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Mon, 22 Jul 2019 12:45:22 -0400

Maybe No Rate Cut In July?

Authored by Chris Whelan via TheInstitutionalRiskAnalyst.com,

We caused a bit of a fuss last week on�CNBC�by suggesting that the Federal Open Market Committee will�not cut the target for Fed funds this month.� We suggested instead that the Federal Reserve Board will first end the runoff of the System Open Market Account (SOMA) and then �wait and see� about any ch Read more.....

Authored by Chris Whelan via TheInstitutionalRiskAnalyst.com,

We caused a bit of a fuss last week on�CNBC�by suggesting that the Federal Open Market Committee will�not cut the target for Fed funds this month.� We suggested instead that the Federal Reserve Board will first end the runoff of the System Open Market Account (SOMA) and then �wait and see� about any change in the rate target.

Readers of�The Institutional Risk Analyst�know that we tend not to follow the crowd, especially when the data suggests that the narrative is at odds with actual market conditions. To us, any sudden and poorly considered change in policy by the Fed could create even more structural problems than we already face.

The basic problem facing the FOMC is that the combination of shrinking the Fed SOMA balance sheet, Basel III and the various other rules and regulations meant to �protect� banks has the effect of actually reducing liquidity.� The quarter ended June, for example, saw a lot of liquidity exit the market as we wrote last week.� With the short-term markets still clearly tightening, the FOMC is in the position of having to compensate for overly restrictive prudential regulations and the negative impact of a shrinking balance sheet.

Our colleague Ralph Delguidice at Pavillion Global Markets summarized the situation nicely in a note last week.

�The problem with repo continues to be that Basel 3 was�designed to make balance sheet expensive, and the private money markets are growing increasingly illiquid as a result. In a recent post the�NYFRB �Liberty Street��blog demonstrates the impact of the IOER cuts (to discourage reserves) as purely transitory; with repos and various other money market rates edging back towards�and even above�the top of the target range over and over.

Once again, we see that if efforts to push private cash into GC repo flows by lowering the IOER does not incentivize capital constrained primary dealers to keep rates in the target zone, then efforts to steepen the curve from the front with fed-funds cuts may be equally futile.

Even if they do get repo rates lower�perhaps by offering repo directly in the Standing Repo Facility (SRF), the problem will be keeping mid curve yields from falling even faster. The FX basis is driven primarily by short rate differentials, and lower LIBOR will reduce FX swap costs bringing hedged foreign buyers back into the US curve.�

Whereas in past cycles the FOMC limited �fine tuning� to the adjustment of key interest rates, since 2008 the Fed has attempted�the impossible by trying to manage�the entire yield curve.� The foray into quantitative easing or �QE� began this quixotic adventure, putting the Fed in the position of manipulating the entire term structure of interest rates via open market operations.�We actually saw�somebody suggest on�Twitter�last week that changing the rate of interest�paid on excess reserves (IOER) actually �sterilizes� the runoff of the SOMA balance sheet.� Really?

Imagine the situation if the FOMC were to actually follow�the advice of the howling mob of equity analysts and captive economists, cutting the FF target while continuing to run off the Fed balance sheet.�The SOMA is currently shrinking at an 8% annual rate according to our friends at�Grant�s Interest Rate Observer.� How far would the FOMC need to reduce the Fed funds rate to compensate for this relentless tightening of liquidity in the US banking system?� Try zero.

We all are left to ponder the conflict between momentary policy, on the one hand, and prudential policy on the other.� If the Fed were able to adjust Basel III and the other rules imposed upon banks since 2008 in order that they may prove their liquidity, there would be no need for an interest rate cut.� Indeed, looking at the chart below from FRED�showing the 10-year Treasury note and the 30-year fixed mortgage from Freddie Mac, interest rates are near the low end of the range going back five years.

