Lira Flash Crashes After Turkey Threatens US With Retaliation Against Any US Missile Sanctions
by Zero Hedge - June 20th, 2019 9:25 am
Courtesy of ZeroHedge. View original post here.
Turkish president Erdogan has decided that the best way to respond to Trump's threats is with threats of his own, and on Thursday, Erdogan said that Turkey will retaliate against any U.S. sanctions imposed when it takes delivery of the Russian S-400 missile-defense system from Russia, refusing to back down from a dispute that has roiled the NATO alliance.
"We would have our own sanctions against them,” Erdogan said in a meeting with foreign journalists on Thursday, without elaborating. While relations with U.S. President Donald Trump “are really good,” he said, “our ties with people working under him are far more different."
Additionally, ending any debate over whether Turkey will terminate the deal with Russia as Congress has demanded, he said that delivery of the S-400 missile system to Turkey may start in the first half of July and the Turkish military has already decided where to deploy it.
Additionally, Bloomberg quoted two Turkish officials familiar with the deal said the missiles could arrive as early as the first week of July.
The planned purchase has resulted in fresh threats of U.S. penalties that could cripple the ailing Turkish economy similar to what happened last summer, while creating severe strains between Washington and a crucial Middle East partner that relies on it for arms.
The Pentagon has argued that integrating the Russian system into NATO’s second-largest army could help Moscow gather critical intelligence on the stealth capabilities of American F-35 fighter planes, which Turkish manufacturers help to build. Erdogan dismissed the U.S. argument and said Turkish military experts were good at deciding what to purchase. He plans to discuss the S-400 purchase with Trump at the Group of 20 summit in Japan this month, and is counting on their personal rapport to fend off stinging sanctions, despite vigorous opposition to the missile deal in Congress.
Washington has warned that Turkey would be expelled from Lockheed Martin Corp.’s F-35 program and face sanctions under two pieces of legislation that allow the punishment of entities doing business with parts of the Russian state.
Erdogan responded in typical fashion, saying “it’s not the end of the world” if Turkey can’t get F-35 fighter jets from the U.S. “Turkey can…
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Goldman Slashes Tesla Target To $158, Expects Shares To Be On A “Downward Path”
by Zero Hedge - June 20th, 2019 9:21 am
Courtesy of ZeroHedge. View original post here.
Goldman Sachs is the latest to cut its Tesla price target, with analyst David Tamberrino cutting his target to $158 from $200 due to a lower likelihood of the company hitting his upside volume scenarios and continued questions about demand heading into the second half of the year, according to a new note released Thursday morning.
Tamberrino says he "expects shares to be on a downward path as it becomes more clear that demand for the company’s current products are below expectations".
While stating that Q2 deliveries might reach the FactSet consensus, he identified his cause for concern about estimates beyond Q2, which he feels may have to come down:
"…we do believe 2H19 (and beyond) volume estimates look high considering there are fewer levers to pull to stoke demand going forward (i.e., company released lower priced variants of the Model 3, a leasing option was introduced, and right-hand drive orders have begun)."
He continues, commenting how the drop off of the Federal Tax Credit and cannibalization between models is a concern:
Further, when coupled with a lack of direct impetus to open up new demand pockets (other than introducing incentives or more attractive financing rates) and another step-down in the US Federal Tax Credit for TSLA vehicles beginning on July 1 — we believe 2Q19 was a better environment for demand and thus deliveries, but to a level that is likely not sustainable. We believe that is the largest question for investors to underwrite at this point — what are sustainable demand levels for the Model S, Model X, and Model 3 — and how does that change with the introduction of Model Y production. While there is potential upside surprise from a faster ramp or pull forward of Model Y ahead of schedule (i.e., 2H20 volume production targeted, but with 70% parts commonality to the Model 3 and decision to manufacture in Fremont — this could be accelerated), there is likely cannibalization of current Model X and Model 3 product demand with a crossover variant.
Tamberrino also raises the all important question of cash: when is Tesla going to need it again and, as…
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US Farmers Call For Third Farm Bailout If Trade War Intensifies: Lobby
by Zero Hedge - June 20th, 2019 9:17 am
Courtesy of ZeroHedge. View original post here.
This year's corn crop has been absolutely decimated by constant rain and unseasonably cold weather. Trade wars have collapsed American exports of soybeans to China, as foreclosures and bankruptcies are now rippling through the Midwest's agricultural sector at disturbing speeds.
The US farm lobby said Tuesday that a third farm bailout would be needed if Washington grinds to a halt during the 2020 US election cycle limits President Trump from closing trade deals and reopening top export markets, reported Reuters.
