Goldman Expected To Officially Name David Solomon Next CEO

The time has finally come for longtime Goldman Sachs CEO Lloyd Blankfein to stop doing “God’s work” and turn the management of the storied investment bank over to one of his lieutenants. According to the New York Times, Goldman is expected to officially name David Solomon as Blankfein’s successor as soon as Monday,months after the bank said Solomon would take over as the sole president of Goldman, effectively positioning him to be next in line to the throne.

David Solomon

Blankfein is expected to stay on “for an interim period” that will last at least until the end of the year. While Solomon’s status as CEO heir apparent was more or less confirmed earlier this year, the official announcement of his succession wasn’t expected until the fall. It wasn’t immediately clear what had prompted Goldman, which is set to release its second-quarter earnings on Tuesday, to formalize its succession plan so early.

Blankfein
Lloyd Blankfein

According to NYT, 63-year-old Blankfein, who once joked that he would “die at his desk”, has led the firm through radical changes and periods of tumult including the 2008 financial crisis and the reshaping of the bank’s business. Solomon joined Goldman as a partner in 1999 after a lengthy career at Bear Stearns, where he helped run the bank’s junk bonds business.

Mr. Solomon is a longtime investment banker who spent his formative years as a manager at Bear Stearns, where he helped run the bank’s junk bonds division. He joined Goldman as a partner in 1999 to work with its leveraged finance team and in 2006 he was named co-head of its investment bank. He held that job for the next decade before being named co-president of Goldman late in 2016. A little over a year later, he was named sole president and, with that, became the likely successor to Mr. Blankfein.

Mr. Solomon has said that priorities for the firm include working toward gender parity among its employees and improving the coordination between different divisions that serve the same clients. He has also been a big proponent of the firm’s nascent push into consumer banking, Goldman officials say.

Mr. Solomon, who works on strategy and deals with top executives at companies like Walt Disney Company, Uber and 3M, comes from one of the firm’s mainstay divisions. But his personal interests, which include a side gig as an electronic dance music D.J., would make him an unconventional bank chief executive.

Maybe Blankfein is rushing his departure because central banks have continued with their “buying up all the risky assets,” though volatility has returned to the market this year, a development that should help pad the bank’s profits and help Blankfein leave on a high note.

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Author: Tyler Durden

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Our Institutions Are Failing

Authored by Charles Hugh Smith via OfTwoMinds blog,

Our institutional failure reminds me of the phantom legions of Rome’s final days.

The mainstream media and its well-paid army of “authorities” / pundits would have us believe the decline in our collective trust in our institutions is the result of fake news, i.e. false narratives and data presented as factual.

If only we could rid ourselves of fake news, all would be well, as our institutions are working just fine.

This mainstream narrative is itself false: our institutions are failing, and the cause isn’t fake news or Russian hacking–the cause is insider plundering and collusion, aided and abetted by a decline in transparency and accountability and the institutionalization of incompetence.

In other words, the citizenry’s trust in institutions is declining because the failure of institutions is undeniably the fabric of everyday life in America.

When was the last time you heard the top management of a university system take responsibility for the unprecedented rise in the cost of tuition and textbooks? The short answer is “never.” The insiders benefiting from the higher-education cartel’s relentless exploitation of students and their families act as if the soaring costs are akin to cosmic radiation, a force of nature that they are powerless to control.

The same can be said of every other cartel plundering the nation: healthcare (i.e. sickcare, because profits swell from managing chronic illness, not from advancing health); the Big Pharma cartel; the military-industrial complex; banking; student loans; the governance-lobbying cartels; the war-on-drugs gulag, the FBI and so on in an endless profusion of insiders whose self-serving plunder and gross incompetence rarely generates consequences (such as being fired or indicted) due to an absence of accountability and transparency.

Incompetence has been institutionalized, and is now the accepted norm.Schools fail, municipal agencies fail, oversight agencies fail, state agencies fail, and the public feels powerless to effect any systemic change.

Changing the elected officials who are the citizens’ representatives does nothing to rid the system of incompetence or enforce accountability and transparency; the insider elites have wired the system to avoid responsibility and maintain their institutionalized skims regardless of who is in elected office.

Budgets never decline, they only expand. The system is organized to punish frugality and reward incompetence, sweetheart contracts, overtime, and ever higher public spending.

Calls to trim waste are met by gestures of powerlessness: rising costs and institutional failure are presented as the equivalent of gravity: we can’t change the system, it’s unstoppable.

The general public has largely lost the experience of public-sector/institutional competence and accountability. As a result, resignation is now the response. So the public dutifully waits in line for hours to renew a drivers license, despite having made an appointment online, to take one common example in California, which likes to pat itself on the back as the tech / progressive capital of the galaxy, if not the universe.

How is it “progressive” to rob the working stiffs who pay all the taxes hours of their life for something that should be routine and quick? Where’s the Big Data and high tech when it actually counts? If citizens had a choice to renew their drivers license at (say) Amazon or the DMV, do you reckon Amazon might not make everyone cool their heels for hours?

The list of gross institutional incompetence is truly endless in America:Universities that can’t offer enough classes so students can graduate from college in four years (oops, you have to pay another rip-off tuition fee for another semester to get those last few classes you need for your worthless diploma); finance departments that can’t track payments (so here’s your bogus late fees that will take hours to challenge), and on and on.

