Just one day after officially launching his campaign for the 2020 Democratic nomination during an interview on Vermont Public Radio, Bernie Sanders has already raised more than $6 million through more than 220,000 individual contributions, according to CNN.
Sanders, who consistently ranks near the top of most polls alongside former Vice President Joe Biden, saw the money pour in from donors in all 50 states. The average contribution was $27, which is roughly in line with the average contribution from Sanders 2016 upstart primary campaign against Hillary Clinton, in which he won a number of crucial primaries (all while actively working against the DNC). Confirming his outsize popularity in an increasingly crowded field, the self-described “Democratic Socialist”‘s haul dwarfs the $300,000 raised by Elizabeth Warren during the 24 hours after her official campaign launch.
Of the $6 million raised, some 10% (about $600,000) came in the form of recurring donations, providing “a huge, dependable grassroots donor base that will afford the campaign a consistent budgeting baseline.”
During his last race, Sanders regularly touted the fact that his campaign was largely funded by small donations. And it appears this is already emerging as a central theme for the 2020 race.
“The only way we will win this election and create a government and economy that work for all is with a grassroots movement – the likes of which has never been seen in American history,” Sanders said in his message announcing his campaign. “They may have the money and power. We have the people.”
On top of that $6 million haul, Sanders is entering the race with more than $9 million left in his US Senate campaign committee: funds that he can transfer to his presidential campaign. That puts him behind only Warren ($11 million) and Sen. Kirsten Gillibrand ($10.3 million).
That ought to give Sanders plenty of cushion to stick it to the “millionaihs and billionaihs”.
In light of the relative lack of new information in the Fed minutes, which reinforced the Fed’s dovish, patient, “data-dependent” posture with hint of growing dovishness when it comes to future inflation, however coupled with the new data that “almost all” FOMC officials wanted a “plan” to step reducing the balance sheet by year end, it is perhaps not surprising that markets haven’t done much.
Indeed, as Bloomberg’s Ye Xie notes, “many participants don’t know what will be the next move later this year, which perhaps is the definition of being neutral.” Furthermore, the Fed underscored its data-dependence, perhaps to an extreme, after several participants argued that rate hikes are only necessarily when inflation surprises on the upside, while some hawks say higher rates are needed if the economy performs as expected.
In keeping with this take, there has not been any notable move in Fed Fund expectations, which still call for a rate cut in early 2020, a divergence with the Fed’s dots which will have to be address by the Fed next month when the FOMC releases its latest economic projections and dot plot, which still sees 2 rate hikes this year versus the market’s zero.
Following the minutes, the broader market has drifted, first sliding to session lows, then rebounding before stabilizing modestly in the green…
… with bank stocks, energy and small caps leading and homebuilders and tech dragging stocks lower.
Meanwhile, with the dollar back to unchanged on the day, yields along the curve were pushed modestly higher, led by the long end as the steepening discussed earlier by Charlie McElligott appears to be taking hold:
The bottom line is that the Fed can afford to wait and see because inflation pressure is muted. It’s more about risk management. Bond yields and the dollar moved a bit higher but the minutes shouldn’t move the needle for markets by much.
Empire star Jussie Smollett is expected to be indicted in “a matter of hours. Not days,” according to Chicago’s Fox 32 reporter Rafer Weigel.
Top attorney Mark Geragos has joined #JussieSmollett legal team. He is assisting Todd Pugh and Victor Henderson. #CPD sources tell me an indictment of #Smollett could be coming in “a matter of hours. Not days”.
The news comes shortly after word that Smollett’s defense team was able to postpone testimony in front of a Cook County grand jury testimony by two men once considered potential suspects in the case.
Two men once considered potential suspects in the alleged attack on “Empire” actor Jussie Smollett were moments away from testifying to a Cook County grand jury, before a last-minute phone call from Smollett’s defense team convinced prosecutors to postpone the testimony.
