en Everything You Need To Know About The Italian Referendum (& Should Be Afraid To Ask) <p>Update: The market was modestly spooked as Transport Minister Delrio appeared to confirm Renzi&#39;s resignation will occur on a &#39;no&#39; vote...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 402px;" /></a></p> <p>*&nbsp; *&nbsp; *</p> <p>While the post-Trump <strong>euphoria in US stocks has been the perfect distraction</strong> from the ugly realities elsewhere, this weekend&#39;s Italian Referendum could well be the biggest &#39;revolt&#39; yet, topping Brexit and Trump. Should Italy vote &quot;no&quot;, as polls forecast, PM Renzi may quit, leaving the Italian bank recapitalization would then be in jeopardy and, as Bloomberg&#39;s Mark Cranfield warns <strong><em>&quot;we could be looking at a Greece-like market reaction on steroids.&quot;</em></strong></p> <p>Italy&rsquo;s referendum on Sunday is the biggest risk for markets going into year-end, according to a poll of Citigroup clients, and <strong>several risk indicators suggest investors&#39; concern is growing...</strong></p> <p>FX hedge costs are soaring (to Brexit highs)</p> <p><a href=""><img height="314" src="" width="600" /></a></p> <p>Italian equity protection costs are at 2-year highs relative to Europe...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 312px;" /></a></p> <p>And Italian government bond spread to Bunds has surged to 3 year highs...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 310px;" /></a></p> <p>&nbsp;</p> <h2><u><strong>So what are the Italian Referendum implications?</strong></u></h2> <p><a href="">ABN Amro&#39;s Nick Kounis and Aline Schuling</a> explain...</p> <ul> <li>The impact of Italy&rsquo;s referendum on the outlook for its economy and wider financial markets is far from black and white</li> <li>There are a lot of possible scenarios, given the uncertainty about polls and elections, as well as the feedback loops between electoral reforms and the implications for government formation</li> <li>In case of a No vote, an interim government will likely take over and political instability and policy stagnation are likely, but the risks for euro exit in the medium term actually diminish</li> <li>A Yes vote opens up the possibility of a reformist government from 2018, but also for a euro referendum, depending on the election outcome &ndash; so it increases the tail risk on both sides</li> <li>The immediate reaction of Italian bonds will be to sell-off in a No and rally on a Yes but in both cases spreads will remain elevated</li> <li><strong>The size of government debt, NPLs and economic stagnation mean the country remains vulnerable in either scenario</strong></li> </ul> <h2>Introduction</h2> <p>Investor concern about European political risk has sharpened further following the surprise outcome in the US presidential elections. That result, following Brexit, is seen as confirming the surge of an anti-establishment movement fuelled by discontent at the impact of globalisation. There are a number of polls coming up, but the Italian referendum on 4 December and its potential ramifications have been in the spotlight recently. Below we tackle the key issues that arise in a Q&amp; A format.</p> <h2>What is the referendum about?</h2> <p>The referendum is on a proposal to change the electoral system of the Senate, which has been already approved by parliament. Italy&rsquo;s political system would become a single-house system, where only the lower house ratifies a government and approves most ordinary legislation. The current elected Senate would become a House of Regions and Municipalities, with limited and specific legislative powers and no right of veto. The number of MPs in the Senate would fall from 315 to 100.</p> <p>The reform to the Senate is part of a broader reform to the electoral system that has been on the agenda since Matteo Renzi took office in 2014. Italy has a perfectly symmetrical parliamentary system (a bicameral system), in which the Lower House and the Senate effectively have the same powers. This tends to result in laws bouncing back from one House to the other, often blocking the legislative process and hindering policy making. A reform to the lower house (the Italicum) was already agreed by parliament but a number of appeals have been filed against it at Italy&rsquo;s Constitutional Court (see box below). If both reforms of the lower house and Senate are passed, it would make government formation easier in the future and make it easier for future governments to implement their policy agenda.</p> <p><a href=""><img alt="161130-box1" class="alignnone size-full wp-image-97141" src="" style="width: 600px; height: 437px;" /></a></p> <p>&nbsp;</p> <h2>What is the likely result?</h2> <p>The last opinion polls suggest that the No camp has a slight lead. Our running average of the last five polls stands at 40% for No and 37% for Yes. This essentially means that the outcome is too close to call. The gap is within the margins of statistical error. This is especially the case given the recent poor performance of opinion polls in predicting actual outcomes. In addition, there is a large proportion of the population (23%) that is undecided. The way these voters turn will have big implications for the outcome and increase the uncertainty.</p> <p><a href=""><img alt="161130-graph1" class="alignnone size-full wp-image-97147" src="" style="width: 599px; height: 463px;" /></a></p> <h2>What happens in case of a No vote?</h2> <p>There are two significant possible implications of a No. It would reduce the ability of the future governing party or coalition to pass into law its policy agenda. A future government would likely not have control of both chambers. This would make passing ambitious structural reforms more difficult. However, it is uncertain whether Mr Renzi&rsquo;s Democratic party (PD), or any other party, has such an agenda anyway. On the other hand, a split in the chambers, would also make it difficult for the populist and euro-sceptic Five Star movement (M5S) to push through a referendum on the future of the euro.</p> <p>The other implication would be political instability. Prime Minister Mateo Renzi has flip-flopped on whether he would stay on in his role in the case of a No vote. However, there is a significant risk he would resign. That could potentially trigger new elections in early 2017. However, we think in that case, it would be more likely that a new Prime Minister would be appointed that would lead an interim government. That government may not last its full term (early 2018) and there could be new elections in the second half of next year in any case. An alternative source of instability in case of a No is that the PD may lose support from smaller groups in the Senate, which could mean that a grand coalition (including Forza Italia) would need to make up the new government.