As for sickcare–how about the evidence-free embrace of synthetic heroin as a “safe” and “non-addictive” pain treatment? Skeptics were bulldozed or marginalized, because there was simply too much money to be made by jumping on the Oxy et al. bandwagon.

As Scientific American reported in its June 2018 issue, “Powerful drug-marketing efforts had somehow swamped science.” When a large study was finally done comparing the effectiveness of opioid and non-opioid drugs, “The results, published in March, were eye-opening. Patients given alternative drugs did just as well as those taking opioids in terms of how much pain interfered with their everyday life. In fact they reported slightly less pain and had fewer side effects.”

Yes, many transactions are more complex now than they were 30 years ago.30 years ago it took less than a day to obtain a building permit for an entire house in the rural county I lived in. Now it takes 3 to 4 months in the same county to get a permit, which must now be stamped by a licensed architect or engineer (at great expense, of course).

OK, we get it– things are more complex now. But how does a one-day process balloon into a 100-day process at best? We can understand a one-day process becoming a 3 day process, but did the complexity really rise 100-fold?

I think we all know the answer is “no.” The vast majority of the wasted time, effort and cost is the result of unaccountable insider incompetence enabled by a complete lack of accountability and transparency.

Conscientious public servants and institutional insiders are thwarted by incompetent managers, lazy co-workers and institutional bloat designed to increase costs and inefficiencies because higher budgets and inefficiencies boost payrolls and thus power. Organizations within the failing institutions are loathe to surrender their gravy trains, so they resist any change, even those which might have saved the institution from its inevitable collapse.

Our institutional failure reminds me of the phantom legions of Rome’s final days. Legions existed in the bureaucracy, and payrolls were sent to the pay masters, but the Legions were mere fictions–there were no soldiers, and no fighting force; there were only a few insiders skimming their take, confident that accountability and transparency had been irrevocably lost.

Systems fail one institution at a time. No wonder the super-wealthy are building bunkers.

*  *  *

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Author: Tyler Durden

“The Best Is Behind Us”: How A $139 Billion Fund Is Preparing For The Worst

While equities continue to take the risk of escalating trade wars in stride, ignoring the threat of an additional $200BN in tariffs on Chinese exports and pushing the S&P back above 2800, some investors are taking a far more cautious approach: instead of piling into tech names – the most popular trade of 2018 bar none – Australian investment manager AMP Capital Investors, which manages $139BN, is instead buying ultra-long bonds as a hedge for a worst case scenario, according to Ilan Dekell, the head of macro for global fixed income at the asset manager.

“Six weeks ago, we started increasing our duration in the 30-year part of the curve,” Dekell told Bloomberg in an interview in Sydney.  “It gives us a bit of protection. I can’t forecast the trade war.”

Doing the opposite of Horseman Capital, AMP Capital is also betting on continued dollar strength by shorting a basket of emerging-market currencies which have been pounded in recent months amid tightening global liquidity.

Looking ahead, Dekell said that “the best is probably behind us,” referencing the environment of synchronized and rising global growth and benign inflation seen earlier this year, which have since seen the US emerge as the leading dynamo of global growth largely on the back of Trump’s fiscal stimulus. And then there is the great unknown of what Trump may do or tweet at any moment: “The trade war adds to our concerns – our book overall is very conservative.”

While betting on lower long-term yields, the fund is also shorting two-year government notes, betting the ongoing yield curve steepening will continue as it sees the Federal Reserve raising interest rates two more times this year and thrice in 2019.

“We held our shorts in the two-year part of the curve” because of the rate hikes, said Dekell. “We’ve become more concerned and conservative about tightening conditions and we think the policy bias is higher.”

As the latest CFTC data reveals, the AMP position is against the market grain, with specs putting on record bets that the curve will steepen in the near future, as 2Y shorts have shrunk even as 10Y net spec shorts remain at record levels.

Dekell also has a negative outlook on emerging markets, seeing further weakness in EM assets, particularly in countries with current-account deficits such as Indonesia and India. Looking at the Australian dollar, Dekell said the currency is currently trading at “fair value” after predicting earlier in the year that the AUD would fall to 73 U.S. cents before the end of the year. “If you go down the route of trade wars and people getting concerned about China growth, then that would put downward pressure on the Aussie.”

AMP Capital is not alone to seek refuge from the coming storm in 30Y bonds: as Bloomberg notes, the same strategy is being used by Goldman Sachs Asset Management and QIC, while PIMCO previously said that it would seek a Treasury safe haven “if things get worse.”

The 30Y Tsy was yielding 2.93%, down from 3.26% mid-May, when it hit the highest level since September 2014. Recently, Morgan Stanley went so far as to call the peak in the 10-year yields amid trade concerns with the number of stories referencing “trade war” closely following the price on the 30Y Tsy.

Meanwhile the broader market remains overwhelmingly short the 30Y, with non-commercial net spec shorts targeting the Ultra bond in record amounts, providing continued ammo for a material short squeeze if economic growth in the US or globally were to take a leg lower, an outcome that is quite possible should the global trade wars accelerate . 

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Author: Tyler Durden

Key Events This Week: All Eyes On Powell

This week’s calendar features a steady stream of potentially interesting events culminating with Fed Chair Powell’s semi annual Monetary Policy Report, as well as the currently ongoing summit between President’s Trump and Putin, the overnight EU-China summit, US earnings including the remaining banks, the relatively subdued China Q2 GDP data and the slowdown in US retail sales data.