CBS 2’s Charlie De Mar has learned the brothers were waiting outside the grand jury chambers at the Leighton Criminal Courthouse on Tuesday, just minutes from testifying, when the Cook County State’s Attorney’s Office got a call from Smollett’s lawyers, claiming they may have new evidence. –CBS Chicago
The two men, brothers Ola and Abel Osundario were arrested last week, however Chicago PD released them without charges after they reportedly said that Smollett paid them $3,500 each to stage a January 29 predawn “hate crime” attack designed to make Trump supporters look like bigots.
According to CBS, “About a dozen search warrants have now been issued, including ones for Smollett’s financial and phone records, and detectives are waiting for those records to come back.”
Update from court confusion Monday:
Brothers were expected to appear before Grand Jury.
Last second phone call from Jussie Smolletts legal team claiming they possibly have new evidence calls off Grand Jury for the day. https://t.co/AF2To1whdb
The Osundario brothers said that Smollett concocted the hoax after a racist letter containing a white substance which was mailed to the Chicago Empire studio failed to have the impact Smollett intended.
The evening of the alleged attack, the Osundarios poured a chemical on the actor, placed a noose around his neck and yelled racist and homophobic slurs, including “this is MAGA country.”
Earlier Wednedsay, 20th Century Fox TV tweeted their ongoing support for Smollett:
“Jussie Smollett continues to be a consummate professional on set and as we have previously stated, he is not being written out of the show.” – STATEMENT FROM 20TH CENTURY FOX TELEVISION AND FOX ENTERTAINMENT
Barely a week after being sworn in as the head of the Justice Department, Attorney General William Barr is reportedly planning to announce as early as next weekthat Robert Mueller has completed his investigation and that a confidential report on Mueller’s findings will be submitted to Congress in the very near future.
According to CNN, the preparations – which are in line with an NBC report from late last year that the Mueller report would be completed by the end of February – “are the clearest indication yet that Mueller is nearly done with his almost two-year investigation.” Barr has said that he wants to be as “transparent” as possible while being “consistent with the rules and the law.”
According to the law, Mueller must submit a “confidential” report to the AG after the investigation ends. But the rules don’t require it to be shared with Congress or the public (though, like everything involving the Mueller probe, it will almost certainly leak).
One thing that remains unclear is to what extent Mueller’s findings will be shared with Congress (since the DOJ typically frowns on publicizing embarrassing or compromising information about people who haven’t been charged with a crime…though that principle has apparently gone out the window over the last two years).
CNN also noted that it’s possible that Mueller has made referrals to other prosecutors besides the New York US attorney who brought charges against Michael Cohen. The existence of other investigations might also soon come to light. CNN reported that attorneys from the US attorney’s office for Washington DC have been visiting Mueller “more than usual.”
Signs that the Mueller probe is winding down have been multiplying in recent weeks. Four of his 17 prosecutors have been reassigned, and the grand jury he has used to secure his indictments hasn’t convened since late January.
While Trump is probably hoping that the Russia collusion narrative will decidedly die after the report is released, former DNI James Clapper – whom Trump threatened to strip of his security clearance – warned that the report might leave open the question of whether there actually was collusion between Trump and Russia, giving the release a disappointingly anti-climactic feel, according to the Hill.
Former Director of National Intelligence James Clapper said Wednesday that he’s far from sure that special counsel Robert Mueller’s investigation will clear up questions about President Trump and Russia.
He said he was hopeful the Mueller probe will provide some answers, but warned it might not even draw a conclusion on whether there was collusion between the Trump campaign and Moscow.
“I think the hope is that the Mueller investigation will clear the air on this issue once and for all.I’m really not sure it will, and the investigation, when completed, could turn out to be quite anti-climactic and not draw a conclusion about that.”
So, it appears that, after a series of false alarms and blown deadlines, maybe the Mueller probe really is winding down. But the notion that Russia helped Trump cheat during the 2016 campaign might not die yet.
