en "Extraordinary & Worrisome" - Wall Street Journal Demands To Know How FBI 'Meddled' In 2016 Elections <p><a href=""><em>Via The Wall Street Journal&#39;s Editorial Board,</em></a></p> <p><strong><em>Congress needs to learn how the FBI meddled in the 2016 campaign.</em></strong></p> <p><em><a href=""><img height="288" src="" width="600" /></a></em></p> <p>When Donald Trump claimed in March that he&rsquo;d had his &ldquo;wires tapped&rdquo; prior to the election,<strong> the press and Obama officials dismissed the accusation as a fantasy.</strong> We were among the skeptics, but with former director James Comey&rsquo;s politicized FBI<strong> the story is getting more complicated</strong>.</p> <p>CNN reported Monday that the FBI obtained a warrant last year to eavesdrop on Paul Manafort, Mr. Trump&rsquo;s campaign manager from May to August in 2016. The story claims the FBI first wiretapped Mr. Manafort in 2014 while investigating his work as a lobbyist for Ukraine&rsquo;s ruling party. That warrant lapsed, but the FBI convinced the court that administers the Foreign Intelligence Surveillance Act (FISA) to issue a second order as part of its probe into Russian meddling in the election.</p> <p><em><strong>Guess who has lived in a condo in Trump Tower since 2006? </strong>Paul Manafort.</em></p> <p><strong>The story suggests the monitoring started in the summer or fall, and extended into early this year. </strong></p> <p>While Mr. Manafort resigned from the campaign in August, he continued to speak with Candidate Trump.</p> <p><strong>It is thus highly likely that the FBI was listening to the political and election-related conversations of a leading contender for the White House.</strong></p> <p>That&rsquo;s extraordinary - and worrisome.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Mr. Comey told Congress in late March that he &ldquo;had no information that supports those [Trump] tweets.&rdquo; </strong></p> <p>&nbsp;</p> <p><strong>Former Director of National Intelligence James Clapper was even more specific</strong> that &ldquo;there was no such wiretap activity mounted against&mdash;the President-elect at the time, or as a candidate, or against his campaign.&rdquo;</p> <p>&nbsp;</p> <p>He denied that any such FISA order existed.</p> </blockquote> <p><u><strong>Were they lying?</strong></u></p> <p><strong>The warrant&rsquo;s timing may also shed light on the FBI&rsquo;s relationship to the infamous &ldquo; Steele dossier.&rdquo; </strong>That widely discredited dossier claiming ties between Russians and the Trump campaign was commissioned by left-leaning research firm Fusion GPS and developed by former British spy Christopher Steele&mdash;who relied on Russian sources. But the Washington Post and others have reported that Mr. Steele was familiar to the FBI, had reached out to the agency about his work, and had even arranged a deal in 2016 to get paid by the FBI to continue his research.</p> <p>The FISA court sets a high bar for warrants on U.S. citizens, and presumably even higher for wiretapping a presidential campaign. <em><strong>Did Mr. Comey&rsquo;s FBI marshal the Steele dossier to persuade the court?</strong></em></p> <p><u><strong>All of this is reason for House and Senate investigators to keep exploring how Mr. Comey&rsquo;s FBI was investigating both presidential campaigns.</strong></u></p> <p><strong>Russian meddling is a threat to democracy but so was the FBI if it relied on Russian disinformation to eavesdrop on a presidential campaign. </strong>The Justice Department and FBI have stonewalled Congressional requests for documents and interviews, citing the &ldquo;integrity&rdquo; of Special Counsel Robert Mueller&rsquo;s investigation.</p> <p><u><strong>But Mr. Mueller is not investigating the FBI,</strong></u> and in any event his ties to the bureau and Mr. Comey make him too conflicted for such a job. Congress is charged with providing oversight of law enforcement and the FISA courts, and it has an obligation to investigate their role in 2016. The intelligence committees have subpoena authority and the ability to hold those who don&rsquo;t cooperate in contempt.</p> <p>Mr. Comey investigated both leading presidential campaigns in an election year, playing the role of supposedly impartial legal authority. <strong>But his maneuvering to get Mr. Mueller appointed, and his leaks to the press, have shown that Mr. Comey is as political and self-serving as anyone in Washington.</strong></p> <p><u><strong>No investigation into Russia&rsquo;s role in the 2016 campaign will be credible or complete without the facts about all Mr. Comey&rsquo;s wiretaps.</strong></u></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="836" height="401" alt="" src="" /> </div> </div> </div> Congress Department of Justice Donald Trump Donald Trump Draft:Investigations of collusion between Russia and the Trump campaign FBI Federal Bureau of Investigation Federal Bureau of Investigation FISA court GPS James Comey Law Links between Trump associates and Russian officials national intelligence Paul Manafort Politics Russian interference in the 2016 United States elections Senate SPY Trump Tower Ukraine UN Court United States Wall Street Journal White House White House Wed, 20 Sep 2017 12:39:50 +0000 Tyler Durden 603829 at "We've Never Seen Anything Like This" - Maria Slams Puerto Rico With 9-Foot Storm Surge, 155Mph Winds <p>Hurricane Maria made landfall near the city of Yabucoa, Puerto Rico, at around 6:15 am Wednesday, according to the National Hurricane Center, battering the densely populated eastern side of the island with torrential rains and 155 mph gusts as hundreds of thousands of people hunkered down in one of the island&#39;s 500 storm shelters in hopes of riding out the second major hurricane to impact the island within two weeks.</p> <p>Category 4 Maria slammed the island with winds of 155 mph, just 2 mph short of category 5 status.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 244px;" /></a></p> <p>The island&#39;s governor has said the hurricane will likely cause &quot;catastrophic&quot; damage to the island&#39;s power grid and infrastructure, much of which has yet to be repaired following Hurricane Irma, which didn&#39;t make landfall in Puerto Rico, but passed close enough to cause $1 billion in damage. As Bloomberg points out, Maria is the fourth major hurricane and 13th storm in the Atlantic this season that&rsquo;s wreaked havoc from Texas to the Caribbean and left dozens dead.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 407px;" /></a></p> <p>According to the NHC, the storm made landfall around 6:15 a.m. The NHC has instituted hurricane watches and warnings for many of Puerto Rico&#39;s neighboring islands.</p> <p>SUMMARY OF WATCHES AND WARNINGS IN EFFECT:<br />A Hurricane Warning is in effect for...<br />* U.S. Virgin Islands<br />* British Virgin Islands<br />* Puerto Rico, Culebra, and Vieques<br />* Dominican Republic from Cabo Engano to Puerto Plata<br />* Turks and Caicos Islands and the Southeastern Bahamas<br />A Tropical Storm Warning is in effect for...<br />* Saba<br />* St. Maarten<br />* Dominican Republic west of Puerto Plata to the northern border of<br />the Dominican Republic and Haiti<br />* Dominican Republic west of Cabo Engano to Punta Palenque<br />A Hurricane Watch is in effect for...<br />* St. Maarten<br />* St. Martin and St. Barthelemy<br />* Dominican Republic from Isla Saona to Cabo Engano</p> <p>Puerto Rico Gov. Ricardo Rossello is saying Maria is &quot;potentially most catastrophic hurricane to hit&quot; the U.S. territory in a century. Rossello said up to 25 inches of rain could fall in some areas and he urged anyone in a flood-prone, mudslide-prone or coastal area to leave.</p> <p>&nbsp;</p> <blockquote class="twitter-tweet" data-partner="tweetdeck"><p dir="ltr" lang="en"><a href="">#Hurricane</a>-force winds occurring in Puerto Rico- <a href="">#Maria</a>&#39;s eye should make landfall in the next couple of hours. <a href=""></a> <a href=""></a></p> <p>&mdash; NHC Atlantic Ops (@NHC_Atlantic) <a href="">September 20, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>&nbsp;</p> <p><strong>&quot;We have not experienced an event of this magnitude in our modern history,&quot;</strong> Rossello said. &quot;Although it looks like a direct hit with major damage to Puerto Rico is inevitable, I ask for America&rsquo;s prayers,&quot; he said. &quot;No matter what happens here in the next 36 hours, Puerto Rico will survive, we will rebuild, we will recover and with your support, we will come out stronger than ever.&quot;</p> <p><a href=""><img alt="" src="" style="width: 524px; height: 275px;" /></a></p> <p>The NHS expects the storm to cross Puerto Rico on Wednesday and then move just north of the coast of the Dominican Republic later in the night and on Thursday. Maria had earlier battered the hurricane-ravaged Caribbean island nation of Dominica on Tuesday, devastating the island, according to the island&#39;s governor, Roosevelt Skerrit.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;It is devastating, indeed, mind boggling,&rdquo; Roosevelt Skerrit, Dominica&rsquo;s prime minister, said in a statement. The eastern Caribbean nation with a population of 75,000 has &ldquo;lost all what money can buy and replace,&rdquo; he said. Skerrit said he was rescued after the roof of his house was torn off by the storm.</p> </blockquote> <p>At least six people have died on the island of Dominica, according to a spokeswoman for the government in London. &ldquo;Damage is extensive throughout the island,&rdquo; she said, &ldquo;and people are walking the streets in a delirious state of mind.&rdquo; With all lines of communication down, the government was relying on amateur radio, or ham radio, operators for updates, according to <a href="">Bloomberg</a>. In addition, at least two have been confirmed dead on the island of Guadalope.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 282px;" /></a></p> <p>Many Puerto Ricans were busy reinforcing their homes with plywood and other supplies ahead of the anticipated landfall.</p> <p>&nbsp;</p> <blockquote class="instagram-media" data-instgrm-captioned="" data-instgrm-version="7" style=" background:#FFF; border:0; border-radius:3px; box-shadow:0 0 1px 0 rgba(0,0,0,0.5),0 1px 10px 0 rgba(0,0,0,0.15); margin: 1px; max-width:658px; padding:0; width:99.375%; width:-webkit-calc(100% - 2px); width:calc(100% - 2px);"><div style="padding:8px;"> <div style=" background:#F8F8F8; line-height:0; margin-top:40px; padding:50.0% 0; text-align:center; width:100%;"> <div style=" background:url(data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAACwAAAAsCAMAAAApWqozAAAABGdBTUEAALGPC/xhBQAAAAFzUkdCAK7OHOkAAAAMUExURczMzPf399fX1+bm5mzY9AMAAADiSURBVDjLvZXbEsMgCES5/P8/t9FuRVCRmU73JWlzosgSIIZURCjo/ad+EQJJB4Hv8BFt+IDpQoCx1wjOSBFhh2XssxEIYn3ulI/6MNReE07UIWJEv8UEOWDS88LY97kqyTliJKKtuYBbruAyVh5wOHiXmpi5we58Ek028czwyuQdLKPG1Bkb4NnM+VeAnfHqn1k4+GPT6uGQcvu2h2OVuIf/gWUFyy8OWEpdyZSa3aVCqpVoVvzZZ2VTnn2wU8qzVjDDetO90GSy9mVLqtgYSy231MxrY6I2gGqjrTY0L8fxCxfCBbhWrsYYAAAAAElFTkSuQmCC); display:block; height:44px; margin:0 auto -44px; position:relative; top:-22px; width:44px;">&nbsp;</div> </div> <p style=" margin:8px 0 0 0; padding:0 4px;"><a href="" style=" color:#000; font-family:Arial,sans-serif; font-size:14px; font-style:normal; font-weight:normal; line-height:17px; text-decoration:none; word-wrap:break-word;" target="_blank">Last preparations almost done. The wind is starting to blow so we should be done with everything by 3:00pm. Still a category 5 with sustained winds of 160mph... let&#39;s hope for the best! #hurricane #hurricanemaria #puertorico #puertorican #puertoricancastaways #emergency #hurricaneseason #badweather #weather #caribbean #adventure #blogger #blog #vlog #travelvlog #travelvlogger</a></p> <p style=" color:#c9c8cd; font-family:Arial,sans-serif; font-size:14px; line-height:17px; margin-bottom:0; margin-top:8px; overflow:hidden; padding:8px 0 7px; text-align:center; text-overflow:ellipsis; white-space:nowrap;">A post shared by Peter &amp; Gigi (@puertoricancastaways) on</p> <p><time datetime="2017-09-19T16:41:30+00:00" style=" font-family:Arial,sans-serif; font-size:14px; line-height:17px;">Sep 19, 2017 at 9:41am PDT</time></p></div> </blockquote> <p><script async defer src="//"></script></p><p>&nbsp;</p> <p>Maria could cause $30 billion in damage to Puerto Rico and the US Virgin Islands, according to Chuck Watson, a disaster modeler for Enki Research. The island, which filed for bankruptcy in May after years of economic decline while a series of defaults, has been effectively shut out of capital markets, which could slow the recovery process, <a href="">Bloomberg </a>reports. Its aging government-owned electric utility operates under court protection from creditors and its emergency fund stood at about $32 million before Irma knocked out electricity access for hundreds of thousands of Puerto Ricans.</p> <p>It could plunge &ldquo;their not-all-that-robust electric grid into a pit of despair,&rdquo; Watson said.</p> <p><strong>A dangerous storm surge of as much as 9 feet is expected along the coast of Puerto Rico,</strong> and according to NHS data, water levels have already risen precariously.