut) strike largely a function of buyers, those combining with sales in lower strikes (short skew) seem prepared for something like no cut or one hike scenario. Of course, the risk is that if Powell rhetoric around potential hikes is seen as hawkish and followed by strong NFP and CPI, we move quickly toward the low strikes as the market prices in a higher probability of multiple hikes and we get another positioning flush. I do think that if the Fed feels the need to change its directional bias and hike (not just stay on hold), one has to price in a high probability of multiple hikes, not a one and done. However, I still think there’s a very high bar for the Fed to pay more than lip service to open-mindedness.

QT slowdown

  • The Fed is expected to announce a reduction in the pace of QT, likely to $30bn per month for UST. I wouldn’t expect much guidance on an end date. Slowing runoff should theoretically allow for a longer period of QT and lower ultimate level of reserves (thanks to more time for an efficient redistribution of liquidity) – a level around which uncertainty bands are very large.

Putting it together suggests a ‘middle of the road’ Powell can give way to a temporary relief rally, while a blundered characterization of hike optionality could lead to another position flush out and bear-flattening of the yield curve.

Hence, McElligott warns that with all this HAWKISH mentality / sentiment / positioning, the risk is that any surprisingly dovish Fed speak or Data (e.g. NFP Friday), you COULD see potential for an outsized SHORT SQUEEZE / RALLY RISK on stops.

Tyler Durden Wed, 05/01/2024 - 14:25

FOMC Leaves Rates Unch, Says (Bigger Than Expected) QT Taper To Start In June

FOMC Leaves Rates Unch, Says (Bigger Than Expected) QT Taper To Start In June

Tl;dr: The Fed just told the market that 'yields are too damn high'.

*  *  *

Since the last FOMC meeting, on March 20th, gold has been the biggest outperformer (interesting along with dollar strength), while stocks, bonds, and crude (and crypto) have all been sold (with bonds and oil equally ugly)...

Source: Bloomberg

And since March 20th, US macro data has serially disappointed...

Source: Bloomberg

More problematically, since the last FOMC meeting, inflation data has dramatically surprised to the upside and growth data to the downside - screaming stagflation in the face of the Fed...

Source: Bloomberg

Rate-cut expectations (for 2024 and 2025) have plunged significantly since the last FOMC (that is now just one 25bps rate-cut priced in for 2024)...

Source: Bloomberg

Expectations are fully priced for a nothing-burger today on rates...

Source: Bloomberg

... with a slight hawkish bias in the language-changes in the statement (and the possibility of QT-taper signaling). But it will be Powell's press conference that everyone will be focused on.

So what did The Fed say?

Rates unchanged...

  • *FED HOLDS BENCHMARK RATE IN 5.25%-5.5% TARGET RANGE

Key statement changes

Fed adds following sentence:

"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective."

Fed also replaces

"The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance"

with

"The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.

And the QT Taper is here - and its bigger than expected (-$35BN/mth vs -$30BN expected):

Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities

This means $105BN less gross issuance needed in Q3, with The Fed implicitly saying 'yields are too high'.

Just as we said...

Read the full redline below:

What happens next (on average)?

Tyler Durden Wed, 05/01/2024 - 14:00

Lu-Lu-Leveraged: Lululemon Founder Pledges Shares For Margin Loan

Lu-Lu-Leveraged: Lululemon Founder Pledges Shares For Margin Loan

Lululemon's founder is taking on some lu-lu-leverage - and it's coming at a time when Lululemon's stock is more than 20% off its recent highs. 

Chip Wilson, the founder of Lululemon, has reportedly used a significant portion of his stake in the company to secure financing from Goldman Sachs Group Inc., according to a new report from Yahoo/Bloomberg

According to a recent regulatory filing, an investment firm representing the Canadian billionaire pledged 1.8 million Lululemon shares, nearly 20% of his total holdings, as collateral for a $200 million margin loan from the US bank.

Wilson's stake, valued at approximately $660 million based on Tuesday's closing price, comes at a challenging time for Lululemon, with its stock declining by 25% since late March due to disappointing US sales and sales projections.

While representatives for Lululemon and Wilson declined to comment, this transaction sheds light on how wealthy individuals leverage their public holdings for substantial liquidity. For Wilson, who relinquished daily management of Lululemon over a decade ago, it signifies a broader investment diversification strategy.

The report states that the 69-year-old entrepreneur has expanded his investments beyond Lululemon, increasing his stake in Amer Sports Inc. and establishing a real estate firm, Low Tide Properties, among other ventures.

Additionally, he is actively investing in research to find a cure for his rare form of muscular dystrophy.

Pledging shares as collateral is common among the ultra-rich, with examples including Elon Musk leveraging Tesla Inc. stock for personal loans.

While borrowing against shares offers tax advantages, it also carries risks, as evidenced by margin calls during market downturns, such as those experienced at the onset of the pandemic.

Wilson founded Lululemon in 1998 and stepped down as chairman in 2013 following controversies and disagreements with the company's leadership.

Despite selling a significant portion of his stake a decade ago, he retains control of approximately 8% of Lululemon's shares, making it his largest individual asset.

Now he better hope yoga pants stay in style...

Tyler Durden Wed, 05/01/2024 - 13:45

The Great Gold Vs Bitcoin Debate: ZeroHedge Presents Roubini And Schiff Against Scaramucci And Voorhees

The Great Gold Vs Bitcoin Debate: ZeroHedge Presents Roubini And Schiff Against Scaramucci And Voorhees

Proponents of gold and bitcoin often hail from the same ideological background: Austrian economists, dollar bears, Libertarians tired of State manipulation of fiat currencies and, generally, the anti-Fed crowd. Yet shared principles have not eased the age-old rivalry between the two assets.

Relative to Bitcoin, gold lost considerable value last year as an ounce of gold fell from 0.11 BTC to almost 0.03 BTC, a historically important level. The last month has seen the precious metal rebound somewhat relative to 'digital gold':

However, as Benjamin Graham said: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” So we are more interested in the fundamentals:

  • Does Bitcoin’s instant transferability and infinite portability make it the superior asset/security? Or is it a worthless string of numbers with infinite substitutes?

  • Will gold’s thousand-year history as the preferred monetary commodity continue in the digital age? Or does its reliance on third-party custodians (at least at scale), and significant bulk, make it inferior to BTC?

We’ll answer these questions - and more - this Friday.

On May 3 at 7pm ET, ZeroHedge is partnering with Crypto Banter to bring together top macroeconomic minds to debate.

In the anti-crypto corner is the man whose name is synonymous with “gold”, infamous crypto bear Peter Schiff. Alongside Schiff will be “Dr. Doom”, renowned economist Nouriel Roubini.

Arguing in favor of crypto will be Anthony Scaramucci - wealth manager with over $10 billion in AUM - as well as day-one crypto veteran Erik Voorhees, founder of ShapeShift and torch-bearer for the asset class’ libertarian roots.

The debate will be moderated by Ran Neuner, founder and host of Crypto Banter, one of the largest digital asset news channels on YouTube.

Learn more about our VIP ticket offering to attend the debate in person and grab dinner with the participants here.

ZeroHedge would also like to thank our sponsors for this debate: Preserve Gold and BITLAYER — “Layer 2. The future of Bitcoin.” Whether you’re a fan of gold or Bitcoin, you probably see the wisdom in diversifying away from U.S. dollars. Do so by visiting their websites and checking out their products.

ZeroHedge Goldbugs can access a special offer from Preserve Gold by texting “ZERO” to 50505.

Tyler Durden Wed, 05/01/2024 - 12:10

Feds Scrutinizing Block's Square And Cash App, Eyeing If Transactions Funded Terror And Skirted Sanctions

Feds Scrutinizing Block's Square And Cash App, Eyeing If Transactions Funded Terror And Skirted Sanctions

Federal prosecutors are investigating compliance issues at Block, the fintech firm co-founded by Jack Dorsey, according to a new report from NBC, citing "two people with direct knowledge". 

Questions about the company started swirling back in March 2023 when short seller Hindenburg Research released a report called "Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion". 

In it, they concluded that "the 'magic' behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics."

Now, a former employee has shared documents revealing insufficient customer information collection, transactions involving sanctioned countries, and cryptocurrency dealings with terrorist groups, the latest report from NBC says.

The employee claims many transactions weren't reported as required, and Block failed to address the breaches despite being notified. The documents detail transactions with entities in sanctioned countries, including Cuba, Iran, Russia, and Venezuela, as recent as last year.

One former told NBC: “From the ground up, everything in the compliance section was flawed. It is led by people who should not be in charge of a regulated compliance program.”

“It’s my understanding from the documents that compliance lapses were known to Block leadership and the board in recent years," Edward Siedle, a former Securities and Exchange Commission lawyer who represents the former employee and participated in the discussions with prosecutors told NBC

Cash App, a mobile payment platform under Block's ownership, faced allegations of compliance failures from two other whistleblowers in mid-February. Introduced in 2013, Cash App enables instant money transfers and stock and Bitcoin purchases. By December, it boasted 56 million active transacting accounts and $248 billion in inflows over the previous four quarters.

Block commented to NBC: “Block has a responsible and extensive compliance program and we regularly adapt our practices to meet emerging threats and an evolving sanctions regulatory environment. Our compliance program includes systems, tools, and processes for sanctions screening, as well as investigating and reporting on sanctions issues in accordance with our regulatory obligations."

They continued: "Continually improving the safety and security of our ecosystem is a top priority for Block. We have been and remain committed to building upon this work, as well as continuing to invest significantly in our compliance program.”

Federal prosecutors are also examining Square, another key component of Block's operations, which serves millions of merchants. According to documents provided to prosecutors and reviewed by NBC News, Square allegedly failed in basic customer due diligence on international merchant sellers and mistakenly reimbursed some merchants' funds frozen for sanctions violations.

The documents also reveal that new customers triggering sanctions alerts were allowed to conduct transactions before resolution, with instances of inadequate screening against sanctions keyword lists, the report adds.

Cash App, due to its design, also apparently heightened compliance risks, NBC wrote. A document highlighted the challenge, stating that stored balances in Cash App are typically depleted by the time of review, limiting the platform's ability to block or reject funds.

The former employee also informed prosecutors of findings from an external consultant hired by Block, which identified nearly 50 deficiencies in monitoring suspicious activities and screening for sanctions violations.