Fed Chair Powell is due to deliver his semiannual Monetary Policy Report to the Senate Banking Committee in Washington on Tuesday and then the House Financial Services Committee on Wednesday. Both events will include Q&A. The text of the report is not usually a market mover and it’s the Q&A next week which is more likely to be market sensitive. Last week’s comments from Powell were generally upbeat but the market might be focused on how the risks to the outlook have changed post the latest trade developments. Staying with the Fed, Vice Chair for Supervision Randal Quarles (neutral/voter) is to make introductory remarks at a roundtable event on Thursday and St Louis Fed President Bullard (dove/non-voter) is due to speak on Friday on the US economy and monetary policy.

Also of note is the summit between President’s Trump and Putin in Helsinki, which is currently in progress and which should add a bit of political drama to the start of the week. Expect the subject of economic sanctions on Russia imposed by the US and EU to be fairly high up the list of agenda items.

Meanwhile as DB’s Craig Nicol notes, earnings will start to ramp up next week with 64 S&P 500 companies set to report including the remaining US banks and some of the tech heavyweights. In terms of the highlights, we’ll get Netflix after the close, with Bank of America reporting generally solid numbers earlier, while Johnson and Johnson and Goldman Sachs are due on Tuesday, Morgan Stanley, IBM and eBay on Wednesday, Microsoft on Thursday, and General Electric on Friday.

As for data, well the most anticipated print of the week already hit when we get the Q2 GDP print in China, and which slowed again in line with expectations, at 6.7%, the slowest growth in 2 years, Separately, while Chinese retail sales beat, the market was disappointed by the slowdown in industrial production.

In the US it’s a particularly light week for data and the main highlight is the just reported June retail sales report, which came in line but missed modestly ex autos and gas, following an upward revised May print. Other data worth highlighting in the US is June industrial production on Tuesday (+0.5% mom expected), June housing starts and building permits prints on Wednesday and the June leading index on Thursday.

It’s not alot more exciting for data in Europe although the focus should lie with the UK where there is more than enough to keep markets busy, especially with the August BoE policy meeting outcome still far from certain. On Tuesday we’ll get the May and June employment report where expectations are for a +2.7% 3m/yoy weekly earnings ex bonus print, and no change in the unemployment rate at 4.2%. On Wednesday we’ll then get the June CPI/RPI/PPI data docket. Core CPI is expected to hold at +2.0% yoy. On Thursday June retail sales data is then due in the UK. It’s worth noting that we’ll also get the broad Eurozone final June CPI report on Wednesday with the market consensus for a +1.0% yoy reading, unchanged from May.

Other interesting things to watch out for next week include China Premier Li Keqiang co-hosting the China-EU summit with European Council President Tusk and European Commission President Juncker on Monday. One would expect there to be plenty of chat about trade, as well as the WTO. The IMF’s latest World Economic Outlook will also be out on Monday, while on Tuesday Japan PM Abe will meet Tusk and Juncker to sign an EU-Japan trade agreement. Finally on Thursday the US Commerce Department is due to start two days of hearings into an investigation on if auto imports pose a national security threat or not.

Courtesy of Deutsche Bank, here is a summary of the key events by day:

Monday: We look set to start the week with a bit of a bang on Monday with the main data highlight being the early morning Q2 GDP release in China. As well as that, we’ll also get June retail sales, industrial production and fixed asset investment data in China. In Europe, the July Rightmove house price data in the UK followed by the release of the May trade balance for the Eurozone are due. In the US the highlight is likely to be the June retail sales report, while the July empire manufacturing report and May business inventories data are also due. Away from that, Bank of America and Netflix are due to report their Q2 earnings while the IMF is due to release it’s World Economic Outlook. Politics is likely to be a big focus too with US President Trump holding talks with his Russian counterpart President Vladimir Putin and the China – EU summit starting in Beijing.

Tuesday: The main highlight on Tuesday is likely to be Fed Chair Powell delivering his semi-annual testimony to the Senate Panel in the afternoon. Datawise, May and June employment data in the UK will be a focus, while June EU27 new car registrations and the final June CPI release in Italy are also due in Europe. In the US we’ve got June industrial and manufacturing production prints along with the July NAHB housing market index release all scheduled. Q2 earnings for Goldman Sachs and Johnson & Johnson are also due.

Wednesday: With nothing of note in Asia overnight on Wednesday, it’s straight to Europe where we get June CPI, PPI and RPI data in the UK along with the May house price index print. This is followed by the release of the final June CPI report for the Euro area, along with May construction output data. In the US, June housing starts and building permits data is due before the Fed’s Beige Book in the evening. Morgan Stanley, IBM and eBay will also be reporting their Q2 earnings. Fed Chair Powell will also appear before the House Financial Services Committee.

Thursday: It’s a quiet day for data on Thursday. Overnight we’ll get the June trade balance reading in Japan. This is followed by the release of the June retail sales print in the UK, while in the US, the latest weekly initial jobless claims data is then followed by the release of the July Philadelphia Fed business outlook and June leading index prints. Away from that, Microsoft will be releasing its Q2 earnings. The Fed’s Quarles is also due to speak in the afternoon.