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 388px;" /></a></p> <p>Meanwhile, vacationers and honeymooners visiting the island confronted a troubling reality earlier this week: With flights quickly filling up ahead of the storm, many tourists found themselves stuck on the island, forced to ride out the hurricane in whatever hotel or accomodations they had booked.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 307px;" /></a></p> <p>Heather Farrell, a visitor to the island, is on her honeymoon with her husband Luke. They were married on September 9. She says that they had tried to cut their trip short when it became apparent that they were in Maria&#39;s firing line.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;We did try to get off, as early as Saturday but all flights were either booked or canceled. We actually are on the ocean -- our room faces the ocean. It&#39;s pretty windy but there is no rain. We&#39;ll stay inside for now.&quot;</p> <p>&nbsp;</p> <p>She said that hotel staff had asked that all guests that are staying at the hotel come downstairs early Wednesday morning to a safe room that they have set up for them.</p> <p>&nbsp;</p> <p>&quot;I would rather be home than here but I guess we&#39;re making the best of it,&quot; she said.</p> <p>&nbsp;</p> </blockquote> <p>According to <a href="">CNN</a>, calls for rescue immediately started pouring in. But first responders weren&#39;t expected to be able to help immediately because they&#39;d been ordered to head indoors when sustained winds reached 50 mph. Thousands of Puerto Ricans did obey calls to seek refuge in emergency shelters. &quot;As of 2:30 a.m. we count 10,059 refugees and 189 pets (in shelters),&quot; the island&#39;s governor, Ricardo Rosselló, tweeted.</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="es">A las 2:30AM, contamos con 10,059 refugiados y 189 mascotas.</p> <p>&mdash; Ricardo Rossello (@ricardorossello) <a href="">September 20, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>Maria became the first category 4 hurricance to hit the island - which presently has a population of about 3.3 million people - in about 80 years. Conditions were expected to worsen between 8 am and 9 am ET Wednesday, when the storm&#39;s eye wall - typically the part of the storm with the most powerful winds - is expected to reache island&#39;s eastern coast. The Puerto Rico Convention Center in San Juan - which was still housing Hurricane Irma evacuees from other Caribbean islands - prepared to accept thousands more residents.</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">Most ppl at Pedrin Zorria shelter will lose their home if <a href="">#HurricaneMaria</a> hits. However, mood is light &amp; everyone helps each other here<a href="">@CNN</a> <a href=""></a></p> <p>&mdash; Jaide Garcia (@Jaide_Garcia) <a href="">September 20, 2017</a></p></blockquote> <p><script async src="//" charset="utf-8"></script></p><p>The storm is likely to break all previous records, according to CNN meteorologist Derek Van Dam said.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;This could potentially be the strongest hurricane to ever reach the shores of Puerto Rico,&quot; he said from San Juan, Puerto Rico&#39;s capital.</p> <p>&nbsp;</p> <p>&quot;A lot of people remember or have heard of the storms that hit in 1928 and 1930. Well, guess what? This could pale those in comparison. ... It will go down in the record books.&quot;</p> </blockquote> <p>According to Bloomberg, most long range models keep Maria away from the US coastline after it passes through the Caribbean and the Bahamas this week, said Shane Mill, a meteorologist at MDA Weather Services in Gaithersburg, Maryland. <strong>&ldquo;But I am not comfortable saying the entire East Coast is out of the woods yet,&rdquo; he said.</strong></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="925" height="452" alt="" src="" /> </div> </div> </div> Americas Caribbean Disaster East Coast eastern Caribbean Environment Hurricane Edith Hurricane Maria Lesser Antilles National Hurricane Center New Spain NHS Puerto Rico Puerto Rico San Ciprian hurricane Spanish colonization of the Americas Spanish Empire Tropical Storm Olga Twitter Twitter Weather Wed, 20 Sep 2017 12:20:32 +0000 Tyler Durden 603827 at "We Are In A State Of Siege": Spanish Police Arrest Top Catalan Officials In Referendum Raids <p>Spanish police arrested top-ranking Catalan officials including the region’s junior economy minister Josep Maria Jove, as Madrid launched a crackdown on Catalonia over the upcoming Independence referendum <a href="">Reuters reported. </a>Jove, who is a senior member of the Republican Left of Catalonia political party, was detained following a Wednesday morning raid carried out by Spain’s Civil Guard, which has the authority of both the Interior and the Defence ministries. </p> <p>At least a dozen high-ranking local officials were arrested, La Vanguardia newspaper said. Among those detained are Josue Sallent Rivas from the Centre of Telecommunications and Information Technology, Xavier Puig Farré from the Office of Social Affairs and Josep Maria Salvat Tenesa from the Ministry of Economics and Finance.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Police, acting under court orders, have stepped up raids on printers, newspaper offices and private delivery companies in recent days in a search for campaign literature, instruction manuals for manning voting stations and ballot boxes. </p> <p>&nbsp;</p> <p>On Tuesday, Spain’s Civil Guard, a national police force, seized more than 45,000 envelopes packed in cardboard boxes that the Catalan government was ready to send to notify people around the region about the referendum. </p> </blockquote> <p>"<strong>Catalonia is now in a state of siege </strong>”, Catalonia’s Minister of Labor, Social Affairs and Family Dolors Bassa said on Twitter, confirming that the Civil Guard has also entered her department.</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="und">I ara,a nostre departament també , acaba d'entrar la Guardia Civil.Estem en un estat de setge ! Vergonyós !@govern .Votarem <a href="">#1dO</a></p> <p>— Dolors Bassa (@dolorsbassac) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>Meanwhile, the fiercely pro-independence leader of the regional government, Carles Puigdemont, has called an emergency meeting of his cabinet for 10:30 CET (8:30 GMT), the sources said. </p> <p>Police efforts to stop the planned Oct. 1 referendum on splitting from Spain have intensified in recent days as the wealthy northeastern region shows no signs of halting the vote which the central government says is illegal.&nbsp; Hundreds of protesters gathered outside the offices of the regional government’s economy ministry in the center of Barcelona’s tourist district, chanting “They will not pass” and “We will vote”, a Reuters witness said. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="es">Una hora después de la entrada de la <a href="">@guardiacivil</a> al departamento de Economía, manifestantes protestan por el registro <a href=""></a></p> <p>— Josep Catà (@jcatafiguls) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>That did not stop the Civil Guard from conducting searches of the Catalonian government buildings including the region’s economy, interior, foreign affairs, welfare, telecommunications and tax departments. </p> <p> “They are attacking the institutions of this country and attacking the citizens. We will not allow it” Oriol Junqueras, the Vice President of the Catalan Government, wrote on Twitter.</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="und">Estan atacant les institucions d'aquest país i per tant atacant els ciutadans. No ho permetrem.</p> <p>— Oriol Junqueras (@junqueras) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>On Wednesday, a protest has been staged in front of the Economic Department of the Catalonian Government, according to photos and videos on Twitter. People were reportedly shouting “We want to vote” and “democracy.”</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="es">Más manifestantes en la sede de Economía. "Queremos votar", "democracia" y "fuera las fuerzas de ocupación" <a href=""></a></p> <p>— Josep Catà (@jcatafiguls) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>Earlier in the month, Catalonia’s Parliament passed a bill paving the way for an independence referendum to be held on October 1. However, the Constitutional Court has suspended the vote after the central government challenged its legality. Spain’s central government says the referendum goes against the country’s 1978 constitution which states Spain is indivisible. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="es">Medio centenar de manifestantes se concentran en el dep de economía para protestar contra el registro por el referéndum <a href=""></a></p> <p>— Josep Catà (@jcatafiguls) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>As reported previously, the Spanish state prosecutor ordered a criminal investigation of 712 Catalan mayors for co-operating with the process. Catalonia previously held an independence referendum in 2014, which saw 80 percent of voters choose independence. Nevertheless, it was ruled unconstitutional by Madrid.</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="687" height="348" alt="" src="" /> </div> </div> </div> Autonomous communities of Spain Carles Puigdemont Catalan government Catalan independence movement Catalan nationalism Catalonia Catalonian government Catalonia’s parliament Centre of Telecommunications and Information Technology Constitutional Court Convergence and Union Economic Department European Free Alliance Generalitat de Catalunya Government of Catalonia Information Technology Ministry of Economics and Finance Newspaper office of Social Affairs Oriol Junqueras Politics Politics of Catalonia regional government regional government’s economy ministry Republican Left of Catalonia Republican Left of Catalonia Reuters Spanish police Twitter Twitter Wed, 20 Sep 2017 12:08:26 +0000 Tyler Durden 603826 at “This Is Where The Next Financial Crisis Will Come From” <p><span style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif;"><span style="font-size: 16px;"><strong><a href="">“This Is Where The Next Financial Crisis Will Come From”</a></strong></span></span></p> <p><span style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif;"><span style="font-size: 16px;"><strong>&nbsp;</strong></span></span><strong style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">By Zero Hedge</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">In an extensive, must-read report published on Monday by Deutsche Bank's Jim Reid, the credit strategist unveiled an extensive analysis of the "<strong>Next Financial Crisis",&nbsp;</strong>and specifically what may cause it, when it may happen, and how the world could respond assuming it still has means to counteract the next economic and financial crash.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><img src="" width="500" height="313" style="height: auto; max-width: 100%;" /></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">In our first&nbsp;<a href="" target="_blank">take on the report yesterday</a>, we showed one key aspect of the "crash" calculus: between bonds and stocks,&nbsp;<strong>global asset prices are the most elevated they have ever been.</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">With that baseline in mind, what happens next should be obvious: unless one assumes that the laws of economics and finance are irreparably broken, a deep recession and a market crash are inevitable, especially after the&nbsp;<a href="" target="_blank">third biggest&nbsp;</a>and&nbsp;<a href="" target="_blank">second longest&nbsp;</a>central bank-sponsored bull market in history.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">But what will cause it, and when will it happen?</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">Needless to say, these are the questions that everyone in capital markets today wants answered. And while nobody can claim to know the right answer, here are some excerpts from what DB's Jim Reid, one of the best strategists on Wall Street, thinks will take place.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><em>Below we present the key excerpts from his must read report;</em></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">* * *</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">We think that the post Bretton Woods (1971-) global financial system remains vulnerable to financial crises.<strong>&nbsp;A simple internet search of financial crises through history (Figure 1, LHS chart) confirms that the frequency has increased over this period</strong>. Examples include the UK secondary banking crisis (1975), the two Oil shocks (1970s), numerous EM defaults (mid-1980s), US Savings and Loans mass failures (late 80s/early 90s), various Nordic financial crises (late 80s), Japanese stock bubble bursting (1990-), various ERM shocks/devaluations (1992), the Mexican Tequila crisis (1994), the Asian crisis (1997), the Russian &amp; LTCM crisis (1998), the crash (2000), the various accounting scandals (02/03), the GFC (08/09) and the Euro Sovereign crisis (10-12).</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">A more quantitative search backs this up (Figure 1, RH chart). We show the number of DM countries (%) in our sample back to 1800 experiencing one of the following on a YoY basis; -15% Equities, -10% FX, -10% Bond move, a sovereign default, or +10% inflation.