The Fed's Game Of "Make Believe" Comes To An End

Authored by James Hickman via SchiffSovereignMan.com,

It’s barely been a year since the 2023 bank crisis in which several large banks, including Silicon Valley Bank and Signature Bank, failed.

At the time, I wrote that the bank failures weren’t over, and that there would be more.

But it’s been quiet for most of the last year; the banking system has been pretty calm thanks in large part to an emergency program that the Federal Reserve created to bail out other troubled banks.

They called it the Bank Term Funding Program (BTFP), and it essentially expired a few weeks ago. In other words, no more emergency lending to troubled banks.

Barely a month later, we have already witnessed our first casualty: Pennsylvania-based Republic First (not to be confused with First Republic, which failed last year) was shut down by regulators on Friday afternoon.

Republic First had the same issues as the others that failed last year — too many ‘unrealized bond losses’ on their balance sheet.

Just like Silicon Valley Bank, Signature Bank, etc. last year, Republic First had used their customers’ deposits to buy US Treasury bonds in 2021 and 2022, back when bond prices were at all-time highs.

By early 2023, the situation had reversed. Bond prices had plummeted; even supposedly ‘safe’ and ‘stable’ US Treasury bonds had fallen substantially in price, and banks were sitting on huge losses.

Remember that bond prices fall when interest rates rise. So when the Fed jacked up interest rates from 0% to 5% in an attempt to control inflation, they were simultaneously creating huge losses in the bond market… which also meant huge losses for banks.

Silicon Valley Bank was just the tip of the iceberg. Plenty of other banks (including Bank of America) had racked up enormous bond losses. In fact the total unrealized losses in the banking sector last year amounted to a whopping $620 billion.

The Fed knew they had an enormous problem on their hands. So they created this Bank Term Funding Program, which was basically a giant game of ‘make believe’.

Through the BTFP, banks were allowed to borrow money from the Fed using their cratering bond portfolios as collateral. But instead of valuing the bonds at the actual market price, everyone simply pretended that the bonds were still worth 100 cents on the dollar.

In other words, the banks just made up prices for their assets, and the Fed allowed them to do it.

(It’s ironic that a certain former President is on trial in New York City for inflating the value of his assets, even though banks were inflating the value of their bonds through the BTFP.)

The Fed managed to prevent any further embarrassing bank failures last year by sprinkling this magical fairy dust across the banking system.

But now that the BTFP has expired, it has become obvious that problems in the banking system haven’t gone away. Republic First’s failure a few days ago is just one symptom.

Think about it: Bond prices are still down (because interest rates remain much higher than they were in 2021-2022). Banks are still sitting on massive unrealized losses.

And now that the Fed has stopped playing ‘make believe’, the bank failures have started up again.

It’s not to say that ALL banks are in terrible shape; some banks wisely used the last twelve months to get their financial houses in order.

Unfortunately most didn’t… which is why there’s still more more than HALF A TRILLION dollars in unrealized losses in the US banking system. This means that Republic First probably won’t be the only failure, unless the Fed steps in with its magical fairy dust again.

Also bear in mind that losses from their US Treasury portfolios aren’t the only problem in the banking system; for example, plenty of banks are sitting on huge potential losses from loans they made on office properties.

I don’t think the scope of this problem is anywhere near the 2008 financial crisis, which brought down some of the world’s largest banks. Not even close.

But the reality is that there are still a lot of banks with a lot of unrealized losses. And the biggest one of all happens to be the Federal Reserve.

According to its own financial statements, just released last month, the Fed’s total unrealized losses are almost $1 TRILLION — $948.4 BILLION to be more precise. And the vast majority of those unrealized losses come from US Treasuries.

So just like Silicon Valley Bank, Signature, First Republic, and now Republic First, the Federal Reserve has rendered itself completely insolvent.

In fact, total Federal Reserve capital is just $51 billion… versus $948 billion in losses. This means the Fed is insolvent 19 times over.

Think about that: the largest, most important central bank in the world… the steward of the global reserve currency… is completely insolvent on a mark-to-market basis.

You’d think that would be front page news. But no one ever talks about it. No one even wants to talk about it.

Of course plenty of people will insist that it doesn’t matter, just like they insist that the national debt doesn’t matter.

But this is yet more absurd fantasy; just look at the facts:

• The FDIC’s published reports show more than $500 billion in unrealized losses in the US banking sector.

• The Federal Reserve, which in theory would bail out the banking sector, is itself insolvent by $900 billion.

• The US government, which would bail out the Fed, is insolvent by more than $50 trillion.

It’s just debt on top of debt on top of debt. Losses on top of losses on top of losses.

Just like the BTFP, everyone wants to play a giant game of ‘make believe’ and pretend that the Fed’s solvency is not a problem, that the US government’s enormous debt is not a problem.

On the contrary, they’re huge challenges. And the ultimate consequence is going to be the loss of the US dollar as the global reserve currency.

Tyler Durden Mon, 04/29/2024 - 17:00

Biden Rejects World Court Investigation Of Israel As Netanyahu Arrest Warrant Looms

The Biden administration is reportedly in the midst of a diplomatic full court press in efforts to prevent the International Criminal Court (ICC) from issuing arrest warrants for top Israeli officials, including Prime Minister Benjamin Netanyahu. The ICC is also expected to issue warrants for Defense Minister Yoav Gallant and Israel Defense Forces chief of staff Herzi Halevi, in connection with alleged large-scale human rights abuses related to the war in Gaza.

Axios reports Monday that the Israeli government is growing "increasingly concerned" over the possible action, while Walla news has written that Netanyahu is "under unusual stress" over what will be a largely symbolic, albeit still deeply embarrassing reputational black eye for his government at a moment he's facing immense domestic pressure at home to bring back the hostages.

Via AFP

The Israeli leader has personally asked President Biden to intervene. Axios details of the call: "The officials said Netanyahu expressed his concern to Biden in a phone call on Sunday, where the two leaders also discussed hostage negotiations, Israel's defense against Iran's missile attack, and the need to increase humanitarian aid to Gaza, according to a White House readout."

The White House has issued a fresh statement Monday stressing that the United States "does not support" the ongoing ICC investigation into Israeli war crimes.

The ICC's investigation actually goes all the way back to the 2014 Israel-Hamas war. But also following Oct.7 and Israel's invasion of Gaza, South Africa brought a fresh war crimes case - which has gained the support of countries like Turkey, but especially a number of countries of the Global South.

The Hague-based court in March 2023 issued an arrested warrant for Russian President Vladimir Putin over the Ukraine war, so this means that ironically Netanyahu could soon be a "wanted" man right alongside Putin.

On Friday Netanyahu defiantly said, "We will never stop defending ourselves. Whereas decisions of the court in the Hague will not affect Israel’s actions, they would be a dangerous precedent threatening the soldiers and officials of any democracy fighting criminal terrorism and aggression," in a message on X.

Israel is now warning that an ICC warrant could blow up a hostage deal being mediated by Egypt and Qatar:

If the International Criminal Court does issue arrest warrants for Israeli leaders, continues the official, it will lead to “a wave of antisemitism around the world” that could blow up a potential hostage deal. This is not an Israeli threat to walk away from talks in the case of an ICC decision, explains the official, but reflects Israel’s belief that international pressure on Israel will remove pressure on Hamas to make compromises necessary for a deal.

Reacting to the US State Department report that found five IDF units guilty of “gross human rights violations,” the official says that Jerusalem “categorically rejects any attempts to harm the IDF and Israel’s right to defend itself.”

In January, the ICC issued an interim ruling which stated that South Africa's case has legal merit and can proceed while ordering Israel to take all measures capable to prevent acts of Genocide against Palestinians in the Gaza Strip. 

Ultimately the ICC has no enforcement power on its own, but can call on member states to arrest leaders on its blacklist if they ever travel through their territories. Putin back in August canceled an in-person trip to South Africa for a BRICS summit precisely to avoid a potential embarrassing situation at a moment Pretoria was being pressured to act.

Tyler Durden Mon, 04/29/2024 - 16:40

"We Live In An Age Of Full-Spectrum Deception"

Authored by James Howard Kunstler via Kunstler.com,

Pep Talk On A Dark Day

“We live in an age of full spectrum deception.”

- Edward Dowd

You realize, don’t you, that what’s going on in our country is the collapse not just of an empire, or an economy, but a comprehensive paradigm of human progress. The hallmark of post-war life in Western Civ was supposed to be a return to sanity after the mid-twentieth century fugue of mass psychotic violence. The wish for just and rational order was not entirely pretense. But that was then. Now that we are going medieval on ourselves, the not-so-ironic result will be our literally going medieval, sinking back into a pre-modern existence of darkness, superstition, and penury, grubbing for a mere subsistence in the shadow of scuffling hobgoblins, our achievements lost and forgotten.

What’s most appalling is that our governing apparatus is visibly willing that to happen. When Barack Obama warned America to not underestimate Joe Biden’s ability to fuck things up, was that some kind of joke? After all, it was Mr. Obama and his fellow blobsters — the cabal of Intel spooks, covert Marxist bureaucrats, lawfare ninjas, globalist megalomaniacs, post-liberal think tankers, weapons grifters, degenerate billionaires, and assorted mentally-ill camp followers — who inflicted Joe Biden on the body politic. And then ran him on the country like some demon algorithm designed to wreck the USA as fast as possible.

The source of anguish in all that is the struggle to understand why they would want that to happen. What debauched sense of history would drive anyone to such lunatic desperation? It’s a cliché now to say that the Democratic Party has turned its traditional moral scaffold upside down and inside out. It acts against the kitchen table interests of the working and middle classes. It’s against civil liberties. It demands mental obedience to patently insane policy. It’s avid for war, no matter how cruelly pointless. It’s deliberately stirring up racial hatred. It despises personal privacy. It feeds a rogue bureaucracy that has become a veritable Moloch, an all-devouring malevolent deity. And now, rather suddenly, it aligns itself with a faction that seeks to exterminate the Jews.

And how did the opposition to that epic divergence into bad faith turn so flabby? How did the Republican Party roll over and wheeze so feebly while the FBI ran amok swatting grandmothers in dawn raids, and the US attorney general made justice a whore, and a Republican Congress allowed the Frankenstein agency of Homeland Security to flood the country with its enemies and give them gobs of operational cash? If Mr. Trump was unappetizing to them as a leader, why were they unable to produce an alternative figure of standing and stature at least equally resolute? They look like traitors and cowards.

For the moment, the country lies mired, inert, and demoralized in the face of in those terrible mysteries. But events are still tending and the hidden hand of emergence still operates backstage, preparing surprises for us. You are necessarily aware that the center did not hold. It’s even hard to locate where the center used to be with the action so heavy on the far-out margins. You’re watching drag queens importune young children to shove all the Jews into the sea. And the kids are sitting next to their mommies. What happened to the mommies’ brains that permits them to think this spectacle is okay? How will the mommies ever get their minds right?

In some quarters, a great rage is building. Not a few resent the overthrow of common sense, common law, and common decency. You better believe they will be aiming to do something about it. They will stand up for their dignity, their culture, their history. Virtue isn’t dead; it’s just broke down on a lonely highway waiting to hitch a ride back to where the lights are still on. Don’t forget that this really is the land of the free and the home of the brave.

Meanwhile, prepare for action. It’s obvious that the enemies of the people don’t intend to rest. They are going to try to play out this string to the last move because otherwise a lot of them will be going to jail, or might even hang for their wickedness. Once they turned criminal, there was no turning back. They have dishonored themselves and they’re trying to dishonor their country.

It’s true nonetheless that we’re moving into a new disposition of the human project. It’s going to be smaller and leaner, and not nearly as complex as the tottering Rube Goldberg apparatus we’re currently trapped in. We don’t know yet what the shape and texture of that America is going to be. As the sage Yogi Berra observed, our whole future is ahead of us. If you’re not among the insane, have faith. We’ll get there and everything is going to be all right.

*  *  *

Support his blog by visiting Jim’s Patreon Page or Substack

Tyler Durden Mon, 04/29/2024 - 16:20

Yen & Yellen Yank Stocks, Bonds, & The Dollar On Otherwise Quiet Day

A quiet micro and macro-economic day was dominated by Treasury's refunding size estimates (which spoiled all the fun by coming in less than some hyperbolic expectations a but generally in line with expectations), and Japanese intervention the FX markets.

As Goldman's trading desk noted, a quiet start to a busy week with the S&P trading within a 15 handle range (volumes -11% vs 20dma) and largely traded in a vacuum for the majority of the session as the market awaits macro (QRA, ISM, ECI, FOMC, JOLTS, NFP) and micro (24% of SPX reports including AAPL, AMZN and AMD) catalysts slated for later this week.

And that prompted a rapid kneejerk down-draft in stocks shortly after 3pmET (led by Small Caps which had been outperforming). However, that didn't last long as traders quickly remembered that the buyback window reopens later this week. All the majors ended higher on the day with Small Caps leading and the S&P and Nasdaq lagging. By the last few minutes, all the QRA anxiety was long-gone and stocks were surging back towards the highs...

The Dow and Russell 2000 both found support at their 100DMA on the initial QRA dip and bounced right off it...

'Most Shorted' stocks dumped on the QRA news, after extending the large two-day squeeze from Thurs/Fri. The basket still ended green on the day...

Source: Bloomberg

TSLA made headlines with news from China that the carmaker's full-self-drive will be cleared for us, rallying 15% for its best day in three years...

Yields also kneejerked higher on the QRA news but not enough to ruin the day, with yields down 2-4bps across the curve (with the belly outperforming)...

Source: Bloomberg

By the end of the day, yields were at the low of the day and stocks at the high of the day...

Source: Bloomberg

Elsewhere the reaction was muted as traders tried to figure out what the QRA news meant.

The dollar index was dominated by Japanese officials fiddling while Tokyo burns...

Source: Bloomberg

...after yen plunged overnight to its 1990 lows and the very visible hand stepped in...

Source: Bloomberg

Did Japan's "benign neglect" come to an end?

Source: Bloomberg

Gold was magnificently unmoved by the Borrowing and BoJ buggery, ending very modestly lower...

Source: Bloomberg

Oil ended lower on the day, legging down three times, interestingly in tune with Japan's intervention...

