http://www.zerohedge.com/fullrss2.xml/%20 en How Did Toys "R" Us Implode So Fast? The CEO Explains http://www.zerohedge.com/news/2017-09-20/how-did-toys-r-us-implode-so-fast-ceo-explains <p>Reviewing first day motions from a company's chapter 11 docket, and more specifically the CEO's declaration, can be a great way to learn exactly what happened in the days/weeks leading up to a bankruptcy filing.&nbsp; The company spends millions of dollars every month on expensive lawyers (Kirkland &amp; Ellis in the case of Toys "R" Us), investment bankers (Lazard), turnaround advisors (Alvarez &amp; Marsal), claims administrators, etc., who all spend many sleepless nights in the days leading up to a filing trying to make sure the first day motions are as informative as possible.</p> <p>With those high expectations, <strong>you can imagine our surprise when we opened the Toys "R" Us CEO's declaration to find this "preliminary statement":</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/20/2017.09.20 - Toy 1.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/20/2017.09.20%20-%20Toy%201_0.JPG" style="width: 600px; height: 266px;" /></a></p> <p>&nbsp;</p> <p>Yes, Kirkland &amp; Ellis was paid $800 an hour (ish) to type up the Toys "R" Us jingle in a court filing.&nbsp; Bravo!</p> <p>In any event, once you get beyond the amateur-hour antics, CEO David Brandon explains why Toys "R" Us was forced to file for bankruptcy in such a hurry.&nbsp; While debt service on a excessively levered capital structure was a big part of it, Brandon explains that <strong>media speculation over a potential bankruptcy filing led to a rapid tightening of trade terms just as the company was trying to build inventory ahead of the holiday season.</strong>&nbsp; Here are the details:</p> <p>1.&nbsp; <span style="text-decoration: underline;"><strong>Debt </strong></span>- Apparently spending the majority of your FCF on debt service while ignoring capital improvements and store remodels is a bad long-term business strategy for a bricks-and-mortar retailer.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Toys “R” Us, however, has been operating for more than a decade with significant leverage, necessitating the use of <strong>substantial amounts of cash each year (approximately $400 million) to service the more than $5.0 billion of funded indebtedness.</strong>&nbsp; But these substantial debt service obligations<strong> impair the Company’s ability to invest in its business and future.</strong>&nbsp; As a result, the Company has fallen behind some of its primary competitors on various fronts, including with regard to general upkeep and the condition of our stores, our inability to provide expedited shipping options, and our lack of a subscription-based delivery service.</p> </blockquote> <p>2. <span style="text-decoration: underline;"><strong>Vendors </strong></span>- Media speculation of an imminent bankruptcy filing starting on September 6th caused<strong> 40% of vendors to restrict shipments and demand "cash on delivery" </strong>for new inventory purchases which would have required $1 billion incremental liquidity.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>More recently, the Company’s need for a comprehensive solution to its capital structure issues caused <strong>widespread “bankruptcy” speculation in the media, </strong>leading to a severe constriction in the Company’s trade terms.&nbsp; More specifically, in late July the Company hired Kirkland &amp; Ellis LLP and Alvarez &amp; Marsal North America, LLC, complementing its retention of Lazard, to consider restructuring and capital structure solutions.</p> <p>&nbsp;</p> <p><strong>A news story published on September 6, 2017, reporting that the Debtors were considering a chapter 11 filing, started a dangerous game of dominos: within a week of its publication, nearly 40 percent of the Company’s domestic and international product vendors refused to ship product without cash on delivery,</strong> cash in advance, or, in some cases, payment of all outstanding obligations.&nbsp; Further, many of the credit insurers and factoring parties that support critical Toys “R” Us vendors withdrew support.&nbsp; Given the Company’s historic average of 60-day trade terms, <strong>payment of cash on delivery would require the Debtors to immediately obtain a significant amount—over $1.0 billion—of new liquidity.</strong></p> </blockquote> <p>3.&nbsp; <span style="text-decoration: underline;"><strong>Holiday Inventory Build</strong></span> - Finally, this all came at the exact moment that the company was trying to build inventory for the holiday selling season.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The timing of all of this could not have been worse, as the Company is in the process of building holiday inventory.&nbsp; While birthdays, new game releases, and other special events drive year-round sales, the holiday season is the most important for annual results.&nbsp;<strong> In the fourth quarter (the weeks prior to Christmas), the Company generates approximately 40% of its annual revenue.</strong></p> <p>&nbsp;</p> <p>To prepare for the holiday season, Toys “R” Us significantly increases inventory in September to fill store shelves with the selection and variety of products our customers expect.&nbsp; Accordingly, I believe it is critical that the Company reopen its supply chain immediately to ensure a successful holiday season.</p> </blockquote> <p><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/20/ToysRUs_0.JPG" alt="Toy" width="600" height="332" /></p> <p>&nbsp;</p> <p>Given that, it's somewhat ironic that <a href="https://www.bloomberg.com/news/articles/2017-09-20/toys-r-us-lives-on-because-mattel-and-hasbro-can-t-let-it-die">Bloomberg</a> notes this morning how important Toys "R" Us is to vendors and how Mattel and Hasbro couldn't possibly allow the company to liquidate.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Rest easy, kids. Toys “R” Us Inc. isn’t going anywhere, at least not if the makers of Barbie and Transformers have their way.