If we take the upward surge in US interest rates in 2016 following the election of Donald Trump and draw a line straight across to today, we have pretty much come full circle.� The difference is that since that time, the Fed has withdrawn hundreds of billions in liquidity from the system via QT, shrinking the deposit base of US banks dollar for dollar as securities owned by the Fed are redeemed by the Treasury.� Both the management of the Fed�s balance sheet and the liquidity rules that apply to US banks have actually been hurting economic growth.� One hand in Washington is working against the other.

Since 2008, the FOMC has been over-compensating with monetary policy to boost the economy and fight deflation.� Bank regulators, on the other hand, have been turning large banks into islands of liquidity that periodically cut off their clients to prove their ability to fund themselves in times of stress.� The market breakdown seen in December 2018 illustrates this conflict in rather graphic terms.�The chart above show the $1.2 trillion decline in excess reserves since 2014.� Will the Fed repeat the December fiasco again this Fall?

The Fed was created a century ago to ensure a flexible currency system, yet the current conflict between monetary policy and prudential regulation of banks is a serious national problem.� It�s as though we have wound back the clock to 1907, when the Treasury and J.P. Morgan & Co were the only sources of liquidity to the US financial system in times of financial crisis.�Today�s toxic mix of radical money policy and retrograde prudential regulation of bank liquidity�is the functional equivalent of being back on the gold standard a century ago.

Jim Grant wrote in his classic 2014 book, �The Forgotten Depression: 1921: The Crash That Cured Itself,� of the Fed's conflict of visions.

�The Federal Reserve Act was drafted in a world of peace and limited government. It was implemented in a world of war and statism. It was as if a central bank designed to function on Earth were somehow relocated to Mars.� Fixed exchange rates and free gold movement were the hallmarks of prewar monetary arrangements; the Federal Reserve had to adapt on the fly to untethered exchange rates and immobilized gold stocks.�

A century later, the US government is still struggling to get it right when it comes to providing a flexible currency to fuel the American dream.� Ask not whether we should cut the target for Fed funds.� Ask instead why liquidity is not moving through the US financial system in a prudent and reasonable fashion.

Close

Mon, 22 Jul 2019 12:30:00 -0400

Registered Sex Offender Weiner Moves Back In With Wife Huma Abedin And 7-Year-Old Son

Anthony Weiner has been a free man for a few months now, ever since he left a Bronx halfway house, and now it appears he's moving back in with his wife, Hillary Clinton aide Huma Abedin, and their seven-year-old son Jordan.

The Daily Mail reported that the 54-year-old Read more.....

The Daily Mail reported that the 54-year-old ex-Congressman and former mayoral candidate was seen rolling boxes and designer garment bags into Abedin's home over the weekend. Weiner has never lived in the lower Manhattan apartment where Huma moved with their seven-year-old son Jordan soon after the disgraced politician went to prison. Abedin had filed for divorce, but has since withdrawn her petition, after the two parties decided to settle the issue privately. Abedin initially filed for divorce on the day Weiner entered his guilty plea for sexting a 15-year-old girl.

It's not clear where Weiner had been staying since leaving his Bronx halfway house, where he was sent after spending 21 months in custody.

When he was leaving his halfway house in May, Weiner told reporters he hoped to get his family back and make up for lost time.� Weiner, who is a registered level one sex offender, said "I hope to be able to live a life of integrity and service, and I�m glad this chapter of my life is behind me."

Anthony Weiner moving his things

Since his release, Weiner has reportedly been pushing a marijuana business on potential investors, and shopping a book deal around.

The DM offered some amusing eye-witness details about an awkward encounter with Weiner at a coffeeshop.

A source told DailyMail.com of the meeting: "Weiner was advising the other man on how to approach investors and said, '"Tell them you have this great venture and then be like, I know the perfect guy'."

"Weiner appeared to be referring to himself and explaining how to get other money on board but conceal his involvement."

He told one potential investor that the "sexual stuff shouldn't matter."�

The "stuf" he referred to were explicit text messages he exchanged with a 15-year-old girl while he was married in September 2016.

Among them was one text which read: "I would bust that tight p***y so hard you would leak and limp for a week."

