Another Data Point for QT Thesis

The S&P 500 Index fell 0.69 percent today. The QT thesis predicted a down day given $28.5 billion in Fed-held Treasuries matured today and a substantial chunk was likely rolled off the balance sheet (we won't know how much until next week). The stock market has been tracking the Federal Reserve's balance sheet for all periods since December 2008 except from November 2016 to the January 2018 top.

Chinese Govt Bond Bulls Keep Rolling On


Don't Worry About the Decline, the Market is Calm

WSJ: That Calm Chinese Stock Market? It’s Engineered by the Government
Three years after a national uproar when Chinese stocks plunged by nearly half in just over two months, traders and brokers say regulators are increasingly stepping in to influence trades and make China’s markets appear less volatile, especially during political events when Beijing wants to project stability.

The steps, aided by advanced surveillance techniques to monitor traders, include warning brokerage firms to police trades that are out of step with government wishes and phoning investors directly when they act out of line.

The intervention is becoming more common just when Chinese equities are about to be included for the first time in a global stock index. MSCI Inc., whose benchmarks many investment funds follow, is set to add more than 200 Chinese stocks to its emerging-markets index on June 1. The introduction means more foreign investors will be exposed to a Chinese market that doesn’t move purely to the dictates of supply and demand.

Never in over 25 years of watching the Chinese markets has the state been so involved and interfering in micro issues,” said Fraser Howie, an independent analyst and author of “Privatizing China: Inside China’s Stock Markets.”

Social Mood in Brazil: Negative

Is mood bottoming? If you think the U.S. dollar rally is over and a new downtrend is coming, buy Brazil here.
SCMP: Rumours of a military coup get louder as Brazil’s trucker strike causes supply chaos and expose wider discontent

Full Blown Democrat Civil War Still One to Two Election Cycles Away

The Republican civil war started in 2008 with Ron Paul's campaign, picked up steam with the 2010 arrival of the Tea Party, continued into 2012 with Romney shutting Ron Paul out of a speaking role at the convention and ultimately culminated in Donald Trump winning the presidency on an anti-establishment platform.

The Democrats had power from 2008 through 2016, but as soon as there was a change election Bernie Sanders surged with an insurgent campaign. As had been done to Paul in the Republican party, the establishment of the party worked against Sanders. Now this mid-terms could be the Democrats "Tea Party" year, but a conclusion of the internal battle will come in the next 2 to 4 years once aging establishment Democrats retire and create an even bigger free-for-all opportunity for outsider politicians.

SanFran Chronicle: Democrats try to end civil war in California race that’s key to House control
“We have some truly talented and accomplished individuals running as first-time candidates,” said state party Chair Eric Bauman in announcing the agreement between Gil Cisneros and Andy Thorburn. “One of the biggest concerns ... is that the competition in the primaries has become so heated and divisive it impedes our ability to unite behind the person chosen by the voters to represent our party in the fall campaign.”

Translation: Fight the Republicans, not each other. And if you lose in the June 5 primary, smile and suck it up.

...That’s not all good news, though. Plenty of enthusiastic, well-funded Democratic candidates means those ambitious congressional wannabes all are competing against each other for what’s likely to be a single spot on the November ballot. If those various Democrats slice their part of the political pie into enough small pieces, it opens for way for a second Republican candidate to sneak into the top two and create a GOP-only November election.
Also in the next couple of election cycles, demographics will shift enough that the Republicans may cease to exist entirely, freeing Democrats from having to worry about vote splitting.

The Sacramento Bee: Reports of a Democratic party rift are greatly exaggerated
I didn’t write about the race, because my wife is Fletcher’s pollster. But one piece of Fletcher’s polling, printed here with the campaign’s permission, shows how phony the establishment vs. insurgent narrative was: Likely Democratic voters in the district had a highly positive view of the insurgent Sanders: 74 percent favorable, 15 percent unfavorable. But guess what?

Their view of the establishment doyenne Hillary Clinton was virtually identical: 72 percent favorable, 17 percent unfavorable.

If this was supposed to be a Democratic civil war, Democratic voters were non-combatants.

Certainly, there are policy differences among Democrats, and those will come out whenever they are again in a position to govern rather than resist. But Democrats are more ideologically homogenous than they have been historically. The southern conservatives are long gone, and there is no equivalent to the “New Democrats” of the Bill Clinton era. The party has been pulled to a populist consensus by Sanders and Elizabeth Warren, and pushed there by the Trump plutocracy, which has showered riches on the wealthy and the corporate.
The split in the Democrat party, when it comes, will be more about identity. Instead of fighting on ideological issues, they will fight over who gets to rule.

From 2011: Republican party headed for civil war; Democrats to follow?
2013: GOP Civil War About to Explode
This will not be won by the establishment. The party establishment is going to be destroyed in the 2014 election as the GOP tears itself apart and swings to the right. This is good news for Democrats in 2014 and 2016, but bad news for 2020 and beyond because it means the GOP is likely to turn increasingly radical. That makes them more likely to win at what will eventually turn into musical chairs. Voters will be fed up with all of the establishment, and the small radicalized GOP will be able to reshape politics. That, or the GOP split up leads to a third party, and that third party would then have the inside track to winning the electoral lottery when voters next are fed and vote not for a candidate, but against the establishment.
Trump surprised by coming early in 2016, which is why he has little support in Congress. The wave of GOP retirements this year is the final phase of the political realignment.

Central Planning 101: Housing "Shortages", Price Distortions Appear as Cities Limit Prices

Chinese are waiting in line for days for a chance to buy homes priced well below market. Tens of thousands sign up to purchase a few homes and buyers put up millions of yuan in order to qualify for housing lottery tickets. Aside from making the housing situation worse by creating artificial shortages, these policies are also creating distortions in real estate data as the government successfully suppresses new home prices, but in some cities, existing home prices continue roaring higher.

iFeng: 南京775套限价房引1.25万人抢购 报名通道一度瘫痪
After consulting with the sales office, Ms. Liu was informed that the online registration system had collapsed due to an influx of large numbers of customers and was temporarily changed to on-site registration. At 6 o'clock on the evening of the 29th, Ms. Liu rushed to the sales office located in the southwestern part of the river. At this time, the team had 10 lines and there were more than 10 buyers in each line. After submitting the relevant materials and photographing the project by the real estate staff, the registration process was successfully completed. At 9:00 that evening, the online registration channel for the project returned to normal.

After half a year of “discarding food,” Nanjing Hexi finally had 4 properties for sale, and 775 hardcover houses will be listed at the beginning of June. "This property has a lot of 880 square meters of small units, the largest apartment but also only 128 square meters, the average price of the southwest of the river is still about 35,000, three or four million can buy a suite, can be said to be the lowest purchase threshold in Hexi The cost of capital verification was relatively low at 2.3 million yuan. The other three properties were all large-sized units with a high total price. The capital verification amount was more than 4 million yuan, we had much more and we couldn't get it, said Ms. Liu.

