Your Tax Dollars At Work: US To Buy Ukrainian-Made Weapons For Ukraine

It's not just US and Western defense contractors and arms makers that have been raking in the billions as a result of Washington's mammoth defense aid handed over to Ukraine, but Ukrainian defense companies are also enjoying the largesse at US taxpayers' expense.

"A total of $1.6 billion of the recent US aid to Ukraine would go to the purchase of Ukraine-made weapons, said a senior Kyiv official," Defense Post reports of the $61 billion in US aid just approved.

Image via Reuters

G7 countries have been planning broader assistance to Ukraine which would develop and prop up a Ukrainian domestic military-industrial complex for the long-term, in order to ensure the country's independence from Russia well into the future.

Ukraine parliamentarian and foreign policy committee member Arseniy Pushkarenko has said, "This is very important today, because it is about the creation of joint defense enterprises that will be located on the territory of Ukraine or in neighboring countries, taking into account security aspects."

The funds will be taken from the $14 billion apportioned by Congress for the Ukraine Security Assistance Initiative (USAI), allowing the DoD to purchase new weapons for Ukraine.

Interestingly, Pushkarenko admitted that all of this is about more than just defending Ukraine from the Russian military onslaught, but is also about 'testing' new weapons systems in real combat.

"This is one of the factors in the development of the Ukrainian economy. Today, the military technologies that we have are tested in combat conditions, which makes our military-industrial complex attractive enough for many countries of the world," he said.

Other Western countries, including the United Kingdom and Denmark, are expected to establish programs ensuring the purchase of Ukrainian-made weapons.

As we've long documented, over the course of more than two years of war in Ukraine, American defense firms are making a killing, with four US-based companies having been ranked as among the world’s five largest military companies.

Zelensky promises more Ukraine-made weapons in new year speech https://t.co/7UCb6pLX17

— BBC News (World) (@BBCWorld) January 1, 2024

The legendary early 20th century US Marine Corps Major General Smedley Butler said it best:"War is a racket. It always has been... It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives."

Tyler Durden Tue, 04/30/2024 - 13:05

New Biden Energy Rules Will Raise The Cost Of A New Home By $31,000

Authored by Mike Shedlock via MishTalk.com,

New HUD energy rules will raise the cost of home construction by imposing stricter building codes. Payback time is 90 years...

Homes To Become Even More Unaffordable

The Wall Street Journal comments on Biden’s New Plan for Unaffordable Housing.

The Department of Housing and Urban Development is mandating costly new energy standards for new homes insured by the Federal Housing Administration (FHA), which will become de facto nationwide building codes.

HUD last Thursday announced that it will require new homes financed or insured by its subsidy programs to follow the 2021 International Energy Conservation Code standard.

Many governments have declined to adopt the 2021 standards because of their higher costs. The National Association of Home Builders says the energy rules can add as much as $31,000 to the price of a new home. It can take up to 90 years for a buyer to realize a payback on the higher up-front costs through lower energy bills.

Not to worry, HUD says taxpayers will help cover the cost. It “is anticipated that many builders will take advantage” of numerous tax incentives in the Inflation Reduction Act “as well as rebates that will become available in 2025 or earlier for electric heat pumps and other building electrification measures,” the rule says.

These incentives include a $5,000 per unit tax credit for “zero energy” multifamily construction that meets prevailing-wage requirements that also raise building costs. HUD adds that builders may also “take advantage of certain EPA Greenhouse Gas Reduction Fund programs, especially the Solar for All initiative” and an investment tax credit that can offset 50% of a solar project’s cost.

Even with the subsidies, HUD estimates the price of a new home will go up by $7,229.

You get a $5,000 credit but only if the builder pays union wages for everything. How much will that cost?

My general rule of thumb is to take government estimates and triple them. That’s for short projects like building a home. But 10x would not be surprising. And this is with subsidies.

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

Who Are the Renters?

The answer is younger voters and blacks.

Generation Z homeownership is dramatically lower than the home ownership rate of millennials.

And according to the National Association of Realtors, the homeownership rate among Black Americans is 44 percent whereas for White Americans it’s 72.7 percent.

That’s the largest Black-White homeownership rate gap in a decade.

Home Prices Hit New Record High

Case-Shiller, OER and CPI data from St. Louis Fed, chart by Mish

The latest Case-Shiller housing data shows home prices hit a new record high. Adding insults and costs, the 30-year mortgage rate ended last week at 7.50 percent

Youth Poll

On April 20, I commented People Who Rent Will Decide the 2024 Presidential Election

Q: What is it that young voters really have on their minds?
A: Rent

Many with rent as their top concern will switch to Trump. They are fed up with rising inflation. Rent is up at least 0.4 percent per month for 30 months.

Young voters propelled Biden over the top in 2020. Things look very different today. Many voters who do not like either Trump or Biden will sit this election out.

Tyler Durden Tue, 04/30/2024 - 12:45

Walmart Targets Gen-Z With Cheap Private Label Food As Youngsters Struggle In Era Of Failed Bidenomics

Walmart executives must be paying attention to Gen Z consumers bitching on TikTok and X about the failures of Bidenomics, as many of them have to work multiple jobs and still can't afford to put food on the table, pay shelter costs, and buy gasoline at the pump. That's why America's largest retailer is launching a new line of cheap store-brand groceries for consumers, more importantly, targeting lost and hopeless youngsters. 

Bettergoods is Walmart's "largest private brand food launch in 20 years and the fastest food private brand Walmart has brought to market," according to the retailer in a press release published Tuesday morning. 

The new brand targets young consumers and will offer them 300 items, including frozen, dairy, snacks, beverages, pasta, soups, coffee, chocolate, and more. Prices of the goods range from under $2 to under $15, with most products available for under $5.

"Today's customers expect more from the private brands they purchase – they want affordable, quality products to elevate their overall food experience. The launch of bettergoods delivers on that customer need in a meaningful way," said Scott Morris, senior vice president of private brands, food and consumables.

Morris continued, "Bettergoods is more than just a new private brand. It's a commitment to our customers that they can enjoy unique culinary flavors at the incredible value Walmart delivers."

Over the last few years, retailers have made a major push to expand private label brands that offer consumers a cheaper option amid persistent high inflation. This has forced many to drain personal savings and max out credit cards—just to survive the ongoing inflation storm. 

We have been documenting the countless number of Gen-Zers who have taken to various social media platforms to complain about how liberal colleges and Bidenomics are scams. Many of these youngsters seem more miserable than millennials who entered the workforce after the 2008 financial crash. At least back then, millennials weren't battered by high inflation. 

• Watch: Gen-Zers Melt Down Over 9-5 Jobs Amid Criticism About 'Bidenomics'

The latest Gallup poll numbers show youngsters are at a breaking point with Democrats who have promised them nothing but rainbows and unicorns, only to step foot in the real world after obtaining a worthless liberal arts college degree to realize affording rent, $1,000 car payments, and $15 avocado and toast is not what they signed up for.  

Walmart is smart. They're reading the crowd's outrage about 'Biden-flation' hitting supermarket items. 

And it's only a matter of time before Gen-Zers have to make the difficult decision to trade down from Walmart to Dollar General as the inflation storm heats up (read here). What comes next? Well, it's dumpster diving. 

Tyler Durden Tue, 04/30/2024 - 12:25

China Hosts Hamas & Palestinian Authority For Rare Talks

Via The Cradle

Representatives of Hamas and the Palestinian Authority’s (PA) Fatah party met recently in Beijing and held talks on reconciliation, the Chinese Foreign Ministry announced Tuesday. "Representatives of the Palestine National Liberation Movement and the Islamic Resistance Movement [Hamas] recently came to Beijing," China’s Foreign Ministry spokesman Lin Jian said. 

"The two sides fully expressed their political will to achieve reconciliation through dialogue and consultation, discussed many specific issues, and made positive progress," he added. The spokesman did not clarify exactly what day the meeting took place. 

Prior intra-Palestinian talks in Moscow, via Reuters

China, Hamas, and Fatah confirmed beginning last Friday that intra-Palestinian talks would be held in the Chinese capital. 

"They agreed to continue the course of talks to achieve the realization of Palestinian solidarity and unity at an early date," Jian went on to say, adding that the two sides thanked China for efforts to "promote Palestinian internal unity and reached an agreement on further dialogue."

China has continued to call for a ceasefire and an end to the war in the Gaza Strip and has long been an advocate of Palestinian unity and a two-state solution between the Palestinians and Israelis. 

Chinese diplomat Wang Kejian met with Hamas leader Ismail Haniyeh in Qatar last month, where they both called for an end to the war in Gaza and the achievement of "political goals and aspirations of establishing an independent Palestinian state."

Hamas assumed leadership of Gaza in 2006 after a political victory against Fatah in local elections. The Beijing talks come as Hamas has yet to deliver an official response to a new Israeli–Egyptian initiative for a ceasefire and prisoner release deal. 

While the initiative reportedly reflects an Israeli openness for the return of the displaced to northern Gaza and the establishment of a sustainable ceasefire, a Hamas official told Al-Mayadeen on Sunday that the proposal "does not reflect a fundamental shift" in Tel Aviv’s position. 

Washington has been promoting the idea of a reformed PA assuming control over post-war Gaza, something Hamas has rejected.

Prior file image: Chinese diplomat Wang Kejian met with Hamas political leader Ismail Haniyeh in Qatar on March 17. 

US–Israeli efforts to "create bodies to manage Gaza is a failed conspiracy that will not come to fruition," a Hamas official said last month. 

Tyler Durden Tue, 04/30/2024 - 12:05

Columbia Student Protesters Break Into, Barricade Themselves Into Building After Deadline To Disperse Passes

Dozens of Columbia University students broke into Hamilton Hall on the New York campus early Tuesday and barricaded themselves inside, hours after the school began suspending students who violated a deadline to disperse from a pro-Palestinian encampment.

Demonstrators supporting Palestinians in Gaza barricade themselves inside Hamilton Hall, an academic building which has been occupied in past student movements, in New York on April 30, 2024. (Alex Kent/Getty Images)

"The safety of every single member of this community is paramount," said Ben Chang, vice president for communications at Columbia University, in an emailed statement to The Epoch Times, adding "In light of the protest activity, we have asked members of the University community who can avoid coming to the Morningside campus to do so; essential personnel should report to work according to university policy."

Holy…. pic.twitter.com/42Lw4kaRHY

— Jessica Schwalb (@jessicaschwalb7) April 30, 2024

Taking over Hamilton Hall as done in 1968, Columbia students unfurl a banner that reads "Hind's Hall," in reference to Hind Rajab, a six-year-old girl killed by Israeli forces.
Hundreds of students cheer as the banner is revealed, erupting into chants to "Free Palestine." pic.twitter.com/Oi8WgdZmqf

— Prem Thakker (@prem_thakker) April 30, 2024

As the Epoch Times' Katabella Roberts notes further;  According to The New York Times, the students began occupying the hall at around 12:35 a.m.

The protesters linked arms and blocked off the main entrance to the building at the Ivy League institution after previously marching around campus to chants of “free Palestine,” according to the publication.

A statement shared on the social media platform Instagram by student groups said the protesters had “taken matters into their own hands,” and would remain in the building until the university “divests from death.” Protesters have been urging the university to pause its investments in companies that, they claim, are profiting from Israel’s war against Hamas in Gaza.

The statement included video footage that appeared to show the students carrying metal barricades into Hamilton Hall as other students cheered them on.

“This escalation is in line with the historical student movements of 1968, 1985, and 1996 which Columbia repressed then and celebrates now,” the statement read. “This action will force the university to confront the blood on its hands.”

In the statement, the student group further accused the university of having been “complicit” in “Israel’s ongoing genocidal assault on the Gaza strip” for the past seven months.
“The students are on the right side of history,” the statement continued. “We know that the university will remember them as anti-apartheid, anti-genocide activists with moral clarity.”

Protesters Make Demands

According to Politico, protesters hung a sign reading “intifada,” which is Arabic for uprising, from the front of the building.

