It’s obvious this is due to his fiscal support for Jihadwatch, but Horowitz is ironically a proponent of the Canary Project which is itself a sort of crusade against critics of Israel so that makes this whole event literally insane: https://twitter.com/getongab/status/1032430937928216576
The US Treasury curve has (infuriatingly for policymakers) refused to reflect any growth hype narrative at all, with the spread between 2Y and 10Y maturities back in the teens – for the first time since 2007.
However, in what Deutsche Bank calls a “landmark moment” the US yield curve has tumbled back below the Japanese yield curve for the first time since Nov 2007…
We are sure the ‘smartest men (and women) in the room’ in Jackson Hole will be doing their best to shrug off this yield curve collapse as ‘different this time’, but we suspect deep down they all realize that one more hike priced into the short-end and the curve is inverted.
“We know there’s a bunch of people who are saying this time it’s different [when discussing the yield curve]” said Omair Sharif, senior U.S. economist at Societe Generale . “Yet they spent a good chunk of that [July] meeting listening to a staff presentation on whether their tool kit is sufficient if there’s another downturn. They’re kind of prepping their tool kit.”
Sharif said the minutes of the July meeting showed that some Fed officials are concerned about the flattening curve but others are not.
And bear in mind that the market remains adamant that The Fed will be cutting rates in 2020, not hiking…
Maybe this explains it – 2018’s US Macro data is now the most disappointing since 2004…
“If anyone is looking for a good lawyer,” said President Donald Trump ruefully, “I would strongly suggest that you don’t retain the services of Michael Cohen.” Michael Cohen is no Roy Cohn.
Tuesday, Trump’s ex-lawyer, staring at five years in prison, pled guilty to a campaign violation that may not even be a crime.
Cohen had fronted the cash, $130,000, to pay porn star Stormy Daniels for keeping quiet about a decade-old tryst with Trump. He had also brokered a deal whereby the National Enquirer bought the rights to a story about a Trump affair with a Playboy model, to kill it.
Cohen claims he and Trump thus conspired to violate federal law. But paying girlfriends to keep past indiscretions private is neither a crime nor a campaign violation. And Trump could legally contribute as much as he wished to his own campaign for president.
Would a Democratic House, assuming we get one, really impeach a president for paying hush money to old girlfriends?
Hence the high-fives among never-Trumpers are premature.
But if Cohen’s guilty plea and Tuesday’s conviction of campaign manager Paul Manafort do not imperil Trump today, what they portend is ominous. For Cohen handled Trump’s dealings for more than a decade and has pledged full cooperation with prosecutors from both the Southern District of New York and the Robert Mueller investigation.
Nothing that comes of this collaboration will be helpful to Trump.
Also, Manafort, now a convicted felon facing life in prison, has the most compelling of motives to “flip” and reveal anything that could be useful to Mueller and harmful to Trump.
Then there is the Mueller probe itself.
Twenty-six months after the Watergate break-in, President Nixon had resigned. Twenty-six months after the hacking of the DNC and John Podesta emails, Mueller has yet to deliver hard evidence the Trump campaign colluded with Putin’s Russia, though this was his mandate.
However, having, for a year now, been marching White House aides and campaign associates of Trump before a grand jury, Mueller has to be holding more cards than he is showing. And even if they do not directly implicate the president, more indictments may be coming down.
Mueller may not have the power to haul the president before a grand jury or indict him. After all, it is Parliament that deposes and beheads the king, not the sheriff of Nottingham. But Mueller will file a report with the Department of Justice that will be sent to the House.
And as this Congress has only weeks left before the 2018 elections, it will be the new House that meets in January, which may well be Democratic, that will receive Mueller’s report.
Still, as of now, it is hard to see how two-thirds of a new Senate would convict this president of high crimes and misdemeanors.
Thus we are in for a hellish year.
Trump is not going to resign. To do so would open him up to grand jury subpoenas, federal charges and civil suits for the rest of his life. To resign would be to give up his sword and shield, and all of his immunity. He would be crazy to leave himself naked to his enemies.
No, given his belief that he is under attack by people who hate him and believe he is an illegitimate president, and seek to bring him down, he will use all the powers of the presidency in his fight for survival. And as he has shown, these powers are considerable: the power to rally his emotional following, to challenge courts, to fire Justice officials and FBI executives, to pull security clearances, to pardon the convicted.
Democrats who have grown giddy about taking the House should consider what a campaign to bring down a president, who is supported by a huge swath of the nation and has fighting allies in the press, would be like.
Why do it? Especially if they knew in advance the Senate would not convict.
That America has no desire for a political struggle to the death over impeachment is evident. Recognition of this reality is why the Democratic Party is assuring America that impeachment is not what they have in mind.