Friday: Overnight on Friday we’ll get the June CPI print in Japan. In Europe, June PPI in Germany is followed by the May current account balance reading for the Eurozone and June public finances data in the UK. There is nothing of note in the  US on Friday. Away from the data, the Fed’s Bullard will speak on the U.S. economy and monetary policy at a Glasgow Chamber of Commerce breakfast in Glasgow, Kentucky in the afternoon. We’ll also get Q2 earnings from General
Electric on Friday.

* * *

Finally, here is Goldman with a detailed breakdown alongside consensus expectations:

The key economic releases for the coming week include retail sales on Monday and industrial production on Tuesday. In addition, there are several scheduled speaking engagements by Fed officials this week, including Fed Chairman Powell’s testimony to Congress on Tuesday and Wednesday

Monday, July 16

  • 08:30 AM Retail sales, June (GS +0.3%, consensus +0.5%, last +0.8%); Retail sales ex-auto, June (GS +0.2%, consensus +0.3%, last +0.9%); Retail sales ex-auto & gas, June (GS +0.2%, consensus +0.4%, last +0.8%); Core retail sales, June (GS +0.2%, consensus +0.4%, last +0.5%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose at a subdued pace in June (+0.2% mom sa), reflecting softer chain store results and a possible pullback among clothing and department stores. Based on the rebound in auto SAAR but a seasonally adjusted decline in gasoline prices, we estimate 0.3% and 0.2% respective increases in the headline and ex-auto measures.
  • 08:30 AM Empire State manufacturing index, July (consensus +21.0, last +25.0)
  • 10:00 AM Business inventories, May (consensus +0.4%, last +0.3%)

Tuesday, July 17

  • 09:15 AM Industrial production, June (GS +0.5%, consensus +0.5%, last -0.1%); Manufacturing production, June (GS +0.7%, consensus +0.6%, last -0.7%); Capacity utilization, June (GS +78.2%, consensus +78.2%, last +77.9%): We estimate industrial production rose 0.5% in June, largely driven by a sizeable rebound in auto manufacturing as production resumed at a light truck manufacturing plant following a fire in early May. We estimate capacity utilization edged up three tenths to +78.2% in June.
  • 10:00 AM Fed Chairman Powell appears before the Senate Banking Committee: Federal Reserve Chairman Jerome Powell will appear before the Senate Banking Committee to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers. We expect his testimony to be in line with the June FOMC statement and the post-meeting press conference.
  • 10:00 AM NAHB housing market index, July (consensus 69, last 68)

Wednesday, July 18

  • 08:30 AM Housing starts, June (GS -3.5%, consensus -2.2%, last +5.0%); Building permits, June (consensus +2.2%, last -4.6%): We estimate housing starts declined 3.5% in June, retracing some of the 5.0% May rise, which was entirely concentrated in the Midwest. We expect a softer number because single-family starts now look elevated relative to single-family permits.
  • 10:00 AM Fed Chairman Powell appears before the House Financial Services Committee: Federal Reserve Chairman Jerome Powell will appear before the House Financial Services Committee to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers.
  • 02:00 PM Beige Book, July FOMC meeting period: The Fed’s Beige book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The June Beige Book reported growth at a moderate pace across the country and noted a positive outlook for overall near-term growth, though some contacts continued to express concerns related to trade policy uncertainty. It also reported that labor markets continued to tighten, leading some firms to increase wages or total compensation. In the July Beige book, we look for additional anecdotes related to trade policy uncertainty, price inflation, and wage growth.

Thursday, July 19

  • 08:30 AM Initial jobless claims, week ended July 14 (GS 225k, consensus 221k, last 214k); Continuing jobless claims, week ended July 7 (consensus 1,725, last 1,739k): We estimate initial jobless claims increased by 11k to 225k in the week ending July 14, 2k above the prior four-week moving average. We continue to expect a temporary boost from auto plant shutdowns. Consensus expects continuing claims — the number of persons receiving benefits through standard programs — to decline 14k to 1,725k.
  • 08:30 AM Philadelphia Fed manufacturing index, July (GS +24.0, consensus +21.5, last +19.9); We estimate the Philadelphia Fed manufacturing index rebounded 4.1pt to 24.0 in July, retracing part of the 14.5pt sharp decline to 19.9 in June. Given encouraging industrial sales commentary, we expect an elevated reading this month.
  • 09:00 AM Vice Chairman for Supervision Quarles (FOMC voter) speaks: Federal Reserve Vice Chairman for Supervision Randal Quarles will give introductory remarks to an Alternative Reference Rates Committee Roundtable in New York via pre-recorded video. Prepared text is expected.

Friday, July 20

  • 08:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks; St. Louis Fed President James Bullard will present on the U.S. economy and monetary policy at a Glasgow Chamber of Commerce Breakfast in Glasgow, Kentucky. Prepared text and audience and press Q&A are expected.

Source: DB, Goldman, BofA

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Author: Tyler Durden

Consumer Credit Binge Hangover Sparks Slowdown in Retail Sales Growth

Following May’s exuberant jump (revised even higher to +1.3% – biggest since Sept 2017) which coincided with a massive spike in consumer credit, June’s retail sales growth slowed notably (+0.5% as expected).