</p> <h2>What happens in case of a Yes vote?</h2> <p>A Yes vote would mean that Prime Minister Renzi&rsquo;s government would stay in place, likely through to the scheduled election in 2018. An optimistic take is that he would then be free to focus all his energies on a major structural reform programme. However, it remains to be seen whether Mr Renzi wants to pursue aggressive reforms. His track record leaves question marks. Since coming to power, his main achievement on economic policy side is labour market reform, but that was not far-reaching. In addition, the Prime Minister still needs to deal with the Senate in the current state, and he has a waver thin majority. So major reform before new elections does not seem likely. However, if he does win new elections and both the lower house and senate reforms are passed, he would be in a powerful position to implement major reforms in his next term.</p> <p>There is also another scenario following the Yes vote. The forces of populism are unlikely to go away in a hurry. A new election, even in 2018, could still see the MS5 party win. It would then have (again assuming both parliamentary reforms are passed) the ability to execute its policy agenda, though it may still struggle to push through a euro referendum (see below). So a Yes win may be positive in terms of near term political stability, but could raise the risk of a more dangerous scenario in the not too distant future.</p> <h2>What would be the result of any new election?</h2> <p>A new general election is scheduled in early 2018, but as noted above could occur earlier, given the political instability a No vote could trigger. There are two complications in trying to assess the outcome of any new election. First of all we need to rely on the outcome of the current polls, which may or might not be accurate, and in any case may change up to the election. The second is that outcome will also depend on to whether the electoral system will change (fully or partially).</p> <p>The latest polls suggest that PD would still be the biggest party. PD is currently polling at 33%, while MS5 is at 28%. Still given the uncertainty of the polls and the potential for swings, MS5 still has a realistic chance of winning. If the electoral reform of the Lower House is passed before the new election, then PD or MS5 would emerge as the dominant force in the lower house as the system ensures that winning party has more than 50% of the vote. If the senate reform has also passed (so in case of a Yes vote in the referendum) the winning party in the lower house would have significant power to pass through its legislative agenda. However, if the reform does not pass, dominance in the Lower House may not amount to much, as the Senate would remain able to frustrate the government.</p> <p><a href=""><img alt="161130-graph2" class="alignnone size-full wp-image-97146" src="" style="width: 600px; height: 470px;" /></a></p> <p>If the electoral reform of the lower house is blocked by the Constitutional court (or if it is significantly watered down) Italy may well find it very difficult to form a new government. This is because the electoral law under which Renzi&rsquo;s government was elected, which also had a winner premium to help ensure a majority, was ruled unconstitutional by the Constitutional Court in 2014. If this law is not replaced by the Italicum, any new election would be decided by full proportional representation. This means that the winning party would have to form a coalition given current polling. The next biggest party in the polls is Lego Nord (12.1%) followed by Forza Italia (11.5%). Assuming that PD and MS5 would not want to form a coalition, the other combinations look problematic, and would in any case need to involve a multitude of small parties. In this case, a &lsquo;Spain scenario&rsquo; where coalition negotiations are drawn out and new elections become necessary would seem likely.</p> <h2>What is Five Star&rsquo;s policy on Europe?</h2> <p>The Five Star movement is against Italy&rsquo;s membership of the euro, but not necessarily of its membership of the EU. Last month, Luigi Di Maio, a MS5 party leader in the lower house of parliament who is often seen as a possible future prime minister, set out the party&rsquo;s position on the euro in a recent interview. He said he would like to &lsquo;see a European referendum on the euro, to see other countries starting to talk about it&rsquo;. He added that it would be &lsquo;a consultative referendum&rsquo;. He also noted that Italy should explore other alternatives to the euro and mentioned a return to the lira, as well as the (more fanciful) idea of splitting the eurozone into different currency areas.</p> <h2>Would a No vote start the countdown for Italy&rsquo;s euro exit?</h2> <p>We do not think that a No vote would increase the chances of an Italian euro exit. It actually might make it less likely. The nightmare scenario for financial markets in simple terms is that a No triggers early elections, MS5 wins, it holds an in-out euro referendum, which leads to a vote for ITEXIT. However, in case of a No vote, the situation would be more complex. As described above, without parliamentary reform, MS5 would struggle to form a government and to pass the legislation to hold the referendum.</p> <p>In many ways a YES vote followed by a MS5 win in 2018 could actually be the scenario which implies the bigger risk of ITEXIT. This is because MS5 would have more legislative power. However, even then there would be significant hurdles to overcome. The constitution does not allow referenda on pulling out of international treaties, though it does allow advisory referenda. However, to launch an advisory referendum, there needs to be a two-thirds support in parliament currently (though this could change eventually). Even assuming the Italicum reform sticks and MS5 wins the election, they would still struggle to achieve that. MS5 would then have 340 seats. Given current polling, the other Eurosceptic party Lega Nord would have around 55 seats. So it would need to increase its share of the vote significantly (from the current 12.5% to around 16.5%) to push the combined MS5-Lega Nord to the two-thirds majority necessary. If it does not get that majority, it would need to a referendum to hold the advisory referendum.