Source: Bloomberg

Bitcoin was lower today after a modest rollercoaster over the weekend. Notably BTC found support at $62,000 and bounced this afternoon...

Source: Bloomberg

Finally, fear is being rapidly rinsed out of the markets once again...

Source: Bloomberg

...and financial conditions will start easing...

Source: Bloomberg

...too much (again) for Powell's liking (even in an election year)

Tyler Durden Mon, 04/29/2024 - 16:00

Treasury Estimates Borrowing Needs For Q3 Which Sneak Below The Median Estimate

Ahead of today's big event - the Treasury borrowing estimates publication - we said that contrary to hyperbolic expectations of $300BN in revised Q2 funding needs and a whopping $1.2 trillion in Q3, the most likely range of Q2 and Q3 borrowing estimates is as follows: a ranges of $120bn to $240bn for Q2, and $650bn to $850bn for Q3, to wit:

Well, at exactly 3:00pm the Treasury published the numbers, and while we were almost spot on correct, they did come on the high end of our forecast range, specifically:

• Q2 funding needs were revised higher to $243 billion (just above the upper end of our range of $240 billion) from $202 billion projected last quarter.  According to the Treasury, the borrowing estimate was "$41 billion higher than announced in January 2024, largely due to lower cash receipts, partially offset by a higher beginning of quarter cash balance."
• Q3 funding needs (released for the first time) were estimated at $847 billion, just below the upper end of our range of $850BN.

But wait, there's more, because while the Treasury projects $750BN cash balance at end of Q2, this number rises to $850BN at end of Q3, and since the streetwide estimate for Q3 end of quarter cash was $750BN, this suggests that the real funding needs (on an apples to apples basis) is actually $747BN, which is below the median Wall Street estimate.

Source: Treasury

Bottom line: amid some ridiculous speculation and even conspiracy theories that the BOJ intervened today because it was expecting a surge in funding needs, the Treasury reported numbers that came in in line with expectations for Q2, and actually below the estimate for Q3, which is precisely what we said, because the number is driven not so much by financial but by political considerations.

The real question should be not what the Treasury projects for Q2 and Q3, but Q4, which is after the election, and when all the lipstick on this pig will finally wash off.

Tyler Durden Mon, 04/29/2024 - 15:25

"He's Back": Morgan Stanley's Adam Jonas Say Musk's China Trip Is "Gesture Of Tesla Commitment"

Tesla bears are getting their nuts squeezed in the US cash session Monday after Elon Musk's surprise weekend trip to Beijing landed the EV carmaker a deal with tech giant Baidu to roll out its driver-assistance system, known as "Full Self-Driving," or FSD, in the world's largest car market.

Earlier, we noted Wedbush Securities senior analyst Dan Ives' comment on Musk's trip as a "watershed moment" for Tesla and "this could open up FSD in China, which I view as unlocking what really could be the golden opportunity for them." 

Now Morgan Stanley's Adam Jonas, one of Tesla's most prominent Wall Street bulls, states in bold print on the top of his note to clients today, "He's back." 

"Elon Musk's visit to China means far more than seeking approval for self driving tech on Chinese roads. Whether Tesla's CEO is sleeping on a floor or on a plane... the message is clear: he's back," Jonas said. 

Jonas wrote there had been mounting investor concerns about whether Musk was "all in" on Tesla, considering the billionaire spends some of his precious time (only appears) on an anti-woke crusade on his X platform. The analyst said Musk's weekend trip to China was a "gesture of commitment" to Tesla:

• Commitment. Investor concerns around whether Elon Musk was 'all in' on Tesla have been weighing heavily on the stock since the compensation package was rejected by Delaware judge. Even the smallest gesture of commitment (an unannounced trip to Beijing) has elevated meaning here, combating concerns over Musk's commitment to Tesla relative the broader Musk ecosystem of companies (SpaceX/X.AI/etc.).

Jonas made a very interesting point about Musk's national security clearance, saying it must be "higher than that of the typical American CEO due to his control of SpaceX and the range of missions it conducts with NASA, Space Force and the broader DoD." 

He added that China's "blessing" of an FSD rollout in the country "seems to address embedded fears of Tesla's China profit (we estimate China accounts for as much as one half of profit)." 

Jonas reiterated an overweight rating on Tesla with a $310 price target. 

Here's how the analyst arrived at the $310 figure: 

He also touched on notable upside and downside risks to the future outlook. 

Musk's timing of the China trip comes as Tesla's short interest hit a three-year high, or about 3.84% of the float short, equivalent to about 106 million shares. 

For all those technicians out there... 

Meanwhile, on X, Musk posted this image...

pic.twitter.com/eygrdIhWZz

— Elon Musk (@elonmusk) April 29, 2024

There's nothing like a good ole' squeeze. 

Tyler Durden Mon, 04/29/2024 - 14:55

'Crying Out For Justice': Female Athletes Sue NCAA Over "Dangerous" Transgender Policies

Authored by Liliana Zylstra via The College Fix,

Female college athletes are “crying out for justice,” safety, and privacy in a lawsuit challenging the National Collegiate Athletic Association’s transgender policies, their attorney told The College Fix in an exclusive interview.

Attorney William Bock III said the 16 plaintiffs, all current or former collegiate athletes, are challenging the NCAA and the University of Georgia for violating Title IX’s provisions for equal opportunity in sports by allowing males to compete in the women’s category.

The lawsuit also alleges female athletes’ right to bodily privacy under the 14th Amendment was violated.

According to the suit, the NCAA authorized “naked men possessing full male genitalia to disrobe in front of non- consenting college women and creating situations in which unwilling female college athletes unwittingly or reluctantly expose their naked or partially clad bodies to males.”

Bock told The Fix in a recent phone interview that many athletes sent letters sharing their concerns about these policies to the NCAA, but they were ignored.

“They’re crying out for justice and the NCAA won’t even talk to them,” he said.

“It isn’t even willing to respect their concerns enough to give them an audience. So it became clear that the only thing that would have a chance of changing their policy is filing a lawsuit.”

Bock told The Fix, “The NCAA is so committed to radical gender ideology that they have completely lost concern for women’s rights.”

“It’s very clear that the NCAA violated the law,” he said.

Bock formerly worked as general counsel for the U.S. Anti-Doping Agency and served as the lead attorney for USADA in the case against professional cyclist Lance Armstrong.

“The advantage that Lance Armstrong got through doping pales in comparison to the advantage that male athletes have when competing against females in collegiate sports,” he said.

“The NCAA suggests that one can reduce or eliminate the performance gap [between men and women] by suppressing testosterone and that’s ludicrous from a matter of science,” Bock told The Fix.

Bock also served on the NCAA Committee on Infractions for several years. However, he quit earlier this year after expressing concerns about transgender athletes like former University of Pennsylvania swimmer William “Lia” Thomas, a male who identifies as female who won an NCAA Division I championship on the women’s team in 2022.

Safety is among female athletes’ biggest concerns, Bock said. “The NCAA is not in many instances even telling women that they’re competing against a male. And that’s dangerous … in a contact sport where you can get a concussion.”

Female athletes speak out

Two of the plaintiffs also spoke with The Fix in a phone interview about their concerns for safety, fairness, and the overall future of women’s sports.

Ainsley Erzen (pictured right), a soccer and track athlete at the University of Arkansas, said, “We want the stories that people are seeing now to be the last ones. We don’t want the generations in the future to deal with that.”

Erzen said she and her fellow athletes are fighting so women will have the opportunities to set records, win championships and earn college scholarships.

“What kind of message are we sending to women — but especially to young girls — when we tell them that their safety doesn’t matter, their rights don’t matter, their opportunities don’t matter, their futures don’t matter?” she told The Fix.

Kaitlynn Wheeler (pictured left), a former swimmer for the University of Kentucky, said the protection of women’s sports is a ”common-sense issue.”

Wheeler told The Fix speaking up is important “because the overwhelming majority of people are on our side.”

“This lawsuit is really not about hurting anyone. It’s about helping the women who have been hurt and preventing it from happening in the future. It’s about ensuring fair, equal, and safe competition and I think that just about everyone should want that,” she said.

An NCAA spokesperson declined to comment on the lawsuit in response to a request from The Fix.

“College sports are the premier stage for women’s sports in America, and while the NCAA does not comment on pending litigation, the Association and its members will continue to promote Title IX, make unprecedented investments in women’s sports and ensure fair competition in all NCAA championships,” the association said in an emailed statement.

Others involved in the lawsuit include Riley Gaines, a former 12-time All-American swimmer at the University of Kentucky and current advocate for women’s sports. The Independent Council on Women’s Sports is supporting the athletes’ case.

Tyler Durden Mon, 04/29/2024 - 14:35

Alvin Bragg And The Art Of Not Taking Law Too Seriously

Authored by Jonathan Turley,

Rube Goldberg, the inventor of bizarre machines that performed simple tasks through dozens of mechanical steps, was once asked about the essence of creating such fantastic, illogical machines. He replied “An inventor is simply a fellow who doesn’t take his education too seriously.”

After the first week of testimony, the trial of Donald Trump is increasingly looking like a mad prosecution machine by lawyers who don’t take law too seriously.

I have long been a critic of the Bragg indictment as legally incomprehensible. However, I must confess that after a week of testimony, some of us have developed a weird fascination with the utter madness of the scene unfolding in Manhattan. It was not until the second week of proceedings that Bragg even revealed part of his theory of criminality. For months, even liberal legal analysts have expressed dismay that Bragg’s indictment had not clearly stated what specific crime that Trump sought to conceal by allegedly misrepresenting payments to former adult film actress Stormy Daniels.

The premise of the prosecution always had that Rube Goldberg feel. It was so implausible as to be impossible. After all, the base charge is a simple misdemeanor under a New York law against falsifying business records. Trump paid Cohen hundreds of thousands of dollars in legal fees and costs, including $130,000 for a nondisclosure agreement with Daniels.

Bragg is vague as to what should have been noted on the ledgers for the payments. It is not even clear if Trump knew of this expense’s designation as a legal cost.

However, it really did not matter, because the misdemeanor has been as dead as Dillinger for years.

The dead misdemeanor was shocked back into life by claiming that it was committed to conceal another crime. Under New York’s penal law, section 175.10, it can be a felony if the “intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.”

For months, Bragg has suggested that the “other crime” was the violation of federal election laws, suggesting that the payment was really a campaign contribution Trump made to himself that was not properly recorded. The problem is that the Justice Department investigated that crime already and decided that it was not a viable criminal claim. It did not even seek a civil fine.

Bragg’s predecessor and Bragg himself rejected the theory behind this prosecution.

But then a pressure campaign led Bragg to green-light a prosecution roughly eight years after the 2016 campaign.

In the trial, Bragg added a type of frying pan flip to his Rube Goldberg contraption by arguing that Trump may have been trying to hide his violation of another dead misdemeanor under yet another New York election law prohibiting “conspir[ing] to promote or prevent the election of any person to a public office by unlawful means.”

In other words, Trump was conspiring to try to win his own election. This even though the notations were made after he had won the election, and even though Trump was running for a federal, not a state office.

So again, what is the unlawful means?

The machine then flips you back to the beginning — seeking “to influence the election.” There are still the federal election violations, but that theory was rejected after an investigation. And if it were a real crime, it would be brought by federal, not state prosecutors.

There are also the misdemeanor falsifications of business records under section 175.05. So Bragg would use one dead misdemeanor to trigger a second dead misdemeanor to create a felony on the simple notations used to describe payments for a completely legal nondisclosure agreement.

This circular reasoning is already incredibly creative, but the actual evidence used to propel this ball through the machine is even wackier. Bragg decided to start with a witness to discuss an affair that is not part of the indictment. David Pecker, former publisher of the National Enquirer tabloid, had supposedly been paid to kill a story of a Trump affair with a different woman, Karen McDougal, a former Playboy model.

Pecker proceeded to make the prosecution case even more convoluted. On cross examination, Pecker admitted that had Trump told him that he knew nothing about any reimbursement to Cohen for any hush money, that he had killed or raised such stories with Trump for decades before he ever announced for president and that he had also killed stories for other celebrities and politicians, including Arnold Schwarzenegger, Tiger Woods, Rahm Emanuel and Mark Wahlberg.

He also testified that Trump told him that paying hush money never really worked because stories still get out. And he understood that Michael Cohen was working as Trump’s personal counsel, not his campaign counsel. Finally, he testified that Trump had no direct involvement in arranging any payments to McDougal.

Pecker added that Bragg’s star witness, Michael Cohen, commonly exaggerated and often became loud and argumentative. Cohen will effectively ask the jury to send his former client to jail for following his own legal advice.

Bragg will now call to the stand Cohen, whom a judge just recently denounced as a serial perjurer who is continuing to game the system.

Even as legal experts debate what crime can be found in any of these flips and dips, Judge Juan Merchan seems content to listen as this weird machine bleeps and whirls in his courtroom.

That is why Bragg has created the perfect Rube Goldberg attraction. The artist himself explained his unlikely success by saying, “It just happened that the public happened to appreciate the satirical quality of these crazy things.”

In New York, that appreciation has moved from the satirical to the legal.

Tyler Durden Mon, 04/29/2024 - 13:40

Supreme Court Rejects Elon Musk's "Free Speech" Appeal In SEC Case

Another day, another chapter in the Elon Musk vs. SEC saga.

The US Supreme Court declined to hear Elon Musk's appeal regarding his ongoing "Twitter sitter" case, Bloomberg reported on Monday, keeping Musk's agreement with the SEC to have a company lawyer approve his social media posts in place.

Musk, without success, had argued that the 2018 agreement infringed upon his constitutional right to free speech.

The decision marks the latest development in Musk's lengthy, ongoing dispute with the SEC, which started after he tweeted in August 2018 that he had "funding secured" for a potential $80 billion take-private deal for Tesla.

As a result, Tesla stock rocketed higher the day of. 

Following Musk's tweet, the SEC filed a lawsuit alleging shareholder deception and, shortly after, Musk settled with the SEC, agreeing to step down as Tesla chairman and pay a $20 million fine.

In 2021, Musk reopened the dispute by conducting a Twitter poll regarding selling 10% of his stock. This prompted the SEC to issue subpoenas to Musk and Tesla. Musk then sought to annul his pre-screening agreement, but his arguments were dismissed by a federal appeals court last year.