He originally made contact with the girl on Twitter.�

But given the Congressman's tainted reputation, we imagine a multimillion dollar book deal is his best shot at making a living comparable to what he enjoyed before his political career finished prematurely when Weiner accidentally tweeted a close-up shot of his bulging genitals.

Mon, 22 Jul 2019 12:10:13 -0400

Demonetized: YouTube Destroys Trailblazing Musician's Income Stream Over 'Misleading Thumbnails'

YouTube content creators beware;�it's not just divergent political opinions that can result in arbitrary demonetization and loss of income.�

YouTube content creators beware;�it's not just divergent political opinions that can result in arbitrary demonetization and loss of income.�

*Thumbnail for�TRAPPIN IN JAPAN EX ???????? ??lpha 2 : $TUDY BEAT$*

In the case of trailblazing music producer Ryan Celsius, it was "misleading thumbnails" that earned him a�full demonetization�as well as a "shadowblock" on several videos�uploaded to�his eight-year-old channel, which boasts more than 60 million views, 980 videos�and nearly 400,000 subscribers as of this writing.�

Demonitized and countless videos shadowblocked, not for Copyright but because @YouTube doesn't understand what my content is . keep your ad money , just unblock my videos pic.twitter.com/ggnfu3HiKN
� AESTHETIC DIETY (@RyanCelsius) June 18, 2019

"Surprisingly to me the reason provided was fairly vague and didn't identify which of my 900+ public videos was in violation of the policy. It only noted that I had 1 or more videos with a 'Misleading thumbnail' designed to gain views," Celsius told�Zero Hedge.

I reached out to creator support again and they struggled to understand my issue or provide any new information on why my videos were shadow blocked despite YouTube policy stating video searchability and visibility is not affected by monetization. After a month of being demonetized and having my videos blocked , no bot or human at YouTube can even tell me how my content is 'misleading' or why the subjective opinion of a non offensive image on 1 of 900+ videos merits taking down a whole channel.�-Ryan Celsius.�

The thumbnails in question often include anime, Simpsons fan-art, and nostalgic imagery to match both the audio and visuals created by Celsius and guest artists he elevates using his platform. Of note,�the channel was�not�demonetized due to copyright violations, however�when asked about the shadowbans, YouTube pointed to�claims by other artists.

"I refuted this since I know all of the claimants," said Celsius.�"When I asked them which specific claimant blocked the videos (since this information is not visible) they said that it could not be known."

YouTube has no clue what to make of Celsius

"The running joke in the community is that the YouTube policy team cannot understand the link between �Japan -> Trap Music -> Anime -> The Simpsons, so since they don't understand my content it must be misleading," said RC, adding "Apparently, the YouTube demonetization has been somewhat of a plague for the creators in my community. For example, a few creators I know such as SmoothSounds and RizonielTV have been hit with the same demonetization issues as well as copyright strikes."�

Ryan's�unique style�combines phonk, trap and hip-hop music against nostalgic backdrops, popular anime clips and other interesting footage. In short, it's an entirely new genre.

I create experimental visual mixtapes that intersect many genres of music. Internally, when I create mixes or single videos I imagine I am creating a soundtrack for a movie that doesn't exist yet or even a movie that couldn't exist," said Celsius.�

"It started as a personal project for my own enjoyment. I never expected to build an audience of thousands of people, but when I did, I felt like it would be irresponsible to not take advantage of this huge opportunity I was given," he told�Amuse.io�in January.

I spend most of my time looking for tracks from independent artists that fit in with the concepts I want to develop. On the way I usually find tons of other tracks that I would not have discovered otherwise. This digital crate digging has led me to find a lot of incredibly talented artists that are taking the styles of music I enjoy such as vapor trap, phonk, lofi hip hop, dark trap and continuing to expand them. I am honored that I have an opportunity to help represent these artists. -Ryan Celsius

The channel's immensely popular 'Trappin' in Japan' series features�custom mixes by Celsius and others set to footage of people walking and driving through various parts of the island nation.�

Other videos feature remixed beats set to clips from popular nostalgia, such as the 1989 animated film�Akira.