American Farm Bureau Federation President Zippy Duvall said if Congress fails to approve the United States-Mexico-Canada Agreement (USMCA), then other trade deals between the European Union and Japan could remain unresolved.
Farmers have already felt a tremendous loss of momentum in exports to China. They're now hoping countries like Europe and Mexico can purchase additional agriculture products.
"The deeper we get into this campaign season, the more difficult it might become" to get USMCA ratified or any trade deals done, Duvall said in an interview.
"Not because of the treaty itself, not because of the need itself, but just because of the rhetoric around the election," Duvall said.
Democratic lawmakers seized the House of Representatives during the 2018 midterm election - as they have routinely demanded changes to the USMCA trade deal.
Duvall said the Farm Bureau has indicated that key export markets have been disrupted at a time when low spot prices, high inventory levels, slowing economic outlook, and damaging weather across the Midwest, could culminate into a full-blown farm crisis on par to the 1980s.
President Trump has promised about $28 billion in farm bailouts in two separate rounds to farmers, who many are his base, to compensate for the loss of sales.
"If we're not going to get USMCA finished, if we're not going to get the solution to our problems in China or Japan, then we need to be talking about another payment to try to hold farmers over until that gets done," Duvall said.
The bailouts came from the Commodity Credit Corporation (CCC), established in…
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Why US Commercial Real Estate Is Another Dangerous Bubble In The Making
by Zero Hedge - June 20th, 2019 9:17 am
Courtesy of ZeroHedge. View original post here.
Authored by Jesse Colombo via RealInvestmentAdvice.com,
While most people – including mainstream economists – seem to believe that our bubble problems ended when the U.S. housing bubble burst in 2008, the reality is that there are even more bubbles forming today than before the Great Recession. I listed the bubbles that I am warning about in a detailed piece that I wrote last week called “Why You Should Not Underestimate The Severity Of The Coming Recession.” I believe that the bursting of these numerous bubbles is likely to cause another recession that may be even more severe than the Great Recession was. In the current piece, I will discuss the bubble that is currently forming in U.S. commercial real estate and how it is likely to burst.
In order to understand the bubble that is currently forming in U.S. commercial real estate, it is important to first understand the extremely unusual monetary environment that the U.S. has been in since the Great Recession. After the U.S. housing and credit bubble burst in 2008, the Federal Reserve was desperate to stimulate the economy by slashing borrowing costs. The Fed cut and held interest rates at virtually zero percent (i.e., zero interest rate policy or “ZIRP”) for seven years and has been gradually increasing those rates since late-2015. Unfortunately, dangerous economic bubbles form during low interest rate periods and burst when rates rise once again. The dot-com and housing bubbles formed in this manner and so are numerous other bubbles in the current cycle, including commercial real estate. Commercial real estate is particularly sensitive to interest rates, and benefits when rates are low and suffers when rates are high.
In addition to ZIRP, the Fed utilized an unconventional monetary policy known as quantitative easing or QE, which pumped $3.5 trillion dollars worth of liquidity into the U.S. financial system from 2008 to 2014. When conducting QE, the Fed creates new money digitally for the purpose of buying bonds and other assets, which helps to suppress interest rates and boost asset prices. The chart below shows the growth of the Fed’s balance sheet since QE started in 2008:
As a result of the Fed’s…
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“Powell Throws In The Towel”: Gold, Global Stocks Soar, S&P At All Time High As Yields Tumble
by Zero Hedge - June 20th, 2019 9:14 am
Courtesy of ZeroHedge. View original post here.
Risk assets, safe havens? it doesn't matter: just buy it all as central banks enter the last stretch of the race to the (credibility) bottom.
The global dovish tsunami – still in its jawboning phase – which was started by Mario Draghi on Tuesday and escalated on Wednesday when Fed chair Powell finally threw in the towel and effectively said he would cut rates in July, has resulted in a global scramble for both risk assets and safe havens, with global equity markets a sea of green…
… and S&P500 futures at all time high, indicating a record S&P print when the cash market opens…
… even as the 10Y Treasury yield plunged overnight, dropping below 2% for the first time since November 2016 and reaching as low as 1.97% before rebounding.
At the same time, Japan's 10Y JGB futures hit a new all time high overnight after the central bank telegraphed that it is considering rate flexibility during Kuroda's press conference following the latest BOJ decision.
Finally, the ultimate safe asset, gold, has surged 1.5% overnight, and has finally broken out above multi-year support as we noted last night.
