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One day after President Trump's former attorney, Michael Cohen, was sentenced to three years in prison for a variety crimes, Trump took to Twitter to address alleged campaign finance violations Cohen says he engaged in at Trump's direction. 

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One day after President Trump's former attorney, Michael Cohen, was sentenced to three years in prison for a variety crimes, Trump took to Twitter to address alleged campaign finance violations Cohen says he engaged in at Trump's direction. 

Cohen flipped on Trump after federal agents raided his office and home in April, later making the remarkable claim that Trump directed him to pay off two women who claimed to have had affairs with the president in order to prevent their allegations from influencing the 2016 US election. The payments included $130,000 to porn star Stephanie Clifford (Stormy Daniels), while Cohen also orchestrated a $150,000 payment to a former Playboy playmate through the National Enquirer's parent company, American Media Inc. (AMI). 

Trump, who initially denied knowing about the payments but later acknowledged that he had known about them, insisted this week that they were "a simple private transaction," and not related to the election - and therefore would not be subject to campaign finance laws. 

On Thursday, Trump took to Twitter to defend himself and lash out at Cohen in a three-part tweetstorm - claiming Cohen had an obligation to know the law, and that his former personal attorney had pleaded guilty in order to embarrass him and receive a reduced sentence.

"I never directed Michael Cohen to break the law," Trump said. "He was a lawyer and he is supposed to know the law. It is called “advice of counsel,” and a lawyer has great liability if a mistake is made. That is why they get paid. Despite that many campaign finance lawyers have strongly stated that I did nothing wrong with respect to campaign finance laws, if they even apply, because this was not campaign finance. Cohen was guilty on many charges unrelated to me, but he plead to two campaign charges which were not criminal and of which he probably was not guilty even on a civil bases [sic]. Those charges were just agreed to by him in order to embarrass the president and get a much reduced prison sentence, which he did-including the fact that his family was temporarily let off the hook. As a lawyer, Michael has great liability to me!"

I never directed Michael Cohen to break the law. He was a lawyer and he is supposed to know the law. It is called “advice of counsel,” and a lawyer has great liability if a mistake is made. That is why they get paid. Despite that many campaign finance lawyers have strongly......

— Donald J. Trump (@realDonaldTrump) December 13, 2018

....stated that I did nothing wrong with respect to campaign finance laws, if they even apply, because this was not campaign finance. Cohen was guilty on many charges unrelated to me, but he plead to two campaign charges which were not criminal and of which he probably was not...

— Donald J. Trump (@realDonaldTrump) December 13, 2018

....guilty even on a civil basis. Those charges were just agreed to by him in order to embarrass the president and get a much reduced prison sentence, which he did-including the fact that his family was temporarily let off the hook. As a lawyer, Michael has great liability to me!

— Donald J. Trump (@realDonaldTrump) December 13, 2018

Hours after Cohen's guilty plea, American Media Inc. admitted responsibility for its role in a $150,000 "catch-and-kill" hush money payment to former Playboy model Karen McDougal, which Cohen negotiated, to keep the story out of the public sphere "and prevent it from influencing the election." 

According to AMI's cooperation agreement with federal prosecutors, Cohen and another campaign official met with AMI Chairman and longtime Trump friend David Pecker about the payment around August 2015. 

The company initially said they paid McDougal $150,000 for two years' worth of her fitness columns, magazine covers and exclusive life rights to any relationship she has had with a then-married man, only to walk that back Wednesday afternoon. 

Update: The detained Canadian businessman Michael Spavor, who worked with North Korea, is being investigated on suspicion of "harming China’s security", China said on Thursday, days after a former Canadian diplomat disappeared in the escalating diplomatic row between Beijing and Ottawa.

The state security bureau in the northeastern Chinese city of Dandong, which borders North Korea, has been investigating Spavor since Dec. 10, an official news site for the Liaoning pr Read more.....

Update: The detained Canadian businessman Michael Spavor, who worked with North Korea, is being investigated on suspicion of "harming China’s security", China said on Thursday, days after a former Canadian diplomat disappeared in the escalating diplomatic row between Beijing and Ottawa.

The state security bureau in the northeastern Chinese city of Dandong, which borders North Korea, has been investigating Spavor since Dec. 10, an official news site for the Liaoning province government said.

Canada has been unable to contact Spavor since he notified the government that he was being questioned by Chinese authorities, Foreign Ministry spokesman Guillaume Bérubé said in statement issued in Canada. Canadian officials were working hard to ascertain Spavor’s whereabouts and would continue to raise the issue with the Chinese government, Bérubé said.