Over the past two months, as the market soared higher from its December lows, it wasn’t just financial conditions that eased dramatically, and in fact to levels where the Fed was hiking (the same Fed that complained about tighter financial conditions as being a driver behind its decision to put rate hikes on pause), inflation expectations have also rebounded and over the past week, we’ve seen US 5Y Breakevens jump from 1.733% (and below 1.50% at the start of the year) to the current 1.814%, the highest print so far this year.
Commenting on this move, Nomura’s Charlie McElligott notes that it is likely due to two development trends: i) the market’s growing acceptance of a “new-and-improved” Fed inflation framework — one which would in-theory help “pump-up” inflation expectations via an “inflation averaging” (or even “targeting”) approach as Bill Dudley hinted at last Friday; and ii) the record credit- and money- data showing the extent of Chinese liquidity-boosting efforts) risk “tipping over” the market’s consensual belief in “the death of inflation.”
So as hints of reflation start to be appreciated by the market, another potential market reversal may be in store: a renewed curve steepening, which would have material consequences across all asset classes.
Laying out his argument why a steeper curve is one of his “core 2019 trading view expressions”, McElligott writes that despite the past month’s “stalling” of curve steepening – with the 2s10s oddly rangebound in the past 3 months between 15 and 20bps, he sees four scenarios which could act as catalysts for a potential “steepening impulse” moving-forward:
The first “steepening” scenario would be a meaningful deterioration in US data, which would then see the market “pull-forward” the Fed CUT priced-into 2020—in turn, the front-end rally would accelerate even further (entire curve would ‘bull-steepen’)
The second scenario would be what several strategists, including Nomura’s George Goncalves, have been discussing, which is the case for the Fed to address adjusting the composition of its balance-sheet in coming meetings via a “Reverse Operation Twist”, where reinvestments would be allocated towards the front-end in order to shorten the weighted average maturity of the portfolio (while still seeing MBS run-off to zero)
An additional benefit of a “Reverse Op Twist”, is that the implicit “steepening” (as the reinvestments into T-bills would then help push front-end yields lower) would also assist the Fed in avoiding the “negative optics” of curve inversions; the steepening too would provide potential “wiggle room” w.r.t. IOER vs effective Fed Funds; the steepening too would “throw a bone” to the health of the banking industry; and ultimately, a steeper curve would then make it easier for the Fed to engage in an EASING via resumption of the original “Operation Twist” down the road to again flatten curves and ease financial conditions in the case of the next crisis–but in a manner that is “sterilized” without the politically sensitive “creating money” discussion
The third scenario includes the newest information inputs regarding potential drivers of a global “reflationary” impulse, and is potentially the highest risk/reward for global markets according to the Nomura strategist: That would be a reflationary mix of 1) record PBoC / China easing-/ stimulus-/ liquidity- pumping (last week’s data showing that Chinese credit growth hit a new record in January, with shadow banking rising for the first time in eleven months, and new Yuan loans jumping by the most of any month in data back to 1992) in conjunction with 2) the introduction of the Fed’s new inflation framework (“trial ballooned” by Dudley comments Friday / Fed inflation focus paper Friday / consultant and strategist ‘trending’ talk etc) which highlights an “inflation averaging” approach, while others have spoken to the potential for “price targeting,” which in-turn would allow inflation to overshoot / run-hot without forcing the Fed to immediately tighten
In this scenario, theoretical inflation would then see the long-end sell-off on potential “bear-steepening” fashion, especially in light of the consensual view that “inflation is dead” alongside now “Max Long” positioning in global fixed-income witnessed per our CTA Trend model (“+100% Max Long” in USD 10Y, EUR 10Y, JPY 10Y, GBP 10Y, AUD 10Y, CAD 10Y, CHF 10Y, FRA 10Y, ESP 10Y along with “+100% Max Long” in ED4, ER4, YE4 and L4)
Finally, a fourth driver for a curve steepening could come from a continuation of recent easing/compression in funding markets— with the front-end chasing LIBOR fixings-, x-ccy basis- and CP rates- lower, which then looks set to extend further “catch-down” in the front-end echo-chamber.