The rest of the world joined the party, with Europe's Stoxx 600 Index boosted by gains in technology shares and carmakers. Just like in the US, European stocks and bonds rally simultaneously in the aftermath of the Fed’s dovish tilt yesterday. Euro Stoxx 50 +0.9% to highest since May 6, led by technology, autos and industrials. In rates, Euro-area yields were steady to 4bps lower across the 2-yr through 10-yr tenors, with 10-yr BTPs outperforming bunds by 6bps.
Earlier in the session, Asian stocks also climbed, heading for their best week since January. The MSCI Asia Pacific Index rose for a third day, with communications and finance among the best-performing sectors. Most markets in the region were up, as China and Hong Kong led gains. Chinese stocks rallied the most in Asia with a surge in…
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Sterling Slides After BOE Keeps Rates Unchanged, Sees Rising No-Deal Brexit Risk
by Zero Hedge - June 20th, 2019 9:10 am
Courtesy of ZeroHedge. View original post here.
In a break from the global easing tsunami that has swept the world in the past 48 hours, moments ago the Bank of England did not cut rates – as expected – in a unanimous 9-0 decision.
MPC voted unanimously to keep #BankRate at 0.75% pic.twitter.com/ViqS4Zwe3G
— Bank of England (@bankofengland) June 20, 2019
The MPC noted that near-term data has been broadly in-line with projections made in the May report, however, downside risks to growth have increased; the bank also said that global trade tensions and especially the increasing risk of a no deal Brexit: “Domestically, the perceived likelihood of no-deal Brexit has risen,” the bank said in a summary of monetary policy.
Today's announcement follow a May report in which the BOE indicated that more rate hikes would be needed over the next few years to keep inflation under control, and said the market curve doesn’t reflect that. Since then investors have increased bets in the other direction, with the market showing a greater likelihood of a cut rather than an increase as the next move.
The market moves “highlighted the ongoing tension between the MPC’s forecast conditioning assumption of a smooth Brexit and the assumptions about alternative Brexit scenarios that were priced into the financial market variables,” the minutes said.
While Mark Carney's central bank said it still sees the need for interest-rate hikes in coming years if the forecasts bear out, they also said that investors are taking a different view than the bank’s assumption of a smooth Brexit. That pressured the pound and market expectations for future interest rates, the Monetary Policy Committee said in the minutes of its June meeting. The pound declined after the report while UK equities jumped.
Some other observations:
- Rates: Maintains guidance that rates will be raised at a gradual pace and to a limited extent
- Brexit: Maintains guidance that the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction
- Growth: After 0.5% growth seen in Q1, Q2 GDP is expected to be flat (Prev. view of 0.2%); in part reflects an unwinding of stockpiling
…
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Xi, Kim Hold Historic Meeting In Pyongyang
by Zero Hedge - June 20th, 2019 9:06 am
Courtesy of ZeroHedge. View original post here.
President Xi and North Korean leader Kim Jong Un are meeting in Pyongyang Thursday after Xi became the first Chinese leader in 14 years to visit North Korea. And although nobody could say for sure what the two would be discussing, most believed that their mutual difficulties with Washington would likely be on the agenda.
Earlier, Xi and his wife Peng Liyuan along with several senior Chinese officials, were greeted with a 21-gun salute during a massive ceremony at the airport. State media claimed that about 10,000 people stood in tight formation, waving flowers and chanting slogans to welcome Xi. Kim and his wife, Ri Sol Ju, met the visiting delegation at the airport.
A banner at the airport welcome ceremony read: "Long Live with Unbreakable Friendship and Unity Formed by Blood," a declaration of the longstanding 'friendship' between the two Communist nations, according to the AP.
Xi is on a two-day visit to North Korea, though the meeting with Kim is probably the highlight from the visit.
A former North Korean diplomat who defected in 2016 said he thinks Kim wants to give Xi a message to give to Trump when the two leaders meet in Osaka next weekend.
Thae Yong Ho, the defector mentioned above, said that Kim may offer some kind of compromise on his nuclear facilities to set up a third summit with Trump. But Thae cautioned such a move would only buy time, and that NK has no plans to denuclearize. Thae spoke at a news conference in Tokyo while promoting the Japanese translation of his book.
Talks between the US and NK have been stalled since the Hanoi talks fell apart.
John Park, director of the Korea Project at Harvard Kennedy School, said the meeting could be "an opportunity for both sides."
Some have speculated that Beijing could use its relationship with Pyongyang as leverage against Trump, but Park said he thinks that "ultimately what China is seeking to preserve" is a "dual freeze."
