Young People Are Increasingly Blaming “Climate Change” For Not Saving For Retirement

Authored by Mac Slavo via,

An increasing number of younger Americans are blaming climate change for not putting away money for their own retirement.  They say that because the world won’t exist when they retire (because of climate change) there’s no need to save any money.

But if we apply that logic to everything, there is never a need to prepare for the future of anything and the liberal ideology crumbles upon itself.

Market Watch used a young professional as an example of this flawed thinking. Lori Rodriguez, a 27-year-old communications professional in New York City, is not saving for retirement, and it isn’t necessarily because she can’t afford to, but because she doesn’t expect it to matter. Like many people her age, Rodriguez has bought into the propaganda and religiously believes that climate change will have catastrophic effects on our planet. Some 88% of millennials (a higher percentage than any other age group) believe in the climate change religion and 69% say it will impact them in their lifetimes.

“I want to hope for the best and plan for a future that is stable and secure, but, when I look at current events and at the world we are predicting, I do not see how things could not be chaotic in 50 years,” Rodriguez says.

“The weather systems are already off, and I don’t think it’s hyperbolic to be a little apocalyptic.”

The mainstream media isn’t helping either.  Using manipulation techniques, the media engulfs people in a constant barrage of depressing and hate-filled news stories. So much so, that many young people are skeptical about saving for a future they are constantly being told won’t exist.

Just to clarify for these younger people, in 2008 liberal hero Al Gore predicted that there would be no polar ice caps in three to five years because of global warming. However, the “inconvenient truth” is that the ice caps are still there today (over ten years later).

Interestingly enough, right after stating that younger Americans don’t save for retirement because they believe climate change will destroy the world, Market Watchclarified that mental health could be an issue. 

Mental-health issues affecting young adults and adolescents in the U.S. have increased significantly in the past decade, a study published in March in the Journal of Abnormal Psychology found. The number of individuals between the ages of 18 and 25 reporting symptoms of major depression increased 52% from 2005 to 2017, while older adults did not experience any increase in psychological stress at this time, and some age groups even saw decreases. –Market Watch

Jean Twenge, who authored the study cited by Market Watch, says this spike in mental health issues may be attributed to the increased use of digital media. Technology has changed modes of indoctrination just enough to impact social lives and communication. Millennials are also said to suffer from “eco-anxiety,” according to a 2018 report from the American Psychological Association, with 72% saying their emotional well-being is affected by the inevitability of climate change, compared with just 57% of people over the age of 45.

Two-thirds of millennials (defined by Pew as the generation born between 1981 and 1996) have nothing saved for retirement, according to the National Institute on Retirement Security. And now we know why some aren’t saving.  The religion of climate change has a death grip on their mental stability.

It isn’t that we don’t want to take the planet. Those who don’t subscribe to the climate change religion of hysteria simply believe that people should care for the Earth the best way they can.  Putting the Earth’s salvation in the hands of a few bureaucrats isn’t going to solve anything.  After all, government officials can’t even clean up a trash pile in the Democrat’s paradise of Los Angeles. If climate change was really a problem, there’s no way authoritarians could solve it nor would they want too. There’s just too much money to be made off the gullible masses.

Some people just want to watch the world burn.

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Author: Tyler Durden


What Is The Market’s “Worst Case” Scenario In All-Out Trade War: Goldman’s Take

After confidently denying for months that there is a chance of an aggressive escalation in the US-China trade war, Goldman finally moved toward joining what has now become a virtual sellside consensus call that the feud between China and the US will become worse before its get better, when on Monday the bank said that “additional trade-related actions taken over the last several days further raise the risk of additional US tariffs on imports from China and further reduce the chances of a formal agreement at the June G20 meeting”, yet even then adding that “while there is substantial uncertainty, we believe the odds are slightly greater that further US-China tariff escalation is avoided. That said, this is a close call and without additional signs of progress over the next few weeks, implementation of the next round of tariffs on $300bn of imports from China (“List 4”) could easily become the base case.”

In light of the latest developments, which have seen the bilateral trade war mutate into a global tech war targeting various key Chinese companies, with Australia, New Zealand, the UK and Japan all siding with the US in refusing to supply Huawei with critical components effectively jeopardizing the continued existence of the Chinese telecom giant, it now appears that implementation of the 4th round of tariffs is virtually certain.