&nbsp;<strong>This is our crisis/shock indicator. 0% equals no country with one of these conditions met, 100% equals all in our sample with one being met.</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>It would therefore take a huge leap of faith to say that crises won’t continue to be a regular feature of the current financial system that has been in place since the early 1970s.&nbsp;</strong>The near exponential growth of finance and its liberalisation since this point has encouraged this trend.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">Indeed as we’ll show in this report there are a number of areas of the global financial system that look at extreme levels. This includes valuations in many asset classes, the incredibly unique size of central bank balance sheets, debt levels, multi-century all-time lows in interest rates and even the level of potentially game changing populist political support around the globe.<strong>&nbsp;If there is a crisis relatively soon (within the next 2-3 years), it would be hard to look at these variables and say that there was no way of spotting them.</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">Having said that, crises tend to have a large element of unpredictability. If they didn’t then surely more would predict their imminent arrival. So while we highlight a lot of the main global vulnerabilities in this report,&nbsp;<strong>history would tell us that there is still a chance that when the next crisis comes its origin will take us by surprise to a certain degree</strong>.&nbsp;<strong>As will its timing</strong>. In the remainder of this executive summary we highlight the conditions that have encouraged crises through history and the main areas of worry as to why we may be vulnerable for another financial crisis relatively soon.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">Periods with a higher number of crises/shocks coincide with higher levels of debt….</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><a href=""><img src="" width="500" height="211" style="height: auto; max-width: 100%;" /></a></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">…and with it higher budget deficits. G7 Government Debt was only previously higher with impact of WWII and before the early 1970s, persistent budget deficits only really existed in war time. Now a permanent feature.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><a href=""><img src="" width="500" height="211" style="height: auto; max-width: 100%;" /></a></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>We think the final break with precious metal currency systems from the early 1970s (after centuries of adhering to such regimes) and to a fiat currency world has encouraged budget deficits, rising debts, huge credit creation, ultra loose monetary policy, global build-up of imbalances, financial deregulation and more unstable markets</strong>.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">The various breaks with gold based currencies over the last century or so has correlated well with our financial shocks/crises indicator. It shows that you are more likely to see crises/shocks when we break from hard currency systems.</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>Some of the devaluation to Gold has been mindboggling over the last 100 years...</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">&nbsp;</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">&nbsp;</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>Related Content</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="" target="_blank">Gold Protect From $217 Trillion Global Debt Bubble</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="" target="_blank">Global Debt&nbsp;Bubble Sees Wealthy Diversify Into Gold</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">World Is Now $199 Trillion In Debt</a><a href="" target="_blank"><br /></a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">&nbsp;</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>News and&nbsp;Commentary</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Gold Hedges, Higher Caution Sets in Ahead of FOMC Statement (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Gold prices nearly flat as investors wait for Fed outcome (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Traders Hold Back Before Fed Decides on Policy (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">U.S. import prices post biggest gain in seven months (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">U.S. current account widens sharply in second quarter (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><a href="" target="_blank"><img src="" width="1474" height="906" style="height: auto; max-width: 100%;" /></a>&nbsp;Blame Tricky Dicky for the next financial crisis. Source Money Week</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Next financial crisis is coming – and it’s all Richard Nixon’s fault (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">One Fund I Met Is Convinced Bond Markets Are On The Edge Of A Precipice (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Advice from the trader who made $1+ billion in 1929... (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Bitcoin receives yet another eulogy from a financial luminary (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">Gold Investment Resuming - Push Gold Dramatically Higher (</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>Gold Prices (LBMA AM)</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">20 Sep: USD 1,314.90, GBP 970.53 &amp; EUR 1,094.79 per ounce<br />19 Sep: USD 1,308.45, GBP 969.30 &amp; EUR 1,091.25 per ounce<br />18 Sep: USD 1,314.40, GBP 970.16 &amp; EUR 1,100.68 per ounce<br />15 Sep: USD 1,325.00, GBP 977.32 &amp; EUR 1,109.16 per ounce<br />14 Sep: USD 1,323.00, GBP 1,002.44 &amp; EUR 1,111.58 per ounce<br />13 Sep: USD 1,332.25, GBP 1,003.85 &amp; EUR 1,112.43 per ounce<br />12 Sep: USD 1,326.25, GBP 1,000.66 &amp; EUR 1,109.41 per ounce</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>Silver Prices (LBMA)</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">20 Sep: USD 17.38, GBP 12.84 &amp; EUR 14.48 per ounce<br />19 Sep: USD 17.15, GBP 12.70 &amp; EUR 14.31 per ounce<br />18 Sep: USD 17.53, GBP 12.94 &amp; EUR 14.66 per ounce<br />15 Sep: USD 17.70, GBP 13.03 &amp; EUR 14.81 per ounce<br />14 Sep: USD 17.75, GBP 13.40 &amp; EUR 14.91 per ounce<br />13 Sep: USD 17.91, GBP 13.50 &amp; EUR 14.94 per ounce<br />12 Sep: USD 17.75, GBP 13.37 &amp; EUR 14.87 per ounce</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><br />Recent Market Updates</strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="">-&nbsp;Global Debt Bubble Understated By $13 Trillion Warn BIS</a></strong><br /><strong><a href="">-&nbsp;Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials</a></strong><br /><strong><a href="">-&nbsp;Gold Up, Markets Fatigued As War Talk Boils Over</a></strong><br /><strong><a href="">-&nbsp;Oil Rich Venezuela Stops Accepting Dollars</a></strong><br /><strong><a href="">-&nbsp;Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today</a></strong><br /><strong><a href="">-&nbsp;British People Suddenly Stopped Buying Cars</a></strong><br /><strong><a href="">-&nbsp;Buy Gold for Long Term as “Fiat Money Is Doomed”</a></strong><br /><strong><a href="">-&nbsp;Conor McGregor – Worth His Weight In Gold?</a></strong><br /><strong><a href="">-&nbsp;Gold Has 2% Weekly Gain,18% Higher YTD – Trump’s Debt Ceiling Deal Hurts Dollar</a></strong><br /><strong><a href="">-&nbsp;‘Things Have Been Going Up For Too Long’ – Goldman CEO</a></strong><br /><strong><a href="">-&nbsp;Physical Gold In Vault Is “True Hedge of Last Resort” – Goldman Sachs</a></strong><br /><strong><a href="">-&nbsp;Bitcoin Falls 20% as Mobius and Chinese Regulators Warn</a></strong><br /><strong><a href="">-&nbsp;Gold Surges To $1338 as U.S. Warns of ‘Massive’ Military Response</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong>Important&nbsp;<span class="m_-928942620346942956il">Guides</span></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">For your perusal, below are our&nbsp;<span class="m_-928942620346942956m_5033479916755799273m_2111833215933341997il">most</span>&nbsp;<span class="m_-928942620346942956m_5033479916755799273m_2111833215933341997il">popular</span>&nbsp;<span class="m_-928942620346942956m_5033479916755799273m_2111833215933341997il">guides</span>&nbsp;in 2017:</p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="*W1sFhNs6QLBySW4Rr0Hl90CHT-0/*N5MhbFRBkTqXW95dlRy194d-P0/5/f18dQhb0S5ft8X-f1rW8cCGTT51FcdHN5s9DSvWrM1ZW3MpzC43frry_W8r4Kht63lH28W1lQSSc8y_DL1W8z_p0c67hcl-W1qMTKP5xLd3bN8zTG51RBdNtW3L39B54P7Fz2W8rCHmp3PnStQVS9p0b63dhWbW8mp0Tc5x5KNkW7-XB_567h1CPW8r5PXz49z-4PN2MV0Xm5w8jDW1mw3yc59SFsZN4H-tjrQC5z2VPC2cV7gvpc4W4XYhBl2y9PQJW4sxqtN7h5hQFW28TbSB2Cg_LLW96LzRy5DkRJDW5BRXXj2y4Lc7N3Kd2SV_-Nf6W3brNsz66rKFTW2xH0xz1lcG1VVQBGcH5DQdGhN22JjmzdPgQwW9464-Y5GFs9DW4Rj6Nh6BzJrnN45Ly2MkwRN4W8qYMH51FnsVDW2X9_p02MVHnbN2GZdYq215_BW1J7MZd3mgJK7W4F32xR1JjtM5W4Bn5JG3ZzLH2W5jL56q7dkHC7W3VtW1b1MWhN-W1MKd944yqBfl111" target="_blank">Essential&nbsp;<span class="m_6690301754972839650m_5033479916755799273m_2111833215933341997il"><span class="m_6690301754972839650il">Guide</span></span>&nbsp;To Storing Gold In Switzerland</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="*W1sFhNs6QLBySW4Rr0Hl90CHT-0/*W5Hh19S2J1j6jW1gxPj45yTRLt0/5/f18dQhb0S5fw8X-fbXW8cCGTT51FcdHN5s9DSvWrM1YW3MpzC43frry_W8r4Kht63lH28W1lQSSc8y_DL1W8z_p0c67hcl-W1qMTKP5xLd3bN8zTG51RBdNtW3L39B54P7Fz2W8rCHjG25x99KVwyMQc6PVJWyW625bx16Gj8TSW6bVy-525hjVhW83KHrF7J39qHN2m8DqKmmF0wW1jsTjn5VDnrHVbq5fx4TKc2lW6Rjg6t5Pk17jW2xZzRk8LpcPpW36k5sF4FnHNZW1mvfQB2BpzSjN1mT8mr2g4dYW5VZ-P_37vq3BW2--Tfh1w3GzfW5CkFpW6ZccdyW5vvKY_3N2S6fW3KRSNH8yxr7CW7YJp821cQlwRW63x06S1bBvW3W408wWR11rnNbV4Vjkz6NjfdLW55Fr2P5nn1d6W301cwV4GX00sW5hfR428jJDdkW4Cy2w54wj2JxVMFy4w4hyJQMV6N2-D1mPRd4N6YRN0Y4ZDMLD2LMBk7BT1f5Fq5PC03" target="_blank">Essential&nbsp;<span class="m_6690301754972839650m_5033479916755799273m_2111833215933341997il"><span class="m_6690301754972839650il">Guide</span></span>&nbsp;To Storing Gold In Singapore</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;"><strong><a href="*W1sFhNs6QLBySW4Rr0Hl90CHT-0/*W7dc5x_8dXcz0W57pb-W8yRfPY0/5/f18dQhb0Sjv98X-fhGW8cCGTT51FcdHN5s9DSvWrBCVW3MpzC43frry_W8r4Kht63lH28W1lQSSc8y_DL1W8z0sTg7mCbb0W57V1HT7tVHF9W8Z32tg35s628W859LV685kgn-W5mG2963qCNtmW8hTG4j5Zh496W2d551v3pNnKLVLrb9R83_Pn-W7JCxGl81bhDKW7N_KqM11GBXTW41TlcR3TwTqzW19BjML1ks0KjW7RPZVs5-2sjBW7ZzDyK7GLjPjW2KH_vB6SdpRZW1hx1p11Gg3W9W6rwy5K1YZKs5W2gFslL6NqPjwW1tbMwf7n90PHW67SS1j224DVBW6SdFBY1S1FW8W1Th1-Q1X2dwGW1swLvy81myPRW1B9M4Q6SdHPtW7C3gqS89xKZ9W1Ms6WG19gjwJN42ktpLPs031VgkKmy5qqk_FW41Q13s3srYmmW2-yGlm4v9PYhVmLW2J4r5l5jW7fnqv3187HWVW794lJw3T7yBDW1Zq0mT90vVQHW7SNfQy7BfhjRN3QzSrFQN_TjVcGblm3cFvNY0" target="_blank">Essential&nbsp;<span class="m_6690301754972839650m_5033479916755799273m_2111833215933341997il"><span class="m_6690301754972839650il">Guide</span></span>&nbsp;to Tax Free Gold Sovereigns (UK)</a></strong></p> <p style="color: #333333; font-family: Georgia, &quot;Times New Roman&quot;, &quot;Bitstream Charter&quot;, Times, serif; font-size: 16px;">Please share our research with family, friends and colleagues who you think would benefit from being informed by it.</p> Asian financial crisis BIS Bitcoin Bond Business Capital Markets Debt Ceiling default Economic bubbles Economy Finance Financial crisis Financial crisis of 2007–2008 G7 Global financial system goldman sachs Goldman Sachs Great Recession International trade Jim Reid Market Crash Monetary Policy Money Recession Reuters Sovereign Default Sovereigns Stock market crashes Switzerland Systemic risk US Federal Reserve Wed, 20 Sep 2017 11:55:00 +0000 GoldCore 603825 at Frontrunning: September 20 <ul> <li>Fed Poised to Set Portfolio Reduction Plan in Motion (<a href="">WSJ</a>)</li> <li>Dollar close to 2015 lows as conflicted Fed prepares policy update (<a href="">WSJ</a>)</li> <li>The Risk of a New Economic Non-Order (<a href="">El-Erian</a>)</li> <li>A last, last chance: Republicans strain for Obamacare repeal (<a href=",-last-chance:-Republicans-strain-for-Obamacare-repeal">AP</a>)</li> <li>McConnell Won’t Promise Obamacare Repeal Vote as Foes Mobilize (<a href="">BBG</a>)</li> <li>Jimmy Kimmel Rips Into GOP Health Bill for Failing ‘Kimmel Test’ (<a href="">BBG</a>)</li> <li>Stress at UN Not Shared on Wall Street as Stocks Set Records (<a href="">BBG</a>)</li> <li>Trump’s North Korea threat leaves Asia struggling to explain (<a href="'s-North-Korea-threat-leaves-Asia-struggling-to-explain">AP</a>)</li> <li>China offers support for strife-torn Venezuela at United Nations (<a href="">Reuters</a>)</li> <li>States Need $645 Billion to Pay Full Health-Care Costs (<a href="">WSJ</a>)</li> <li>Trump Aides Caught in Russia Probe Face Legal Bills and Paranoia (<a href="">BBG</a>)</li> <li>Police arrest high-ranking Catalan officials in raids (<a href="">Reuters</a>)</li> <li>Opioids on the Job Are Overwhelming American Employers (<a href="">BBG</a>)</li> <li>Russia's B&amp;N Bank seeks bailout: central bank (<a href="">Reuters</a>)</li> <li>Toys ‘R’ Us Will Live Because Mattel and Hasbro Can’t Let It Die (<a href="">BBG</a>)</li> <li>From Russia with fuel - North Korean ships may be undermining sanctions (<a href="">Reuters</a>)</li> <li>Two Big Words Show Why U.S. Oil May Finally Be Turning a Corner (<a href="">BBG</a>)</li> <li>How $5 billion of debt caught up with Toys 'R' Us (<a href="">Reuters</a>)</li> <li>Why This Hurricane Season Is So Intense (<a href="">WSJ</a>)</li> <li>Buffett calls pessimists about United States 'out of their mind' (<a href="">Reuters</a>)</li> <li>Uber reviews Asia business amid U.S. bribery probe (<a href="">Reuters</a>)</li> <li>Amazon Is a Lifeline for Retail Workers. (If They Live in the Right City.) (<a href="">BBG</a>)</li> </ul> <p>&nbsp;</p> <p><strong>Overnight Media Digest</strong></p> <p><em><span style="text-decoration: underline;">WSJ</span></em></p> <p>- Central Mexico was rocked by a 7.1 magnitude earthquake that collapsed scores of buildings in Mexico City, killing at least 149 people in a toll that was rising by the hour on Tuesday night.