Musk’s lawyers had argued to the Supreme Court that the agreement was a “quintessential prior restraint that the law forbids.”

They said in their appeal: “The pre-approval provision at issue continues to cast an unconstitutional chill over Mr. Musk’s speech whenever he considers making public communications.”

In its brief, the SEC responded: “This court has consistently held that, in resolving litigation, parties may choose to waive even fundamental constitutional rights."

Tyler Durden Mon, 04/29/2024 - 13:20

Early Tests Find Pasteurization Killed Bird Flu In Milk: FDA

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Results from early testing show that pasteurization killed highly pathogenic avian influenza in milk, the U.S. Food and Drug Administration (FDA) says.

Containers of milk in El Paso, Texas, on March 17, 2021. (Jose Luis Gonzalez/Reuters)

Results from “an initial limited set of geographically targeted samples” show that “pasteurization is effective in inactivating” the influenza, commonly known as the bird flu, the FDA said in an April 26 update.

The FDA gathered samples from grocery stores with confirmed cases of the flu in cattle. The agency has said that one in five tested positive for avian influenza, but stressed that polymerase chain reaction (PCR) testing can return positive due to residual fragments.

“This additional testing did not detect any live, infectious virus. These results reaffirm our assessment that the commercial milk supply is safe,” the regulatory agency stated.

Testing of samples of powdered infant formula sold at stores also returned negative.

Many infectious disease experts and government officials have said they believe the pasteurization process will inactivate the virus, also known as avian influenza.

“I’m not worried about the milk itself,” said Samuel Alcaine, an associate professor of food science at Cornell University. “It does indicate that the virus is more widespread among dairies than we had previously thought.”

The FDA, which has refused to say how many milk samples tested positive, the sources of the samples that tested positive, and what other products were tested outside milk and formula, is in the process of conducting additional testing. That testing could find milk with live virus intact, agency officials acknowledged.

“The FDA is further assessing retail samples from its study of 297 samples of retail dairy products from 38 states,” it said. “All samples with a PCR positive result are going through egg inoculation tests, a gold-standard for determining if infectious virus is present. These important efforts are ongoing, and we are committed to sharing additional testing results as soon as possible. Subsequent results will help us to further review our assessment that pasteurization is effective against this virus and the commercial milk supply is safe.”

The bird flu has traditionally spread in birds. Cases of H5N1 in cattle began being confirmed in the United States earlier this year. The virus has since been detected in herds in nine states. A herd in Colorado tested positive on April 25, the U.S. Department of Agriculture said.

One person in Texas has had a confirmed case this year and survived the infection.

Worldwide, 28 cases of H5N1 have been reported to the World Health Organization since the beginning of 2021, including the recent case in Texas and a case in the United States in 2022. Some of the patients survived, while others died.

Authorities say that cow-to-cow transmission has occurred. Major questions that remain unanswered include the method of that transmission and whether cows have spread the virus back to birds.

The White House has said that it is monitoring the avian flu situation, launching an “immediate response team” to ensure the safety of the nation’s food supply, monitor trends to mitigate risk and prevent the virus’ spread.

Starting on Monday, the U.S. Department of Agriculture will require dairy cows to test negative for bird flu before they are moved across state lines.

In addition to Colorado, infections among cattle have been confirmed in Texas, Kansas, Michigan, Ohio, Idaho, New Mexico, North Carolina, and South Dakota.

In Indiana, officials are considering potential restrictions, such as testing within the state, even though there are no confirmed cases, according to Bret Marsh, the state veterinarian.

“We’re taking a look here at the state level to see what we may need to do,” he said on a conference call.

Reuters contributed to this report.

Tyler Durden Mon, 04/29/2024 - 11:00

Key Events This Extremely Busy Week: Fed, Treasury Refunding, Jobs, JOLTS, ISM And Tons Of Earnings

As DB's Jim Reid notes, with just two days left in a rollercoaster April for markets - and FX - last week actually saw the best week for the S&P 500 (+2.67%) and NASDAQ (+4.23%) since November, following several weeks of declines, as earnings gave markets a boost even if the US inflation data was on net worrying. And while the month is almost over, the new week is just starting and as Reid notes, it's shaping up an exceptionally busy week of important events.

The FOMC on Wednesday is the obvious highlight of the week, but we also have payrolls on Friday to look forward to. DB expect a more hawkish-leaning Fed this week. While our economists expect the Committee will maintain an easing bias, they do expect the statement and press conference to echo Chair Powell’s view that firmer inflation prints suggest it will take longer to gain confidence about disinflation. The press conference will be fascinating to see the nuances in Powell’s responses as he justifies a likely unchanged easing bias, even if the rhetoric is more hawkish, in the face of rising inflation.

In terms of the jobs report on Friday, our US economists see payrolls gaining +240k in April (consensus +250k), down from +303k in March. The consensus expects the unemployment rate and the hourly earnings growth rate to stay at 3.8% and +0.3% MoM, respectively, although DB expects the former to tick up a tenth. Overall the market sees a solid report.

Other key data in the US includes consumer confidence tomorrow, the manufacturing ISM, JOLTS, and ADP on Wednesday, and the services ISM on Friday. We also see the latest US Treasury quarterly refunding announcement on Wednesday, after the borrowing estimate is due today. This was a big pivot point for global markets back in August (negative) and October (positive) but since then a commitment not to increase auction sizes has reduced its importance.

Finally in the US, earnings season maintains its peak pace as 174 report in the S&P versus 180 last week with Amazon (Tuesday) and Apple (Thursday) the obvious highlights. Meanwhile, 66 Stoxx 600 companies will report this week.

In Europe, preliminary CPI reports for Germany and Spain today, and the Eurozone tomorrow will have a lot of significance for the June ECB meeting and whether we will see the first cut. Our European economists preview the release here. For the Eurozone, they expect the headline HICP to fall one-tenth to 2.31% yoy, its lowest value since August 2021 and see core inflation slowing further to 2.45% yoy, 0.50pp lower than in March 2024. Staying in Europe the latest GDP data for Germany, France, Italy and the Eurozone are due tomorrow. In Asia, various China PMIs (tomorrow) will be a big focus and in Japan, several key economic indicators are also due, including industrial production and labour market data tomorrow.

Day-by-day calendar of events:

Monday April 29

• Data : US April Dallas Fed manufacturing activity, Germany April CPI, Eurozone April services, industrial and economic confidence
• Earnings : PetroChina, China Construction Bank, BYD, NXP Semiconductors, Domino's Pizza, Paramount Global
• Auctions : US Treasury borrowing estimates

Tuesday April 30

• Data : US Q1 employment cost index, February FHFA house price index, April MNI Chicago PMI, Dallas Fed services activity, Conference Board consumer confidence, UK March net consumer credit, mortgage approvals, M4, April Lloyds business barometer, China April official PMIs, Caixin manufacturing PMI, Japan March retail sales, job-to-applicant ratio, jobless rate, industrial production, housing starts, Italy Q1 GDP, March hourly wages, April CPI, Germany Q1 GDP, April unemployment claims rate, France Q1 GDP, March PPI, consumer spending, April CPI, Eurozone Q1 GDP, April CPI, Canada February GDP, New Zealand Q1 jobs report , Denmark March unemployment rate
• Central banks : BoE's APF report
• Earnings : Amazon, Eli Lilly & Co, Samsung, Coca-Cola, AMD, McDonald's, Stryker, Starbucks, Mondelez, Mercedes-Benz Group, Volkswagen, PayPal, adidas, Diamondback Energy, Restaurant Brands, Pinterest, Vonovia, Covestro, Caesars Entertainment

Wednesday May 1

• Data : US March JOLTS report, construction spending, April total vehicle sales, ISM index, ADP report, Canada April manufacturing PMI
• Central banks : Fed's decision
• Earnings : Mastercard, Qualcomm, Pfizer, KKR, GSK, Marriott, Estee Lauder, DoorDash, Corteva, Haleon, Devon Energy, Barrick Gold, eBay, Albemarle, Etsy
• Auctions : US quarterly refunding announcement

Thursday May 2

• Data : US Q1 unit labor costs, nonfarm productivity, March trade balance, factory orders, initial jobless claims, Japan April monetary base, consumer confidence index, Italy March PPI, April manufacturing PMI, new car registrations, budget balance, Canada March international merchandise trade, Switzerland April CPI
• Central banks : BoJ minutes of the March meeting
• Earnings : Apple, Novo Nordisk, Shell, Linde, ConocoPhillips, Booking, Cigna, Regeneron, Apollo, Pioneer, Universal Music Group, Block, Ares, Moderna, Blue Owl, Vestas, AP Moller - Maersk, Orsted, ArcelorMittal, Live Nation Entertainment, DraftKings
• Other : UK local elections, OECD economic outlook

Friday May 3

• Data : US April jobs report, ISM services, UK April official reserves changes, Italy March unemployment rate, France March industrial production, budget balance, Eurozone March unemployment rate, Canada April services PMI, Norway April unemployment rate
• Earnings : Hershey, Daimler Truck, Cheniere Energy

* * *

Looking at just the US, Goldman writes that the key economic data releases this week are the Employment Cost Index on Tuesday, ISM manufacturing and JOLTS job openings on Wednesday, and the employment report on Friday. The May FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. Treasury will release its Q2 financing estimates on Monday and the Quarterly Refunding Statement on Wednesday.

Monday, April 29

• 10:30 AM Dallas Fed manufacturing activity, April (consensus -11.3, last -14.4)

Tuesday, April 30

• 08:30 AM Employment cost index, Q1 (GS +0.9%, consensus +1.0%, last +0.9%): We estimate the employment cost index rose by 0.9% in Q1 (qoq sa), which would lower the year-on-year rate by two tenths to 4.0% (nsa yoy). Our forecast reflects deceleration in the Atlanta Fed wage tracker and in average hourly earnings of production and nonsupervisory workers. We also expect a slower pace of ECI growth among unionized workers, following the 1.7% spike in Q4 (SA by GS, not annualized). On the positive side, we assume ECI benefit growth picks back up to 0.9% (vs. 0.7% in Q4), reflecting expanded benefit offerings at the start of the year.
• 09:00 AM FHFA house price index, February (consensus +0.1%, last -0.1%)
• 09:00 AM S&P Case-Shiller 20-city home price index, February (GS +0.07%, consensus +0.10%, last +0.14%)
• 09:45 AM Chicago PMI, April (GS 46.4, consensus 45.0, last 41.4): We estimate that the Chicago PMI rose by 5pt to 46.4 in April, reflecting the rebound in global manufacturing activity.
• 10:00 AM Conference Board consumer confidence, April (GS 104.3, consensus 104.0, last 104.7

Wednesday, May 1

• 08:15 AM ADP employment change, April (GS +185k, consensus +180k, last +184k): We estimate a 185k rise in ADP payroll employment in April, reflecting a solid underlying pace of job growth and a possible boost from residual seasonality: the ADP measure has picked up in April relative to Q1 in four of the last six years excluding 2020.
• 09:45 AM S&P Global US manufacturing PMI, April final (consensus 49.9, last 49.9)
• 10:00 AM Construction spending, March (GS +0.8%, consensus +0.3%, last -0.3%)
• 10:00 AM JOLTS job openings, March (GS 8,650k, consensus 8,680k, last 8,756k): We estimate that JOLTS job openings fell by 0.1mn to 8.65mn in March, reflecting the pullback in online job postings.
• 10:00 AM ISM manufacturing index, April (GS 50.8, consensus 50.1, last 50.3): We estimate the ISM manufacturing index rose by 0.5pt to 50.8 in April, reflecting the rebound in global manufacturing activity. Our manufacturing tracker rose 1.5pt to 49.9.
• 02:00 PM FOMC statement, April 30-May 1 meeting: As discussed in our FOMC preview, the upside inflation surprise over the last three months has delayed the first cut and narrowed the path for the FOMC to cut at all this year. We have not changed our big picture inflation view because the surprises look idiosyncratic, the categories that are still hot reflect lagged catch-up rather than current cost pressures, and the key pillars of the disinflation narrative remain intact. We expect the next few inflation reports to be softer and have therefore stuck with our forecast of cuts in July and November, but even moderate upside surprises could delay cuts further.
• 05:00 PM Lightweight motor vehicle sales, April (GS 15.8mn, consensus 15.7mn, last 15.5mn)

Thursday, May 2

• 08:30 AM Trade balance, March (GS -$69.0bn, consensus -$69.2bn, last -$68.9bn)
• 08:30 AM Nonfarm productivity, Q1 preliminary (GS +0.8%, consensus +0.8%, last +3.2%); Unit labor costs, Q1 preliminary (GS +3.5%, consensus +3.3%, last +0.4%): We expect nonfarm productivity growth of +0.8% (qoq saar) in the Q1 preliminary reading. We expect unit labor costs—compensation per hour divided by output per hour—to grow 3.5% in the Q1 preliminary reading, which would increase the year-over-year rate to +4.2%.
• 08:30 AM Initial jobless claims, week ended April 27 (GS 215k, consensus 210k, last 207k): Continuing jobless claims, week ended April 20 (consensus 1,798k, last 1,781k)
• 10:00 AM Factory orders, March (GS +1.6%, consensus +1.6%, last +1.4%); Durable goods orders, March final (consensus +2.6%, last +2.6%); Durable goods orders ex-transportation, March final (last +0.2%); Core capital goods orders, March final (last +0.2%);Core capital goods shipments, March final (last +0.2%)

Friday, May 3

• 08:30 AM Nonfarm payroll employment, April (GS +275k, consensus +250k, last +303k); Private payroll employment, April (GS +225k, consensus +198k, last +232k); Average hourly earnings (mom), April (GS +0.20%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), April (GS +3.95%, consensus +4.0%, last +4.1%); Unemployment rate, April (GS 3.8%, consensus 3.8%, last 3.8%); Labor force participation rate, April (GS 62.7%, consensus 62.7%, last 62.7%): We estimate nonfarm payrolls rose by 275k in April (mom sa), reflecting a favorable evolution in the April seasonal factors and a continued boost from above-normal immigration. Big Data measures were mixed but generally indicate a solid or strong pace of job gains, and our layoff tracker continues to indicate that the pace of layoffs is low. We estimate that the unemployment rate edged down but was unchanged on a rounded basis at 3.8%, reflecting a rise in household employment and flat-to-up labor force participation (at 62.7%). Foreign-born unemployment normalized in March, falling sharply by 261k (SA by GS) and limiting the scope for further declines in April. We estimate average hourly earnings rose 0.20% (mom sa), which would lower the year-on-year rate from 4.14% to 3.95%. Our forecast reflects waning wage pressures and a nearly 10bp drag from calendar effects (mom sa).
• 09:45 AM S&P Global US services PMI, April final (consensus 50.9, last 50.9)
• 10:00 AM ISM services index, April (GS 52.1, consensus 52.0, last 51.4): We estimate that the ISM services index rose 0.7pt to 52.1 in April. Our non-manufacturing survey tracker edged up 0.3pt to 52.1.
• 07:45 PM Chicago Fed President Goolsbee (FOMC non-voter) speaks: Chicago Fed President Austan Goolsbee will participate in a panel discussion at the Hoover Institution. A Q&A is expected. On April 19, Goolsbee said, "Right now, it makes sense to wait and get more clarity before moving [rates]." He added, "So far in 2024, that progress on inflation has stalled. You never want to make too much of one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed."
• 08:15 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak in a panel discussion at the Hoover Institution. Speech text and a Q&A are expected. On April 18, Williams said, "I definitely don’t feel urgency to cut interest rates...I think interest rates will need to be lower at some point, but the timing of that is driven by the economy." He added, "We have a strong economy… which means that the rates we have haven’t caused the economy to slow too much."