This, in turn, prompted Goldman last week to warn that a burst in US inflation is likely in the near future, since the final tranche of tariffs would affect mostly consumer goods…

… and the result would be higher prices for a wide range of goods for two reasons: i) the costs of US tariffs have fallen entirely on US businesses and households, with no clear reduction in the prices charged by Chinese exporters; ii) the effects of the tariffs have spilled over noticeably to the prices charged by US producers competing with tariff-affected goods.

In other words, if the trade war escalates further from here, the inflation impact could become quite large, and Goldman calculates that imposing 25% tariffs on roughly $300bn of remaining Chinese imports would have a peak effect of 0.5pp on core PCE, while auto tariffs would have a roughly 0.3pp peak effect. These considerably larger effects reflect the much larger share of consumer goods that would be affected. If all proposed tariffs were implemented within a year, the total impact on core PCE would peak at around 0.9pp.

But what about the impact of escalating trade war, and the imposition of “Tranch 4” tariffs on markets?

That’s the topic that Goldman’s economists discussed in a note published overnight, in which the bank tries to estimate “the impact of trade tensions on key asset markets and the FCI, and simulate the impact of different policy scenarios.”

The bank’s big picture prediction is that a $100bn increase in annual expected tariff revenue for two years tightens the bank’s Financial Conditions Index by 50bp, “mostly driven by a decline in equity prices with dollar appreciation and credit spread widening playing a smaller role. A decline in Treasury yields provides only a partial offset.”

To drill down the impact of this wholesale tightening in financial conditions on various asset classes, Goldman then looks at the recent escalation from Trump’s tweets, which Goldman economist David Choi describes as “the cleanest ‘out of the blue’ surprise of the trade war.” Specifically, the bank estimates that expected tariff revenue over the next two years “:increased by around $40bn in the days surrounding President Trump’s tweet, with the chances of 25% tariffs on $200bn worth of imports increasing from roughly 0% to 100% over the next quarter, from 0% to 30% from 2019Q4 and after, and the chances of further escalation rising as well.”

How about market impact?

First, Goldman calculates the impact of its bullish, baseline case which consists of “a deal and a staggered reduction of the tariffs in place now”, and estimates a roughly 4% increase in the stock market, with an overall FCI easing of 20bp boosting the FCI growth impulse by 0.2%. However, now that further escalation appears virtually assured, the bank also projects that the imposition of tariffs on the remaining $300bn of imports from China would lead to a roughly 4% additional decline in equity prices and a 25bp FCI tightening. Goldman also sees a 15bps decline in 10Y yields under this scenario.

Finally, in the worst case scenario, which adds auto tariffs (which would increase the expected tariff revenue by a cumulative $75 billion), Goldman predicts a total 7% decline in equity prices, a 40bp FCI tightening and a 0.4% deterioration in the FCI growth impulse. Furthermore, in this scenario, Goldman would also expect a 20-25bp decline in yields, and 1-2% appreciation  in the dollar.

The impact on Financial Conditions from these three scenarios relative actual, is shown in the chart below, and is summarized as follows: “Further escalation resulting in tariffs on the remaining imports from China would lead to an additional 0.25pp FCI drag on growth, while auto tariffs on top of that would lead to a 0.4pp deterioration in the FCI growth impulse for a peak net drag of almost 1pp”

In an amusing footnote, Goldman states that it sees “the risks as skewed toward larger market impacts in the escalation cases , if non-tariff measures are implemented as well”, a list of which was provided earlier by Barclays and noted here, while the worst market impact would occur “if sentiment deteriorates nonlinearly”, in other words if the market responds even more adversely in a way that Goldman can’t predict. Which, of course, means that Goldman’s entire attempt to model the impact of trade war is an exercise in futility as there will always be a “nonlinear deterioration” in sentiment.

Yet here a bigger problem emerges: assuming that even Goldman’s relatively rose “worst case” scenario is correct, it would only hit stocks by 7%, resulting in a drawdown of only 200 S&P points, and leaving the S&P 500 comfortably above 2,600. That in itself presents a circular problem, because as Deutsche Bank’s Jim Reid noted today, echoing what we said earlier this week, “Falling asset prices might be the only way for markets to get the [trade war] resolution they desperately want.