</p> <p>- Walgreens Boots Alliance Inc received regulatory approval to acquire nearly 2,000 stores from Rite Aid Corp , but only after the number of stores to be purchased in the deal was again trimmed to allay antitrust concerns.</p> <p>- Post Holdings Inc said it plans to buy breakfast-sausage maker Bob Evans Farms Inc for a deal valued at $1.5 billion.</p> <p>- Ford Motor Co said on Tuesday it will temporarily idle production lines at five North American plants, including three in the U.S.</p> <p>- Creditors of Australia's Ten Network Holdings Ltd accepted an increased offer for the broadcaster from CBS Corp , rejecting a rival proposal from media moguls Bruce Gordon and Lachlan Murdoch.</p> <p>- Hurricane Maria, with sustained winds near 160 miles per hour, thrashed the eastern Caribbean on Tuesday, killing at least one person on Guadeloupe and devastating the tiny island nation of Dominica, now heads for the Virgin Islands and Puerto Rico.</p> <p>- U.S. President Donald Trump threatened to annihilate North Korea if the United States has to defend itself or its allies against the Pyongyang regime, delivering the dire warning on Tuesday during his first address to the United Nations General Assembly.</p> <p>- Myanmar's leader Aung San Suu Kyi said her government would investigate all allegations of human rights abuses in her country, and said Myanmar would allow Rohingya who could prove they had lived in the country to return.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">FT</span></em></p> <p>At least three audit contracts were lost by KPMG in South Africa as it faces widespread client reviews after it got involved in a high-profile political scandal involving South Africa’s billionaire Gupta family.</p> <p>In an attempt to prove that a technologically enabled urban environment can improve quality of life, Google’s parent company Alphabet Inc is working on a plan to build a city from the ground up, the executive in charge of its urban innovation business said on Tuesday.</p> <p>The activist investor fighting Clariant AG has increased its stake to 15.1 percent in the Swiss chemicals group and repeated that it demands to drop the $20 billion planned tie-up with Huntsman Corp of the United States.</p> <p>The British government has told German Chancellor Angela Merkel to expect Theresa May to offer this week to fill a post-Brexit European Union budget hole of at least 20 billion euros ($23.98 billion), this week.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">NYT</span></em></p> <p>- In his first address to the U.N. General Assembly, U.S. President Donald Trump brought his confrontational style of leadership to the platform. While his tough words were cheered by Israel and Republican lawmakers, leaders of France, the European Union and the United Nations were sharply critical of his tone.</p> <p>- Eleven governors, including five Republicans, urged the U.S. Senate on Tuesday to reject a new push to dismantle the Affordable Care Act.</p> <p>- Senate Republicans agreed on Tuesday to move forward on a budget that would add to the federal deficit in order to pave the way for a $1.5 trillion tax cut over the next 10 years.</p> <p>- In contrast to soaring health insurance premiums in many Affordable Care Act marketplaces, the cost of coverage for vast numbers of people who get insurance through their jobs rose relatively little this year, according to a national survey released Tuesday.</p> <p>- Hurricane Maria is expected to produce more than 12 inches of rainfall, which will cause "life-threatening flash floods and mudslides" in Puerto Rico and the U.S. Virgin Islands, the National Hurricane Center said.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Canada</span></em></p> <p>THE GLOBE AND MAIL</p> <p>** Swiss advocacy group, the Bruno Manser Fund pursuing allegations of financial crimes against Ottawa real estate company Sakto Corp, is turning to Ontario's courts to obtain sensitive financial records from three Canadian banks and a major accounting firm.</p> <p>** The future of Alimentation Couche Tard Inc remains clouded after its chairman expressed doubts that he and the company's three other founders will be able to maintain control of the retailer as the clock starts ticking on the expiry of their special stock rights.</p> <p>** The Organization for Economic Co-operation and Development raised its projection for growth in Canada this year by 0.4 of a percent point from its earlier forecast, to 3.2 percent.</p> <p>NATIONAL POST</p> <p>** The solvent Canadian subsidiary of Toys R Us Inc (IPO-TOYS.N) was granted court-appointed relief on Tuesday to continue operating through the holidays as it disentangles aspects of its business from that of its struggling U.S. parent company.</p> <p>** Investigators for Ontario's Ministry of the Environment and Climate Change raided the headquarters of Volkswagen Canada on Tuesday morning, executing a search warrant as part of the massive international investigation into "cheat devices" meant to evade emissions regulations. </p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Britain</span></em></p> <p>The Times</p> <p>BHP Billiton is rethinking its membership of Australia's leading mining organisation over differences on climate change. The company committed on Tuesday to publishing a review of its membership of trade associations and explicitly disclosing where there were "material differences" in their positions. (</p> <p>The head of the Treasury select committee has demanded a "full explanation" from the accounting watchdog for its decision to drop an investigation into KPMG's role as auditor of HBOS. (</p> <p>The Guardian</p> <p>Yoko Ono Lennon has stepped in to rescue the name of her husband from fizzy pop reinvention, taking legal action to halt the sale of a lemonade called John Lemon. The Polish company which sells the beverage has agreed to change its name to On Lemon after legal letters were sent by Ono Lennon's lawyers to the parent company and its distributors across Europe. (</p> <p>One of Lloyd's of London's largest insurance syndicates is to move its European headquarters to Dublin because of Brexit, Ireland's prime minister has announced. XL Group Ltd, which operates the XL Catlin brand, chose the Irish capital as its preferred location for its principal EU insurance company subject to regulatory approval, said the Irish Industrial Development Authority. (</p> <p>The Telegraph</p> <p>German dairy business Müller is defying worries about Brexit's impact by revealing plans for 100 million pounds ($135.15 million) of investment in its UK business. (</p> <p>French oil company Total SA is in talks with Alphabet's Google Inc and Microsoft Corp to help develop bespoke artificial intelligence in the energy sector's race to tap digital technologies. (</p> <p>Sky News</p> <p>Chinese insurer Ping An Insurance and consulting firm Oliver Wyman are buying stakes in 10X Future Technologies, the financial technology start-up founded by former Barclays chief Antony Jenkins. (</p> <p>Wyevale Garden Centres, which is owned by Guy Hands' Terra Firma Capital Partners has struck a 100 million pound debt deal with Hayfin, a specialist lender. (</p> artificial intelligence B+ Barclays BBG Bitly British government Bruno Manser Fund Business Central Mexico China Creditors Donald Trump Donald Trump eastern Caribbean Economy of the United States European Union European Union Federal Deficit federal government Financial data vendors flash Ford France Google Internal Revenue Code Irish Industrial Development Authority Israel Mexico National Hurricane Center North Korea Obamacare Ontario's Ministry of the Environment and Climate Change Patient Protection and Affordable Care Act Puerto Rico Real estate Republican Party Reuters Reuters The Wall Street Journal Thomson Reuters UN General Assembly United Nations United Nations General Assembly United States United States Senate Volkswagen Wed, 20 Sep 2017 11:49:17 +0000 Tyler Durden 603824 at The Morning After: Mexican Earthquake Leaves Over 248 Dead, Millions Without Electricity <p>Across central Mexico, rescue workers including soldiers and volunteers worked late into the night Tuesday to free the living who were still trapped in the rubble of collapsed buildings following Mexico&#39;s deadliest earthquake in more than 30 years.</p> <p>The death toll from the 7.1 magnitude quake &ndash; which bizarrely occurred on the anniversary of a 1985 quake that left 5,000 dead &ndash; has climbed to 248, with more than half of those deaths occurring in the Mexican capital city.&nbsp; It also comes two weeks after another powerful <a href="">quake left nearly 100 dead in Mexico City</a><a href="">. </a>The quake was unusually close to Mexico City, located just 60 miles south of the capital in Chiautla de Tapia, a small town in neighboring Puebla state, according to Mexico&rsquo;s seismological service.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 291px;" /></a></p> <p>More are feared dead, including possibly dozens of teachers and schoolchildren feared buried in the rubble of a Mexico City school, one of hundreds of buildings that was destroyed by the quake, according to <a href="">Reuters</a>.&nbsp;</p> <p>Additionally, several buildings collapsed in the chic neighborhoods of Roma and Condesa in central Mexico City, where many foreigners live. In Condesa, rescue workers scrambled to find eight to 10 people believed trapped under the debris of a building that collapsed near Mexico Park, one of the city&rsquo;s most famous parks. Hundreds of volunteers formed a human chain to help clear rubble and bring food and water to rescue workers.</p> <p>Mexico was also hit earlier this month by Hurricane Katia, which killed two. Even the Popocatépetl volcano southeast of the city sent a large cloud of ash into the sky on Tuesday. &ldquo;This is too much. It&rsquo;s like we&rsquo;re cursed or something,&rdquo; said Marcos Santamaría, a 62-year-old retiree.</p> <p>Philippines and the United Nations have offered to support the recovery effort. At least 30 second-grade students are still missing, along with eight adults.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 252px;" /></a></p> <p>Mexican President Enrique Pena Nieto said in a video message released late Tuesday that the initial focus of rescue efforts must be to find people trapped in wrecked buildings, according to the <a href="">Associated Press. </a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The priority at this moment is to keep rescuing people who are still trapped and to give medical attention to the injured people.&quot;</p> </blockquote> <p>Pena Nieto added that, as of late Tuesday, 40% of Mexico City and 60% of Morelos state had no electricity.</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="es"><a href="">#Sismo</a> cae cúpula en iglesia de San Francisco <a href="">#Puebla</a> <a href=""></a></p> <p>&mdash; Periódico e-consulta (@e_consulta) <a href="">September 19, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script><p>Dust-covered and exhausted from digging, 30-year-old Carlos Mendoza said two people were pulled alive from the ruins of a collapsed apartment building in the Roma Sur neighborhood during a three-hour period.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;When we saw this, we came to help,&quot; he said, gesturing at the destruction. &quot;This is ugly, very ugly.&quot;</p> </blockquote> <p>In Condesa, rescue workers scrambled to find eight to 10 people believed trapped under the debris of a building that collapsed near Mexico Park, one of the city&rsquo;s most famous parks. Hundreds of volunteers formed a human chain to help clear rubble and bring food and water to rescue workers, according to the <a href="">Wall Street Journal. </a><br /><a href=""><img alt="" src="" style="width: 500px; height: 430px;" /></a></p> <p>Gabriela Magaña, who works in a nearby art gallery, was inside the building when the quake hit. She managed to make it to the street just before it fell.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;I just saw an immense black cloud of dust and heard a big bang. Then I started to hear crying, and the smell of gas was unbearable. It was a nightmare,&rdquo; she said.