The announcement follows the detention in Beijing on Monday of former diplomat Michael Kovrig, who works for the International Crisis Group (ICG). According to Reuters, state media in China has reported Kovrig is being investigated on the same charges.

Chinese Foreign Ministry spokesman Lu Kang, asked about Spavor’s detention, said both he and Kovrig were suspected of harming national security, reiterating state media announcements.

“The legal rights and interests of these two Canadians have been safeguarded,” Lu told a daily news briefing. “These two cases are in the process of being investigated separately.”

The Canadian embassy has been notified of the detentions, he added, declining to provide further details of the investigations but added that he had not heard of any other cases of Canadians being investigated.

Asked if Meng’s release would see the two Canadians released, Lu reiterated that Meng’s arrest was mistaken action and Canada should immediately let her go. He said authorities had taken measures “according to the law” in the Canadians’ cases, and China welcomed foreign visitors, and they had nothing to fear so long as they obeyed the law.

Meanwhile, Hu Xijin, editor of the state-backed Global Times, a nationalistic tabloid, said on the Weibo social media platform the Chinese government would never concede that the Canadians’ detentions were related to Meng’s case.

“But the use of a complete set of laws to prove the rationale for arrest is one and the same as what the U.S. and Canada did to Meng Wanzhou,” he wrote.

* * *

For a trade war that was supposed to be between the US and China, Canada has found itself increasingly in the middle of the crossfire. And so after the arrest of a former Canadian diplomat in Beijing in retaliation for the detention of the Huawei CFO in Vancouver, Canada said a second person has been questioned by Chinese authorities, further heightening tensions between the two countries.

The second person reached out to the Canadian government after being questioned by Chinese officials, Foreign Minister Chrystia Freeland said, at which point Canada lost contact with him. His whereabouts are currently unknown and Global Affairs Canada said they are in contact with his family.

"We haven’t been able to make contact with him since he let us know about this,” Freeland told reporters Wednesday in Ottawa. "We are working very hard to ascertain his whereabouts and we have also raised this case with Chinese authorities."

According to the he Globe and Mail, the man was identified as Michael Spavor, a Canadian whose company Peaktu Cultural Exchange brings tourists and hockey players into North Korea. He gained fame for helping arrange a visit to Pyongyang by former NBA player Dennis Rodman, and he met North Korean leader Kim Jong Un on that trip, the newspaper reported. Attempts to reach Spavor on his contact number either in China, or North Korean went straight to voicemail.

Spavor's personal Facebook page contains several images of him with North Korean leader Kim Jong-un including one of him with both Jong-un and former Dennis Rodman at an undisclosed location.

Another image shows the two sharing a drink on a boat.

The unexplained disappearance takes place after China’s spy agency detained former Canadian diplomat Michael Kovrig in Beijing on Monday, who was on leave from the foreign service. The arrest came nine days after Canada arrested Huawei Chief Financial Officer Meng Wanzhou at the request of U.S. DOJ. While Canada has asked to see the former envoy after it was informed by fax of his arrest, Canada is unaware of Kovrig current whereabouts or the charges he faces.

“Michael did not engage in illegal activities nor did he do anything that endangered Chinese national security,” Rob Malley, chief executive officer of the ICG, said in a written statement. “He was doing what all Crisis Group analysts do: undertaking objective and impartial research.”

One possibility is that Kovrig may have been caught up in recent rule changes in China that affect non-governmental organizations, according to Bloomberg. The ICG wasn’t authorized to do work in China, Foreign Ministry Spokesperson Lu Kang said during a regular press briefing in Beijing Wednesday.

“We welcome foreign travelers. But if they engage in activities that clearly violate Chinese laws and regulations, then it is totally another story,” he said, adding he had no information on Kovrig specifically.

As Bloomberg further notes, foreign non-governmental organizations are now required to register with the Chinese authorities under a 2017 law that subjects them to stringent reporting requirements. Under the law, organizations without a representative office in China must have a government sponsor and a local cooperative partner before conducting activities. ICG said this is the first time they’ve heard such an accusation from the Chinese authorities in a decade of working with the country. The company closed its Beijing operations in December 2016 because of the new Chinese law, according to a statement. Kovrig was working out of the Hong Kong office.

Meanwhile, realizing that it is increasingly bearing the brunt of China's retaliatory anger, Trudeau’s government distanced itself from Meng’s case, saying it can’t interfere with the courts, but is closely involved in advocating on Kovrig’s behalf.