Source: DB, Goldman

Tyler Durden Mon, 04/29/2024 - 10:40

Biden Embraces G20-Proposed 2% Wealth Tax To Battle 'Racial Wealth Inequality'

Authored by Mike Shedlock via MishTalk.com,

Biden and Yellen support a global minimum tax on corporations. And a new wealth tax scheme is now in the works...

Watch Out for a Global Wealth Tax

The Wall Street Journal says Watch Out for a Global Wealth Tax

In our new socialist age, the demand to tax and redistribute income is insatiable. The latest brainstorm arrives in a proposal by four countries in the G-20 group of nations to impose a 2% wealth tax on the world’s billionaires.

“The tax could be designed as a minimum levy equivalent to 2% of the wealth of the super-rich,” write economic ministers of Germany, Spain, Brazil and South Africa in the Guardian. They say the levy would raise about $250 billion a year from some 3,000 billionaires and “would boost social justice and increase trust in the effectiveness of fiscal redistribution.” The countries plan to float this at the next G-20 meeting in June.

Presumably, the plan is to have the G-20 endorse the idea, including President Biden and Treasury Secretary Janet Yellen. Then negotiate a global tax deal that would wait until Democrats control all of the U.S. government to approve it, even if that takes many years.

That’s more or less what Ms. Yellen has done with her global minimum tax on corporations, and the four ministers are candid in saying this is their model. The wealth tax “is a necessary third pillar that complements the negotiations on the taxation of the digital economy and on a minimum corporate tax of 15% for multinationals,” the ministers write.

Ms. Yellen went along with the first two pillars, though as we’ve written they subject American companies to foreign tax raids of the kind the U.S. government has long opposed. An architect of the wealth tax idea is French socialist Gabriel Zucman, who was also behind Ms. Yellen’s global minimum tax. Once a global wealth tax is in place, you can be sure that billionaires won’t be the last target.

The Biden Administration is run by liberal internationalists who are happy to cede more power to multilateral institutions. President Biden is also campaigning on a wealth tax of his own that would impose the highest tax rates on Americans since before the Reagan tax reform. For this crowd, taxing American billionaires to redistribute income around the world is all too imaginable.

I used to dismiss ideas like this. Not anymore.

Letting the G-20 set US tax rates would be unconstitutional, but since when does Biden give a damn?

Besides, if Democrats get control of the Senate, House and White House they may try to pack the courts.

President Biden and Treasury Secretary Janet Yellen embrace a massive wealth tax redistribution scheme including taxes on unrealized gains in their Fiscal Year 2025 proposal.

Advancing Equity Through Tax Reform

Please consider Fiscal Year 2025 Revenue Proposals on Racial Wealth Inequality

The revenue proposals in the Administration’s Fiscal Year 2025 Budget (U.S. Treasury, 2024) would raise revenues, help ensure the wealthy and large corporations pay their fair share, expand tax credits for working families, and improve tax administration and compliance.

Research has demonstrated that wealth gaps are one of the primary “mechanisms for
perpetuating racial economic inequality”.

The millions of African Americans who left the southern United States to escape Jim Crow laws faced formal and informal employment, educational, and housing discrimination in destination cities in the North and West, including discriminatory “redlining” policies that started in the 1930s. In addition to funneling Black households into neighborhoods with lower home values, research has illustrated the extent to which redlining introduced place-based policies that affected the employment, education, and health of residents in those neighborhoods, all of which are directly related to income and wealth accumulation.

Biden’s Wealth Tax Remedy

• A minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth greater than $100 million.

• Requiring the wealthiest taxpayers to pay at least 25% of their total income in taxes will reduce economic disparities among Americans and raise needed revenue

• Inheritance Taxes: In 2019, thirty percent of White families received an inheritance compared to 10 percent of Black families and 7 percent of Hispanic families. The Administration’s Fiscal Year 2025 Budget would limit the duration of the GST [Generation Skipping Trust] tax exemption.

• The Budget would tax long-term capital gains and dividends at ordinary rates for taxpayers with more than $1 million in income, curtailing a tax expenditure the benefits of which accrue disproportionately to White families. It would also treat transfers of appreciated property as realization events and impose a minimum tax on the wealthiest families, while expanding tax credits that improve equity.

Biden Explanations

There’s still more if you dive into General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals

The explanations are 256 pages long. The following points do not represent all of the ways the administration is coming after you.

I have a 15-point synopsis at the end for those just wishing to see general ideas.

Here are some details.

• The child tax credit would be expanded through 2025, would permanently be made fully refundable, determined monthly, and paid out in advance. Reforms to the delivery of the credit would facilitate take-up. The earned income tax credit would also be expanded to cover more workers without children. The premium tax credit expansion first enacted in the American Rescue Plan Act of 2021 and extended in the Inflation Reduction Act of 2022 would be made permanent, making health insurance more affordable for millions of families.

• Raising the corporate income tax rate is an administratively simple way to raise revenue to pay for the Administration’s fiscal priorities.

• The proposal would increase the tax rate for C corporations from 21 percent to 28 percent. The effective global intangible low-taxed income (GILTI) rate would increase to 14 percent under the proposal.

• The proposal Revise the Global Minimum Tax Regime, Limit Inversions, and Make Related Reforms described later in this text would further increase the effective GILTI rate to 21 percent.

• A new 25- percent minimum income tax would be imposed on extremely wealthy taxpayers. For high income taxpayers, gaps in the law that allow some pass-through business owners to avoid Medicare taxes would be eliminated and Medicare tax rates would be increased. Additional loopholes, including the carried interest preference and the like-kind exchange real estate preference, would be eliminated for those with the highest incomes. Together these reforms would sharply curtail tax preferences that allow the wealthy to pay lower tax rates on their investment income and exacerbate income and wealth disparities, including by gender, geography, race, and ethnicity.

• The child tax credit would be expanded through 2025, would permanently be made fully refundable, determined monthly, and paid out in advance. Reforms to the delivery of the credit would facilitate take-up. The earned income tax credit would also be expanded to cover more workers without children.

• The proposal would increase the tax rate on corporate stock repurchases to 4 percent.

• The Secretary would be granted authority to promulgate any regulations necessary to carry out the purposes of the proposal, including (a) coordinating the application of the proposal with other interest deductibility rules, (b) defining interest and financial services entities, (c) permitting financial reporting groups to apply the proportionate share approach using the group’s net interest expense for U.S. tax purposes rather than net interest expense reported in the group’s financial statements, (d) providing for the treatment of pass-through entities, (e) providing adjustments to the application of the proposal to address differences in functional currency of members, (f) if a U.S. subgroup has multiple U.S. entities that are not all members of a single U.S. consolidated group for U.S. tax purposes, providing for the allocation of the U.S.

• The proposal would repeal: (a) the enhanced oil recovery credit for eligible costs attributable to a qualified enhanced oil recovery project; (b) the credit for oil and gas produced from marginal wells; (c) the expensing of intangible drilling costs; (d) the deduction for costs paid or incurred for any qualified tertiary injectant used as part of a tertiary recovery method; (e) the exception to passive loss limitations provided to working interests in oil and natural gas properties; (f) the use of percentage depletion with respect to oil and gas wells; (g) two year amortization of geological and geophysical expenditures by independent producers, instead allowing amortization over the seven-year period used by major integrated oil companies; (h) expensing of exploration and development costs; (i) percentage depletion for hard mineral fossil fuels; (j) capital gains treatment for royalties; (k) the exemption from the corporate income tax for publicly traded partnerships with qualifying income and gains from activities relating to fossil fuels; (l) the OSTLF and Superfund excise tax exemption for crude oil derived from bitumen and kerogenrich rock; and (m) accelerated amortization for air pollution control facilities.

• The eligibility of the petroleum taxes dedicated to the OSLTF and Superfund for drawback would be eliminated.

• An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms. Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.

• The proposal would expand the NIIT base to ensure that all pass-through business income of high-income taxpayers is subject to either the NIIT or SECA tax.

• The proposal would increase the additional Medicare tax rate by 1.2 percentage points for taxpayers with more than $400,000 of earnings. When combined with current-law tax rates, this would bring the marginal Medicare tax rate up to 5 percent for earnings above the threshold. The threshold would be indexed for inflation.

• The proposal would increase the top marginal tax rate to 39.6 percent. The top marginal tax rate would apply to taxable income over $450,000 for married individuals filing a joint return and surviving spouses, $400,000 for unmarried individuals (other than surviving spouses and head of household filers), $425,000 for head of household filers, and $225,000 for married individuals filing a separate return. After 2024, the thresholds would be indexed for inflation using the CPI-U, which is used for all current thresholds in the tax rate tables.

• Under the proposal, the donor or deceased owner of an appreciated asset would realize a capital gain at the time of the transfer. The use of capital losses and carry-forwards from transfers at death would be allowed against capital gains and up to $3,000 of ordinary income on the decedent’s final income tax return, and the tax imposed on gains deemed realized at death would be deductible on the estate tax return of the decedent’s estate (if any). Gain on unrealized appreciation also would be recognized by a trust, partnership, or other noncorporate entity that is the owner of property if that property has not been the subject of a recognition event within the prior 90 years.

• Preferential treatment for unrealized gains disproportionately benefits high-wealth taxpayers and provides many high-wealth taxpayers with a lower effective tax rate than many low- and middle-income taxpayers. Preferential treatment for unrealized gains also exacerbates income and wealth disparities, including by gender, geography, race, and ethnicity. The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by subtracting liabilities from assets) greater than $100 million.

• The proposal would require a high-income taxpayer with an aggregate vested account balance under tax-favored retirement arrangements that exceeded $10 million as of the last day of the preceding calendar year to distribute a minimum of 50 percent of that excess.

• The provision would prohibit a rollover to a Roth IRA of an amount distributed from an account in an employer-sponsored eligible retirement plan that is not a designated Roth account (or of an amount distributed from an IRA other than a Roth IRA) for a high-income taxpayer.

• Increase the maximum credit per child to $3,600 for qualifying children under age 6 and to $3,000 for all other qualifying children. Increase the maximum age to qualify for the CTC from 16 to 17. The proposal would make the CTC fully refundable, regardless of earned income.

• The first-time homebuyer credit would be equal to ten percent of the purchase price of a home, up to a maximum credit of $10,000. For multiple individuals who purchase a home together, the maximum credit would be allocated proportionally to ownership interest in the purchased home or in a manner determined by the Secretary in published guidance. The credit allocated to a married individual filing a separate return would not exceed $5,000. The home must be in the United States.

• Upon disposition, any measured gain on an item of section 1250 property held for more than one year would be treated as ordinary income to the extent of the cumulative depreciation deductions taken after the effective date of the provision. Depreciation deductions taken on section 1250 property prior to the effective date would continue to be subject to current rules and recaptured as ordinary income only to the extent that such depreciation exceeds the cumulative allowances determined under the straight-line method. Any gain recognized on the disposition of section 1250 property in excess of recaptured depreciation would be treated as section 1231 gain. Any unrecaptured gain on section 1250 property would continue to be taxed to noncorporate taxpayers at a maximum 25 percent rate.

• In general, no Federal income tax is imposed concurrently on a policyholder with respect to the earnings credited under a life insurance or endowment contract. Furthermore, amounts received under a life insurance contract by reason of the death of the insured generally are excluded from the gross income of the recipient. The proposal would limit the tax benefits for private placement life insurance and annuity contracts.

• The proposal would expand the regulatory authority under which the Secretary may require taxpayers to furnish information relating to the verification and computation of the FTC [Foreign Tax Credit].

• A separate proposal would first raise the top ordinary rate to 39.6 percent (43.4 percent including the net investment income tax). An additional proposal would increase the net investment income tax rate by 1.2 percentage points above $400,000, bringing the marginal net investment income tax rate to 5 percent for investment income above the $400,000 threshold. Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.

Massive Wealth Distribution Scheme.

The administration went after anything and everything from wealth taxes, huge jumps in marginal rates, REIT, Roth IRA conversions, etc.

Here are the key changes, and I may have missed some.

Fifteen Key Points

1. The top marginal rate on long-term capital gains jumps to 44.6 percent.

2. Deductions for oil and gas companied eliminated.

3. 30 percent tax on electricity used in mining cryptos

4. Restrictions on conversions to Roth IRA

5. Forced acceleration of IRA withdrawals

6. Taxes on insurance policies

7. Expanded Child Tax Credits

8. Earned Income Tax Credits to include those with no kids.

9. Restrictions on trusts to avoid inheritance taxes

10. Corporate minimum taxes

11. Homebuyer tax credits

12. Minimum 25 percent tax on unrealized stock gains for wealthy individuals

13. Marginal Medicare tax rate upped to 5 percent

14. Tax rate for C corporations goes to 28 percent from 21 percent. The effective global intangible low-taxed income (GILTI) rate would increase to 14 percent.