Board members including Lawrence Summers and Sharon Rothstein have also recently departed the company.

Tyler Durden Wed, 05/01/2024 - 11:50

Fed Policies Turn The Wealth Gap Into A Chasm

Fed Policies Turn The Wealth Gap Into A Chasm

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

In an op-ed for the Washington Post on November 5, 2010, Ben Bernanke did a victory lap, praising the Fed’s efforts in stemming the financial crisis. In the article, he discusses how QE and other Fed policies eased financial conditions, bolstering investor confidence.

And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion. 

If Bernanke wants credit for his Fed policies that boosted stock prices, he should also take responsibility for the costs. Those same monetary policies, which have been repeated many times since 2008, have played an important role in exacerbating the wealth gap in America. Accordingly, we should question his use of the term “virtuous circle” to describe how modern monetary policy works.

Graphing The Wealth Gap

Inspiration for this article comes from our recent article, Wealth Gap and the Road to Serfdom.

Before discussing the Fed’s role in widening the wealth gap, we put context to the problem. The graphs and quote below are from the article.

For 80% of Americans, the end game of too much debt, an aging demographic, and the push for “socialistic policies” is the continued extraction of wealth from the “middle class” to the “rich.”

Trickledown Economics and Monetary Policy

Trickledown economics” was coined by John Kenneth Galbreth in 1982 and made famous by President Ronald Reagan. The expression is another name for supply-side economic policy. The policy theorizes that the populace benefits when government interference in the economy is minimal. For example, lower taxes and reduced regulations should promote economic activity and prosperity for the entire populace.

The theory is logical, but politicians have done a poor job enacting it.

In 2008, the Fed took a page from the supply-side economic playbook to stem the financial crisis. From that point forward, the Fed’s modus operandi has been trickle-down monetary policies.

Does QE Trickle Down?

Ben Bernanke wasn’t the first Fed Chair or central banker to use QE. But he did make it a household name and seemingly a permanent tool in the Fed’s toolbox.

QE has two significant impacts on the financial markets and the banking system.

First, removing assets from financial markets alters the supply-demand balance in favor of higher prices. Additionally, when investors believe QE is positive for asset prices, as is the case, demand increases, which provides even more impetus for higher asset prices.

Second, the Fed buys bonds from the banks with reserves. Reserves are a form of money that is only viable in transactions between banks or with the Fed. Reserves support bank loans and asset purchases. Therefore, when more reserves are available, banks can more easily make loans and buy assets. Further, some bank loans, specifically margin or repo loans, generate additional demand for assets.

The scatter plot below shows the positive correlation between the one-year percentage change in margin debt and the Fed’s balance sheet.

Higher stock and asset prices coupled with more leverage is a winning combination for investors.

The Graph of All Graphs

With that explanation of how trickledown monetary policy bolsters asset prices to accomplish the Fed’s goals, we share a graph explaining why the Fed’s policies widen the wealth gap.

Since 1990, the dollar’s purchasing power has declined by over 50%. At the same time, the S&P 500 has risen by over 1,300%. Those with a sufficient portfolio of stocks could more than offset the decline in the dollar’s purchasing power. Those without stocks are left behind.

Further, it doesn’t help that real household income for the lowest 20% has been unchanged since 1990. Over the same period, they have risen by about 50% for those in the upper 20% of incomes.

Share Of Wealth

The wealthier have seen their wages and the value of their financial assets rise much more than inflation. At the same time, the lower wealth and income classes have seen marginal real income gains at best and little in the way of benefits from rising stock prices. 

The two graphs below show how the percentage of the wealth owned by the top 1% and the change in the S&P 500 are well correlated.

On the contrary, the aggregate wealth of much of the bottom half of the nation, as a percentage of total wealth, has a negative relationship with the S&P 500.  

There is a straightforward explanation as to why the correlation between the share of the wealth of the rich versus that of the rest of the population has opposing correlations to the S&P 500. 10% of the population holds nearly 90% of the stocks.

Trickledown Monetary Policy Handicaps Capitalism

QE and other Fed policies may help the economy on the margin and save some jobs. However, there is little evidence that, over the longer term, the economic benefits increase the prosperity of most of the populace. Further, as we share, there is compelling evidence it further exacerbates the wealth gap.

Capitalism has proven to be the best economic system for growing the wealth of the entire population. A key tenant of capitalism promises financial incentives for those who work hard and have unique skill sets. That incentive results in productivity gains, which benefit economic growth and allow for higher wages and a broad distribution of wealth.

Unfortunately, when financial incentives are not only a function of capitalism but also an offshoot of government and Fed policies, the benefits of capitalism are reduced.

For example, Elon Musk is extraordinarily wealthy and should be rewarded handsomely for everything he has accomplished. However, how much of his wealth is based on his hard work and ingenuity, and how much was gifted to him by the Fed via their stock-boosting monetary policies. While slightly off-topic, we should also question how much of his wealth is attributable to government subsidies for electric vehicles. 

Summary

President Biden’s poll numbers on economic confidence are poor despite robust economic growth and a historically low unemployment rate. While there are many reasons for the odd divergence, we think it’s fair to say that the benefits of the post-pandemic growth spurt have disproportionately accrued to those in higher-income classes and those with stocks. Those left behind, representing a large majority of the population, are not confident in Biden’s handling of the economy and suffer from higher prices.

Most Americans continue to see wages that cannot combat inflation and have little to no wealth invested in the stock market. Can you blame them for lacking confidence?

QE may have served as an emergency way to add bank reserves to the system and boost confidence. However, its continued use, even during economic prosperity periods, only makes the wealth gap wider.

Tyler Durden Wed, 05/01/2024 - 11:30

AMD's Muted AI Sales Forecast Fails To Unleash Bulls 

AMD's Muted AI Sales Forecast Fails To Unleash Bulls 

Advanced Micro Devices, the second-largest maker of computer processors, disappointed investors with its sales outlook for processors used in data centers. The company also reported weak demand for chips used in gaming hardware, which could serve as a warning for Nvidia bulls as they await the company's earnings report in three weeks.

On Tuesday, AMD reported first quarter earnings that were in line with Wall Street's expectations. However, this wasn't enough to overly excite bulls as shares traded down 6.7% in the early cash session. 

First-quarter earnings, excluding certain items, were 62 cents per share on revenue of $5.47 billion. This report exceeded the estimated profit of 61 cents per share and projected revenue of $5.45 billion.

AMD's computer chip division had around $1.4 billion in revenue, compared with a $1.29 billion estimate. Datacenter chip sales were $2.3 billion, which is in line with Wall Street's expectations. Sales of gaming-related chips reached $922 million, falling short of analysts' expectations of $965.5 million.

The company stated that its second-quarter revenue forecast is around $5.7 billion, plus or minus $300 million, compared with the average estimate of $5.72 billion. 

Although earnings met expectations, the updated guidance of $4 billion for data center chips was considered conservative. Despite being an improvement over the previous $3.5 billion estimate, some Wall Street analysts forecasted a higher figure. 

"We are firm believers in AMD's revitalized product roadmap strategy, and product traction is compelling," KeyBanc strategists led by John Vinh wrote in a note. 

Vinh continued, "However, expectations for share gains and growth are high. We're concerned that any moderate downtick to expectations could add substantial risk to the stock based on valuation levels well above peers."

Oppenheimer analysts led by Rick Schafer noted, "We remain on the sidelines for now as AMD's emergent AI growth story is diluted by sluggish" sales in other areas. Perhaps this is an ominous sign that the parabolic trend of the AI bubble is unsustainable. 

AMD and Nvidia are rivals in the PC GPU and AI data center markets. Nvidia bulls and bears are awaiting the company's May 22 earnings report for hints about the state of the AI industry. 

Qualcomm will be reporting earnings on Wednesday afternoon. Then Arm Holdings on May 8. 

Bloomberg data shows the Philadelphia semiconductor index is priced around 26 times projected profits, down from a March peak of 30 times profits. However, the index trades well above the 10-year average of 17 times. 

Chipmaker valuations are being driven by multiple years of future earnings growth fueled by the AI bubble. Perhaps the collapse of ASML's order book is an ominous sign of what's to come (read here)

Tyler Durden Wed, 05/01/2024 - 11:15

Markets Are Very, Very Nervous Going Into The FOMC Decision

Markets Are Very, Very Nervous Going Into The FOMC Decision

By Michael Every of Rabobank

Higher for Longer Anxiety

Markets are very, very nervous going into the FOMC decision. The Wall Street Journal’s Timiraos tells us the Fed’s message will be “higher for longer”, language that had been dumped in December.

Moreover, if the Fed sees more hot data --following a jump in the Employment Cost Index, US house price inflation rising again, and a New York Fed wage tracker showing pay hikes staying around 5% y-o-y-- then while they may not raise rates again, they will certainly remove some of the implied cuts in the next dot plot; in his words, that would force yields higher along the curve in order to tighten financial conditions. So, higher yields anxiety.

Meanwhile, former President Trump give an interview to Time magazine that underlines how remarkably different, and radical, a ‘Trump 2’ would be. In particular, markets should note:  

Let’s shift to the economy, sir. You have floated a 10% tariff on all imports, and a more than 60% tariff on Chinese imports. Can I just ask you now: Is that your plan?

It may be more than that. It may be a derivative of that. A derivative of that. But it will be somebody - look when they come in and they steal our jobs, and they steal our wealth, they steal our country.

When you say more than that, though: You mean maybe more than 10% on all imports?

More than 10%, yeah. I call it a ring around the country. We have a ring around the country. A reciprocal tax also, in addition to what we said. And if we do that, the numbers are staggering. I don't believe it will have much of an effect because they're making so much money off of us. I also don't believe that the costs will go up that much. And a lot of people say, “Oh, that's gonna be a tax on us.” I don't believe that. I think it's a tax on the country that's doing it…

Mr. President, most economists—and I know not all, there isn't unanimity on this—but most economists say that tariffs increase prices.

Trump: Yeah.

Are you comfortable with additional inflation?