So far Canada has declined to speculate on whether there was a connection between the Kovrig and Meng cases, with neither Freeland nor Canadian Trade Minister Jim Carr saying Wednesday that there is any indication the cases are related. Then again, it is rather obvious they are. Indeed, Guy Saint-Jacques, who served as ambassador to China from 2012 to 2016 and worked with Kovrig, says the link is clear. “There’s no coincidence with China."

“In this case, they couldn’t grab a Canadian diplomat because this would have created a major diplomatic incident,” he said. “Going after him I think was their way to send a message to the Canadian government and to put pressure.”

Even though Meng was granted bail late Tuesday, that did not placate China, whose foreign ministry spokesman said that "The Canadian side should correct its mistakes and release Ms. Meng Wanzhou immediately."

The tension, according to Bloomberg,  may force Canadian companies to reconsider travel to China, and executives traveling to the Asian country will need to exercise extra caution, said Andy Chan, managing partner at Miller Thomson LLP in Vaughan, Ontario.

“Canadian business needs to look at and balance the reasons for the travel’’ between the business case and the “current political environment,’’ Chan said by email. Chinese officials subject business travelers to extra screening and in some case reject them from entering, he said.

Earlier in the day, SCMP reported that Chinese high-tech researchers were told "not to travel to the US unless it's essential."

And so, with Meng unlikely to be released from Canada any time soon, expect even more "Chinese (non) coincidences", until eventually China does detain someone that the US does care about.

As expected, Mario Draghi managed to deliver yet another dovish "end of QE", because while in less than three weeks the European Central Bank will no longer engage in government bond QE (although it will reinvest maturities for an "unspecified" period of time), the reason the Euro tumbled is that, as previewed overnight by Bloomberg, Draghi not only uttered the magic, for algos, words that the "balance of risks is moving to the downside", but also cut both the ECB's GDP and inflation forecast Read more.....

As expected, Mario Draghi managed to deliver yet another dovish "end of QE", because while in less than three weeks the European Central Bank will no longer engage in government bond QE (although it will reinvest maturities for an "unspecified" period of time), the reason the Euro tumbled is that, as previewed overnight by Bloomberg, Draghi not only uttered the magic, for algos, words that the "balance of risks is moving to the downside", but also cut both the ECB's GDP and inflation forecasts.

This is the sentence that pushed the Euro lower at first:

“Risks surrounding the euro area growth outlook can still be assessed as broadly balanced. However, the balance of risks [to the growth outlook] is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility”

... followed promptly by the cut to both 2018 and 2019 GDP and HICP inflation:

GDP forecasts:

• 2018 at 1.9% (prev. 2.0%),
• 2019 at 1.7% (Prev. 1.8%),
• 2020 at 1.7% (Prev 1.7%),
• 2021 at 1.5%

HICP forecasts:

• 2018 at 1.8% (prev. 1.7%),
• 2019 at 1.6% (Prev. 1.7%),
• 2020 at 1.7% (Prev 1.7%),
• 2021 at 1.8%

And visually:

On the other hand, the ECB's inflation forecast has been roughly in range for the past year.

In kneejerk reaction, the EURUSD tumbled 40 pips and was trading at day lows.

Authored by Kevin Muir via The Macro Tourist,

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Authored by Kevin Muir via The Macro Tourist,

Think back to this past summer.

The US dollar was rallying hard, having risen from 88 DXY in the spring to 97 as August drew to a close. At the same time, the American stock market was on fire, tacking on 400 S&P points in less than half a year. This was happening while the rest of the world’s stock markets were sucking wind. Europe was down a handful of percentage points, the MSCI world index ex-US was down a similar amount and emerging markets were being beaten like Marvin Nash at the hands of Mr. Blonde. In the period when the S&P had risen almost 10 percent, emerging markets were pushing down 15%. When you combine the meteoric US stock market rise along with the USD appreciation, the relative outperformance of US equities for overseas investors was stunning.

I understand all the reasons for the move. America was the only major country engaging in fiscal stimulus. They were also cutting taxes and engaging in pro-business deregulation. These policies allowed the U.S. Central Bank to pursue a tighter-than-would-otherwise-be-the-case monetary policy.

All of these circumstances combined to create a virtuous self-reinforcing feedback loop. As foreigners chased U.S. stocks, it put a bid to the U.S. dollar and also loosened financial conditions which caused the Federal Reserve to tighten policy which caused the U.S. dollar to rise even more and encouraged foreigners to buy even more stocks. It became reflexive.

