By Lambert Strether of Corrente.
“How significant will the freight rail revolution be over sea freight” [Shipping & Freight Resource]. “As per China Railway Corporation, China-Europe freight trains have made around 1,000 trips in the first three months of 2018 which is up by a massive 75% percent compared with the same period last year. As per the company, they attribute this growth to the increase in the number of routes between the two continents and also the increase in train speeds on the Chinese side…. In less than two years, their travel time has been cut from 20 days to 12, while operational costs have decreased by 40 percent…. Of course in terms of cost comparison with sea freight, the participants in this freight rail initiative are aware that this will not be possible without the heavy cost subsidies provided by the Chinese Government.. It has been reported that the subsidy may be as high as USD3500/40′ which sea freight cannot compete against.” Yikes!
“Mexico and the U.S. are at odds over [NAFTA] automotive rules of origin, which has become the key issue for reaching a final deal. Mexican officials presented a counterproposal this week that reportedly sets a 70 percent regional value threshold for cars to avoid tariffs, compared with the 75 percent demanded by the U.S. It would be phased in over 10 years instead of the U.S. four-year demand. Mexico also continues to reject a U.S. proposal that would require 40 percent of a car’s content to be built by workers earning at least $16 per hour” [Politico].
“Is Cory Booker for real?” [Yahoo News]. Betteridge’s Law applies to this even-handed profile, where this leaped out at me: “An aide to a senior Senate Democrat told Yahoo News about listening to one of Booker’s speeches. Booker wept on stage and had much of the audience joining him. The staffer was shocked when the senator abruptly left amid the applause. ‘,’ the senator [staffer??] said.”
That lovable goof, Joe Biden:
More Biden: "I love Bernie but I’m not Bernie sanders. I don’t think 500 billionaires are the reason we’re in trouble. The folks at the top aren’t bad guys. But this gap is yawning. And it’s having the effect of pulling us apart. You see the politics of it."
— Lydia DePillis (@lydiadepillis) May 8, 2018
“The folks at the top aren’t bad guys.” Oh. OK.
“Morrisey Wins as GOP Gets Its Wish in W.Va., Ind., Ohio” [RealClearPolitics]. “The biggest victory for Republicans came in West Virginia, where Don Blankenship, a former coal baron who recently served a prison sentence related to a mining disaster that killed 29 people, finished a distant third. The national party spent more than $1.3 million in recent weeks hoping to sink his campaign, and Trump intervened in the final hours to urge voters against supporting Blankenship. Attorney General Patrick Morrisey ultimately won, and will take on Sen. Joe Manchin in the fall.”
“Dems look to decide on midterm message” [The Hill]. “Party leaders intend to repeat the playbook the party used in 2006, when they won control of the House with promises to prioritize a handful of specific policies largely designed to ease . Democrats plan to offer a similar platform later this year. The question facing leaders in the meantime, though, is how to hone the list so it resonates most loudly in crucial swing districts while also appeasing various party factions, each of which has its own idea about which issues deserve precedence.” So, working class “economic anxiety” is really a cover for racism. But middle-class “economic insecurity” is…. is…..
Realignment and Legitimacy
“Impeach” [Eschaton]. “Trump is never going to be impeached. This is not a comment on what should happen, just on what will. I don’t know why people perpetuate this fantasy.” Wait, what? Democrats spent two solid years yammering about something that won’t happen?
“Follow The Money: Three Billionaires Paved Way For Trump’s Iran Deal Withdrawal” [Lobe Log]. “[T]oday’s unpopular announcement [from Trump on Iran] may have been exactly what two of Trump’s biggest donors, Sheldon Adelson and Bernard Marcus, and what one of his biggest inaugural supporters, Paul Singer, paid for when they threw their financial weight behind Trump. Marcus and Adelson, who are also board members of the Likudist Republican Jewish Coalition, have already received substantial returns on their investment: total alignment by the U.S. behind Israel, next week’s move of the U.S. embassy in Israel to Jerusalem, and the official dropping of “occupied territories” to describe the West Bank and East Jerusalem. Adelson, for his part, was Trump and the GOP’s biggest campaign supporter. He and his wife Miriam contributed $35 million in outside spending to elect Trump, $20 million to the Congressional Leadership Fund (a super PAC exclusively dedicated to securing a GOP majority in the House of Representatives), and $35 million to the Senate Leadership Fund (the Senate counterpart) in the 2016 election cycle.” Ka-ching. Although, since money is speech, I guess they were just haveing a “conversation”? And I guess this makes Joe Biden wrong?