There are not a few buyers who have the same ideas as her. At 9:00 am on May 30th, after registering for a full day, all four real estate registration channels were closed. Thang Long Tian Hui Real Estate received a total of approximately 6,700 customer registration applications. However, many people have registered online and offline. Therefore, the final registration data is still being combed, and is expected to be around 5,000.

Thang Long Tian Hui Real Estate is about to launch 262 suites, roughly calculated by 5,000 groups of customers, with an average of 19 groups buying a suite. The probability of buying is only about 5.2%.
Hexi is a hot spot in Nanjing's property market. The price limit policy is still strictly enforced in this area. First, the price gap of second-hand housing is very different. Because of this, the market's mentality of “buying and earning” for new houses in Hexi has only increased, and “a room is hard to find” and the scenes of buying houses such as Zhongcai have become increasingly fierce.
Some buyers have formed buying groups to increase their chances of winning a home.
The promotion of a new real estate purchase group came out with such information: In order to improve the success rate, there are buyers to raise funds to invest 36 million yuan registration to take 9 numbers to participate in the purchase of a shake. What's more, raise 40 million yuan to register and get 10 numbers!
The reporter was informed that from March 1st onwards, undergraduates under the age of 40 can directly settle in Nanjing. After the implementation of the policy, they have attracted a lot of demand from the outside world, and they have also stimulated a large number of outside buyers to come to Nanjing. A homebuyer from Yancheng raised 10 million yuan to “support” the daughter who had just settled in Nanjing to join the housing lottery. However, he revealed to reporters that after going to Hexi for two new property developments last weekend, he found that the product was not ideal. The 140-square-meter apartment was made into two rooms, and the other home was elevated. Or wait for the next batch."
In April of this year, when a real estate property opened in Wuhan, there were home buyers who were carrying a quilt for 1 km.

Wuxi, a real estate project recently pushed 443 suites source, the average price of 11,000 yuan / square meter, significantly lower than the surrounding housing prices, temporarily attracting thousands of buyers. Many people took their chairs, quilts, water and food and spent 3 days and 2 nights outside the sales office.

In May, the opening of a real estate development in Chengdu, the number of more than 1,000 registered suites actually exceeded 70,000 people, and the number of home-buying teams stretches for several kilometers.

Ma Guangyuan, an economist, believes that the reason for the madness of the property market is very simple. It is still the inverse price of new and second-hand housing caused by the price limit. For example, the four seasons of Hangzhou real estate China Huaxia are priced at 26,000 yuan per sqm, while the second-hand property from China Coast, which is only 2 kilometers away from Huaxia, has a unit price of 52,000 yuan.
Housing lotteries also entice speculators.

China Daily: Housing lotteries not best way to check prices
The authorities may believe that housing lotteries are a way to reduce manipulation and other corrupt practices in the real estate sector, but it is unfair to people desperate to buy a house, because they have to depend only on their luck to succeed in their endeavor.

Can housing sales through lotteries prevent housing prices from rising? The problem is, when it becomes difficult for an ordinary person to qualify as a "legitimate" homebuyer, even those who don't need to buy a house immediately join the pool of homebuyers, which will further widen the imbalance in supply and demand in the real estate market.
SCMP: Xian Housing Authority launches probe into alleged rigged sales lottery at major development

SCMP: A Chinese homebuyer’s ordeal to secure a home that she didn’t like
Government policies to cool the mainland’s real estate market including controlling prices and supply have drawn more panicky buyers to snap up flats, making the supply/demand imbalance more severe. Across the country, local authorities in cities including Shanghai, Hangzhou, Qingdao and Changsha required developers to hold buyer lotteries.

“As I got ever more impatient, my husband and I began to register as intent buyers whenever a new project was released on the market,” Zhang said. “We even didn’t bother to find out where the projects were.”

After 14 unsuccessful lotteries, Zhang finally won the chance this March to buy a suburb flat at a price equivalent to a downtown pre-owned flat a year ago. Although the property was 18 kilometres away from her office, she paid up, however reluctantly, for the 120 square metre unit in Shuangliu district – where the airport is located – at a price of nearly 10,000 yuan (US$1,580) per sq m.
SCMP: The only way to buy property in Shanghai these days is to win the lottery
SCMP: In Qingdao, chances of winning the housing ‘lottery’ are as good as one in six, thanks to price controls
“I’ll give you the information within 10 minutes after the project wins approval for pre-sale,” the salesman said. “Then you’ll have six to seven hours to come here to go through all the procedures. You’d better take public transport because I’m afraid there’ll be a traffic jam by then.”

Price controls set by the local government have capped the project’s selling price at around 10,000 yuan (US$1,575) per square metre, a substantial discount to the 18,000 yuan per sq m for pre-owned homes in Pinghailinfeng. Chinese developers typically release projects to market in phases, and normally prices increase with each successive release.
SCMP: Prayers, lucky charms help Shenzhen home lottery entrants win a chance to buy dream flat

iFeng: 限价之下,新房价格最失真的那几个城市!
Judging from the difference in cumulative growth in the prices of existing home prices and new home prices over the past one-and-a-half years, the three cities in Wuhan, Wuxi, and Hangzhou have the largest differences. They are 10.5%, 10.2%, and 10.1%, respectively, indicating that while new home prices were suppressed, the price of existing homes still maintained relatively high growth. In other words, after the government introduced the "price limit order," new home prices have become more distorted. In addition, the difference between the six cities of Qingdao, Shenzhen, Fuzhou is between 5-9%, and the difference between the eight cities of Urumqi, Chengdu and Huizhou is between 1-4.5%.
"Limit orders" as the government's short-term control measures are not sustainable. The long-term stable and healthy development of the property market requires long-term real-estate mechanisms as a support. By studying the regulation and control of "limit orders" in various places, we can find that the true supply and demand relationship in the new housing market is distorted, which will help restore a more real market. At the same time of subsequent adjustment and control, increase the supply of new houses, curb unreasonable demand for home purchases, investigate and chaos all kinds of chaos in the new home sales market, and speed up the cultivation of the housing leasing market, all will fundamentally resolve the contradiction between supply and demand in the market and promote the healthy development of the industry.

Chinese Collusion: CCP Cheers American Media's Anti-Trump Take

It's the Cold War all over again as the American media sides with foreign communists against the U.S. president.

iFeng: 奇了!特朗普这次失信,权威美媒观点竟与中国几乎一致!
The site's expert commentators also stated that even if President Trump himself wants to negotiate with China next, the Chinese can still trust this one to say, “China is killing the United States,” and later said “Our relationship with China is very good. What's the good guy?

"If we want the United States to convey our appeal to China, we must at least make a consistent and unified voice rather than make China feel extremely confused," said the American expert.
I can't tell if people are deliberately obtuse or they're genuinely unable to see how a person can say one aspect of a relationship is horrible (trade), but the overall relationship is good.

"Hillary is a 99 percent lock for the presidency" is all you need to know about American media. I put my money where my mouth is and did very well betting Trump would win (based on the probability and potential payoff). The American media is mostly garbage, they tell stories (narratives) not facts. There are many experts who do have something intelligent to say, but many of them hate Trump for ideological reasons, political reasons, or because they don't like the way Trump does things. The American establishment is also very weak culturally, you see this throughout society and on social media. People want others to like them and if someone disagrees they're a racist, hater, bully or troll.