</p> </blockquote> <p>At least 86 dead had been counted in Mexico City and 71 in Morelos state, which is just south of the capital. Another 43 were known dead in Puebla state, where the quake was centered. Twelve deaths were listed in the State of Mexico, which surrounds Mexico City on three sides, four in Guerrero state and one in Oaxaca, according to the official Twitter feed of civil defense agency head Luis Felipe Puente.</p> <p><a href=""><img alt="" src="" style="width: 500px; height: 280px;" /></a></p> <p>Mexico City residents rallied and joined the rescue efforts to free their neighbors following the quake.&nbsp; Mexico City Mayor Miguel Angel Mancera said buildings fell at 44 sites in the capital alone as high-rises across the city swayed and twisted and hundreds of thousands of people, fearing for their lives, ran into the streets. Buildings also collapsed in Morelos state, including the town hall and local church in Jojutla near the quake&#39;s epicenter. A dozen people died in Jojutla. The quake also ruptured gas mains and sparked fires across the city and other towns in central Mexico as falling rubble and billboards crushed cars.</p> <p>Mexico&rsquo;s Popocatepetl volcano, visible from the capital on a clear day, had a small eruption. On its slopes, a church in Atzitzihuacan collapsed during mass, killing 15 people, Puebla Governor Jose Antonio Gali said, according to <a href="">Reuters.</a></p> <p>Meanwhile, Mexico City residents slept in the streets while authorities and volunteers set up tented collection centers to distribute food and water. The city&rsquo;s metro area has a population of some 20 million. Federal authorities ordered schools in seven states, as well as Mexico City, closed until further notice. Patients were evacuated from many hospitals.</p> <p>Hours after the quake, residents were still huddled on the streets, too afraid to go back inside. Along the boulevard Paseo de la Reforma, a strong smell of gas caused panic.</p> <p>President Donald Trump, who had been criticized for taking days to contact Mexican Mr. Peña Nieto after the quake earlier this month, was quick to offer support. &ldquo;God bless the people of Mexico City. We are with you and will be there for you,&rdquo; Trump tweeted Tuesday afternoon.</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="749" height="377" alt="" src="" /> </div> </div> </div> Americas Central Mexico Chivalry Colonia Roma Disaster Donald Trump Enrique Peña Nieto Environment Geography of Mexico Jojutla Mexico Mexico Mexico City Mexico City metropolitan area Morelos Puebla recovery Reuters States of Mexico Twitter Twitter United Nations Wall Street Journal Wed, 20 Sep 2017 11:23:47 +0000 Tyler Durden 603822 at Bill Blain: "We’ve Heard JPM Traders Bragging In The Pub How Much They’ve Made From Bitcoin" <p><em>Submitted by Bill Blain <a href="">of Mint Partners</a></em></p> <p><strong>Blain’s Morning Porridge – September 20th 2017</strong><em><br /></em></p> <p><em>&nbsp;&nbsp;&nbsp;&nbsp; “New Car, caviar, four star daydream, think I’ll buy me a football team….”<br /></em></p> <p>Will they? Won’t they?&nbsp; I’m not talking about Donald’s playground bluster about nuking North Korea back to the 1950s. Shocking and intemperate. Yes. But, plays to his audience. </p> <p><strong>Of more import are Central banks and how they wriggle out of their current chains. Will the Fed put another nail into QE this afternoon? </strong>We think they will announce the end of coupon reinvestment: de-facto normalisation/tightening. Get on with it! US markets are resilient enough to cope – but we really need to see serious spread decompression between the fixed income asset classes. </p> <p>As we’ve written before, it’s more a problem for the ECB. They are caught in a horrible decision matrix: the imperative to continue QE infinity to maintain the illusion nothing is wrong, the Germans sticking to their guns about normalisation and no debt mutualisation, and electorates who aren’t anywhere near ready to surrender that kind of economic sovereignty to Brussels. </p> <p>I suspect the stories about the ECB being split as it sounds off on setting a firm date in October for scaling back their bond buying is a bit of Kite Flying. If they asked me, I’d say bite the bullet and say it’s going to happen. It make Angela Merkel’s job constructing a new German coalition next week much easier, but will just fuel electoral tensions across the various Italies.. (Yes.. I wrote Italies..) </p> <p><strong>Personally, I suspect Draghi is praying for a crisis. </strong></p> <p>It would allow him to play his “Kick-the-Can-Card.” Remember he said: “Unless a risk that is not seen today materialises, we should be ready to take the bulk of these decisions in October.” A nice little bond crisis, stock market collapse, or renewed Global Financial Crisis (maybe even some unpleasantness in Asia or Middle East), would allow him to put the back the decisions, massage some votes and keep the QE illusion in place till after next year’s Italian vote. It’s all about timing. </p> <p>As they used to say on Stringray: “Anything can happen in the next 20 minutes. (I guess there may still be a few of us who remember Troy Tempest and Aquamarina.. if you are one of them, I’ll see you in the bond traders’ retirement home shortly)</p> <p><strong>Regular readers will know I’m worried about the unintended consequences of QE – and just how distorted markets have become as a result. I’m not alone in that view – I’ve read many reports of other market watchers saying similar. </strong></p> <p><strong></strong>For instance, one bloke says: “Evaluating the effects of monetary policy is difficult, even in the case of conventional interest rate policy.. with respect to QE, there are good reasons to be sceptical that it works as advertised, and some economists have made a good case that QE is actually detrimental”. Same chap says asset prices have climbed but inflation remains elusive. </p> <p>But this wasn’t some jumped up teenage scribbler like myself – <strong>this was a senior Federal Reserve economist – Stephen D Williamson - reported on CNBC! </strong>A “No Sh*t Sherlock” award on his way to him then. </p> <p>On the other hand, Bloomberg report European economists saying that monetary policy is now working across Europe, and the key moment was when TLTROs went negative rate, allowing peripheral banks to really start lending across the European periphery states. I’d always assumed the main effect of free ECB money to banks was for them to buy Government bonds (safe in the knowledge the ECB would be the buyer of last resort) – but apparently I’m wrong: the reason we’re seeing 3% growth in Spain and close to it in Portugal is due to renewed lending. </p> <p><strong>That would be lending by the same European banks that have experienced massive Non-performing loans and enforced capital rises then? I must look into this.. I hae ma doots. </strong></p> <p>And thanks to all the readers who commented on yesterday’s porridge and my note on Greece. As expected I got pillioried by European chums (you know who you are!) for my lack of faith in the European dream and got well put in my place about the failure of the UK to exploit the weak currency. </p> <p>But I also had some Europeans agree with me. A very senior banker told me he doubts the EU will survive much beyond the end of ECB QE – and he’s French!</p> <p><strong>A bigger worry was my blithe assumption the Global economy is on the road to recovery. More than one reader pointed out their fears the last 18 months of sluggish growth will shortly run out of steam and we’re heading into a new recession, which could be exacerbated by the negative sentiment from a market slowdown. </strong>This morning I’ve just been sent articles hinting of a China slowdown next year hitting commodity markets.. </p> <p>Gosh.. this global economic thingymaboab is complex stuff..&nbsp; </p> <p>Meanwhile… I’ve been asked a number of times to comment on cryptocurrencies.</p> <p>I try not to – on the basis I don’t really understand the underlying logic. But a blog I read this morning struck a chord. I can’t grasp why they have taken off - except to make things like Silk Road the modern equivalent of smuggling as it hides transactions from financial scrutiny raising questions of illegality and tax. That is legally and morally wrong. Their valuations are bubbletastic, and there are now over 1200 of the things looking ripe for legislative sideswipes. </p> <p><strong>Neither can I figure how Bitcoin can possibly work </strong>– apparently the Blockchain underlying it can only handle 6 transactions per second, unlike your average credit card which can handle hundreds of thousands of simultaneous deals. In other words, you could never run a global economy off it!&nbsp; More to the point, I’m not quite sure why we need it when we have well established offshore currency markets and accepted “stores-of-value” like the gold brick. </p> <p>And then there is the story Jamie Dimon of JP Morgan will sack any of his bankers who own them. (<strong>Hah.. we’ve heard them bragging in the pub about how much they’ve made from holding Bitcoin</strong>.)</p> <p>Step back and the kinds of gains Crypto-currencies have made scream “bubble”! – fuelled by the sillies now pilling into them looking for big bucks, lured in by unverifiable stories about the riches to be made. </p> <p>When a London taxi driver tells you he’s long Bitcoin… Sell! And all the folk who say they look like a Ponzi scheme – they might well be right. </p> <p>But, for all their faults, the dodgy trading arenas, and the desperation of buyers, the bottom line is Bitcoin and others have made money for early investors. Why? It’s gone through successive waves of enticing reasonings: first it was the smart technological solution to a perceived crisis of confidence in currencies, before morphing into the “insider” financial trade, and now it’s a sure fire route for “Lovely Linda from Liverpool” to turn her £20k retail wages into million. </p> <p>There will be tears. </p> <p><strong>Maybe Bitcoin was a well intentioned attempt to practically demonstrate the monetary theories of the Japanese bloke who is said to have invented the concept.. but today? </strong>They are a scam designed to tap the spigot of idiocy. Caveat Emptor.&nbsp; </p> <p>Like I say.. I don’t really understand cryptocurrencies.. </p> <p>In a world where the biggest real definable threat may be cyber attacks on banking systems, perhaps they might be a secure store of value. But I also suspect the first place cyber crims will ransack accounts will be the cryptocurrencies themselves. </p> <p>I really don’t like this digital world..</p> <p><a href=""><img src="" width="500" height="282" /></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="2048" height="1154" alt="" src="" /> </div> </div> </div> Alternative currencies Bitcoin Bitcoin Bond Central Banks China Cryptocurrencies European Central Bank European Central Bank European Union European Union Eurozone Federal Reserve Finance Financial technology fixed Global Economy Greece Jamie Dimon Middle East Middle East Monetary Policy Money non-performing loans North Korea Portugal Recession recovery US Federal Reserve Wed, 20 Sep 2017 11:12:01 +0000 Tyler Durden 603823 at Global Markets, US Futures Barely Move With All Eyes On The Fed <p>The day has finally arrived: today the Fed will officially announce the start of its balance sheet shrinkage (<a href="">full preview here</a>) while keeping rates unchanged, perhaps hiking again in December (market odds at 56%), while revising its economic projections and "dots", most likely in a lower direction. </p> <p><a href=""><img src="" width="500" height="281" /></a></p> <p>And while we wait for the announcement and press conference after 2pm, US index futures - as well as European and Asian equities - are little changed, signaling a pause for Wall Street’s three major benchmark indexes after they hit new all-time highs ahead of the Federal Reserve’s policy announcement due today. They probably will not be changed after 2:30 pm, however, especially if Yellen surprises on the hawkish side. Don't look at the dollar for clues though: The DXY fell less than 0.1% against a basket of major currencies and was down against the euro, the yen and sterling. The Bloomberg Dollar Spot Index fell a second day, with the U.S. currency confined to a narrow trading range, as Treasury yields edged lower; broad lack of directional catalyst seen over the session as traders awaited the FOMC decision.</p> <p>“If we move closer to a U.S. rate hike, that should come along with a bit more dollar strength and euro weakness which would harden the ECB’s exit case and be a headwind for government bonds,” said Commerzbank strategist Rainer Guntermann.