15. If there is anything ambiguous, the Secretary of the Treasury gets to determine what the law is.

If you have any money or assets, Biden is coming after you. He is also going after oil and gas companies, corporations, and Bitcoin to fund massive wealth distribution schemes.

This is on grounds “Research has demonstrated that wealth gaps are one of the primary mechanisms for perpetuating racial economic inequality“.

Tyler Durden Mon, 04/29/2024 - 10:20

Biden Looks To Prevent Future President From Ending Ukraine War With 10-Year Agreement

Soon on the heels of President Biden last week signing into law a $61 billion aid package for Ukraine's defense, President Volodymyr Zelensky on Sunday indicated that he's working with Washington on a bilateral security agreement which would last ten years.

"We are already working on a specific text," Zelensky said in his nightly video address. "Our goal is to make this agreement the strongest of all."

Ukrainian Presidential Press Office via AP

"We are discussing the specific foundations of our security and cooperation. We are also working on fixing specific levels of support for this year and the next 10 years."

He indicated it will likely include agreements on long-term support centering on military hardware and joint arms production, as well as continuing reconstruction aid. "The agreement should be truly exemplary and reflect the strength of American leadership," Zelensky added.

But ultimately a key purpose in locking such a long-term deal in would be to keep it immune from potential interference by a future Trump administration.

Below is what The Wall Street Journal spelled out last year:

The goal is to make sure Ukraine will be strong enough in the future to deter Russia from attacking it again. More immediately, Ukraine’s Western allies hope to discourage the Kremlin from thinking it can wait out the Biden administration for a potentially more sympathetic successor in the White House. 

Western officials are looking for ways to lock in pledges of support and limit future governments’ abilities to backtrack, amid fears in European capitals that Donald Trump, if he recaptures the White House, would seek to scale back aid. Trump has a wide lead in early polling in the Republican presidential primary field, but soundly lost the 2020 election to President Biden and has been indicted in four criminal cases in state and federal courts. 

We and others have previously underscored that NATO and G7 countries are desperately trying to "Trump-proof" future aid to Ukraine and the effort to counter Russia.

As for its first new weapons package in the wake of the $61 billion being authorized, the Biden administration has announced new arms packages totaling $7 billion. The US has vowed to rush the weapons to Kiev, given that by all indicators its forces are not doing well on the frontlines.

"We are still waiting for the supplies promised to Ukraine – we expect exactly the volume and content of supplies that can change the situation on the battlefield in the interests of Ukraine," Zelensky had said over the weekend. "And it is important that every agreement we have reached is implemented – everything that will yield practical results on the battlefield and boost the morale of everyone on the frontline. In a conversation with Mr. Jeffries, I emphasized the need for Patriot systems, they are needed as soon as possible."

Zelensky announces that Ukraine is working on a security agreement with the U.S. that will fix levels of support for the next 10 years. The $61 billion was just the beginning. The next two U.S. presidents won’t be able to switch it off. pic.twitter.com/q1RWCxf93m

— David Sacks (@DavidSacks) April 28, 2024

But all of this means the war will be prolonged, and this puts negotiations much further away on the horizon, despite what are now daily acknowledgements of Ukraine forces being beaten back. Currently the governments of Greece and Spain are being pressured by EU and NATO leadership to hand over what few Patriot systems they possess to Kiev. The rationale is that they don't need them as urgently as Ukraine does.

Tyler Durden Mon, 04/29/2024 - 10:00

Intervention Or Not, Yen Bears Will Stay Confident

By Vassilis Karamanis, Bloomberg Markets Live reporter and FX strategist

Unless Japanese authorities show their hand with conviction when it comes to intervening in the spot market, the yen is bound to stay under pressure over the medium-term.

The currency’s sharp rally this morning certainly looks like an intervention — it’s not often that we get a 500-pip move seemingly out of nowhere. But thin liquidity due to a public holiday in Japan that forced algorithmic trading to take over as trailing stops were triggered could be what’s driven the market. The fact that traders aren’t sure this is an official hand supporting the yen is telling. Masato Kanda, the nation’s top currency official, said no comment when asked about the moves.

The market has been testing Japanese authorities’ patience — or determination — when it comes to yen weakness for some time now. And it will keep on doing so for as long as intervention threats are seen as a clumsily-played bluff.

The yen kept breaching through one big level after the other on Friday against the dollar and everyone’s question was whether we would finally have official yen buying before a long weekend in Japan. The answer was an emphatic no.

Did price action Friday actually give Japanese authorities the green light to intervene in the spot market?

The yen fell by the most since October on an intraday basis, for a two standard-deviation move; one-week realized volatility touched a one-month high

It was down 3.5% on a ten-day basis; Kanda said that a 4% move over two weeks doesn’t reflect fundamentals and is unusual
Over one month, the dollar was up by around seven big figures against the Japanese currency; Kanda has said that a 10-yen move over such a time period is considered rapid.

So in nominal terms, we could argue it was justified that no intervention took place, given a simple rates-check during a Japan holiday could actually do the trick. But in real terms, no one would blame Japanese authorities if they went beyond their official guidelines to step in the spot market. It’s not just about the 350-pip day range that took place. It’s the starting point that also matters. Fresh 34-year lows were hit Thursday.

Traders could see lack of official yen buying as an attempt to find excuses in order to stay pat. After all, a weaker currency in theory accelerates inflationary dynamics that will eventually support the Bank of Japan as to signal a more-aggressive-than priced in tightening bias — which could really be a game changing moment for the currency, especially if at the same time the Federal Reserve will indeed be close to easing its own policy.

And as long as credibility comes to the question, the more confident traders will be to re-add dollar longs in case the Ministry of Finance does decide to intervene. There was some speculation during the weekend that Japan is waiting for the Fed meeting and the release of the next US jobs report due this week before deciding to press the button. To me, it doesn’t matter so much if this is credible thinking, but the mere fact traders are discussing it shows the ball is moving away from officials’ court.

It’s not easy going against a central bank. In poker terms, policymakers always start the game with a pair of aces. But the flop did no favors to them and their raise on the turn looks miscalculated. Maybe the upcoming river will see traders winning this hand despite Monday’s retreat for the dollar that at the time of writing has no official confirmation it was down to spot intervention.

Tyler Durden Mon, 04/29/2024 - 09:45

Futures Rise, Yen Downgraded To Banana Republic Currency After Another Rollercoaster Session

US equity futures swung between gains and losses and traded near session highs as US traders walked to their desks on Monday morning after a rollercoaster day for the Japanese yen, which increasingly looks like some 3rd world banana republic currency instead of belonging to the world's 3rd largest economy, and which first plunged below 160 vs the USD - the lowest level since 1990 amid dismal volumes thanks to the Japanese market holiday on Monday - only to soar more than 500 pips in what is now the first confirmed BOJ intervention since 2022. Futures were buoyed by rising earnings optimism as traders looked ahead to another very busy week for company results, and as of 7:40am, S&P futures gained 0.2% with Nasdaq futures rising 0.3%, boosted by another surge in Tesla shares.  10Y Treasury yields fell four basis points to 4.62% ahead of today's announcement by the Treasury of its funding needs for the coming quarter, while the dollar weakened. Oil retreated, with Brent first trading below $89 a barrel, only to rebound higher amid the endless speculation that a peace deal between Israel and Hamas is coming that would reduce geopolitical tensions in the Middle East (spoiler alert: there will be no deal). Gold rose and bitcoin fell.

In premarket trading, Tesla surged 11%, slamming the recent pile up of shorts (the biggest in two years) as Elon Musk’s quick visit to China paid immediate dividends, with Tesla receiving in-principle approval from government officials to deploy its driver-assistance system in the world’s biggest auto market.

Here are some other premarket movers:

• Here Altimmune drops 4% after Guggenheim downgraded the stock, saying a partnership for the biotech’s lead asset pemvidutide look “increasingly unlikely.”
• Apple climbs 2% after Bernstein upgraded its rating, calling issues in China “more cyclical than structural” and highlighting that the tech giant’s business in the country has tended to be more volatile than the wider company.
• AT&T rises 1% as Barclays upgrades to overweight, noting the wireless carrier’s “steadier execution story.”
• Paramount Global jumps 5% after Bloomberg reported that the Redstone family and Skydance Media CEO David Ellison have both offered concessions to make a possible change in control at the media company more appealing to other investors.
• Shopify advances 3% after Citi raises the e-commerce company to buy, expecting solid first-quarter results following recent industry conferences and channel checks.
• SoFi Technologies gains 2% after the company boosted its adjusted Ebitda guidance for the full year.
• Southwest Airlines declines 1.2% after Jefferies downgraded the carrier to underperform, noting that optimization plans are languishing as delays at Boeing reduce fleets.
• Tandem Diabetes rises 4% after Wells Fargo upgraded the medical device manufacturer, saying a survey indicates stable growth in insulin pumps.

The big overnight market event was the rollercoaster move in the Japanese yen which again took center stage with dramatic moves that fueled speculation over whether the government had intervened to support its beleaguered currency. In holiday-thinned trading, the yen swung wildly, rallying more than 2% on Monday after earlier dropping as much as 1.2% to 160.17 per dollar.

While analysts suggested the size and speed of the jump smacked of intervention, some traders questioned that conclusion and said Japanese banks sold dollars for customers as it rallied. Japan’s top currency official, Masato Kanda, chose to keep investors guessing by declining to comment. Dow Jones reported authorities stepped in to support the yen, citing people familiar with the matter.

It is a busy week: the Fed meeting on Wednesday and US jobs report on Friday will also be critical for markets this week. The last time Fed Chair Jerome Powell spoke, he signaled that policymakers were likely to keep borrowing costs high for longer than previously anticipated, pointing to the lack of further progress on bringing inflation down, and to enduring strength in the labor market. Meanwhile, with Apple and Amazon.scheduled to report in the next few days, investors will be hoping for more evidence that big technology profits can keep propelling stocks.

Echoing Goldman Sachs, Morgan Stanley’s in house permabear Michael Wilson said the pressure from higher Treasury yields is taking the shine off an upbeat earnings season; that's even as Bloomberg data showed that 81% of S&P 500 firms have beaten first-quarter profit estimates so far. Still, as we noted over the weekend, the average stock price has barely outperformed the benchmark index on the day of results — the worst scorecard since the fourth quarter of 2020, the figures showed.

European stocks are higher, the Stoxx 600 rising 0.3% to 509.7, with Dutch medtech Philips the biggest stand-out performer, rising the most on record after striking a settlement related to a device recall; Deutsche Bank was the biggest decliner after making €1.3 billion of provisions, with its country peer Porsche falling too, following its latest earnings. Here are the biggest movers Monday:

• Philips gains as much as 37%, the most on record, after the Dutch medical equipment manufacturer agreed to pay $1.1 billion to settle US claims related to the 2021 recall of sleep apnea devices
• Alfen surges as much as 14% after it agreed with Dutch grid operator Liander on a new production method to avoid moisture in its Pacto transformer substations, with KBC raising the firm to buy
• Anglo American shares gain as much as 4.1% after Bloomberg News reported over the weekend that BHP is considering making an improved proposal after its $39b initial offer was rejected
• Unicaja Banco jumped as much as 8% to the highest level since 2018, after the Spanish lender delivered revenue ahead of expectations in the first quarter
• Douglas jumps as much as 5.3% after several brokerages initiated the German perfume retailer at buy, including Citi, which called the stock a “scarce asset” in a growing category
• Bravida rises as much as 6% after an internal investigation which revealed previously reported overinvoicing at the Swedish real estate services firm was very limited
• Atos shares jump as much as 20%, to the highest in almost three weeks, after the IT firm got a non-binding letter of intent from the French state to acquire some parts of the business
• Deutsche Bank declines 5.7%, the sharpest drop since 2023, after the German lender’s announcement that it is setting aside as much as €1.3b in legal provisions in a blow to profitability
• Porsche AG shares fall as much as 4.6% after the German firm saw a “challenging” first quarter, according to analysts, who note the automaker’s headline earnings miss
• Morphosys falls as much as 2.4% after a report flagged a potential issue related to experimental drug pelabresib, an issue which could complicate the planned acquisition by Novartis
• Siltronic shares fall as much as 3.4% after the German wafer maker was downgraded to hold by Hauck & Aufhaeuser following a profit warning issued last week

Meanwhile, Asian equities climbed for a second straight day, as benchmarks for mainland and Hong Kong stocks looked set to enter a bull market. The MSCI Asia Pacific Index climbed as much as 0.3%, with AIA Group and TSMC among the top contributors to the gains. The MSCI China Index and Hong Kong’s Hang Seng Index were both on track to close more than 20% higher than their January lows, helped by a surge in property shares after a major Chinese developer reached a solution with bondholders for its liquidity issues.

“China may continue to outperform especially in a scenario where global risk sentiment remains cautious,” Nomura strategists including Chetan Seth wrote in a note. “Fundamentals remain tepid” and economic data in the next couple of months are important to avoid a reversal of recent gains, they added. Benchmarks in Taiwan, the Philippines and South Korea also advanced on Monday. Markets in Japan and Vietnam were closed for holidays.
 

In FX, the yen rallied to a 155 handle versus the dollar, having earlier weakened past 160 for the first time since 1990. The abrupt swing prompted speculation authorities may have intervened, although Japan’s top currency official has declined to comment even as Dow confirmed intervention. The Bloomberg Dollar Spot Index is down 0.3% as the greenback loses ground versus all its G-10 rivals.

In rates, treasuries climbed with US 10-year yields falling 4bps to 4.62%, with gains supported by euro-zone bond markets, particularly France’s, outperforming after Moody’s and Fitch affirmed the sovereign’s rating Friday. April inflation numbers from Germany and Spain were taken in stride.  US yields richer by 2bp to 4bp across the curve with long-end-led gains flattening 2s10s, 5s30s spreads by 1.5bp and 0.5bp on the day; 10-year remains near session low around 4.625% with bunds outperforming by around 1.5bp in the sector, French 10-year by ~3bp. On Wednesday, Treasury announces quarterly refunding, expected to follow through on its January guidance of holding off on further increases

Oil prices are lower as the US pushes to broker a peace deal between Israel and Hamas. WTI falls 0.2% to trade near $83.70. Spot gold is little changed around $2,338/oz.