Producer Price Index (Final Demand), April 2018: “Prices are up for steel and aluminum but overall wholesale prices proved subdued in April” [Econoday]. “When excluding food and energy and also a 0.2 percent gain for trade services, the result is only plus 0.1 percent which, like the headline, is below the low estimate…. Tariffs may be adding some pressure at the base of the wholesale price pipeline, but there’s no evidence of it moving higher.” And: “April 2018 Producer Price Final Demand Year-over-Year Inflation Moderates” [Econintersect]. “The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.”
Wholesale Trade, March 2018: “Usually there’s not much difference between the advance inventory estimate and the month’s final, but there is in March” [Econoday]. “Wholesale inventories rose only 0.3 percent vs the advance gain of 0.5 percent. The build however is in line with sales which also rose 0.3 percent in the month to keep the stock-to-sales ratio unchanged at 1.26.”
Capital Investment: “There is now growing evidence that the economy’s deceleration that followed the collapse of oil related capital expenditures at the end of 2014 continued for about two years after which it reversed course” [Mosler Economics]. “This means the collapse in private sector deficit spending was replaced by other sources of deficit spending, some of it public, the rest private. The increase in private sector deficit spending was apparently not bank financed, as indicated by bank lending statistics, so seems it must have been done in the capital markets. First quarter weakness, if not reversed in q2, would indicate the contribution of private sector deficit spending is fading, as happened with consumer credit.” Hmm.
Banking: “François Villeroy de Galhau: Between “shadow” banking and an angelic vision of the market – towards a balanced development of non-bank finance” [Bank of International Settlements]. “The topic we have chosen to address is far from anodyne: [slide 2] according to the Financial Stability Board (FSB), [Monitoring Universe of Non-Bank Financial Intermediation, MUNFI], . And yet – or maybe precisely because of this – there is still much heated debate over its scope and over what exactly it should be called. In order to better understand it, we need to rid ourselves of two mindsets: first, one of irrational fear, as non-bank finance also enables the financing of growth and innovation; and, in contrast, an over-idealised or “angelic” vision of the sector, as shadow banking does indeed carry risks and regulators have a role to play in mitigating them.” What could go wrong?
Banking: “WMD Old and New Primed for Next Financial Crisis” [Satyajit Das, Bloomberg]. This is a must read, and helps make sense of the rather Dephic BIS speech above. “The recurrent risks introduced by new instruments are straightforward. The assumption of market liquidity fails repeatedly to recognize that no product can be more liquid than its underlying asset — which frequently can’t be traded during dislocations. ETFs and automated trading create a perverse illusion of liquidity in favorable, calm conditions. Research by the Bank of England found that in times of stress, algorithmic trading provided poor liquidity and inefficient prices, magnifying shocks. In the next crisis, that will be exacerbated by a reduction in the number of market-makers and their risk-taking appetite due to regulatory changes and reluctance to lose capital. Liquidity has also diminished because of market fragmentation.” Another warning sign: “[T]here’s a lack of institutional memory. Investors, traders and risk managers who made mistakes in the last crisis are rarely retained. Many current financial market participants began their careers after 2008 and have never experienced a serious downturn.” “The night they re-read Minsky,” to quote Paul Krugman long ago, before he lost his mind.
Energy: “Power Demand Is Doing Something Weird: It’s Rising in Some Places” [Bloomberg]. “Something’s happening in the electricity market that hasn’t happened in years. Americans east of the Rocky Mountains are — at least for now — ramping up their power use. High commodity prices have led to increased power demand from the oil and gas and metals industries, and so have changes to U.S. tax law, according to first-quarter earnings reports from some of the largest U.S. utility companies. Jobs growth and industrial activity have also boosted electricity sales.”
Commodities: “Volatile aluminum prices are shaking up manufacturing supply chains. Prices last month swung to their widest monthly range since at least 1997 after the U.S. sanctioned Russian aluminum producer United Co. Rusal” [Wall Street Journal]. “The impact has jolted companies that make everything from jets to beer cans. Some suppliers have canceled deliveries, leaving businesses unsure whether they can meet production targets for products like window frames and car parts. And some buyers already grappling with limited supply options in the wake of U.S. tariffs on steel and aluminum imports left Rusal deliveries unopened for fear of violating sanctions. Although prices have retreated some since their April highs, companies like Whirlpool Corp. and Caterpillar Inc. say rising metals costs are a potential headwind and industry veterans expect the rollercoaster ride to continue.”