And while we know that JPM’s Marko Kolanovic was wrong, predicting that Trump would only suffer a 4% drop in the S&P before he returned to the negotiating table, the question is what is Trump’s breaking point. In December, the S&P dropped as low as 2,350, which is roughly when Trump and Xi reached a trade war truce. This also means that Trump’s breaking point may be as low as 2,350 on the S&P, some 500 points, or almost 20% lower.

In which case, Goldman’s prediction of a modest, 7% pullback in a “worst case” scenario is impossible by definition, as it means that there would be nothing adverse about the market to force trade war to end, and instead it would continue indefinitely, resulting in sharply lower corporate earnings, a sharp hit to the US, Chinese and global economy, and ultimately, a global recession, in the process creating a feedback loop where the longer trade war drags on, the bigger the market drop. Then again, this may be precisely how Goldman hedges by warning that the risk is skewed toward larger market impacts due to a “nonlinear deterioration in sentiment.”

Goldman’s conclusion: “while the direct growth effects of the trade war are likely manageable, our findings show that the impact of financial conditions poses significant downside risks to growth.” Which also happens to be the most bearish Goldman has been on the potential impact of the escalating trade war between the two superpowers.

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Author: Tyler Durden

White House To Send Another 2,000 Troops To Counter “Credible” Iranian Threat

Yesterday, Secretary of State Mike Pompeo assured his interviewers on Fox News that the threat from Iran is totally “real” and “credible” – though he once again refused to get into specifics. But whatever the threat might be, American troops in the region will soon be able to sleep a little easier, because the White House and Pentagon have reportedly agreed to send “roughly 2,000” additional troops to the Middle East…to help protect American forces in the region.

Other reports put the number at closer to 1,500.


The US will also send additional Patriot missile defense capabilities and surveillance and reconnaissance units, according to the Washington Post, which broke the story.

Though Washington has been vague about the exact nature of the immediate threat from Iran that prompted the evacuation of diplomatic personnel from nearby Iraq, Iran has certainly been getting more belligerent by the day, reiterating its threats to seize control of the Strait of Hormuz – which could damage the global oil trade – while promising to start stockpiling enriched uranium again.

But to give credit where credit is due, Trump has done an expert job of managing expectations: First, he denied reports about a Pentagon plan to send 120,000 troops to the region as he chided the neoconnish John Bolton for trying to start a war.

Then, reports earlier this week put the number of the troop surge at 10,000.

Now, Trump will look like he’s resisting the whims of Bolton and the generals by capping the number at 2,000.

Though, to be sure, an aircraft carrier strike force is sitting in the Persian Gulf, and a squad of B-52 bombers have been deployed to nearby Qatar. The US has already built up its forces in the region – another 2,000 troops is relatively insignificant.

It’s worth remembering: Despite these escalations, the official line from the Pentagon is there’s no plan to go to war.

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Author: Tyler Durden

CIA Whistleblower: Assange Is Going To Get Railroaded By “Hanging” Judge

A former CIA analyst-turned-whistleblower says that an extradited Julian Assange would have no chance of a fair trial in front of a federal judge who “reserves every national security case for herself.” 

Judge Leonie Brinkema, Julian Assange

John Kiriakou, who was sentenced to 30 months in prison by Eastern District of Virginia Judge Leonie Brinkema for telling ABC News about CIA waterboarding, told Russian state-sponsored RT They are going to try to make an example of Julian,” adding “He’s been charged in the Eastern District of Virginia. His judge was also my judge and ex-Snowden’s judge and [CIA whistleblower] Jeffry Sterling’s judge who reserves every national security case for herself.”

“She is a hanging judge. She will not give him a fair trial. It’s impossible for Julian to receive a fair trial in the Eastern District of Virginia,” addid Kiriakou. 

Speaking from his own experience with the same district court, Kiriakou argued that it “gonna try to give him as many years as they can,” which means a “sentence of 30-40 years” if served concurrently.