A spokesperson for the New York Police Department told Politico that law enforcement officers were outside the university campus as of Tuesday; however, they declined to elaborate further on exactly how many officers were on site or whether they had authorization to enter the school grounds.

The Epoch Times has contacted a spokesperson at Columbia University and the New York Police Department for further comment.

The takeover of Hamilton Hall occurred just hours after the university confirmed that it had begun suspending some students. The pro-Palestinian students failed to disband before Monday’s 2 p.m. deadline.

Students/protestors lock arms to guard potential authorities against reaching fellow protestors who barricaded themselves inside Hamilton Hall, an academic building which has been occupied in past student movements, in New York on April 30, 2024. (Alex Kent/Getty Images)

Students have occupied the lawn in the middle of campus—in which graduation ceremonies are scheduled to take place for roughly 15,000 students on May 15—for nearly two weeks while calling on the university to disclose and divest from any of its financial ties to Israel.

They are also calling for an end to alleged “land grabs” in the Harlem neighborhood of New York City and Palestine, no more policing on the university campus, and no academic ties with Israeli universities.

However, negotiations between university officials and student protest leaders broke down earlier in the day when the university rejected their demands, prompting officials to issue the 2 p.m. deadline.
In a statement, Minouche Shafik, Columbia’s president, said that ultimately, the university will not divest from Israel, adding that the school is committed to maintaining its core principles and shared values, which include ensuring no students suffer from harassment and discrimination and no anti-Semitic language is used.

Columbia University students protest the Israel-Gaza conflict at Columbia University in New York City, on April 27, 2024. (Emel Akan/The Epoch Times)

School, Students Fail to Reach Agreement

“Both sides in these discussions put forward robust and thoughtful offers and worked in good faith to reach common ground,” Ms. Shafik said. “We thank them all for their diligent work, long hours, and careful effort and wish they had reached a different outcome.”

While the University will not divest from Israel, it has offered to “develop an expedited timeline for review of new proposals from the students by the Advisory Committee for Socially Responsible Investing, the body that considers divestment matters,” Ms. Shafik noted.

“The University also offered to publish a process for students to access a list of Columbia’s direct investment holdings, and to increase the frequency of updates to that list of holdings,” she added.

Ben Chang, vice president for communications at Columbia University, confirmed the suspensions had begun in a press conference late Monday, USA Today reports.

He added that students had been notified in advance that they would face disciplinary action, including suspension if they did not vacate the encampment by 2 p.m. ET and sign a form committing to abide by student politics until either June 30, 2025, or until their graduation, whichever came first.

The site of the protests has created an unwelcoming environment for many Jewish students and faculty members, he said. It has also been a source of loud noise.

“We’ve been suspending students as part of this next phase of our efforts to ensure safety on campus,” Mr. Chang said.

Mr. Chang did not provide further details regarding how many students from Columbia and its affiliate Barnard College have been disciplined. However, he confirmed that those suspended would not be able to finish the semester or graduate, Axios reports.

They will also be banned from entering any campus housing or academic buildings, he added.

Juliette Fairley contributed to this report.

Tyler Durden Tue, 04/30/2024 - 11:40

We Have Reached The Geo-Populist Tipping Points: Here Are Four Examples

By Michael Every of Rabobank

Beg, Borrow, or Steel

Yesterday’s JPY slump from 158 to 160, surge to 155 on BOJ intervention, and stop over 156 underlines how volatile markets are as long-run fundamentals finally reach tipping points. Tomorrow’s FOMC decision should make that clear for all asset classes: especially with the Treasury’s quarterly refunding announcement the same day, and as the US borrowed a net $748bn in Q1, expects another $243bn in Q2, $41bn higher than seen in January due to lower receipts, and then $847bn in Q3. As a potential warm-up of sorts, albeit due to traditional overbought dynamics, was a 15% collapse in cocoa.

Today we have a sizeable packet of economic data: we already saw the Chinese official manufacturing PMI at 50.4 vs. 50.3 expected and 50.8 last month, and services at 51.2 vs. 52.3 consensus and 53 in March. Will the rest of today’s numbers show disinflation, inflation, or stagflation? That answer is fundamentally related to a subject which markets understand little and dislike lots: the intersection of political economy and the global economic architecture reductively known as either “geopolitics” or “populism”. There, we are also reaching tipping points.

• Example 1: The Rhodium Group says for Europe to compete with Chinese EVs would require it to impose ‘Trump 2’ tariffs of at least 50%. However, they expect the EU will make a typically rear-view mirror decision to raise tariffs to the ‘Trump 1’ range of 15-30%. That would push up prices while allowing Chinese EVs to push EU auto production off the market. In short, we either get higher inflation and protectionism; or we get stagflation as prices rise somewhat less, yet Europe loses its key auto sector, taking 7% of GDP, 6% of (well-paid) jobs, the muscle-memory for sideways moves into defence production, and hopes for “strategic autonomy” with it.

• Example 2: The White House is trying to ban imports of Russian processed uranium, which currently make up 25% of the supply for the 90 US commercial nuclear reactors. Of course, this means inflation. And it can mean stagflation if local supply isn’t brought on-line.

• Example 3: In the Financial Times, Nobel laureate economist Joseph Stiglitz: (i) argues neoliberalism produces “demagogues”; (ii) implies liberty is not something which can be easily maximized for all, as I alluded to recently via the Quadragesimo anno; and (iii) says the US needs to be like the EU, with higher regulation, state spending, and taxation – yet, in the absence of protectionism, with the same loss of strategic industries? So, again, it’s still inflation or stagflation.

• Example 4: in an unwitting riposte to Stiglitz, former UK PM Gordon Brown warns, ‘There’s a hard-right tidal wave about to hit Europe – and it will only make the economic crisis worse’ as “near-zero growth has crushed living standards, sending voters to populist demagogues” -- the D word again -- but “they have no solutions to offer.” Brown concludes: “The nationalist timebomb is ticking. Across the continent, Europeans need a plan for better jobs through economic and environmental transformation. When the Polish trade union Solidarity was first formed, its anti-Soviet slogan was “No solidarity without freedom”. But soon many realized that free-for-all neoliberal economics would mean rising inequality and low living standards for the mass of people, and so a new slogan soon rang out: “There is no solidarity in freedom.” If progressives want to prevent an election campaign dominated by anti-immigrant propaganda, they will have to stand up to protectionism and xenophobia by showing the benefits of cooperation.”

But how could Europe do Brown’s Green Keynesianism, with expanded issuance of Eurobonds to fund vast fiscal deficits, without higher inflation? And, absent protectionism, how does it do it without importing the key inputs from China, so running large balance of payments deficits? Moreover, does mass immigration not lower wages or push up rents and house prices via supply vs. demand, as Marx argued, and voters see around them? Must governments boost investment to reduce housing supply pressures (how?) and regulate for higher wages (how?) and build Green Keynesianism and rearm Europe? That implies double-digit fiscal deficits as far as the eye can see. Absent new, hybrid tighter AND looser fiscal-and-monetary policy to match domestic demand to new domestic supply, with inflationary tariffs and industrial policy, that backdrop implies a drift towards becoming a deindustrialised, macro-destabilised, stagflationary emerging market-style economy that certainly produces demagogues.

Allow me to share two related quotes from Classical ‘free market’ economists that are likely to upset Stiglitz and Brown as much as they do those who think we live solely in financial times:

“If any particular manufacture was necessary, indeed, for the defence of the society, it might not always be prudent to depend upon our neighbours for the supply; and if such manufacture could not otherwise be supported at home, it might not be unreasonable that all the other branches of industry should be taxed in order to support it.” – Adam Smith, The Wealth of Nations (Book IV, Chapter V)

* *  *

“It would undoubtedly be advantageous to the capitalists of England, and to the consumers in both countries, that under such circumstances, the wine and the cloth should both be made in Portugal, and therefore that the capital and labour of England employed in making cloth, should be removed to Portugal for that purpose... Experience, however, shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connections, and entrust himself with all his habits fixed, to a strange government and new laws, check the emigration of capital.” - David Ricardo, ‘Principles of Political Economy and Taxation’ (Chapter VII: ‘On Foreign Trade’)

That, dear readers, is the sound of the two great ‘free market’ and ‘free trade’ champions supporting protectionism for national security purposes.

We have long lived in an environment where central banks saying “whatever it takes” was what mattered most to markets (apart from playing ‘higher/lower’ on a daily basis, without which there can be little to do). A well-known idiom for doing whatever it takes is to ‘beg, borrow, or steal’. When looking at China’s mercantilist EV --and steel-- production, as just two examples, and the geopolitical / national security backdrop they are tightly wrapped up in, then the choice of outcomes for Western economies is abundantly clear for those who want to see it:

Beg, borrow, or steel – literally and metaphorically.

The first and second choices imply short-term market-friendly disinflation, then followed by long-term EM-style stagflation. The third choice implies near-term inflation and radical policy framework and market shifts, if done correctly, then disinflation, and near and long-term stagflation if done wrong.

Which will it be?

Tyler Durden Tue, 04/30/2024 - 10:45

Judge Holds Trump Contempt With Fine, Jail Threat For Violating Gag Order In 'Hush Money' Trial

Manhattan Supreme Court Judge Juan Merchan has held Donald Trump in contempt of court for 'repeatedly violating' a gag order in his so-called hush money trial in New York.

According to Merchan, Trump violated the gag order nine times in online posts which targeted jurors or likely witnesses in the trial. The former president was fined the maximum of $1,000 per violation, or $9,000 - and was ordered to remove all of the offending posts by 2:15 p.m. ET on Tuesday.

What's more, Merchan threatened to toss Trump in jail if he willfully violates court orders again.

"Defendant is hereby warned that the Court will not tolerate continued willful violations of its lawful orders and that if necessary and appropriate under the circumstances, it will impose an incarceratory punishment," wrote Merchan in his ruling, CNBC reports.

Merchan read the order aloud before the trial resumed with more testimony from a banker who worked with the former president’s lawyer on a $130,000 hush money payment to porn star Stormy Daniels.

That payment is at the heart of Manhattan prosecutors’ case accusing Trump of falsifying business records as part of a scheme to influence the 2016 presidential election.

Gary Farro, a former senior managing director at First Republic bank, took the stand Friday and continued testifying Tuesday.

On his way into the courtroom, Trump repeated his call for Merchan to both recuse himself from the case and dismiss it entirely. -CNBC

"The judge should terminate the case because they have no case," said Trump in response, adding that he's been unable to campaign for president because he's stuck in court.

That said, Merchan is allowing Trump to attend his son Barron's high school graduation on May 17.

The historic trial began last week, which has included testimony from former National Enquirer publisher David Pecker, as well as Trump's longtime personal secretary, Rhona Graff.

Pecker testified to his efforts to "catch and kill" stories that could be damaging to Trump - including one instance in which his company American Media paying $30,000 for the rights to a former Trump Tower doorman's story about Trump having a secret love child - though Pecker believes the story is untrue.

The company also inked a $150,000 deal with former Playboy model Karen McDougal, who claimed to have had an extramarital affair with Trump, according to Pecker.

Pecker said he did not pay to silence Daniels, who claims she had sex with Trump.

As the Epoch Times notes further, Court was resuming Tuesday with Gary Farro, a banker who helped President Trump’s former attorney Michael Cohen open accounts, including one that Mr. Cohen used to send a payment to adult film performer Stormy Daniels, whose real name is Stephanie Clifford. She alleged a 2006 affair with President Trump, which he denies.

...

Outside the courtroom Tuesday, President Trump criticized prosecutors again. “This is a case that should have never been brought,” he said.

“Our country’s going to hell and we sit here day after day after day, which is their plan, because they think they might be able to eke out an election,” he declared last week in the courthouse hallway.

Tyler Durden Tue, 04/30/2024 - 10:31

Don't Buy Rate-Hike Hype, Next Fed Move Is A Cut

Authored by Simon White, Bloomberg macro strategist,

The Federal Reserve’s next move this year is likely to be a rate cut - despite the re-emergence of inflation - leaving markets at risk of a dovish repricing.