Monday’s US session has few calendar events. US economic data slate includes April Dallas Fed manufacturing activity at 10:30am New York time; ahead this week are consumer confidence, ADP employment change, manufacturing PMI, ISM manufacturing, factory orders and April jobs report. Fed members are in self-imposed quiet period ahead of May 1 policy announcement.

Market Snapshot

• S&P 500 futures up 0.2% to 5,142.75
• STOXX Europe 600 up 0.3% to 509.67
• MXAP up 0.9% to 173.90
• MXAPJ up 0.9% to 540.54
• Nikkei up 0.8% to 37,934.76
• Topix up 0.9% to 2,686.48
• Hang Seng Index up 0.5% to 17,746.91
• Shanghai Composite up 0.8% to 3,113.04
• Sensex up 1.2% to 74,584.25
• Australia S&P/ASX 200 up 0.8% to 7,637.38
• Kospi up 1.2% to 2,687.44
• German 10Y yield little changed at 2.55%
• Euro up 0.2% to $1.0719
• Brent Futures down 0.6% to $88.94/bbl
• Gold spot up 0.1% to $2,339.61
• US Dollar Index down 0.31% to 105.61

Top Overnight News

• Tesla CEO Musk made a surprise visit to Beijing with media reports saying he aims to discuss enabling autonomous driving mode on Tesla cars in China. Later, it was reported Tesla is to partner with Baidu for China self-driving approval, according to Bloomberg. (BBC/Bloomberg) Separately, two US Senators say NHTSA should require Tesla to restrict autopilot use to certain roads.
• White House said President Biden approved the Kansas disaster declaration and ordered federal assistance to supplement recovery efforts in areas affected by severe winter storm from January 8th-16th.
• Apple intensified talks with OpenAI for iPhone generative AI features in which they are discussing the terms of a possible agreement and how the OpenAI features would be integrated into Apple’s iOS 18, according to Bloomberg. EU says that Apple's (AAPL) iPad operating system has been designated as a gatekeeper under the EU DMA; apple has six months to comply with EU tech rules.
• Paramount is reportedly preparing to fire CEO Bakish, via FT citing sources; additionally, sources add that the Co. is expected to receive a counterbid from Sony and Apollo this week to the offer from Skydance Media. (FT)
• China's industrial profits fell in March and slowed gains for the quarter compared to the first two months, raising doubts about the strength of a recovery for the world's second-biggest economy. Cumulative profits of China's industrial firms rose 4.3% to 1.5 trillion yuan ($207.0 billion) in the first quarter from a year earlier, NBS data showed, slower than a 10.2% rise in the first two months. RTRS
• China’s banking regulator warns the country’s regional banks to stop piling into long-term government bonds as they could be hit with heavy losses if rates rise. FT
• Japan's currency surged as much as 5 yen against the dollar on Monday, with traders citing heavy dollar-selling intervention by Japanese banks for the first time in 18 months after the yen hit fresh 34-year lows earlier in the day. RTRS
• Russia is expected to launch a new large-scale offensive in May or June (although the influx of American weapons will make Ukraine better positioned to withstand the onslaught). FT
• Ukraine isn’t expected to regain offensive momentum until 2025 at the earliest and has no clear military path to recapturing the ~20% of the country stolen by Russia. WaPo
• BHP is considering an improved bid for Anglo American, people familiar said. The miner may need to find over $9 billion in cost savings from the tie-up to raise the offer, which may be a stretch. BBG
• Apple’s iPad was hit by the EU rules aimed at stopping potential competition abuses before they take hold. Apple now has six months to make sure its tablet ecosystem complies with preemptive measures. BBG
• AAPL has renewed negotiations w/OpenAI and remains in talks w/Google about incorporating AI-linked technology into the next version of iOS (investors expect to hear a lot more about Apple’s plans at the upcoming WWDC). BBG  

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the week on the front foot after the tech-led surge last Friday on Wall St and amid increased optimism regarding a Gaza truce with negotiators set for talks in Cairo on Monday, although Japan was on holiday and ahead of this week's key risk events. ASX 200 was led higher by real estate, tech and telecoms owing to softer yields. Hang Seng and Shanghai Comp. gained with the former entering into bull market territory after climbing over 20% from its January lows, while participants digested a slew of earnings and the mainland also shrugged off the slowdown in March Industrial Profits.

Top Asian News

• China's MOFCOM said export control measures proposed by Japan on semiconductors will seriously affect the normal trade between Chinese and Japanese enterprises, as well as undermine the stability of the global supply chain. Furthermore, it stated that China urges the Japanese side to rectify its 'erroneous practices' in a timely manner and China will take necessary measures to firmly safeguard the legitimate rights and interests of Chinese enterprises, according to Reuters.
• US and Taiwan are to hold in-person negotiation talks on trade beginning on April 29th, according to Reuters.
• Japanese PM Kishida said they will promote union policies for wage increases, according to Reuters.
• PBoC has reportedly expanded a warning on bond investments to regional banks, via Bloomberg citing sources.
• Agricultural Bank of China (1288 HK) Q1 (CNY): Net Income 70.839bln (exp. 73.578bln), NII 144.535bln (exp. 137.021bln).
• PetroChina (857 HK) Q1 (CNY): Revenue 812.184bln (exp. 833.77bln), Net +5% Y/Y, EPS 0.25 (exp. 0.24).
• Japanese Top Currency Diplomat Kanda offers no comments on whether there was FX intervention; will continue to take appropriate action against excessive FX moves; does not have a specific FX level in mind. Speculative, rapid, abnormal FX moves have bad impact on the economy, so unacceptable. Ready to respond 24 hours, 365 days, when asked whether Japan was ready to take action in FX. Will disclose at the end of May if there way intervention.

European bourses, Stoxx600 (+0.3%) are almost entirely in the green, taking the lead from a positive APAC session overnight. Trade has been rangebound since the open, though has just been coming off best levels in recent trade. Basic Resources is found towards the top of the pile, benefiting from modestly firmer base metal prices and after further takeover reports regarding BHP/Anglo American. Retail marginally underperforms. US Equity Futures (ES +0.2%, NQ +0.3%, RTY +0.3%) are entirely in the green, posting modest gains in tandem with European peers. In terms of pre-market movers; Apple (+1.5%) gains on reports that it has resumed talks with OpenAI. And Tesla (+6.5%) benefits from news that the Co. has received tentative approval for its self-driving service.

Top European News

• ECB's Wunsch (interview from 20th April) said ECB should be cautious regarding a July cut, should be cautious regarding a larger-than-25bps cut in June. Base case it as least two cuts, "but if we only do two or even three cuts, then we shouldn't communicate that we're going to cut at every meeting". Don't think ECB has sufficient data to have confidence on 100bps of cuts throughout the year. On what could get in the way of a June cut, Wunsch said "really bad news", "two bad readings on the inflation front or other major developments."
• Spanish PM says he has decided to stay on as Prime Minister.
• Scotland's First Minister Humza Yousaf is set to step down after coming to the conclusion that is position is no longer tenable, according to The Sunday Times.
• Fitch affirmed France at AA-; Outlook Stable and affirmed Switzerland at AAA; Outlook Stable, while it affirmed Sweden at AAA; Outlook Stable.

FX

• USD is softer vs. peers in the wake of aggressive USD/JPY selling overnight and into the European morning. From a technical perspective, DXY has been as low as 105.46 but is respecting Friday's 105.41 base.
• JPY was volatile overnight and initially surged above 160.00 with no obvious catalysts and with Japanese participants away from the market. The pair later saw a sharper drop and breached 156.00 to the downside in the absence of any obvious drivers; some have speculated potential intervention. Since, USD/JPY has continued to bleed, going as low as 154.54 (currently 155.80).
• EUR is firmer vs. USD (as is the case for all major peers). Focus in the Eurozone today is on the German national CPI at 13:00BST, with regional releases thus far broadly showing increases on a M/M and Y/Y basis, though initial reaction dovish as the core numbers continue to moderate. 1.0733 is the high thus far and yet to approach Friday's best of 1.0753.
• Antipodeans are benefitting from the broadly softer USD. AUD/USD is now up for a 6th consecutive session with focus on a test of 0.66 after printing a session high of 0.6586.
• Japan's Top currency diplomat Kanda said will not comment now, when asked about whether Japan intervened in the currency market.
• PBoC set USD/CNY mid-point at 7.1066 vs exp. 7.2759 (prev. 7.1056).

Fixed Income

• USTs are bid with specifics light so far and direction drawn from EGB action after the regions core inflation numbers from Spain & German. Currently at the top-end of a 107-18+ to 107-27+ range with the 10yr yield below 4.65% but in familiar ranges.
• Bunds are firmer with markets focussing on the continued moderation in core Spanish and German state CPI into the 13:00BST nationwide German number. Bunds peaked at 130.87 having pared knee-jerk pressure of around 20 ticks on the German headline numbers; now off best levels.
• Gilts are a touch firmer but yet to move significantly from the unchanged mark in a narrow circa-20 tick range with specifics light and direction for today and this week broadly likely to come from European and US events. Currently at 96.25 shy of Friday's 96.33 best and then 96.67 from Wednesday thereafter.
• Italy sells EUR 6.75bln vs exp. EUR 5.75-6.75bln 3.35% 2029, 3.85% 2034 BTP and EUR 3.5bln vs exp. EUR 3-3.5bln CCTeu.
• EU sells EUR vs exp. EUR 2.5bln 3.125% 2028 and EUR 2.5bln 2.75% 2033 EU Bond.

Commodities

• A subdued day for the crude complex despite the weaker Dollar, but amid the lack of geopolitical escalation over the weekend and amid more sanguine atmosphere surrounding the latest Israel-Gaza ceasefire talks. Brent counterpart slipped from USD 89.25/bbl to USD 88.43/bbl.
• Mixed trade across precious metals with only spot silver benefiting from the slide in the Dollar, whilst spot gold sees its upside capped by the lack of geopolitical escalation and ahead of FOMC later this week. XAU clambered off its USD 2,319.84/oz intraday low but is yet to reach highs seen on Friday at USD 2,352.64/oz.
• Base metals are mixed with some of the market benefiting from the softer Dollar, albeit modestly; 3M LME copper trades on either side of USD 10,000/t.
• TotalEnergies (TTE FP) CEO said the Co. is expected to complete the first phase of the solar power project in Iraq within the next year, while the Co. is to complete the first stage of utilising the by-produced gas from Iraq’s project during 2025 with a production capacity of 50mln cubic feet, according to Reuters.
• Turkey is in talks with ExxonMobil (XOM) over a multi-billion dollar LNG deal, according to FT.

Geopolitics: Middle East

• "Al-Arabiya sources: An Israeli delegation will head to Cairo tomorrow and the plan is indirect negotiations with Hamas"
• UKMTO said it has receives a report of an incident 54NM Northwest of Yemen's Mokha
• Egypt offered a new proposal for a truce between Israel and Hamas in which some Israeli hostages would be exchanged for Palestinian prisoners and a three-week ceasefire, while Egyptian officials said Israel helped create the proposal and would enter longer-term discussions once Hamas releases the first group of 20 hostages over the truce period, according to WSJ.
• Hamas said it received Israel’s official response to its position over ceasefire talks and will study the proposal before submitting its response. It was later reported that a Hamas official told AFP that there were no major issues in the group’s remarks on the truce proposal, while it was separately reported that a Hamas delegation is to visit Cairo on Monday for ceasefire talks, according to an official cited by Reuters.
• Israel’s Foreign Minister said Israel will suspend the planned operation in Rafah if Hamas agrees to a hostage deal and stated the release of hostages is their top priority. It was also reported that the Israeli military said the amount of aid going into Gaza will scale up in the coming days.
• Palestinian President Abbas said Israel will go into Rafah in the next few days and the US is the only country that can stop Israel from attacking Rafah, while he is worried that Israel will try to push Palestinians out of the West Bank after it is done with Gaza, according to Reuters.
• Medical official said at least 13 Palestinians were killed in Israeli airstrikes on three houses in Rafah in southern Gaza, according to Reuters.
• US President Biden spoke with Israeli PM Netanyahu on Sunday and reaffirmed his ironclad commitment to Israel’s security, as well as stressed the need for progress in aid deliveries to be sustained and enhanced in full coordination with humanitarian organisations. Furthermore, they discussed Rafah and Biden reiterated his clear position, according to the White House cited by Reuters.
• White House national security spokesperson Kirby said Israel assured the US that they won’t go into Rafah until the US has a chance to share its perspectives and concerns, while he added Israelis have started to meet the aid commitments that US President Biden asked them to meet. It was separately reported that US Secretary of State Blinken will travel to Jordan and Israel following Saudi Arabia, according to Reuters.
• France’s Foreign Minister said to make proposals in Lebanon to stabilise the zone and prevent a war between Hezbollah and Israel, according to Reuters.
• UKMTO said it received reports of an incident 177 nautical miles southeast of the Port of Nashtoon located in eastern Yemen on Saturday night which involved a small boat that approached a ship, although there was no harm or damage and the ship carried on its journey, according to IRNA.

OTHER

• US intelligence found that Russian President Putin did not directly order Navalny’s death in February, according to WSJ. US intelligence report does not dispute Putin’s culpability for the death of Navalny but believes he probably did not order it at that moment, while a Kremlin spokesperson called the intelligence report empty speculation.
• Russian Foreign Ministry said there will be a severe response if Russian assets are touched and it is a pity that some in the West do not understand it, while it was also reported that Russia’s Kremlin said there will be endless legal challenges if Russian assets are seized.
• Russia’s Kremlin said there are no grounds to hold any peace talks with Ukraine given Kyiv’s official refusal to conduct such talks with Russia.
• Kyiv’s top general said fighting on the eastern front worsened and Ukrainian troops had fallen back in three places.
• North Korea’s Foreign Ministry said it will make stern and decisive choices in response to the US using human rights for anti-North Korean behaviour, while it added that the US envoy on North Korean human rights is motivated politically and is considered political provocation, according to KCNA.

US Event Calendar

• 10:30: April Dallas Fed Manf. Activity, est. -11.3, prior -14.4

DB's Jim Reid concludes the overnight wrap

I wrote some of this while supervising my three kids doing their homework this weekend. The 6yr old twins had fractions and adverbs, with the latter being pretty challenging. They had a whole story where they had to insert missing adverbs. It was incredibly, astonishingly, extremely, exceedingly, enormously, supremely, difficult. So if you see a few stray adverbs below it's because I've been swimming in them this weekend.

