Posts Categorized: Jim’s Mailbox

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Jim/Bill,

On Saturday, Denny asked what Turkey’s breaking with NATO would mean for the USA as the former world leader.

Dave

Post-Trump, Macron Is Enlightened And Sochi Is The New Washington
November 2, 2019

Now that it’s all over but the shouting, a few people need to be thinking about the future, as Trump’s long-delayed impeachment gets underway. In the US, this will be a difficult exercise, due to the riveting, minute by minute coverage of a process that will continue for months, leading into the 2020 presidential election. However, on a positive note, America’s soap opera is forcing Europeans to begin a process that that has been delayed since the fall of the Berlin Wall and the dissolution of the Soviet Union.

Decades after these earth-shattering events, Europe is weakened by the triple difficulties of immigration, right-wing populism and continued obedience to Washington. As French President Emanuel Macron takes over from Angela Merkel’s decades-long leadership, Europe is no longer a model for social-democracy, but a cacophony. Although France is ‘the US’s closest ally after Great Britain’, only the website of a Russian-American known as The Saker publicized Macron’s recent, stunning acknowledgement that the world is fundamentally changing. In a yearly speech to France’s Foreign Ambassadors that reflects an education system based upon the rigorous analysis of complex ideas, (incarnated in the ‘dissertation’ that even science majors must master) forty-one year-old Macron announced that the international order is being shaken to its roots “by the great upheaval taking place for the first time in history.”

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Jim/Bill,

On Saturday, we talked about gun barrel diplomacy.

Dave

China Breaks The Western Debt Stranglehold On The World
November 2, 2019

The difference between the west and east is stark. While anybody and any country that does not agree with the US dictate and doctrine, risks being regime-changed or bombed, China does not impose her new Silk Road – the BRI – to any country. China invites, respecting national sovereignty. Who wants to join is welcome to do so. That applies as much to the Global South, as it does to Europe.

China’s President Xi Jinping launched the BRI in 2013. In 2014 Mr. Xi visited Madame Merkel in Germany, offering her to be at that time the western-most link to the BRI. Ms. Merkel under the spell of Washington, declined. President Xi returned and China continued working quietly on this fabulous worldwide economic development project – BRI – THE economic venture of the 21st Century, so massive that it was incorporated in 2017 into the Chinese Constitution.

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Jim/Bill,
Ever wonder why skyscrapers aren’t built 200, 300, 500, or more stories high?
The foundation can’t support them.
No different with debt.
Collapse is imminent.
This is a chart worthy to hang on your wall for a continual reminder of our precarious position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

And this one points to the growing fear pervasive at the FED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Be afraid. VERY afraid.
CIGA Wolfgang Rech

The ‘Mother Of All Bubbles’ Could Blow Up The Economy If Profits Don’t Improve, Warns Blackstone Strategist
November 4, 2019

“When we try to pick out anything by itself, we find it hitched to everything else in the universe,” wrote famed naturalist John Muir more than a century ago, referring to an epiphany he had while hiking in California’s Yosemite Valley.

In our call of the day, Blackstone BX, -1.04% strategist Joseph Zidle offers a similar take, but with dollar signs instead of granite cliffs.

“At the end of any economic cycle, we often get warnings that appear to be unrelated,” he wrotein a recent not. “It’s in hindsight that we realize that they were not at all random.” Investors saw this during the runup and aftermath of the housing bubble, he added, and we’re seeing it now.

Among the recent troubles he thinks are connected are repo market woes, negative-yielding debt, global trade conflicts and collapsing manufacturing. And every cycle ends with excess.

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Bill/Jim,

When JPM begins forfeiting higher yields from corporate lending, and parks its stash in 1.5% government bonds, it should send a red flag to all.

Expect a wave a defaults.  Not that “govvies” will protect them should yields soar on oversupply, but at least they’ll have a more liquid exit door.

This is NOT the bull market and roaring economy we are led to believe.

CIGA Wolfgang Rech

As I wrote in my article for subscribers today, “don’t listen to what they say, watch for what exactly they are doing”!

Bill

JPMorgan Pours $130bn Of Excess Cash Into Bonds In Major Shift
November 3, 2019

JPMorgan Chase has pushed more than $130bn of excess cash into long-dated bonds and cut the amount of loans it holds, marking a major shift in how the largest US bank by assets manages its enormous balance sheet. The moves, which have seen the bank’s bond portfolio increase by 50 per cent, are prompted by capital rules that treat loans as riskier than bonds. As it continues to return billions of dollars to shareholders in dividends and share buybacks each year, JPMorgan has less room than some rivals to hold riskier assets.

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Jim/Bill,

Key words, both party’s and the media.

Dave

The Political Parties & The Media Have Abandoned The Working “Middle Class”
October 31, 2019

. . .