When it comes to the Fed, it’s easy to get hung up on what they should do, and neglect what they actually will do. From an inflation perspective, it’s becoming increasingly clear the central bank needs to raise rates further to quell resurgent price growth. But that’s unlikely. Instead, the risks to government funding costs and mounting pressure on liquidity are likely to tilt the Fed in favor of cutting rates, even as inflation is making an unwelcome return.

This week again draws focus to the greater entanglement of monetary and fiscal policy. The Fed meets on Wednesday, but the Treasury’s QRA (quarterly refinancing announcement) is just as consequential for the path of monetary policy. We found out the Treasury’s borrowing requirements on Monday.

The amounts are eye-watering - $243 billion in 2Q and $847 billion in 3Q - and unthinkable outside a recession only a few years ago. The market is gradually waking up to the Treasury put and the realization the fiscal deficit is unlikely to go back to a non-recessionary norm any time soon. Term premium is rising as lenders demand greater compensation for holding longer-term debt.

The chart below shows a tradeable proxy for term premium - the difference between the 10-year yield and the 1-month OIS rate 10-years forward - that is as high it’s been since the GFC.

Other measures of term premium are also rising. The ACM term premium has gone back into positive territory, while implied measures of term premium based on forecasters’ estimate of the 10-year bill rate are already 150 bps higher than the OIS-based term premium shown above. Even if Treasuries are not as overpriced as this infers, the government still has a problem.

As important for yields as how much the Treasury wants to borrow is how it intends to borrow it. On Wednesday, we will find out the proportion of longer-term versus shorter-term debt (i.e. bills) Treasury expects to issue over the next two quarters.

The increase in bill issuance over the last year or so has been of immense importance to markets. The “Yellen pivot” meant that liquidity lying idle in the RRP could be used by money market funds to buy bills and thus help fund the government.

Without this, there’s a strong likelihood the mass of sovereign issuance would have crowded out other assets, and markets would be considerably weaker. The Treasury thus – implicitly or otherwise – aided the Fed by allowing it to keep rates higher for longer and proceed with quantitative tightening.

Wednesday’s announcement will shed further light on whether the Treasury will stick to its stated aim and not significantly increase coupon (i.e. non-bill) issuance for now. A look at the nominal amounts of coupons and bills issued appears to confirm this has been the case.

But in duration-adjusted terms the picture is already changing. The amount of coupons issued adjusted for duration is rising. That will amplify the move higher in term premium and ultimately jeopardize support for risk assets.

USTs are simply not in high demand at current prices. Foreigners are more wary due to reserve-confiscation risks, or put off by high FX hedging costs; banks have on net been reducing their ownership of USTs as policy has been tightened; multi-asset managers have less need when Treasuries are a poor recession hedge when inflation is elevated, and a poor portfolio hedge when the stock-bond ratio is positive; and the Fed is busy trying to offload its UST inventory.

Households have become the de facto buyer of last resort for Treasuries. But there’s nothing to suppose they’ll be happy to continue to do so at any price. As the chart below shows, consumers’ long-term inflation expectations typically lead term premium. The market’s view of longer-term inflation, i.e. breakevens, is about 150-200 basis points lower than households’ outlook. As the UST buyer of last resort, households will increasingly set the price, one that’s likely to be lower than it is now.

Higher long-term yields will lead to the government having to borrow yet more to pay its spiraling interest-bill on its outstanding debt. But that points to fewer reserves and falling reserve velocity – effectively undoing the work of the Yellen pivot and leaving the stock market in a precarious spot.

The Fed is thus likely to cut rates in a quid pro quo with the Treasury. This would not only help the government fulfill its borrowing requirements at a non-usurious cost, it also helps the Fed with its responsibility for financial stability by taking the pressure off risk assets and reducing the likelihood of a funding squeeze.

Even though such a move would be unwise, it doesn’t mean it won’t happen. Cutting rates before inflation has been snuffed out threatens to intensify structural risks for price growth.

But in the heat of liquidity drying up, funding risks rising, markets on increasingly shaky ground, and the government locked in an issuance doom-loop as its interest costs soar, the Fed is likely to cut rates as an easy first move to ease the pressure — an outcome made even more likely with an election looming.

In the short-to-medium term, it’s hard to see how quantitative tightening isn’t soon tapered or curtailed. But the Fed is unlikely to want to go full tilt into easing again, or engage in yield curve control. That’s why in the longer term some sort of financial repression – where private cash flows are directed into public debt markets – is very likely.

This would be yet another chip in the de facto erosion of Fed independence. In such an environment, gauging the central bank’s next move needs to consider the spending whims of the government as much as the outlook for inflation and unemployment.
 

Tyler Durden Tue, 04/30/2024 - 10:10

Fastest Drop Since 'Lehman': Chicago PMI Puke Screams Stagflation

After miraculously surging to two years highs in Nov 2023, Chicago PMI has plunged for five straight months, with the last four months seeing the MoM declines accelerating. Against expectations of a rise to 45.0 (from March's 41.4), April's PMI data printed 37.9

Source: Bloomberg

That is the worst five-month collapse since Lehman...

Source: Bloomberg

More problematically - the underlying data screams stagflation:

• Prices paid rose at a faster pace; signaling expansion

• New orders fell at a faster pace; signaling contraction

• Employment fell at a faster pace; signaling contraction

• Inventories fell at a slower pace; signaling contraction

• Supplier deliveries fell at a faster pace; signaling contraction

• Production fell at a faster pace; signaling contraction

• Order backlogs fell at a slower pace; signaling contraction

All of which leaves 'hope' languishing at 'Bidenomics'-cycle lows...

Source: Bloomberg

And cue...

cue mainstream media splaining to Chicago: "you don't understand how strong Biden's economy is" https://t.co/W1ewTgjsLx pic.twitter.com/lrhYqDDNM7

— zerohedge (@zerohedge) April 30, 2024

Tyler Durden Tue, 04/30/2024 - 09:59

US Futures Dip On Last Day Of April, First Down Month Of 2024

US equity futures dropped, and European markets were mixed on the last day of the month amid concerns the Fed may stick to its hawkish messaging at its meeting on Wednesday. As of 7:40am, S&P 500 and Nasdaq futures were down 0.1% while Europe’s Stoxx 600 index retreated 0.4%, while Asian stocks gained on Japan's return from holiday. The Bloomberg Dollar Spot Index climbed and 10-year Treasury yields were steady at 4.62%. The yen resumed its decline even as a Bloomberg analysis found that Japan almost certainly conducted its first currency intervention since 2022 to prop up the yen on Monday. Commodities were mixed with metals down and oil rebounding from its biggest drop in almost two weeks amid discussions on a possible cease-fire in the Middle East. Macro data today includes Q1 employment cost index, Case Shiller home prices, April MNI Chicago PMI, consumer confidence and Dallas Fed services activity. Bitcoin tumbled after activity on Hong Kong's new crypto ETFs came in far below expectations.

In premarket trading, HSBC Holdings climbed more than 3% after solid earnings and the surprise departure of CEO Noel Quinn, which some analysts said could pave the way for the next stage in the bank’s growth plans. Chegg shares fell 13% after the online educational platform company forecast total net revenue for the second quarter that missed the average estimate. Here are some other notable premarket movers:

• Blend Labs shares jump 20% after it reported a $150 million investment by Haveli Investments in the form of convertible preferred stock with a zero percent coupon.
• Coursera’s shares drop 14%, putting them on track for a one-year low, after the online educational firm cut full-year revenue and adjusted-Ebitda forecasts, prompting analysts to lower their price targets on the stock.
• NXP Semiconductors shares rose 3.6% after the chipmaker reported better-than-expected 1Q adjusted earnings per share and forecast 2Q adjusted EPS and revenue largely above average analyst expectations.
• Paramount Global analysts note that investors are more focused on the Skydance deal rather than results this quarter. The media company replaced CEO Bob Bakish as the board negotiates a possible change in control of the company. Shares in the company fell about 0.4% in premarket trading.

US stocks are on the edge of closing out the first monthly retreat of 2024, with the S&P 500 down 2.6% in April. Amazon.com, McDonald’s and Coca-Cola are due to report later today, but all eyes are on Fed Chair Powell who will likely bolster expectations interest rates will stay higher for longer after Wednesday’s rates announcement.

“Sentiment is positive but reserved,” said Peter Rosenstreich, head of investment products at Swissquote. “There has been plenty of hype around rates, earnings and the macro environment — now markets want to see the results.”

Meanwhile, as we reported first last night, Goldman's desk calculated that momentum traders are modeled to buy equities over the next week, regardless of market direction. Commodity trading advisers — funds that use systematic strategies to trade futures contracts — are exposed to about $106 billion in long positions after the drawdown in April, Cullen Morgan, an equity derivatives and flows specialist at the bank, wrote in a note. That’s set to support a bounce in global equities after a rough month.

European stocks also fall, led by declines in autos as Volkswagen and Mercedes Benz shares fall post-earnings which offset better-than-expected European economic data. Here are the biggest movers Tuesday:

• Logitech shares soar as much as 10%, the most in six months, after the Swiss maker of computer accessories reported better-than-expected FY25 sales guidance
• Cargotec jumps as much as 17% to a fresh high after the Finnish crane and cargo-handling equipment firm reports “record” first-quarter earnings boosted by its Marine division
• HSBC shares advanced as much as 3.6% after the lender announced a larger buyback than expected and reported earnings that analysts saw as solid
• OMV shares jump as much as 5.3%, largest intraday rise since November, after Austrian refiner reported 1Q clean CCS operating profit beat
• Clariant shares gain as much as 4.8%, to the highest level in more than six months after the Swiss specialty chemicals firm’s margins beat consensus despite some challenges
• Rotork shares rise 3.9% after the valve manufacturer reported a solid start to the year. Sales and orders both grew, while its book-to-bill ratio also improved
• European automakers shares fall as 1Q numbers from Stellantis, Volkswagen and Mercedes disappointed the market, making the SXAP auto index the worst performing subsector
• Straumann shares drop as much as 10%, the most since Oct. 26, after a soft performance in North America overshadowed the Swiss dental equipment company’s 1Q revenue beat
• SES depositary receipts drop as much as 12% after the satellite firm agreed to buy Intelsat for $3.1 billion, in a deal to be funded by cash on hand and new debt
• Air France-KLM falls as much as 4.7% after carrier reports a wider operating loss than expected in the first quarter. Bernstein says one-off costs weighed on profitability
• Santander shares drop as much as 2.9% after forecast-beating net interest income and fees in the first quarter were offset by a cost surge at the Spanish lender
• Adidas shares fell as much as 1.6% as 1Q results broadly confirmed a recent pre-release, and the sportswear maker’s guidance was seen by some as conservative

Earlier in the session, Asian stocks advanced for a third day, led by a rally in Japanese shares as the yen stabilized following wild swings in the previous session. The MSCI Asia Pacific Index rose as much as 1.1%, led by industrial shares such as Hitachi and Toyota Motor. Japan’s Topix Index jumped more than 2% as the market reopened from a holiday. Traders remain on alert for sharp yen moves after the currency’s rebound from a 34-year low sparked speculation of intervention.

“While we remain constructive on the Japan equity market over the medium term, we also believe that near-term FX movement is likely to see some profit taking from investors in the broad Japanese equity market,” said Ricky Tang, head of client portfolio management at Value Partners Group.

In FX, the dollar gained against all its major peers on expectation of a hawkish message from the Federal Reserve on Wednesday. The euro outperformed and the region’s government bonds fell after data showed the largest economies of the bloc were stronger than expected in the first quarter. The yen weakens towards 157 against the dollar. The Aussie underperforms, falling 0.5% after retail sales missed estimates.

In rates, treasuries are slightly cheaper across the curve, paring a portion of Monday’s gains, amid steeper declines for bunds after first estimate of 1Q euro-zone growth rate topped estimates. US yields cheaper by 0.5bp to 1.5bp across the curve with losses led by intermediates, steepening 2s10s spread by 1bp on the day; 10-year yields around 4.63% with bunds underperforming by 1.5bp in the sector.  Also during London morning, an array of regional inflation readings lifted intermediate German yields by ~3bp. Bunds are in the red, with German 10-year yields rising 2bps to 2.55%. S&P 500 futures are down 0.1%.