What's more,�Celsius has at least two 24/7 streaming channels,�where hundreds of fans chat�in real time as a staff of moderators police the room for bad vibes and�self-promotion.

In short, Ryan has created a platform for a unique community of musicians and fans to enjoy their creations - and�neither�YouTube's algorithms, nor their "creator support" group at the Silicon Valley behemoth�have any�clue what box to put him�in.�None of RC's content is particularly controversial, so�his demonetization should serve as a cautionary tale for anyone who depends on YouTube ad revenue for income.�

Fortunately for Ryan�this isn't going to�put him on skid row.�"YouTube was not my primary source of income," he said.�"[B]ut it brought in enough money to run a suite of beefy VPS's to run my livestreams and purchase any albums or other content / equipment to continue making videos and growing."

YouTube did not respond when reached for comment.�

Mon, 22 Jul 2019 11:59:13 -0400

Demise Of Phillips Curve Shifts Focus To Asset Cycles And Financial Stability

Submitted by Joseph Carson, Former Director of Global Economic Research, Alliance Bernstein

The Phillips curve has been dormant for over two decades, as the dynamic between tight labor markets and inflation has virtually disappeared. Yet, the demise of the Phillips curve should not be used as a reason for policymakers to think it is safer to run with a more stimulative monetary policy.

The transmission of modern day monetary policy works mainly through the asset marke Read more.....

Submitted by Joseph Carson, Former Director of Global Economic Research, Alliance Bernstein

The transmission of modern day monetary policy works mainly through the asset markets and shifts the balance of risks towards asset cycles and financial stability. Decision to ease monetary policy today against a backdrop of record asset values would be tantamount to easing policy at the peak of previous high inflation cycles.

In testimony before Congress, the Fed Chair Jerome Powell acknowledged that the linkage between unemployment and inflation has been broken for at least 20 years ago. A number of fundamental and technical factors have come into to play in the past two decades to alter this relationship.

For example, in 1998 the Bureau of Labor Statistics (BLS) determined that it could no longer find an adequate sample of owner-occupied housing to safely ensure an accurate measurement of owners rent so BLS decided to rely exclusively on the survey data from the rental market to measure both owner's rent and apartment rents, even though the two markets are fundamentally different.

Measurement changes for technical reasons tend to be of minor importance but in this case the risk of altering the behavior of reported inflation as well as its relationship to other series was high for two reasons; first, the owner's rent is the single largest component, accounting for over 30% of the core consumer price index; and, second, it was being replaced with a rent series that tends to move countercyclical, or the opposite direction of house price inflation.

Here's a quick glance at how the owners rent series tracked housing prices under the original and new measurement practices.

During the 15-year period (1983 to 1998) when BLS used the original owner's sample, the owners rent index rose cumulatively 74%, nearly matching the 72% increase in house price inflation as measured by the S&P Core Logic Case-Shiller series. Yet, during the housing boom period of 2002-06 when house price inflation jumped 50%+, the new owners rent index showed a cumulative increase of only 15%.

The near disappearance of housing inflation from reported inflation is mainly technical, but it did contribute (a lot) to the breakdown in the Phillips curve. Meanwhile, the loss of the house price signal should not be interpreted that real asset inflation is any less important to the economy's performance or to monetary policy. Yet, from an operational standpoint for monetary policy the change moved housing inflation from the inflation-targeting bucket to the financial stability mandate.

Why is this important? Monetary policy feeds asset cycles through the same channels (interest rates and expectations) as it does general inflation. Yet, policymakers treat asset cycles differently believing that supervision and regulation---as a substitute for tighter money--- is a better approach to promote financial stability.

It always difficult to prove causation but its hard to deny the recurring pattern of boom/bust asset cycles ever since this two-prong policy has been used in the past two decades. Moreover, the tipping point for the last two recessions came from destabilizing excesses in the asset markets and not from imbalances tied to general inflation. Today's readings on asset values - relative to nominal income and GDP - exceed those of the dot.com and the housing bubble.