Trump: No, I've seen. I've seen - I don't believe it'll be inflation. I think it'll be lack of loss for our country. Because what will happen and what other countries do very successfully, China being a leader of it. India is very difficult to deal with. India - I get along great with Modi, but they're very difficult to deal with on trade. France is frankly very difficult on trade. Brazil is very difficult on trade. What they do is they charge you so much to go in. They say, we don't want you to send cars into Brazil or we don't want you to send cars into China or India. But if you want to build a plant inside of our country, that's okay and employ our people. And that's basically what I'm doing. And that’s - I was doing and I was doing it strongly, but it was ready to really start and then we got hit with COVID. We had to fix that problem.

So, higher tariffs and, for some, higher inflation anxiety. And it’s not just from Trump: following yesterday’s Global Daily title of ‘Beg, Borrow, or Steel’, Treasury Secretary Yellen flagged higher US tariffs are needed vs. Chinese steel dumping; and the White House wants ethanol aviation fuel subsidies which will boost corn prices – you can tell it’s a US election year.  

Meanwhile, Trump may want to end Fed independence (vs. telling the world rate cuts are coming by end year, and placing doves, not hawks, on the FOMC after a series of scandals). Would this imply “bigly” rate cuts, or open the door to the hybrid higher-rates-for-some/lower-for-others monetary/fiscal/industrial policy I have hypothesized as the only logical solution to the mess we are in? Either way, it would be “bigly” for all asset classes; more so when another headline suggests Trump wants to punish the BRICS who try to dedollarise with high tariffs.

Meanwhile other things are likely seeing central banks reach for their Valium:

  • The West has K-shaped, unequal, unhappy, stagflationary, more emerging-market economies with too much debt and too few good options.
  • Not only the yield curve, but an entire generation is lying flat or inverted in calling for violent revolution or communism in the US; and, at elite universities, to the approval of faculty, administrators, and authorities. As legitimate protest metastasizes into a ‘tentifada’ or, as Alan Dershowitz calls it, “Mein Kampus”, a Harvard-Harris poll shows 43% of US 18-24 year-olds support Hamas over Israel, and a majority want *Iran* to have a nuclear weapon.
  • High geopolitical tensions mean protectionist, inflationary, Hamiltonian rearmament; yet the West currently can’t get the Suez Canal open to its maritime commerce again because of the Houthis; and Poland confirms it’s asked the US to let it host nuclear weapons, which could lead to an EU Cuban Missile Crisis.

In 2019, I suggested we were on the cusp of an ‘Age of Rage’ that risked injecting politics into central banks: within 2 years, the Fed was talking about social justice, which some think perhaps played a partial role in the FOMC’s delayed recognition that rate hikes were necessary. In 2024, a former ECB president is calling for “radical” change, a US presidential candidate may back the end of Fed independence, and the Wall Street elite’s kids want global revolution. Where will things sit in another five years? “25bps lower” is not an answer that captures the real tail risks. However, not many want to ‘go there’, which leads me to high anxiety.

In Mel Brooks’ High Anxiety, psychologist Richard Thorndyke and belle Victoria Brisbane must pass through San Francisco Airport, where the police are looking for them. To hide, they wear clothes from charity and do an impression of many grandparents, as Thorndyke urges Victoria: “Be loud and annoying. Psychologically, when you are loud and annoying, people don’t notice you.” Indeed, when the metal detector is triggered by a forgotten gun, Thorndyke avoids arrest thus:

Thorndyke: “What is this, a gameshow? What did I win, a Pinto?”

Security: “I'm sorry sir, we're going to have to search you.”

Thorndyke: “Please Sir, what did I do? What did I do? What's to my crime?”

Security: “You beeped.”

Thorndyke: “I beeped! I beeped! Take me away! Take me back to Russia! Put me in irons! I beeped! The mad beeper is loose! Take away the beeper! Take me away!”

Security: “It’s alright! It’s alright, please go! Please go!”

We are now living that movie. Tipping-points loom in our ecology, economy, society, theology, psychology, demography, national security – and, yes, markets. Yet many ignore those “loud and annoying” messages right up until the likes of Timiraos spell it out for them. As such, aren’t those focused solely on the next rate cut the real “mad (25) beepers”?

Our Australia/New Zealand strategist Ben Picton will make some very, very nervous: he’s revised his RBA policy rate forecast to include two further 25bps hikes (in August and November) to reach a terminal rate of 4.85%, and has removed future cuts in accordance with our house view that Trump will win the US election and enact tariffs. Those not prepared to make those kind of tough market calls may react as in the High Anxiety shower scene, where the attached clip misses the punchline: “That kid gets no tip.” But I think Ben just gave you a great tip.

Tyler Durden Wed, 05/01/2024 - 10:55

Job Openings Tumble, Quits Plunge, Hires Unexpectedly Crater To January 2018 Levels

Job Openings Tumble, Quits Plunge, Hires Unexpectedly Crater To January 2018 Levels

After several months of relatively boring JOLTS prints, this morning Janet Yellen's favorite labor market indicator once again got exciting, and not in a good way.

Starting at the top, according to the March JOLTS reported, job openings unexpectedly tumbled by 325K - the biggest drop since October 2023 - from an upward revised 8.813 million in February to just 8.488 million, far below the 8.690 million expected - and the lowest number since February 2021 when it last printed below 8 million.

The 192K miss to estimates of 8.690 million, was the biggest since last October.

According to the DOL, in March job openings decreased in construction (-182,000) and in finance and insurance (-158,000), but increased in state and local government education (+68,000) because when all else fails, just "hire" more government zombies, ideally in the form of unionized illegal aliens to boost wages and inflation.

The kicker: construction jobs openings plunged from 456K to 274K, a 182K one-month drop and the biggest on record!

In the context of the broader jobs report, in March the number of job openings was 2.059 million more than the number of unemployed workers (which the BLS reported was 6.429 million), down significantly from last month's 2.355 million and the lowest since June 2021.

Said otherwise, in March the number of job openings to unemployed dropped to 1.32, a sharp slide from the February print of 1.36, matching the lowest level since August 2021 and almost back to pre-covid levels of 1.3.

But even more interesting than the drop in job openings was the number of quits: here we find that the number of people quitting their jobs, an indicator closely associated with labor market strength as it shows workers are confident they can find a better wage elsewhere - unexpectedly plunged by 198K, the biggest montyly drop since last June, to just 3.329 million the lowest number since January 2021!

But perhaps the most notable twist, is that amid the stagnant level of job openings, not only did the number of quits plunge - as workers no longer expect to find better paying jobs elsewhere - but so did the number of hires, which cratered by 281K to just 5.500 million - the lowest since Jan 2018 (excluding the record one-month plunge due to covid), and is now well below pre-covid levels.

Needless to say, a freeze in hiring is always the precursor to a wholesale collapse in the labor market, which we expect will materialize in 2-3 months, but since the election  will determine what econ data is published, expect the US economy to be in freefall the moment Trump wins the election.

It's not just us warning on this metric: the chief economist as Glassdoor, Daniel Zhao, echoes our warning that "employers are hesitant to hire & workers are hesitant to switch to a new job"

His conclusion: "low hires, quits and layoffs are an unusual combination that points to a certain "lock-in" in the job market. For the Fed, that is likely to tamp down wage growth driven by job switchers even if it doesn't slow net jobs growth."

Finally, no matter what the "data" shows, let's not forget that it is all just estimated, and it is safe to say that the real number of job openings remains still far lower since half of it - or some 70% to be specific - is guesswork. As the BLS itself admits, while the response rate to most of its various labor (and other) surveys has collapsed in recent years, nothing is as bad as the JOLTS report where the actual response rate remains near a record low 33%

In other words, more than two thirds, or 70% of the final number of job openings, is estimated!

And at a time when it is critical for Biden to still maintain the illusion that at least the labor market remains strong when everything else in Biden's economy is crashing and burning, we'll let readers decide if the admin's Labor Department is plugging the estimate gap with numbers that are stronger or weaker (we already know that they always get revised lower next month).

Tyler Durden Wed, 05/01/2024 - 10:39

WTI Extends Losses After Bigger Than Expected Crude Build

WTI Extends Losses After Bigger Than Expected Crude Build

Oil prices extended losses overnight (3rd day lower in a row) following API's report showing an unexpected crude build. Rising stocks would add to bearish headwinds for prices driven by hopes that peace (or some such variant of it) may break out in the Middle East.

“The potential for a cease-fire agreement between Israel and Hamas has eased concerns of an escalation of the conflict and any possible disruptions to supply,” ANZ Banking Group Ltd. analysts Brian Martin and Daniel Hynes said in a note.

“Continued signs of inflation also raised concerns about demand for crude oil” ahead of the US driving season, when gasoline consumption rises.

Additionally, OPEC’s crude production stayed steady last month, leaving the group’s latest cutbacks incomplete.

The Organization of Petroleum Exporting Countries pumped 26.81 million barrels a day in April, about 50,000 a day less than the previous month, according to a Bloomberg survey. Minor increases by Libya and Iraq were offset by reductions in Iran and Nigeria.

As a result, supply curbs agreed by the group and its allies at the start of the year to avert a surplus are still unfinished

Will the official data confirm API's unexpected build...

API

  • Crude +4.91mm (-1.5mm exp)

  • Cushing +1.48mm

  • Gasoline -1.48mm (-1.2mm exp)

  • Distillates -2.19mm (+400k exp)

DOE

  • Crude +7.265mm (-1.5mm exp)

  • Cushing -1.089mm

  • Gasoline +344k (-1.2mm exp)

  • Distillates -732k (+400k exp)

The official data showed an even bigger crude build than API (and stocks at Cushing also rose significantly)...

Source: Bloomberg

The Biden admin added another 594k barrels to the SPR last week...

Source: Bloomberg

US Crude production was flat at 13.1mm b/d...

Source: Bloomberg

WTI was hovering around $81.25 (off the morning lows) ahead of the official data and extended losses after the big build...

Finally, we note that oil options are signaling that traders are becoming less worried about conflict in the Middle East driving crude prices higher.

About 1,000 more Brent put options - which give the holder the right to sell at a pre-determined price and time - changed hands than bullish calls on Tuesday. That’s the first time put volumes have outnumbered calls since late March.

Puts are trading at their biggest premium to calls since the end of March.

Tyler Durden Wed, 05/01/2024 - 10:36

Whoopi Goldberg "Enraged" By Donald Trump Saying There Is An "Anti-White Feeling" In America

Whoopi Goldberg "Enraged" By Donald Trump Saying There Is An "Anti-White Feeling" In America

Authored by Paul Joseph Watson via modernity.news,

The View host Whoopi Goldberg said she was “enraged” over Donald Trump asserting that there is “an anti-white feeling in America.”