Change is uncomfortable. There are winners and losers. If everyone likes you then it's a good sign you're not actually changing anything.

Will Trump fail? I don't know, but I know that the Chinese don't think things are going well and that's how they should be feeling because any serious trade deal is bad news for the Chinese economy (unless it involves them opening up their economy, slashing tariffs, etc.)

Sign of the Times: Mystery Booms Again and UFOs as Major News

Although the stock market rallied strongly from March 2009 to January 2018, the anecdotal evidence shows the wider society has been in a state of relatively negative mood. I believe social mood peaked in 2000 and while there have been bear market rallies, the overall trend is negative. One explanation for the stock market providing a false signal is how it closely tracked the Federal Reserve's balance sheet. See: Fed Fork In The Road: Bear Market Or QE4

Socionomic theory says belief in superstition, magic and fantasy increases during periods of negative mood. "Mystery booms" aren't a new thing, but they have gone viral because they tap into a general sense of unease and uncertainty in a time of negative mood. UFOs are similarly mysterious, unexplained phenomena that attracts more attention from the general public during periods of negative mood.

ZH: Mystery Booms Heard Across Pennsylvania Continue To Baffle FBI, Local Authorities
One resident's account of what happened seems to back up the explosions theory after a boom was heard in Nockamixon Township by resident Nick Zangly, who told the Bucks County Herald “it was one hell of an explosion,” who lives down the street from a 4-foot wide by 1-foot deep cavity, which he alleges opened up after the blast.

Zangli said there was “nothing in the hole, which was filled with water because of heavy rain over the weekend.” Law enforcement came out Monday to investigate the sinkhole but did not respond to any media requests.

Residents have described the noises as something falling out of the sky or an earthquake.

“I thought that somebody was making a tunnel or space junk fell out of the sky,” said Susan Crompton, who lives in Haycock Township.

“From poachers, gunfire, to explosions to a sonic boom,” said Jerry Hertz of the mysterious sound.

KYW-TV said there had been no shortage of theories among residents, but still, no clear answer of the cause.

“It’s a rumble, it actually like rumbles the ground like an earthquake would happen but with a loud like boom,” Crompton added.

“I’ve been in the military, I’ve got experience with explosives, I was a Navy diver and was definitely not a gunshot,” Hertz said.
If mystery booms aren't your thing, there's always UFOs.

Stars and Stripes: UFOs are suddenly a serious news story — you can thank the guy from Blink-182 for that
You've seen it without knowing it. Remember that wild news in December about a secret Pentagon UFO program? And those grainy military videos showing radar images of unexplained phenomena — white, Tic-Tac-shaped objects that appear to fly at remarkable speeds, at impossible angles, without wings or exhaust?

Tom DeLonge helped ring the alarm about those things, as part of his new business venture: To The Stars Academy of Arts and Science. For his advisory board, DeLonge recruited physicists, aerospace experts and former Department of Defense officials, who have been talking publicly about UFOs and arguing that the government has failed to fully investigate them.

In the past six months, DeLonge's associates have appeared on CNN and Fox News, written for The Washington Post and been cited in the New York Times — usually in the context of those eerie videos.

"What the f--- is that thing?" a Navy pilot says in a video released by To The Stars in March, but perhaps the more pertinent question is: How the f--- did the guy from Blink-182 get wrapped up in it?

Unionem Europaeam Delenda Est

In a nutshell, the reason why populists will win is because when their choice is between two forms of economic failure, they will choose based on identity and sovereignty.

The article below is describes how Italy's economic woes are mostly self-inflicted. And I predict that even if you fully explained this to Italian voters, it wouldn't make any difference. Furthermore, it is the act of asserting sovereignty that will cause Italy and other nations to face the cost of their poor decision making. The European/Globalist projects are complete and utter failures because they have taken suppression of personal responsibility to the level of national governments.

ZH: Italy, "Safe Bonds", & Europe's Populist Fantasyland
Let us start with reality.

Italy’s economic problems are self-inflicted, not due to the Euro.

Italy has seen more governments since World War II than any other country in the European Union.

Governments of all colors have consistently promoted inefficient dinosaur “national champions” and state-owned semi-ministerial corporations at the expense of small and medium enterprises, competitiveness and growth.

Labor market rigidities remained, leaving high unemployment and differences between regions.

A perverse incentive financial system, where banks were incentivized to lend to obsolete and indebted state-owned companies in their disastrous empire-building acquisitions, inefficient municipalities, as well as finance bloated local and national government spending. This led to the highest Non-Performing Loan figure in Europe.

A nightmare legal system that makes it virtually impossible to repossess assets from bad debt, led non-performing loans through the roof and malinvestment to soar.

A thriving export and small enterprise ecosystem were constantly limited by taxation and bureaucracy. This made the thriving companies smaller and actively looking to set activities outside of Italy.

Because of this, government spending continued to rise well above revenues. As Italy -like Spain and Portugal- decided to penalize high-productivity sectors with rising taxes, revenues fell short, while expenditures continued to rise. Italy, like so many peripheral countries, created a massive “crowding out” effect of the public sector against the private. It is not a coincidence that most citizens in Italy, like Spain or Portugal, prefer to be civil servants than entrepreneurs.
Italy hasn't slashed its budgets as would have made sense given its economic conditions. Just as California, Illinois, New York, Greece and Spain have not done, because they are not societies that make hard choices.
The nonexistent austerity has led to madness. Populist parties behave like those children who receive a treat if they stop behaving badly, they continue to misbehave because they think they will receive more candy.
That's how the European system works. German creditors are on the hook for Italian debts.
The funny thing is that millions of Italians and Europeans think that their pensions, their public salaries and their healthcare would be maintained or increased by defaulting and leaving the euro.

There is not a single case in history in which a default and exit like that of Italy has not generated huge cuts. There is not a single case in which the welfare state has not been massively cut in real terms with the devaluation. Whoever thinks that is a great idea should review history.

More importantly, even if these measures are accepted by Europe, it will create a domino effect of squandering states doing the same, ultimately destroying the European Union in the next debt crisis.
Unionem Europaeam delenda est. The cuts are coming no matter what because Italy cannot meet its obligations. All across the developed world, nations have promised more than they can deliver because voters borrow from tomorrow to spend today. All the European Union, ECB, Federal Reserve, Bank of Japan et al have done is prevent the resolution of the debt crisis. They have stolen a decade from the people and will steal another and another, locking the global economy into stagnation for as long as they can to avoid the painful adjustment.
Effective default would mean the bankruptcy of the social security, pensions, the collapse of public salaries and savings (since the main defaulted-on would be the Italian savers). But the bankruptcy of the banking system and rises in bond yields would lead to the drying up of credit to companies and families, no matter how exporters they may be. Exiting the euro would be a massive huge devaluation and a domino of bankruptcies.
Same as it ever was, same as it ever was, same as it ever was.
The problems of Italy -or Spain, or any other European nation- are not solved by destroying the country and the currency. In this scenario, it seems almost naive to me that the European Commission thinks that it is going to place “safe” bonds packaging government debt while the politicians think that the only solutions are default or excess.
And here is where the analysis goes totally wrong. Exiting the euro and destroying the EU will save Italy because Italy will exist. On its current trajectory, Italy will become an Arab-African debt colony of Germany.