Park explained that Beijing will want North Korea to stop testing nuclear missile trials; while also hoping that the US and South Korea will stop conducting large scale military exercises on the peninsula as well.
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Doubtful ECB Can Prevent Recession, Former IMF Chief Economist Warns
by Zero Hedge - June 20th, 2019 9:02 am
Courtesy of ZeroHedge. View original post here.
European equity and credit markets have exploded higher on the heels of Mario Draghi’s “whatever it takes” double-down this week, former IMF Chief Economist, Olivier Blanchard spoke to CNBC Europe, pouring some rational cold water on the exuberant market sentiment…
“I’m sure they’ll do whatever they can, but whether it has major effects [on the real economy], I am doubtful.”
“I am nearly sure that the ECB, by itself, cannot right a recession. It will need help, it’s fairly obvious.”
When asked if the world’s central banks have enough ammunition, Blanchard once again reflects pessimistically, noting that:
“they have a lot of ammunition, the question is how much it kills…
…because they can buy assets in very large quantities but the fact is at this stage it has very little effects on the rates [and thus the economy] which is all that matters in the end.“
Blacnhard does have a solution, however…
“Monetary policy needs help, from fiscal policy… we can do a few other things like structural reforms but they don’t do any good in the short-run… yes, I think [the central banks] need help.”
The only problem with the IMF chief economist’s view is that policymakers will do nothing until the crisis “of bad numbers” actually occurs, warning that “Germany, who has been set in their [frugal] ways, will have to give in.”
Makes you wonder if buying European stocks and credit was so smart after all eh?
Watch the full interview below…
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Thursday Thrust – Powell’s Comments are Spun to Blast Market Higher
by phil - June 20th, 2019 8:33 am
“The case for somewhat more accommodative policy has strengthened.”
That is the phrase investors are taking to the bank from Powell's press conference yesterday. While the Fed Chairman didn't bow to Trump's pressure to deliver an immediate cut – he did leave the door open to interpretation that he was willing to cut rates the moment the economy begins to falter – giving investors a "Powell Put" to the market.
It wasn't the US markets that took Powell's statement as bullish but overnight the spin was in and now the Dow Futures are up 250 points as the spin doctors chimed in overnight to take any stray word Powell said and treat is like it was policy:
“The market now knows the Fed is going to ease unless the data dramatically reverse,” said Steven Blitz, chief U.S. economist at TS Lombard.
For the Fed to not cut rates at its July meeting, “it would take all of the data coming in to be consistently strong,” together with an end to trade-related uncertainty, said Seth Carpenter, chief U.S. economist at UBS.
The central bank’s rate-setting committee on Wednesday dropped language from its policy statement describing its stance as “patient”—which implied rates were on hold. Instead, it said uncertainties about the economic outlook have increased, a phrase it has used during past periods of rate cuts. “The committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the statement said.
Of course that means that IF Trump makes a Trade Deal with China or tensions with Iran calm down or earnings or economic data improve – then the Fed will have no reason to cut so will good economic news be bad news for the markets going forward? We'll have to see but, for now, the madness continues.
Behind this morning's rally is a collapsing Dollar as we're back to testing the 96 line, down 1% from yesterday's open so of course the markets are up 1% and it's hard to get excited about a 1% pop in the markets that coincides…
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Silver; Multi-Year Bull Market Getting Started?
by kimblechartingsolutions - June 20th, 2019 7:37 am
Courtesy of Chris Kimble.
Is a multi-year bull market about to start in Silver? We should find out soon!
This chart looks at Silver since the early 1970s. It has spent the majority of the past 35-years inside of rising channel (1).
It created a series of flat bottoms and lower highs in the late 1990s. When it broke out at (2), it rallied for years to come, where it gained several hundred percent.
Silver hit the top of this channel back in 2011 at $50, where a long-term bear market started. The 65% decline over the past 8-years has it testing the bottom of this multi-decade channel and its 23% retracement level of the low at $3.50 and high of $50. While testing the 23% level, it has created a series of level lows and lower highs.
Silver looks to be creating a pattern similar to the lows back in 2001 when it was creating a base to start a multi-year bull market from.
If Silver breaks above heavy resistance at (3), it is possible that it could be starting a new leg higher, similar to the breakout in 2002!
Keep an eye on falling resistance, as it is the first short-term key to proving if Silver is about to start a new “Hi-Yo Silver” rally.
–
To become a member of Kimble Charting Solutions, click here.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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