Wall Street always does this. They take a good idea, and they push it too far. The US-will-eat-the-world financial theory made a lot of sense… at first.

I am about to embark on a reason to sell US assets, but make no mistake - I am not disputing any of the reasons to own American assets, merely disputing whether those reasons are already in the price. Don’t send me a list of all the reasons why Europe is $%#%’d or why America is the undisputed global super power with a military and economic power unmatched by any rival. I get it.

I understand Santiago Capital’s Brent Johnson’s “Dollar Milkshake Theory” In fact, even though I didn’t agree with Brent’s call, earlier this year (when the whole world was bearish on the US dollar) I brought the loneliness of his prediction to everyone’s attention with a piece titled “US Dollar - Up then down?“

…there are others who believe the flow of funds from managers choosing the most attractive destination for their capital means more. My favourite US-dollar-bull-yet-still-gold-bug buddy Santiago Capital’s Brent Johnson created this great presentation outlining his arguments for why the US dollar is poised to rally.

As I was watching, I realized that Brent was one of the few pundits willing to say the US dollar was headed higher - not because of structural problems in the Eurodollar funding market or from a short squeeze in US borrowers paying back money - but because the US is the best economy out there. I might not agree with Brent, but I felt a certain kinship with his lonely call. Often the best trades are the ones where the fewest agree with you. I joked with Brent that it almost made me want to join him on the US dollar long side.

The investor is in me is convinced Luke and Mark are right that the US has entered into a long period of decline, but the fact that MacroVoices couldn’t find a single bull to make the US dollar bull argument makes the trader in me think that Brent is going to be right in the coming weeks and months.

Brent is one of the nicest guys out there, and let’s face it - he stood in there when no one (and I mean no one) was willing to be bullish on the US dollar. Kudos to him. You should all follow Brent, but just be careful when you google him. I am not sure, but there is someone that looks an awful lot like Ricky Gervais rapping and pretending to be Brent.

Actually, come to think about it, has anyone seen Brent and Ricky together in the same room?

Regardless of what Brent does in his spare time (host the Emmys?), his “milk shake theory” has been spot on. America has drunk everyone else’s milkshake. Just like Brent said would happen.

But in digging up the earlier post, it reminded me how lopsided sentiment was back then.

That was then, this is now

Contrast that to the current environment.

If MacroVoices were to have another US dollar round table, I suspect they would have little trouble coming up with dollar bulls. Do you think it would be difficult to find a money manager who believes that US financial assets will outperform the rest of the world?

My guess is that they would be lined up around the block to tell you all the reasons why the rest of the world is a basket case, and that the US is the only safe place to park your money.

Yeah, I get it. The world’s financial landscape inspires little confidence. Brexit, French riots, slumping German banks, Chinese slowdown, emerging market carnage - none of these things scream it’s time to venture out the risk curve.

At the same time, America seems to be making all sorts of positive pro-business-capital-friendly moves. So, money flows into America. After all, who gets fired for buying IBM?

Yet buying American assets is the most over-owned crowded trade out there. Can I prove it with numbers? Nope, but all you have to do is look at the charts.

Do you know how difficult it is for a money manager to sit in front of the year-end-review committee and justify an overweight in European or emerging market equities? I would rather Mr. Blonde have a run at me.

The simple fact is that apart from the most disciplined systematic manager (who is about to get fired), no one is underweight US assets.

Will this change going into year end? I suspect not. In fact, we could even see a little bit of “window dressing” with managers’ desire to show how they got the trade right in 2018 and were in fact overweight US assets. Therefore I suspect the US-relative-bid will stay firm and might in fact push higher into the final trading days of 2018.

Yet, during the next couple of weeks, I will be using any strength in US assets - both equities and US dollars - to sell into.

Against what?

When I tell people I am bearish on US dollars, after they stop laughing, they often ask me - against what? When I tell them against everything, they proceed to lecture me on why those countries are awful places to invest. Yeah, they are probably correct. Europe is a disaster. Japan seems intent on printing their currency into oblivion. Britain can’t seem to do anything right these days. It’s difficult to put your foot down and say, “you should sell US dollar against XYZ currency.” But that’s precisely why everyone is stuffed full of US assets.