With just two days left of a difficult April for markets, last week actually saw the best week for the S&P 500 (+2.67%) and NASDAQ (+4.23%) since November as earnings generally gave markets a boost even if the US inflation data was net net worrying. You’ll see our full recap of last week towards at the end but looking forward first it's an exceptionally busy week of important events.

The FOMC conclusion on Wednesday is the obvious highlight (full preview below) but we also have payrolls on Friday to look forward to. DB expect a more hawkish-leaning Fed this week. While our economists expect the Committee will maintain an easing bias (preview here), they do expect the statement and press conference to echo Chair Powell’s view that firmer inflation prints suggest it will take longer to gain confidence about disinflation. The press conference will be fascinating to see the nuances in Powell’s responses as he justifies a likely unchanged easing bias, even if the rhetoric is more hawkish, in the face of rising inflation.

In terms of the jobs report on Friday, our US economists see payrolls gaining +240k in April (consensus +250k), down from +303k in March. The consensus expects the unemployment rate and the hourly earnings growth rate to stay at 3.8% and +0.3% MoM, respectively, although DB expects the former to tick up a tenth. Overall the market sees a solid report.

Other key data in the US includes consumer confidence tomorrow, the manufacturing ISM, JOLTS, and ADP on Wednesday, and the services ISM on Friday. We also see the latest US Treasury quarterly refunding announcement on Wednesday, after the borrowing estimate is due today. This was a big pivot point for global markets back in August (negative) and October (positive) but since then a commitment not to increase auction sizes has reduced its importance. Our strategists preview the event and detail their estimates here. Finally in the US, earnings season maintains its peak pace as 174 report in the S&P versus 180 last week with Amazon (Tuesday) and Apple (Thursday) the obvious highlights. Meanwhile, 66 Stoxx 600 companies will report this week.

In Europe, preliminary CPI reports for Germany and Spain today, and the Eurozone tomorrow will have a lot of significance for the June ECB meeting and whether we will see the first cut. Our European economists preview the release here. For the Eurozone, they expect the headline HICP to fall one-tenth to 2.31% yoy, its lowest value since August 2021 and see core inflation slowing further to 2.45% yoy, 0.50pp lower than in March 2024. Staying in Europe the latest GDP data for Germany, France, Italy and the Eurozone are due tomorrow. In Asia, various China PMIs (tomorrow) will be a big focus and in Japan, several key economic indicators are also due, including industrial production and labour market data tomorrow.

The day-by-day calendar at the end as usual gives a more detailed diary of the main events this coming week.

Asian equity markets have started the week on a positive note extending Friday’s rally on Wall Street. Chinese stocks are the best performers across the region with the Hang Seng (+1.93%) leading gains followed by the CSI (+1.63%) and the Shanghai Composite (+0.94%), buoyed by a rally in property stocks after embattled property developer CIFI Holdings reached a solution with bondholders on a plan to restructure its offshore debt. Elsewhere, the KOSPI (+0.91%) is also trading higher while stock markets in Japan are closed for a public holiday, also meaning no cash Treasury trading as yet. S&P 500 (+0.25%) and NASDAQ 100 (+0.34%) futures are edging higher.

In FX, the Japanese yen remained under pressure as it weakened past 160 earlier (from just below 158 at the open), its weakest level since 1990. This was in thin holiday trading and it's subsequently bounced back to below 156. So some astonishing moves this morning!

Over the weekend, China’s industrial profits fell -3.5% in March (YoY) and have now risen + 4.3% y/y in the first quarter, significantly down from a +10.2% expansion in the January-February period, thus still pointing to challenges for China even with a better outlook of late.

Recapping last week now, the US March PCE inflation came in line with expectations on Friday at +0.3% month-on-month, allowing markets to breathe a slight sigh of relief compared to the strong Q1 PCE deflator in the GDP data the day before. In year-on-year terms, the March PCE release came in just above expectations at +2.7% (vs 2.6% expected). The month-on-month core print was also in line with consensus at +0.3%, and at +2.8% year-on-year (vs 2.7% expected). The March data also pointed to a still vibrant US consumer, with real personal spending up +0.5% on the month (vs +0.3% expected).

With the PCE print largely in line with expectations, US equities rallied, with the S&P 500 rising +1.02% on Friday. A strong performance by the tech giants following strong Q1 results from Alphabet (+10.22%) and Microsoft (+1.82%) the previous evening saw the Magnificent Seven post their best day in two months (+3.27%). After three weeks of consecutive losses, both the S&P 500 (+2.67%) and the NASDAQ (+4.23%) saw their largest weekly gains since last November. Even as technology spearheaded the rally, the gains were broad-based, as the Russell 2000 index rose +2.79% (and +1.05% on Friday). European equities also advanced, with the STOXX 600 up +1.74% last week (and +1.11% on Friday). The FTSE 100 hit another record high after gaining +3.09% (and +0.75% on Friday).

Friday’s PCE print did little to reverse expectations for fewer Fed rate cuts this year. The number of cuts anticipated by the December meeting was unchanged on Friday (+0.1bps) but down -4.9bps over the week to 34bps, with the decline coming on Thursday following the inflation data within the Q1 GDP release. US Treasuries did see a moderate rally on Friday, as the 2yr and 10yr yields fell -0.3bps and -4.0bps respectively. However, this was insufficient to erase earlier losses with Treasury yields seeing their highest weekly close year-to-date, up +0.9bps to 4.996% for 2yrs and +4.3bps to 4.665% for 10yrs. The story was similar in Europe, as investors dialled back their expectations of ECB rate cuts by -2.2bps on the week to 72bps. This saw 10yr bund yields rise +7.5bps on the week to 2.57%, despite a sizeable recovery on Friday (-5.5bps).

Meanwhile in Asia, the major story last week was the weakening of the Japanese yen. With the Bank of Japan leaving interest rates on hold, alongside restrained commentary on the exchange rate by policymakers, the yen fell -2.33% (and -1.78% on Friday) to 158.33 per dollar, its weakest level since 1990. Against this backdrop, the Nikkei 225 rose +2.34% (and +0.81% on Friday).

Finally in commodities, copper secured its fifth consecutive week of gains after rising +1.48% (and +1.03% on Friday) on the back of growing demand for clean transition metals and tight supply. On the other hand, gold ended its five-week streak of consecutive gains, falling -2.26% (+0.39% on Friday) amid easing geopolitical fears.

Tyler Durden Mon, 04/29/2024 - 08:23

After Overnight Collapse To 34-Year-Lows, Yen Surges In Apparent 'Intervention'

The Japanese Yen strengthened sharply overnight after crashing to its lowest level since April 1990, breaking 160/USD.

The FT reports that traders in Hong Kong, Australia and London said it was “highly likely” that the recovery was due to Japan’s finance ministry selling dollar reserves and purchasing the Japanese currency for the first time since late 2022.

While analysts suggested the size and speed of the jump smacked of intervention, some traders questioned that conclusion and said Japanese banks sold dollars for customers as it rallied.

Japan’s top currency official, Masato Kanda, chose to keep investors guessing by declining to comment.

"It is difficult to ignore the bad effects that these violent and abnormal movements [in currencies] will cause for the nation's economy," Kanda told reporters on Monday.

Dow Jones reported authorities stepped in to support the yen, citing people familiar with the matter.

It is unlikely to be the last time Japan intervenes in the currency market this year, given that U.S. interest rates are likely to remain high, said Alvin Tan, head of Asia foreign-exchange strategy at RBC Capital Markets.

"We will have a tug of war going forward between Tokyo and the market," he said.

*  *  *

The yen crashed in early Asia trading, tumbling to match is exact lows from April 1990 in what is being blamed on a 'fat finger' trade or multiple barrier-option trades being triggered, by sources that have literally no idea.

The plunge extended Friday's big drop which followed BoJ Governor Ueda's apparent lack of interest in doing anything about the yen's decline, claiming it had 'no impact' on the currency's inflation picture.

“Currency rates is not a target of monetary policy to directly control,” he said.

“But currency volatility could be an important factor in impacting the economy and prices. If the impact on underlying inflation becomes too big to ignore, it may be a reason to adjust monetary policy.”

In fact, policymakers have repeatedly warned that depreciation won’t be tolerated if it goes too far too fast.

Finance Minister Shunichi Suzuki reiterated after the BoJ meeting that the government will respond appropriately to foreign exchange moves.

Potential triggers for interventions are public holidays in Japan on Monday and Friday next week, which bring the risk of volatility amid thin trading.

“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.

“It is not the level but it’s the speed that will trigger the action.”

Well currency volatility is what he has now...

Source: Bloomberg

The sudden drop pushed USDJPY perfectly to its April 1990 highs to the tick...

Source: Bloomberg

The currency pain was all focused in the Japanese market as EUR and GBP strengthened against the USD...

Source: Bloomberg

Perhaps even more notably, the yen puked relative to the Chinese yuan, hitting 22 for the first time since 1992 and putting further pressure on Beijing to potentially do something...

Source: Bloomberg

The question is, of course, what will Japan's MoF/BoJ do now - if anything as their recent excuses about 'velocity' or some such spin are now out of the window after a 6-handle standalone surge in their currency in a few short days (when the rest of the world's currencies are not).

“Authorities may say they don’t target levels per se, but they do pay close attention to the trend and the rate of change and current levels suggest they have to act soon or risk facing a credibility crisis,” said Chris Weston, head of research at Pepperstone Group Ltd.

“The FX market is almost taking them on like the bond vigilantes of old.”

Specifically as SocGen's FX strategist Kit Juckes noted on Friday, the yen's decline is becoming disorderly, which points to a final, potentially sharp, decline before it finds a floor.

However, as we detailed last week, the problem with intervention is that once the genie is out of the bottle… it’s hard to put it back in.

In other words, the onus should be on the BOJ to step in with a much more hawkish move than the market expects.

As Viraj Patel from Vanda Research goes on to note that "we’re at a stage where MoF/BoJ have no choice but to intervene. The best way would be for BoJ to hike 25bps this week. It’s not about the macro anymore (BoJ should’ve normalized policy faster last year)."

Instead, what is going on is that Japan's disastrous handling of its currency has evolved into a game between speculators and officials: Specs are short yen for good fundamental reasons (carry). At this stage, a “surprise” hike to send a signal to markets that they are concerned about ongoing FX weakness (and don’t test us) would be less costly to the economy vs. a further devaluation in the yen. It also adds an additional level of uncertainty to the BoJ/MoF reaction function - which speculators (long carry trades) don’t like.

Meanwhile, FX intervention - which unfortunately looks to be the MoF/BoJ’s preferred route based on recent history - is not even a short-term fix anymore. USD/JPY dips would be quickly bought into based on recent market chatter. A hike goes a bit further towards solving the root cause of yen weakness - even it’s only a marginally better option.

However, not everyone is convinced intervention is imminent.

In a note late last week, Deutsche Bank says the currency's decline is warranted and finally marks the day where the market realizes that Japan is following a policy of benign neglect for the yen.

We have long argued that FX intervention is not credible and the toning down of verbal jawboning from the finance minister overnight is on balance a positive from a credibility perspective. The possibility of intervention can't be ruled out if the market turns disorderly, but it is also notable that Governor Ueda played down the importance of the yen in his press conference today as well as signalling no urgency to hike rates. We would frame the ongoing yen collapse around the following points.

1. Yen weakness is simply not that bad for Japan. The tourism sector is booming, profit margins on the Nikkei are soaring and exporter competitiveness is increasing. True, the cost of imported items is going up. But growth is fine, the government is helping offset some of the cost via subsidies and core inflation is not accelerating. Most importantly, the Japanese are huge foreign asset owners via Japan’s positive net international investment position. Yen weakness therefore leads to huge capital gains on foreign bonds and equities, most easily summarized in the observation that the government pension fund (GPIF) has roughly made more profits over the last two years than the last twenty years combined.

2. There simply isn't an inflation problem. Japan's core CPI is around 2% and has been decelerating in recent months. The Tokyo CPI overnight was 1.7% excluding one-off effects. To be sure, inflation may well accelerate again helped by FX weakness and high wage growth. But the starting point of inflation is entirely different to the post-COVID hiking cycles of the Fed and ECB. By extension, the inflation pain is far less and the urgency to hike far less too. No where is this more obvious than the fact that Japanese consumer confidence are close to their cycle highs.

3. Negative real rates are great. There is a huge attraction to running negative real rates for the consolidated government balance sheet. As we demonstrated last year, it creates fiscal space via a $20 trillion carry trade while also generating asset gains for Japan's wealthy voting base. This encourages the persistent domestic capital outflows we have been highlighting as a key driver of yen weakness over the last year and that have pushed Japan's broad basic balance to being one of the weakest in the world. It is not speculators that are weakening the yen but the Japanese themselves.

The bottom line, Deutscxhe concludes, is that for the JPY to turn stronger the Japanese need to unwind their carry trade. But for this to make sense the Bank of Japan needs to engineer an expedited hiking cycle similar to the post-COVID experiences of other central banks. Time will tell if the BoJ is moving too slow and generating a policy mistake. A shift in BoJ inflation forecasts to well above 2% over their forecast horizon would be the clearest signal of a shift in reaction function. But this isn’t happening now.

The Japanese are enjoying the ride.

Finally, it goes without saying that the only true circuit-breaker for yen weakness is lower US yields/weak US macro, which is unlikely until the election if, as so many now speculate, there has been a directive by the Biden admin to make the economy look as good as possible ahead of the elections, even if that means manipulating the data to a grotesque degree.

One added complexity for MoF/BoJ is that their two options for tackling yen weakness indirectly adds upward pressure to global rates/yields. They’re caught between a rock and a hard place… and speculators know (enjoy) this.

And finally there is China: the longer BOJ/MoF does nothing to curb the collapse of the yen, a move which is seen a pumping up the country's exporting base at the expense of other mercantilist nations such as China, the higher the probability Beijing will retaliate against Tokyo by devaluing its own currency. At which point all hell will break loose.

But, one way or another, as Goldman noted, it's crunch time for USDJPY.

Tyler Durden Mon, 04/29/2024 - 08:05

Who Has Savings In This Economy?

Two full years of inflation have taken their toll on American households. In 2023, the country’s collective credit card debt crossed $1 trillion for the first time. So who is managing to save money in the current economic environment?