In commodities, oil prices advanced, with WTI rising 0.2% to trade near $82.80. Spot gold falls 0.8%.

Looking at today's calendar, we have the 1Q employment cost index (8:30am), February FHFA house price index, S&P CoreLogic home prices (9am), April MNI Chicago PMI (9:45am, 3 minutes earlier for subscribers), consumer confidence (10am) and Dallas Fed services activity (10:30am). Fed members are in self-imposed quiet period ahead of May 1 policy announcement.

Market Snapshot

• S&P 500 futures down 0.1% to 5,139.50
• STOXX Europe 600 down 0.2% to 507.25
• MXAP up 0.7% to 174.73
• MXAPJ little changed at 540.41
• Nikkei up 1.2% to 38,405.66
• Topix up 2.1% to 2,743.17
• Hang Seng Index little changed at 17,763.03
• Shanghai Composite down 0.3% to 3,104.82
• Sensex up 0.5% to 75,063.11
• Australia S&P/ASX 200 up 0.3% to 7,664.08
• Kospi up 0.2% to 2,692.06
• German 10Y yield little changed at 2.54%
• Euro down 0.2% to $1.0700
• Brent Futures little changed at $88.47/bbl
• Gold spot down 0.9% to $2,314.21
• US Dollar Index up 0.31% to 105.90

Top Overnight News

• China’s NBS PMIs for April are mixed, with manufacturing about inline at 50.4 (vs. the Street 50.3 and down from 50.8 in Mar) while non-manufacturing fell short at 51.2 (vs. the Street 52.3 and down from 53 in Mar). China’s Caixin manufacturing PMI came in at 51.4, slightly ahead of the Street’s 51 forecast. WSJ
• China’s ruling Communist Party vowed to explore new measures to tackle a protracted housing crisis, which remains the biggest drag on the nation’s economy, and hinted at possible rate cuts ahead. BBG
• HSBC’s chief executive Noel Quinn is to retire unexpectedly after five years, setting off a hunt for a successor at the UK-based bank. Quinn, 62, has overhauled the lender since taking charge in 2019, selling off parts of its global operations to increase its focus on Asia, where it makes the lion’s share of its profits. FT
• BOJ accounts suggest Japan probably intervened in the FX market yesterday, buying around 5.5 trillion yen. Officials have declined to say whether they stepped in. BBG
• The chief executive of Ericsson said a focus on regulation was “driving Europe to irrelevance” as he warned that the region’s competitiveness was being undermined and called for changes to antitrust policy. FT
• EU’s Apr CPI was inline with the Street on a headline basis at +2.4% (unchanged vs. Mar) and a bit firmer on core (+2.7% vs. the Street +2.6% and vs. +2.9% in Mar). BBG
• ECB’s Knot says it is “realistic” to anticipate a cut in June and expresses confidence in inflation coming back to 2%, although he doesn’t envision rates returning to their pandemic/pre-pandemic lows. Nikkei
• Tensions grow between Trump and Lake in Arizona race for Senate. The former president fears that GOP candidate Kari Lake might not win and will drag down his own prospects in the battleground state. WaPo
• Apple has poached dozens of artificial intelligence experts from Google and has created a secretive European laboratory in Zurich, as the tech giant builds a team to battle rivals in developing new AI models and products. FT
• Caterpillar Caterpillar announced a voluntary delisting from Euronext Paris and the Six Swiss Exchange; cites low trading volumes and high administrative costs. CAT will solely trade on NYSE thereafter. (Newswires)
• Tesla (TSLA) CEO Musk is reportedly planning more layoffs as two senior executives depart, while roughly 500 people will be laid off in supercharger group, according to The Information. (The Information)
• WSJ's Timiraos article "Fed to Signal It Has Stomach to Keep Rates High for Longer" & "Firmer price pressures could lead longer-term rates to rise as investors continue paring back expectations of cuts"

Earnings

• NXP Semiconductors NV (NXPI) Shares climb 3.4% pre-market on top- and bottom-line beats, and guidance. Q1 adj. EPS 3.24 (exp. 3.16), Q1 revenue USD 3.13bln (exp. 3.13bln). Q1 gross margin 58.2% (exp. 58%), Q1 operating margin 34.5% (exp. 34%). Auto revenue -1% Y/Y, Industrial/IoT +14%, Mobile +34%, Communications Infrastructure -25% Y/Y. Exec said early views into H2 underpin a cautious optimism. Sees Q2 revenue of 3.125bln (exp. 3.11bln), Q2 EPS of 3.20 (exp. 3.12).
• Paramount Global (PARA) Q1 Adj. EPS 0.62 (exp. 0.36), Q1 revenue USD 7.69bln (exp. 7.73bln); Q1 Paramount+ net additions +3.7mln (exp. +2.2mln); Q1 EBITDA USD 0.987bln (exp. 0.756bln), Q1 FCF USD 209mln (exp. -62mln). President and CEO Bob Bakish stepped down, as many press reports suggested he would do over the weekend. Establishes a management committee; George Cheeks, Chris McCarthy, and Brian Robbins will work with CFO Naveen Chopra to accelerate growth, streamline operations, and optimise streaming strategy; Chair Shari Redstone (of National Amusements) has expressed confidence in their leadership.
• Adidas (ADS GY) Q1 (EUR): Revenue 5.45bln (exp. 5.46bln, prev. 5.27bln Y/Y). Currency-neutral sales +8% driven by growth in all regions except in North America, where revenue fell by 4% to 1.12bln. Europe: +14%.
• Stellantis (STLAM IM/STLAP FP) Q1 (EUR): Revenue 41.7bln (exp. 43.92bln), -12% Y/Y due to "volume, mix and foreign exchange headwinds, partly offset by firm net pricing".
• Volkswagen (VOW3 GY) Q1 (EUR): Operating Profit 4.59bln (exp. 4.51bln). Revenue 75.5bln (exp. 74.193bln). Operating Margin 6.1% (prev. 7.5% Y/Y); outlook confirmed.
• Mercedes-Benz Group (MBG GY) Q1 (EUR): Adj. EBIT 3.60bln (exp. 3.71bln). Sales 35.87bln (exp. 35.58bln). Cars Adj. EBIT 2.32bln (2.57bln); Outlook maintained.
• HSBC (5 HK/ HSBA LN) Q1 (USD): Revenue 20.75bln (exp. 21.03bln). Pretax profit 12.65bln (exp. 12.61bln). CET1 ratio 15.2% (exp. 15.4%). CEO Quinn is unexpectedly retiring.

A more detailed look at markets courtesy of Newsquawk

APAC stocks were mostly higher but with gains capped heading into month-end amid a slew of data and earnings. ASX 200 was led by strength in the mining sector but with upside limited after a surprise contraction in Retail Sales. Nikkei 225 outperformed on return from the long weekend and as participants digested a slew of earnings releases. Hang Seng and Shanghai Comp. were varied in which the former made another brief foray into bull market territory, while the mainland lagged ahead of the Labour Day holidays and as participants reflected on mixed Chinese PMI data in which the official NBS Manufacturing and Caixin Manufacturing PMIs topped forecasts but Non-Manufacturing PMI disappointed despite remaining in expansion territory.

Top Asian News

• PBoC injected CNY 440bln via 7-day reverse repos with the rate at 1.80%.
• PBoC reportedly wants to halt the bond-buying spree and not join in on it, with the central bank concerned about bond market bubbles and economic gloom, according to Bloomberg.
• Japan's top currency diplomat Kanda said no comment on FX intervention and noted that a weak yen has positive and negative impacts, while he added the currency has a bigger impact on import prices now and that excessive FX moves could impact daily lives. Kanda said they need to take appropriate actions on FX and reiterated they are ready to take action 24 hours a day and will continue taking appropriate actions when needed.
• BoJ keep monthly bond purchases plan for May unchanged from April
• China's Communist Party Central Committee is to hold a 3rd plenum during July, via State Media; Politburo undertook a meeting on Tuesday.
• Former Japanese top FX diplomat Furusawa says it is highly likely the Japanese government intervened on Monday to prop up the JPY

European bourses, Stoxx600 (-0.3%) are mixed, with a slight negative bias. Indices initially opened around flat, though tilted lower as the morning progressed, with little driving the shift in sentiment. European sectors hold little bias, with the breadth of the market fairly narrow, with the exception of Autos, dragged down by poor results from Mercedes (-3.4%), Stellantis (-2.4%) and Volkswagen (-2.1%). Real Estate tops the pile, propped up by post-earning gains in Vonovia (+5.5%). US Equity Futures (ES -0.2%, NQ -0.2%, RTY -0.3%) are modestly softer, in fitting with the broader price action seen in European trade. Earnings include: McDonald's, AMD, Amazon and Starbucks.

Top European News

• ECB's Knot said he is increasingly confident inflation is falling towards the 2% target but the ECB must be cautious beyond a June rate cut.

FX

• USD is attempting to claw back some of yesterday's JPY-induced losses which sent the index down to a low of 105.46. For now, the DXY has topped out at 105.96 and unable to reclaim 106 status, 106.18 was the high from yesterday. Recent EUR strength in the wake of the EZ data has led the index back down to the unchanged mark.
• EUR is slightly firmer vs. the broadly flat USD in the wake of a slew of EZ data with EUR being propped up by firmer than expected growth metrics. Inflation data was in-line on a headline basis and mixed from a core perspective.
• JPY is softer vs. the USD after yesterday's wild (touted intervention led) session which saw USD/JPY swing from a 160.20 peak to a 154.51 low; currently trades towards the top end of a 156.08-99 range.
• Antipodeans are giving back yesterday's gains and then some as the USD regains some poise. AUD/USD had advanced to a peak of 0.6586 yesterday (highest since April 12th) before pulling back as low as 0.6514 with soft retail sales also acting as a drag.

Fixed Income

• Bunds began on the backfoot after hotter than expected French inflation and a sticky Services metric, with additional pressure coming from better-than-forecast GDP prints by France & Germany ahead of the EZ figures. EZ HICP headline Y/Y was in-line with the core metrics mixed against expected, which led to a hawkish reaction; Bunds currently sit at session lows around 130.40 given the strong GDP numbers and potentially mixed core.
• USTs are moving in tandem with EGBs which leaves the benchmark a touch softer but some way from Monday's 107-18+ base. Specifics light thus far into Wednesday's FOMC and Quarterly Refunding.
• Gilts are once again following EGB/UST impetus. A narrative that is unlikely to change significantly in the near-term given a sparse UK docket before next week's BoE; though, we are attentive to anything from the EZ/US, particularly around the Fed, which provides insight into the Central Bank divergence narrative.
• UK sells GBP 4bln 4.125% 2029 Gilt: b/c 3.21x, average yield 4.251%, tail 0.8bps.

Commodities

• Crude futures are choppy and now in modest positive territory after earlier subdued trade. Prices are on standby ahead of key macro risk events including the FOMC and US jobs data on Friday; Brent July similarly found an intraday base at USD 86.64/bbl.
• Softer trade across precious metals amid yesterday's geopolitical unwind coupled with a rebound in the Dollar today. Spot silver sits as the laggard after yesterday's outperformance; XAU fell under yesterday's low (USD 2,319.84/oz) to a current base at USD 2,310.96/oz.
• Losses seen across base metals amid the aforementioned Dollar rebound coupled with a pullback in sentiment. 3M LME copper topped USD 10,200/t earlier to reach a USD 10,217.00/t intraday peak.