</p> <p>&nbsp;</p> <p>Yet, the company, which operates about 1,600 stores globally, will likely survive because manufacturers such as Mattel Inc., Hasbro Inc. and closely held MGA Entertainment Inc. need the last remaining toy chain. These vendors are eager for whatever remaining leverage they have against the might of Amazon and Wal-Mart, the bane of all companies focused on a single category of shopping.</p> <p>&nbsp;</p> <p><strong>“Oh my God, they are very important, and people don’t understand,”</strong> Isaac Larian, founder and chief executive officer of MGA, said of the toy chain.<strong> “That’s the only place where kids can go and just buy toys. There is no toy business without Toys ‘R’ Us.”</strong></p> <p>&nbsp;</p> <p>In many respects, suppliers have been propping up Toys “R” Us for years, according to Moody’s Corp. analyst Charlie O’Shea; they give the chain exclusive products during the holidays and funds for promotions to help it compete with the general merchandisers. The manufacturers offer this support because they want a place to sell toys at full price, year round. Major brands have also been funding an overhaul of Toys “R” Us stores by adding more featured areas for top brands such as Mattel’s American Girl dolls.</p> <p>&nbsp;</p> <p>In the toy business, the incentive is particularly powerful. <strong>Last year, Toys “R” Us accounted for 11 percent of sales at Mattel and 9 percent at Hasbro -- the second most at both companies after Wal-Mart.</strong></p> </blockquote> <p>Meanwhile, many have speculated this week over how/why TOY bonds traded off 75 points on the company's filing?&nbsp; How could they be so wrong?&nbsp; While the timing of the filing was probably somewhat of a surprise, we can't help but wonder whether this simplistic org structure might have contributed in some small way?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/20/2017.09.20 - Toy Org Structure.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/20/2017.09.20%20-%20Toy%20Org%20Structure_0.JPG" style="width: 600px; height: 451px;" /></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="756" height="418" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/ToysRUs_0.JPG?1505909005" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/how-did-toys-r-us-implode-so-fast-ceo-explains#comments Babycare Barbie Business Economy Economy of the United States ETC Investment Lazard Li & Fung Mattel Toys "R" Us Wayne, New Jersey Wed, 20 Sep 2017 16:34:09 +0000 Tyler Durden 603832 at http://www.zerohedge.com Russian Depositors On Edge After Second Major Bank Fails In Under A Month http://www.zerohedge.com/news/2017-09-20/russian-depositors-edge-after-second-major-bank-fails-under-month <p>If once is happenstance, twice is coincidence, and three times is a full-blown collapse in the financial system, then Russia may be getting close.</p> <p>Just three weeks after Russia <a href="http://www.zerohedge.com/news/2017-08-29/russian-central-bank-bails-out-otkritie-bank-countrys-largest-private-lender">bailed out its largest and very politically connected private bank</a>, Otkritie, after an unexpectedly acute bank run resulted in the bank's near-collapse, already nervous Russian depositors shifted their attention to another domestic lender, and earlier today Russia’s B&amp;N Bank, <strong>the country’s 12th biggest lender by assets, also sought a bailout from the central bank</strong>. While it is unclear how much this bailout would cost Russian taxpayers, when the central bank took over Otkritie last month, it said it might need up to $6.9 billion, <strong>the biggest ever bailout in the country.</strong></p> <p>B&amp;N Bank, which is controlled by Russian oligarch Mikhail Gutseriev and was not on the central bank’s list of systemically important lenders, <strong>said it had under-estimated the problems within the banks it had bought during an expansion drive</strong>. “Our objective is, with the support of the central bank ... to conduct an effective financial rehabilitation of the bank,” said Mikail Shishkhanov, who was named as chairman of B&amp;N Bank, <strong>whose assets account for 2 percent of the Russian banking system, according to ratings agency Fitch.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/gutseriev.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/gutseriev_0.jpg" width="500" height="332" /></a><br /><em>Mikhail Gutseriev </em><strong><br /></strong></p> <p>Some background on the now defunct bank: B&amp;N Bank, founded in 1993, is [or rather was] part of a sprawling conglomerate controlled by energy tycoon and billionaire Mikhail Gutseriev - said to be worth over $6 billion - that includes oil firms, a property development portfolio and an electronics retailer. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The bank embarked on an expansion drive after 2010, buying smaller lenders including Moskomprivatbank, Rost Bank, SKA-Bank before completing its biggest deal in 2016, a merger with MDM Bank, one of Russia’s largest lenders.</p> <p>&nbsp;</p> <p>Fitch said last month that the bank was one of a handful of Russian lenders, including Otkritie, that had seen “an outflow of interbank funding” in the first few months of the year.</p> </blockquote> <p>Gutseriev is perhaps best known in the west <a href="http://www.zerohedge.com/news/2016-03-31/russian-energy-tycoon-spends-1-billion-sons-wedding-locals-dub-it-feast-time-plague">for the March 2016 wedding of his son Said</a><strong>, on which he reportedly spent $1 billion and was attended by around 600 guests with Sting, Jennifer Lopez and Enrique Iglesias performing.</strong></p> <p><img src="http://i.dailymail.co.uk/i/pix/2016/03/30/02/32A70D0800000578-3514779-Luxury_cars_including_Rolls_Royces_and_Bentleys_were_seen_parked-a-18_1459301110777.jpg" alt="Luxury cars including Rolls Royces and Bentleys were seen parked outside the venue&nbsp;" width="500" height="495" /></p> <p>In an amusing U-turn, Shishkhanov, who stepped down as B&amp;N Bank chairman in May this year handing over the role to Gutseriev, who is also his uncle, Shishkhanov said he had decided to take over the role again to work with the central bank, saying in a statement that problems at Rost Bank and MDM Bank “turned out to be much more serious than we had believed” in tough markets</p> <p>And then there is this amusing anecdote, which suggests that bank frauds in Russia and the US are not that different:<strong><br /></strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>B&amp;N Bank staff declined to comment outside its head office, three kilometres (1.9 miles) from the Kremlin, <strong>while a truck belonging to a firm called Shredder Express, which offers mobile document shredding, was parked on a private road in front.