Retail Sales ex-Autos beat expectations, rising 0.5% vs 0.4% expected, but slowing dramatically from an upwardly revised May spike of 1.3% MoM; but retail sales ex-autos and gas disappointed.

However, the control group’s growth (ex-food, auto dealers, building materials, and gas stations) collapsed to unchanged in June (against expectations of a 0.4% MoM jump)…

 

Under the hood it was a mixed picture, with 8 of 13 major retail categories showed increases, according to the Commerce Department data.

Up:

  • Motor Vehicle and parts dealers: +0.9%
  • Furniture and home furnishing stores: +0.6
  • Building material and garden equipment: +0.8%
  • Health and personal care stores: +2.2%
  • Gasoline stations: +1.0%
  • Nonstore (internet) retailers: +1.3%
  • Food service and drinking places: +1.5%
  • Miscellaneous store retailers: +0.2%

Down:

  • Electronics and appliance stores: -0.4%
  • Food and beverage stores:  -0.3%  
  • Clothing and clothing accessories stores: -2.5%
  • Sporting goods, hobby, musical and book stores: -3.2%
  • General Merchandise stores: -0.8%

So, once again, retail sales seems as dependent on the gusher of available consumer credit as any sentiment-driven impact.

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Author: Tyler Durden

15 Flashpoints That Could Produce A “Perfect Storm” In H2 2018

Authored by Michael Snyder via The American Dream blog,

Events are beginning to greatly accelerate, and many believe that the ingredients for a “perfect storm” are starting to come together as we enter the second half of 2018.

Other than the continual drama surrounding the Trump presidency, things have been quite calm for the past couple of years. We have been enjoying a time of peace, safety and relative economic prosperity that a lot of Americans have begun to take for granted. But great trouble has been brewing under the surface, and many are wondering if we are about to reach a major turning point. Our planet is being shaken physically, emotionally and financially, and it isn’t going to take much to push us over the edge. The following are 15 flashpoints which could create world changing events during the 2nd half of 2018…

#1 War In The Middle East – A state of war already exists in Israel. 200 rockets and mortar shells were fired into Israel on Saturday alone, and it won’t take much to spark a much broader regional war.

#2 Civil Unrest In U.S. Cities – Progressives are promising a “summer of rage”, and they are assuring us that all of the anger that has been building up against President Trump and his administration is about to starting boiling over onto the streets of our major cities all across America.

#3 The Nomination Of Brett Kavanaugh To The Supreme Court – Prominent liberals are stoking fears that the Supreme Court will start taking away “our most cherished liberties” if Brett Kavanaugh is confirmed by the Senate. Expect Washington D.C. to be the focus for a lot of the chaos that will happen later this summer.

#4 Tensions In The Windy City – The City of Chicago is a powder keg that could erupt at any moment. The recent shooting of a young African-American man resulted in a violent night of protests, and we should expect much more chaos in the days ahead.

#5 The 2018 Mid-Term Elections – These are probably the most important mid-term elections in modern American history, and tempers are running high on both sides. At this point the left appears to have more energy than the right, as they have accumulated a voter registration lead of 12 million in states that require party affiliation.

#6 Hillary Clinton – Hillary has been acting very much like a presidential candidate in recent days, and she has been continually fueling hatred for Donald Trump during her public appearances. Many believe that she will launch yet another campaign for the presidency once the 2018 mid-term elections are over.

#7 The U.S. Border With Mexico – President Trump’s immigration policies have absolutely infuriated the left, and Mexico’s new president is a radical socialist that absolutely hates Donald Trump and that has declared that immigration to the United States is a “human right”. It is difficult to see how this crisis is going to end well.

#8 The Trade War Between The United States And China – A full-blown trade war has erupted between the two largest economies on the entire planet. U.S. consumers are going to have to start paying much more for certain goods, and U.S. businesses that are heavily dependent on exports are going to have to start laying off workers.

#9 The Deteriorating Relationship Between The United States And Russia – Russia has become the “boogeyman” that gets blamed for everythingthese days, and relations between our two nations are the worst that they have been since the Cold War. Hopefully Trump and Putin can change that, but it is hard to be optimistic at this point.

#10 Will NATO Survive? – Donald Trump has threatened to pull the United States out of NATO if European leaders do not “immediately” begin increasing defense spending.

#11 The Stock Market – Markets all over the world have already been plummeting, and the smart money in the United States is getting out of the market at a pace that we haven’t seen since 2008. We are way overdue for a major crash, and if one happens during the second half of 2018 it definitely will not be a surprise.

#12 The Price Of Oil – The price of oil has reached levels not seen in many years, and many believe that the price is going to go much higher. This is already putting a tremendous amount of strain on working families all over America.

#13 The Political And Financial Crisis In Italy – The Italian government is going through an enormous amount of turmoil right now, and there are rumblings that the Italians may decide to leave the euro altogether. If that happens, we should expect to see the greatest financial shaking in modern European history.

#14 Earth In Travail – More than 30 volcanoes are erupting all around the world right now, and seismic activity appears to be escalating along the Ring of Fire. It is only a matter of time before we have a major seismic event in the United States, but hopefully that will not happen within the next six months.

#15 Drought In The Southwest – A devastating drought of historic proportions has already caused “Dust Bowl conditions” to return to some areas of the Southwest. If more rain doesn’t start falling, farmers and ranchers in the region are going to be absolutely crippled.