Geopolitics

• "IDF finalizes Rafah plans, invasion possible if no deal in 72 hours", according to Times of Israel.
• "Israeli delegation will not head to Cairo until Hamas gives its response, according to Israeli official", according to Walla's Elster.
• Hamas is expected to respond to the exchange deal proposal "tomorrow evening", Al Arabiya reports
• Hamas delegation left Cairo and will return with a written response to the ceasefire proposal, according to Egypt's Al Qahera News.
• An Israeli delegation plans to travel to Cairo to resume ceasefire talks if Hamas agrees to attend, according to NYT.
• Israeli PM Netanyahu asked US President Biden to help prevent the ICC from issuing arrest warrants against Israeli officials, according to Axios.
• Yemen's Houthis said they targeted the 'Cyclades' vessel and two US destroyers in the Red Sea, while it also targeted 'Israeli ship MSC Orion' in the Indian Ocean, according to Reuters. US CENTCOM later confirmed that Iranian-backed Houthis fired three anti-ship ballistic missiles and three UAVs from Yemen into the Red Sea towards MV Cyclades but added there were no injuries or damages reported by US, coalition or merchant vessels.
• Chinese Coast Guard expelled a Philippines Coast Guard ship and vessels from waters adjacent to the Scarborough Shoal.
• Shanghai Maritime Safety Administration said military activities will be carried out in a part of the East China Sea from 07:00 AM on May 1st to 09:00 AM on May 9th local time and vessels unrelated to the activity are prohibited from entering the area.

US Event Calendar

• 08:30: 1Q Employment Cost Index, est. 1.0%, prior 0.9%
• 09:00: Feb. FHFA House Price Index MoM, est. 0.2%, prior -0.1%
• 09:00: Feb. S&P CS Composite-20 YoY, est. 6.70%, prior 6.59%
  • Feb. S&P/CS 20 City MoM SA, est. 0.10%, prior 0.14%
  • Feb. S&P/Case-Shiller US HPI YoY, est. 6.38%, prior 6.03%
• 09:45: April MNI Chicago PMI, est. 45.0, prior 41.4
• 10:00: April Conf. Board Consumer Confidenc, est. 104.0, prior 104.7
  • April Conf. Board Present Situation, prior 151.0
  • April Conf. Board Expectations, prior 73.8
• 10:30: April Dallas Fed Services Activity, prior -5.5

DB's Jim Reid concludes the overnight wrap

Markets got the week off to a decent start yesterday, with the S&P 500 (+0.32%) building on last week’s advance as we await the Fed’s decision tomorrow and an array of earnings releases. Several factors helped to boost sentiment, including a remarkable advance for Tesla (+15.31%) as outlets including Bloomberg and the Wall Street Journal reported that Chinese government officials had given the firm in-principle approval for its driver-assistance system. In addition, investors were reassured after there was nothing alarming in the flash CPI releases from several European countries, which cemented expectations that the ECB would deliver a rate cut in June. And alongside that, concern about a geopolitical escalation continued to ebb, with Brent crude oil prices down -1.23% to $88.40/bbl. So there were several positive catalysts helping to boost sentiment. The Yen's range of around 160.25 - 154.5 was a constant side show all day, with heavy speculation that the government had intervened in very thin holiday trading. As we type this morning the Yen is trading down slightly at 156.75 from 156.35 as the US closed last night, which continues to leave it as the worst performing G10 currency year-to-date, down -10% against the US dollar. The intervention hasn't been officially confirmed but top currency official Kanda has commented that the authorities are watching the Yen 24 hours a day and suggested they were looking more for the size of moves rather than specific levels.

Staying in Asia, China's factory activity remained in expansion territory for the second consecutive month in April but the pace of expansion slowed slightly as the official manufacturing PMI came in at 50.4 (v/s 50.3 expected) as against a reading of 50.8 in March. Meanwhile, the decline in non-manufacturing activity was more pronounced as the official PMI moderated to 51.2 (v/s 52.3 expected) down from a reading of 53.0. At the same time, the Caixin manufacturing PMI advanced to 51.4 in April (v/s 51.0 expected), marking the fastest pace since February 2023 and compared to an expansion of 51.1 seen in March. Our Chinese economist reviews the details within today’s PMIs in a note just out here.

Going into more detail now on the main events of the last 24 hours. Those European inflation numbers were important from the market open, as they helped to allay fears about a European inflation rebound of the sort happening in the US. We’ll have to wait for the Euro Area-wide number today, but ahead of that, Spanish inflation came in at +3.4% on the EU-harmonised measure, in line with expectations. Then in Germany, harmonised inflation ticked up to +2.4% in April (vs. +2.3% expected), whilst in Ireland it fell a tenth to +1.6%, the lowest since June 2021. So given recent ECB commentary about a potential June cut, those numbers keep that on track, and market pricing raised the chance to a 91% probability by the close, up from 88% on Friday. Estonia’s Muller also backed up that sentiment, as he said that in June “we’ll probably have reached the point where it’s already possible to start lowering central-bank interest rates”.

The lack of any bad news on inflation supported government bonds on both sides of the Atlantic, with some added support from the fall in energy prices. For instance in Europe, yields on 10yr bunds (-4.3bps), OATs (-6.2bps) and BTPs (-6.6bps) all saw decent declines. And over in the US, yields on 10yr Treasuries were also down -5.0bps to 4.61% and are a further -1bps lower overnight at 4.60% as we go to print.

US Treasuries had sold off by a couple of basis points later in the US session following the latest borrowing estimates from the US Treasury. These saw the expected Q2 issuance rise from $202bn to $243bn, “largely due to lower cash receipts”. This was slightly puzzling given what have been fairly strong tax receipts in the recent April tax period. Still, while the Q2 estimate was revised slightly higher, the Q3 number (excluding TGA movement) was in line with expectations, so our rates strategists don’t see meaningful alteration to the fiscal outlook. Indeed, the negative reaction in Treasuries did not persist with yields closing not far above their intra-day lows.

For equities, it was also a solid day, with the S&P 500 (+0.32%) up to its highest level in a couple of weeks, and Europe’s STOXX 600 (+0.07%) inching up to a 3-week high. The advance was a broad-based one, with the small-cap Russell 2000 (+0.70%) and the equal-weighted S&P 500 (+0.70%) posting larger gains. But there was some weakness in continental Europe, where the CAC 40 (-0.29%), the DAX (-0.24%) and the IBEX 35 (-0.48%) all lost ground.

Asian equity markets are mostly higher again this morning with the Nikkei leading gains (+1.38%) after returning from a public holiday with the KOSPI (+0.70%) also notably higher after index heavyweight Samsung Electronics topped earnings estimates for the Jan-March quarter after its semiconductor division returned to profitability. Meanwhile, the Hang Seng (+0.25%) and the S&P/ASX 200 (+0.24%) are also moving higher. Elsewhere, mainland Chinese stocks are trading slightly lower with both the CSI (-0.18%) and the Shanghai Composite (-0.12%) seeing minor losses following the batch of mixed PMI readings for April. S&P 500 (-0.11%) and NASDAQ 100 (+0.0%) futures are quiet.

Retail sales in Australia unexpectedly slumped -0.4% m/m in March (v/s +0.2% expected) as against a revised +0.2% increase the previous month thus dampening expectations that the next move in interest rates might be up. This was a very low number relative to the last several decades of data so it does put into doubt the RBA’s view that the consumer is holding up.

In the political sphere, Spanish Prime Minister Sánchez confirmed that he would remain as PM, which follows his decision to cancel engagements last week following allegations against his wife. Separately in the UK though, the Scottish First Minister Humza Yousaf announced his resignation. That comes after last week’s collapse of an agreement between his Scottish National Party and the Greens, meaning that the SNP no longer had a majority in the Scottish Parliament. We’ve got lots more UK political events this week, as local elections are taking place on Thursday, which are the final electoral test for the political parties before the next general election, which has to be held by January at the latest.

To the day ahead now, and data releases include the Euro Area flash CPI release for April, along with Q1 GDP. In the US, we’ll also get the Employment Cost Index for Q1, the FHFA house price index for February, the Conference Board’s consumer confidence for April, and the MNI Chicago PMI for April. Meanwhile in the UK, there are mortgage approvals for March. Finally, today’s earnings releases include Amazon, Eli Lilly, Coca-Cola, McDonald’s and Starbucks.

Tyler Durden Tue, 04/30/2024 - 08:15

HSBC CEO Unexpectedly Steps Down For 'Work-Life Balance' 

HSBC Holdings Plc unexpectedly announced Tuesday that Chief Executive Noel Quinn is resigning after five years, citing the need for a 'better work-life balance.' 

The Asia-focused bank plans to complete the succession process in the second half of the year. Reuters said the top candidate for the position (at the moment) is Chief Financial Officer Georges Elhedery. 

Quinn, 62, has been at the helm for five years. Under his leadership, the bank's profits soared, and its share price increased after the size of its underperforming units was slashed, especially in the United States and Europe. The bank has focused its efforts on Asia. 

Throughout his tenure, shares of HSBC have risen nearly 50% in Hong Kong.

Quinn told reporters on a call that his departure is entirely based on pursuing a better work-life balance, or at least that's the public understanding.

"Doing this job, you have to give 100% — if not 120% — of your energy, your mindset, your time to the role," he said, adding, "You can keep doing that, but that doesn't necessarily achieve the balance in life that I wanted."

"I've held intensive leadership roles since I took on a commercial bank role in October 2008 so I'm personally ready for a change," he continued. 

And he concluded:  "It's also a natural inflection point for the bank, as it comes to the end of the current transformation phase. It's an ideal time to bring in leadership to move the bank forward over the next five years."

Will Howlett, a financial analyst at Quilter Cheviot, who was quoted by Bloomberg, said the CEO's exit is a major "surprise, especially given Quinn's short tenure during which he has led the bank through significant changes." 

Cheviot said, "The departure of Quinn introduces an element of uncertainty about the bank's future leadership at a time when HSBC is navigating a complex global financial landscape."

Matt Britzman, equity analyst at Hargreaves Lansdown, pointed out that Quinn has "navigated geopolitical tensions between the US and China" over the course of his tenure and also cites "uncertainty" on who will lead the bank from here. 

Other analysts hope the next CEO will introduce further plans to maintain the bank's focus on its businesses in Asian countries.

Let's not forget that HSBC has been involved in US money laundering probes. In 2012, the bank agreed to pay $1.92 billion to settle one of these investigations. 

Tyler Durden Tue, 04/30/2024 - 07:45

Big Government's Crackdown On Hedge Fund Home-Buying Looms 

"I strongly support free markets," but this "corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home," Republican Texas Gov. Greg Abbott wrote on X in March. He added, "This must be added to the legislative agenda to protect Texas families." 

I strongly support free markets.

But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home.

This must be added to the legislative agenda to protect Texas families. https://t.co/VBs6Rluh3K

— Greg Abbott (@GregAbbott_TX) March 15, 2024

Institutional ownership of single-family homes has surged in recent years, with many firms turning the bulk of these homes into rentals. This has triggered a massive uproar with some lawmakers who want to end Wall Street's home-buying mania. 

The Wall Street Journal reports that several lawmakers in Nebraska, California, New York, Minnesota, and North Carolina have sponsored bills requiring large single-family hedge fund owners to dispose of their portfolios or risk hefty fines. 

The bill mentioned the most in the corporate press, called the End Hedge Fund Control of American Homes Act, was introduced in the Senate by Oregon Sen. Jeff Merkley with companion legislation introduced in the House by Rep. Adam Smith. 

The Merkley/Smith bill could force hedge funds to divest their single-family home portfolios over the course of ten years. 

Lawmakers argue that "investors that have scooped up hundreds of thousands of houses to rent out are contributing to the dearth of homes for sale and driving up home prices," according to WSJ, noting that limited housing supply has made housing unaffordable for the vast majority of Americans. 

Data from John Burns Research and Consulting shows that the share of institutional buying of single-family homes topped 25% in the first quarter—near a record high. The data goes back to 1Q16. 

Source: The Wall Street Journal 

Calls to block hedge funds from buying single-family homes predominantly come from Democrats, but some conservatives, such as Texas Gov. Abbott, also show support.  

In an election year, blocking hedge funds from buying single-family homes might be popular with middle-class and working-poor voters battered by the era of high inflation under failed Bidenomics. Many have been financially paralyzed in today's economy, unable to afford a home, and stuck in a doom loop of renting and no savings with maxed-out credit cards. 