Commodities: “Maple Syrup Cartel Has a Plan to Cover Shortfall” [Bloomberg]. “Output of maple syrup in Quebec, the largest global producer, is poised to fall as much as 27 percent to 110 million pounds (49,900 metric tons), according to the Federation of Quebec Maple Syrup Producers — a government-sanctioned sales agency that sets bulk prices for about 72 percent of the world’s syrup and limits farmer output through quotas. Production was hurt after below-average daytime temperatures resulted in less sap flowing from the province’s trees. The good news is nobody’s waffles will go bare, thanks to the agency’s strategic reserve.”
Retail: “Walmart says Flipkart is ‘a key center of learning’ for its entire global business” [TechCrunch]. “Walmart has opened up on the thinking behind its $16 billion majority investment in Flipkart, and perhaps the most interesting facet is that the retailer plans to export ideas from the Indian e-commerce firm to the rest of its global business, including the U.S..’ ‘At Walmart, we’re learning how to build — and how to partner to build — retail ecosystems around the world. India will now become a key center of learning for our entire company,’ [Walmart CEO Doug McMillon] said on a call with analysts following the announcement of the deal… .’Not only is [Flipkart] innovative [with the] problem-solving culture that they have, but they are doing some great work both in the AI space, how they are using data across their platforms but particularly in terms of the payment platform that they’ve created through PhonePe,’ Judith McKenna, Walmart COO, said on the call.”
Shipping: “Weekend package delivery is throwing a wrench in United Parcel Service Inc.’s labor negotiations. The parcel carrier and the Teamsters union are discussing a two-tier wage system that could have lower-paid workers deliver on weekends” [Wall Street Journal]. “[T]he strategy is part of the delivery giant’s hunt for ways to cope with surging e-commerce volumes while keeping costs under control. The majority of UPS packages in the U.S. now go to consumers rather than businesses, which makes delivery more expensive—especially on weekends, when unionized package-truck drivers can earn premium overtime pay. The hybrid driver proposal has caused a rift between some factions within the union, and comes as UPS is trying to finalize one of the largest collective bargaining agreements in the U.S. before it expires this summer.” As it should; two-tier deals — as for example with Social Security, where eligibility is random with respect to birth — are horrible.
Shipping: “Private equity firm teams with former OHL CEO to acquire 3PL companies” [DC Velocity]. 3PL: third-party logistics. “Private equity firm Welsh, Carson, Anderson & Stowe said today it has partnered with Randall E. Curran, the former CEO of Ozburn-Hessey Logistics LLC (“OHL”), to identify third-party logistics (3PL) providers that may want to be acquired. The partnership will initially focus on U.S.-based contract logistics and transportation management providers, firms whose services are in high demand but which often lack the internal resources needed to maximize their growth, Welsh, Carson said. The 3PL market is also very fragmented, with many niche players that may be looking for an exit strategy.”
Shipping: “A stark difference in opinion over truck size and weight remains intact between trucking and rail” [Logistics Management]. “The [Americans for Modern Transportation’s] letter, which was signed by several companies such as FedEx, Amazon, UPS, XPO Logistics, the National Retail Federation, and NASSTRAC, among others, called for policies to improve vehicle safety, reduce congestion, lower fuel consumption, and address freight capacity, things they said can be addressed by raising the national twin trailer standard from 28 feet to 33 feet…. Not surprisingly, the [Association of American Railroads] has a different take on twin-33’s, explaining in a statement on its web site that that Congress already maintains ‘reasonable limits’ on interstate highway system truck sizes at 80,000 pounds and no more than two 28-foot trailers for total length… AAR President and CEO Ed Hamberger has previously stated that increasing truck size and weight would come at the expense of billions to dollars to taxpayers in the form of damaged roads and bridges. The added truck weight will further destroy precious national infrastructure and cost taxpayers dearly and allowing trucks to be 14% heavier would be a fundamental change to national policy, according to Hamberger.” Seems to me like the AAR has the right of it….
Pensions: “Multiemployer pension a ‘ticking time bomb’ for Teamsters’ trucking retirees” [Logistics Management]. “Since deregulation in 1980, there have been more than 500 Teamsters-covered trucking companies close, fail or go out of business. That has left just a handful of unionized LTL carriers often supporting tens of thousands of retirees who never actually worked for the surviving companies…. The U.S. Chamber has estimated multiemployer plans contributed more than $2.3 trillion to the U.S. economy in 2015, the last full year for which records are available…. The multiemployer pension plans of 1.5 million workers and retirees nationwide are facing shortfalls and are at risk of insolvency in the coming decade. Multiemployer plans are at risk because there are about four retirees pulling benefits for every active worker. There are only about 80,000 unionized workers, mostly Teamsters, in the heavy freight sector of the trucking industry. Their dues are supporting perhaps as many as 350,000 unionized retirees, many in trucking industry. (UPS Teamsters, which number about 260,000, are in separate pension plans).”