Goldberg made the remarks as she angrily glared at the camera.

“This is my favorite, and I’m gonna tell you before I say it that it enraged me,” she said before going on to quote Trump, who said, “There is a definite anti-white feeling in the country right now.”

Apparently, Trump pointing out a manifestly factual phenomenon is enough alone to infuriate Goldberg and the audience, which murmured with sanctimonious discontent.

That’s what he said!” continued Goldberg, before going on to suggest that there can’t be any “anti-white feeling” until white people are literally being lynched.

“Yeah, Sir. Nobody in your family was hung. Nobody in your family was chased because of the color of their skin. How dare you? There’s no anti-white issue here. You are perpetrating anti-humanist issues here,” she said.

One respondent on X provided a comprehensive response cataloguing dozens of examples of where the media, academia and major institutions have engaged in deliberate anti-white sentiment.

Another warned that Goldberg’s rage is another example of how “they’re saying the quiet part out loud.”

Others noted how absolutely nobody in Goldberg’s family was hanged, rendering her entire argument obsolete.

As we previously highlighted, Goldberg’s co-host Sunny Hostin faced embarrassment when it was revealed that her ancestors were actually white European slave owners.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Tyler Durden Wed, 05/01/2024 - 10:15

More Stagflation Signals As Manufacturing Surveys Show Soaring Prices, Orders Tumble

More Stagflation Signals As Manufacturing Surveys Show Soaring Prices, Orders Tumble

While 'hard' data has been improving recently (albeit then downwardly revised a month later), it is the 'soft' survey data that has collapsed amid Bidenomics.

Source: Bloomberg

And this morning continued that trend as S&P Global's US Manufacturing PMI (survey) fell from 51.9 in March to 50.0 as the final print for April (49.9 flash). ISM's Manufacturing survey also missed, dropping from 50.3 to 49.2 (contraction).

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers. Order inflows into factories fell for the first time since December, meaning producers had to rely on orders placed in prior months to keep busy.

However, there are some encouraging signs. The drop in orders appears to have been largely driven by reduced demand for semi-manufactured goods – inputs produced for other firms – as factories adjust their inventories of inputs. In contrast, consumer goods producers reported a further strengthening of demand, hinting that the broader consumer-driven economic upturn remains intact.

Producers on the whole also seem confident enough in the business outlook to continue adding to payroll numbers at a pace that compares well with the average seen over the past two years, investing further in operating capacity.

But, under the hood it was not pretty - ISM New Orders tumbled, Employment rose modestly, but Prices Paid soared (to their highest since June 2022)...

Source: Bloomberg

Prices charged for goods rose at a slower rate than the 11-month high seen in March. But, as S&P Global notes, the rate of increase nevertheless remains elevated by historical standards – and well above the average seen in the decade prior to the pandemic – as firms continued to pass higher commodity prices on to customers.

However, input costs increased sharply, with the rate of inflation quickening for the second consecutive month. Higher prices for oil and metals were mentioned in particular.

So, stagnating growth and sharply rising input costs... Stagflation signals everywhere.

Tyler Durden Wed, 05/01/2024 - 10:07

Who Is Crossing The English Channel?

Who Is Crossing The English Channel?

Five more people, including a child, died when trying to cross the English Channel by boat last Tuesday (April 23).

The news came the same day that Rishi Sunak’s government pushed through the next steps of its Rwanda legislation, supposed to deter such attempts to cross from happening. The Rwanda bill has sparked backlash, with a majority of the UK public doubtful that it will cut down on small boat arrivals.

The new law will state that any asylum seeker who has arrived in the UK “illegally” after January 2022 could be deported to Rwanda, where their asylum requests would be processed instead of in the UK.

Many of these are people who have arrived to the UK by small boats without the necessary documentation, and as Statista's Anna Fleck shows in the following chart, have had to leave countries of origin that are currently in a state of conflict or unrest.

 Who Is Crossing the English Channel? | Statista

You will find more infographics at Statista

newly published document published by the UK government states that migrants who are granted asylum in Rwanda will stay there and will not be permitted to return to the UK. Meanwhile, those who are not granted asylum will also not be “removed from Rwanda”.

Instead, the document on the bill says:

"Those who are unsuccessful [in their asylum application] would either depart voluntarily or gain another kind of status in Rwanda with equal treatment to those recognised as refugees."

According to official data published on the UK government website, a total of 114,345 people were recorded as having crossed the English Channel from France to the United Kingdom by small boat between 2018 and 2023. An analysis by the Migration Observatory reveals that this route has become increasingly busy in recent years, with a peak of 45,789 people detected making the crossing in 2022. Last year, the official figure was 29,437.

Commenting on the law, Filippo Grandi, theUN High Commissioner for Refugees said:

The new legislation marks a further step away from the UK’s long tradition of providing refuge to those in need, in breach of the Refugee Convention.

Protecting refugees requires all countries – not just those neighboring crisis zones – to uphold their obligations. This arrangement seeks to shift responsibility for refugee protection, undermining international cooperation and setting a worrying global precedent.”

Three quarters of all small boat arrivals between 2018 and 2023 were nationals from just six countries: Iran (21,546), Afghanistan (16,636), Iraq (15,388), Albania (14,480), Syria (8,528) and Eritrea (8,068). The share of nationals from each country ebbs and flows per year depending on various factors, however. For example, where only 32 Indian arrivals were reported in the first quarter of 2022, according to the Migration Observatory, that figure had risen to 670 in the same period in 2023.

Tyler Durden Wed, 05/01/2024 - 05:45

Maté: What 10 Years Of US Meddling In Ukraine Have Wrought (Spoiler Alert: Not Democracy)

Maté: What 10 Years Of US Meddling In Ukraine Have Wrought (Spoiler Alert: Not Democracy)

Authored by Aaron Maté via RealClear Investigations,

In successfully lobbying Congress for an additional $61 billion in Ukraine war funding, an effort that ended this month with celebratory Democrats waving Ukrainian flags in the House chamber, President Biden has cast his administration’s standoff with Russia as an existential test for democracy.

“What makes our moment rare is that freedom and democracy are under attack, both at home and overseas,” Biden declared in his State of the Union address in March. “History is watching, just like history watched three years ago on January 6th.”

While Biden’s narrative is widely accepted by Washington’s political establishment, a close examination of the president and his top principals’ record dating back to the Obama administration reveals a different picture. Far from protecting democracy from Kyiv to Washington, their role in Ukraine looks more like epic meddling resulting in political upheaval for both countries.

Over the last decade, Ukraine has been the battleground in a proxy war between the U.S. and Russia – a conflict massively escalated by the Kremlin’s invasion in 2022. The fight erupted in early 2014, when Biden and his team, then serving in the Obama administration, supported the overthrow of Ukraine’s elected president, Viktor Yanukovych. Leveraging billions of dollars in U.S. assistance, Washington has shaped the personnel and policies of subsequent Ukrainian governments, all while expanding its military and intelligence presence in Ukraine via the CIA and NATO. During this period, Ukraine has not become an independent self-sustaining democracy, but a client state heavily dependent on European and U.S. support, which has not protected it from the ravages of war.

The Biden-Obama team’s meddling in Ukraine has also had a boomerang effect at home.

As well-connected Washington Beltway insiders such as Hunter Biden have exploited it for personal enrichment, Ukraine has become a source of foreign interference in the U.S. political system – with questions of unsavory dealings arising in the 2016 and 2020 elections as well as the first impeachment of Donald Trump. After years of secrecy, CIA sources have only recently confirmed that Ukrainian intelligence helped generate the Russian interference allegations that engulfed Trump’s presidency. House Democrats' initial attempt to impeach Trump, undertaken in the fall of 2019, came in response to his efforts to scrutinize Ukraine’s Russiagate connection.

This account of U.S. interference in Ukraine, which can be traced to fateful decisions made by the Obama administration, including then-Vice President Biden and his top aides, is based on often overlooked public disclosures. It also relies on the personal testimony of Andrii Telizhenko, a former Ukrainian diplomat and Democratic Party-tied political consultant who worked closely with U.S. officials to promote regime change in Ukraine. 

Although he once welcomed Washington’s influence in Ukraine, Telizhenko now takes a different view. “I'm a Ukrainian who knew how Ukraine was 30 years ago, and what it became today,” he says. “For me, it's a total failed state.” In his view, Ukraine has been “used directly by the United States to fight a [proxy] war with Russia” and “as a rag to make money for people like Biden and his family.”

The State Department has accused Telizhenko being part of a "Russia-linked foreign influence network." In Sept. 2020 it revoked his visa to travel to the United States. Telizhenko, who now lives in a western European country where he was granted political asylum, denies working with Russia and says that he is a whistleblower speaking out to expose how U.S. interference has ravaged his country. RealClearInvestigations has confirmed that he worked closely with top American officials while they advanced policies aimed at severing Ukraine’s ties to Russia. No official contacted for this article – including former CIA chief John Brennan and senior State Department official Victoria Nuland – disputed any of his claims.

A Coup in 'Full Coordination' With the U.S.

The Biden team’s path to influencing Ukraine began with the eruption of anti-government unrest in November 2013. That month, protesters began filling Kyiv’s Maidan Nezalezhnosti (Independence Square) after then-President Viktor Yanukovych, a notoriously corrupt leader, delayed signing a European Union (EU) trade pact. To members of what came to be known as the Maidan movement, Yanukovych’s decision was a betrayal of his pledge to strengthen Western ties, and a worrying sign of Russian allegiance in a country haunted by its Soviet past.

The reality was more complex. Yanukovych was hoping to maintain relations with both Russia and Europe – and use competition between them to Ukraine’s advantage. He also worried that the EU’s terms, which demanded reduced trade with Russia, would alienate his political base in the east and south, home to millions of ethnic Russians. As the International Crisis Group noted, these Yanukovych-supporting Ukrainians feared that the EU terms “would hurt their livelihoods, a large number of which were tied to trade and close relations with Russia.” Despite claims that the Maidan movement represented a “popular revolution,” polls from that period showed that Ukrainians were evenly split on it, or even majority opposed.