Of course it is inevitable that we will face some moments of crisis during the second half of 2018 that have nothing to do with the items on this list. One thing that is always true about life is that it is unpredictable, and so we should expect the unexpected.

But what virtually everyone should be able to agree upon is the fact that we are witnessing a very strange confluence of events that is unlike anything that we have witnessed in a very, very long time.

Is America about to plunge into a time of unprecedented turmoil? Only time will tell, but all of the ingredients are definitely there, and if a “perfect storm” does emerge during the second half of 2018 there are many of us that won’t be shocked at all.

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Author: Tyler Durden

Soros-Linked Nonprofit Led By Clinton & Obama Alum Spending Millions To “Stop” Kavanaugh

Today’s edition of “George Soros Meddles” is brought to you by ten-week-old political advocacy group Demand Justice – a Soros-linked organization which has pledged $5 million towards a “multi-platform” campaign to stop Judge Brett Kavanaugh’s confirmation to the US Supreme Court.

Headed by former Clinton campaign press secretary Brian Fallon and longtime Obama aide Christopher Kang as chief counsel, Demand Justice was created and financed by nonprofit organization the Sixteen Thirty Fund,which has received millions from the Open Society Policy Center (OSPC), according to the Daily Callers Kevin Daley and Andrew Kerr.

As we reported two weeks ago, Demand Justice intends to fight “Trump’s hateful vision for America” by opposing his Judicial picks across the country – including the Supreme Court.  

The campaign will feature television spots promoting embattled Democratic Senate incumbents in West Virginia, Indiana, and North Dakota, who face competitive Republican challengers this November.

They will also run ads in Maine and Alaska, urging GOP Sens. Susan Collins and Lisa Murkowski to oppose the nomination. Collins and Murkowski are pro choice moderates who have broken with their party on Obamacare repeal and federal funding for Planned Parenthood. The spots urge the senators to protect abortion access by withholding support for nominees who oppose the 1973 Roe v. Wade decision. –Daily Caller

The Sixteen Thirty Fund collected some $2.2 million in contributions from the OSPC between 2012 and 2016 – while more recent records are not available. The OSPC, meanwhile, is virtually indistinct from Soros’s Open Society Foundations (OSF), the 87-year-old’s grant-giving and philanthropic network. 

The [Sixteen Thirty] Fund is largely financed by a handful of donors. Financial statements filed with state oversight officials in 2014 show just three contributors accounted for 70 percent — or some $11.5 million — of the Fund’s total donations and grant revenue. Disclosure forms filed with the same agency in 2016 present similar facts. Fewer than five donors gave $13.3 million to the Fund, representing 63 percent of their donations.

One of those donors is the OSPC. The Center’s tax forms show the Soros group gave hundreds of thousands of dollars to the Fund each year between 2012 and 2016, the last year in which records are publicly accessible. The Center gave the Fund $350,000 in 2012, $772,000 in 2013, $125,000 in 2014, $550,000 in 2015, and $481,483 in 2016. –Daily Caller

The Caller reports that the OSPC has no staff of its own – rather, Open Society Foundation employees are compensated for work done on OSPC efforts. 

“OSPC has no employees,” the form reads. “Employees of Open Society [Foundations], a related section 501(c)(3) tax-exempt organization, perform services for OSPC. OSPC advances funds to Open Society [Foundations] for their services based on the time they spend on OSPC matters. Their compensation is determined by Open Society [Foundations], and is based on market comparability data and is documented in Open Society [Foundations’] records.”

The Sixteen Thirty Fund created Demand Justice in May of this year in order to counter a network of conservative advocacy groups which “advertise and organize around judicial confirmations,” according to the Caller

Republicans have significantly outpaced Democrats in this space in recent years, given conservative voters’ sustained interest in the federal courts.

Executive director Brian Fallon told The New York Times that DJ hopes to “sensitize rank-and-file progressives to think of the courts as a venue for their activism and a way to advance the progressive agenda.” –Daily Caller

Hillary Clinton threw her support behind her former Press Secretary’s new political machine in a late June tweet:

“Long after Donald Trump is no longer our President, his takeover of our courts will keep alive his hateful vision for America for decades to come,” their website reads. “Trump’s judges are overwhelmingly white men. Many are not at all qualified for their posts. And they consistently hold extreme, right-wing views.”

If we truly want to stop Trump, we can’t surrender this fight.” -Demand Justice

Since the Sixteen Thirty Fund serves as Demand Justice’s fiscal sponsor, it doesn’t submit its own tax returns or disclose its supporters. As such, beyond the Soros network’s $2.2 million contribution to Sixteen Thirty over five years – it’s difficult to determine how much money individual donors like Soros have channeled directly to Demand Justice since its inception ten weeks ago. 

The National Council of Nonprofits says that fiscal sponsors provide “fiduciary oversight, financial management, and other administrative services” for its dependents, like Demand Justice. As such, many grants or donations DJ receives are awarded by way of the Fund. Both organizations are based out of the same Washington, D.C., address.

Supporters can also give to DJ through ActBlue Civics, a major fundraising platform for leftwing causes.