McElligott’s conclusion: a “realization” of this interplay of policy tweaks, mechanical adjustments and a broad CB “pursuit of inflation” message advocates tactical positioning in Steepeners, Breakevens, US Equities Value vs Growth / Cyclicals vs Defensives
Indeed, if one looks below the surface of the market, and specifically the leadership in stocks, Nomura notes that “something is happening”, as in something different, because equity “value” factors are telling a much different story from 2018, where they continuously lagged growth.
This is seen clearly in the next chart, showing the outperformance of Value over Growth over the past week:
Meanwhile, as we discussed before, when it comes to trend-followers such as CTAs, there is little room for additional upside as virtually every major asset class is now in the “Max Long” bucket:
Responding to reports that the US had asked China to commit to not devaluing its currency (presumably to compensate for any new tariffs), China’s Foreign Minister said Wednesday said that China “doesn’t engage in competitive currency devaluation” and reportedly hopes that the US doesn’t politicize exchange-rate issues.
China added that it will not use the yuan as “a tool to handle trade disputes.”
#China is a responsible major power and we have repeatedly reiterated that [the country] will not engage in a competitive currency devaluation; we won’t use the yuan’s exchange rate as a tool to handle trade disputes: Foreign Ministry pic.twitter.com/mrFIJiyx4N
According to ForexLive, China is pushing back against the insinuation that it intentionally pushed the yuan lower during the trade dispute. So the Chinese side will likely push to exclude a currency clause from the memorandum of understanding that the two sides are reportedly close to reaching.
As if Illinois sky-high taxes, outsize cost of living and teetering public pension fund weren’t enough reasons for people and business to flee the state (it suffered record population loss in 2018, the fifth straight year of declines), newly inaugurated Democratic Gov. JB Pritzker – heir to the Pritzker fortune – signaled Thursday that he would sign a bill to double Illinois minimum wage from $8.25 to $15 by 2025 after it passed both houses of the state legislature.
As the Daily Caller reported, the bill will raise the state minimum wage incrementally to $9.25 on Jan. 1, 2020, then to $10 an hour the following July, and it will continue to increase by $1 a year until 2025.
“Phasing in the minimum wage over the next six years will put $6,300 a year into the pockets of nearly a quarter of our state’s workforce and billions of dollars into local economies in every corner of our state,” Pritzker said in a statement.
Of course, while fighting economic equality sounds like laudable goal, minimum wage hikes ignore the fact that by raising costs, employers will be incentivized to hasten their adoption of automation, which, as McKinsey warned in a study published back in 2017, is expected to kill 800 million jobs by 2030.
Pritzker’s decision to sign the bill comes after his predecessor, Republican Gov. Bruce Rauner, vetoed a similar proposal back in 2017.
To be sure, Illinois won’t be the first state to reach a $15 minimum wage. That honor will likely go to California, which is expected to adopt a $15 minimum wage in 2022. Massachusetts is set to have a $15 minimum wage in 2023 and New Jersey in 2024. New York’s minimum wage will eventually hit $15 through a series of increases tied to inflation. Cities like New York City and Seattle have already caved to unions demands – pushed by the “Fight for $15” initiative – and hiked minimum wages independently.
In fact, a study of Seattle’s minimum wage hikes found that, contrary to the city council’s stated intentions, the decision to raise wages actually had an adverse impact on the city’s poor by killing thousands of jobs.
Last month, the Fed made dovish tweaks at its January meeting, and with the FOMC now firmly in “data-dependent” mode, discussion on the balance of risks will be key; additionally, markets will be keeping an eye out for any clues that there is a consensus on the FOMC to halt its balance sheet run-off this year.