After an initial period of peaceful protest, the Maidan movement was soon co-opted by nationalist forces, which encouraged a violent insurrection for regime change. Leading Maidan’s hardline contingent was Oleh Tyahnybok of the Svoboda party, who had once urged his supporters to fight what he called the “Muscovite-Jewish mafia running Ukraine.” Tyahnybok’s followers were joined by Right Sector, a coalition of ultra-nationalist groups whose members openly sported Nazi insignia. One year before, the European Parliament condemned Svoboda for “racist, anti-Semitic and xenophobic views” and urged Ukrainian political parties “not to associate with, endorse or form coalitions with this party.”

Powerful figures in Washington took a different view: For them, the Maidan movement represented an opportunity to achieve a longtime goal of pulling Ukraine into the Western orbit. Given Ukraine’s historical ties to Russia, its integration with the West could also be used to undermine the rule of Russian President Vladimir Putin.

As the-late Zbigniew Brzezinski, the influential former national security adviser to President Jimmy Carter, once wrote: “Without Ukraine, Russia ceases to be a Eurasian empire.” Two months before the Kyiv protests erupted, Carl Gershman, head of the National Endowment for Democracy, dubbed Ukraine “the biggest prize” in the West’s rivalry with Russia. Absorbing Ukraine, Gershman explained, could leave Putin “on the losing end not just in the near abroad" – i.e, its former Soviet satellites – "but within Russia itself.” Shortly after, senior State Department official Nuland boasted that the U.S. had “invested more than $5 billion” to help pro-Western “civil society” groups achieve a “secure and prosperous and democratic Ukraine.”

Seeking to capitalize on the unrest, U.S. figures including Nuland, Republican Sen. John McCain, and Democratic Sen. Chris Murphy visited Maidan Square. In a show of support for the movement’s hardline faction, which went beyond supporting the EU trade deal to demand Yanukovych’s ouster, the trio met privately with Tyahnybok and appeared with him on stage. The senators' mission, Murphy said, was to “bring about a peaceful transition here.”

The Maidan Movement’s most significant U.S. endorsement came from then-Vice President Joe Biden. “Nothing would have greater impact for securing our interests and the world’s interests in Europe than to see a democratic, prosperous, and independent Ukraine in the region,” Biden said.

According to Andrii Telizhenko, a former Ukrainian government official who worked closely with Western officials during this period, the U.S. government’s role went far beyond those high-profile displays of solidarity.

As soon as it grew into something, into the bigger Maidan, in the beginning of December, it basically was full coordination with the U.S. Embassy,” Telizhenko recalls. “Full, full.”

When the protests erupted, Telizhenko was working as an adviser to a Ukrainian member of Parliament. Having spent part of his youth in Canada and the United States, Telizhenko’s fluent English and Western connections landed him a position helping to oversee the Maidan Movement’s international relations. In this role, he organized meetings with and coordinated security arrangements for foreign visitors, including U.S. Ambassador Geoffrey Pyatt, Nuland, and McCain. Most of their briefings were held at Kyiv’s Trade Unions Building, the movement’s de-facto headquarters in the city’s center.

Telizhenko says Pyatt routinely coordinated with Maidan leaders on protest strategy. In one encounter, the ambassador observed Right Sector members assembling Molotov cocktails that would later be thrown at riot police attempting to enter the building. Sometimes, the U.S. ambassador disapproved of his counterparts’ tactics. “The U.S. embassy would criticize if something would happen more radical than it was supposed to go by plan, because it's bad for the picture,” Telizhenko said..

That winter was marked by a series of escalating clashes. On February 20, 2014, snipers fatally shot dozens of protesters in Maidan square. Western governments attributed the killings to Yanukovych's forces. But an intercepted phone call between NATO officials told a different story.

In the recorded conversation, Estonian foreign minister Urmas Paet told EU foreign secretary Catherine Ashton that he believed pro-Maidan forces were behind the slaughter. In Kyiv, Paet reported, “there is now stronger and stronger understanding that behind the snipers, it was not Yanukovych, but it was somebody from the new [opposition] coalition.”

In a bid to resolve the Maidan crisis and avoid more bloodshed, European officials brokered a compromise between Yanukovich and the opposition. The Feb. 21 deal called for a new national unity government that would keep him in office, with reduced powers, until early elections at year’s end. It also called for the disarmament of the Maidan forces and a withdrawal of riot police. Holding up its end of the bargain, government security forces pulled back. But the Maidan encampment's ultra-nationalist contingent had no interest in compromise.

“We don’t want to see Yanukovych in power,” Maidan Movement squadron leader Vladimir Parasyuk declared that same day. “… And unless this morning you come up with a statement demanding that he steps down, then we will take arms and go, I swear.”

In insisting on regime change, the far-right contingent was also usurping the leadership of more moderate opposition leaders such as Vitali Klitschko, who supported the power-sharing agreement.

“The goal was to overthrow the government,” Telizhenko says. “That was the first goal. And it was all green-lighted by the U.S. Embassy. They basically supported all this, because they did not tell them to stop. If they told them [Maidan leaders] to stop, they would stop.”

Yet another leaked phone call bolstered suspicions that the U.S. endorsed regime change. On the recording, presumably intercepted in January by Russian or Ukrainian intelligence, Nuland and Pyatt discussed their choice of leaders in a proposed power-sharing government with Yanukovich. Their conversation showed that the U.S. exerted considerable influence with the faction  seeking the Ukrainian president’s ouster.

Tyahnybok, the openly antisemitic head of Svodova, would be a “problem” in office, Nuland worried, and better “on the outside.” Klitschko, the more moderate Maidan member, was ruled out as well. “I don’t think Klitsch should go into government,” Nuland said. “I don’t think it’s necessary. I don’t think it’s a good idea.” One reason was Klitschko's proximity to the European Union. Despite her government’s warm words for the European Union in public, Nuland told Pyatt: “Fuck the EU.”

The two U.S. officials settled on technocrat Arseniy Yatsenyuk. “I think Yats is the guy,” Nuland said. By that point, Yatsenyuk had endorsed violent insurrection. The government’s rejection of Maidan demands, he said, meant that “people had acquired the right to move from non-violent to violent means of protest.”

The only outstanding matter, Pyatt relayed, was securing “somebody with an international personality to come out here and help to midwife this thing.” Nuland replied that Vice President Joe Biden and his senior aide, Jake Sullivan, who now serves as Biden’s National Security Adviser, had signed on to provide “an atta-boy and to get the deets [details] to stick.”

Just hours after the power-sharing agreement was reached, Nuland’s wishes were granted. Yanukovich, no longer protected by his armed forces, fled the capital. Emboldened by their sabotage of an EU-brokered power-sharing truce, Maidan Movement members stormed the Ukrainian Parliament and pushed through the formation of a new government. In violation of parliamentary rules on impeachment proceedings, and lacking a sufficient quorum, Oleksandr Turchynov was named the new acting president. The Nuland-backed Yatsenyuk was appointed Prime Minister.

In a reflection of their influence, at least five post-coup cabinet posts in national security, defense, and law enforcement were given to members of Svoboda and its far-right ally Right Sector.

“The uncomfortable truth is that a sizeable portion of Kyiv’s current government – and the protesters who brought it to power – are, indeed, fascists,” wrote Andrew Foxall, now a British defense official, and Oren Kessler, a Tel Aviv-based analyst, in Foreign Policy the following month. While denying any role in Yanukovich’s ouster, the Obama administration immediately endorsed it, as Secretary of State John Kerry expressed “strong support” for the new government.

In his memoir, former senior Obama aide Ben Rhodes acknowledged that Nuland and Pyatt “sounded as if they were picking a new government as they evaluated different Ukrainian leaders.” Rather than dispel that impression, he acknowledged that some of the Maidan “leaders received grants from U.S. democracy promotion programs.”

In 2012, one pro-Maidan group, Center UA, received most of its more than $500,000 in donations from the U.S. Agency for International Development (USAID), the National Endowment for Democracy, eBay founder Pierre Omidyar, and financier George Soros.

By its own count, Soros’ International Renaissance Foundation spent over $109 million in Ukraine between 2004 and 2014. In leaked documents, a former IRF board member even bragged that its partners “were the main driving force and the foundation of the Maidan movement,” and that without Soros’ funding, “the revolution might not have succeeded.” Weeks after the coup, an IRF strategy document noted, “Like during the Maidan protests, IRF representatives are in the midst of Ukraine’s transition process.”

Jeffrey Sachs, a Columbia University professor who advised Ukraine on economic policy in the early 1990s, visited Kyiv shortly after the coup to consult with the new government. 

I was taken around the Maidan where people were still milling around,” Sachs recalls. “And the American NGOs were around there, and they were describing to me: ‘Oh we paid for this, we paid for that. We funded this insurrection.’ It turned my stomach.” Sachs believes that these groups were acting at the behest of U.S. intelligence. To go about “funding this uprising,” he says, “they didn't do that on their own as nice NGOs. This is off-budget financing for a U.S. regime-change operation.”

Weeks after vowing to bring about a “transition” in Ukraine, Sen. Murphy openly took credit for it. “I really think that the clear position of the United States has in part been what has helped lead to this change in regime,” Murphy said. “I think it was our role, including sanctions and threats of sanctions, that forced, in part, Yanukovych from office.”

The Proxy War Gets Hot

Far from resolving the unrest, Viktor Yanukovych’s ouster plunged Ukraine into a war.

Just days after the Ukrainian president fled to Moscow, Russian special forces stormed Crimea’s local parliament. The following month, Russia annexed Crimea following a hasty, militarized referendum denounced by Ukraine, the U.S., and much of the world. While these objections were well-founded, Western surveys of Crimeans nonetheless found majority support for Russian annexation.

Emboldened by the events in Crimea, and hostile to a new government that had overthrown their elected leader Yanukovych, Russophile Ukrainians in the eastern Donbas region followed suit.

On April 6 and 7, anti-Maidan protesters seized government buildings in Donetsk, Luhansk, and Kharkiv. The Donetsk rebels declared the founding of the Donetsk People’s Republic. The Luhansk People’s Republic followed 20 days later. Both areas announced independence referendums for May 11.

As in Crimea, Moscow backed the Donbas rebellion. But unlike in Crimea, the Kremlin opposed the independence votes. The organizers, Putin said, should “hold off on the referendum in order to give dialogue the conditions it needs to have a chance.”

In public, the Obama administration claimed to also favor dialogue between Kyiv and the Russia-backed rebels in eastern Ukraine. Behind the scenes, a more aggressive plan was brewing.