Today, it is Republicans leaders who are under pressure to break with Trump, denounce him, and call for new investigations into alleged collusion with the Russians. But if Democrats capture the House, then they will be the ones under intolerable pressure from their own media auxiliaries to pursue impeachment.
Taking the House would put newly elected Democrats under fire from the right for forming a lynch mob, and from the mainstream media for not doing their duty and moving immediately to impeach Trump.
Democrats have been laboring for two years to win back the House. But if they discover that the first duty demanded of them, by their own rabid followers, is to impeach President Trump, they may wonder why they were so eager to win it.
Having warned several weeks ago it would impose sanctions on Russia for its alleged use of the Novichok chemical agent in the UK, on Friday morning the US followed through with the threat when the U.S. released a notice of sanctions, saying they will take effect when published in Federal Register on Aug. 27.
The sanctions will include foreign assistance, arms sales, denial of U.S. government credit through the ExIm bank, other financial assistance, and will remain in place for at least one year and until further notice.
Exceptions include on flight safety, wholly-owned U.S. subsidiaries, space flight – as Russia is a primary supplier of space engines for US rockets – commercial end-users, deemed exports and reexports.
Even before the latest announcement, there was growing bipartisan support in the Senate for separate pieces of legislation that would ramp up the pressure on Moscow as evidence emerges of continued Russian meddling ahead of the 2018 midterm elections. And as we discussed before, among the most stringent measures being proposed in Congress are ones that would impose curbs on Russian sovereign debt sales and tougher limits on some of the country’s biggest banks as punishment for election meddling.
Plans to impose the sanctions were announced by the Trump administration on Aug. 8 and since the move was fully priced in, despite a small dip in the ruble in kneejerk response, the USDRUB quickly dropped and was trading near session lows amid broad-based weakness in the US dollar.
The lack of a reaction shows that investors are less concerned with limitations that, however, fall short of blocking purchases of Russian sovereign debt.
Separately, speaking to reporters in Kiev, U.S. National Security Adviser John Bolton said the U.S. sanctions against Russia will remain in force “until there is a required change in Russian behavior” adding that the U.S. doesn’t accept Russian meddling in U.S. elections.
Bolton, who held talks earlier on Friday with Ukrainian President Petro Poroshenko, also said that Kiev had made progress in its efforts to join NATO, but still had work to do.
“A lot depends on Ukraine fulfilling the requirements necessary to meet all of the military and political tests to be a NATO member,” Bolton said.“I would say progress is being made but there is still more to accomplish.”
Russia strongly opposes NATO expansion towards its western borders and in 2014 annexed Crimea from Ukraine after Viktor Yanukovich, Ukraine’s Russia-friendly president, was toppled in a popular revolution. Bolton said it was important to resolve the Ukraine crisis and that it would be dangerous to leave the situation as it was in Crimea and eastern Ukraine, where Moscow has backed separatists in their conflict with Kiev.
Bolton also added he had told Poroshenko that Moscow should not meddle in Ukraine’s presidential vote next year.
“President Poroshenko and I agreed that we will look at steps that the United States and Ukraine could take to look at election meddling here,” he said.
By Charlie McElligott, head of cross-asset strategy at Nomura
Momentum Parties While Softer US Dollar, PBOC Actions Boost Risk-Assets
Global risk-sentiment in one asset: Offshore Yuan sees a powerful reversal STRONGER again overnight and is back through the “centrifugal pull” of 6.85, to 6.827 all the way from ~6.90 earlier (!)
And this is why, just out now: *PBOC SAID TO PLAN RESUMING COUNTER-CYCLICAL FACTOR IN YUAN FIX, which will likely contribute bias towards a STRONGER Yuan fixing vs Dollar
Along with a broadly weaker USD (G10 and EM), this is risk-asset stabilizing, with the “virtuous cycle” back in-play: firmer Commodities / higher “Inflation Expectations” (5Y Breakevens back above 1.985) and stronger Emerging Markets see better global Equities / higher UST Yields overnight
Macro-wise, the key STRUCTURAL “go forward” themes for risk-assets come down to aforementioned
“USD Direction” (near-term) and
U.S. Yield Curve “shape” (medium-term), as any “steepening” will likely be signaling that the market is “sniffing-out a slowdown” from “Peak Cycle,” and beginning to REMOVE rate hike projections from the front-end—this is why we’ve pushed the 1y and 2y expiration curve-caps as broad risk hedges
To this latter-point, I remain fixated on the inversion of EDZ9-Z0 spread, as well as the recent precipitous decline in March ’19 hike probabilities—going from 63.5% to now “just” 45% in less than a month
Tactically however, I remain focused on the U.S. Equities-centric theme of “the great performance puke of 2018,” as it will then act as a critical input / catalyst for “the next move” post-Labor Day.