</strong></p> </blockquote> <p>The second consecutive intervention by the Russian central bank has prevented market contagion... for now: on Wednesday the monetary authority confirmed it was in talks with B&amp;N’s owners and would decide on a bailout in the near future. Furthermore, according to market insiders quoted by Reuters, the huge state banks that dominate the sector in Russia are solid, while "the problems which have triggered crises at B&amp;N and previously at Otkritie bank are likely to be contained within a handful of private lenders."</p> <p>Unless of course they emerge as systemic: the bigger problem is that just like in China, Russian banks, which were already under stress from an economic slowdown made worse by Western sanctions, have seen bad debts rise over the past three years. Only, unlike China which can create virtually infinite new credit to rollover existing debt plus enjoy the PBOC's backstops for every risky institution, in Russia quasi-insolvent banks eventually have their equity wiped out following nationalizations. </p> <p>As <a href="https://www.reuters.com/article/russia-banks-bn-request/update-3-russia-hit-by-second-bailout-as-bn-bank-seeks-central-bank-aid-idUSL5N1M112U">Reuters adds</a>, the financial health of some worsened after the central bank forced them to make more rigorous provisions for non-performing loans, while margins have tightened due to lower interest rates.</p> <p>* * * </p> <p>According to Alexander Abramov, professor at the Russian Higher School of Economics, this event is not yet a reason for panic, but points to a serious crisis of banking supervision. "If the head of a large bank appeals to the Central Bank and it becomes an official news, this is a serious event," he pointed out in the first place, in an interview with <a href="http://vestnikkavkaza.net/news/Is-Russia%E2%80%99s-B-N-Bank-on-brink-of-collapse.html">Vestnik Kavkaza</a>.</p> <p>"The reasons that could cause the need for B&amp;N Bank's sanitation are similar to those factors that led to the reorganization of Otkritie FC Bank. The main reason is the use of credit resources to lend the group's projects, that is, risky credit policy. High costs of raising funds also could cause troubles," Alexander Abramov explained.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"The event does not speak about the banking crisis, as it's only about selective banks. The obligations to depositors will be fulfilled: almost all deposits are insured, and the Central Bank firmly expresses its intention to help. <strong>There is another crisis: the stability of the banking system</strong>," the professor at the department of the stock market and investments at the Higher School of Economics concluded.</p> </blockquote> <p>The news of the bailout did not result in any major market moves: while Russia’s composite financial sector underperformed the broader index of Russian stocks, it was down only 0.9% earlier in the day.&nbsp; Meanwhile, the Russian rouble firmed, adding 0.4 percent to 57.9 versus the dollar and gaining 0.3 percent to 69.54 against the euro.</p> <p>According to analysts, the muted response was because <strong>the problems are within a small number of mid-sized private banks which are parts of struggling wider business groups, pursued rapid expansion, and lent to high-risk businesses such as real estate.&nbsp; </strong>The central bank also has the resources to step in if the others fail, stopping a wider contagion, they added.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Kirill Lukashuk, senior director at Russian ratings agency ACRA, said that wider risks stemming from B&amp;N Bank’s difficulties depended on the form of central bank bailout. </p> <p>&nbsp;</p> <p>If it is along the same lines as Otkritie rescue, with senior creditors protected and no freeze on deposit withdrawals, “<strong>the effect on the market will be extremely limited</strong>”.</p> </blockquote> <p>Perhaps: if the Russian central bank has unlimited funds to keep bailing out the Russian oligarch's pet banks which they used mostly to launder illicit funds, then sure. Then again, where there are two bank runs in under a month, more are guaranteed, and all that would take to cripple the Russian financial system is a panic at one of the larger domestic banks, rekindling memories of the near collapse Russia experienced in late 2014 when crashing oil prices and a plunging ruble, sent Russian rates as high as 20% and pushed the country to the verge of hyperinflation. </p> <p>In other words, if the "deep state" really wants to hurt Russia, it knows what to do.&nbsp; </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="360" height="186" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/binbank.jpg?1505924014" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/russian-depositors-edge-after-second-major-bank-fails-under-month#comments B&N Bank B+ Bailout Bank Bank Run Banking Business Central bank China Creditors Economy Fail Financial services Fitch Hyperinflation Mikail Shishkhanov Mikhail Gutseriyev non-performing loans Otkritie FC Bank Otkritie Holding People's Bank of China ratings Real estate Reuters Russian central bank Russian Higher School of Economics Wed, 20 Sep 2017 16:16:09 +0000 Tyler Durden 603854 at http://www.zerohedge.com Venezuela's Grim Reaper: A Weekly Report http://www.zerohedge.com/news/2017-09-20/venezuelas-grim-reaper-weekly-report <p class="p1" style="text-align: left;"><strong><span class="s1">Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.