The only avenue worth taking a shot on is to protest the constitutionality of the Espionage Act, notorious for its vague language, to the US Supreme Court, Kiriakou said.

“He’ll have immediate standing to appeal on the basis that the Espionage Act is unconstitutionally vague,” he said. “The Supreme Court has never ruled on this issue. That may be the way to go.” –RT

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Author: Tyler Durden

S&P Erases Overnight “Trade Deal Optimism” Gains As Dollar, Yields Slide

Well that didn’t last long…

The S&P joins Dow Transports in the red (after a solid open for the former, juiced by “optimism” of a trade deal)…


The Dollar has been rangebound but is fading out of its flag now…


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Author: Tyler Durden

Not A Square To Spare: Tesla Cost Cuts Wipe Toilet Paper From Some Facilities

If you’re a Tesla employee – enough coddling, the comfort gravy train is now officially over. The time to live like savages is upon you. 

Tesla, which is a $35 billion company (on paper), is now refusing to provide toilet paper for its employees at some locations. After Elon Musk’s email days ago about “hardcore” cost cutting, and the company literally pulling every lever that it possibly can to try and cut costs, electrek is now reporting that the result is some employees not being provided with toilet paper. Sounds like a very futuristic place to work, perhaps they should consider the name “Beyond Toilet Paper”. 

Regardless, in an email to employees last week, Elon Musk had said that he was implementing a new cost cutting initiative that required the company’s CFO to review and sign every page of outgoing payments, while Musk himself reviewed every 10th page.

Given that Tesla has implemented so many cost cutting strategies in the past, it was easy for us to wonder: what’s left to cut?

That answer is apparently toilet paper. Sources familiar with the matter said that teams at several Tesla facilities are not only skipping ordering office supplies, they’re also skipping on ordering toilet paper. This is forcing some employees to bring toilet paper from home in an effort to help Tesla reduce its overhead.

In the past, Tesla had also relied on car washes and businesses to detail and prepare vehicles, but now it’s being reported that employees are actually taking vehicles home and cleaning them on their own time to save money. We’re sure this is a viable plan that can continue in perpetuity.

In addition, Tesla is also cutting down stipends that it gives its employees for cell phone plans and implementing other “traditional” cost reduction methods. The report claims that every expense not believed to be “essential” for the sale and delivery of vehicles is being reviewed and possibly frozen. We’re sure that vendors are going to love this.

Tesla has still not updated its guidance for the coming quarter and instead confirmed a leaked (and interestingly worded) email making its rounds yesterday that stated the company would produce record numbers in Q2.

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Author: Tyler Durden

Schiff Claims Trump ‘Conspiring’ With Barr; Says Investigating Russiagate Origins “Un-American” 

Rep. Adam Schiff (D-CA) says that President Trump and Attorney General William Barr are ‘conspiring’ to “weaponize law enforcement against their political enemies,” calling the DOJ investigation into the origins of the Russia probe “un-American.” 

Last month, Barr said that he was reviewing the “conduct” of the FBI during its original 2016 Trump-Russia investigation, telling Congress during testimony that while DOJ 

Inspector General Michael Horowitz has a pending investigation into FISA abuse, Barr said “I am reviewing the conduct of the Russia investigation, and all the aspects of the counterintelligence investigation that was conducted in the summer of 2016.”

And on Thursday, President Trump directed the US intelligence community to “quickly and fully cooperate with the Attorney General’s investigation into surveillance activities during the 2016 Presidential election,” adding that Attorney General William Barr has been given “complete authority to declassify information pertaining to this investigation.”

Joining in Schiff is never-trump Republican David Frum, who writes in The Atlantic, “The declassification process will be selective, of course, in service to a predetermined narrative,” adding “Trump will be acting as his own Julian Assange, releasing U.S. secrets to advance his agenda.” 

In short, Trump’s enemies now want selective transparency

Schiff was promptly called out: 

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Author: Tyler Durden

How Many Times Must Assange Be Proven Right Before People Start Listening?

Authored by Caitlin Johnstone via,

And there it is. WikiLeaks founder Julian Assange has been charged by the Trump administration’s Justice Department with 17 counts of violating the Espionage Act, carrying a maximum sentence of 175 years in prison. Exactly as Assange and his defenders have been warning would happen for nearly a decade.