If I am correct, then we don’t need these other countries to be terrific investments. All we need is asset allocators to return closer to their benchmark weighting and the US dollar will decline. And in fact, if all this move ends up being is a return from overweight to benchmark, then the currencies that were hated the most - the ones that investors were most eager to sell in exchange for dollars - will be the ones that rise the most.

Something changed

Have a look at both of those relative performance charts above. Do you want to know when they bottomed? Right around October 3rd. You know - the day Powell claimed the US was “still a long way from neutral” (see “Don’t Ingore the Yield Curve).

Powell’s over exuberant tightening was not quite as bad as ECB Chairman’s Jean-Claude Trichet’s disastrous tight money rampage of late 2008 and 2011, but it’s not nearly as benign as the “milkshake bulls” believe.

Something changed October 3rd with Powell’s “quite a ways from neutral” comment. The Federal Reserve finally tightened to a point where it was no longer reflexively positive. Raising rates at that point couldn’t attract anymore capital into the US stock market. It did not cause a positive feedback loop, but instead ushered in a little deflationary mini-wave. More milkshake merely caused the patron to throw up a little in their mouth.

This is my main point. Raising rates from this point will not cause a positive feedback loop, but rather only exacerbate the problems. Capital no longer rushes in to America chasing stocks because everyone is already long.

And the real problem is that these flows over the past year have caused the Federal Reserve to be tighter than would otherwise be the case. Don’t forget that the real reason Powell was so hawkish in that October 3rd speech was because markets were loosening financial conditions regardless of the Fed’s actions.

Powell was rightfully scared that the reflexive nature of the flow of funds into America would cause financial conditions to loosen to inappropriate levels.

Yet without all this money pouring into America desperately trying to have a sip of the “milkshake”, monetary policy would have been easier. Monetary policy was set for financial conditions, not eocnomic conditions. The United States was too successful and in the process have pushed themselves into at least an economic slowdown, and maybe even a recession.

Here comes the pushback

I can already hear the cries of protest. Let’s start with my favourite - the “market has taken out almost all next year’s rate hikes and yet the US dollar is still up” argument. Yeah, that’s a good one. And it’s certainly true that the market has taken out a lot of 2019 hiking in the past month.

Although traders like us might sit around watching every tick, real money moves more slowly. A lot more slowly.

The fact that the market has taken out more than one hike in 2019 over the past month means that the real money has barely reacted. If you are running a large endowment or pension fund, then you aren’t banging out US assets with every tick in Fed Funds futures market. So I don’t buy this argument at all.

Next up is the “Powell is different than other Fed chairs and will not be swayed by each downtick in financial markets.” Really? He has already switched his tune in the space of less than one quarter due to stock market wobbles. I call bullshit on that one.

Well, what if the economy proves more resilient to the recent rate hikes? Then Powell might indeed raise rates and cause the US dollar to rally. This argument I will accept, but let me ask you something - what do you think that a stronger economy (with corresponding tighter monetary policy) does to both the yield curve and stocks? My guess is that the yield curve inverts, stocks sag, and sure, the US dollar rises, but it’s no longer a virtuous rise.

Here is my prediction; US stocks might rise, but only if the greenback falls. The US dollar might rally, but it will snuff out the stock market rally. The days of them both going up together are over. The milkshake glass is empty.

After re-accelerating in October, US Import and Export price growth slowed dramatically in November to the lowest since Nov 2016 and July 2017 respectively...

Import prices fell 1.6% MoM (well below expectations of a 1.0% decline) slamming the YoY growth to just +0.7%.

Export prices also fell, down 0.9% MoM (well below the -0.3% expectation) pushing the YoY gains to just +1.8%.

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After re-accelerating in October, US Import and Export price growth slowed dramatically in November to the lowest since Nov 2016 and July 2017 respectively...

Import prices fell 1.6% MoM (well below expectations of a 1.0% decline) slamming the YoY growth to just +0.7%.

Export prices also fell, down 0.9% MoM (well below the -0.3% expectation) pushing the YoY gains to just +1.8%.

Under the hood:

• Import prices ex-petroleum fell 0.3% after rising 0.2% in Oct.

• Import prices ex-food and fuel rose 0.4% y/y in Nov.

• Import fuel prices fell 11%, most since Jan. 2016, after a 3.2% increase in Oct.

• Industrial supplies prices fell 5.3% after rising 1.4% in Oct.

• Auto prices unchanged after no change in Oct.

• Consumer goods prices unchanged after falling 0.3% in Oct.

As China's import price index slumps, exporting the most deflation since 2007...