What differentiates classes now is debt, employment security and the ability to build household capital that isn’t just a sand castle of speculative bubble “wealth.” The worker with tradecraft skills (welding, logger, etc.) has more security and earning power than a college graduate with few skills that can’t be outsourced or automated.

Many college graduates work in sectors that are highly exposed to layoffs and downsizing once the economy contracts: food and beverages, hospitality, etc.

All of which leads us to a highly verboten conclusion: both political parties and the corporate media have abandoned the 2/3 of the workforce that is working/middle class. The bottom 20% dependent on government transfers has more security than those earning just enough to disqualify the household for transfers, while the top 15% in the Protected Class are doing just fine unless they’re over-indebted.

The winner take most class and the wealthy dominate both political parties and the media which is now dependent on advertising that appeals to the top 10% of households that collect more than 50% of the national income.

The political parties take care of the government dependent class to keep the rabble from rebelling, and they keep the government gravy train flowing to the Protected Class (healthcare, national defense, academia, government employees) to insure their support at election time, but they take their marching orders from the Aristocracy / Oligarchy that fund their campaigns and enrich them with $100,000 speaking fees, seats on the board of directors, etc.

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Bill/Jim,

Deep State is all about removing your vote and your rights.

JB.

Wait a minute, people used to call us whack job conspiracy theorists whenever we used the term “deep state”…you mean we were right and the deep state actually does exist?

Bill

“Thank God For The Deep State”: Intel Agents Admit They Want To “Take Out” Trump
November 1, 2019

Authored by Steve Watson via Summit News,

“These are people who are doing their duty or responding to a higher call.”

 

 

 

 

 

 

 

 

 

Two former intelligence heads bragged about how the deep state is engaged in a coup to remove President Trump Thursday, with one even praising God for the existence of the deep state.

During an interview with Margaret Brennan of CSPAN, former CIA head John McLaughlin along with his successor John Brennan both basically admitted that there is a secretive cabal of people within US intelligence who are trying to ‘take Trump out’.

“Thank God for the ‘Deep State,’” McLaughlin crowed as liberals in the crowd cheered.

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Jim/Bill,

Boiling cauldron of Fiat spreading everywhere.

JB

We Now Have Mass Public Unrest In France, Spain, Algeria, Iraq, Lebanon, Egypt, Hong Kong, Venezuela, Chile, Ecuador And Bolivia
October 28, 2019

Submitted by Michael Every of Rabobank

Ages and Ages of Rage

Monday morning and we here we go again for another “dramatic week”. There are going to be monthly PMIs to look at in particular: will we see any further deterioration, or will growth start to pick up as an early Christmas present? And there are of course rate meetings for the Fed, and the BOJ, and the BOC: the former will cut, with the real issue being if they will signal more soon or not given they are already deep in Repo Madness; and will the giant BOJ wake up from slumber like a giant Kaiju and start throwing markets into turmoil again? 

Plus there is the Brexit circus. Will the EU grant the UK an extension until end-January 2020, or a more flexible date, or will France veto that and insist on a very short extension? Almost certainly they will insist that the newly reopened Withdrawal Agreement is this time firmly shut – so if the British Parliament then decides to merrily reopen it from its end and unilaterally start ramming amendments into it, it will not be doing so with EU approval. As such, and just as pertinently, will PM BoJo get his December election or not? The greater likelihood is not, as Labour appears to be desperate for an election – just not now – although the Lib Dems may be prepared to allow one given they see this as a way to prevent any further movement towards Brexit in the short term. (Though what do they think the election campaign will be about? The price of cheese?) Note that the latest opinion poll for the Observer has the Tories on 40% (+3 on the week), Labour unchanged on 24%, and the Lib Dems on 15% (-1), with the Brexit Party on 10% (-2).

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Jim/Bill,

A listener, Kevin, has sent this in for us with hopes that we can talk about this next Saturday.

Dave

Wag The Dog – The New COMEX And SGE Gold Contracts
October 25, 2019

Last week, in a move which went largely unnoticed, the US and Chinese gold markets moved one step closer to lockstep, when the CME group, home of the gold derivatives market and the world’s largest physical gold exchange, simultaneously and jointly launched a series of gold futures products in what they pitched as cross-market cooperation.

On the US side, CME has launched two cash-settled ‘Shanghai Gold futures‘, based on the SGE’s daily Shanghai Gold Benchmark Price, one denominated in US dollars and the other denominated in offshore Chinese renminbi (CNH). Both of these contracts are listed on the COMEX. On the Chinese side, the SGE has launched a T + N (margin) 100 gram contract denominated in renmimbi (RMB) that’s based on the CME’s COMEX Gold Futures Asia Spot Price. The SGE calls this the NYAuTN contract.