Each generation of policymakers has had to deal with fundamentals changes in the economy, and with the changing transmission and channels of monetary policy. During the high inflation cycles of the 1970s, policymakers misread inflation dynamics leading policymakers to believe that by accommodating the inflation cycle it would extend the economic cycle. That did not end well. Are policymakers nowadays falling into the same trap, misreading the dynamics of asset cycles believing that by promising more easy money it will help extend the economic cycle, while overlooking the risks to financial stability?

The Phillips curve might be dead, but its "ghost" lives on in the "Asset" curve (or the new dynamic between monetary policy and asset cycles). Policymakers should proceed with caution.

Mon, 22 Jul 2019 11:40:00 -0400

UK Minister Resigns, Tries To Topple Johnson Government Before It's Even Official

In a race that has been marked by mostly harmless scandal (the altercation between Boris Johnson and girlfriend Carrie Symonds being an exception), some exciting developments are threatening to topple Johnson's administration before it even begins.

Alan Duncan

Ministers' discomfort with serving under Boris Johnson have manifested in a series of resignations in recent days.

And on Monday, one of Johnson's longtime enemies within the Conservative Party became the latest to resign and try to be a thorn in Johnson's side, and possibly even scuttle hiswell-laid path to No. 10.

In a letter to Prime Minister Theresa May, Sir Alan Duncan resigned his post as foreign office minister, saying it was "customary" for ministers to step aside upon the changing of a PM, and added that it would free to "express my views" ahead of May leaving office.

May accepted Duncan's offer and thanked him for his "distinguished" service.

NEW: Exchange of letters between PM and Sir Alan Duncan who resigned as Foreign Office Minister today. pic.twitter.com/thbPHcOI3V
� Joe Pike (@joepike) July 22, 2019

Though many still refuse to believe that Brexit, or a no-deal Brexit, is even possible...

...Duncan immediately tried calling for a vote that, through a series of technicalities, would have amounted to a de facto confidence vote in Johnson.

But Duncan was stymied by Speaker John Bercow, who blocked his bid.

But even if enough support for the next leader was registered in the vote, it might have exposed how shaky a Johnson government would be.

Here�s the motion Duncan wanted a vote on... pic.twitter.com/n1SyeVZtbC
� Laura Kuenssberg (@bbclaurak) July 22, 2019

For the nerds out there and @PaulTwinn on his lounger, it was to be an SO 24
� Laura Kuenssberg (@bbclaurak) July 22, 2019

If Johnson (still hypothetical remember) didn't have the numbers in the Commons, then he would not have become PM... I know it's 2019, but it's still pretty extraordinary that a Tory wants to give the Commons the opportunity to stop the next Tory leader getting into Number 10
� Laura Kuenssberg (@bbclaurak) July 22, 2019

5. Last thought on this for now - this move is clearly not something Duncan dreamt up overnight - and that may be the worrying thing for Team Johnson - there are MP s who know their way around the system extremely well who won't be on his side
� Laura Kuenssberg (@bbclaurak) July 22, 2019

In an interview with the BBC, Duncan said he wanted the Commons to hold an effective confidence vote in Johnson on Tuesday, after Johnson is declared the new Tory leader, but one day before he is sworn in as PM. Some saw the maneuver as a long-time critic trying to undercut Johnson, but Duncan insisted he wanted Johnson's government to succeed.

But, Duncan argued, this would be the first time in living memory where a minority government changes PM mid-term. To avoid a "constitutional crisis," Duncan said he thought it was important to establish that Johnson had the confidence of the Commons.

Recent polls show Johnson is expected to defeat his rival, Jeremy Hunt, by a landslide.

You will find more infographics at Statista

But with Duncan now the fourth minister to resign from May's government in recent days, the vote just underscores how tenuous Johnson's government's grip on power will be.