Dear Jay Powell, still want to hike rates next week?

Having slashed both growth and inflation outlooks,  one could be forgiven for wondering why ECB President Mario Draghi would choose now to stop its massive bond-buying program (which has done so much good for the European economy and markets)...

With stocks and the euro weak, Draghi will do his utmost to crush any reporters' efforts to shift The ECB's actions Read more.....

Having slashed both growth and inflation outlooks,  one could be forgiven for wondering why ECB President Mario Draghi would choose now to stop its massive bond-buying program (which has done so much good for the European economy and markets)...

With stocks and the euro weak, Draghi will do his utmost to crush any reporters' efforts to shift The ECB's actions narrative in a hawkish direction.

"I got this..."

And here is what The ECB looks like on Bloomberg's Hawk-Dove-o-meter:

Watch live (starting at 0830ET) to see Draghi talk his way out of this...

Blain’s Morning Porridge submitted by Bill Blain

“I put them with my own, can’t make it all alone, I’ve built my dreams around you.”

As I said yesterday; if May wins the UK remains a SELL.

She won her confidence vote, but, the essential reality is 2 in 5 Conservative MPs oppose her. As a result, nothing will be solved about Brexit. The latest polls broadly suggest the UK i Read more.....

Blain’s Morning Porridge submitted by Bill Blain

“I put them with my own, can’t make it all alone, I’ve built my dreams around you.”

As I said yesterday; if May wins the UK remains a SELL.

She won her confidence vote, but, the essential reality is 2 in 5 Conservative MPs oppose her. As a result, nothing will be solved about Brexit. The latest polls broadly suggest the UK is hung 50/50 leave/remain, but break it down and it’s still 50% remain, but 25% of leavers who would accept the current deal are vehemently opposed by the 25% who’d prefer a no deal Brexit. That’s the critical political fault line exposed by yesterday’s vote.

These are the numbers party strategists will be making their calculations upon. Every politician is each assessing their own chances and opportunities. The UK is now a game of political optimisation.

Pro-Brexit MPs with leave majorities should be concerned – their vote is split. For MPs sitting on Remain majorities or even modest minorities, their political maximization strategy is probably to align with Remain as the Leave vote becomes increasingly fractured, split and disenchanted. The extreme Brexiteers will fulminate, get angry, drop their allegiances, and waste their votes on the extreme right or whatever Nigel Farage comes up with.. 25% of the electorate will win one or two seats at the next election. Discount them.

The exact numbers are something we need to analyse in terms of individual MPs, on a party to party basis, at a constituency parliamentary and referendum level – I’ve got someone in mind to work on it.

Smart investors should be able to make some educated guesses how these scenarios play out… and thus: when to buy into a cheap UK. More than happy to discuss timing…

My own guess is we’re likely to see a parliamentary shift towards Remain and even a second referendum – simply on the basis that’s where MPs are likely to see the best chance of holding onto their jobs. Democracy be damned. (For clarity – I am a soft Brexiteer. I’d accept the current deal and move on! I think a second referendum would be abject surrender.)

We’re likely to see further Brexit-led instability, but little new, through Jan into Feb. No compromise from Europe. Then, as the deadline approaches, I expect Theresa’s final act will be for the  UK to step back and delay Brexit – citing the need for more time to avoid the No Deal (which only 25% support). The EU will graciously allow us more time, even suggest we pause or annul Article 50. They know the argument is heading their way if they exhibit patience.

Then we head towards inevitable elections – Theresa May will be gone. She will be persuaded to step down to let a “strong and stable” leader take over.. (something familiar about that phrase…?). Who? Does it matter? I suspect the prospect of electoral suicide means the Tories won’t vote for a prominent Brexiteer. Will the party split? Who knows? Who cares? It would have serious impact on our electoral calculations.

Voter disenchantment with the Tories – or the BSBP (back-stabbing b******s party) – is very real. At least Boris has learnt to keep his mouth shut. The minister for the 19th Century might care to take note. Smart Tories are making positive sounds about listening. I suspect fear of a Labour Government means an election isn’t likely to lead to electoral cataclysm for the Tories (although it’s a very attractive thought). A good chum is quoted in the WSJ this morning saying: “a Jeremy Corbyn government is far worse than any Brexit or no Brexit,” and “It would be apocalyptic for the economy.”