</p> <p>Ahead of the Fed, Europe's Stoxx Europe 600 Index was mixed alongside S&amp;P 500 futures and a fractionally higher session for Asian equities. The dollar slipped, the euro and yen gained and the British pound jumped as data showed U.K. retail sales rose more than forecast in August. Spanish assets showed resilience even as the government stepped up its crackdown on an illegal separatist referendum planned for the Catalonia region. The Mexican peso swung after a 7.2 magnitude earthquake struck. Benchmark crude rose but struggled to break $50 a barrel. US Treasuries halted a three-day decline awaiting the Fed's interest-rate projections. New Zealand’s dollar led gains versus the greenback after an election poll showed the ruling National Party ahead, while the pound advanced after U.K. retail-sales data beat forecasts. </p> <p>Financial markets remain largely calm - even after President Donald Trump used a UN speech to threaten to annihilate North Korea - as all eyes turn to Wednesday’s Fed decision. Expectations are high that the central bank of the world’s biggest economy will unveil plans to start shrinking its $4.5 trillion balance sheet, while any clues on the chances of a rate increase this year could tip the balance - market expectations of another hike in 2017 are at about 50 percent.</p> <p>Asian stocks swung between gains and losses as investors awaited the Fed. The MSCI Asia Pacific Index rose 0.2 percent to 164.44 even as most shares declined, after earlier falling by the same magnitude; the gauge closed Tuesday at its highest level since December 2007. The Topix index ended the session in Tokyo almost flat at the highest since August 2015. Australia’s S&amp;P/ASX 200 and the Kospi index in Seoul closed slightly lower. The Hang Seng Index in Hong Kong swung between gains and losses with the Shanghai Composite Index, before both advanced.&nbsp; Telecommunications and energy stocks advanced, while utilities and consumer shares slipped. SoftBank Group Corp. was the biggest boost the gauge while Sony Corp. was among the biggest drags after Credit Suisse Group AG downgraded the stock, saying earnings may plateau in fiscal 2019. Japanese shares fluctuated in a narrow range throughout Wednesday’s session as investors awaited the outcome of the U.S. Federal Reserve’s policy meeting. The benchmark Topix index ended little changed, with about five shares declining for every four that rose. Nintendo Co. and telecommunications companies provided the most support, while chemicals and pharmaceutical shares were the biggest drags. The yen strengthened slightly against the dollar following a three-day. 1.2 percent drop</p> <p>The Asia benchmark has risen about 22 percent this year, outstripping the S&amp;P 500 Index’s 12 percent advance to a record, as investors looked past tensions between the U.S. and North Korea. Further gains may lie ahead because the Fed is expected to leave rates unchanged and may use “slightly dovish” language when announcing its decision later Wednesday in Washington, said James Soutter, a fund manager at K2 Asset Management in Melbourne. “Lower for longer rates probably means the U.S. dollar remains weak,”&nbsp; Soutter said in an email. That’s “a positive for Asian stocks."</p> <p>Elsewhere, the New Zealand dollar surged after a poll put the ruling National Party back in the lead ahead of the main opposition Labour Party ahead of this weekend’s election. And the fixing of the yuan remained in focus as investors try to gauge where the People’s Bank of China wants the currency. In a notable move in Chinese rates, the local 5Year bond yield had its biggest move since March. </p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">What has changed? China 5 yr makes biggest jump since March <a href=""></a></p> <p>— Sunchartist (@Sunchartist) <a href="">September 20, 2017</a></p></blockquote> <script src="//"></script><p>Similarly, European equities are little changed for a second day, unwilling to make major moves ahead of any potential Fed surprises: the Stoxx Europe 600 Index was unchanged. Zara owner Inditex SA was among the worst performers after posting first-half earnings that missed analysts’ forecasts, while Kingfisher Plc was the best gainer after reporting France retail profit for the first half that beat the average analyst estimate.</p> <p>In rates, the yield on 10-year Treasuries declined two basis points to 2.22 percent, the largest drop in almost two weeks. Germany’s 10-year yield fell two basis points to 0.44 percent, the biggest drop in almost two weeks. Britain’s 10-year yield declined less than one basis point to 1.327 percent.</p> <p>In commodities, gold advanced 0.3 percent to $1,315.36 an ounce. Oil prices rose after Iraq’s oil minister said Organization of the Petroleum Exporting Countries producers and others were considering extending a supply cut and after data showed U.S. crude stocks were lower than expected.</p> <p>Aside from the Fed, economic data include mortgage applications and existing home sales. General Mills is reporting earnings</p> <p><strong>Bulletin Headline Summary From RanSquawk</strong></p> <ul> <li>GBP &amp; NZD see initial bids following Retail Sales and Election Polls</li> <li>UK PM May intends to make a EUR 20bln Brexit payment offer to the EU, according to the FT</li> <li>Looking ahead, highlights include DoEs and the FOMC announcement &amp; press conference</li> </ul> <p><strong>Market Snapshot</strong></p> <ul> <li>S&amp;P 500 futures little changed at 2,505.10</li> <li>STOXX Europe 600 up 0.03% to 382.25</li> <li>MSCI Asia up 0.2% to 164.48</li> <li>MSCI Asia ex Japan up 0.2% to 544.19</li> <li>Nikkei up 0.05% to 20,310.46</li> <li>Topix unchanged at 1,667.92</li> <li>Hang Seng Index up 0.3% to 28,127.80</li> <li>Shanghai Composite up 0.3% to 3,366.00</li> <li>Sensex up 0.03% to 32,413.08</li> <li>Australia S&amp;P/ASX 200 down 0.08% to 5,709.09</li> <li>Kospi down 0.2% to 2,412.20</li> <li>Brent futures up 0.9% to $55.61/bbl</li> <li>German 10Y yield fell 1.0 bps to 0.442%</li> <li>Euro up 0.1% to $1.2011</li> <li>Italian 10Y yield fell 2.4 bps to 1.756%</li> <li>Spanish 10Y yield fell 1.0 bps to 1.546%</li> <li>Gold spot up 0.2% to $1,313.11</li> <li>U.S. Dollar Index down 0.1% to 91.68</li> </ul> <p><strong>Top Overnight News from BBG<br /></strong></p> <ul> <li>Investors looking to own exposure on the euro need to pay the stiffest premium since December 2016 when it comes to a Federal policy decision </li> <li>Even as the Fed will likely hold rates today, futures suggest another Fed hike could happen this year</li> <li>Oil rises on signs the pace of U.S. stockpile gains is slowing as refiners resume operations after Hurricane Harvey, boosting crude demand</li> <li>At least 248 people were confirmed dead after a 7.2 magnitude earthquake struck near Mexico City</li> <li>Bitcoin is looking increasingly likely to splinter off again in<br /> November, creating a third version of the world’s largest cryptocurrency </li> <li>Hurricane Maria was on course to hit Puerto Rico just two weeks after Irma caused as much as $1 billion in damages</li> <li>Impact of pound fall on goods inflation may have peaked, BOE says in quarterly agents’ summary of business conditions</li> <li>Capital Four, which is the largest European high-yield bond fund, is now cutting down on risk as higher interest rates loom on the horizon</li> <li>Merkel pact with SPD still looks most likely after Germany votes</li> <li>Abe said to delay fiscal 2020 primary balance target: Nikkei</li> <li>U.K. retail sales rise 1% m/m in Aug. vs est. +0.2%</li> <li>Japan Aug. exports rise 18.1% y/y; est. +14.3%</li> <li>Bain Is Said to Plan Toshiba Deal Close Despite Legal Threat</li> <li>Thyssenkrupp and Tata to Create Europe’s No. 2 Steelmaker</li> <li>Maersk Sells Tankers Unit for $1.17 Billion to Holding Company</li> <li>After Reaping 40% in Turkey, Traders Eye 2017’s Worst Stocks</li> <li>Noble Group CDS Ruling Puts Payouts in Doubt in Market Feud</li> <li>OPEC Has Success at Last, But Oil Revival May Be Short-Lived</li> </ul> <p><strong>Asia markets saw an indecisive trading </strong>day amid a cautious tone ahead of today’s FOMC announcement. The looming risk event initially sapped the momentum from another record close on Wall St. and kept bourses in Australia and Japan subdued, while Chinese markets also conformed to the tentativeness after a significantly weakened liquidity operation by the PBoC. However, sentiment then gradually improved throughout the session which helped Nikkei 225 (Unch), Hang Seng (+0.2%) and Shanghai Comp. (+0.2%) pare losses, although gains were only superficial as focus remained on the FOMC and ASX 200 (-0.1%) continued to lag amid weakness across its major industries. 10yr JGBs were flat with participants sidelined amid an enhanced liquidity auction in which the b/c fell from previous, while the BoJ also kick starts its latest 2-day policy meeting where it is widely anticipated to refrain from any policy tweaks. PBoC injected CNY 20bln via 7-day reverse repos and CNY 10bln via 28-day reverse repos. PBoC set CNY mid-point at 6.5670 (Prev. 6.5530) Japanese Trade Balance Total Yen (Aug) 113.6B vs. Exp. 104.4B (Prev. 418.8B).</p> <p><em>Top Asian News</em></p> <ul> <li>China Is Said to Mull Relaxing Foreign EV Maker Restrictions</li> <li>Buffett-Backed BYD Looks Overcharged on China Electric Car Bets</li> <li>Philippine Tax Reform Bill Heads for Senate Plenary Debates</li> <li>Iron Ore Sinks as ‘Peak Steel’ Call, Supply Angst Rattle Market</li> <li>Yuan Fix Back in the Spotlight as Traders Track PBOC Signals</li> <li>Bitcoin’s Likely to Split Again in November as Debate Rages On</li> </ul> <p><strong>European equity markets trade close to flat levels, </strong>as much of the anticipation is on the Fed decision and press conference later in the session. Kingfisher is the notable out-performer following their better than expected trading update, while Thyssenkrupp also trade in the green, following agreeing a JV with Tata Steel. Bonos have been surprisingly calm ahead of the Catalonia independence referendum, where we saw earlier reports stating that the Spanish Police have arrested the Catalonian Jr Minister. 10y spreads to Bunds have been tighter by over 10bps to 111.3bps, from a wide of 123bps earlier this month. Much fixed income anticipation was on the new German 30y Bund auction, with a B/C of 1.8 and an average yield of 1.27%. Gilts saw some bearish pressure following the stela Retail Sales report from the UK, falling 30 ticks as a reaction and printing fresh recent lows</p> <p><em>Top European News:</em></p> <ul> <li>Banks Are Said to Hire Lazard to Solve Turkey’s Biggest Default</li> <li>Zara Owner’s Profitability Drops to Eight-Year Low on Euro</li> <li>Volkswagen Comeback Pushes Europe Bond Sales Past Trillion Euros</li> <li>U.K. Retail Sales Rise More Than Forecast as Consumers Stir</li> <li>Kingfisher Gains Most Since 2011 in ‘Litmus Test’ for Sector</li> <li>NorteGas Energia May Sell EUR Benchmark 5Y, 10Y Bonds Tomorrow</li> <li>Major Lender Requests Bailout as Russian Banking Woes Spread</li> </ul> <p><strong>In currencies, </strong>GBP was the outperformer early in the EU session, evident of the aforementioned strong Retail Sales report from the UK, printing the largest increase since April. Cable was pushed towards the week’s high around the 1.3619 area, finding some resistance around these levels and retracing much of the move, trading back at pre-announced levels. EUR/GBP bears also took advantage of the strong figures, reversing the failed attempt to attack yesterday’s high. The latest New Zealand election poll sparked some early volatility on the futures open, with the seemingly market friendly, National Party regaining ground in the One News Poll (National Party 46% (+6%), vs. Labour 37% (-7%), vs. Green 8% (+1%)). AUD/NZD trades back inside the 2017 range and back below 1.1, a close below 0.9 could see the 1.1 – 1.03 2017 range once again become the trading pattern in the pair. The DXY remains range bound as much focus is on the Fed later in the session</p> <p><strong>In commodities,</strong> oil markets have seen slow trade, with WTI’s attempt of a successful break of yesterday’s high failing, and now consolidating back in the post API range. Elsewhere, Saudi Aramco will be able to release its financial accounts in early 2018 if the government decides where they plan to list the oil giant, according to sources.</p> <p><strong>Looking at the day ahead, </strong>Germany’s August PPI printed at 2.6%, vs 2.5% yoy expected; in the US, data wise there is MBA mortgage applications and existing home sales. Onto other events, the main story is the FOMC rate decision in the US, followed by Yellen’s press conference at 14:30 EDT. Elsewhere, EU’s Chief Brexit negotiator Michael Barnier will speak and the OPEC’s panel of technical representatives will meet to discuss production cuts. </p> <p><strong>US Event Calendar</strong></p> <ul> <li>7am: MBA Mortgage Applications, prior 9.9%</li> <li>10am: Existing Home Sales, est. 5.45m, prior 5.44m</li> <li>10am: Existing Home Sales MoM, est. 0.18%, prior -1.3%</li> <li>2pm: FOMC Rate Decision (Upper Bound), est. 1.25%, prior 1.25%</li> <li>2pm: FOMC Rate Decision (Lower Bound), est. 1.0%, prior 1.0%</li> </ul> <p><strong>DB's Jim Reid concludes the overnight wrap</strong></p> <p>I was casually watching CNBC yesterday afternoon, listening on my headphones while doing some work. So generally minding my own business. However I nearly spilt my coffee when the anchor suddenly asked one of the guests whether he thought Jim Reid was "crazy" for the conclusions of his latest report. I suppose they say all publicity is good publicity. One pastime I'm strangely addicted to is occasionally reading the comments section of the more 'far out there' financial market blogs whenever they quote one of my pieces. Yesterday was no exception with hundreds of comments from readers at the bottom of one questioning&nbsp; me (a polite way of putting it), my profession and then discussing numerous random conspiracy theories which in the past have included whether or not man walked on the moon. To be fair, my dearly departed&nbsp; father was absolutely convinced that man on the moon was a Hollywood stunt. I spent years trying to have a rational conversation with him about it. Alas I never got him to change his mind.