Duncan, who once served under Johnson when Johnson was Foreign Secretary, said he was "totally" loyal to Johnson when he was his deputy, but that he nonetheless had serious concerns about Johnson's ability to lead. He suggested that he believes Jeremy Hunt, Johnson's opponent and Secretary of State for Foreign and Commonwealth Affairs, would be the more competent leader, despite widely held expectations that Johnson will win a ballot of Tory members.

"When I was his deputy I was totally loyal. We never had an argument. I never bad mouthed him. So I�ve served both foreign secretaries. And I�ve no doubt which of the two is the more capable and more competent. So I have very grave concerns that he flies by the seat of his pants, and it�s all a bit haphazard and ramshackle. But there�s no personal animosity of any sort. I just think he�s going to go smack into a crisis of government."

Rumors have been spreading that Europe is preparing to offer Johnson a new deal to try and avert a "no deal" Brexit, something that Johnson seems increasingly intent on delivering.

Mon, 22 Jul 2019 11:25:42 -0400

Trump Trashes 'Squad' As "Racist Group Of Troublemakers"

President Trump's ongoing effort to force 'moderate' liberals to support the most extreme leftists - somewhat tarring the entire Democratic party with the same open-borders, anti-Israel, "America's the worst" strategy - was turned up to '11' on the rhetoric scale today.

What Goes Around

Authored by James Howard Kunstler via Kunstler.com,

What Goes Around

Just how dead is the RussiaGate story - and how brain-dead are the House Democratic Committee chairmen, Nadler (Judiciary Committee) and Schiff (Intelligence Committee) to haul RussiaGate�s front-man, Robert Mueller back into the spotlight where the next thing to roll over and die will be Mr. Mueller�s evanescent reputation? The entrapment operation that was the Special Counsel�s covert mission has turned out to be Mr. Mueller own personal booby-trap, prompting the question: is it possible that he�s just not very bright?

Though Mr. Mueller�s final report asserted that the Russian government interfered in �a sweeping and systemic fashion� to influence the 2016 election, the 450-page great tome contains zero evidence to support that claim, and the discrepancy was actually noticed by federal judge Dabney Friedrich who is presiding over the case against the alleged Russian Facebook trolls that was one of the two tent-poles in the RussiaGate fantasy. The case is now blowing up in Robert Mueller�s face.

In early 2018, Mr. Mueller sold a DC grand jury on producing indictments against a Russian outfit called the Internet Research Agency and its parent company Concord Management, owned by Russian oligarch Yevgeny Prigozhin for the so-called election meddling. The indictment was celebrated as a huge coup at the time by the likes of CNN and�The New York Times, styled as a silver bullet in the heart of the Trump presidency. But the indicted parties were all in Russia, and could not be extradited, and there was zero expectation that any actual trial would ever take place � leaving Mueller & Co. off-the-hook for proving their allegations.

To the great surprise of Mr. Mueller and his �team,� Mr. Prigozhin hired some American lawyers to defend his company in court. Smooth move. It automatically triggered the�discovery process, by which the accused is entitled to see the evidence that prosecutors hold. It turned out that Mr. Mueller�s team had no evidence that the Russian government was involved with the Facebook pranks. This annoyed Judge Friedrich, who ordered Mr. Mueller and his lawyers to desist making public statements about Concord and IRA�s alleged �sweeping and systemic� collusion with Russia, and threatened legal sanctions if they did.

Judge Friedrich�s rulings were unsealed in early July, after Messers Nadler and Schiff had already scheduled Mr. Mueller�s testimony before their committees. And now they�re stuck with him. The only purpose of his appearance was to repeat and reinforce the narrative that the Russian government interfered in the election, which he is now forbidden to do, at least in connection to the Concord and IRA�s activities. But the other tentpole of the two-year-plus inquisition has also collapsed: the allegation that Russian intel hacked the DNC servers. It�s now a matter of public record that the DNC servers were never examined by federal officials. They were purportedly scrutinized by a DNC contractor called CrowdStrike, co-founded by Russian Dimitri Alperovitch, an adversary of Vladimir Putin, active in US-based anti-Putin lobbying and PR. CrowdStrike�s �draft� report on their review of the server was laughably incomplete, and the Mueller team�s lawyers took no steps to validate it.