</p> <p>If it MS5 were to manage to hold a consultative referendum, then the public would need to vote to leave the euro. Most polls suggest a majority of the Italian public favour staying in, though support has diminished and the gap is now small. If the public did vote to leave, the government could then use that referendum as a mandate to start the process of a euro exit.</p> <h2>What is the most likely scenario?</h2> <p>There are a lot of possible scenarios, given the uncertainty about polls and elections, as well as the feedback loops between electoral reforms and the implications for government formation and policymaking. We have set out a scenario tree in Figure 3. Based on opinion polls, and the anti-establishment trends more generally, we judge that a No outcome (55%) is more likely than Yes (45%). The Italicum law would also most likely be watered down in such a scenario, meaning that future government formation as well as policymaking would be difficult. A Yes outcome would make less likely that the Italicum is watered down, given that Mr Renzi is a stronger supporter of it. However, other reforms before the next election (early 2018) would probably not be likely given that the current situation in terms of parliament would remain in place until then and Mr Renzi would not likely take measures that could hit his popularity in the run up to the poll.</p> <p>A strong government beyond the next election would be very likely following a Yes vote. Given current opinion polls a strong PD government would be the more likely and it would then have the possibility to be a reformist government that tackled Italy&rsquo;s economic problems. However, that is not a given, as that also would depend on the willingness of that government to follow an aggressive reform path, which could still lead to strong opposition from trade unions and other vested interests. Alternatively, an MS5 government could win the elections and take power. However, it would be a small probability within that scenario that they could enough support in parliament to hold a referendum on the euro, given the higher hurdle to pass constitutional laws.</p> <h2><a href=""><img alt="161130-box2" class="alignnone size-full wp-image-97145" src="" style="width: 600px; height: 482px;" /></a><br />How severe are Italy&rsquo;s economic problems?</h2> <p>Italy badly needs an economic reform programme to boost its potential growth rate. Its potential growth is generally estimated at close to zero due to ageing and weak productivity growth (see Figure 4). Surveys of international competitiveness suggest it is structurally one of the weakest economy&rsquo;s in the eurozone, with only Portugal and Greece ranked more poorly (Figure 5). The low potential growth rate exacerbates the country&rsquo;s two other economic problems: its mountains of government debt and non-performing loans.</p> <p><a href=""><img alt="161130-graph3" class="alignnone size-full wp-image-97144" src="" style="width: 600px; height: 457px;" /></a></p> <p><a href=""><img alt="161130-graph4" class="alignnone size-full wp-image-97143" src="" style="width: 600px; height: 461px;" /></a></p> <p>We have made some debt projections set out in the chart below. In the base case, we assume that nominal growth averages 2.5% in coming years, that the primary surplus gradually rises from 1.5% now to 2.5% and interest payments roughly trend at current levels. That leaves the debt ratio trending down only slightly to around 130% GDP in 2025 from 133% now. Furthermore, Italy&rsquo;s debt sustainability could come into question in the case of even relatively moderate shocks. For instance, assuming 1% slower nominal growth and 1% higher interest rate, would see the debt ratio rising to 160% GDP over that horizon. Arguably the nominal GDP growth we assume is rather &lsquo;generous&rsquo; given current potential growth estimates and trends in inflation.</p> <p><a href=""><img alt="161130-graph5" class="alignnone size-full wp-image-97142" src="" style="width: 600px; height: 461px;" /></a></p> <p>At the same time, Italy&rsquo;s banking sector needs more capital given the high level of non-provisioned loans. We estimate that if the banking sector sells its NPLs at 25-35%, given the current provisioning, this would imply a capital short-fall of EUR 88-124bn. This amounts to 5.5-7.8% GDP. This would significantly increase the government debt ratio if there was a direct re-capitalisation following a bail-in. Up until now, the government has been trying to find private sector solutions to re-capitalise its banks, but there are serious question marks about investor appetite.</p> <h2><u>What are the market implications?</u></h2> <p>The immediate reaction of Italian government bonds will be to sell-off in a No and rally on a Yes but in both cases spreads will remain elevated. The 10y spread over Italy could move towards 200bp in the first instance in the case of a No, and back towards 140bp in case of a Yes vote. However, these early moves would probably to some extent unwind (especially in case of the initial reaction following a Yes). It would likely become clear that a No vote would not immediately open the door for a MS5 &nbsp;government, while a Yes vote would not lead to much reform in the next year, while it could eventually put MS5 in the driving seat after the next elections. Crucially, we think the key issue is Italy&rsquo;s economic vulnrabilities, which will remain in place over the next year whatever the result of the poll.</p> <p><strong>The ECB&rsquo;s ongoing QE policy should limit the upside for Italy&rsquo;s government bond yields.</strong> Given current sovereign credit ratings, Italy has a quite a buffer before all four agencies place its debt in the sub-investment grade category that would make its bonds ineligible for ECB asset purchases. The ECB bases itself on the highest rating, which currently is given by Fitch, which is three notches away from sub-investment grade (though with a negative outlook).