All of the developed world is in a horrible position because voters are unwilling to accept any pain, because nearly (in some cases more than) half of voters live at the expense of the rest. There is no more to tax. There are only cuts to be made. Voters will never accept cuts, therefore the end result will either be cataclysmic debt defaults and budget cuts or the destruction of currencies. Precisely because voters will never choose the hard choices, they must be allowed to choose a path that leads to resolution. Similarly, the "establishment" in these countries are trying to prevent voters from making bad decisions, but their solutions are merely tossing sticks of dynamite into a sea of gasoline. More debt, mass immigration, financial repression, attacks on sovereignty and democracy. All their solutions have done is delay, while making the inevitable crisis all the larger when it finally strikes. Wiping away the current establishment while reaching a conclusion to the long depression is a two-for-one deal.


Socionomics Alert: Technology Makes Our Lives Much Worse

You may agree or disagree with these articles. The point isn't whether there is some truth in them or not, but that it reflects an overall negative attitude towards technology and more broadly growth and development. There are always positives and negatives, but during periods of negative/falling mood the negative views will outweigh the positive.

Seattle Times: Bitcoin backlash as ‘miners’ suck up electricity, stress power grids in Central Washington
In a normal year, demand for electric power in Chelan County grows by perhaps 4 megawatts ­­— enough for around 2,250 homes — as new residents arrive and as businesses start or expand. But since January 2017, as Bitcoin enthusiasts bid up the price of the currency, eager miners have requested a staggering 210 megawatts for mines they want to build in Chelan County. That’s nearly as much as the county and its 73,000 residents were already using. And because it is a public utility, the PUD staff is obligated to consider every request.

The scale of some new requests is mind-boggling. Until recently, the largest mines in Chelan County used five megawatts or less. In the past six months, by contrast, miners have requested loads of 50 megawatts and, in several cases, 100 megawatts. By comparison, a fruit warehouse uses around 2.5 megawatts.
Bitcoin presents a legitimate concern for utilities because they don't know how long growth will last. But you will have to look very hard to find the optimistic view: we have a major power gap that needs to be filled by nuclear, fusion or some other new technologies. Instead, people focus on costs and limits.

CBS: Are ‘Smart’ Meters Spying On You? Rockland Electric Company Says Absolutely Not
Mashable: Let's all chill out about this whole 'Alexa is spying on you' thing
"Echo woke up due to a word in background conversation sounding like "Alexa." Then, the subsequent conversation was heard as a "send message" request. At which point, Alexa said out loud "To whom?" At which point, the background conversation was interpreted as a name in the customer’s contact list. Alexa then asked out loud, "[contact name], right?" Alexa then interpreted background conversation as "right". As unlikely as this string of events is, we are evaluating options to make this case even less likely."
That explanation is 5 days old and I haven't come across it anywhere else. Everyone thinks Alexa is a spy device. One meme I've seen has someone talking into the Alexa saying, "Hey wiretap, get me the recipe for cheesecake."

Medium: Jeff Bezos Can Thank Exploited Workers for His $100 Billion
Observer: Report: Amazon Workers Have to Process 300 Packages an Hour and Pee in Bottles
The Onion: Jeff Bezos Tables Latest Breakthrough Cost-Cutting Idea After Realizing It’s Just Slaves

Tesla is now a favorite of short-sellers thanks to production issues and Elon's conference call behavior, but the general mood has also turned negative.

Marketwatch: Is Tesla the next Enron? One hedge-fund manager charts a gloomy path
Observer: Is Tesla the New Enron? Here’s Why Some Wall Street Bears Say Yes
Burning Platform: Elon’s Undoing
Bloomberg: Tesla Manufacturing Woes and Fatal Crash Combine to Sink Shares

Media report on every single crash of a Tesla care (or any self-driving car)

BBC: Tesla hit parked police car 'while using Autopilot'

Aside: Journalists, probably the single most hated profession in this round of negative mood and mostly deservedly in my opinion, managed to step into the middle of the mostly one-way hate on Elon Musk by inserting themselves into the conversation.

Daily Beast: What It’s Like When Elon Musk’s Twitter Mob Comes After You

Finally, from Quartz: The Amish understand a life-changing truth about technology the rest of us don’t
It’s not that the Amish view technology as inherently evil. No rules prohibit them from using new inventions. But they carefully consider how each one will change their culture before embracing it. And the best clue as to what will happen comes from watching their neighbors.

“The Amish use us as an experiment,” says Jameson Wetmore, an engineer turned social researcher at the Arizona State University’s School for the Future of Innovation in Society. “They watch what happens when we adopt new technology, and then they decide whether that’s something they want to adopt themselves.”

After observing a given technology’s effect on outside society, Wetmore explains, each Amish community can vote on whether to accept or reject it. If a person is seriously ill, checking into a hospital is acceptable. So is accepting a ride in a Ford F-150. But the Amish refuse to own television or automobiles because they’ve decided those technologies erode their community and neighborliness.
The whole article is great, but here's where Socionomic theory will really come into play:
Do you think the opposite is happening where people in our society want to jump into their world? Not become Amish per se, but people are trying to replicate some of those characteristics.

I wrote an article a couple years ago that we’re all becoming a little bit more Amish. Again, the Amish don’t always simply reject a technology, but they have very specific rules about how it is to be used.

What really fascinated me over the last few years is the number of people who have developed rules about their cell phone usage. The federal government doesn’t really regulate cell phone usage at all. Some state governments regulate whether you can use it while driving, but nobody says you are not allowed to use your cell phone at the dinner table.
An image from the article, from 1924, still in a mood upswing:
In the 1930s, we ended up as a society deciding that four-year-olds should be the one to blame. We began to train people even before they began to speak about how to cross the street and how to avoid it in the street. We redesigned our world to be safe for automobiles and dangerous for children.

Those are the conversations we’re having today.

Negative Social Mood + Diversity + Democracy = Civil War or Secession

Now that America is transitioning into pure identity politics, there is no more debate. There is only war between identity groups. Toss in negative social mood and it is a combustive situation.

Washington Examiner: Warning: 2018 political ‘civil war’ threatens, fueled by media
In two separate reports, the two opposites come to a similar conclusion that the nation and even families are terribly divided and that the media has played a big role in creating the split.

Daniels is well regarded as level-headed and has been dubbed the best university president in the nation. He has used his commencement addresses to push for openness and understanding, but this year he noted a shift to “tribalism,” where sides cluster in cliques.

“It’s no longer just a matter of Americans not knowing and understanding each other. We’ve seen these clusters deepen, and harden, until separation has led to anger, misunderstanding turned into hostility. At the individual level, it’s a formula for bitterness and negativity. For a self-governing people, it’s poison,” Daniels told his students this month.