</span></strong></p> <p class="p1" style="text-align: left;"><span class="s1">The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world’s worst inflation.</span></p> <p class="p1" style="text-align: left;"><img src="http://www.zerohedge.com/sites/default/files/images/user222098/imageroot/2017/09/20/VefFallZH.png" width="800" height="579" /></p> <p class="p1" style="text-align: left;"><span class="s1">As the bolivar collapsed and inflation accelerated, the Banco Central de Venezuela (BCV) became an unreliable source of inflation data. Indeed, from December 2014 until January 2016, the BCV did not report inflation statistics. Then, the BCV pulled a rabbit out of its hat in January 2016 and reported a phony annual inflation rate for the third quarter of 2015. So, the last official inflation data reported by the BCV is almost two years old. To remedy this problem, the <a href="https://www.cato.org/research/troubled-currencies-project"><span class="s2">Johns Hopkins – Cato Institute Troubled Currencies Project</span></a>, which I direct, began to measure Venezuela’s inflation in 2013.</span></p> <p class="p1" style="text-align: left;"><span class="s1">The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black market (read: free market) for currency and the black market data are available, changes in the black market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.&nbsp;</span></p> <p class="p1" style="text-align: left;"><span class="s1">I compute the implied annual inflation rate on a daily basis by using PPP to translate changes in the VEF/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate, which previously peaked at 1823.03% (yr/yr) in early August 2017. At present, Venezuela’s annual inflation rate is 2432.94%, the highest in the world (see the chart below).</span></p> <p class="p1" style="text-align: left;"><img src="http://www.zerohedge.com/sites/default/files/images/user222098/imageroot/2017/09/20/VefAnnualZH_0_0.png" width="800" height="579" /></p> <p class="p1" style="text-align: left;">&nbsp;</p> <p class="p1" style="text-align: left;">&nbsp;</p> <!-- p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000} p.p2 {margin: 0.0px 0.0px 0.0px 0.0px; text-align: center; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000} p.p3 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000; min-height: 14.0px} p.p4 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; color: #9e4a2f; -webkit-text-stroke: #9e4a2f} p.p5 {margin: 0.0px 0.0px 0.0px 0.0px; font: 16.0px 'Helvetica Neue'; -webkit-text-stroke: #000000; min-height: 18.0px} span.s1 {font-kerning: none} span.s2 {font-kerning: none; 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font-kerning: none} span.s4 {text-decoration: underline ; font-kerning: none; color: #9e4a2f; -webkit-text-stroke: 0px #9e4a2f} span.s5 {font-kerning: none; background-color: #fffb01} td.td1 {width: 13.0px} td.td2 {width: 436.0px} --><!-- p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; text-align: center; font: 13.0px Verdana; -webkit-text-stroke: #000000} p.p2 {margin: 0.0px 0.0px 0.0px 0.0px; text-align: center; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000} p.p3 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000; min-height: 14.0px} p.p4 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; color: #9e4a2f; -webkit-text-stroke: #9e4a2f} p.p5 {margin: 0.0px 0.0px 0.0px 0.0px; font: 16.0px 'Helvetica Neue'; -webkit-text-stroke: #000000; min-height: 18.0px} p.p6 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; -webkit-text-stroke: #000000} span.s1 {font-kerning: none} span.s2 {font-kerning: none; color: #000000; 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color: #000000; -webkit-text-stroke: 0px #000000} span.s3 {text-decoration: underline ; font-kerning: none} span.s4 {font: 12.0px 'Helvetica Neue'; text-decoration: underline ; font-kerning: none; color: #9e4a2f; -webkit-text-stroke: 0px #9e4a2f} td.td1 {width: 13.0px} td.td2 {width: 436.0px} --> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="1423" height="1030" alt="" src="http://www.zerohedge.com/sites/default/files/images/user222098/imageroot/VefAnnualZH.png?1505923556" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/venezuelas-grim-reaper-weekly-report#comments Banco Central de Venezuela Business Cato Institute Central Bank of Venezuela Countrywide Currency Economy Economy of Venezuela Financial economics Inflation Macroeconomics Money Purchasing Power Purchasing power Purchasing power parity Reserve Currency Steve Hanke the Johns Hopkins University Twitter Twitter Venezuelan bolívar Wed, 20 Sep 2017 16:06:40 +0000 Steve H. Hanke 603851 at http://www.zerohedge.com Iran's Rouhani Responds To "Rogue Newcomer" Trump's "Ugly, Ignorant Words" http://www.zerohedge.com/news/2017-09-20/irans-rouhani-responds-trumps-ugly-ignorant-words <p>Following President Trump&#39;s words yesterday and reports that<a href="http://www.zerohedge.com/news/2017-09-20/trump-i-have-decided-what-do-about-iran-russia-vows-defend-nuclear-deal"> he has &quot;made his decision&quot; on what to do about the Iran nuclear deal,</a> Iranian President <strong>Rouhani just responded to &quot;rogue newcomer&quot; Trump</strong>, speaking at The United Nations, and also did not pull any punches...</p> <p><iframe frameborder="0" height="315" src="https://www.youtube.com/embed/by0PXLspbhA" width="560"></iframe></p> <p>As he spoke, his words were transcribed into a Tweetstorm...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_iran1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_iran1_0.jpg" style="width: 560px; height: 1048px;" /></a></p> <p>&nbsp;</p> <p>In text:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>We never threaten anyone and we do not tolerate threats from anyone.</strong> Unmoved by intimidation our discourse is one of dignity &amp;respect.</p> <p>&nbsp;</p> <p>Historically backing the oppressed Iran upholds the right of the Palestinian people as it did those of the Jewish people centuries ago.</p> <p>&nbsp;</p> <p><strong>Iran does not seek to restore its ancient empire; impose its official religion on others; or export its revolution with force of arms.