The indictment, like the one which preceded it last month with Assange’s arrest, is completely fraudulent, as it charges Assange with “crimes” that are indistinguishable from conventional journalistic practices. The charges are based on the same exact evidence which was available to the Obama administration, which as journalist Glenn Greenwald noted last year declined to prosecute Assange citing fear of destroying press freedoms.

Hanna Bloch-Wehba, an associate professor at Drexel University’s Thomas R. Kline School of Law, has called the indictment “a worst-case, nightmare, mayday scenario for First Amendment enthusiasts.” Bloch-Wehba explains that that the indictment’s “theories for liability rest heavily on Assange’s relationship with Manning and his tendency to encourage Manning to continue to bring WikiLeaks material” in a way that “is not readily distinguishable from many reporter-source relationships cultivated over a period of time.”

One of the versions of the New York Times’ report on the new Assange indictment, which has since been edited out but has been preserved here in a quote by Slate, said that “officials would not engage with questions about how the actions they said were felonies by Mr. Assange differed from ordinary investigative journalism. Notably, The New York Times, among many other news organizations, obtained precisely the same archives of documents from WikiLeaks, without authorization from the government.”

Press freedom organizations have been condemning these new espionage charges in stark and unequivocal language.

“Put simply, these unprecedented charges against Julian Assange and WikiLeaks are the most significant and terrifying threat to the First Amendment in the 21st century,” reads a statement by Freedom of the Press Foundation Executive Director Trevor Timm.

The Trump administration is moving to explicitly criminalize national security journalism, and if this prosecution proceeds, dozens of reporters at the New York Times, Washington Post and elsewhere would also be in danger. The ability of the press to publish facts the government would prefer remain secret is both critical to an informed public and a fundamental right. This decision by the Justice Department is a massive and unprecedented escalation in Trump’s war on journalism, and it’s no exaggeration to say the First Amendment itself is at risk. Anyone who cares about press freedom should immediately and wholeheartedly condemn these charges.”

“The indictment of Julian Assange under the Espionage Act for publishing classified information is an attack on the First Amendment and a threat to all journalists everywhere who publish information that governments would like to keep secret,” reads a statement by Committee to Protect Journalists Executive Director Joel Simon.

“Press freedom in the United States and around the world is imperiled by this prosecution.”

“For the first time in the history of our country, the government has brought criminal charges under the Espionage Act against a publisher for the publication of truthful information,” reads a statement by the ACLU.

This is a direct assault on the First Amendment. These charges are an extraordinary escalation of the Trump administration’s attacks on journalism, establishing a dangerous precedent that can be used to target all news organizations that hold the government accountable by publishing its secrets. The charges against Assange are equally dangerous for US journalists who uncover the secrets of other nations. If the US can prosecute a foreign publisher for violating our secrecy laws, there’s nothing preventing China, or Russia, from doing the same.”

Also opposing the new indictment, far too late, have been popular pundits from mainstream liberal news outlets.

“The Espionage indictment of Assange for publishing is an extremely dangerous, frontal attack on the free press. Bad, bad, bad,” tweeted MSNBC’s Chris Hayes.

“Today the Trump DOJ becomes the first administration to ever charge a publisher with *espionage* — an assertive, unprecedented legal crackdown on the traditional rights and protections for publishers,” tweeted MSNBC’s Ari Melber. “That is a legal fact, regardless of one’s views of Julian Assange. The new Trump DOJ indictment treats activities most top newspapers engage in — gathering and publishing classified material — as criminal plotting, claiming Assange ‘conspired’ with and ‘aided and abetted’ his source in the pursuit of classified material.”

One need only to look at the outraged “this is a horrible take” commentsunderneath these tweets to see that these condemnations are coming long after the propaganda they’ve helped advance against WikiLeaks has seeped well into the bloodstream. It’s impossible to tell the same group of people day after day that Assange is an evil Nazi Putin puppet rapist who smells bad and mistreats his cat, and then persuade them to respond to a depraved Trump administration agenda against that same person with an appropriate level of resistance.