</p> <p>Reuters reported that the ECB is ready to temporarily step up purchases of Italian government bonds if the outcome of the referendum on Sunday leads to a surge in the country&rsquo;s bond yields. It cites four unidentified ECB officials who also noted that the move would not necessarily need Governing Council approval. The ECB already deviates from the capital key to make substitute purchases to make up for not being able to make targets for countries where holdings have reached the issuer limit or for other technical reasons. However, this would be a relatively modest and temporary phenomenon because it cannot sharply and persistently deviate from the capital key under the current rules of the programme. Indeed, the Reuters report quotes the officials saying such a policy would be limited to &lsquo;days or weeks to counter any immediate volatility&rsquo;. If Italy needed long-term support, it would need to officially ask for help according to the report. This would presumably be via the OMT, though that would require Italy entering a reform programme, which would be politically very challenging.</p> <p><strong>However, an economic shock that leads to a sharp deterioration in the outlook for growth and government debt could increase concerns that there would be significant downgrades in the future. </strong>Alternatively, in the scenario where MS5 did get into government following parliamentary reform and did manage to hold a euro referendum, this would also obviously be a major game changer that would see Italy&rsquo;s spread over Germany explode. An additional element, is that if investors do become worried, a surge in yields would also lead to a sharp deterioration in the government debt outlook, so could become a self-fulfilling prophesy.</p> <p>On the positive side, following the next elections, a reformist PD government in a reformed parliament, could lead to a rise in growth expectations, leading to a virtuous circle of lower spreads and an improving debt outlook.</p> <p>*&nbsp; *&nbsp; *</p> <p>So that&#39;s the long version, but <a href="">we leave it to Doug Casey to sum it all up succinctly:</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Italy would be the first domino to fall.</p> <p>&nbsp;</p> <p><u><strong>December 4 referendum fails&nbsp;&gt;&gt;&nbsp;M5S comes to power&nbsp;&gt;&gt;&nbsp;Italians vote to leave the euro currency&nbsp;&gt;&gt;&nbsp;European Union collapses</strong></u></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="962" height="503" alt="" src="" /> </div> </div> </div> Bond Brexit Citigroup Constitutional Court Democratic Party Democratic Party Europe European Central Bank European Union European Union Eurozone Eurozone Fitch Forza Italia Germany Governing Council Greece Italian electoral law Italian government Italy Italy’s Constitutional Court Italy’s government Lega Lower House Matteo Renzi MS5 government MS5 party Nominal GDP non-performing loans Politics Politics of the European Union Portugal Prime Minister Renzi’s government ratings Referendum Renzi Cabinet Renzi’s government Reuters Senate Volatility Withdrawal from the European Union Fri, 02 Dec 2016 18:16:41 +0000 Tyler Durden 579310 at Schwarzman, Dimon, Fink Will Advise Trump How To Create Jobs <p>Shortly after Donald Trump picked former Goldman partner Steven Mnuchin as Treasury Secretary, he was <a href="">rumored to be considering </a>another Goldmanite, current President and COO Gary Cohn - who as reported earlier this week is already contemplating "life after Goldman" - for energy secretary. The follows a previous <a href="">report </a>that Trump may appoint Cohn as head of the Office of Management and Budget. So, as Trump wonders which other Goldman banker to poach to fully outsource financial management of the US directly to Goldman, a taxpayer-backed hedge fund which has already taken over the world's central banks, he decided to spread the Wall Street love and earlier today announced that he has created an economic panel chaired by Blackstone's Stephen Schwarzmann, whose members will also include such illustrious "<em>non-swampies</em>" as Jamie Dimon and Larry Fink, as well as various other "prominent U.S. business leaders" to get Wall Street's advice on such matters as ... job creation.&nbsp;</p> <p>The <a href="">President’s Strategic and Policy Forum </a>will begin meeting with Trump in February after his inauguration. From the announcement:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>President-elect Donald J. Trump today announced that he is establishing the President’s Strategic and Policy Forum. <strong>The Forum, which is composed of some of America’s most highly respected and successful business leaders, will be called upon to meet with the President frequently to share their specific experience and knowledge as the President implements his plan to bring back jobs and Make America Great Again. The Forum will be chaired by Stephen A. Schwarzman, Chairman, CEO, and Co-Founder of Blackstone. </strong></p> <p>&nbsp;</p> <p>Members of the Forum will be charged with providing their individual views to the President – informed by their unique vantage points in the private sector – on how government policy impacts economic growth, job creation, and productivity. The Forum is designed to provide direct input to the President from many of the best and brightest in the business world in a frank, non-bureaucratic, and non-partisan manner.</p> </blockquote> <p>This is the same Schwarzman who during the Republican primaries in October 2015, <a href="">characterized </a>Trump as "the P.T. Barnum of America."</p> <p>Other members include General Motors Co. chairman and CEO Mary Barra, Cleveland Clinic CEO Toby Cosgrove, Bob Iger of the Walt Disney, Wal-Mart Stores Inc. president and CEO Doug McMillon, and former Boeing Co. chairman James McNerney, as well as the above named Jamie Dimon of JPMorgan Chase and BlackRock Inc.’s Larry Fink, </p> <p>“This forum brings together CEOs and business leaders who know what it takes to create jobs and drive economic growth,” Trump said in a statement issued by Blackstone. “<strong>My administration is committed to drawing on private sector expertise and cutting the government red tape that is holding back our businesses from hiring, innovating, and expanding right here in America.”</strong></p> <p>Sadly, it was the private sector's policies, expertise and "advice" to the Obama administration, that led to this <a href="">particular outcome</a>:<strong>&nbsp;</strong> </p> <p><a href=""><img src="" width="500" height="339" /></a></p> <p>It also led to record stock buybacks and all time high stock prices, not to mention record CEO compensation, but surely Trump will see right any such attempts to pass "advice" meant to help the people whose only intention is to make a handful of Wall Street oligarchs even richer... right.