</strong></p> <p>&nbsp;</p> <p><strong>We opened our doors to engagement &amp; cooperation.</strong> Missing this opportunity, some imposed sanctions on themselves and now feel betrayed.</p> <p>&nbsp;</p> <p>It&#39;s disgraceful that the Zionist regime not committed to any intl instrument or safeguard has the audacity to preach peaceful nations.</p> <p>&nbsp;</p> <p><strong>Iran won&#39;t be the first country to violate the agreement but it will respond decisively and resolutely to its violation by any party.</strong></p> <p>&nbsp;</p> <p><strong>Destruction of #JCPOA by &quot;rogue&quot; newcomers to the world of politics</strong> will never impede Iran&rsquo;s course of progress and advancement.</p> <p>&nbsp;</p> <p><strong>By violating its international commitments, the new U.S. administration only destroys its own credibility for future negotiations.</strong></p> <p>&nbsp;</p> <p>Iran&#39;s defense capacities are only deterrent. Target of Saddam&#39;s ballistic missiles we won&#39;t be victim of irrational aspirants again.</p> <p>&nbsp;</p> <p>Iran has continuously and vociferously rejected nuclear weapons.</p> <p>&nbsp;</p> <p><strong>Ugly, ignorant words were spoken by the US president against the Iranian nation. Full or hatred &amp; baseless allegations and unfit for UN.</strong></p> </blockquote> <p>Now we anxiously await Trump&#39;s tweeted response...</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="486" height="278" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170920_iran_0.jpg?1505922602" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/irans-rouhani-responds-trumps-ugly-ignorant-words#comments Foreign relations of Iran Hassan Rouhani Iran Iran Iran–United States relations Islamic Consultative Assembly Joint Comprehensive Plan of Action Nuclear energy in Iran Nuclear program of Iran Politics Politics of Iran Rouhani United Nations US Administration Wed, 20 Sep 2017 15:54:32 +0000 Tyler Durden 603850 at http://www.zerohedge.com FX Traders Haven't Been This Worried About An FOMC Meeting Since Last Year http://www.zerohedge.com/news/2017-09-20/fx-traders-havent-been-worried-about-fomc-meeting-last-year <p><strong>While equity implied vols are compressed to record lows</strong> - what could possibly go wrong with unwinding a $4 trillion balance sheet? - it appears<strong> FX traders are a little less sanguine about the market&#39;s reaction to today&#39;s FOMC decision</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_EUR1.jpg"><img height="354" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_EUR1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>And more specifically, <strong>one-day volatility in euro-dollar options surged to the highest level for the day of a Federal Reverse monetary-policy decision this year,</strong> suggesting elevated expectations among investors.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_EUR.jpg"><img height="256" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_EUR_0.jpg" width="600" /></a></p> <p>As Bloomberg notes, t<strong>he raised level of the gauge suggests traders see a good chance of the euro breaking out of its recent range</strong> should Chair Janet Yellen&nbsp;surprise the markets on the outlook for Fed policy.</p> <p><strong>The probability of another U.S. interest-rate increase by year-end is over 50 percent, </strong>according to the overnight indexed swap curve.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_eod3.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170919_eod3_0.jpg" style="width: 600px; height: 249px;" /></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="853" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170919_EUR1.jpg?1505913345" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/fx-traders-havent-been-worried-about-fomc-meeting-last-year#comments Business Committees Economics Economy of the United States Federal Open Market Committee Federal Reserve System Janet Yellen Janet Yellen United States US Federal Reserve Volatility Wed, 20 Sep 2017 15:49:26 +0000 Tyler Durden 603833 at http://www.zerohedge.com Financialization & The Destruction Of The Real Economy http://www.zerohedge.com/news/2017-09-20/financialization-destruction-real-economy <p><a href="http://charleshughsmith.blogspot.com/2017/09/financialization-and-destruction-of.html"><em>Authored by Charles Hugh Smith via OfTwoMinds blog,</em></a></p> <p><em>Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse. </em></p> <p><strong>Financialization is destroying the real economy, but few in power seem to notice or care.</strong> The reason why is painfully obvious: those in power are reaping vast fortunes from the engines of financialization--for example, former President Obama: <a href="https://www.bloomberg.com/news/articles/2017-09-18/obama-goes-from-white-house-to-wall-street-in-less-than-one-year" target="resource">Obama Goes From White House to Wall Street in Less Than One Year</a>.</p> <p>This is not to single out President Obama as a special case; politicos across the spectrum depend on the engines of financialization to fund their campaigns and make them multi-millionaires, and corporate managers and financiers have skimmed billions of dollars in gains not from producing new, better and more affordable goods and services but by playing financialization games such as borrowing billions to buy back stocks, leveraged buyouts, and so on--all of which have reaped the insiders gargantuan fortunes while hollowing out the real economy.</p> <p><strong>Financialization necessarily hollows out the real economy, as Gordon Long and I detail in this new video program:</strong> <a href="https://www.youtube.com/watch?v=P0F0d8Xi36k&amp;feature=youtu.be" target="resource">The Results of Financialization - Part I</a> (34 minutes)</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/P0F0d8Xi36k" width="560"></iframe></p> <p><strong>The key dynamic is that financialization creates irresistible incentives to ramp up debt and leverage at the expense of the real economy.</strong> Those who fail to exploit financialization will <em>underperform the market</em> and be fired.