Of course it would.. Wouldn’t it? Would Labour really be that bad? Momentum, to be frank, controls far fewer seats than its given credit for, and is running out of “momentum”.. All it needs is for grass roots labour supporters to support moderates. Corbyn’s ability to deliver his Red policies on nationalisation etc will be extremely limited by the parliamentary party which remains vehemently opposed to him. Even momentum candidates know their electorates objectives are not the same as the 40 unwashed Trotskyites that won them the right to stand.   

When it comes to Labour, the Trend is our Friend. Every time Labour wanders too far left, it eventually goes into autocorrect – and swings back right. Think about Militant and Clause 4 last century! What we really need is a sans Blair Blairite revolution. That’s why I mentioned David Miliband yesterday. The Time is Now! If Labour could get a palatable leadership in place in the next few months they are assured of power. As might a new soft centre party.. there’s a thot!

I’m just a market commentator. I’m not a political pundit. But it’s clear the current unresolvable political environment creates a series of very interesting market outcome scenarios. All of which means the UK remains uncertain, and markets hate uncertainty – except to the extent it generates wonderful volatility to gamble against!

Don’t expect this to end any time soon.

Meanwhile, back in the real world..

I have to laugh at Macron’s France blithely breaking EU debt guidelines while Italy is forced to put new policies in place to get their budget deficit back in line at 2.04%. Actually, that’s bullsh*t. Italy is not going to cut the deficit number. It simply says it will. That’s not quite same thing. More on where European Govt spreads are going next week. Meanwhile, what is Draghi going to say about the end of QE? As Europe sinks towards recessions… I’m sure he’ll find some other way to deluge the continent in free money to keep the happy party going…

The German govt is apparently keen for Commerz and Deutsche to merge. That will be the end of Finanzplatz Deutscheland. Merging two troubled banking dinosaurs to create a larger basketcase is a recipe for years of conflict as their competing cultures of mediocracy duke it out. Sorry to be harsh… but in recent years neither bank has been batting in doubt digits. What about the European dream? Domestic mergers like this are born from political protectionism. There still isn’t a single successful example of pan-European banking – and don’t quote me Santander.. there are sound reasons they kept The Shabby-Abbey.

What to say about the US? Who would you trust? Michael Cohen or Donald Trump? Or neither?

A day after collapsing to the ominous $6.66 March 2009 closing lows, GE stock is soaring in the pre-market after long-time bear JPMorgan analyst Steve Tusa upgrades the company to neutral from underweight.

Citing the fact that the liabilities and “known unknowns” are better understood and priced into the stock price, Tusa (who has been a "sell" since May 2016) wrote that:

“We believe a more negative outcome on these liabilities (equity dilution, f Read more.....

A day after collapsing to the ominous $6.66 March 2009 closing lows, GE stock is soaring in the pre-market after long-time bear JPMorgan analyst Steve Tusa upgrades the company to neutral from underweight.

Citing the fact that the liabilities and “known unknowns” are better understood and priced into the stock price, Tusa (who has been a "sell" since May 2016) wrote that:

“We believe a more negative outcome on these liabilities (equity dilution, for one) is at least partially discounted, and it’s possible that the company can execute its way through an elongated workout that limits near-term downside,”

And that was good enough to juice the stock up 12% in the pre-market...

Still, he warned that a reset in free cash flow expectations may be necessary, even as it could provide a bottom for the stock.

Additionally, as Bloomberg reports, GE Digital said it would sell a majority stake in its ServiceMax cloud-based field-service software to Silver Lake and create a new industrial Internet-of-things firm with starting annual revenue of $1.2 billion.

As one wise old equity trader said to us on the news of another bottom-caller - "It can't get any worse... right?" - well it can still fall 100% more from her.

As expected, the ECB - which obviously is keeping its rates unchanged - confirmed it would end its asset purchases in December 2018, while clarifying for the first time that it would "continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates."

Also of note, the ECB announced it "expects interest rates to remain at their present le Read more.....

As expected, the ECB - which obviously is keeping its rates unchanged - confirmed it would end its asset purchases in December 2018, while clarifying for the first time that it would "continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates."

Also of note, the ECB announced it "expects interest rates to remain at their present levels at least through the summer of 2019" which however the market no longer believes, having priced out a full rate hike in 2019.

In any case look for more clarity in 45 minutes when Draghi speaks.

Full statement below:

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

Regarding non-standard monetary policy measures, the net purchases under the asset purchase programme (APP) will end in December 2018. At the same time, the Governing Council is enhancing its forward guidance on reinvestment. Accordingly, the Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

Here is a redline comparison with the October statement:

As usual, much more during the presser at 830am ET when Draghi is expected to cut both the ECB's inflation and GDP forecasts.