</p> <p>Hollywood are unlikely to make a movie about the last 6 days of trading as the S&amp;P 500 (+0.11%) saw its 6th consecutive session where the intraday range was no larger than 0.35%. This is the first time that this has happened since Bloomberg started collating intra-day data back to April 1982. I suspect with the Fed concluding their FOMC today this run will come to an end.</p> <p>For those who may have missed it, DB’s Peter Hooper and his team expects the reinvestment tapering to begin on October 1 and that the Committee will also signal, via its economic projections and in Yellen’s commentary during the press conference, that it still anticipates raising rates one more time this year so long as incoming data are supporting its projections for inflation and growth. In their view, the median Fed expectation of three rate hikes next year will likely also remain intact despite downward revisions to individual forecasts.</p> <p>Staying in the US, Trump’s debut speech at the UN general assembly seemed to have lots of punchy rhetoric but little material policy implications. On North Korea, he said “if US is forced to defend itself or its allies, we will...totally destroy NK” and that “rocket man is on a suicide mission for himself and for his regime”. On Iran, he said its nuclear program is “an embarrassment to the US” that should be revisited. He also stressed the importance of sovereignty for individual nations, noting “as president of US, I’ll always put America first”. Finally, on the UN, he said the institution was often associated with “bureaucracy and process”, although later noted that he hopes disputes would be resolved via the UN. Notably, other world leaders including Germany’s Merkel, Russia’s Putin, UK’s May and China’s President Xi were absent from&nbsp; the meeting given their domestic commitments.</p> <p>Turning to Europe, Reuters reported that the Euro’s strength is causing a rift among ECB policymakers on the timing and approach to the unwinding of QE. Sources told Reuters that Germany is ready to wind down the bond purchase program, while others prefer to reduce the monthly pace of buying, with earlier reports suggesting the scenarios discussed involved reducing the monthly buying to €20bln-€40bln (from €60bln). The split of opinions may mean no definitive end date for QE will be set when officials formally met in October. There was some talk of a delay on the decision until December.</p> <p>Looking at how markets are kicking off on FOMC day over in Asia, we've pared back earlier losses following stronger than expected Japanese August import (15.2% yoy vs. 11.6% expected) and export (18.1% yoy vs. 14.3% expected) figures. As we type, markets are mixed but broadly unchanged, with the Kospi (-0.04%) and ASX 200 (-0.19%) down slightly, while the Nikkei is flattish and the Hang Seng is up 0.23%. Notably, Japan’s Abe is holding a press conference on 25 September, with speculation suggesting that a snap early election will be called. Returning to yesterday, US equities edged up slightly with all three bourses at fresh all-time highs. The S&amp;P and Nasdaq were both up 0.1% and the Dow rose 0.18%. Within the S&amp;P, gains were led by the telco sector (+2.25%), partly buoyed by merger talks between Sprint and T-Mobile. European markets were also higher, but little changed, with the Stoxx 600 (+0.04%) and DAX (+0.02%) broadly flat, while the FTSE 100 advanced (+0.30%) for the second consecutive day.</p> <p>Core bond yields were also little changed, with Bunds and French OATs 10y yields down slightly (c0.5bp), while 10y Gilts continued to underperform (+2.7bp).</p> <p>Elsewhere, peripherals have continued to outperform, with Italian and Spanish 10y yields down 2.5bp and 3bp respectively. Over in the US, yields were slightly higher (2Y: +0.5bp; 10Y: +1.6bp) yesterday, but are firmer (-0.7bp) this morning. Turning to currencies, Sterling was range bound intra-day on reports of whether Foreign Secretary Boris Johnson will resign or be sacked after his unauthorised Brexit manifesto but closed the day little changed (+0.06% vs. USD). Elsewhere, the US dollar index dipped 0.28% and the EURUSD gained 0.33%. In commodities, WTI oil rose 0.57% and Iron ore fell 4.06% as concerns build that Chinese steel production may be close to a peak. Precious metals have slightly recovered (Gold +0.28%; Silver +0.60%) after two consecutive days of weakness, while industrial metals broadly rose, with Copper (+0.04%), Zinc (+2.23%) and Aluminium (+1.38%) all up modestly.</p> <p>Away from the markets and back to Brexit. Yesterday was an evolving day on the political front. Initially, the Telegraph reported that Foreign Secretary Boris Johnson may quit if PM Theresa May oppose his Brexit demands in her big speech later this week. Perhaps in response to this, Bloomberg reported that PM May has called a special cabinet meeting and avoided answering whether Johnson will resign or not. Then finally, later reports suggest the situation has been defused with Johnson planning to attend her keynote speech at Florence and that PM May plans to pay €20bln divorce payment to the EU to kick start the stalled Brexit talks. We can’t wait to hear what she has to say.</p> <p>Elsewhere, the FT reported that France’s Emmanuel Macron will outline his proposal for EU reform in a speech on 26 September, potentially including themes such as a separate budget, a finance ministry and an EU monetary fund. This broadly echoes earlier comments made by EC President Juncker in his State of Union address where he called for a tighter EU integration.</p> <p>Finally, the power of Amazon on traditional bricks and mortar stores has been shown again with Toys R US officially filing for Chapter 11 after c12 years under private equity ownership. Notably, its October 2018 bond now trades at 26c versus 97c at the start of this month. Elsewhere, S&amp;P noted that 24 US retailers have filed for Chapter 11 this year, compared to 18 for all of 2016. So in a low default world the retail sector is certainly bucking the trend.</p> <p>Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, August housing starts were soft, edging down 0.8% mom (vs. 1.7% expected), in part due to the impact of Hurricane Harvey. However, building permits were stronger than expected, rising 5.7% mom (vs. -0.8% expected) and leaves annual growth at 8.3% yoy. The level of permits has now returned to 1.3m, which is in line with this year’s high in January. Moving along, higher fuel prices have helped to drive a 0.6% mom increase in import prices in August (vs. 0.2% expected). Elsewhere, the 2Q current account deficit was -US $123.1bln (vs. -US$116bln expected), equivalent to c2.6% of GDP.</p> <p>In Germany, the ZEW survey was above market expectations in the lead up to elections. For the current situations component, the reading came in 87.9 (vs. 86.2 expected) and on the expectations component, it was also higher at 17 (vs. 12 expected) – the highest in ten months. In the Eurozone, the ZEW survey on expectations rose to 31.7 (vs. 29.3 previous), while the July construction output came in at 0.2% mom (vs. 0.2% previous).</p> <p>Looking at the day ahead, Germany’s August PPI will be out early in the morning (0.1% mom, 2.5% yoy expected). In the UK, there is retail sales for August (0.1% mom for core expected). Over in the US, data wise there is MBA mortgage applications and existing home sales. Onto other events, the main story is the FOMC rate decision in the US, followed by Yellen’s press conference at 14:30 EDT. Elsewhere, EU’s Chief Brexit negotiator Michael Barnier will speak and the OPEC’s panel of technical representatives will meet to discuss production cuts. </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="800" height="450" alt="" src="" /> </div> </div> </div> API ASX 200 Australia B+ Bain Bank of England Bank of Japan Bloomberg Dollar Spot BOE Bond British Pound Business CDS China Committees Copper Credit Suisse Crude default Donald Trump Dow 30 Economy Economy of China Equity Markets European Central Bank European Union Eurozone federal government Federal Open Market Committee Federal Reserve System fixed France FTSE 100 Futures contract General Mills Germany Gilts Gold Spot Hang Seng 40 Hong Kong Housing Starts Iran Japan Jim Reid Kospi Labour Party Lazard Mexico MSCI Asia Pacific NASDAQ National Party New Zealand Nikkei Nikkei 225 North Korea Organization of Petroleum-Exporting Countries People's Bank of China Precious Metals Private Equity Puerto Rico Renminbi Reuters S&P S&P 500 S&P/ASX 200 Spanish police SSE 50 Steelmaker Maersk Sells Tankers Unit Stock market Stoxx 600 Tata Topix Trade Balance Turkey Twitter Twitter United Nations US Dollar Index US Federal Reserve Volatility Yen Yuan Wed, 20 Sep 2017 10:53:14 +0000 Tyler Durden 603821 at Why This Time Is Different: "Fed Guidance Really Matters" <p><em>From Bloomberg macro commentator Marc Cudmore</em></p> <p>Today’s Fed meeting is critical for all financial assets. A large part of the framework for how to trade the year ahead will be clarified between Wednesday’s statement, the dot plot and subsequent FOMC member speeches in coming days. </p> <p><strong>Fed meetings are often overhyped, particularly by financial commentators. Don’t dismiss the hype this time</strong>. And because the Fed’s decision is so crucial for the path of FX and rates, every other asset hinges on the outcome by extension.</p> <p>It’s not that Fed guidance has never mattered before, but it’s vital now that we have moved beyond the data dependence that was the key theme for the last few years.</p> <p>Previously, those traders who believed in higher yields bought into the idea of inflation accelerating, whereas those who were most bullish Treasuries feared for the strength of the economy.</p> <p><strong>Investors are still as divided as ever on the path of U.S. rates and the dollar, but the arguments have radically shifted</strong>. There’s a broad consensus that the economy is solid but that inflation isn’t at risk of surging any time soon. The data trends have been remarkably clear, so who cares too much about the marginal releases?</p> <p>What people do care deeply about now is the reaction function of the FOMC. Will the committee ignore the lack of inflation and press on with policy normalization for as long as easy financial conditions suggest the economy can cope? Or, given its official mandate, <strong>will the fact that core personal consumption expenditure growth has been in a clear and sharp downtrend all year mean that it immediately ends the hiking cycle?</strong></p> <p>A December rate rise is approximately 50% priced going into the meeting. <strong>Such a binary setup, in the context of crystal clear data trends, shows how it’s now all about the reaction function for traders.</strong></p> <p>The Fed’s statement and press conference will clarify that reaction function. Speakers may refine the message in the coming days but, if the committee is to maintain credibility, it can not reverse completely from the course it’s about to set. <strong>The underlying asset-price directions prompted today are likely to sustain well into 2018.</strong></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="691" height="403" alt="" src="" /> </div> </div> </div> Business Committees Economics Economy Federal Open Market Committee Federal Reserve System FOMC Inflation James B. Bullard Macroeconomics Monetary policy Personal Consumption US Federal Reserve Wed, 20 Sep 2017 09:50:33 +0000 Tyler Durden 603820 at Full Preview Of Today's "Historic" FOMC Meeting <p>It is virtually guaranteed that on Wednesday the FOMC will make history by officially announcing the Fed's plan to begin shrinking its balance sheet through the gradual phasing out of bond reinvestments, which however in a world in which <strong>other </strong>central banks continue to pump $125 billion per month, will hardly by noticed by markets at least in the beginning.</p> <p><a href=""><img src="" width="500" height="332" /></a></p> <p>So aside from the start of balance sheet renormalization what else should traders expect tomorrow? Earlier today, <a href="">we showed a cheat sheet from ING</a> that broke down the various USD bullish and bearish permutations of how Yellen could still surprise the market, including the Fed's signalling on policy rates, economic projections, a shift in the "dots", comments on asset prices and, last but not least, whether Yellen will stay or leave when her term expires in Feb 2018. </p> <p><a href=""><img src="" width="500" height="346" /></a></p> <p>* * * </p> <p>For those seeking a more in-depth preview, <a href="">here courtesy of RanSquawk</a>, is the full "historic" September 20 FOMC Preview.