However, institutional investors have a different view of the bills being proposed by lawmakers. They're overwhelmingly frustrated with signs that the government could step into a free market and break something. 

During a recent interview on Fox Business, Kevin O'Leary shared his stance on the proposed legislation.

"Very bad idea. Very bad policy when you try to manipulate markets or sources of capital," O'Leary said, adding, "I don't care if they're Democrats or Republicans, whoever they are, stay out of the markets. Let the markets be the markets."

The real problem isn't the hedge funds but the Federal Reserve, which has distorted markets with record-low rates over the years. Great job, Yellen/Powell. 

Tyler Durden Tue, 04/30/2024 - 06:55

How EU Law Has Made The Internet Less Free For Everyone Else

Authored by Mustafa Ekin Turan via The Mises Institute,

If you have been using the internet for longer than a couple of years, you might have noticed that it used to be much “freer.”

What freer means in this context is that there was less censorship and less stringent rules regarding copyright violations on social media websites such as YouTube and Facebook (and consequently a wider array of content), search engines used to often show results from smaller websites, there were less “fact-checkers,” and there were (for better or for worse) less stringent guidelines for acceptable conduct. In the last ten years, the internet’s structure and environment have undergone radical changes. This has happened in many areas of the internet; however, this article will specifically focus on the changes in social media websites and search engines.

This article will argue that changes in European Union regulations regarding online platforms played an important role in shaping the structure of the internet to the way it is today and that further changes in EU policy that will be even more detrimental to freedom on the internet may be on the horizon.

Now that readers have an idea of what “change” is referring to, we should explain in detail which EU regulations played a part in bringing it about. The first important piece of regulation we will deal with is the Directive on Copyright in the Digital Single Market that came out in 2019. Article 17 of this directive states that online content-sharing service platforms are liable for the copyrighted content that is posted on their websites if they do not have a license for said content. To be exempt from liability, the websites must show that they exerted their best efforts to ensure that copyrighted content does not get posted on their sites, cooperated expeditiously to take the content down if posted, and took measures to make sure the content does not get uploaded again. If these websites were ever in a place to be liable for even a significant minority of the content uploaded to them, the financial ramifications would be immense.

Due to this regulation, around the same period, YouTube and many other sites strengthened their policy regarding copyrighted content, and ever since then—sometimes rightfully, sometimes wrongfully—content creators have been complaining about their videos getting flagged for copyright violations.

Another EU regulation that is of note for our topic is the Digital Services Act that came out in 2023. The Digital Services Act is a regulation that defines very large online platforms and search engines as platform sites with more than forty-five million active monthly users and places specific burdens on these sites along with the regulatory burden that is eligible for all online platforms. The entirety of this act is too long to be discussed in this article; however, some of the most noteworthy points are as follows:

1. The EU Commission (the executive body of the EU) will work directly with very large online platforms to ensure that their terms of service are compatible with requirements regarding hate speech and disinformation as well as the additional requirements of the Digital Services Act. The EU Commission also has the power to directly influence the terms of conduct of these websites.

2. Very large online platforms and search engines have the obligation to ban and preemptively fight against and alter their recommendation systems to discriminate against many different types of content ranging from hate speech and discrimination to anything that might be deemed misinformation and disinformation.

These points should be concerning to anyone who uses the internet. The vagueness of terms such as “hate speech” and “disinformation” allows the EU to influence the recommendation algorithms and terms of service of these websites and to keep any content that goes against their “ideals” away from the spotlight or away from these websites entirely.

Even if the issues that are discussed here were entirely theoretical, it would still be prudent to be concerned about a centralized supragovernmental institution such as the EU having this much power regarding the internet and the websites we use every day. However, as with the banning of Russia Today from YouTube, which was due to allegations of disinformation and happened around the same time the EU placed sanctions on Russia Today, we can see that political considerations can and do lead to content being banned on these sites. We currently live in a world with an almost-infinite amount of information; due to this, it would be impossible for anyone or even any institution to sift through all the data surrounding any issue and to come up with a definitive “truth” on the subject, and this is assuming that said persons or institution is unbiased on the issue and approaching it in good faith, which is rarely the case.

All of us have ways of viewing the world that filter our understanding of issues even when we have the best intentions, not to mention the fact that supranational bodies such as the EU and the EU Commission have vested political incentives and are influenced by many lobbies, which may render their decisions regarding what is the “truth” and what is “disinformation” to be faulty at best and deliberately harmful at worst. All of this is to say that in general, none of us—not even the so-called experts—can claim to know everything regarding an issue enough to make a definitive statement as to what is true and what is disinformation, and this makes giving a centralized institution the power to constitute what the truth is a very dangerous thing.

The proponents of these EU regulations argue that bad-faith actors may use disinformation to deceive the public. There is obviously some truth in this; however, one could also argue that many different actors creating and arguing their own narrative with regard to what is happening around the world are preferable to a centralized institution controlling a unified narrative of what is to be considered the “truth.”

In my scenario, even if some people are “fooled” (even though to accurately consider people to be fooled, we would have to claim that we know the definitive truth regarding a multifaceted complex issue that can be viewed from many angles), the public will get to hear many narratives about what happened and can make up their own minds.

If this leads to people being fooled by bad-faith actors, it will never be the entirety of the population. Some people will be “fooled” by narrative A, some by narrative B, some by narrative C, and so forth. However, in the current case, if the EU is or ever becomes the bad-faith actor who uses its power to champion its own narrative for political purposes, it has the power to control and influence what the entirety of the public hears and believes with regard to an issue, and that is a much more dangerous scenario than the one that would occur if we simply let the so-called wars of information be waged. The concentration of power is something that we should always be concerned about, especially when it comes to power regarding information since information shapes what people believe, and what people believe changes everything.

Another important thing to note is that just because it is the EU that makes these regulations does not change the fact that it affects everyone in the world. After all, even if someone posts a video on YouTube from the United States or from Turkey, it will still face the same terms of service. Almost everyone in the world uses Google or Bing, and the EU has power over the recommendation algorithms of these search engines. This means that the EU has the power over what information most people see when they want to learn something from the internet. No centralized institution can be trusted with this much power.

One final issue of importance is the fact that the EU is investing in new technologies such as artificial intelligence programs to “tackle disinformation” and to check the veracity of content posted online. An important example of this is the InVID project, which is in its own words “a knowledge verification platform to detect emerging stories and assess the reliability of newsworthy video files and content spread via social media.”

If you are at all worried about the state of the internet as explained in this article, know that this potential development may lead to the EU doing all of the things described here in an even more “effective” manner in the future.

Tyler Durden Tue, 04/30/2024 - 06:30

$3.5 Billion Slipped Into Ukraine-Israel Aid Bill To 'Supercharge Mass Migration From The Middle East'

Tucked away in the $95 billion military aid package for Ukraine, Israel and Taiwan is a $3.5 billion slush fund to open new processing centers for Muslim migrants, in what Sen. Eric Schmitt described as a bid to "supercharge mass migration from the Middle East."

Muslims pray during the "Islam on Capitol Hill 2009" event at the West Front Lawn of the US Capitol September 25, 2009, in Washington, DC.
(Photo by Alex Wong/Getty Images)

Not only did the “Foreign Aid” package do nothing to secure our own border it included $3.5 Billion to supercharge mass migration from the Middle East. https://t.co/bsbYapsaE2

— Eric Schmitt (@Eric_Schmitt) April 24, 2024

And as Breitbart points out, the $95 billion package does not include any funds to help rebuild America's border defenses against illegal migration - but it does contain $481 million to settle migrants in US cities, and of course, the $3.5 billion to expand migration programs worldwide.

The $3.5 billion was granted to the Department of State, which works with many international groups that feed and transport migrants on their way to the United States.

Biden’s deputies are now using the refugee programs as an adjunct to their diversity-expanding “equity” migration policy. For example, Biden’s deputies used the program in March to import 3,009 migrants from the safe and democratic countries of El Salvador and Guatemala.

They are also using the refugee funds to expand migration routes from many African and Muslim countries. In March, they pulled in 12,018 people from the Congo, plus 16,732 migrants from the Muslim countries of Afghanistan, Syria, Pakistan, Iraq, and Eritrea, according to a report by Stacker.com. -Breitbart

Tucked into the folds of the new foreign aid package is $3.5 billion for mass immigration NGOs.

America Last Republicans voted to supercharge mass immigration while approving ZERO $$ for the U.S. border.

— Theo Wold (@RealTheoWold) April 25, 2024

According to an April 23 release from the Biden DHS visa-granting agency, "The Biden-Harris administration set the refugee admissions ceiling for fiscal year 2024 at 125,000 refugees," adding "With the opening of the Doha Field Office on May 7, 2024, and the Ankara Field Office on May 9, 2024, USCIS will have 11 international field offices. Other international field offices include Beijing; Guangzhou, China; Guatemala City; Havana; Mexico City; Nairobi, Kenya; New Delhi; San Salvador, El Salvador; and Tegucigalpa, Honduras."

So - we have the US government encouraging migration, both legal and illegal - which hurts low-income Americans the most, while neglecting to the borders. Seems we've learned nothing from Europe.

Tyler Durden Tue, 04/30/2024 - 05:45

"Remarkable Turn Of Events" - Alleged Chinese Spy Working For AfD MP Was Informant For German Intelligence For Years

Authored by John Cody via ReMix News,

The news about Alternative for Germany (AfD) MEP Maximilian Krah’s assistant and his arrest for suspected espionage on behalf of China continues to make national headlines, but as more information comes out, the more German intelligence and the political establishment continue to look worse and worse.

Now, news reports have revealed that Krah’s employee, Chinese-German national Jian G., worked for the German domestic intelligence service for years before joining the AfD politician.

Krah has since commented on the new bombshell information, writing on X:

“Remarkable turn of events!”

https://twitter.com/KrahMax/status/1783917894159458787

Much is at stake, as Krah is the top candidate for the AfD in the run-up to the EU parliamentary elections in June. The latest report shows that the powerful Office for the Protection of Constitution (BfV) not only recruited Jian G. as a spy, but also dropped him as an informant because there were concerns he was a double agent for China.

However, despite these suspicions, Jian G. gained German citizenship, became a member of the Social Democrats (SPD), and even passed the EU parliament’s security clearance.

Former minister Mathias Brodkorb questioned the story on X, writing:

They are really funny. Let’s assume the story is true:

1. The Office for the Protection of the Constitution is working with the man.

2. Then, the Office for the Protection of the Constitution ends the collaboration because the man could be a double agent.

3. Then the German state naturalizes this agent.

Intermediate question: Where was the Office for the Protection of the Constitution at that time?

4. Then, Krah wants to hire the man as an employee of the EU parliament. That cannot be done without a security check. So the EU parliament should actually have asked the German security authorities whether there was anything against the man. But apparently they didn’t. Otherwise, the man would not have been cleared and could not have been hired.

Intermediate question: Where was the Office for the Protection of the Constitution at that time? And you are now seriously asking what the problem is? Seriously?

One of the main questions is why the Office for the Protection of the Constitution never informed Krah or the AfD about their suspicions, which is standard operating procedure, and one designed to protect the country’s parties from foreign infiltration. Notably, allowing Jian G. to work for Krah created a favorable political scenario for the establishment to later arrest him in order to smear the AfD. Notably, Jian G. was arrested right before EU parliamentary elections.

The question now is whether the BfV purposefully kept the AfD in the dark for years about the information it knew in order to damage the party.

Working for the BfV all the way back in 2007

According to Bild newspaper, Jian G. was an informant for the Saxon Office for the Protection of the Constitution (BfV) since 2007 at the earliest. Previously, he had unsuccessfully offered to work for the federal branch of the BfV, but he was rejected, and referred back to the Saxon branch of the BfV.

Jian G. reportedly worked with the intelligence service on his own initiative, including supplying information that dealt with Chinese state actors taking action against Chinese exiles in Germany. Eight years after joining the Saxon BfV as an informant, the Saxon branch was informed by the Federal Office for the Protection of the Constitution that G. could be a double spy.