</p> <p>Schwarzman, the 69-year-old private equity executive who will chair the forum, said at the Wall Street Journal CEO Council after the election that he is "excited" about the prospects for economic growth in America and expects the business horizon to look "infinitely better" in the next few years. </p> <p>"Things are going to change, and I think things are going to change a lot," he said. He did not refer to Trump by name. </p> <p>In an interview with Bloomberg before the election, Schwarzman said he was undecided between Trump and Clinton. He said the GOP nominee's plans for economic growth sound "wonderful if you could do that," but also expressed concerns about his immigration plans. </p> <p>"If you were really removing a large number of people, that's got to adversely affect the economy," he said.</p> <p>Other panel members are also prominent Clinton fans: Disney's Iger, 65, supported Hillary Clinton during the campaign and co-hosted a fundraiser for her over the summer. However, he too quickly changed his tune in the days following Trump's election, when he said he was "hopeful" about what's to come in an interview with CNBC. </p> <p>"There is going to be far more energy around attacking the tax code, changing the tax code, closing loopholes on corporate taxes and lowering the base," he said. "We're not as competitive as we need to be as a country. I think that is going to be addressed on a timely, meaning a fast basis. That's certainly good."</p> <p>Jim McNerney, former chairman and CEO of Boeing, who is also on the committee, once referred to Trump's rhetoric on trade as "dangerous."</p> <p>The full list of panel members include the following:</p> <ul> <li>Stephen A. Schwarzman, Chairman, CEO, and Co-Founder of Blackstone</li> <li>Paul Atkins, CEO, Patomak Global Partners, LLC, Former Commissioner of the Securities and Exchange Commission</li> <li>Mary Barra, Chairman and CEO, General Motors</li> <li>Toby Cosgrove, CEO, Cleveland Clinic</li> <li>Jamie Dimon, Chairman and CEO, JPMorgan Chase &amp; Co</li> <li>Larry Fink, Chairman and CEO, BlackRock</li> <li>Bob Iger, Chairman and CEO, The Walt Disney Company</li> <li>Rich Lesser, President and CEO, Boston Consulting Group</li> <li>Doug McMillon, President and CEO, Wal-Mart Stores, Inc.</li> <li>Jim McNerney, Former Chairman, President, and CEO, Boeing</li> <li>Adebayo "Bayo" Ogunlesi, Chairman and Managing Partner, Global Infrastructure Partners</li> <li>Ginni Rometty, Chairman, President, and CEO, IBM</li> <li>Kevin Warsh, Shepard Family Distinguished Visiting Fellow in Economics, Hoover Institute, Former Member of the Board of Governors of the Federal Reserve System</li> <li>Mark Weinberger, Global Chairman and CEO, EY</li> <li>Jack Welch, Former Chairman and CEO, General Electric</li> <li>Daniel Yergin, Pulitzer Prize-winner, Vice Chairman of IHS Markit </li> </ul> <p>For some inexplicable reason, Warren Buffett failed to make the list, if only for the time being. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="723" alt="" src="" /> </div> </div> </div> American people of German descent Blackrock BlackRock Board of Governors Bob Iger Boeing Business Business Central Banks Climate change skepticism and denial Donald Trump Donald Trump Donald Trump presidential campaign Economy Federal Reserve Finance General Motors Hoover Institute Jamie Dimon Jamie Dimon JPMorgan Chase Markit Obama Administration Obama administration office of Management and Budget Private Equity Republican Party Securities and Exchange Commission Stephen A. Schwarzman The Apprentice US Federal Reserve Wall Street Journal Wall Street Journal CEO Council Warren Buffett Warsh WWE Hall of Fame Fri, 02 Dec 2016 18:10:18 +0000 Tyler Durden 579308 at US Oil Rig Count Rises To 10-Month Highs <p>From the 316 rig trough in May, American oil drillers have added 161 to 477 - the<strong> highest since January 2016. </strong>The rising rig count continues to track lagged oil prices higher and <strong>US crude production is following that trend</strong> to its highest level since June.</p> <p>US Oil Rig count is up 3 in the last week to 477 - <strong>up 25 of the last 27 weeks...</strong></p> <p><a href=""><img src="" width="600" height="300" /></a></p> <p>&nbsp;</p> <p>And with the OPEC deal holding oil prices, is US production set to rise no matter what?</p> <p><a href=""><img src="" width="600" height="315" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="967" height="508" alt="" src="" /> </div> </div> </div> Business Business Crude Economy Energy crisis OPEC OPEC Organization of Petroleum-Exporting Countries Peak oil Petroleum industry Petroleum politics Price of oil Pricing World oil market chronology from Fri, 02 Dec 2016 18:03:53 +0000 Tyler Durden 579309 at Hillary Clinton Gains One Vote On First Day Of Wisconsin Recount <p><em><a href="">Submitted by&nbsp; Joseph Jankowski via Planet Free Will</a></em></p> <p>On the first day of the Jill Stein spawned vote recount in Wisconsin, the <strong>gap between Hillary Clinton and Donald Trump narrowed by 1 vote.</strong></p> <p>The first day’s results suggest that Stein’s efforts, which came with a hefty price of almost $3.5 million, will show a final vote tally very close to the original one.</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">Wire transfer of $3,499,689 from <a href="">@DrJillStein</a> has arrived at Wisconsin Elections Commission.</p> <p>— Wisconsin Elections (@WI_Elections) <a href="">November 29, 2016</a></p></blockquote> <script src="//"></script><p>&nbsp;</p> <p>Daily Caller <a href="">reports</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Only Menominee County, home to the Menominee Indian Reservation, fully reported its recounted results on the first day. <strong>It found 17 extra votes for Stein and 12 for Libertarian Gary Johnson, while removing two votes from Trump and one from Clinton.</strong></p> <p>&nbsp;</p> <p>When putting all the results together, that means the first day of the recount narrowed the gap between Clinton and Trump <a href="">by just a single vote</a>.</p> </blockquote> <p>Trump defeated Clinton in the state of Wisconsin by just over 22,000 votes or about 1% of the total vote.</p> <p>Stein filed for a Wisconsin recount after suggesting that fraud or technological glitches may have swayed the results but has admitted that there is no concrete evidence of voter fraud.