</p> <p><strong>As Gordon explains, if a CEO refuses to load a company up with debt, a private-equity financier with access to cheap Federal Reserve credit will scoop up the company in a private buyout</strong>, fire the management, extract immense profits by loading the company with debt, then take the hollowed-out shell public again, reaping another windfall of financialized gains.</p> <p>Note that the private-equity financiers have every incentive to lay off employees, especially experienced workers who earn higher salaries, to reduce costs before they take the hollowed-out shell public.</p> <p><strong>How can corporations pay out more to shareholders than they actually earned? Easy--financialization.</strong></p> <p><strong>Another key dynamic in financialization is limitless liquidity and super low interest rates set by central banks</strong>--rates that are so low and liquidity so abundant that corporations can roll over their debt and actually add more debt and keep their interest payments unchanged.</p> <p><strong>This dynamic inevitably leads to <em>zombie corporations</em></strong>--corporations with low rates of growth and profitability and high debt loads that in an unfinancialized economy would be recognized as insolvent and liquidated.</p> <p><strong>As we explain, financialization skews the risk-reward in favor of financial games, so real-world investments no longer make sense.</strong> Why risk building a factory in the U.S. or training workers when the pay-off is uncertain, when there are so many ways to reap immense fortunes via financial games that are ultimately backstopped by the Federal Reserve or federal agencies (i.e. the taxpayers)?</p> <p>As many observers have noted, these perverse incentives have siphoned human talent away from productive employment and into enormously well-compensated but parasitic, exploitive financialization-related jobs.</p> <p><img src="http://www.oftwominds.com/photos2015/yellowstone1.jpg" style="border-width: 0px; border-style: solid; height: 524px; width: 560px;" /></p> <p><strong>Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse.</strong> The metaphor I&#39;ve used to explain this in the past is the Yellowstone forest fire. The deadwood of bad debt, extreme leverage, zombie companies and all the other fallen branches of financialization pile up, but the central banks no longer allow any <em>creative destruction</em> of unpayable debt and mis-allocated capital; every brush fire is instantly suppressed with more stimulus, more liquidity and lower interest rates.</p> <p>As a result, the deadwood sapping the real economy of productivity and innovation is allowed to pile higher.</p> <p><strong>The only possible output of this suppression is an economy piled high with explosive risk.</strong> Eventually Nature supplies a lightning strike, and the resulting conflagration consumes the entire economy.</p> <p><a href="http://www.oftwominds.com/blogmay09/yellowstone-analogy05-09.html" target="resource"> The Yellowstone Analogy and The Crisis of Neoliberal Capitalism</a> (May 18, 2009)</p> <p><a href="http://www.oftwominds.com/blogapr15/markets-control4-15.html" target="resource"> The Financial Markets Now Control Everything</a> (April 29, 2015)</p> <p>I explain all this in greater detail in my short book <a href="http://www.amazon.com/gp/product/B01ELXQZGE/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B01ELXQZGE&amp;linkCode=as2&amp;tag=charleshughsm-20&amp;linkId=33DAOPEVGBNGBS37" target="resource">Why Our Status Quo Failed and Is Beyond Reform</a>.</p> <p>*&nbsp; *&nbsp; *</p> <p><em>If you found value in this content, please join me in seeking solutions by <a href="https://www.patreon.com/charleshughsmith" target="resource">becoming a $1/month patron of my work via patreon.com</a>. Check out both of my new books, <a href="https://www.amazon.com/gp/product/B01MSP2SXM/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B01MSP2SXM&amp;linkCode=as2&amp;tag=charleshughsm-20&amp;linkId=e45dbb20ba66e69c33a3a26772391278" target="resource">Inequality and the Collapse of Privilege</a> ($3.95 Kindle, $8.95 print) and <a href="http://www.amazon.com/gp/product/B01ELXQZGE/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B01ELXQZGE&amp;linkCode=as2&amp;tag=charleshughsm-20&amp;linkId=33DAOPEVGBNGBS37" target="resource">Why Our Status Quo Failed and Is Beyond Reform</a> ($3.95 Kindle, $8.95 print, $5.95 <a href="https://www.amazon.com/gp/product/B01M7YCLI2/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B01M7YCLI2&amp;linkCode=as2&amp;tag=charleshughsm-20&amp;linkId=60a5ab448cf91113c0df9df97732358e" target="_blank"> audiobook</a>) For more, please visit the <a href="http://www.oftwominds.com/essentials.html" target="resource">OTM essentials website</a>.</em></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="274" height="183" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170920_fire.jpg?1505913964" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/financialization-destruction-real-economy#comments Business Capital Central Banks Fail Federal Reserve Financial capital Financialization Politics President Obama US Federal Reserve White House White House Wed, 20 Sep 2017 15:29:12 +0000 Tyler Durden 603836 at http://www.zerohedge.com "I Have Decided": Trump Says He Has Made Decision On Iran Deal http://www.zerohedge.com/news/2017-09-20/trump-i-have-decided-what-do-about-iran-russia-vows-defend-nuclear-deal <p>Following his extremely <a href="“I have decided,” President Trump tells reporters, when asked what he’s going to do about Iran deal. Won’t say what decision is; “I’ll let you know”">aggressive statements yesterday at The United Nations</a> regarding Iran, President Trump has told reporters this morning that:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&quot;I have decided,&quot; </strong>when asked what he&rsquo;s going to do about Iran deal.</p> </blockquote> <p>However he refused to say what the decision is, responding<strong>&quot;I&#39;ll let you know.