Here is what traders will be looking for heading into today’s Fed minutes, courtesy of RanSquawk
MEETING RECAP: Heading into the FOMC’s rate decision and statement, the market was looking for an update on the balance sheet, whether the Fed would maintain a “gradual” pace of rate hikes, whether it judges the balance of risks as “roughly balanced” and whether it revises its assessment of the economy.
All of those factors saw dovish tweaks in the latest statement:
on the balance sheet, the FOMC indicated that it was prepared to adjust the pace of the balance sheet run-off, it dumped language on “gradual” rate hikes, adding in that the Committee will be “patient” on future hikes.
The language around “roughly balanced” risks was also dumped, and it downgraded its view of the economy slightly, now characterising it as “solid” from “strong”.
The Fed also changed its view on inflation, which it now sees as “muted”.
There were some fears among traders that the Fed might not be as dovish as hoped for; that fear was jettisoned with the release of the statement, and the dovish Fed saw risk assets bounce higher.
POWELL PRESS CONFERENCE: In the press conference, Chair Powell sounded upbeat on the economy, reiterating his now familiar message of data-dependence and patience. He did note cross-current headwinds from the slowdown in Chinese and European growth.
On rates, Powell said the case for raising rates has weakened somewhat. On the balance sheet, Powell said the policy will be driven by reserve demand, which he suggested was higher than it was a year ago. He also suggested that it was still not the Fed’s primary tool of normalization, that remains rates, though the balance sheet could be used if required (he later said that in a future downturn, the balance sheet would be used to stimulate the economy, but after using rates).
He was quizzed about the ideal size of the balance sheet, though he dismissed the question, suggesting the size will be whatever is most efficient to implement the Fed’s policy. Powell said rates were now in the range of estimates of neutral; previously he had seen them in the bottom end of the range of the estimates neutral. On the government shutdown, Powell said that it would leave an “imprint” on Q1 growth, though much of that would be made up in the Q2. On trade talks, Powell said that drawn out negotiations could weigh on business confidence.
WHAT TO LOOK FOR IN THE MINUTES: In 2019, Fed officials have pivoted away from seeing two hikes this year (in the December projections), to a patient, data-dependent approach. Currently, markets are pricing a flat rate hike trajectory, and sees a possibility of rate CUTS next year. Accordingly, traders will be attentive to commentary around the balance of risks, to see if FOMC members believe that risks have materially shifted to the downside. “Although Chair Powell in subsequent remarks continued to note that the economy entered the year on solid footing, several officials since have remarked that slowing global growth, tighter financial conditions, and the lagged effect of prior rate hikes could combine to slow growth by more than the Fed expected,” SocGen writes.
Naturally, comments around the balance sheet will also be eyed. There are risks that the minutes will not reveal anything materially new on the balance sheet, in terms of when the Fed plans to end the run-off policy, however, SocGen says that the minutes may give some clues on whether the central bank sees the run-off ending this year, as was suggested by Fed Governor Lael Brainard last week.
Additionally, even some of the more hawkish on the FOMC, like Loretta Mester (non-voter), have suggested that she’d be comfortable with slowing – or even halting – the pace of reinvestments of maturing securities in 2019. Mester added that if it were her choice alone, she’d favour slowing reinvestments of maturing securities, and suggested that her preference would be for the Fed to hold primarily Treasuries, with a bias towards shorter-dated securities.
Venezuela has shut a key maritime border and grounded flights as the Washington-backed coup-leader Juan Guaido has said that foreign aid will enter Venezuela from neighboring countries by land and sea on Saturday.
CNN reports that a government representative confirmed Venezuela has closed its maritime border with Aruba, Curacao, and Bonaire and, in the Western state of Falcon, prevented flights leaving from or departing to those islands.
President Maduro has rejected offers of foreign food and medicine, denying there are widespread shortages and accusing Guaido of using aid to undermine his government in a U.S.-orchestrated bid to oust him.