Given this structure, it is difficult to know how much money individual donors like Soros have channeled to Demand Justice. Daily Caller

Meanwhile, Capital Research noted last month that “coupled with the fact that Fallon recently spoke at the Atlanta Conference of the Democracy Alliance, a shadowy network of left-leaning donors including George Soros, it is clear that Demand Justice could be well on its way to becoming something much bigger than the obscure nonprofit it is now. As a (c)(4), it is allowed to engage in unlimited lobbying. But it can also support or oppose candidates for election (as long as that activity isn’t the organization’s primary purpose, which currently means spending no more than 49 percent of expenditures on electioneering).”

And just like that, the newly formed, Soros-linked, Obama and Clinton alum operated nonprofit has sprung up with a $5 million “multi-platform effort” to prevent Judge Brett Kavanaugh’s ascension to the US Supreme Court.

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Author: Tyler Durden

BofA Boasts Of “Best First Half In History” Despite Revenue Drop, Muted Loan Growth

Bank of America joined JPMorgan (if not Wells Fargo) in reporting Q2 earnings that beat on the top and bottom line, reporting Q2 Net Income of $6.8 BN, up 33% from the $5.1BN a year ago, and EPS of $0.63, above consensus exp. of $0.57, and the highest quarterly EPS in the past decade, on revenue of $22.6BN, less than last year’s $22.8BN but better than the $22.1BN expected. According to CFO Paul Donofrio on the earnings call, this was “the best first half in the company’s history” even though the bank just reported its first revenue decline in 2 years.

A big contributor to the jump in the bottom line is the lower tax rate, although pretax income also jumped 11% due to “improved operating performance.”

CEO Moynihan noted the bank’s expense cutting, expenses as well as growth in different areas of the bank:

Solid operating leverage and client activity drove earnings higher this quarter. Responsible growth continued to deliver as a driver for every area of the company. We grew consumer and commercial loans; we grew deposits; we grew assets within our Merrill Edge business; we generated more net new households in Merrill Lynch; and we supported more institutional client activity — all of this while we continued to invest in our businesses and began an additional $500 million technology investment, which we intend to spend over the next several quarters, due to the benefits we received from tax reform.’

As it has done in recent quarters, BofA showed a chart demonstrating its improving operating leverage, which has increased for 14 consecutive quarters, with Q2’s decline in revenue growth offset by a bigger Y/Y drop in operating expenses.

Looking at the balance sheet, BofA reported a very modest, 2% Y/Y increase in loans and leases, which rose to $935BN in Q2 from $932BN in Q1 and up from $915BN a year ago, missing expectations of $943BN and surprising many market observers . The modest increase was the result of an increase in loans in Consumer banking, Wealth Management, Global Banking and Global Markets, offset by a drop in Residential Mortgage and Home Equity loans.

While loans increased, deposits declined modestly, from $1.328TN  in Q1 to $1.310TN in Q2. The bank notes that rising rates are causing some wealthy clients to move their money from lower-yielding deposits to higher yielding investments in the Global Wealth and Investment Management business, a part of the so-called “deposit beta” shift.

Looking at the bank’s asset quality, the bank reported total net charge-offs of $1.0B, which increased $0.1B from 1Q18; with the net charge-off ratio increasing 3 bps to 0.43%.  Consumer net charge-offs were flat at $0.8B, and reflected seasonally higher losses in credit card, offset by improvement in home equity. Meanwhile, provision expense of $0.8B decreased modestly from 1Q18. BofA also took advantage of a net reserve release of $0.2B in 2Q18, which reflected “improvements in consumer real estate and energy, partially offset by portfolio seasoning in consumer credit card.”

The Provision for credit card losses also jumped by just over $100MM Y/Y to $827MM, from $726MM a year earlier.

BofA’s allowance for loan and lease losses of $10.1B, represented 1.08% of total loans and leases, while nonperforming loans (NPLs) decreased $0.5B from 1Q18, “driven by improvements in both consumer and commercial.”

Looking at the income statement, the bank reported a 6% increase in net interest income to $11.7 billion, driven by higher interest rates and one additional interest accrual day, partially offset by seasonally lower Global Markets and credit card NII, and increased $0.7BN from 2Q17, reflecting higher interest rates and loan and deposit growth, offset by a decline resulting from the sale of the non-U.S. consumer credit card business in 2Q17 and higher funding costs in Global Markets.

However, in a disappointing tangent, BofA also reported a decline in its NIM, with net interest yield declining by 1 basis point to 2.38% from 2.39% last quarter, if 4 bps higher from 2Q17, which “reflected the benefits from spread improvement, offset by a reduction in the non-U.S. consumer credit card portfolio (higher-yielding asset), as well as the impact from an increase in Global Markets assets (lower-yielding).” BofA also clarified that excluding Global Markets, the net interest yield would have been 2.95%, up 12 bps from 2Q17.

While net revenue dipped by $200MM, this was more than offset by a $600MM drop in noninterest expense, which declined 5% from $14.0N to $13.3BN Y/Y, “due to the absence of a $0.3B impairment charge in 2Q17 related to certain data centers, as well as reduced support costs and lower litigation.” Noninterest expense also declined from 1Q18, due primarily to the absence of seasonally elevated payroll taxes, while the efficiency ratio improved to 59% in 2Q18.

Revenues at the consumer bank were up from higher interest rates, deposit and loan growth, and higher income from cards. The one offset was lower mortgage banking income. Here BofA also set more money for credit losses, with provisions for credit losses increasing $110 million to $944MM, which the bank attributed to credit-card portfolio seasoning and loan growth.