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Jim/Bill,

Who could have seen this coming?

Dave

Meet WeWork’s Epic Cash Black Hole: 36% Of Shanghai Locations Are Vacant
October 26, 2019

The whole WeWork scheme is unraveling in realtime, and a new Financial Times (FT) report shows the epicenter of the implosion is in China.

The Chinese subsidiary of WeWork, valued at $5 billion in 2018, could be headed to zero in the quarters ahead. Why?

Well, sources have told FT that WeWork locations in China have been severely underperforming, to the extent that occupancy levels are absolutely disturbing.

    “WeWork locations in Shanghai, where it has installed 43,600 desks, had a vacancy rate of 35.7% in October. In Shenzhen, where the company has 8,000 desks, 65.3% were vacant, while 22.1% of the group’s 8,900 desks in Hong Kong sat unfilled. The company was also expanding in central China, with multiple offices in Xi’an. There, it suffered a vacancy rate of 78.5%.”

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Jim/Bill,

As Mr Griffin pointed out, the military is a gift that keeps on giving.

Before joining the Department of Defense, Esper was vice president of government relations at Raytheon, a major U.S. defense contractor

Dave

As Secret Pentagon Spending Rises, Defense Firms Cash In
October 23, 2019

. . .

The boost in secret contracts has also shown up in big defense contractors’ recent annual reports. For example, Raytheon’s 2018 annual report touted “record classified bookings of nearly $7 billion” — up 46 percent in just a year and representing 19 percent of the company’s total revenues.

“These increases were largely driven by the need of our domestic customers to address advanced peer threats as outlined in both the National Defense Strategy and the Missile Defense Review,” the company said at the time. Raytheon remains well-aligned to both of these documents, which emphasize capabilities such as high-energy lasers, high-power microwaves, space, hypersonics and counter-hypersonics, next-generation sensors and cybersecurity.”

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Jim/Bill,

As Mr Griffin said, the military industrial complex just keeps on spending no matter what party is in office.

Dave

Pentagon Gives $10-Bn Deal To Microsoft After Funny Business
October 26, 2019

. . .

“At the president’s urging, Congress increased the military’s already-bloated budget, and Trump has sped up the process for approving arms deals,” reported Rolling Stone. The magazine quoted Raytheon CEO Thomas Kennedy’s assessment last year that “It’s the best time that we’ve ever seen for the defense industry.”

So why was Esper – determined, as he had shown, not to give up the Raytheon trough while he’s in government service – suddenly so sensitive on Wednesday about the appearance of a lesser conflict that others might have to squint to see.

After all, the company Esper’s son Luke works for is IBM, which was beaten out early in the JEDI competition along with Oracle.

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…of course they did JB!!!!?

Bill

Ex-Deutsche Bank Traders Avoid Prison Time For Libor Scheme
October 24, 2019

NEW YORK (Reuters) – Two former Deutsche Bank AG <DBKGn.DE> traders will serve no prison time for conspiring to manipulate the Libor benchmark interest rate between 2005 and 2011, a federal judge ruled on Thursday, sharply criticizing U.S. prosecutors for treating the two men as “proxy wrongdoers” for a much larger scheme.

Matthew Connolly, who once led Deutsche Bank’s pool trading desk in New York, was sentenced by U.S. District Judge Colleen McMahon in Manhattan to six months’ home confinement, while Gavin Campbell Black, who worked on the bank’s London desk, was sentenced to nine months’ home confinement, which he will be allowed to serve in England.

McMahon also ordered Connolly to pay a $100,000 fine, and Black to pay a $300,000 fine.

The sentence is a setback for U.S. prosecutors in one of the few criminal cases to emerge from a sweeping probe of Libor rigging. The prosecutors had asked the judge to order “substantial” prison time for both men, saying federal guidelines called for close to 10 years, along with a $3 million fine for Connolly and a $2 million (£1.56 million) fine for Black.

McMahon, however, said the prosecutors were trying to hold Connolly and Black responsible for behaviour throughout the financial industry.

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Shhhh! Nobody cares until they all of a sudden, everyone cares.

JB

…and care they will JB!

Bill

Fed Injects $134BN In Liquidity, Term Repo Oversubscribed Amid Month-End Liquidity Panic
October 24, 2019

With stocks threatening to close in the red, late on Wednesday the Fed sparked a furious last hour rally…

 

 

 

 

 

 

 

 

 

 

 

… when in a a statement published at 1515ET, precisely when the S&P ramp started, the New York Fed confirmed it would dramatically increase both its overnight and term liquidity provisions beginning tomorrow through November 14th.

The Desk has released an update to the schedule of repurchase agreement (repo) operations for the current monthly period. Consistent with the most recent FOMC directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation…

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