In comments broadcast on state TV, Defense Minister Vladimir Padrino said the opposition would have to pass over “our dead bodies” to impose a new government. Guaido, who has invoked the constitution to assume an interim presidency, denounces Maduro as illegitimate and has received backing from some 50 countries.
Padrino said it was unacceptable for the military to receive threats from Trump, and said officers and soldiers remained “obedient and subordinate” to Maduro.
“They will never accept orders from any foreign government … they will remain deployed and alert along the borders, as our commander in chief has ordered, to avoid any violations of our territory’s integrity,” Padrino said.
“Those that attempt to be president here in Venezuela … will have to pass over our dead bodies,” he said, referring to what he called Guaido’s efforts to create a “puppet government.”
Additionally, Thomson reports that Cuba denied on Tuesday it has security forces in Venezuela (after the Trump administration made claims):
“Our government categorically and energetically rejects this slander,” Cuban Foreign Minister Bruno Rodriguez said at a Havana press conference, adding all of the some 20,000 Cubans in Venezuela were civilians, most health professionals.
Rodriguez called on the U.S. administration to produce proof.
“The accusation by the US President that Cuba maintains a private army in Venezuela is despicable. I demand that you present evidence.
“There is a big political and communications campaign underway which are usually the prelude to larger actions by this government,” Rodriguez said.
Rodriguez termed the political crisis in Venezuela “a failed imperialist coup … fabricated in Washington,” and warned plans to deliver humanitarian aid were a recipe for violence and intervention.
“We are all witnesses in the making of humanitarian pretexts. A deadline has been set for forcing the entry of humanitarian aid,” Rodriguez said.
U.S. President Donald Trump on Monday warned members of Venezuela’s military who remain loyal to Maduro that they would “find no safe harbor, no easy exit and no way out.”
“You’ll lose everything,” Trump told a crowd of Venezuelan and Cuban immigrants in Miami.
Traditionally, when the Fed releases the Minutes for its most recent FOMC meeting, the sequence of events is that Bloomberg, Reuters and a handful of other news service blast flashing red headlines with the key highlights and soundbites, which are delivered to markets precisely at 2:00pm which then sets the market mood for the rest of the day, allowing algos to trade in kneejerk response to the initial information disclosure, and forcing analysts and strategists to goalseek their narrative to the market’s reaction: if stocks spike, the minutes are more dovish than expect, conversely if stocks slide, the Fed snuck in a few extra hawkish points, and so on. In fact, by the time people actually finish reading the full minutes which takes, well, a few minutes (the December release was 28 pages, but of these only 3-4 truly matter), sentiment has already been set, ironically by just a couple of headlines and how the headline-scanning algos react to them.
Which means that initial handful of headlines is critical; and what is just as important, is that the initial narrative is compiled by several members of the financial press as the Fed provides members of accredited news organizations access to the minutes shortly ahead of the public release time at a central-bank facility, allowing the journalists time to prepare headlines and articles reporting the content also at 2 p.m. local time.
Today, however, there will be no headlines at 2pm.
The reason: as a result of today’s U.S. government closure due to a snowstorm, the central bank will not release the minutes of its Jan. 29-30 meeting to the media lockup ahead of their normal release, preventing news organizations from reviewing the document before it’s publicly available.
Instead, the Federal Reserve said the record of the meeting will be posted on its website at 2 p.m., as scheduled, meaning that the press will have to comb through the minutes along with the rest of the market and investing public, looking for key highlights and key words; more importantly it means that momentum-igniting, headline-scanning algos will have no basis on which to spark either buying or selling in the milliseconds following 2pm, and instead will drift higher or lower depending on which way the groupthink shifts in the initial seconds after 2pm as various hot takes and interpretations of the minutes hit the tape.
In short, prepare for some brief market chaos and/or confusion today, just after 2pm as the market scrambles to digest what the Fed said three weeks ago.