On April 12, CIA chief John Brennan slipped into the Ukrainian capital for secret meetings with top officials. Russia, whose intelligence services ran a network of informants inside Ukraine, publicly outed Brennan’s visit. The Kremlin and Yanukovych directly accused Brennan of encouraging an assault on the Donbas.

The CIA dismissed the allegation as “completely false,” and insisted that Brennan supported a “diplomatic solution” as “the only way to resolve the crisis.” The following month, Brennan insisted that “I was out there to interact with our Ukrainian partners and friends.”

Yet Russia and Yanukovych were not alone in voicing concerns about the CIA chief’s covert trip. “What message does it send to have John Brennan, the head of the CIA in Kiev, meeting with the interim government?” Sen. Murphy complained. “Does that not confirm the worst paranoia on the part of the Russians and those who see the Kiev government as essentially a puppet of the West?... It may not be super smart to have Brennan in Kiev, giving the impression that the United States is somehow there to fight a proxy war with Russia.”

According to Telizhenko, who attended the Brennan meeting and spoke to RCI on record about it for the first time, that’s exactly what the CIA chief was there to do. Contrary to U.S. claims, Telizhenko says, “Brennan gave a green light to use force against Donbas,” and discussed “how the U.S. could support it.” One day after the meeting, Kyiv announced an “Anti-Terrorist Operation” (ATO) against the Donbas region and began a military assault.

Telizhenko, who was by then working as a senior policy adviser to Vitaliy Yarema, the First Deputy Prime Minister, says he helped arrange the Brennan gathering after getting a phone call from the U.S. embassy. “I was told there was going to be a top secret meeting, with a top U.S. official and that my boss should be there,” he recalls. “I was also told not to tell anyone.”

Brennan, he recalls, arrived at the Foreign Intelligence Office of Ukraine in a beat-up gray mini-van and a coterie of armed guards. Others in attendance included U.S. Ambassador Pyatt, Acting President Oleksandr Turchynov, foreign intelligence chief Victor Gvozd, and other senior Ukrainian security officials.

After a customary exchange of medals and souvenir trophies, the topic turned to the unrest in the Donbas. “Brennan was talking about how Ukraine should act,” Telizhenko says. “A plan to keep Donbas in Ukraine’s hands. But Ukraine’s army was not fully equipped. We only had stuff in reserves. They discussed plans for the ATO and how to keep Ukraine’s military fully armed throughout.” Brennan’s overall message was that “Russia is behind” the Donbas unrest, and “Ukraine has to take firm, aggressive action to not let this spread all over.”

Brennan and Pyatt did not respond to a request for comment.

Two weeks after Brennan’s visit, the Obama administration offered yet another high-level endorsement of the Donbas operation when then-Vice President Biden visited Kyiv. With Ukraine facing “unrest and uncertainty,” Biden told a group of lawmakers, it now had “a second opportunity to make good on the original promise made by the Orange Revolution” – referring to earlier 2004-2005 post-electoral upheaval that blocked Yanukovych, albeit temporarily, from the presidency.

Looking back, Telizhenko is struck by the contrast between Brennan’s bellicosity in Donbas and the Obama administration’s lax response to Russia’s Crimea grab one month prior.

After Crimea, they told us not to respond,” he said. But beforehand, “the Americans scoffed at warnings” that Ukraine could lose the peninsula. When Ukrainian officials met with Pentagon counterparts in March, “we gave them evidence that the little green men” – the incognito Russian forces who seized Crimea – “were Russians. They dismissed it.” Telizhenko now speculates that the U.S. permitted the Crimean takeover to encourage a conflict between Kyiv and Moscow-backed eastern Ukrainians. “I think they wanted Ukraine to hate Russia, and they wanted Russia to take the bait,” he said. Had Ukraine acted earlier, he believes, “the Crimea situation could have been stopped.”

With Russia in control of Crimea and Ukraine assaulting the Donbas with U.S. backing, the country descended into a full-scale civil war. Thousands were killed and millions displaced in the ensuing conflict. When Ukrainian forces threatened to overrun the Donbas rebels in August 2014, the Kremlin launched a direct military intervention that turned the tide. But rather than offer Ukraine more military assistance, Obama began getting cold feet.

Obama, senior Pentagon official Derek Chollet recalled, was concerned that flooding Ukraine with more weapons would “escalate the crisis” and give “Putin a pretext to go further and invade all of Ukraine.”

Rebuffing pressure from within his own Cabinet, Obama promised German Chancellor Angela Merkel in February 2015 that he would not send lethal aid to Ukraine. According to the U.S. Ambassador to Germany, Peter Wittig, Obama agreed with Merkel on the need “to give some space for those diplomatic, political efforts that were under way.”

That same month, Obama’s commitment gave Merkel the momentum to finalize the Minsk II Accords, a pact between Kyiv and Russian-backed Ukrainian rebels. Under Minsk II, an outmatched Ukrainian government agreed to allow limited autonomy for the breakaway Donbas regions in exchange for the rebels’ demilitarization and the withdrawal of their Russian allies.

Inside the White House, Obama’s position on Ukraine left him virtually alone. Obama’s reluctance to arm Ukraine, Chollet recalled, marked a rare situation “in which just about every senior official was for doing something that the president opposed.”

One of those senior officials was the State Department’s point person for Ukraine, Victoria Nuland. Along with allied officials and lawmakers, Nuland sought to undermine the Minsk peace pact even before it was signed.

As Germany and France lobbied Moscow and Kyiv to accept a peace deal, Nuland addressed a private meeting of U.S. officials, generals, and lawmakers – including Sen. McCain and future Secretary of State Mike Pompeo – on the sidelines of the annual Munich Security Conference. Dismissing the French-German diplomatic efforts as an act of appeasement, Nuland outlined a strategy to continue the war with a fresh influx of Western arms. Perhaps mindful of the optics of flooding Ukraine with military hardware at a time when the Obama administration was claiming to support to a peace agreement, Nuland offered a public relations suggestion.  “I would like to urge you to use the word ‘defensive system’ to describe what we would be delivering against Putin’s offensive systems,” Nuland told the gathering.

The Munich meeting underscored that while President Obama may have publicly supported a peace deal in Ukraine, a bipartisan alliance of powerful Washington actors – including his own principals – was determined to stop it. As Foreign Policy magazine reported, “the takeaway for many Europeans ... was that Nuland gave short shrift to their concerns about provoking an escalation with Russia and was confusingly out of sync with Obama.”

As Nuland and other officials quietly undermined the Minsk accords, the CIA deepened its role in Ukraine. U.S. intelligence sources recently disclosed to the New York Times that the agency has operated 12 secret bases inside Ukraine since 2014. The post-coup government’s first new spy chief, Valentyn Nalyvaichenko, also revealed that he established a formal partnership with the CIA and MI6 just two days after Yanukovych’s ouster.

According to a separate account in the Washington Post, the CIA restructured Ukraine’s two main spy services and turned them into U.S. proxies. Starting in 2015, the CIA transformed Ukraine’s military intelligence agency, the GUR, so extensively that “we had kind of rebuilt it from scratch,” a former intelligence official told the Post. “GUR was our little baby.” As a benefit of being the CIA's proxy, the agency even funded new headquarters for the GUR’s paramilitary wing and a separate division for electronic espionage.

In a 2016 congressional appearance, Nuland touted the extensive U.S. role in Ukraine. “Since the start of the crisis, the United States has provided over $760 million in assistance to Ukraine, in addition to two $1 billion loan guarantees,” Nuland said. U.S. advisers “serve in almost a dozen Ukrainian ministries,” and were helping “modernize Ukraine’s institutions” of state-owned industries.

Nuland’s comments underscored an overlooked irony of the U.S. role in Ukraine: In claiming to defend Ukraine from Russian influence, Ukraine was subsumed by American influence.

Boomeranging Into U.S. Politics 

In the aftermath of the February 2014 coup, the transformation of Ukraine into an American client state soon had a boomerang effect, as maneuvers in that country increasingly impacted U.S. domestic politics.

“Americans are highly visible in the Ukrainian political process,” Bloomberg columnist Leonid Bershidsky observed in November 2015. “The U.S. embassy in Kyiv is a center of power, and Ukrainian politicians openly talk of appointments and dismissals being vetted by U.S. Ambassador Geoffrey Pyatt and even U.S. Vice President Joe Biden.”

One of the earliest and best-known cases came in December 2015, when Biden threatened to withhold $1 billion in aid unless Ukraine fired its prosecutor general, Viktor Shokin, whom the vice president claimed was corrupt. When Biden’s threat resurfaced as an issue during the 2020 election, the official line, as reported by CNN, was that “the effort to remove Shokin was backed by the Obama administration, European allies” and even some Republicans.

In fact, from Washington’s perspective, the campaign for Shokin’s ouster marked a change of course. Six months before Biden’s visit, Nuland had written Shokin that “We have been impressed with the ambitious reform and anti-corruption agenda of your government.”

And as RCI recently reported:

An Oct. 1, 2015, memo summarizing the recommendation of the [U.S.] Interagency Policy Committee on Ukraine stated, “Ukraine has made sufficient progress on its [anti-corruption] reform agenda to justify a third [loan] guarantee.” … The next month, moreover, the task force drafted a loan guarantee agreement that did not call for Shokin’s removal. Then, in December, Joe Biden flew to Kyiv to demand his ouster.

No one has explained why Shokin suddenly came into the crosshairs. At the time, the prosecutor general was investigating Burisma, a Ukrainian energy firm that was paying Hunter Biden over $80,000 per month to sit on its board.

According to emails obtained from his laptop, Hunter Biden introduced his father to a top Burisma executive less than one year before. Burisma also retained Blue Star Strategies, a D.C. consulting firm that worked closely with Hunter, to help enlist U.S. officials who could pressure the Ukrainian government to drop its criminal probes.

Two senior executives at Blue Star, Sally Painter and Karen Tramontano, formerly worked as top aides to President Bill Clinton.

According to a November 2015 email sent to Hunter by Vadym Pozharsky, a Burisma adviser, the energy firm’s desired “deliverables” included visits from “influential current and/or former US policy-makers to Ukraine.” The “ultimate purpose” of these visits would be “to close down” any legal cases against the company’s owner, Mykola Zlochevsky. One month after that email, Joe Biden visited Ukraine and demanded Shokin’s firing.