“I find no satisfaction in saying ‘I told you so’ to those who for 9 years have scorned us for warning this moment would come,” tweeted WikiLeaks Editor-in-Chief Kristinn Hrafnsson. “I care for journalism. If you share my feeling you take a stand NOW. Either you are a worthless coward or you defend Assange, WikiLeaks and Journalism.

Indeed, WikiLeaks staff and their supporters have been warning of this for many years, only to be dismissed as paranoid conspiracy theorists and rape apologists by smearers who insisted Assange was merely avoiding rape charges by taking asylum in the Ecuadorian embassy in London back in 2012. There are many tweets by the WikiLeaks Twitter account warning that the US is trying to charge Assange under the Espionage Act all the way back in 2010, and they’ve been warning about it over and over again ever since, but nobody’s listened.

“The only barrier to Julian Assange leaving Ecuador’s embassy is pride,” blaredGuardian headline last year by the odious James Ball, with the sub-header “The WikiLeaks founder is unlikely to face prosecution in the US, charges in Sweden have been dropped — and for the embassy, he’s lost his value as an icon.”

Assange has been warning for years that this was coming. He’s been unequivocal about the fact that he was perfectly willing to participate in the Swedish investigation from the beginning and was only taking asylum with Ecuador due to fear of extradition and political prosecution in the US, which Ecuador explicitly stated were its reasons for granting him asylum. He was absolutely correct. He’s been correct the entire time. History has vindicated him. He was right and his critics were wrong.

We are also already seeing Assange vindicated in his warnings of what his prosecution would mean for the free press. He hasn’t even been extradited yet and we’re already seeing a greatly escalated war on journalism being implemented, with new developments in just the last few days like a San Francisco journalist now being charged with conspiracy for receiving internal documents from the San Francisco Police Department, and a prominent French journalist being summoned by police for reporting on corruption in the Macron government.

All this of course begs the question: what else has he been right about? Anyone with an ounce of intellectual honesty who has previously had their doubts about Assange will necessarily begin asking themselves this question now. It’s worth reviewing the things Assange has been saying about Russia not being the source of the 2016 Democratic Party emails that WikiLeaks published, about what really happened in Sweden, and about his general understanding of what’s going on in the world with opaque and unaccountable power structures leading us all down a very dark and dangerous path.

If you open your mind to the possibility that Assange has been right about more than you’ve given him credit for previously, the implications can shatter your world. Give it a try. There’s no longer any legitimate reason not to.

*  *  *

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Author: Tyler Durden

“Retaliation Is Imminent”: Here Are China’s “Nuclear” Trade War Options

Almost exactly one year ago, when the US-China trade war was still in its early stages and when conventional wisdom (wrong, as it usually is) dictated that the two sides would never escalate to the “tech cold war” stage we have now as it is in “nobody’s interest” to launch an all-out trade war, we listed what were Beijing’s five at the time “nuclear” retaliation options; these included currency depreciation, sales of US Treasurys, blocking of US services, curbing of oil shipments and a rare-earth metal export ban, crippling US supply chains.

Fast forward to today, when the trade skirmish has escalated into a full-blown tech war, with the US constantly ratcheting up measures against China with the blacklisting of Huawei Technologies and discussion of similar bans for other Chinese tech firms, such as drone and video surveillance equipment makers, while China’s President Xi inspected a rare earth factory on 20 May in Jiangxi province, and called for the nation to embark on a “new Long March and start all over again” (Jiangxi is where the Communist Party’s Red Army started the Long March in 1934), striking a nationalist tone and sending the message that China is prepared for hardship in the face of a worsening external environment.  

What is becoming increasingly clear, is that neither Trump nor China are likely to make further concessions unless one side blinks, or from Beijing’s standpoint, the US offers compromises which is certainly unlikely unless the market tumbles, something we pointed out earlier this week…

… and Deutsche Bank echoed today, when Jim Reid said that “Falling asset prices might be the only way for markets to get the [trade war] resolution they desperately want.” Of course, for now stocks refuse to sell off, paradoxically on the expectation that once they do, Trump will fold and stocks will soar (yet without stocks first tumbling, Trump will never fold). As such, Barclays writes this morning that “the latest developments suggest a Standoff scenario is materializing and the Escalation scenario is becoming increasingly likely.”