Among the culprits he cited were biased media, the “anti-social media.” Said Daniels, “Our various modern media lead us to, and feed us from information sources that reinforce our existing biases. They put us in contact with other tribe members, but rarely those who see things differently. We’re starting to resemble ominously our primitive forebearers, trusting no one outside the tribe.”
This is the natural fracturing of a multinational state into multiple nations. There's no going back, there is no center to return to because the center existed within a homogeneous polity. When everyone is the same identity, the risk of identity is greatly diminished. When there are many identities, the odds of identity politics dominating rises to 100 percent certainty.

Der Spiegel: SPIEGEL Interview with Singapore's Lee Kuan Yew
"It's Stupid to be Afraid"

Mr. Lee: Why should I be against democracy? The British came here, never gave me democracy, except when they were about to leave. But I cannot run my system based on their rules. I have to amend it to fit my people's position. In multiracial societies, you don't vote in accordance with your economic interests and social interests, you vote in accordance with race and religion. Supposing I'd run their system here, Malays would vote for Muslims, Indians would vote for Indians, Chinese would vote for Chinese. I would have a constant clash in my Parliament which cannot be resolved because the Chinese majority would always overrule them. So I found a formula that changes that...
A united USA will either be authoritarian or it will not exist. This is the future the current establishment have given us. Their time is up because the post-1965 experiment is coming to an end, one way or another.

High Yield Spread Spikes on Tuesday

The BofA option adjusted spread on high-yield debt should ease back in the coming days, but worth keeping an eye on. High yield ETFs are looking toppy. If the spread breaks out, it doesn't signal imminent market turmoil, but if the trend changes to a rising spread, it's officially a traders market because lower prices are coming in the next 12 to 24 months. What should worry the bulls is how quickly the spread went from totally calm to a near trend reversal.

Chinese Leaders Don't Like Unpredictable Behavior

AP: China says Trump hurts credibility with tariffs
China's government has accused the Trump administration of hurting its credibility by acting erratically on trade and vowed to fight back if Washington goes ahead with a threatened tariff hike.

A foreign ministry spokeswoman complained Wednesday that the U.S. decision to renew a threat to raise duties on a $50 billion list of Chinese goods conflicts with an agreement in mid-May aimed at settling that dispute.
Erratic behavior is a negotiating tactic. The goal remains the same.

Coverage/criticism of Trump is like someone watching a car driving from New York to Los Angeles. Ever time the car moves a bit left, they scream that it is headed into a median or into oncoming traffic. Every time it veers right, it is headed off the road and will crash. Or if it pulls off for gas, food or rest, it has altered its course and is now heading to Canada or Mexico.

I don't know how much Trump is doing this naturally and how much is planned, but it is much more planned that his critics realize. The unsettled feeling because Trump isn't behaving as they predict is also being felt in Beijing. That is a strength, not a weakness.

Everyone thinks Trump desperately wants deals. This is also a negotiating tactic. China keeps coming back with bad offers because it wants as cheap a deal as possible. Trump acts like he's considering it, then rejects it. It was never going to be accepted. China has to come back with a better offer. Trump doesn't need a deal to onshore manufacturing though, he can use tariffs and domestic reform. When he says things like (paraphrasing) "I want a deal, but if it doesn't happen, it doesn't happen" he's remaining on target the entire way.


Socionomics Alert: Trade Wars Spreading

A trade war is looming between the European Union and the world’s biggest producers of palm oil, Indonesia and Malaysia, over proposals to strip biofuel off the menu of renewable energy sources member states may use to reduce their greenhouse gas emissions.

At issue is the US$39 billion palm oil industry. Indonesia and Malaysia are the world’s two biggest producers of the crop, used in everything from fuel to cosmetics to cookies.
Even so, Pandjaitan has warned the government may swear off Airbus aircraft for its military and for the state-controlled carrier, Garuda, if they think palm oil has been given a raw deal.

Pandjaitan’s colleague, Trade Minister Enggartiasto Lukita, has already put Norway on notice by threatening to ban fish imports after its parliament voted to exclude biofuels from government procurements.

Euro Risk Returns

This should get a short-term bottom in the euro.

Markets Teaching Voters a Lesson

Bad Debt Prices Soaring in China, But Big 4 AMCs Under Pressure

21st Century: 万亿不良资产市场“看起来很美” 四大AMC的盈利压力与隐忧
After the banks' non-performing assets were brought to the market in 2014 on a large scale, the price of non-performing asset packages was basically maintained at about 30% of the original value. After 2017, the prices of similar non-performing asset packages are increasing. The actual package price of assets in the first half of 2017 is about 40% to 50%, and the transaction price of some asset packages exceeds 60% in the second half of the year, and some even reach 70% to 80%.
In recent years, with the increase in non-performing assets of the banking industry, financial asset management companies (AMCs), which are mainly engaged in the disposal and disposal of non-performing assets, have developed rapidly. At the same time, local AMCs, private investors, private equity funds, etc. have also poured in one after another, trying to share a share of the trillions of bad asset markets.

On the one hand, the influx of funds from all directions, the direct result is to push up the price of non-performing asset packages, further reducing the AMC's profitability. On the other hand, after the commercialization transformation, AMC needs to raise funds through marketization. The recent rise in capital prices has also aggravated the cost pressure of AMC.
Bad debt prices are rising, the AMCs bought during the low points in late 2014 and into 2016, now they can unload at good prices, raise capital and wait for the next round. "Costs are rising" means there aren't enough bad assets following a wave of credit creation and rising optimism.

Here comes a splash of cold water.
Just as an AMC employee told the 21st Century Business Herald reporter: "The bad acquisitions and disposals need to be cross-cycle, generally buy a lot of bad assets in the economic down cycle, dispose of them in the up economy, and get through this cross-cycle operation method. In the past 5 years, the macro economy has been in a downtrend channel, and AMC has bought more and retired less, there is bound to be profit pressure."
Bad debts are piling up during the credit infused recovery?
It is precisely because of this that AMC has to develop debtor services to become its stable source of income and profits, but the risk has also come. A person in charge of the AMC business department frankly admitted to reporters from the 21st Century Business Herald: “In the past, when doing debt service, it was profitable to accept financial consulting fees and profit, but it did not consider risk factors, such as making provisions and losses. The economic downturn has caused problems in debt-type projects and it is difficult to make profits."
A partial breakdown of Cinda and Huarong follows:
In 2017, Cinda’s total revenue was RMB 120 billion, of which, receivables of non-performing assets of receivables were RMB 17.773 billion, and changes in the fair value of non-performing assets were RMB 8.266 billion, which totaled RMB 26.039 billion, accounting for only 21.69% of the total. Together with the debt-to-equity assets investment income, net proceeds from disposal of repossessed assets, and other custody clearing, restructuring services commissions and fee income, etc., a total of 40.191 billion yuan, accounting for 33.5% of total revenue.

At the same time, the company’s other investment income was 29.465 billion yuan, net premiums earned were 192.67 yuan, and interest income was 20.64 billion yuan. It can be seen that the income from various financial services such as securities, insurance, banking, and financial leasing has become an important source of Cinda's income. According to official data, non-performing assets accounted for “half of the country’s total”, and bad business accounted for 57.7% of pre-tax profits.