The consumer bank’s also said that deposit transactions over mobile devices exceeded ones in the bank’s financial centers for the first time. Digital sales now account for 24% of all consumer banking sales, BofA says.

Finally, something interesting: the rate on BofA’s total interest-bearing deposits ($873BN) rose from 0.17% in Q2 2017 to 0.43% this quarter as the Fed’s monetary tightening continues.

* * *

But focusing on the one income segment which is of most interest to investors, the bank’s Global Markets, the bank reported beats across all key segments. Sales and trading revenue of $3.4B increased 6% from 2Q17, with FICC flat at $2.1B and Equities up 19% to $1.3B.

A detailed breakdown below:

  • Trading revenue (ex DVA) $3.6BN, up 7% Y/Y, beating the estimate $3.39BN
  • FICC trading revenue (ex DVA) $2.29 billion, up 2% Y/Y, beating the estimate $2.17BN
  • Equities trading revenue (ex DVA) $1.31 billion, up 17% Y/Y, beating the estimate $1.21BN.

As Bloomberg notes, looking at BofA’s sales & trading revenues, it “looks like a 17% boost in equities helped them post flat results, similar to what happened at JPMorgan last Friday. As we know, volatility (judging by the VIX index) increased a little bit in June compared to the first two months of the quarter.”

Separately, average total assets increased 5% from 2Q17, while the average VaR declined once more, to a multi-year low low of $30MM in 2Q18 as the bank refuses to take on substantial trading risk.

Net, the results were hardly impressive, with results across the various individual business lines slightly better than expected but hardly spectacular, with loan growth disappointing, however the negative was more than offset by the big drop in expenses. Bank of America shares are up some 1% in the pre-market.

Full presentation below (link).

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Author: Tyler Durden

Bitcoin Bounces Back Above $6500 After BlackRock Creates Crypto Team

Following new last week that billionaire investor Steven Cohen was said to have put money into a hedge fund focusing on crypto, Bitcoin et al. are extending gains today following headlines that BlackRock has formed a team to look into ways to take advantage of the cryptocurrency market and blockchain.

In the last week we have seen the owner of Switzerland’s securities exchange in Zurich say it’s creating a platform for trading digital assets.

Then, according to Fortune, none other than billionaire Steve Cohen has decided to join the bitcoin party and has invested in a Autonomous Partners, a relatively new hedge fund that is acquiring both cryptocurrencies and blockchain-related companies.

And now, as Financial News reports, the world’s largest asset manager will examine whether the manager of $6.3 trillion of assets should invest in Bitcoin futures.  It is also reportedly reviewing what competitors are doing with cryptocurrencies and how it would affect its business.

Notably, the formation of the team marks a change for the company after CEO Larry Fink said in October cryptocurrencies are a speculative platform in Asia and heavily used for money laundering. He has also said Bitcoin and other cryptocurrencies were “far from” being an opportunity for institutional investors, and none of BlackRock’s clients wanted to invest in it, according to Financial News.

And all of this comes after JPMorgan, Fidelity, and CME among others have stepped into the crypto mix.

Bitcoin has spiked back above $6500, back at one-week highs…

And the rest of the crypto space is rising also – led by Bitcoin Cash…

So the big question is – Is the institutional investor finally ready to join the crypto party?

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Author: Tyler Durden

Trump, Putin Arrive In Helsinki Ahead Of Historic Summit

President Trump and First Lady Melania Trump arrived in Helsinki late Sunday night for his long-awaited summit meeting with Russian President Vladimir Putin, according to the Financial Times. And though the two leaders have met before, Monday’s summit will mark the first sit down meeting between the two leaders since Trump’s inauguration. In an interview that aired yesterday, Trump cautioned that he has “low expectations” going into the summit, because no matter what he accomplishes, the media and Trump’s political opponents will treat him like it wasn’t enough.

Trump said Friday during his press conference with UK Prime Minister Theresa May that he expects to discuss Syria, Ukraine and terrorism with Putin. He said later that he would consider asking Putin about the possibility of extraditing the more than two dozen Russians who have now been indicted by the DOJ over allegations of interference in the 2016 election.

Trump

Just hours before meeting with Putin, Trump blamed former President Barack Obama for the so-called Russian interference during the election because Obama knew about the interference but chose to do nothing, and slammed his political opponents for allowing the US’s relationship with Russia to deteriorate to a point where it “has never been worse.”

Following Friday’s latest round of indictments against a dozen Russian military intelligence officials, Democratic lawmakers slammed Trump for refusing to cancel the meeting.

And while Trump berated his political opponents for taking advantage of the indictments and their timing to try and foil the long-anticipated meeting between the two world leaders, National Security Advisor John Bolton said on Sunday that the president had been briefed in advance about the indictments of the Russian intelligence agents. According to Reuters, Trump appeared upbeat during a breakfast meeting with Finland’s president before the meeting with Putin in the Finnish capital, even tweeting his thanks to his hosts for their hospitality.

Shortly before the meeting was set to begin, Putin was filmed getting off his presidential aircraft in Helsinki.

The Kremlin has said it doesn’t expect an easy meeting after pushing back against President Trump’s criticisms of a planned Russian gas pipeline to Germany, while suggesting it could be difficult to find common ground on Syria thanks to tensions over Iran.

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Author: Tyler Durden