Telizhenko – who worked in Shokin’s office at the time, and later worked for Blue Star – said the evidence contradicts claims that Shokin was fired because of his failure, among other things, to investigate Burisma. “There were four criminal cases opened in 2014 against Burisma, and two more additionally opened by Shokin when he became the Prosecutor General,” recalls Telizhenko. “So, whenever anybody says, ‘There were no criminal cases, nobody was investigating Burisma, Shokin was fired because he was a bad prosecutor, he didn't do his work’ ... this was all a lie. No, he did his work.”

In a 2023 interview, Hunter Biden’s former business partner, Devon Archer, said Shokin was seen as a “threat” to Burisma. Both of Shokin’s cases against Burisma were closed after his firing.

Ukraine Meddling vs. Trump

While allegations of Russian interference and collusion would come to dominate the 2016 campaign, the first documented case of foreign meddling originated in Ukraine.

Telizhenko, who served as a political officer at the Ukrainian embassy in Washington, D.C., before joining Blue Star, was an early whistleblower. He went public in January 2017, telling Politico how the Ukrainian embassy worked to help Hillary Clinton’s 2016 election campaign and undermine Trump’s.

According to Telizhenko, Ukraine’s D.C. ambassador, Valeriy Chaly, instructed staffers to shun Trump’s campaign because “Hillary was going to win.”

Telizhenko says he was told to meet with veteran Democratic operative Alexandra Chalupa, who had also served in the Clinton White House. “The U.S. government and people from the Democratic National Committee are approaching and asking for dirt on a presidential candidate,” Telizhenko recalls. “And Chalupa said, ‘I want dirt. I just want to get Trump off the elections.’”

Starting in early 2016, U.S. officials leaned on the Ukrainians to investigate Paul Manafort, the GOP consultant who would become Trump’s campaign manager, and avoid scrutiny of Burisma, as RCI reported in 2022. “Obama’s NSC hosted Ukrainian officials and told them to stop investigating Hunter Biden and start investigating Paul Manafort,” a former senior NSC official told RCI. In January 2016, the FBI suddenly reopened a closed investigation into Manafort for potential money laundering and tax evasion connected to his work in Ukraine.

Telizhenko, who attended a White House meeting with Ukrainian colleagues that same month, says he witnessed Justice Department officials pressing representatives of Ukraine’s Corruption Bureau. “The U.S. officials were asking for the Ukrainian officials to get any information, financial information, about Americans working for the former government of Ukraine, the Yanukovych government,” he says.

By the time Telizhenko spoke out, Ukrainian officials had already admitted intervening in the 2016 election to help Clinton’s campaign. In August, Ukraine’s National Anti-Corruption Bureau (NABU) released what it claimed was a secret ledger showing that Manafort received millions in illicit cash payments from Yanukovych’s party. The Clinton campaign, then in the early stages of its effort to portray their Republican rival as a Russian conspirator, seized on the news as evidence of Trump’s “troubling connections” to “pro-Kremlin elements in Ukraine.”

The alleged ledger was first obtained by Ukrainian lawmaker Serhiy Leshchenko, who had claimed that he had received it anonymously by mail. Yet Leshchenko was not an impartial source: He made no effort to hide his efforts to help elect Clinton. “A Trump presidency would change the pro-Ukrainian agenda in American foreign policy,” Leshchenko told the Financial Times. For him, “it was important to show ... that [Trump] is [a] pro-Russian candidate who can break the geopolitical balance in the world.” Accordingly, he added, most of Ukraine’s politicians were “on Hillary Clinton’s side.”

Manafort, who would be convicted of unrelated tax and other financial crimes in 2018, denied the allegation. The ledger was handwritten and did not match the amounts that Manafort was paid in electronic wire transfers. Moreover, the ledger was said to have been stored at Yanukovych’s party headquarters, yet that building was burned in a 2014 riot by Maidan activists.

Telizhenko agrees with Manafort that the ledger was a fabrication. “I think the ledger was just made up because nobody saw it, and nobody got the official documents themselves. From my understanding it was all a toss-up, a made-up story, just because they could not find any dirt on the Trump campaign.”

But with the U.S. media starting to amplify the Clinton campaign’s Trump-Russia conspiracy theories, a wary Trump demanded Manafort's resignation. “The easiest way for Trump to sidestep the whole Ukraine story is for Manafort not to be there,” Newt Gingrich, the former House speaker and a Trump campaign adviser, explained.

The 2016 Russian Hacking Claim

The release of the Manafort ledger and cooperation with the Democratic National Committee was not the end of Ukraine’s 2016 election interference.

A recent account in the New York Times revealed that Ukrainian intelligence played a vital role in generating CIA allegations that would become a foundation of the Russiagate hoax – that Russia stole Democratic Party emails and released them via WikiLeaks in a bid to help elect Trump. Once again, CIA chief Brennan played a critical role.

In the Times’ telling, some Obama officials wanted to shut down the CIA’s work in Ukraine after a botched August 2016 Ukrainian intelligence operation in Crimea turned deadly. But Brennan “persuaded them that doing so would be self-defeating, given the relationship was starting to produce intelligence on the Russians as the C.I.A. was investigating Russian election meddling.” This “relationship” between Brennan and his Ukrainian counterparts proved to be pivotal. According to the Times, Ukrainian military intelligence – which the CIA closely managed – claimed to have duped a Russian officer into “into providing information that allowed the C.I.A. to connect Russia’s government to the so-called Fancy Bear hacking group.”

“Fancy Bear” is one of two alleged Russian cyber espionage groups that the FBI has accused of carrying out the 2016 DNC email theft. Yet this allegation has a direct tie not just to Ukraine, but to the Clinton campaign. The name “Fancy Bear” was coined by CrowdStrike, a private firm working directly for Clinton’s attorney, Michael Sussmann. As RealClearInvestigations has previously reported, CrowdStrike first accused Russia of hacking the DNC, and the FBI relied on the firm for evidence. Years after publicly accusing Russia of the theft, CrowdStrike executive Shawn Henry was forced to admit in sworn congressional testimony that the firm “did not have concrete evidence” that Russian hackers took data from the DNC servers.

CrowdStrike’s admission about the evidentiary hole in the Russian hacking allegation, along with the newly disclosed Ukrainian intelligence role in generating it, were both kept under wraps throughout the entirety of Special Counsel Robert Muller’s probe into alleged Russian interference. But when Trump sought answers on both matters, he once again found himself the target of an investigation.

In late September 2019, weeks after Mueller’s halting congressional testimony – which left Trump foes dissatisfied over his failure to find insufficient evidence of a Russian conspiracy – House Democrats kicked off an effort to impeach Trump for freezing U.S. weapons shipments in an alleged scheme to pressure Ukraine into investigating the Bidens. The impeachment was triggered by a whistleblower complaint about a phone call between Trump and Ukrainian President Volodymyr Zelensky two months prior. The "whistleblower" was later identified by RealClearInvestigations as Eric Ciaramella, an intelligence official who had served as Ukraine adviser to then-Vice President Biden when he demanded Shokin’s firing and to the Obama administration’s other key point person for Kyiv, Victoria Nuland.

Yet Trump’s infamous July 2019 phone call with Zelensky was not primarily focused on the Bidens. Instead, according to the transcript, Trump asked Zelensky to do him “a favor” and cooperate with a Justice Department investigation into the origins of Russiagate, which, he asserted, had Ukrainian links. Trump specifically invoked CrowdStrike, the Clinton campaign contractor that had generated the allegation that Russia had hacked the Democratic Party emails. CrowdStrike’s allegation of Russian interference, Trump told Zelensky, had somehow “started with Ukraine.”

More than four years after the call, and eight years after the 2016 campaign, the New York Times’ recent revelation that the CIA relied on Ukrainian intelligence operatives to identify alleged Russian hackers adds new context to Trump’s request for Zelensky’s help. Asked about the Times’ disclosure, a source familiar with Trump's thinking confirmed to RCI that the president was indeed referring to a Ukrainian role in the Russian hacking allegations that consumed his presidency. “That’s why they impeached him,” the source said. “They didn’t want to be exposed.”

Trump's First Impeachment

The first impeachment of Donald Trump once again inserted Ukraine into the highest levels of U.S. politics. But the impact may have been even greater in Ukraine.

When Democrats targeted Trump for his phone call with Zelensky, the rookie Ukrainian leader was just months into a mandate that he had won on a pledge to end the Donbas war. In his inaugural address, Zelensky promised that he was “not afraid to lose my own popularity, my ratings,” and even “my own position – as long as peace arrives.”

In their lone face-to-face meeting, held on the sidelines of the United Nations General Assembly, Trump tried to encourage Zelensky to negotiate with Russia. “I really hope that you and President Putin can get together and solve your problem,” Trump said, referring to the Donbas war. “That would be a tremendous achievement."

But Ukraine’s powerful ultra-nationalists had other plans. Right Sector co-founder Dmytro Yarosh, commander of the Ukrainian Volunteer Army, responded: “No, he [Zelensky] would lose his life. He will hang on some tree on Khreshchatyk [Kyiv’s main street] – if he betrays Ukraine” by making a peace with the Russian-backed rebels.

By impeaching Trump for pausing U.S. weaponry to Ukraine, Democrats sent a similar message. Trump, the final House impeachment report proclaimed, had “compromised the national security of the United States.” In his opening statement at Trump’s Senate trial, Rep. Adam Schiff – then seeking to rebound from the collapse of the Trump-Russia conspiracy theory – declared: “The United States aids Ukraine and her people, so that we can fight Russia over there, and we don’t have to fight Russia here.”

Other powerful Washington officials, including star impeachment witness William Taylor, then serving as the chief U.S. diplomat in Ukraine, pushed Zelensky toward conflict.

Just before the impeachment scandal erupted in Washington, Zelensky was “expressing curiosity” about the Steinmeier Formula, a German-led effort to revive the stalled Minsk process, which he “hoped might lead to a deal with the Kremlin,” Taylor later recounted to the Washington Post. But Taylor disagreed.  “No one knows what it is,” Taylor told Zelensky of the German plan. “Steinmeier doesn’t know what it is ... It’s a terrible idea.”