In 2015 and 2016, G. was then directly observed by the counterintelligence department of the Office for the Protection of the Constitution. Officers also questioned him about their suspicions but were unable to prove that he was a spy for China. He was therefore listed as a “suspected case” during that period.

In 2018, G. was finally removed as an informant by the Office for the Protection of the Constitution.

However, by that time, Jian G. had already made contact with Krah and then went on to work as his employee in the EU parliament beginning in 2019. He was then intensively monitored by the domestic intelligence service from 2020 and finally arrested in April 2024.

As noted above, despite the suspicion of espionage, the Chinese national was granted a German passport, was also a member of the SPD for a time, and was able to pass the security check for the EU parliament.

In addition, the BfV under Thomas Haldenwang (CDU), who is notoriously anti-AfD and publicly working against the party, failed to inform Krah or the AfD about the suspicion of espionage against Jian G.

As Remix News has documented, Haldenwang has made numerous remarks against the AfD, including on state-funded television, all in violation of neutrality. Haldenwang belongs to the CDU party.

Notably, this is standard procedure in such cases, which means the Office for the Protection of the Constitution withheld this information from the AfD in violation of past precedent and procedure.

Read more here

Tyler Durden Tue, 04/30/2024 - 02:00

Does The CIA Run America?

Authored by Jeffrey Tucker via The Epoch Times,

We’ve all surely had dark thoughts that the CIA is really running the United States, including many media venues. Maybe that’s been true for decades and we just didn’t know it. If so, let’s just say that it would explain a tremendous amount of what has otherwise been clouded in secrecy.

How would this be possible? Knowledge is power while secret knowledge is full control. Even fake knowledge means power and control, such as we found out in the phony Russiagate investigation early in Trump’s term. They hounded the new administration for years under a completely fake scenario in which Russia somehow got Donald Trump elected.

Yes, that was an intelligence operation all along, one directly designed to overthrow an election, a “color revolution” on our own soil.

How dare an agency not elected by the people, and evading oversight and public accountability, put itself ahead of the Constitution and the rule of law? It’s been going on for many decades as the agencies have gained ever more power, even to the point of forcing a full lockdown of America and even the world under false pretense.

None of this is verifiable precisely because of the secrecy involved. It’s not as if the intelligence community is going to send out a press release: “Democracy in America is an illusion. We know because we control nearly everything, plus we aspire to control even more.”

The incredulous among us will shoot back: look at what you are saying! Your conspiracy theory is non-falsifiable. The less evidence you have for it, the more you believe it. How in the world can we argue with you? Your position is not really plausible but there is nothing we can do to convince you otherwise.

Let’s grant the point. Still, let’s not dismiss the theory completely. Based on a New York Times (NYT) piece that appeared last week, it contains more than a grain of truth. The article is titled: “Campaign Puts Trump and the Spy Agencies on a Collision Course.”

Quote: “Even as president, Donald J. Trump flaunted his animosity for intelligence officials, portraying them as part of a politicized ‘deep state’ out to get him. And since he left office, that distrust has grown into outright hostility, with potentially serious implications for national security should he be elected again.”

Ok, let’s be clear. If the intelligence community led by the CIA is not the “deep state,” what is?

Further, it is proven many times over that the Deep State is in fact out to get him. This is not even controversial. Indeed, there is no reason for these journalists to write the above as if Donald Trump is somehow consumed by some kind of baseless paranoia.

Let’s keep going here: “Trump is now on a possible collision course with the intelligence community .... The result is a complicated and possibly destabilizing situation the United States has never seen before: deep-seated suspicion and disdain on the part of a former and perhaps future president toward the very people he would be relying on for the most sensitive information he would need to perform his role if elected again.”

Wait just a moment. You are telling us that all previous presidents have had a happy relationship with the CIA? That’s rather interesting to know. And deeply troubling too, since the CIA has been managing regime change the world over for a very long time, and is now directly involved in U.S. politics at the most intimate level.

Any president worth his salt should absolutely have a hostile relationship with such an agency, if only to establish clear civilian control over the government, without which it’s not possible to say that we live in a Constitutional republic.

And now, according to the NYT, we have one seeking the Presidency who does not defer to the agency and that this is destabilizing and deeply problematic. Who does that suggest really rules this country?

Is the NYT itself guilty of the most extreme conspiracy theory imaginable, or is it just stating facts as we know them? I’m going to guess that it is the latter. In this case, every single American should be deeply alarmed.

Crazy huh? As for the phrase “never seen before,” we have to push back. What about George Washington, Thomas Jefferson, Andrew Jackson, James Polk, and Calvin Coolidge? They were all previous presidents, according to the history books that people once read.

There was no CIA back then. If you doubt this, I’m pretty sure that your favorite AI engine will confirm it.

One must suppose that when the NYT says “never seen before,” it means in the post-war period. And that very well might be true. John F. Kennedy defied them. We know that for certain. The mysteries surrounding his murder won’t be solved fully until we get the documents. But the consensus is growing that this murder was really a coup by the CIA, a message sent as a lesson to every successor in that office.

Think of that: we live in a country today where most people readily admit that the CIA probably killed the president. Amazing.

It’s intriguing to know at this late date that the Watergate “scandal” was not what it appeared to be, namely an intrepid media holding government to account. Even astute observers at the time believed the mainstream narrative. Now we have plenty of evidence that this too was nothing but a deep state attack on a president who had lost patience with it and provoked another coup.

All credit to my brilliant father who speculated along these lines at the time. I was very young with only the vaguest clue about what was happening. But I recall very well that he was convinced that Richard Nixon was set up in a trap and unfairly hounded out of office not for the bad things he was doing but for standing up to the Deep State.

If my own father, not a particularly political person, knew this for certain at the time, this must have been a strong perception even then.

You hear the rap that these agencies—the CIA is one but there are many adjacent others—are not allowed by law to intervene in domestic politics. At this point and after so much experience, this comes across to me like something of a joke. We know from vast evidence and personal testimony that the CIA has been manipulating political figures, narratives, and outcomes for a very long time.

How involved is the CIA in journalism today? Well, as a traditionally liberal paper, you might suppose that the NYT itself would be highly skeptical of the CIA. But these days, they have published a long string of aggressively defensive articles with titles like “It Turns Out that the Deep State Is Awesome” and “Government Surveillance Keeps Us Safe.” We can add this last piece to the list.

So let’s just say it: the NYT is CIA. So too is Mother Jones, Rolling Stone, Slate, Salon, and many other mainstream publications, including major tech companies like Google and Microsoft. The tentacles are everywhere and ever more obvious. Operation Mockingbird was just the beginning. The network is everywhere and the practice of manipulating the news is wholly normalized.

Once you start developing the ability to see the markings, you simply cannot unsee them, which is why people who think and write about this can come across as crackpot crazy after a while.

Have you considered that maybe the crackpots are exactly right? If so, shouldn’t we, at bare minimum, seek to support a Presidential candidate with a hostile relationship to the intelligence community?

Indeed, that ought to be a bare minimum standard of qualification. There is simply no way we can restore civilian control of government and constitutional government until this agency can be thoroughly reigned in or abolished completely.

Tyler Durden Mon, 04/29/2024 - 23:40

Have Fun Staying Poor: Washington Announces $45 Million Subsidy For Low Income Families To Buy EVs

Just when you thought you've already witnessed a lifetime's worth of examples of the government being excellent capital allocators with your tax money, one more shining example comes along. 

Last week it was reported that Washington Governor Jay Inslee has announced $45 million worth of subsidies that is going to allow "low income" families to purchase an electric vehicle. 

The initiative offers families the opportunity to receive financial assistance for either leasing or purchasing electric vehicles, with up to $9,000 allocated for leasing and $5,000 for purchasing, according to Must Read Alaska.

The program is open to individuals earning 300% or less of the federal poverty level and extends to both new and used EVs. Approximately 9,000 people can benefit from the grant, with the potential for either 9,000 individuals to opt for the $5,000 deal or 5,000 individuals for the $9,000 option.

“Washingtonians really get it when it comes to electric vehicles,” Inslee said at a press conference last week. 

Governor Inslee characterized the initiative as a means to "democratize EVs," emphasizing a broader goal of advancing the electrification of transportation. He expressed optimism about widespread adoption, anticipating significant participation and benefit from the program.

However, the program has faced criticism, notably from Washington Policy Center Environmental Director Todd Myers. Myers contends that the subsidies fail to effectively curb carbon emissions and represent a misallocation of taxpayer funds that could be better utilized for other environmental priorities like (we swear we are not making this up) salmon recovery.

Hey Todd, two wrongs don't make a right! But we digress. Despite the controversy, the grant funds are slated to become available to eligible low-income residents in August.

Myers wrote in a blog post: “This is one more example of how wasteful and ineffective Washington’s climate policy is."

He continued: “It also reveals the disingenuousness of claiming that climate change is an ‘existential crisis’ while wasting tens of millions of dollars on projects that do nothing to address that crisis.”

 

Tyler Durden Mon, 04/29/2024 - 23:20

Von Greyerz: The Real Move In Gold & Silver Is Yet To Start

Authored by Egon von Greyerz via VonGreyerz.gold,

Since the October 2023 gold low of just over $1,600 gold is up but is anyone buying?

Well no, certainly none of the normal players.

Gold Depositories, Gold Funds and Gold ETFs have lost just under 1,400 tonnes of their gold holdings in the last 2 years since May 2022. 

But not only gold funds are seeing weak buying but also mints such as the Perth Mint and the US Mint with its coin sales down 96% year on year. 

Clearly gold knows something that the market hasn’t discovered yet. 

RATES MUCH HIGHER 

For the last few years I have been clear that there will be no lasting interest rate cuts. 

As the chart shows below, the 40 year down trend in US rates bottomed in 2020 and since then rates are in a secular uptrend.  

I have discussed this in many articles as well as in for example this interview from 2022 when I stated that rates will exceed 10% and potentially much higher in the coming inflationary environment, fuelled by escalating deficits and debt explosion.

“But the Fed will keep rates down” I hear all the experts call out!

Finally the “experts” are changing their mind and  believe that cuts will no longer happen. 

No central bank can control interest rates when its government recklessly issues unlimited debt and the only buyer is the central bank itself. 

PONZI SCHEME WORTHY OF A BANANA REPUBLIC

This is a Ponzi scheme only worthy of a Banana Republic. And this is where the US is heading.  

So strongly rising long rates will pull short rates up. 

And that’s when the fun panic starts. 

As Niall Ferguson stated in a recent article:

“Any great power that spends more on debt service (interest payments on the national debt) than on defence will not stay great for very long. True of Habsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire”.

So based on the CBO (Congressional Budget Office), the US will spend more on interest than defence already at the end of 2024 as this chart shows: 

But as often is the case, the CBO prefers not to tell uncomfortable truths. 

The CBO forecasts interest costs to reach $1.6 trillion by 2034. But if we extrapolate the trends of the deficit and apply current interest rate, the annualised interest cost will reach $1.6 trillion at the end of 2024 rather than in 2034. 

Just look at the steepness of the interest cost curve above. It is clearly EXPONENTIAL. 

Total Federal debt was below $1 trillion in 1980. Now, interest on the debt is $1.6 trillion.

Debt today $35 trillion rising to $100 trillion by 2034.

The same with the US Federal Debt. Extrapolating the trend since 1980, the debt will be $100 trillion by 2036 and that is probably conservative.

With the interest trend up as explained above, a 10% rate in 2036 or before is not unrealistic. Remember rates back in the 1970s and early 1980s were well above 10% with a much lower debt and deficit.

US BONDS – BUY THEM AT YOUR PERIL  

Let us analyse the current and future of a US treasury debt (and most sovereign debt):

• Issuance will accelerate exponentially 

• It will never be repaid. At best only deferred or more probably defaulted on

• The value of the currency will fall precipitously

HYPERINFLATION COMING

So where are we heading? 

Most probably we are facing an inflationary period leading to probable hyperinflation 

With global debt already up over 4x this century from $80 trillion to $350 trillion. Add to that a Derivative mountain of over $2 quadrillion plus unfunded liabilities and the total will exceed $3 quadrillion. 