Similar to Huarong, Huarong's total revenue in 2017 was 128 billion yuan. The receivables of non-performing assets of receivables were 30.753 billion yuan, the change in the fair value of bad debt assets was 4.661 billion yuan, the interest income was 21.015 billion yuan, the investment income was 441.79 yuan, and the revenue from non-performing assets business operations accounted for 27.67%.

The previous operating income of non-performing assets of Huarong officials was 68.912 billion yuan, accounting for about half of the total. It also includes debt-to-equity assets business, trust agency business based on non-performing assets, non-performing asset management business carried out by subsidiaries, special opportunity investment business based on non-performing assets, and real estate development business based on non-performing assets.
In terms of capital cost, Huarong’s short-term borrowing rate is 1.65% to 9.00%, and the long-term borrowing rate is 2.00% to 9.50%, respectively.

In addition, given the low cost of financing in overseas markets, Huarong has issued bonds on a large scale overseas. From 2013 to 2017, Huarong issued a total of financial claims and secondary capital bonds of 106 billion yuan, and Huarong International's subsidiaries also had 12 billion US dollars of bonds.

Cinda and Oriental Capital have similar financing conditions. As of the end of 2017, Cinda's bonds payable was 202.4 billion yuan, loans were 580.4 billion yuan, and deposits were 226.2 billion yuan. Cinda parent company fixed loan interest rate is 3.6% -7.06%, floating loan interest rate is 4.75% -4.85%. The short-term loan from the East is 133 billion yuan, the annual interest rate is 1.96%-7.5%, and the bond payable is 130.2 billion yuan. The long-term loan is 177.9 billion yuan, and the interest rate is 2.7%-7%. Great Wall has not released its 2017 performance report yet. It has not publicly disclosed relevant data.

In April this year, the East also announced that it has introduced four strategic investors, including the National Social Security Fund, Telecom, China National New Capital, and Shanghai Electric Group, with a combined total equity of RMB 18 billion. At present, the Great Wall is also in the lead.
The local AMC situation has taken a step. A local AMC personage told the 21st Century Business Herald reporter that “Compared with the Big Four, the local AMC’s funding channels are narrower, mainly capital funds and bank loans. There are also some AMCs trying to develop asset and equity financing methods, but they are It is very small. Compared to the regular army, the cost of funding for private organizations is higher, 15% is a common situation, and some even exceed 20%.”

AMC people also believe that the bank itself has a lot of non-performing asset disposal methods. The pressure for external transfer is mainly from regulatory compliance and assessment pressure. The advantage of AMC lies in its flexible approach, which can be transferred in a premium and can also hold these assets for a long period of time. The key factor is the cost of capital, and the current funds are mainly short-term funds, which are difficult to match with the cross-cycle disposal methods.

SCMP: China’s local bad-asset managers drift from policy mandate

Gold Approaching Breakout

Currency trouble is brewing again and gold is on the rise, but one of the last currencies that will see a new high in gold is USD. First up is non-USD currencies: emerging markets (gold on the cusp of a new high in Brazilian real, already at a new high in Indonesia rupiah) and the Australian dollar.

DXY at Resistance

DXY hit 95 today before pulling back. A good place for a correction (or reversal for the bears).

Going solely by the charts, it looks like there's quite a bit of resistance in the mid-90s, but with politics playing a larger role that doesn't look like much resistance in terms of size. One bad week in the euro would push DXY through it.


No Worries, China's Latest Default Wave "Normal"

Sina: 债市违约常态化 整体风险可控
In recent days, the credit risk of the bond market has accelerated, and some private listed companies or groups holding listed companies have suffered successive bond defaults, triggering market concerns. The industry believes that these debt defaults reflect the financial and government debt under the dual supervision of the background, some companies have their own operational and financial control capabilities problems, the overall risk of the bond market is still controllable.
CICC believes that this “default wave” is not an accident. The current round of debt default acceleration has been driven by the tightening of the financing environment at the end of last year. In particular, after the introduction of the new asset management regulations, the non-standard assets of banks were quickly returned to the local government and the capital chain with private enterprises has brought a lot of pressure. At the same time, a number of deleveraging macroeconomic policies have been superimposed, including slowdown in fiscal spending, tightening of local government financing and infrastructure investment supervision, tighter credit limits on the table, and so on, which has also exacerbated the pressure on corporate finance.
Companies are pouring into the bond market to repay maturing debt.
Wind statistics show that since the beginning of this year, the issuance scale of listed companies’ credit bonds has reached 446.532 billion yuan, compared with only 97.941 billion yuan in the same period of last year, an increase of 355.92%. Behind the dramatic increase, listed companies have further increased their debt repayment pressure. Up to now, the stock of credits of listed A-share listed companies has reached 2.8188 trillion yuan. Among them, the scale of debt service during the year will reach 543.661 billion yuan. Even after deducting the short-term financing issued during the year, the scale of debt repayment was still 366.61 billion yuan.

From the perspective of industry distribution, according to the breakdown of industry segments, real estate has the highest scale of debt issuance, which has reached 86.49 billion yuan, followed by the electric energy industry, which has reached 83.19 billion yuan, and the mining industry has also issued debts of 21.5 billion yuan. yuan. The scale of bond issuance accounts for 42.81% of the total debt issued by listed companies.
No worries though:
Although bond defaults occur from time to time, people in the industry generally believe that the credit risk of the bond market is still entirely controllable. Li Xunlei stressed that from the default amount, the proportion of credit defaults is less than 1%, which is only about 0.4% and 0.5%, which is far below the current level of bank bad debts and is within a normal range. Li Xunlei said that from the perspective of financial supervision, it is necessary to break the rigid payment, so it is not ruled out that there are still many companies that breach the contract. He pointed out that there should be a sense of prevention of systemic risks and good guidance.

China Money Network: Chinese Corporate Bond Defaults Rise With 19 Failures So Far This Year
As China Inc. deleverages, corporate bond defaults are on the rise this year. As of May 7, a total of 19 domestic corporate bonds have defaulted, compared to 49 bond defaults for all of 2017, according to Chinese data provider Wind.

The amount of Chinese domestic corporate bond defaults remains tiny when compared to the total Chinese bond market. The 19 bond defaults this year involved 10 issuing companies with combined face value of just over RMB13 billion (US$2 billion).
SCMP: China’s private firms default on US$2 billion bond repayments as Beijing’s deleveraging efforts bite
No matter what industry they are in, what these companies have in common is that they are finding it much harder than state-owned enterprises to get financing,” Qin Han, chief fixed income analyst at Guotai Junan Securities, wrote in a note.

“Deteriorating business could lead banks to withdraw loans and cause a cash shortage. Eventually, it will lead to more defaults. State-owned enterprises [in contrast] can rely on other sources of borrowing to sustain them, even if their businesses are feeling the strain,” he said.