China’s thinking is further encapsulated by quotes from Hu Xijin, editor-in-chief of China’s Global Times, whose tweets underscore Beijing’s preparation for a protracted trade war and selecting retaliation approaches. Here’s, in a few short tweets, is how China’s trade war take is summarized:

  • (18 May) “China will certainly retaliate for the barbaric suppression Huawei received. It’s a unanimous attitude of officials and ordinary people. I believe Beijing is selecting retaliation targets and approaches, minimizing damage to itself, and not weakening confidence in China’s opening up.”
  • (18 May) “Trump delays EU, Japan auto tariffs for 6 months since there is little chance of reaching a China-US trade deal in six months. The two sides have serious differences with worsening political atmosphere. Negotiation terms have been laid bare to the public, making compromise difficult.”
  • (20 May) “The US is dealing with China with a new kind of cold war, out of a deep sense of crisis in its insufficient economic competitiveness.”
  • (20 May) “The US cutting off Huawei supplies completely woke up Chinese society. China will face difficulties in short term. We will devote to independent R&D and abandon any illusion. But it is also a real turning point of the US semiconductor companies gradually losing Chinese market.”
  • (22 May) “China is now reassured and ready for a protracted trade war. The political goal of not yielding to the US has been placed above the economic goal of minimizing losses.”

Then on 23 May, the Chinese Ministry of Commerce said “the best response to the US bullying is for Chinese companies to keep growing and developing … The Chinese government has confidence and capability to protect the legitimate interests of Chinese companies.”

Which then brings us back to China’s various retaliation options, which will likely be announced and implemented imminently, especially as China’s media builds up a nationalist fervor that demands blood (figuratively, we hope) from the White House. And while one year ago, China had roughly 5 major “nuclear” retaliation options, since then this number has grown, with Barclays writing that “Non-tariff retaliations are now expanded to options that previously looked very unlikely.”

And while Beijing has yet to announce specific countermeasures beyond raising tariffs on $60BN of US imports, the increasingly angry rhetoric hints hinted that some non-tariff retaliation could be imposed, which according to Barclays includes the following:

  • Export restrictions: Limiting exports to the US of some critical resources such as rare earths. President Xi’s visit to one of China’s major rare earth mining and processing facilities adds to the possibility of banning rare earth exports, as China did to Japan in 2010.
  • Restrictions on sales of US goods and services: Restricting sales of certain US products and services in China, based on national security concerns or for regulatory or legal violations etc. The restrictions could apply to US smartphones, servers, autos, pharmaceuticals, or distribution of Hollywood movies and series, as long as the action would not incur significant domestic economic and employment costs. For example, the recent legal case filed by Chinese airlines with Boeing could be viewed as a move in this direction.
  • Financial tools such as devaluing CNY and selling off US treasuries. We think in the event of further escalation of the tariff war, China would allow measured weakness in CNY, although we think the Chinese authorities would be unlikely to tolerate a very sharp and sudden depreciation. It is interesting to note that while Reuters reported that “China’s central bank will not let yuan decline past 7 to the dollar” on 17 May, the time horizon initially reported was “in the immediate term,” which was revised in a later version to “in the near term.”
  • Other non-tariff restrictions targeting US companies trading with or operating in China. The Xinhua commentary (“Triumph will be in China’s hands,” Xinhua, 21 May) said “China has demonstrated full readiness to fight back,” highlighting “there are many possible options given the inter-dependency of the two economies” and that “China is not bluffing.”
    • The countermeasures could include intensifying shipping inspections and prolonging customs checks, applying greater scrutiny or delaying approvals of licenses and permissions for doing business in China, and tightening regulatory discretion of investment by US companies.
    • Citing a recent survey, the American Chamber of Commerce of China said this week that nearly half of its members are seeing non-tariff barrier retaliation in China as a result of the increasingly bitter trade war (“U.S. business group says retaliation rising in China amid trade war,” Reuters, 22 May). The survey also suggested that 40.7% of respondents were considering or had relocated manufacturing facilities outside China, which increased from 19% from the survey before the latest tariff hikes.
  • Imposing restrictions on travel to the US. The US services trade surplus (mainly in the travel, intellectual property categories) with China was USD40bn in 2018.
  • Delaying or cancelling official and civil exchanges and visits between the two countries, likely through tightening approvals and visa requirements etc. (“China recalls giant pandas from US zoo amid ongoing trade war between countries,” Mirror, 17 May)

In addition to offensive tactics, China is also widely expected to play more “defense”, and prop up its economy for the duration of the trade war. As Barclays notes, while “the Chinese government takes a sterner stance against US pressure, official propaganda is also highlighting that China has a sufficiently resilient economy and abundant policy tools to weather further trade-war hits.”