</p> <p><iframe src="" width="600" height="337" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="750" height="82" alt="" src="" /> </div> </div> </div> American people of German descent Business Climate change skepticism and denial Conservatism in the United States Donald Trump Donald Trump Donald Trump presidential campaign Libertarians Politics Politics of the United States Statewide opinion polling for the United States presidential election The Apprentice Wisconsin Elections Commission WWE Hall of Fame Fri, 02 Dec 2016 17:29:44 +0000 Tyler Durden 579296 at Deutsche Bank Stock Slides After "Cutting Off" 3,400 "Non-Strategic" Trading Clients <p><a href="">In September,</a> headlines of Deutsche Bank trading clients pulling collateral sparked grave concern over the world's most systemically dangerous bank. Today, the stock is sliding once again as <a href="">WSJ reports </a>the bank said it would<strong> cease providing some coverage for about 3,400 actively trading clients in its global markets division</strong>, according to a memo sent to equities staff.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="402" /></a></p> <p><strong>The memo to equity sales, sales trading and structuring staff said the move is with “immediate effect," </strong>according to<a href=""> The Wall Street Journal</a>.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>A Deutsche Bank spokesman confirmed the contents of the memo.</p> <p>&nbsp;</p> <p>It follows a detailed review by the trading division of the German lender’s client list<strong> “to identify clients with whom it is not strategically viable for us to continue to do business,” </strong>according to the memo from Dixit Joshi.</p> <p>&nbsp;</p> <p>The action is <strong>aimed at balancing “risk, revenue and profitability,” </strong>according to the memo. The cuts affect Institutional Client Group <strong>debt and equity sales, sales trading and equity structuring clients, </strong>according to the memo.</p> </blockquote> <p>The question is - what knock-on effect will the liquidation of these 3,400 trading clients' collateral have on markets... and Deutsche Bank's risk.</p> <p>We suspect this slide has further to go...</p> <p><a href=""><img src="" width="600" height="317" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1340" height="897" alt="" src="" /> </div> </div> </div> Banking Business Deutsche Bank Deutsche Bank Economy Finance headlines Investment banks Money Primary dealers Repurchase agreement Wall Street Journal Fri, 02 Dec 2016 17:14:47 +0000 Tyler Durden 579305 at Erdogan Demands Turks Exchange Their Dollars To Gold, Lira <p>Early this morning, in yet another session of panicked selling, the Turkish Lira crashed to new record lows to just shy of USDTRY 3.60, momentarily going bidless as the currency plunged nearly 400 pips in seconds, after Turkish President Recep Erdogan said the path for investors will be opened with lower interest rates, and urged the central bank to imitate Japan and U.S. where rates are low: “why should we go around with 14-15 percent?”&nbsp; </p> <p>The answer is simple: the currency tends to drop when an economy is seen as weak, the political regime unstable, or - yes - a central bank cuts rates, which Turkey, as shown in the chart below, can not afford if it hopes to maintain a stable economy with the lira already at all time lows.</p> <p>Normally, any other country would find itself in a dilemma: how to lower rates as per the president's demands to stimulate investment and the economy, without killing the economy... but not Erdogan. As AFP notes, the Turkish president "urged" his fellow Turks on Friday to convert their foreign currencies into gold and lira to stimulate the country's economy as the lira continued its slide against the dollar.</p> <p><strong>"For those who have foreign currencies under the pillow, come change this to gold, come change this to Turkish lira. Let the lira win greater value. Let gold win greater value," </strong>he said during a televised speech in Ankara. </p> <p>It was not exactly clear how a few thousand Turks exchange lira for gold would "let gold win greater value", nor how the same number of locals converting their dollars to lira would withstand another selling onslaught as soon the the Turkish central bank cut rates again, but that's not really relevant for the Turkish president, who appears to have a far better understanding of how to wage "failed coups" than simple finance.</p> <p><strong>"What necessity is there to let foreign currency have greater value?" </strong>he asked. </p> <p>There was no answer, but as he was speaking, the lira lost value against the US dollar, crashing just shy of 3.60. After his address, it stage a modest rebound at 3.55 against the greenback, a loss of over 1.5% on the day. In November alone, <strong>the lira has lost more than 10% against the dollar, and December was not starting off on the right foot either.</strong></p> <p><a href=""><img src="" width="500" height="258" /></a></p> <p>And no, he wasn't joking: as <a href=";nID=106847&amp;NewsCatID=346">Hurriyet reported </a>moments ago, Turkey’s main stock exchange, Borsa Istanbul, became the first institution to convert all of its cash assets into the Turkish Lira a few hours after President Recep Tayyip Erdo?an called on people and institutions to back the struggling currency against the U.S. dollar.&nbsp; <strong>Borsa Istanbul said in a written statement on Dec. 2 that it would convert all of its cash assets into lira and keep them in lira accounts. </strong></p> <p>Erdogan also warned that there were forces "playing games" against Turkey, which Turks could counter by changing their money. He did not say whom he was referring to. <strong>"Don't worry, in a short while, we will destroy this game</strong>", clearly referring to "evil speculators" who could be destroyed if only mom and pop exchanged the dollars in their mattress for the local currency. </p> <p>As noted above, the Lira was also reacting to Erdogan's repeated insistence on lowering interest rates because, he claims, there is "no other remedy". He referred to the United States, Japan and Europe as examples of where rates are low and questioned why Turkey still had such high rates.</p> <p>In a surprise to some, after several months of rate cuts, the central bank stepped in with an unexpected hike of 50 basis points in its leading rate last month. This prompted many to wonder how long Erdogan will tolerate the insolence of his central banker who clearly has defied his decree.