&quot;</strong></p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">NEW: Pres. Trump says he has decided what to do about the Iran nuclear deal, declines to say what his decision is: <a href="https://t.co/xFVbAoTX4x">https://t.co/xFVbAoTX4x</a> <a href="https://t.co/L6He9EyUPi">pic.twitter.com/L6He9EyUPi</a></p> <p>&mdash; ABC News (@ABC) <a href="https://twitter.com/ABC/status/910520767821082625">September 20, 2017</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><p>But judging by his harsh comments yesterday...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The Iranian government masks a corrupt dictatorship behind the false guise of a democracy.</strong> It has turned a wealthy country, with a rich history and culture, into an economically depleted rogue state whose chief exports are violent, bloodshed and chaos. The longest suffering victims of Iran&#39;s leaders are, in fact, its own people. Rather than use its resources to improve Iranian live, its oil profits go to fund Hezbollah and other terrorists that kill innocent muslims and attack their peaceful Arab and Israeli neighbors.</p> <p>&nbsp;</p> <p>This wealth, which rightly belongs to Iran&#39;s people, also goes to shore up bashar Al Assad&#39;s dictatorship, fuel Yemen&#39;s civil war, and undermine peace throughout the entire Middle East. <strong>We cannot let a murderous regime continue these destabilizing activities while building dangerous missiles and we cannot abide by an agreement if it provides cover for the eventual construction of a nuclear program.</strong></p> <p>&nbsp;</p> <p><strong>The Iran deal was one of the worst and most one-sided transactions the United States has ever entered into. Frankly, that deal is an embarrassment to the United States, and I don&#39;t think you&#39;ve heard the last of it. Believe me.</strong></p> <p>&nbsp;</p> <p><strong>It is time for the entire world to join us in demanding that Iran&#39;s government end its pursuit of death and destruction. </strong>It is time for the regime to free all Americans and citizens of other nations that they have unjustly detained. Above all, Iran&#39;s government must stop supporting terrorists, begin serving its own people, and respect the sovereign rights of its neighbors.<strong> The entire world understands that the good people of Iran want change, and other than the vast military power of the United States, that Iran&#39;s people are what their leaders fear the most. </strong>This is what causes the regime to restrict internet access, tear down satellite dishes, shoot unarmed student protesters, and imprison political reformers.</p> </blockquote> <p>It would seem hard for him not to back away from Obama&#39;s deal.</p> <p><strong><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_iran.jpg"><img height="305" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_iran.jpg" width="498" /></a></strong></p> <p>Shortly after Trump&#39;s threats, Iran&#39;s Foreign Minister Javad Zarif said on Twitter that the accord &ldquo;<strong>is not (re)negotiable. A &#39;better&#39; deal is pure fantasy.&rdquo;</strong></p> <p>But perhaps most notable, this &#39;decision&#39; comes hours after Russia branded U.S. President Donald Trump&rsquo;s hostility toward the Iranian nuclear agreement as &ldquo;very worrying,&rdquo; vowing to do everything it can to protect the pact.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;We will defend this document, this consensus, which was met with relief by the entire international community and strengthened both regional and international security,&rdquo;</strong></em> Russian Foreign Minister Sergei Lavrov told reporters in New York Tuesday after meeting U.S. Secretary of State Rex Tillerson on the sidelines of the United Nations General Assembly.</p> </blockquote> <p>This, if Trump decides to abandon the deal, yet another cold-war front with Russia will be opened, and which would further escalate the already tense geopolitical situation in the middle-east.</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="378" height="231" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trump%20decided.jpg?1505920382" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/trump-i-have-decided-what-do-about-iran-russia-vows-defend-nuclear-deal#comments ABC News Asia Donald Trump Foreign relations of Iran Geography of Asia Hizballah International relations Iran Iran Iran's government Iranian government Iran–United States relations Joint Comprehensive Plan of Action Middle East Middle East Mohammad Javad Zarif Negotiations leading to the Joint Comprehensive Plan of Action Nuclear energy in Iran Nuclear program of Iran Politics Politics of Iran Rex Tillerson Twitter Twitter United Nations United Nations General Assembly Wed, 20 Sep 2017 15:25:20 +0000 Tyler Durden 603844 at http://www.zerohedge.com Oil & Gas Exploration stocks testing breakout level http://www.zerohedge.com/news/2017-09-20/oil-gas-exploration-stocks-testing-breakout-level <p><img src="https://kimblechartingsolutions.com/wp-content/uploads/2017/09/oil-exploration-pic-300x168.jpg" width="300" height="168" style="display: block; margin-left: auto; margin-right: auto;" class="aligncenter size-medium wp-image-38940" /></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">Oil &amp; Gas Exploration stocks have been hit hard over the past few years, falling over 50%. Could an opportunity be at hand in this hard-hit sector? Possible!</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">Below looks at the chart of Oil &amp; Gas Exploration ETF&nbsp;<a href="https://finance.yahoo.com/quote/XOP?p=XOP" style="box-sizing: border-box; background: 0px 0px; color: #2ea3f2; outline: 0px;"><span style="box-sizing: border-box; font-weight: bold; outline: 0px; background: 0px 0px;">(XOP)</span></a>&nbsp;over the past few years.