Crypto Breakdown Looms Once Again, Bearish for Stocks

Bitcoin is approaching major support at $7000. Other major cryptocurrencies are already at or through important support levels. Monero has broken through major support to the downside. Litecoin and Omisego broke back below support ) former, now once again resistance. Decred, which has been as close to a Swiss timepiece when it comes to hitting highs and lows in its channels, is threatening to break below. Ehthereum is above support, in a similar position as Bitcoin. A break lower in Bitcoin opens up a drop to a 4-handle or roughly ~30 percent. As goes crypto, so goes the stock market.

China Makes Room for More GDP

ZH: Visualizing China's Keynesian Utopia (In 63 Seconds)


Prepare for Italian Fury: President Blocks Govt, Nationalist Landslide Incoming

The worst possible outcome for Italy is no longer a worry because an even worse outcome has replaced it.

RT: ‘Unprecedented institutional clash’: Italy fails to form govt over anti-EU economic minister
Italy’s PM-designate Giuseppe Conte said he’s given up on attempts to form a government after President Sergio Mattarella rejected his candidacy for economy minister. The country may now face a new election by the end of 2018.

...The candidacy for economy minister has been the main stumbling block for the creation of the new cabinet in the country. The anti-establishment Five Star Movement (M5S) and its rightist coalition ally Lega Nord, which won the most parliamentary seats in the March vote, insist on having Paolo Savona in the vital role.

M5S was outraged by Mattarella’s decision, with 5-star leader Luigi Di Maio calling it “an institutional clash without precedent” in a Facebook live video.

“What’s the point of going to vote if it’s the ratings agencies that decide?” Di Maio fumed. Meanwhile the League leader Salvini was sounding a similar tone.
RAI: Governo, la rinuncia di Conte. Mattarella: no a imposizione di ministri anti-euro
Salvini: "Someone said" no ", now to vote" "First the Italians, their right to work, safety and happiness.We worked for weeks, day and night, to give birth to a government that defends the interests of Italian citizens, but someone (under pressure from whom?) told us No. No more servants than anyone, Italy is not a colony At this point, with honesty, consistency and the courage of all time, the word he must come back to you! " writes the leader of the League.
For the past decade (arguably much longer), the central bankers and establishment assiduously kicked the can down the road. President Mattarella has kicked the can one more time, fearful that Paolo Savona would trigger a negative revaluation of Italian debt in the financial markets. This is the final kick of the can though. Italian voters will likely hand an even greater majority to 5-Star and the League later this year.

Since my U.S. dollar bullish forecast included Italian voters, I am not surprised. Either a political or economic blow-up would touch it off. And because the world is massively short of dollars (long U.S. dollar debt both directly and indirectly), all that's required for a new high in final leg of the U.S. dollar bull market is a rising dollar. Reflexivity will take care of the rest.


China Real Estate Solution: Suppress Market Supply, Increase Govt Housing

The bulk of new housing in Shenzhen will be government backed.
iFeng: 京沪深发出同频信号!楼市大变局真的来了
The “Housing Construction Plan” proposes that Shenzhen will add 165,000 new housing units this year.

Among them, the establishment of talented people housing, residential housing and public rental housing about 113,800 sets, accounting for 69.5% of the annual total housing construction;

About 50,000 sets of commodity housing were newly constructed, accounting for 30.5% of the total.
What does this mean?

This shows that Shenzhen's new market-oriented commercial housing will be as scarce as a limited edition of luxury goods.

And if we take this data and compared to the programmatic document released before, "Shenzhen City Construction and Land Utilization" 13th Five-Year Plan, the pattern of the Shenzhen property market has undergone great changes far beyond our imagination.
Will China succeed where other governments fail at affordable housing? The current plan is a recipe for high prices:
First, although the supply of first-tier cities is difficult, from the point of view of the official increase in total supply, as long as they are willing to squeeze, they can still exceed their targets.

Here, the so-called "land scarcity in first-tier cities - scarcity of housing supply - rising housing prices" does not necessarily hold.

Second, under the condition that the government can exceed its overall goal, it deliberately depresses the number of commercial housing and substantially increases the number of affordable housing.

The morals are self-evident, that is, to increase the number of houses in the hands of the government as much as possible. When the local government becomes a big banker in the urban real estate market, the good days for real estate speculators are over.
If Chinese cities build too few homes, they will cause soaring prices and an even worse affordability crisis. If they build too many homes, they could depress the market. Or they'll build more empty homes that sit idly to avoid depressing prices. Since China's real estate market isn't exactly a free market already, the impact may not be too great. It's unlikely to solve more problems than it creates, but from the government's perspective, more problems may be acceptable if it finally stabilizes home prices.


Fed Rolls $6.1 B in Treasures, Assets Dip Only $0.3 Billion

The Fed rolled $0.3 billion off its balance sheet off its balance sheet in the week ended May 23. Treasuries were $6.1 billion of total. This week a big chunk came from Other Federal Reserve Assets at $8.4 billion. In a note the Fed describes says this "Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable. Also, includes Reserve Bank premises and equipment net of allowances for depreciation.

The S&P 500 Index gained 0.2 percent for the week. Charts will be added when FRED updates tomorrow.

Update: Total reserve assets only declined $0.3 billion for the week. This was a weak performance from stocks considering the Federal Reserve didn't meaningfully reduce assets. The Federal Reserve made large balance sheet reductions at the end of January, February, March and April. The Fed has $13.6 billion to roll off in May, but if it waits for the treasuries maturing on May 31, the next week (ending Wednesday) may see little in the way of reductions.

Wuhan Winning Talent War

Proportion of non-Hubei residents staying the city increased from 10 to 30 percent as the city fights to keep young talent amid a demographic decline.

iFeng: 武汉“抢才”半年吸引14万大学毕业生落户
It has been half a year since Wuhan started the “scramble for talent” war last year. The reporter learned from the Public Security Bureau of Wuhan Municipal Public Security Bureau that a total of approximately 140,000 university graduates eventually settled in Wuhan in the past six months. Among them, undergraduates accounted for half of the graduates, highly educated Shuobo graduates settled in about 20,000 people. In addition, the proportion of non-Hubei households who settled in Wuhan rose from the original 10% to the current level of about 30%.
This would be happening in the United States as well, but capital has depressed labor with high rates of immigration.

Italy Gets a Government

Daily Mail: Little-known lawyer is confirmed at Italy's new Prime Minister despite CV scandal as president gives him the go-ahead to form government with far-right and anti-establishment parties
'I'm aware of the necessity to confirm Italy's place, both in Europe and internationally,' Mr Conte said after his approval.

His coalition planned a radical slate of economic policies including drastic tax cuts, a monthly basic income that will cost the budget €17 billion (£14.9 billion), and pension reform rollbacks.

The government programme, announced on Friday, also planned to speed up expulsions of illegal immigrants and crack down on trafficking.
Globalists cannot win if a single government breaks with the pack and finds success. Success for globalists/Eurocrats in Italy is GDP and equities back to 2005 levels. A great accomplishment because only a few years ago, they were at levels last seen in the late 1990s. If there's a recession and bear market coming, the Eurocrats will have achieved 20 years of stagnation in Italy. A true lost generation.

Nationalists don't have a high hurdle to clear. I'm not even sure they need to revive the economy. Delivering the same stagnation, but deporting migrants would be enough to make them more popular than the centrist parties. If they default on euro debts and that causes a deep recession, it might also be popular because people may not blame them for the pain, but accept it as the cost of getting out from under the European Central Bank.