Pensions: “Pension Fund Gamble: Colorado’s $9 Billion Question Mark” [Capital & Main]. “As the legislature now considers the final version of the PERA reform bill in the waning days of the 2018 legislative session, the consensus among lawmakers seems to be that Colorado must ask for more sacrifice from the PERA’s more than 500,000 members, who on average receive $3,193 a month in benefits and who do not receive Social Security. And yet, despite all the talk of belt-tightening, lawmakers have not done anything to impede the nine-figure payments to one elite set of PERA beneficiaries: the wealthiest people on Earth, who live 1,600 miles to the east. Ask legislators at Colorado’s capitol if they’ve even heard about the $1 billion of investment fees the state’s pension system paid out to external money managers between 2009 and 2016, and you will get blank stares. Ask them if they realize those are only the fees that are disclosed — and that there are likely hundreds of millions of dollars of additional fees being paid out — and they will express disbelief. Ask them if they know that state officials passed legislation — written by the financial industry — barring the details of the fee terms from being revealed to the public, and you will elicit outrage.”
Tech: Report from Google I/O [@Pinboard]. Thread:
Crowd at Google I/O is doing the man wave. There's like 80 copies of the same dude visible just from the one camera angle. The simulators are cutting costs.
— Pinboard (@Pinboard) May 8, 2018
Google Duplex, an AI application, sounds especially creepy:
Google Duplex is a phone tree that calls YOU, and turns every phone call into a Turing test. The on-stage demos all involve deceiving a real human being into thinking they're in a conversation with a person.
— Pinboard (@Pinboard) May 8, 2018
There is such a paucity of vision in Google's stunted view of the world as a convenience store for the gifted, but that doesn't stop them from rolling out everything at scale in 127 countries, with no oversight or accountability. They're giant kids and the world is their sandbox
— Pinboard (@Pinboard) May 8, 2018
The Bezzle: Handy charts from a Tesla short [@TeslaCharts]. Thread:
0/ Now that things are a bit quiet, it is time for the comprehensive charting of $TSLA's Q1 results. Note that I've limited things to the last five quarters, because these include the full impact of SolarCity. Before beginning, please read my disclosures… pic.twitter.com/3GVjNzLEXU
— TeslaCharts (@TeslaCharts) May 5, 2018
Five Horsemen: “Amazon is threatening to blow the top off the Five Horsemen chart again” [Hat Tip, Jim Haygood].
NakedCap Mania-Panic Index: “Yesterday’s drop in the put-call ratio to 0.83 from a May 1st high of 1.11 (indicating a high demand for downside protection) helped the mania-panic index rise to 57 (complacency)” [Hat Tip, Jim Haygood]. (The NakedCap mania-panic index is an equally-weighted average of seven technical indicators derived from stock indexes, volatility (VIX), Treasuries, junk bonds, equity options, and internal measures of new highs vs new lows and up volume vs down volume … each converted to a scale of 0 to 100 before averaging, using thirty years of history for five of the seven series.)
“Comcast won’t give new speed boost to Internet users who don’t buy TV service” [Ars Technica]. Here we go.
“The Senate has forced a vote to restore net neutrality” [The Verge]. “Sen. Ed Markey (D-MA) and 32 other Democrats have submitted a new discharge petition under the Congressional Review Act, setting the stage for a full congressional vote to restore net neutrality. Because of the unique CRA process, the petition has the power to force a Senate vote on the resolution, which leaders say is expected next week…. So far, 50 senators have come out in support of the bill: 48 Democrats together with Sen. Angus King (I-ME) and Sen. Susan Collins (R-ME). Activists have targeted moderate Republicans like Sen. Lisa Murkowski (R-AK), Sen. John Kennedy (R-LA), and Sen. Rob Portman (R-OH) as a possible 51st vote. The 2015 net neutrality rules are still broadly popular, which activists hope will make members of Congress wary of voting against them.” So if any of you have a Republican Senator, feel free to give them a call, because Net Neutrality helps Naked Capitalism.
“Drug made famous by Shkreli’s 5,000% price hike is still $750 a pill” [Ars Technica]. Of course it is.