</p> <p><a href="https://kimblechartingsolutions.com/wp-content/uploads/2017/09/xop-testing-dual-breakout-level-sept-21.jpg" target="_blank" title="Oil &amp; Gas Exploration stocks testing breakout level chris kimble chart"><img src="https://kimblechartingsolutions.com/wp-content/uploads/2017/09/xop-testing-dual-breakout-level-sept-21-640x335.jpg" alt="weekly chart of ETF (XOP) oil and gas exploration, chris kimble chart " title="Oil &amp; Gas Exploration stocks testing breakout level chris kimble chart" width="640" height="335" style="display: block; margin-left: auto; margin-right: auto;" class="aligncenter wp-image-38941 size-large" /></a></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif; text-align: center;"><span style="box-sizing: border-box; outline: 0px; background: 0px 0px; color: #0000ff;"><span style="box-sizing: border-box; font-weight: bold; outline: 0px; background: 0px 0px;">CLICK ON CHART TO ENLARGE</span></span></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">XOP has struggled this year, inside of the falling channel highlighted above. It is testing dual resistance at (1), as momentum of late was low and is attempting to create a series of higher lows.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">A breakout at (1), would be bullish for XOP and could attract buyers for this hard-hit sector.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 0px; padding-bottom: 1em; outline: 0px; background-image: initial; background-position: 0px 0px; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; font-size: 14px; color: #303030; font-family: &quot;Open Sans&quot;, Arial, sans-serif;">&nbsp;</p> <p style="box-sizing: border-box; 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font-variant: inherit; font-weight: normal; font-stretch: inherit; font-size: 10pt; line-height: 14.2667px; font-family: Arial, sans-serif; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; border: 1pt none windowtext;"><strong style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;"><a href="https://www.kimblechartingsolutions.com/" target="_blank" style="box-sizing: border-box; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: 1.2; font-family: inherit; word-wrap: break-word; color: #1e439a; outline-style: none; outline-width: 0px;">KIMBLECHARTINGSOLUTIONS.COM</a></strong></span></strong></span></strong></span></p> <div class="field field-type-filefield field-field-image-blog"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_blog" width="1295" height="678" alt="" src="http://www.zerohedge.com/sites/default/files/images/user182769/imageroot/xop-testing-dual-breakout-level-sept-21.jpg?1505920325" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/oil-gas-exploration-stocks-testing-breakout-level#comments Business Email Technology XOP Wed, 20 Sep 2017 15:12:08 +0000 kimblecharting 603847 at http://www.zerohedge.com Nasdaq Plunges As AAPL Suffers Triple Whammy http://www.zerohedge.com/news/2017-09-20/nasdaq-plunges-aapl-suffers-triple-whammy <p>Weak reviews for iPhone 8, dismal pre-orders, and connectivity issues for Apple Watch have<strong> slammed AAPL shares to their lowest since August 1st earnings.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL.jpg"><img height="325" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL_0.jpg" width="600" /></a></p> <p>As Bloomberg notes, in addition to connectivity issues with the new watch, part of today&#39;s weakness in Apple&nbsp; shares could be related to <strong>negative comments at Rosenblatt due to weak iPhone 8 preorders.</strong></p> <p>Analyst Jun Zhang said their research suggests that iPhone 8 preorders are substantially lower than iPhone 7 and iPhone 6 levels.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&quot;We understand many customers could be waiting for the iPhone X, but we are concerned iPhone 8/8 Plus sell-through could bring some headwinds.&quot;</strong></em></p> </blockquote> <p>It has not been pretty as AAPL is now at its lowest since before its earnings spike on Aug 1st.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL2_1.jpg"><img height="325" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL2_1_0.jpg" width="600" /></a></p> <p>This has pushed the Nasdaq dramatically lower...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL1.jpg"><img height="548" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170920_AAPL1_0.jpg" width="600" /></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="2518" height="1365" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170920_AAPL.jpg?1505920031" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-20/nasdaq-plunges-aapl-suffers-triple-whammy#comments Apple Apple Inc. Apple mobile application processors Apple Watch Business Computing IOS IPhone IPhone 4S IPhone 6 NASDAQ Technology Technology Video Wed, 20 Sep 2017 15:09:31 +0000 Tyler Durden 603846 at http://www.zerohedge.com Full Preview Of Today's "Historic" FOMC Meeting http://www.zerohedge.com/news/2017-09-19/full-preview-tomorrows-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="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/balance%20sheet%20reduction.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/balance%20sheet%20reduction_0.jpg" 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="http://www.zerohedge.com/news/2017-09-19/ahead-tomorrows-historic-fed-meeting-here-definitive-fomc-cheat-sheet">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="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/cheat%20sheet%20fomc.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/cheat%20sheet%20fomc_0.jpg" width="500" height="346" /></a></p> <p>* * * </p> <p>For those seeking a more in-depth preview, <a href="http://www.ransquawk.com">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="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/fomc%20pre%20sept.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/fomc%20pre%20sept_0.jpg" 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="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/fomc%20nest%20sept.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/fomc%20nest%20sept_0.jpg" 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="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/yellen%20thinking%202_7.jpg?1505872050" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-19/full-preview-tomorrows-historic-fomc-meeting#comments 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 15:05:23 +0000 Tyler Durden 603814 at http://www.zerohedge.com