As central banks frenetically try to save the financial system, most of the 3 quadrillion will become debt as counterparties fail and banks will need to be saved with unlimited money printing. 

BANCA ROTTA – BANKRUPT FINANCIAL SYSTEM 

But a rotten system can never be saved. And this is where the expression Banca Rotta derives from – broken bench or broken bank as my article from April 2023 explained. 

But neither a bank nor a sovereign state can be saved by issuing worthless pieces of paper or digital money. 

In March 2023, four US banks collapsed within a matter of days. And soon thereafter Credit Suisse was in trouble and had to be rescued. 

The problems in the banking system have just started. Falling bond prices and collapsing values of property loans are just the beginning. 

This week Republic First Bancorp had to be saved. 

Just look at US banks’ unrealised losses on their bond portfolios in the graph below.

 Unrealised losses on bonds held to maturity are $400 billion.

And losses on bonds available for sale are $250 billion. So the US banking system is sitting on identified losses of $650 billion just on their bond portfolios. As interest rates go up, these losses will increase.

Add to that, losses on loans against collapsing commercial property values and much more.

EXPONENTIAL MOVES 

So we will see debt grow exponentially as it has already started to do.  Exponential moves start gradually and then suddenly whether we talk about debt, inflation or population growth. 

The stadium analogy below shows how it all develops:

It takes 50 minutes to fill a stadium with water, starting with one drop and doubling every minute – 1, 2, 4, 8 drops etc. After 45 minutes the stadium is only 7% full and the last 5 minutes it goes form 7% to 100%.

THE LAST 5 MINUTES OF THE FINANCIAL SYSTEM

So the world is most probably now in the last 5 minutes of our current financial system.

The coming final phase is likely to go very fast as all exponential moves do, just like in the Weimar Republic in 1923. In January 1923 one ounce of gold cost 372,000 marks and at the end of November in 1923 the price was 87 trillion marks!

The consequences of a collapse of the financial system and the global economy, especially in the West can take many decades to recover from. It will involve a debt and asset implosion plus a massive contraction of the economy and trade.

The East and South and especially the countries with major commodity reserves will recover much faster. Russia for example has $85 trillion in commodity reserves, the biggest in the world. 

As US issuance of treasuries accelerate, the potential buyers will decline until there is only one bidder which is the Fed. 

Even today no sane sovereign state would buy US treasuries. Actually no sane investor would buy US treasuries. 

Here we have an already insolvent debtor that has no means of repaying his debt except for issuing more of the same rubbish which in future would only be good for toilet paper. But electronic paper is not even good for that. 

This is a sign in a Zimbabwe toilet: 

Let us analyse the current and future of a US treasury debt (and most sovereign debt):

• Issuance will accelerate exponentially 

• It will never be repaid. At best only deferred or more probably defaulted on

• The value of the currency will fall precipitously

That’s all there is to it. Thus anyone who buys US treasuries or other sovereign bonds has a 99.9% guarantee of not getting his money back. 

So Bonds are no longer an asset of value but just a liability for the borrower that will or can not be repaid.

What about stocks or corporate bonds. Many companies won’t survive or experience a major decline in the stock price together with major cash flow pressures. 

As I have discussed in many articles, we are entering the era of commodities and especially precious metals. 

The coming era is not for speculation but for trying to keep as much of what you have as possible. For the investor who doesn’t protect himself, there will be a wealth destruction of an unprecedented magnitude. 

There will no longer be a question what return you can get on your investment. 

Instead it is a matter of losing as little as possible. 

Holding stocks, bonds or property – all the bubble assets – are likely to lead to massive wealth erosion as we go into the “Everything Collapse”.

THE NEW ERA OF GOLD AND SILVER

For soon 25 years I have been urging investors to hold gold to preserve their wealth. Since the beginning of this century gold has outperformed most asset classes. 

Between 2000 and today, the S&P, including reinvested dividends, has returned 7.7% per annum whilst gold has returned 9.2% per year or 8X.

In the next few years, all the factors discussed in this article will lead to major gains in the precious metals and falls in most conventional assets. 

There are many other positive factors for gold. 

As the chart below shows, the West has reduced its gold reserves since the late 1960s, whilst the East is growing its gold reserves strongly. And we have just seen the beginning of this trend.

The US and EU sanctioning of Russia and the freezing/confiscation of the Russian assets in foreign banks are very beneficial for gold. 

No sovereign states will hold their reserves in US dollars any more. Instead we will see central bank reserves move to gold. That shift has already started and is one of the reasons for gold’s rise. 

In addition, gradually the BRICS countries are moving away from the dollar to trading in their local currencies. For commodity rich countries, gold will be an important part of their trading. 

Thus there are major forces behind the gold move which has just started and will reach further both in price and time than anyone can imagine. 

HOW TO OWN GOLD

But remember for investors, holding gold is for financial survival and protection of assets. 

Therefore gold must be held in physical form outside the banking system with direct access for the investor. 

Also gold must be held in safe jurisdictions with a long history of rule of law and stable government. 

The cost of storing gold should not be the primary consideration for choosing a custodian. When you buy life insurance you mustn’t buy the cheapest but the best.

First consideration must be the owners and management. What is their reputation, background and previous history. 

Thereafter secure servers, security, liquidity, location and insurance are very important. 

Also, high level of personal service is paramount. Many vaults fail in this area. 

Preferably gold should not be held in the country where you are resident, especially not in the US with its fragile financial system. 

Neither gold nor silver has started the real move yet. Any major correction is likely to come from much higher levels. 

Gold and silver are in a hurry so it is not too late to jump on the gold wagon.

Tyler Durden Mon, 04/29/2024 - 22:20

Major Dollar Tree Warehouse Demolished By Tornado, May Spark Supply Chain Chaos

A tornado outbreak on Saturday night across southern Oklahoma decimated a major distribution center for budget retailer Dollar Tree. The facility supplies stores across the Oklahoma-Texas area, plus other surrounding states, which may spark supply chain issues. 

Professional storm chaser Aaron Rigsby posted several aerial images of the Dollar Tree distribution center in the Marietta area on X. The photos show the damage left behind after a tornado ripped through the center of the massive warehouse. 

Images from Marietta, OK Tornado. Would appear as if cars and semis were tossed off the interstate last night next to the Dollar Tree DC that was impressively shredded to bits. #OKwx pic.twitter.com/2y46FeJfdF

— Aaron Rigsby (@AaronRigsbyOSC) April 28, 2024

Another storm chaser, Brandon Clement, posted an up-close drone video of the wreckage, showing millions of products that won't arrive on store shelves anytime soon.

A tornado hit Matietta, OK. Destroying the Family Dollar Distribution center. It also hit a Dollar store, hospital and flipped cars and semis on I-35. #Tornado #Damage #OKWX #Oklahoma #WXTwitter pic.twitter.com/7AF7bgBcQ0

— WxChasing- Brandon Clement (@bclemms) April 28, 2024

Marietta is located in Love County. The country's sheriff's office posted on Facebook that "power lines everywhere and buildings have been destroyed." 

"Significant damage to dollar tree warehouse, homeland, dollar general, nursing home, and part of the hospital," the sheriff's office said. 

With the Marietta distribution center offline, this may spark significant disruptions in the supply of goods to stores located in Texas, Oklahoma, and surrounding states. 

Dollar Tree operates 25 distribution centers nationwide, serving over 15,500 stores.  

There is no official statement from the company specifying supply chain impacts. 

Tyler Durden Mon, 04/29/2024 - 22:00

What, No Bitcoin? How "Hundreds Of Billions" Are Laundered With Cash On Airplanes

Will anti-bitcoin crusader Liz Warren demand that British Pounds be banned next?

shut up https://t.co/7ytElXwXR5 pic.twitter.com/AiTKkB6aKJ

— zerohedge (@zerohedge) January 22, 2024

Jo-Emma Larvin navigated through London’s Heathrow Airport on a fateful day in August 2020, pushing a cart laden with seven suitcases. Traveling business class to Dubai, Larvin and her companion passed through security, seemingly no different from the throngs of other travelers. Yet, unbeknownst to airport authorities, her bags held a clandestine cargo: millions of British pounds, wrapped in rubber bands and sealed in plastic.

Their destination? An international money launderer, adept at converting cash into gold or other currencies, the Wall Street Journal reports, without mentioning bitcoin once, because let's face it: 99% of all money laundering involves not crypto but cold, hard cash!

Jo-Emma Larvin at a London movie premiere in 2010. Photo: Mike Marsland/WireImage/Getty Images

The money launderer, who charges a hefty fee to clients to exchange cash for gold and other currencies, has been operating via Heathrow to Dubai - the former doesn't scan outbound luggage for cash, while the latter welcomes sacks of it. They're also the #1 and #2 of the world's busiest airports for international passengers.

The UK mandates passengers declare amounts exceeding $10,000 to customs authorities. Larvin, however, risked arrest by not disclosing her precious cargo, not that anyone would notice. The suitcases slid through Heathrow's baggage-handling system and its 3-D scanner, designed to detect explosives rather than contraband currency.

The next morning in Dubai, the women calmly collected their bags, declaring $2.8 million at customs, a practice fully permitted by UAE law. While the UAE allows any amount of cash to enter its borders, the laxity of international airports in monitoring money flows has created a loophole, one exploited by money launderers worldwide.

Each year, more than $2 trillion in proceeds from illegal enterprises enters the global financial system, with a significant portion smuggled across borders by air. According to estimates by the UN Office on Drugs and Crime and the Financial Action Task Force, "hundreds of billions in illicit cash" fly out of the UK and other nations to countries with fewer regulations.

One of the reasons for so much airline smuggling is that banks around the globe have stepped up the reporting of suspicious transactions, making it more difficult to launder money using traditional wire transfers. So it's back to even more traditional ways of money laundering.

"You just can’t walk into a bank with this much money without being flagged," said George Voloshin, of ACAMS, an industry group for financial crime-fighting professionals. "You will be arrested at the next branch."

Larvin and her boyfriend became two operatives in an intricate web of money launderers working for a UAE-based kingpin. Over a few months in 2020, this network smuggled around $125 million, primarily from the UK to Dubai. "How did they manage so much money in such a short time?" wondered Ian Truby, a senior officer at the UK's National Crime Agency. "Security isn't designed to detect such activities."

Three weeks after her initial journey, Larvin returned to Heathrow with her boyfriend, carrying eight suitcases filled with cash. "It's fucking ridiculous," he texted, voicing concern about drawing attention. "Talk about conspicuous."

The pair's operation ultimately contributed to unraveling a broader international laundering scheme.

Bundles of cash found in a suitcase after an arrest at Heathrow Airport. Photo: National Crime Agency

The Kingpin

Documents, court records, and interviews reveal how a man named Abdulla Alfalasi spearheaded the smuggling operation, transporting cash from Heathrow to Dubai since 2017. He expanded during the pandemic, once departing with 11 suitcases weighing 463 pounds and reporting $850,000 in Dubai. Alfalasi's connections, including his father-in-law's involvement in developing Dubai's airport, provided an air of legitimacy.

Abdulla Alfalasi Photo: National Crime Agency

He recruited Michelle Clarke, an executive assistant from Leeds, who soon began recruiting others, including Larvin. The scheme enticed participants with promises of easy money, business-class flights, and luxurious accommodations. Yet the allure was short-lived for many.

In October 2020, two couriers were intercepted at Heathrow, and a subsequent investigation uncovered a vast network of 36 international couriers. Clarke was arrested in Zanzibar in December, carrying $9 million in gold on a private plane.

Authorities eventually arrested Alfalasi and several couriers, unveiling details of the operation. Alfalasi pleaded guilty to money laundering and received a 9-year, 7-month prison sentence. His assets, including vehicles and watches, were seized. Clarke remains under investigation in Dubai for money laundering.

In texts to the Journal, Larvin's boyfriend, Jonathan Johnson, said that he and Larvin were simply two ordinary people who were hoodwinked. He suggested that if what they did was such a big crime, why aren't airports scanning luggage for cash?

Tyler Durden Mon, 04/29/2024 - 21:20