It would be interesting to hear Robert Mueller�s explanation for how come US computer forensic experts were never dispatched to take possession of the DNC servers. Surely a ranking member on either House committee would have to ask him that, along with many other embarrassing questions about the stupendously sloppy and disingenuous work of the Special Counsel�s team. It was only one glaring omission among many.

The whole affair now takes on tragic contours of Shakespearean dimensions. The Attorney General, Mr. Barr, is said to be an �old friend� of Mr. Mueller. They clashed pretty publicly after the release of Mr. Mueller�s long-awaited final report. Mr. Barr must at least be dismayed by the bad faith and deliberate deceit in his�old friend�s�final report,� and he really has to do something about it. The entire Mueller episode smacks of prosecutorial misconduct. In retrospect, it can only be explained as a desperate act undertaken by foolishly overconfident political activists.

If Mr. Mueller thought he was being enlisted to play an historically heroic role to help get rid of an elected president detested by the Establishment, then he made the blunder of a lifetime. It was not the first blunder of his long career, but it was the final and fatal one. It is not out of the question that Mr. Mueller himself may eventually be the one indicted and convicted of real crimes against the people of the United States.

Mon, 22 Jul 2019 11:00:20 -0400

Boeing Drops, Drags Dow To Session Lows After Fitch Puts Single-A Rating In Danger Of Downgrade

With the ongoing debacle over the 737 MAX seemingly getting worse by the day, a potentially far more ominous development hit today when rating agency Fitch warned that it may downgrade Boeing as the grounding of the ill-fated airplane stretches into the 5th month.

Citing regulatory uncertainty around the return to service of Boeing's workhorse jet and the �growing logistical challenge� of getting parked planes back in the air, Fitch said Boeing's credit rating was threatened as its cut its credit outlook for the aerospace giant while confirming its single-A, the sixth-highest investment-grade rating, and adding that there�s also a risk that the company will have to make costlier concessions to airlines.

The challenge for Boeing is not just how to get the grounded planes in the air; in the longer term, Fitch said the Max�s grounding presents a significant public-relations challenge that will remain a risk for �Boeing�s reputation and brand� into next year and beyond.

�Fitch also expects there will be a lingering operating-margin impact for several years after the 737 Max returns to service,� the ratings company said.

Boeing is currently rated A2 by Moody and A by S&P, which both have stable outlooks on the company, although we expect these to be cut soon now that Fitch has broken the seal. S&P said last week that Boeing�s announcement that it will be taking a $5.6 billion pretax charge to compensate for the grounding of the 737 Max wouldn�t affect the company�s credit ratings. But S&P warned that more damaging effects to Boeing�s financials or a �substantial loss� in market share to the 737 could warrant a downgrade.

The danger, of course, is that if Boeing is dragged to BBB, it will have far less space to issue debt and repurchase its stock, which could lead to a nasty shockwave for the company's investors and the broader DJIA.

While Boeing�s bonds were unchanged after Fitch�s report, BA stock dropped and since Boeing is the most important Dow member, the industrial average quickly slumped to session lows.

�

Mon, 22 Jul 2019 10:55:37 -0400

The Debt-Ceiling Impasse Has Meant Mini-QE Since May - Will Mean QT When Resolved

Authored by Bryce Coward via Knowledge Leaders Capital blog,

When the US government gets near its statutory debt limit, congress must lift the debt limit in order for the Treasury to continue to issue debt to pay for government expenses. Simple enough. However, even after the debt limit is reached, the Treasury can use �extraordinary measures� so that the government can keep paying its various agencies and servic Read more.....

Mon, 22 Jul 2019 10:35:00 -0400

Comey Under DOJ Investigation For Misleading Trump While Targeting Him In FBI Probe

Former FBI Director James Comey has been under investigation for misleading President Trump - telling him in private that he wasn't the target of an ongoing FBI probe,�while refusing to admit to this in public.

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What Goes Around

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