</p> <ul> <li><strong>FOMC likely to maintain rates between 1.00-1.25%; there will be focus on whether it flattens the rate hike trajectory</strong></li> <li><strong>The formal announcement of balance sheet reduction is expected; it’s unclear what size the Fed wants to return it to</strong></li> <li><strong>Growth and unemployment projections unlikely to see major changes; inflation may be trimmed again</strong></li> </ul> <p><strong>RATES</strong></p> <ul> <li>Money markets price a very slim chance that the FOMC will hike rates this week, with an overwhelming 98.6% implied probability that the Federal Funds Rate target will remain between 1.00% to 1.25%. Looking ahead, markets now assign a 58% chance that rates will be lifted again in 2017.</li> <li>Federal Funds futures currently price in just two more hikes over the Fed’s current forecast horizon; the FOMC’s June forecasts pencilled in seven rate rises over that timeframe. Note, this week’s forecast will extend the horizon out to 2020.</li> <li>Given the cautious tone of comments from FOMC participants in recent weeks, it will be interesting to see whether the central bank lowers its trajectory for the rate path down, in line with the market’s view. However, analysts at Barclays do not expect a major revision to the median view of the rate profile, but sees the average falling: “We expect the median policy path to remain unchanged, but the average policy path should decline. We believe the average funds rate will decline by 15-25bp across the forecast horizon, and we believe as many as seven participants may signal that they prefer no further rate hikes this year (against nine participants who view one or more as appropriate).”</li> </ul> <p><strong>BALANCE SHEET</strong></p> <ul> <li>It is an almost a forgone conclusion that the FOMC will formally announce the start of its balance sheet programme; indeed, ‘several’ were ready to make the announcement in July. The Fed has also been given some leeway not that the debt ceiling has been extended until December.</li> <li>In June, the FOMC suggested a plan where it will allow $6bln of maturing Treasuries and $4bln of maturing MBS to roll-off per month for a three-month period; that amount would then be raised to $12bln for Treasuries and $8bln for MBS for another three months, and after a year, redemptions would be capped at $30bln for Treasuries and $20bln for MBS per month.</li> <li>The plan ensures the Fed wouldn’t have to outright sell any of its holdings immediately, which would cause a market reaction. In fact, Fed commentary suggests that the central bank wants to avoid any “shock and awe”; Loretta Mester (non-voter) said the intention is to set the policy, then “forget it”, suggesting that balance sheet would not be an active policy tool.</li> <li>Some questions remain unanswered; for instance, what size the FOMC is ultimately seeking to cut the balance sheet to. It is currently around $4.5trln; pre-crisis, it was around $800mln, but it is unlikely that the Fed intends to bring it down to that size. It seems as though the FOMC is still undecided: William Dudley (NY Fed, permanent voter) sees the balance sheet falling to between $2.4trln and $3.5trln – a wide range, but there doesn’t seem to be any firm consensus as yet.</li> </ul> <p><strong>STAFF ECONOMIC PROJECTIONS</strong></p> <ul> <li>The Fed meets amid an improving tone in US economic data: The labour market has been ticking along nicely for some time, with the rate of joblessness beneath the Fed’s estimate of NAIRU. The second estimate of growth in Q2 was revised higher to 3.0%, well above the Fed’s longer-term view between 1.8% and 2.0%. Inflation has been the Achilles heel, but there are some signs of improvement here too. Recent CPI data showed upside surprises to headline and core rates; but the Fed’s preferred measure – core personal consumption expenditures – lingers at the lowest since Q4 2015 at (1.4% vs Fed’s June forecast of 1.7% in 2017); additionally, wage growth continues to disappoint, which may give the Fed ammunition to remain dovish.</li> <li>Analysts at Oxford Economics say “a key focus will be on the FOMC’s view of recent inflation readings and its degree of conviction about whether inflation will hit the 2% target over the medium-term,” adding “this in turn will underpin the committee’s decision about raising rates further this year and the pace of rate increases next year.” FOMC Chair Janet Yellen has previously attributed the weak inflation to temporary factors and called for patience. Many will look out for commentary on whether the Committee has reached a consensus on the extent to which low inflation is transitory, and how much patience should be extended. The likes of Neel Kashkari (voter, dovish) expressed outright concerns on inflation, whereas centrists like William Dudley see a return to target in the medium-term; others, like Robert Kaplan (voter) want to see more evidence before committing to a tighter monetary policy path.</li> <li>It is worth noting that the Fed’s forecast horizon will be extended out to 2020, and the FOMC’s June forecasts and the current market view are generally in line, with the exception of inflation, suggesting growth and unemployment forecasts will be little changed, though its short-term inflation views may be cut.</li> </ul> <p><a href=""><img src="" width="500" height="346" /></a></p> <p><strong>PRESS CONFERENCE WITH CHAIR YELLEN</strong></p> <ul> <li>Chair Janet Yellen will likely adopt her usual balanced approach in her press conference, according to SGH Macro Advisors, to ensure that the FOMC still has the option of a rate hike in 2017. “She will certainly give voice to dovish concerns over the persistence in low inflation and the possibility of a new inflation dynamic emerging,” SGH says, “but on balance, we still expect her to modestly tilt her remarks to a base rate path that would warrant a possible third-rate hike in December.”</li> <li>In addition to inflation, the Fed’s forecasts, and the immediacy of near-term rates hikes, Yellen may also be quizzed on FOMC personnel following the early resignation of Stanley Fischer. Tradition dictates that outgoing Governors do not usually attend the last meeting of their term; however, the Fed has confirmed that Fischer will be in attendance, though it is unclear whether he will be submitting economic forecasts.</li> <li>The upshot of Fischer’s resignation means that there would be four vacancies on the Fed’s Board of Governors; but additionally, there remains doubt around Chair Yellen’s own position when her term expires next year, and on top of that, the position of President of the Richmond Fed (which will have a vote in 2018) remains unfilled.</li> </ul> <p><a href=""><img src="" width="500" height="250" /></a></p> <p>* * * </p> <p>Finally, here are select sellside research takes on what to expect:</p> <ul> <li><strong>Barclays</strong>: We believe the Fed will begin balance sheet normalization as described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans. Beyond this, the committee will likely engage in extensive discussions about how much the underlying trend rate of inflation has slowed. We do not believe the committee will reach consensus on the extent to which slower inflation is transitory and, in turn, how much “patience” is needed before proceeding with further policy rate normalization or whether it is worth the risk to financial stability to run the domestic economy hotter. Yet, we believe some members will reflect their view that some of the slowing in inflation will be persistent and mark down modestly their inflation forecast for 2018. Although we do not expect the median policy rate path to change, we do expect the average federal funds rate projection to decline.</li> <li><strong>Credit Suisse: </strong>We expect the Fed to keep the fed funds rate unchanged and to begin reducing the size of their balance sheet. We expect an announcement in line with their June policy normalization plan which stated that reinvestments are ended up to a gradually-increasing cap. The caps are likely to begin at a modest $10bn per month, but are scheduled to rise every quarter before levelling off at $50bn. Aside from the balance sheet reduction, we expect a dovish tone from the September meeting.</li> <li><strong>Goldman Sachs: </strong>We expect the FOMC to officially announce next week that balance sheet runoff will begin in October. As the Fed has already communicated extensively about its plan for a gradual and predictable runoff, we expect markets to focus instead on the outlook for the federal funds rate. The key question is whether the committee’s expectations for the federal funds rate have declined in light of the surprising deceleration in the inflation data since the start of the year. Several Fed officials have expressed reduced confidence in the view that the recent decline is a blip and that inflation will reaccelerate. Despite this week’s stronger-than-expected CPI report, Fed officials will still be looking at year-over-year core PCE and CPI inflation rates that are three tenths and five tenths lower, respectively, than in March. We therefore look for lower core inflation in the Summary of Economic Projections (SEP) and expect the “dot plot” to show a decline in the average projected funds rate path. While risks are tilted to the downside, we still expect the median projection to continue to show a third rate hike this year, 3 hikes in 2018 and a longer-run funds rate at 3%. Ultimately, there are three reasons why we expect only minor dovish changes. First, several influential FOMC members have highlighted that there is not yet enough data in hand to abandon the view that the economy is close to full employment and that diminishing spare capacity will gradually push inflation back up to the target. Second, growth momentum has remained very firm and while hurricanes will make the activity data noisier in the near term, they are unlikely to derail firm underlying trend growth. Third, financial conditions have continued to ease even as the FOMC moved to a path of quarterly tightening last December.</li> <li><strong>ING</strong>: We think this may be one of the more difficult meetings and press conferences for Chair Yellen to navigate, not least because of the growing dichotomy within the FOMC over the appropriate near-term policy approach. Our base case is for the doves to prevail, with a lower conviction over the pace and extent of future policy tightening visible in the Fed's dot plot. While the median 2017 dot is still set to tentatively pencil in a Dec rate hike, we expect to see more members calling for a pause for the remainder of the year; anything more than five would suggest that hopes of a Dec hike stand on a fragile footing. More telling of a dovish shift would be if the 2018 dot also moves lower; here we require five or more members to downgrade their views over future policy hikes, a scenario that cannot be ruled out given the softer US inflation dynamics. What is highly likely is that we'll see the 2019 and longer-run dots moving lower – with Fed officials acknowledging that a 2% handle for the terminal Fed funds rate is more realistic in the prevailing US economic environment.</li> <li><strong>Morgan Stanley: </strong>Our US economists expect the Fed to announce balance sheet normalization at its September meeting. They also expect the median dots to remain as they were in June, with the Fed adding a final rate hike in 2020 (see FOMC Preview: Auto Pilot). In our view, the risks to this outcome are that the 2018 median dot falls to 1.875% from 2.125% and the longer-run median dot falls to 2.75% from 3.00%. To assess the risks, we constructed the September 2017 dot-plot scenario in Exhibit 4. First, we attempted to match up dots in 2017 with dots in 2018. This allows us to create the following scenarios we felt were reasonable. We assume: 2 more FOMC participants pencil in no further hikes in 2017 and decrease the # of subsequent hikes in 2018 to 2from 3; 2 participants keep the third hike in 2017, but decrease the # of subsequent hikes in 2018 to 2 from 3;and 2 participants decrease the # of hikes in 2017 to 3 from 4, but keep 4 hikes in 2018. Given we assumed only 2 more participants join the "no more hikes in 2017" camp, the 2017 median dot remains at 1.375%. However, given our other assumptions, half of the Committee ends up with a 2018 dot below 2.00% and half ends up with a dot above 2.00% – leaving the median between 1.875 and 2.125% versus its 2.125% position in June. It is possible that Randal Quarles is confirmed by the Senate and sworn in before the meeting, thereby allowing a 17th dot to be added. But, at this point, the Senate has not scheduled his confirmation hearing. As a result of our scenario analysis, we think there is a reasonable risk that the 2018 median dot falls by 25bp,even though it's not our base case.</li> </ul> <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="780" height="439" alt="" src="" /> </div> </div> </div> Banking Barclays Bond Business Central bank Central Banks CPI Credit Suisse Debt Ceiling Economy fed Federal funds rate Federal Open Market Committee Federal Reserve Bank of New York Federal Reserve System Fed’s Board of Governors Financial services FOMC goldman sachs Goldman Sachs James B. Bullard Janet Yellen Janet Yellen Monetary Policy Monetary policy Money Morgan Stanley Neel Kashkari NY Fed Open market operation Personal Consumption RANSquawk Richmond Fed Senate Unemployment William Dudley Wed, 20 Sep 2017 09:45:23 +0000 Tyler Durden 603814 at