“California Counties Jump Into Opioid Litigation” [Wall Street Journal]. “As lawsuits over the opioid crisis have spread nationwide, the country’s most populous state has largely stayed on the sidelines. Now, 30 counties in California are jumping in, seeking recovery for alleged taxpayer losses from the major makers and distributors of opioid painkillers. The counties, largely centered in the rural northern and central regions of the state, are each filing lawsuits in federal court. The actions will likely be sent to a federal judge in Ohio, who is overseeing hundreds of opioid lawsuits filed across the country…. The California lawsuits claim the manufacturers aggressively, and unlawfully, marketed their painkillers while playing down their addictive qualities and that the distributors neglected their legal duty to monitor, detect and report suspicious orders. The counties are seeking to recover costs stemming from medical care and rehabilitation services to treat opioid addiction, care for children whose parents are incapacitated by opioid use and infants born with opioid-related conditions, and law enforcement and public safety.”
“A Free Ride: Data Brokers’ Rent-Seeking Behavior and the Future of Data Inequality” (PDF) [Laura Palk, Krishnamurty Muralidhar]. ” To the Authors’ knowledge, research has not explored data brokers’ rent-seeking behavior and how it will further inequality in accessing credible data—or “data inequality.” The Authors contend that without a federal mission to ensure cost-free access to personal data for research and public access purposes, data brokers’ sale of such data will potentially lead to biased or inaccurate research results. This development would further the interests of the educated wealthy at the expense of the general public.” So Google’s crapified search has a bright side?
“The Wealthy Are Hoarding $10 Billion of Bitcoin in Bunkers” [Bloomberg]. Literally: “Behind the guards, the blast doors and down corridors of reinforced concrete, sit the encrypted computer servers — connected to nothing — that hold keys to a vast digital fortune…. Argentine entrepreneur Wences Casares has spent the past several years persuading Silicon Valley millionaires and billionaires that Bitcoin is the global currency of the future, that they need to buy some, and that he’s the man to safeguard it. His startup, Xapo, has built a network of underground vaults on five continents, including one in a decommissioned Swiss military bunker. In the rarefied world of wealth management, Xapo is known for a client list studded with family offices… [Casares’] evangelizing of Bitcoin is so pervasive in Silicon Valley that when Hoffman asked his family office to buy some, his banker asked when he’d spoken to Casares. Xapo’s advisers now include former U.S. Treasury Secretary Larry Summers, ex-Citigroup Inc. Chief Executive Officer John Reed and Visa International founder Dee Hock.”
“The Problem With ‘Feminist’ Men” [Jill Filipovic, New York Times]. “At home, it seems, Mr. Schneiderman was a sexual sadist and manipulative misogynist. At work, he was a champion of women’s rights, investigating potential charges against Harvey Weinstein, appearing at events supporting reproductive freedom, and even writing a bill specifically to punish the same kind of strangulation he is said to have forced on some of his partners. How do we reconcile these two versions of a single man?” Followed by speculation, not without insight. Then there’s this: “Then, she says, [Schneiderman] slapped her across the face, twice. She didn’t report it because ‘He’s a good attorney general, he’s doing good things. I didn’t want to jeopardize that.'” Making the class aspect of the story quite clear, no?
“Human Bus Drivers Will Always Be Better Than Robot Bus Drivers” [Portside]. “‘We have regular emergencies on the buses,’ said John Samuelsen, president of the Transport Workers Union. ‘Folks have heart attacks on buses, children get lost on buses. Every aspect of life in America, the bus and subway are microcosms of it. A robot’s not going to help.'” Help whom? With what?
News of The Wired
Their plot worked:
How about this, UK? pic.twitter.com/01HNVGJGcj
— English Russia (@EnglishRussia1) May 8, 2018
“Despite Korea Unification, North And South Louisiana No Closer To Making Peace” [The Daily Crawfish].
Readers, feel free to contact me at lambert [UNDERSCORE] strether [DOT] corrente [AT] yahoo [DOT] com, with (a) links, and even better (b) sources I should curate regularly, (c) how to send me a check if you are allergic to PayPal, and (d) to find out how to send me images of plants. Vegetables are fine! Fungi are deemed to be honorary plants! If you want your handle to appear as a credit, please place it at the start of your mail in parentheses: (thus). Otherwise, I will anonymize by using your initials. See the previous Water Cooler (with plant) here. Today’s plant (CC):
CC writes: “I took this picture in our backyard this afternoon. I know nothing about plants and so cannot tell you what these are, but I think they’re quite lovely and much nicer than the grass that’s supposed to grow in that area.” Almost anything is lovelier than a lawn, but the angle of the light here is very pleasing.
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