&nbsp; </p> <p>To be sure, concerns over Turkey's political instability, including the government's race to expand Erdogan's powers, as well as its cracking relationship with the European Union meant a rally in the lira was shortlived after the bank's announcement. </p> <p>Worries over Erdogan's influence grew after Prime Minister Binali Yildirim said on Thursday the government would bring a bill to parliament next week which proposes to change the constitution and give greater powers to the president. Considering Erdogan's track record, it is only a matter of time before he appoints himself central bank head too, at which point the Turkish Lira and the Venezuela Bolivar will begin a race which one can reach a value of 0 faster.</p> <p>Incidentally, anyone who <em><strong>does </strong></em>convert their dollars into gold can simultaneously start a countdown how long it will take for the "authorities" to come knocking and confiscate said gold. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="614" height="307" alt="" src="" /> </div> </div> </div> Central Bank of the Republic of Turkey Economy Economy of Northern Cyprus Economy of the Ottoman Empire Economy of Turkey Europe European Union European Union Japan Lira Maltese lira Recep Tayyip Erdo?an Revaluation of the Turkish Lira Turkey Turkey Turkish central bank Turkish lira Fri, 02 Dec 2016 16:58:01 +0000 Tyler Durden 579302 at Defensive Stocks Bounce -- Led Higher by Gold Stocks <p>For gold traders, it has been a long month of the 'Trump-trade' completely decimating their lives -- disrupting their austere lifestyles with harrowing losses. In the shadow of soon to be great again America, gold stocks plummeted by more than 15% over the past month -- knee capping an otherwise spoiled rotten investor base who've been enjoying magnanimous gains throughout 2016 -- even though they've mostly done it under the pretext of waiting for an end of days scenario to unfold.</p> <p>&nbsp;</p> <p>In addition to gold, bonds and anything defensive, like consumer staples, utilities and REITs got hammered -- as Joe Blow blew his wad into high beta, psychotic energy, and aluminum stocks -- gleefully and flippantly tossing money at bank stocks too because the yield curve blew out.</p> <p>&nbsp;</p> <p>If only for today, the defensive plays are back in vogue, reminiscent of the days when the deflationary vortex reigned supreme and people, literally, feared for their lives and the future of their nation. Gold and silver stocks are higher by 4%, REITs by 2.5% Utilities by 1% and Goldman is down 1.6%.</p> <p>&nbsp;</p> <p>Recent underperformers in the biotech space are participating in the rally -- as a general malaise wistfully sweeps through Wall Street -- exuberant about any and all best case scenarios. Traders, as always, are ignoring all of the negative aspects of sharply higher sovereign borrowing costs and an administration whose central campaign promise was to bring China to its knees -- reversing decades of unfair currency manipulation and one sided trade deals. Judging by the sharp rise in basic materials, especially copper, none of that is being priced into stocks.&nbsp;</p> <p>&nbsp;</p> <p>Once again, Trump is not being taken seriously.&nbsp;</p> <p>&nbsp;</p> <p>If recent history is of any use, investors will soon learn about the seriousness of Trump's policies and how upsetting the apple cart isn't exactly a seamless transition into mindless rallies -- based solely on hope.</p> <p>&nbsp;</p> <p><span style="font-size: 13.008px;">Content originally generated at&nbsp;</span><a href="" style="font-size: 13.008px;"></a></p> Apple Borrowing Costs China Copper Economy None Real estate investment trust REITs Trump: The Art of the Deal Yield Curve Fri, 02 Dec 2016 16:56:08 +0000 The_Real_Fly 579301 at Americans Not In The Labor Force Soar To Record 95.1 Million: Jump By 446,000 In One Month <p>So much for that much anticipated rebound in the participation rate. </p> <p>After it had managed to post a modest increase in the early part of the year, hitting the highest level in one year in March at 63%, the disenchantment with working has returned, and the labor force participation rate had flatlined for the next few month, ultimately dropping in November to 62.7%, just shy of its 35 year low of 62.4% hit last October. <strong>This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 446,000 in November, hitting an all time high of 95.1 million. </strong></p> <p><a href=""><img src="" width="500" height="467" /></a></p> <p>As a result of this the US labor force shrank by 226,000 to 159,486K, down from 159,712K a month ago, and helped the unemployment rate tumble to 4.6%, the lowest level since August 2007. </p> <p><a href=""><img src="" width="500" height="261" /></a></p> <p>Adding the number of unemployed workers to the people not in the labor force, there are now over 102.5 million Americans who are either unemployment or no longer looking for work.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1050" height="484" alt="" src="" /> </div> </div> </div> Economy Employment-to-population ratio Labor Social justice Unemployment Unemployment Fri, 02 Dec 2016 16:50:38 +0000 Tyler Durden 579283 at Oil Market Theory Discussion (Video) <p>By <a href=""><span style="text-decoration: underline;"><span style="color: #0066cc;">EconMatters</span></span></a> </p> <p><em><br /></em> </p> <div class="separator" style="clear: both; text-align: center;"><a title="Open in new window" class="external" href="" style="margin-left: 1em; margin-right: 1em;" target="_blank"><img src="" height="318" width="400" border="0" /></a></div> <p> We discuss oil market mechanics and overall theory in this video, adding some color, or fleshing out some of our previous comments on the market. The big question is do we get a move down in markets and the oil market early in 2017? As an aside: I meant we tested the $50 level of support in WTI early in the morning, not $40 - it was a late night.</p> <p></p> <div class="separator" style="clear: both; text-align: center;"><iframe src="" height="266" width="320" frameborder="0"></iframe></div> <p> © <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">EconMatters</span></span></a> All Rights Reserved | <a title="Open in new window" class="external" href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">Facebook</span></span></a> | <a title="Open in new window" class="external" href="!