Theresa May is in power. But she's not in charge.

That's essentially the takeaway from last night's 'no confidence' vote, where more than half of the Tory backbenchers who aren't on the PM's payroll (i.e. don't hold formal positions within the government) voted against the PM, narrowing her margin of victory to just 83 votes, which was hardly the overwhelming margin of vict Read more.....

Theresa May is in power. But she's not in charge.

That's essentially the takeaway from last night's 'no confidence' vote, where more than half of the Tory backbenchers who aren't on the PM's payroll (i.e. don't hold formal positions within the government) voted against the PM, narrowing her margin of victory to just 83 votes, which was hardly the overwhelming margin of victory for which the PM had hoped.

And even this number doesn't accurately reflect the waning enthusiasm for the prime minister; to avoid an even narrower victory, which might have prompted May to resign, May was forced to offer a serious concession on Wednesday: During a speech ahead of the secret ballot, May indicated that she would step down before the next general election (set for 2022), prompting speculation that she could resign as soon as early next year.

And while Brexiteers - who have been criticized by some pro-government MPs for their poor timing in orchestrating the vote - are reportedly "hunkering down" for "trench warfare" (suggesting that few will break ranks to back May's draft deal), according to the Times of London, some former members of May's government - including former Brexit Secretary Dominic Raab - said during an early Thursday interview that it's "hard to see" how the PM can continue to lead.

Here's Reuters:

"We will have to back her as best we can but problem is that both in relation to Brexit and wider sustainability of the government given likelihood of any changes to the deal, given the likely scale of opposition, it looks very difficult to see how this PM can lead us forward," Raab told reporters.

In another sign that May has been seriously weakened by the vote, the Times reported that several senior cabinet ministers are pushing May to bring back a vote on her deal before Christmas so that it can be voted down, and Parliament could proceed with holding a series of "indicative" votes on every conceivable deal option. This could give May leverage with the EU, while also demonstrating to intransigent MPs that there is sufficient political will to avoid ever triggering the backstop.

Cabinet Brexiteers and Remainers were agreed last night that Mrs May should push ahead with the vote on her Brexit plan before Christmas, both camps expecting her to lose heavily, according to the Times of London (though rumors of this plan first surfaced last month).

Five cabinet ministers - David Gauke, Amber Rudd, David Lidington, Greg Clark and Mr Hammond - want Mrs May to bring back her deal for a vote as early as next week. They then want the Commons to hold a series of "indicative" votes on every conceivable option, from a no-deal Brexit, a Canada-style agreement, a single market and customs union to a second referendum.

"They will all fail," one cabinet minister said. "At that point we will probably be able to rule out no-deal and Canada."

Though Commons leader Andrea Leadsome denied reports that a 'meaningful vote' will be called before Christmas.

With May heading back to Brussels on Thursday, EU leaders are reportedly digging in their heels, warning that, while they would be willing to agree to some minor "clarifications" and "legal assurances" about the backstop, the deal text - as it stands - must remain unchanged. According to one report, EU leaders are only planning to give May "ten minutes of their time" (after all, there are other burgeoning crises in Europe that are dividing the bloc's attention).

This should surprise nobody. Because, as one analyst told RT, what incentive does Europe have to fold? After two years of fraught negotiations, May has failed to unify her party. Given that any concessions could still face rejection, the only sensible approach for the EU is "take it or leave it."

Speaking shortly after the Wednesday vote, May said she is determined to fight for changes to her Brexit deal at an upcoming EU meeting on Thursday.

But it’s unlikely that Brussels won’t soften its stance on that, Szamuely said: "They figured that even if they make more concessions, there’s really no guarantee that she’ll be any more successful in winning the vote for Brexit."

And even if May lost the confidence vote, finding somebody else to lead the Tories might be difficult. Because, given the quagmire that the party has found itself in, what sane politicians would really want the job?

"What’s really worked for her is that nobody wants that job because it’s one of the worst jobs in the world," says George Szamuely, Senior Research Fellow of London Metropolitan University.

Unless May can pull off a miracle in Brussels, it's very likely that May's deal will eventually be voted down. And after that (as Deutsche Bank analysts noted the other day) the probability of either a second referendum or - worse - a general election triggered by a Labour-led vote of no confidence (there have been several anxiety-provoking reports about a possible DUP alliance with Labour to sabotage the government) will continue to climb.