With both powerful Ukrainian ultra-nationalists and Washington bureaucrats opposed to ending the Donbas war, Zelensky ultimately abandoned the peace platform that he was elected on. “By early 2021,” the Post reported, citing a Zelensky ally, “Zelensky believed that negotiations wouldn’t work and that Ukraine would need to retake the Donetsk and Luhansk regions ‘either through a political or military path.’”

The return of the Biden team to the Oval Office in January 2021 appears to have encouraged Zelensky’s confrontational path. By then, polls showed the rookie president trailing OPFL, the opposition party with the second-most seats in parliament and headed by Viktor Medvedchuk, a Ukrainian mogul close to Putin.

The following month, Zelensky offered his response to waning public support. Three OPFL-tied television channels were taken off the air. Two weeks later, Zelensky followed up by seizing the assets of Medvedchuk’s family, including a pipeline that brought Russian oil through Ukraine. Medvedchuk was also charged with treason. 

Zelensky’s crackdown drew harsh criticism, including from close allies. “This is an illegal mechanism that contradicts the Constitution,” Dmytro Razumkov, the speaker of the parliament and a manager of Zelensky’s presidential campaign, complained.

Yet Zelensky won praise from the newly inaugurated Biden White House, while hailed his effort to “counter Russia’s malign influence.” 

It turns out that the U.S. not only applauded Zelensky’s domestic crackdown, but inspired it. Zelensky's first national security adviser, Oleksandr Danyliuk, later revealed to Time Magazine that the TV stations' shuttering was “conceived as a welcome gift to the Biden Administration.” Targeting those stations, Danyliuk explained, “was calculated to fit in with the U.S. agenda.” And the U.S. was a happy recipient. “He turned out to be a doer,” a State Department official approvingly said of Zelensky. “He got it done.”

Just days after receiving Zelensky’s “welcome gift” in March 2021, the Biden administration approved its first military package for Ukraine, valued at $125 million. That same month, Ukraine’s National Security and Defense Council approved a strategy to recover all of Crimea from Russian control, including by force. By the end of March, intense fighting resumed in the Donbas, shattering months of a relatively stable ceasefire.

Russia offered its own reaction. Two days after its ally Medvedchuk’s assets were seized in February, Russia deployed thousands of troops to the Ukraine border, the beginning of a build-up that ultimately topped 100,000 and culminated in an invasion one year later.

The Kremlin, Medvedchuk claimed, was acting to protect Russophile Ukrainians targeted by Zelensky’s censorship. “When they close TV channels that Russian-speaking people watched, when they persecute the party these people voted for, it touches all of the Russian-speaking population,” he said.

Medvedchuk also warned that the more hawkish factions of the Kremlin could use the crackdown as a pretext for war. “There are hawks around Putin who want this crisis. They are ready to invade. They come to him and say, ‘Look at your Medvedchuk. Where is he now? Where is your peaceful solution? Sitting under house arrest? Should we wait until all pro-Russian forces are arrested?’ ”

A Whistleblower Silenced
on Alleged Biden Corruption

Along with encouraging a proxy war with Russia in Ukraine, the first Trump impeachment also promoted the highly dubious Democratic Party narrative that scrutiny of Ukrainian interference in U.S. politics was a “conspiracy theory” or “Russian disinformation.” Another star impeachment witness, Lt. Col. Alexander Vindman, who leaked the Trump/Zelensky phone call to Ciaramella, testified that Telizhenko – who had blown the whistle on Ukrainian collusion with the DNC – was “not a credible individual.”

Telizhenko was undeterred. After detailing reliable evidence of Ukrainian’s 2016 election interference to Politico, Telizhenko continued to speak out – and increasingly drew the attention of government officials who sought to undermine his claims by casting him as a Russian agent.

Beginning in May 2019, Telizhenko cooperated with Rudy Giuliani, then acting as Trump’s personal attorney, in his effort to expose information about the Bidens’ alleged corruption in Ukraine. During Giuliani’s visits to Ukraine, Telizhenko served as an adviser and translator.

That same year, Telizhenko testified to the Federal Election Commission (FEC) as part of a probe into whether the DNC’s 2016 collusion with the Ukrainian embassy violated campaign finance laws. By contrast, multiple DNC officials refused to testify. Telizhenko then cooperated with a separate Senate probe, co-chaired by Republicans Chuck Grassley and Ron Johnson, on how Hunter Biden’s business dealings impacted U.S. policy in Ukraine.

By the lead-up to the 2020 election, Telizhenko found himself the target of a concerted effort to silence him. As the Senate probed Ukraine, the FBI delivered a classified warning echoing Democrats’ talking points that Telizhenko was among the “known purveyors of Russian disinformation narratives” about the Bidens. In response, GOP Sen. Johnson dropped plans to subpoena Telizhenko. Nevertheless, Telizhenko’s communications with Obama administration officials and his former employer Blue Star Strategies were heavily featured in Johnson and Grassley’s final report on the Bidens’ conflicts of interest in Ukraine, released in September 2020.

The U.S. government’s claims of yet another Russian-backed plot to hurt a Democratic Party presidential nominee set the stage for another highly consequential act of election interference. On October 14, 2020, the New York Post published the first in a series of stories detailing how Hunter Biden had traded on his family name to secure lucrative business abroad, including in Ukraine. The Post’s reporting, based on the contents of a laptop Hunter’s had apparently abandoned in a repair shop, also raised questions about Joe Biden’s denials of involvement in his son’s business dealings.

The Hunter Biden laptop emails pointed to the very kind of influence-peddling that the Biden campaign and Democrats routinely accused Trump of. But rather than allow voters to read the reporting and judge for themselves, the Post’s journalism was subjected to a smear campaign and a censorship campaign unparalleled in modern American history. In a statement, a group of more than 50 former intelligence officials – including John Brennan, the former CIA chief – declared that the Hunter Biden laptop story “has all the classic earmarks of a Russian information operation.” Meanwhile, Facebook and Twitter prevented the story from being shared on their social media networks.

The FBI lent credence to the intelligence veterans’ false claim by launching a probe into whether the laptop contents were part of a “Russian disinformation” campaign aiming to hurt Biden. The bureau initiated this effort despite having been in possession of Hunter Biden’s laptop, which it had verified as genuine, for almost a year. To buttress innuendo that the laptop was a Russian plot, a CNN report suspiciously noted that Telizhenko had posted an image on social media featuring Trump holding up an edition of the New York Post’s laptop story.

In January 2021, shortly before Biden took office, the U.S. Treasury Department followed suit by imposing sanctions on Telizhenko for allegedly “having directly or indirectly engaged in, sponsored, concealed, or otherwise been complicit in foreign influence in a United States election.”

Treasury, however, did not release any evidence to support its claims. Two months later, the department issued a similar statement in announcing sanctions on former Manafort aide Konstantin Kilimnik, whom it accused of being a "known Russian Intelligence Services agent implementing influence operations on their behalf." Treasury’s actions followed a bipartisan Senate Intelligence report that also accused Kilimnik of being a Russian spy. As RealClearInvestigations has previously reported, neither the Treasury Department or Senate panel provided any evidence to support their allegations about Kilimnik, which were called into question by countervailing information that RCI brought to light. Just like Telizhenko, Kilimnik had extensive contacts with the Obama administration, whose State Department treated him as a trusted source.

The U.S. government’s endorsement of Democratic claims about Telizhenko had a direct impact on the FEC investigation into DNC-Ukrainian collusion, in which he had testified. In August 2019, the FEC initially sided with Telizhenko and informed Alexandra Chalupa – the DNC operative whom he outed for targeting Paul Manafort – that she plausibly violated the Federal Election Campaign Act by having “the Ukrainian Embassy... [perform] opposition research on the Trump campaign at no charge to the DNC.” The FEC also noted that the DNC “does not directly deny that Chalupa obtained assistance from the Ukrainians nor that she passed on the Ukrainian Embassy’s research to DNC officials.”

But when the Treasury Department sanctioned Telizhenko in January 2021, the FEC suddenly reversed course. As RealClearInvestigations has previously reported, the FEC closed the case against the DNC without punitive action. Democratic commissioner Ellen Weintraub even dismissed allegations of Ukrainian-DNC collusion as “Russian disinformation.” As evidence, she pointed to media reports about Telizhenko and the recent Treasury sanctions against him.

Yet Telizhenko’s detractors have been unable to adduce any concrete evidence tying him to Russia. A January 2021 intelligence community report, declassified two months later, accused Russia of waging “influence operations against the 2020 US presidential election” on behalf of Trump. It made no mention of Telizhenko. The Democratic-led claims of Telizhenko’s supposed Russian ties are additionally undermined by his extensive contact with Obama-Biden administration officials, as journalist John Solomon reported in September 2020.

Telizhenko says he has “no connection at all” to the Russian government or any effort to amplify its messaging. “I’m ready,” he says. “Let the Treasury Department publish what they have on me, and I’m ready to go against them.  Let them show the public what they have.  They have nothing ... I am ready to talk about the truth.  They are not.”

Epilogue

Just as Telizhenko has been effectively silenced in the U.S. establishment, so has the Ukrainian meddling that he helped expose. Capturing the prevailing media narrative, the Washington Post recently claimed that Trump has “falsely blamed Ukraine for trying to help Democratic rival Hillary Clinton,” which, the Post added, is “a smear spread by Russian spy services.” This narrative ignores a voluminous record that includes Ukrainian officials admitting to helping Clinton.

As the Biden administration successfully pressured Congress to approve its $61 billion funding request for Ukraine, holdout Republicans were similarly accused of parroting the Kremlin. Shortly before the vote, two influential Republican committee chairmen, Reps. Mike Turner of Ohio and Mike McCaul of Texas, claimed that unnamed members of their caucus were repeating Russian propaganda. Zelensky also asserted that Russia was manipulating U.S. opponents of continued war funding: “When we talk about the Congress — do you notice how [the Russians] work with society in the United States?”

Now that Biden has signed that newly authorized funding into law, the president and his senior aides have been handed the means to extend a proxy war that they launched a decade ago and that continues to ravage Ukraine. In yet another case of Ukraine playing a significant role in domestic U.S. politics, Biden has also secured a boost to his bid for reelection. As the New York Times recently observed: “The resumption of large-scale military aid from the United States all but ensures that the war will be unfinished in Ukraine when Americans go to the polls in November.”

Tyler Durden Wed, 05/01/2024 - 02:00

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