I expect September to be “grabby” within U.S. Equities (particularly “Momentum” factor) on account of said “performance-anxiety” as funds are being “left behind” and thus, forced back into the market.
Anecdotally I’m being told of funds already taking-up “nets” and “chasing” already on account of this “FOMO,” following this enormous underperformance period of past months (and yes, I am aware that many view this as a “contrarian / bearish” indicator!)
This “performance puke” (since mid-May for some) was best-exemplified by the incredible drawdown in “1Y Momentum” factor, -8.8% from start June 5th to July 5th alone; this played-out in “acute reversals” in key status-quo themes: ‘Cyc / Def-,’ ‘Growth / Momentum vs Value / Quality-,’ ‘Small / Large-‘ all experienced powerful rebalances / rotations at times.
The issue has really been about the destruction of “short books” initially (many “High Short Interest” proxies +7% to 9% QTD), which then contributed to sloppy trades in “crowded longs” like Media, China Internet, Casinos, Video Games, all seeing sloppy EPS-related selloffs.
To be fair, some “Growth”–tilted investors have enjoyed a renaissance over the past few sessions; however, broad “consensual longs” continue to struggle against underperformance across various “Crowded Short” proxies.
My call to get long U.S. Equities “1Y Momentum” into September is going bonkers in the best of fashions—the Nomura Momentum Factor is now +3.1% in two sessions since walking-through my rationale on the call, as funds “leg into” the tactical trade—in these two sessions, both legs are working—“Mo Longs” are +1.8% (Tech / Cons Disc / Biotech reasserting themselves) while “Mo Shorts” are -1.3% (Industrials, Financials, broad “Defensives” again struggling).
With U.S. Equities “Momentum” now +6.9% MTD and +3.1% the past two sessions alone, I am already nearing initial profit-taking levels; however I do expect more strength again today with the positive “risk” backdrop and weaker USD setting-up for more of the same.
Finally to reiterate, I DO then believe that following this Equities “burst” into Sep that we will then see reinvigorated Oct cross-asset volatility.
The macro-catalyst being the “QT escalation” theme I’ve been speaking-to leading to potential “interest rate volatility / tantrums”
I too expect high-potential for “position asymmetry” to “tip-over,” as both systematic- and fundamental- investors accumulate leverage and large position size via lower realized volatility into the “risk rally”
Reminder—the QI long-term macro factor sensitivity model for SPX is showing three signs that U.S. Equities are becoming concerned about excessive Fed tightening, in-line with my “QE to QT” thesis:
Long-term SPX model sensitivity to “Inflation Expectations” has now turned ‘negative’
Long-term SPX model sensitivity to “US Real Rates” has now turned ‘negative’
The formerly “positive sensitivity” of SPX to DXY too has ‘rolled-over’
After managing a modest bounce in June, expectations were for a drop in Durable Goods Orders in July and just as we have seen soft survey and hard ‘real’ data disappoint, so did preliminary data showing a worse than expected 1.7% drop MoM.
Against expectations of a 1.0% drop, durable goods orders in July were ugly with a 1.7% drop – the most since January.
Core durable goods orders (ex-transportation) also missed expectations, rising only 0.2% MoM vs economists’ best guess of a 0.5% gain.
Orders rose for machinery, computers and electronic products and motor vehicles and parts last month, according to the report. The data, representing the first results since the U.S. and China imposed tariffs on each other’s goods in early July, signal that business investment remains intact even as President Donald Trump widens a trade war to a growing range of products from China.
There was a modest silver lining in the report as Capital Goods Shipments ex-air (proxy for capex spending) jumped more than expected – rising 0.9% MoM…
The drop in overall durable-goods orders reflects bookings for aircraft and parts, typically a volatile category. Civilian airplane orders fell 35.4 percent in July, while the military side dropped 34.6 percent. Boeing Co. previously reported that the planemaker received 30 orders in July, down from 233 in June.
US macroeconomic data disappointments continue to pour cold water on the ‘greatest economy’ narrative…
Authored by David Finnerty, Bloomberg macro commentator
President Trump was looking at the Fed when lamenting the dollar’s recent strength. He’d have been better off looking in the mirror. When trying to figure out whether the dollar rally has ended or just temporarily stalled, then Trump’s actions are likely to offer more insight than Jay Powell’s Jackson Hole jaw-jaw.
The Fed Chairman is due to discuss economic and monetary policy Friday in Wyoming. But given the central bank’s consistent signaling on rate hikes this year, it’s hard to see him throwing a curveball that could impact the dollar near-term.
Investors are already expecting a rate hike in September, with a strong probability of another by year-end. Hopes for guidance on next year’s plans are likely to be disappointed. There’s little upside to discussing them with all the uncertainty around trade.