The “official line” thinking here is that the US’s long economic expansion has likely peaked and it will soon start to feel the pinch. The Barclays chart below shows the negative impact on Chinese exports to the US from the three rounds of tariff hikes so far (in Jul, Aug and Sep 2018).

Meanwhile, China has rolled out some targeted monetary and fiscal measures since President Trump’s 5 May tweet, and has hinted at other strategies and measures, including:

  • Indigenous innovation: During this week’s tour in Jiangxi, President Xi stressed the need for self-reliance and emphasised that “technological innovation is the root of life for businesses.” China must have its own intellectual property and core technologies to produce products with core competitiveness that won’t be beaten in intensifying competition, he said.
  • Tax exemptions for tech: The finance ministry said on Wednesday that companies in integrated circuit design and software industries will be exempt from paying income taxes in the first two years if they became profitable before the end of 2018, in line with a State Council directive in early May (Figure 3).

  • Fiscal assistance: The government will likely roll out more targeted fiscal support (like tax exemptions) to industries hit by tariffs; to lower corporate operating costs including cutting electricity costs in the manufacturing sector, reducing railway and port charges, and lowering broadband services rates for SMEs.
  • Employment stimulus: To address expected rising unemployment, China upgraded this week an earlier inter-ministerial coordination group on employment and work to a State Council leading group, led by Vice Premier Hu Chunhua. It has also announced plans to finance vocational training with CNY100bn from the unemployment insurance fund to upskill the workforce (30 April State Council meeting).
  • Fiscal policy is expected to play a bigger role. In addition to the above mentioned measures, we expect the government to focus in the remainder of 2019 on implementation and execution of committed tax and fee cuts, and pushing local government to start new infrastructure projects.
  • Monetary policy will be data- and risk-dependent. The PBoC would step up with more easing, while balancing the goals of managing CNY and leverage, including by guiding interbank rates lower via OMOs/MLFs/TMLFs, targeted RRR cuts, and likely broad-based RRR cuts and policy rate cuts.

Finally, here is a Barclays chart putting the most important US and Chinese actions, both past and future, in a timeline context:

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Author: Tyler Durden

The Slow-Down Is Here: Trade Deal Optimism Is “Bollocks”

Authored by Sven Henrich via,

Remember all that talk of optimism in Q1 and into April? It came easy after markets rallied hard following the Fed caving. The Q1 slowdown was just temporary, it’s going to be like early 2016, easy Fed is all that matters.

Besides, a trade deal is just around the corner. Don’t you know? Look at all those ‘trade optimism” headlines.

Bollocks. All of it. It’s called complacency and price driving sentiment.

The slow down did not end in Q1, it continued and perhaps accelerated also into May.

Here’s retail traffic, – 7.2% in May so far:

Here’s global trade:

And what is the data saying exactly?


April: Retail sales growth: Negative. Industrial production growth: Negative Chicago Fed National Activity Index: Negative

May: Manufacturing PMI to nine-year low.

The slowdown is not over. Perhaps it’s just beginning.

Don’t forget retailers are already announcing price increases on products coming from China.

The New York Fed today put out a study that estimates that the cost of tariffs will impact the average family by $831 per year:

Add that to record credit card interest rates and you tell me where the incremental spending growth it to come from.

Forget the hype and the cheerleading. That was Q1 chatter. Now Q2’s data is starting to show that the optimistic narratives were misplaced. Which means earnings estimates for the rest of the year may be too high. Perhaps far too high as there is no trade deal in sight. What is in sight is a slow down.

And markets may just be in the process of realizing that.

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Author: Tyler Durden