Visual Capitalist's Pallavi Rao visualizes the percentage of respondents to the statement “I have money leftover at the end of the month” categorized by age and education qualifications. Data is sourced from a National Endowment for Financial Education (NEFE) report, published last month.

The survey for NEFE was conducted from January 12-14, 2024, by the National Opinion Research Center at the University of Chicago. It involved 1,222 adults aged 18+ and aimed to be representative of the U.S. population.

Older Americans Save More Than Their Younger Counterparts

General trends from this dataset indicate that as respondents get older, a higher percentage of them are able to save.

Note: Percentages are rounded and may not sum to 100.

Perhaps not surprisingly, those aged 60+ are the age group with the highest percentage saying they have leftover money at the end of the month. This age group spent the most time making peak earnings in their careers, are more likely to have investments, and are more likely to have paid off major expenses like a mortgage or raising a family.

The Impact of Higher Education on Earnings and Savings

Based on this survey, higher education dramatically improves one’s ability to save. Shown in the table below, those with a bachelor’s degree or higher are three times more likely to have leftover money than those without a high school diploma.

Note: Percentages are rounded and may not sum to 100.

As the Bureau of Labor Statistics notes, earnings improve with every level of education completed.

For example, those with a high school diploma made 25% more than those without in 2022. And as the qualifications increase, the effects keep stacking.

Meanwhile, a Federal Reserve study also found that those with more education tended to make financial decisions that contributed to building wealth, of which the first step is to save.

Tyler Durden Mon, 04/29/2024 - 06:55

EU Begins 'Tank Of Future' Development After Russia Annihilates Leopard 2 Tanks In Ukraine

German Defense Minister Boris Pistorius and his French counterpart, Sebastien Lecornu, announced Friday the two countries will produce the next-generation battle tank to replace Germany's Leopard 2 tank that will land on modern battlefields in the late 2030s or early 2040s. 

"It's not about making a Leopard 3 or 4; it's about designing something brand new," German defense minister Pistorius said, as quoted by Euronews. 

Pistorius said the next-gen main battle tanks will be equipped with artificial intelligence and will not require "human pilots." 

French defense ministry Lecornu said KNDS, Rheinmetall, Thales, and other defense manufacturers will begin work on the 'tank of the future'—formally known as the Main Ground Combat System (MGCS). 

Developing a next-generation tank comes as there have been countless reports that Russian armed forces have destroyed Leopard 2 tanks operated by the Ukranian Army. 

• Confirmed: Russians Just Destroyed Their First Leopard 2 Tank, Bradley Fighting Vehicles

And this... 

• Ukraine's Leopard 2 Tanks Are Nearly All Destroyed Or Broken

Germany and France are also pushing to build the next-generation fighter jet, called the Future Combat Air System, which is set to enter service in 2040, along with integrated drone fleets. 

The trend is that a world emerging into a multi-polar state has sparked a surge in military spending worldwide. 

A new Stockholm International Peace Research Institute report detailed how global military expenditures hit a record high of $2.44 trillion in 2023. 

We've diligently noted that the defense sector is in a bull market: 

• World Stumbles Into "More Dangerous Decade" As Defense Spending Soars, Says Military Think Tank
• Germany Reportedly Goes On Military Spending Spree To Hit NATO Spending Minimums For First Time
• Lockheed Martin Wins $17BN Interceptor Contract To Protect US Homeland
• German Tank Builder Says "New Decade Of Security Policy Begins" As Defense Bull Market Roars
• SAAB CEO Says Rising War Risk Drives Defense Spending; Missile Stocks In Bull Market

Global defense stocks, tacked by MSCI, have surged to record highs. 

The chaos in the world is not going away. Everything is up for grabs. 

Tyler Durden Mon, 04/29/2024 - 05:45

A Compound Discovered On Easter Island Extends Life, Combats Alzheimer’s

Authored by Flora Zhao via The Epoch Times (emphasis ours),

Scientists are still uncovering the secrets of a compound discovered 50 years ago on Easter Island. Produced by bacteria there, rapamycin appears to be a powerful life-extender and may be a transformative treatment for age-related diseases.

(Illustration by The Epoch Times)

In 2009, the National Institute on Aging Interventions Testing Program (ITP) published a groundbreaking study indicating that rapamycin extended the lifespan of mice by 9 percent to 14 percent. Experiments conducted by various research institutions worldwide have further corroborated these findings or have found the compound to have significantly greater life-extending effects.

The drug also exhibits rejuvenating effects. For example, it can stimulate hair regrowth and prevent hair loss in a short period. It reduces proteins related to aging in the skin and increases collagen. The drug has even shown positive effects in treating age-related diseases such as Alzheimer’s disease, as well as diabetes and heart and muscle conditions.

While the drug label for rapamycin currently does not claim to “extend human life,” some people with a strong desire for longevity have already sought this medication from their doctors and take it regularly in small doses.

A study published in 2023 in GeroScience employed a questionnaire to survey 333 adults taking rapamycin off-label, most under the supervision of a physician. The vast majority (95 percent) reported taking rapamycin for “healthy longevity/anti-aging” reasons, almost 19 percent for preventing dementia, and a few for “cardiovascular disease” or “cancer.” However, no one reported taking the drug for its original approved use: prevention of organ transplant rejection.

Easter Island’s Hidden Treasure

“Rapamycin was not made in a laboratory. It is not a synthetic molecule. It is actually from nature,” Dr. Robert Lufkin, adjunct clinical professor at the University of Southern California Keck School of Medicine, told The Epoch Times.

In December 1964, upon hearing about the Chilean government’s plans to build an international airport on Easter Island, a team of 40 people led by Canadian scientists arrived on the island and stayed for three months. Their objective was to explore the island’s population and natural environment before it became exposed to the outside world.

During this period, they observed that the local indigenous people—who walked barefoot—never contracted tetanus, leading the researchers to suspect that some substance in the soil provided protection. Subsequently, in the laboratory, scientists found just that. This substance was a metabolite of Streptomyces hygroscopicus that possessed antibacterial properties.

Rapamycin was extracted from soil collected on Easter Island. Easter Island is called Rapa Nui in the native Polynesian language. (Pablo Cozzaglio/AFP via Getty Images)

This substance starves fungi and things around them and prevents the organisms from growing, Arlan Richardson, professor of biochemistry and physiology at the University of Oklahoma Health Sciences Center, told The Epoch Times.

In the local indigenous language, Easter Island is called Rapa Nui. Therefore, the substance discovered in the island’s soil was named “rapamycin.”

Early Uses

In addition to rapamycin’s antibacterial properties, scientists observed that it could also inhibit the growth of animal cells. Rapamycin’s specific target is a cellular protein essential to living organisms called TOR, which acts as a “switch” for cell growth.

“It (TOR) is arguably one of the most important biological molecules ever known,” said Dr. Lufkin, as it fundamentally affects metabolism. It is worth mentioning that TOR derives its name directly from rapamycin. TOR stands for “target of rapamycin,” while mTOR, used in many studies, stands for the “mechanistic target of rapamycin.”

Illustration of the immunosuppressant drug rapamycin (red), also known as sirolimus. It is an inhibitor of mTOR (blue). (Juan Gaertner/Science Photo Library/Getty Images)

TOR essentially does one thing: It senses the presence of nutrients. When nutrients are available, TOR signals for cell growth. Conversely, when nutrients are scarce, cells stop growing and initiate repair. “And both of those modes are healthy and necessary for life,” explained Dr. Lufkin.

Rapamycin was initially used as an immunosuppressant. Higher doses of rapamycin (3 milligrams per day) were found to reduce the activity of immune cells, thereby suppressing the immune system’s rejection of foreign organs. In 1999, the U.S. Food and Drug Administration (FDA) approved rapamycin for kidney transplant patients.

Due to its ability to inhibit cell growth, rapamycin was later used as an anti-cancer drug. In 2007, the rapamycin analog temsirolimus was first approved for treating kidney cancer. Dr. Lufkin noted that rapamycin is effective against multiple types of cancer, with the FDA having approved rapamycin for use as a primary or adjunct therapy for eight types.

There is a connection between the immunosuppressive and anti-cancer effects of rapamycin. “It appears to have a positive effect on cancer control in patients who have transplants—for example, heart transplants,” said Dr. Lufkin. Due to immune suppression, “the most common cause of death after the transplant is not organ rejection, but it is actually a cancer.”

Mayo Clinic researchers conducted a controlled trial, tracking over 500 heart transplant recipients for 10 years. They found that patients using rapamycin for anti-rejection had a 66 percent lower risk of developing malignant tumors than those using another anti-rejection medication (calcineurin inhibitor).

Rapamycin’s Longevity Effects

Rapamycin’s primary action is to inhibit mTOR, which can induce a fasting-like state in cells, triggering autophagy. This mechanism may contribute to its effects on longevity.

In simple terms, autophagy is the process by which cells recycle and remove their own waste and foreign materials, conserving energy for survival.

Mr. Richardson explained that mTOR sends growth signals to cells, which are crucial for children and young animals, aiding in bone growth, brain maturation, and other developmental processes. However, this signaling pathway may adversely affect older adults and mature animals. With age, mTOR can become overactive due to disease or oxidative stress—similar to constantly pressing the gas pedal while driving a car. This renders cells hyperfunctional, contributing to age-related diseases and even cancer.

Read more here...

Tyler Durden Mon, 04/29/2024 - 05:00

'Environmental Pollutant' - How A Key Climate Agenda Tool Harms Endangered Species

Authored by Donna Anderson via The Epoch Times (emphasis ours),

As the Biden administration expands its offshore wind projects as part of its goal to reach a carbon-free energy system, whales and other marine life may become collateral damage, according to new research.

(Illustration by The Epoch Times, Shutterstock, Getty Images)

Two independent studies measuring ocean wind turbine construction noise found that the sound emitted by vessels mapping the seafloor was significantly louder than estimated, and that noise protection for whales and other sea creatures during wind turbine pile driving doesn’t work.

Intense noise causes hearing loss in whales, other marine mammals, turtles, and fish, compromising their ability to navigate, avoid danger, detect predators, and find prey, according to scientific studies.

Robert Rand, an acoustics consultant with 44 years of experience, took underwater readings of the sonar survey vessel Miss Emma McCall off the coast of New Jersey. He also recorded acoustic readings of pile driving for Vineyards Wind 1, an offshore wind farm project under construction 15 miles south of Martha’s Vineyard.

In his pile-driving report, published March 28, Mr. Rand found that even the most advanced sound-dampening technologies didn’t adequately control harmful noise. The pounding was just as loud as seismic air gun arrays used for oil and gas exploration, long known to cause injury, hearing loss, and behavioral changes in fish and marine mammals.

Furthermore, the noise made by the construction vessel itself, which is not monitored, was almost as loud as the pile driving. Mr. Rand found that the standard formula used by the National Marine Fisheries Service to calculate how noise, over a period of time, affects a mammal’s hearing, significantly underestimates the sound levels experienced by dolphins and whales.

“These are real data,” Mr. Rand, who testified at a Congressional field hearing on January 20, told The Epoch Times. “I measured it. This is not a computer model. This is not a political press release. These are data.”

Many environmentalists fear that noise related to ocean wind farm construction is contributing to “unusual mortality events” affecting whales. From 2016 through April this year, 220 humpback whales have died, according to data collected by the National Oceanic and Atmospheric Administration (NOAA).

“Elevated humpback whale mortalities have occurred along the Atlantic coast from Maine through Florida,” since 2016, the NOAA states.

The NOAA also reported an “unusual mortality event” for North Atlantic right whales, in which 126 have died since 2017.

“The numbers have been decreasing, especially since 2017, when offshore operations really swung into gear,” Mr. Rand said.

“From my experience in noise control, that’s not a coincidence. Noise is an environmental pollutant. In human terms, it’s measured in life years lost.”

The North Atlantic Right Whale Consortium estimates 350 North Atlantic right whales exist in the world’s oceans today.

Pile-Driving Noise

On Nov. 2, 2023, Mr. Rand went out on a 29-foot sport fishing boat to the Vineyard Wind 1 construction site.

The completed wind farm project will comprise 62 wind turbines in the Atlantic Ocean, spaced one nautical mile apart. The project is estimated to provide power to more than 400,000 homes and businesses.

Giant wind turbine blades for the Vineyard Winds project are stacked on large racks in the harbor, in New Bedford, Mass., on July 11, 2023. At left is the Palmer Island Lighthouse. (Charles Krupa/AP Photo)

The offshore wind farm is owned by Copenhagen Infrastructure Partners of Denmark and Avangrid Renewables, part of the Spanish company, Iberdrola.

At the construction site in November 2023, Mr. Rand said an 874-foot crane ship called the Orion was using a massive hammer to pound a monopile foundation for a wind turbine into the seabed.

The monopile is a steel pipe 31 feet in diameter, 279 feet long, and weighs 1,895 tons, according to the manufacturer, EEW Special Pipe Constructions.

Vineyard Wind 1 implemented two sets of noise controls. The first is a “hydro sound damper,” which Mr. Rand said, is a vertical net in the water around the monopile that’s covered with foam or rubber blocks and balls.

The second is a “double bubble” curtain. These are two weighted hoses lying on the seafloor in concentric circles around the monopile. The radius is roughly 492 to 656 feet.

The hoses have holes in them, and compressed air from a support vessel is forced through the hoses, causing bubbles to rise to the surface. The bubbles are supposed to mitigate the sound pressure created by the pile driving.

“These are advanced techniques,” Mr. Rand said. “They aren’t used anywhere else.”

Unfortunately, the noise mitigation techniques don’t work, he said.

Mr. Rand dropped a research-grade, omnidirectional hydrophone into the water at six locations, starting at 4.10 nautical miles from the pile driving and moving closer to 0.57 nautical miles.

Analyzing the data, Mr. Rand found that even with sophisticated noise mitigation in place, the pile driving is as loud as multiple seismic air guns.

“People have been protesting and the government has been rigorously regulating seismic air gun arrays for years, if not decades, because of their sonic intensity and hazard for endangered species—for whales and other marine species,” Mr. Rand said.

“This pile driving is as loud as an array of air guns.”

Read more here...

Tyler Durden Mon, 04/29/2024 - 03:30