If there is to be any new insight at all it could be in the realm of Powell’s thoughts on the ominous flattening of the U.S. yield curve.
The dollar’s near-term direction, therefore, may be more sensitive to Trump’s actions.
A solution to a U.S-China trade war doesn’t appear imminent; Trump this week confirmed he’s in no rush because he feels he’s winning right now. Fears of escalation should continue to prove generally positive for the dollar.
Nor is Trump in any mood to compromise with Turkey on the fate of the American pastor. Treasury Secretary Steven Mnuchin has already flagged the prospect of more sanctions if he’s not released quickly. That would feed fears of emerging currency contagion, also benefiting the dollar.
But offsetting these forces is the fallout from Cohen’s plea bargain. It’s not certain how this will play out, but it wouldn’t be surprising if the dollar experienced a kneejerk reaction lower should the presidency be challenged in the short-term.
President Trump has complained about the dollar’s strength and bemoaned the Fed’s role in encouraging it through rate hikes. The irony is that for now the largest driver of short term direction is the president himself.
The to-ing and fro-ing continues between President Trump and his attorney general. In a double-tweet storm response this morning to AG Sessions’ strong response to Trump’s barrage of abuse yesterday, the President pressed his AG to “look into all of the corruption on the ‘other’ side,” jabbing at him by saying, “Come on Jeff, you can do it, the country is waiting!“
Continuing his war of words over Twitter, Trump blasted:
“Department of Justice will not be improperly influenced by political considerations.” Jeff, this is GREAT, what everyone wants, so look in to all of the corruption on the “other side” including deleted Emails, Comey lies & leaks, Mueller conflicts, McCabe, Strzok, Page, Ohr……
….FISA abuse, Christopher Steele & his phony and corrupt Dossier, the Clinton Foundation, illegal surveillance of Trump Campaign, Russian collusion by Dems – and so much more. Open up the papers & documents without redaction? Come on Jeff, you can do it, the country is waiting!
Step aside Powell: what may be the most important news for the dollar today came not from Jackson Hole but from Beijing, where the People’s Bank of China unexpectedly announced that it would resume use of the “counter-cyclical factor” in the CNY midpoint fixing mechanism, which it suspended in January, sending the Yuan sharply lower at the time.
As Bloomberg reports, banks that contribute to the fixing plan to resume re-applying the counter-cyclical factor in their calculations from Monday, “while a source from a yuan-fixing bank said the institution has already resumed using the counter-cyclical factor, without saying if the bank received a call from the PBOC.”
What is the counter-cyclical factor?
As a reminder, back on May 26, 2017, shortly after Moody’s downgrade of China, Beijing “moved the goalposts” in its bid to reduce yuan volatility and depreciation, to punish currency manipulators (read Yuan shorts) and limit capital outflows (the currency had weakened for three straight years, triggering draconian capital controls and the surge of bitcoin) when the PBOC introduced a new “counter-cyclical factor” to reduce exchange-rate volatility, mitigate “pro-cyclicality” of market sentiment and reduce “herd behavior” in the FX market
As we explained at the time, under the new reference rate formula unveiled by the PBOC, institutions that provide quotes for the fixing would add an “intangible” counter-cyclical factor to their existing models, which takes into account the previous day’s official closing price at 4:30 p.m. as local time and changes in baskets of currencies.
In an amusing aside, to justify the move, China stated that its “foreign-exchange market can be driven by irrational expectations, resulting in “unreal” supply and demand that increases the risk of overshooting… The counter-cyclical factor may ease “herd actions” and help guide investors to pay more attention to economic fundamentals, according to the statement.”
In other words, instead of “countercyclical”, the PBOC could have just called it a “fudge” factor, whose purpose was to tell the market that the change in yuan rate during any given day should not be validated by incorporation in the next fixing if the economic fundamentals do not warrant it.
In short, the factor’s return is just another way for the PBOC to strengthen the Yuan and it may explain why just two hours ahead of the Bloomberg flashing red headline, the USDCNY inexplicably plunged in afterhour markets as news of the resumption leaked across Chinese trading desks.
And sure enough, the USDCNH has continued to slide, dropping as low as 6.8264 from an overnight high just shy of 6.90.
As Bloomberg notes, “with the recent uptick in Asian exports and even Turkey’s recent descent from the front page headlines, this sort of measure could help provide a bit of stability to EM.”
No, it won’t eliminate the impact of further Fed tightening (and it seems unlikely that Powell will waver from the path this morning), but it might mitigate some of the ancillary concerns.
To be sure, the latest intervention by the PBOC should serve as the latest support for the Yuan at a time when as we noted last night, trade talks between China and the US had broken down with no tangible results, threatening to push the Chinese currency to the key level of 7.00 against the dollar if not lower.