/EconMatters" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">Twitter</span></span></a> | <a title="Open in new window" class="external" href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">YouTube</span></span></a> | <a title="Open in new window" class="external" href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">Email Digest</span></span></a> | <a title="Open in new window" class="external" href=";node=80" target="_blank"><span style="text-decoration: underline;"><span style="color: #0066cc;">Kindle</span></span></a><strong>&nbsp;</strong><em>&nbsp;</em><span style="text-decoration: underline;">&nbsp;</span></p> Business Computing Facebook Social information processing Social media Social networking services Software Technology Twitter Twitter Twitter Universal Windows Platform apps YouTube Fri, 02 Dec 2016 16:44:37 +0000 EconMatters 579300 at Clinton & Trump Aides Forum Devolves Into Screaming Match - "I Would Rather Lose Than Win The Way You Did" <p>How was this ever going to end well? An election post-mortem forum erupted into a shouting match as top strategists of Hillary <strong>Clinton&rsquo;s campaign accused their Republican counterparts of fueling and legitimizing racism </strong>to elect Donald Trump. Clinton communications director Jennifer Palmieri exclaimed<strong><em> &quot;I would rather lose than win the way you guys did,&quot;</em></strong> to which Kellyanne Conway, Trump&rsquo;s campaign manager, fumed <strong><em>&quot;I can tell you are angry, but wow... Will you ever accept the election results?&quot;</em></strong> And it went down-hill from there...</p> <p><iframe frameborder="0" height="315" src="" width="560"></iframe></p> <p><a href=""><em>As NBC News reports, </em></a><strong>a Harvard panel that traditionally writes the first draft of presidential campaign history devolved into a shouting match between Trump and Clinton aides on Thursday in a raw, emotional display echoing the divisive campaign.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&nbsp;</strong>Jennifer Palmieri, who was Hillary Clinton&#39;s communications director, zeroed in on Steve Bannon, the incoming chief strategist for President-elect Donald Trump who once ran the web site Breitbart.</p> <p>&nbsp;</p> <p><em><strong>&quot;If providing a platform for white supremacists makes me a brilliant tactician, I am proud to have lost,&quot; </strong></em>said Palmieri, one of six Clinton aides who sat across tables from top Trump campaign staff at a forum moderated by three journalists, NBC News&#39; Andrea Mitchell among them.<strong><em> &quot;I would rather lose than win the way you guys did.&quot;</em></strong></p> <p>&nbsp;</p> <p>Kellyanne Conway, who managed Trump&#39;s campaign, was visibly angry and indignantly interrupted.<em> &quot;Do you think I ran a campaign where white supremacists had a platform?&quot;</em></p> <p>&nbsp;</p> <p><strong>&quot;You did, Kellyanne. You did,&quot; </strong>Palmieri said, as other Clinton aides chimed in in the affirmative. With only two microphones allowed to be open at any given time, the shouting match was so heated it became difficult to follow.</p> <p>&nbsp;</p> <p>&quot;Do you think you could have just had a decent message for white, working-class voters? How about, it&#39;s Hillary Clinton, she doesn&#39;t connect with people? How about, they have nothing in common with her? How about, she doesn&#39;t have an economic message?&quot; Conway said.</p> <p>&nbsp;</p> <p>&quot;There were dog whistles,&quot; said Clinton strategist Joel Benenson at one point.</p> <p>&nbsp;</p> <p>Said Conway: <strong><em>&quot;Guys, I can tell you are angry, but wow. Hashtag he&#39;s your president...will you ever accept the election results? Will you tell your protesters that he&#39;s their president, too?&quot;</em></strong></p> </blockquote> <p><strong>Exposing a somewhat stunning level of cognitive dissonance,</strong> seemingly blaming the media, <a href="">The Washington Post reports</a> that <strong>Clinton&rsquo;s campaign aides insisted, again and again, that their candidate had been held to a different standard than the other contenders</strong> &mdash; as evidenced by the controversy over her use of a private email server while secretary of state.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Palmieri said that many political journalists had a personal dislike for the Democratic nominee and predicted that the email issue will go down in history as &ldquo;the most grossly overrated, over-covered and most destructive story in all of presidential politics.&rdquo;</p> <p>&nbsp;</p> <p>&ldquo;If I made one mistake, it was legitimizing the way the press covered this story line,&rdquo; Palmieri said.</p> <p>&nbsp;</p> <p>Mook added that Trump deftly used his rally speeches to &ldquo;switch up the news cycle.&rdquo;</p> <p>&nbsp;</p> <p><strong>&ldquo;The media by and large was not covering what Hillary Clinton was choosing to say,&rdquo; Mook said. &ldquo;They were treating her like the likely winner, and they were constantly trying to unearth secrets and expose.&rdquo;</strong></p> <p>&nbsp;</p> <p>For instance, Mook posited that the media did not scrutinize Trump&rsquo;s refusal to release his tax returns as intensively as the issue of Clinton&rsquo;s private email server.</p> <p>&nbsp;</p> <p>Conway retorted: <strong>&ldquo;Oh, my God, that question was vomited to me every day on TV.&rdquo;</strong></p> </blockquote> <p>Joel Benenson, Clinton&rsquo;s chief strategist, meanwhile, served notice that the election may be over but that the battles it spawned are not.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;You guys won, that&rsquo;s clear,&rdquo;</strong></em> Benenson said.<em><strong> &ldquo;But let&rsquo;s be honest. Don&rsquo;t act as if you have a popular mandate for your message. The fact of the matter is that more Americans voted for Hillary Clinton than for Donald Trump.&rdquo;</strong></em></p> <p>&nbsp;</p> <p>At which point Conway turned to her side and said:<em><strong> &ldquo;Hey, guys, we won. You don&rsquo;t have to respond. He was the better candidate. That&rsquo;s why he won.&rdquo;</strong></em></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="575" height="279" alt="" src="" /> </div> </div> </div> Business Cognitive Dissonance Donald Trump Donald Trump Donald Trump presidential campaign Harvard Hillary Clinton Jennifer Palmieri Joel Benenson Kellyanne Conway NBC Political campaign staff Politics Pollsters Racism in the United States Robby Mook United States Fri, 02 Dec 2016 16:29:57 +0000 Tyler Durden 579298 at