More detail here: Alhambra: Italy Went Boom A Long Time Ago (and that’s the point)

Turkey Violates Greek Airspace 56 Times

Who says you can't go back to Constantinople?

ZH: Turkish Fighter Jets Violate Greek Airspace 56 Times In A Single Day

This is played down as a squabble between NATO allies, but Turkey and the EU are moving in opposite directions politically. Turkey is shifting in a more Islamic direction and Europe in a more nationalist direction. Europe's establishment has seeded Europe with jihadist, Europe's establishment is slowly being replaced.

This is the most dangerous flash point in Europe. And since Turkey is toast, lashing out with a military strike and appeal to wider Islam makes sense.


Beijing Mortgage Volume Tumbles as Rates Rise

21st Century: 北京房贷飙涨行情:按揭贷款量跌价升,房企发债成本攀升
In a short period of one and a half years, Beijing’s real estate mortgage loan market experienced an increase in interest rates from a 20% discount on the benchmark interest rate (4.9% annualized) to 15%, 10%, 5%, no discounts on the basis, and then a 5% increase. Even today, there is a general increase of 10% (5.39% annualized) in the market.

A number of real estate analysts said that the main reason for the recent upward adjustment in mortgage rates is the rise in bank funding costs. According to data released by the Central Bank, the weighted average interest rates for inter-bank lending for the period from January to April this year were 2.78%, 2.73%, 2.74%, and 2.81%, respectively, and the overall trend was upward.

Regarding whether the interest rate on mortgage loans will be raised again afterwards, the credit business managers of many banks have indicated that they are not clear, but this possibility is not ruled out.
Loan growth is plummeting:
According to the latest statistics released by the Beijing Business Management Department of the People's Bank of China in April, the statistics on Beijing's money and credit statistics also showed that at the end of April, the RMB loan balance of Beijing residents was 1.68 trillion yuan, an increase of 10.6% year-on-year, and an increase of 33.72 billion yuan over the beginning of the year. A decrease of 69.95 billion yuan over the same period of last year.
In other words, loan growth fell 67 percent. That credit deceleration will leave a market in the real estate sector and then the wider economy.
The capital chain is tight, and the price of overseas bond issuance rises

The cost of funds for people who buy a house is rising, and people who sell the house are not so comfortable.

With the limited financing of domestic real estate companies, the eyes of the housing enterprises have turned to overseas. According to wind data alone, from the beginning of 2018 to May 22, 2018, domestic real estate companies have announced plans to issue 61 gulf bonds, and the total issuance has exceeded 24 billion U.S. dollars, a substantial increase of about 105% from the same period last year.
The same thing happened during the last tightening/real estate crackdown cycle. Most borrowers may simply be rolling over existing foreign debt though:
In addition, although overseas channels for issuing bonds still exist, interest rates have shown a trend of soaring. For example, Hydoo International issued US$130 million in bonds on May 9, and interest rates have been as high as 12%. Landsea Green Group’s US$150 million green priority notes issued in April have interest rates as high as 9.62%. From the average cost point of view, the wind data shows that the average cost of issuing overseas bonds by housing enterprises from 2018 to present is 6.67%, which is 0.4% higher than the annual figure of 6.27% in 2017, and is a significant increase of 1.74 percentage points from 2016. .

On the other hand, from the perspective of the use of overseas bonds issued by real estate companies, most of them belong to the old and new. Wind data shows that in the second half of this year, overseas financing of real estate bonds expired at a scale of 56.475 billion yuan, and the expiry date in 2019 reached 143.695 billion yuan. The 130 million US dollars notes issued by Hydoo International also stated that most of them were used to repay debts.
The last cyclical downturn was aborted when China restarted credit growth and the U.S. Dollar Index peaked.

Turkey Plug Being Pulled From EM Bathtub

AFP: Turkey lira 'in freefall', eyes on central bank
Turkey's embattled lira on Wednesday lost over 3.5 percent in value to hit new historic lows against the US dollar, as markets watched to see if the central bank will take emergency action to buttress the currency.

Following sharp losses on Tuesday, the lira continued to underperform all other emerging market currencies, after suffering a hammering in Asian trade overnight when Japanese investors sold Turkish assets.
Wolf Street: Which European Bank is Most Exposed to Fallout in Turkey?
Like Spain’s biggest bank, Santander, BBVA has spent the last five years doubling down on its emerging economy bets, even as two of their biggest markets, Brazil and Turkey, have heated up politically and slowed economically.
After reaching a record high (USD 22 billion) in 2007, FDI flows to Turkey have decreased. FDI reached USD 13.3 billion in 2016 and dropped to USD 10.8 billion in 2017 according to Turkish Ministry of Economy (2018).The factors hindering FDI development include political instability (an attempted coup d'état took place in 2016 claiming many lives), the weak currency, inflation, the proximity to conflicts in the Middle East as well as administrative measures taken against the Gulenists for their alleged implication in the coup. Turkey is ranked 60th out of 190 economies by the World Bank in its Doing Business 2018 report (same ranking as in 2017).

EU member states are by the largest group of investors (67.9% of total investment in 2017) in Turkey

U.S. Dollar Approaches Resistance


Bitcoin Support at $7k, Monero Weakest, Decred Strongest

Monero major support at $155, could be a major break coming up here. Decred adding privacy to compete with Monero may be playing a role because Monero's weakness is out of step with rest of cryptos. Litecoin and OmiseGo have similar charts. Bitcoin is the key, support at $7000.

Chinese Fertility Locked Into Collapse

Metro: China ‘to scrap two-child policy and put an end to family restrictions’

Trends always end, but China's collapsing fertility has too many factors working against it. Urbanization, high home prices, expensive family formation, feminism, emphasis on formal education, social pressure.

The most powerful antidotes in the short-term would be a housing price collapse, a real collapse that made large apartments with 3 bedrooms affordable, and celebrities and high level officials having three or more children.

Back in 2013 I wrote: China to Relax One-Child Policy, But Chinese Fertility Rate Still Headed Lower
Consider the bigger picture. China is urbanizing and one plan for keeping growth from collapsing to near 0-3% is to push more people into cities. The fertility rates in the cities is already low by choice. China increasingly looks like Hong Kong, Taiwan and Singapore, where the fertility rates are 1.1, 1.1 and 0.8 children born/woman, respectively. China's fertility rate is currently about 1.6 children born/woman.

If they want to raise fertility, they should deurbanize. China's fertility rate is headed lower, one child policy or not.
This post from 2016 went into a lot more detail: China's 2-Child Policy Can't Stop Fertility Collapse

None Dare Call It Sedition Yet: Possible Second Spy Attempted to Infiltrate Trump Campaign

ZH: Second Spy Tried To Infiltrate Trump Campaign Says Former Adviser: "This Is Just The Beginning"
“Let me tell you something that I know for a fact. This informant, this person that planted, that they tried to plant into the campaign and even into the administration if you believe Axios–he’s not the only person that came at the campaign," Caputo claimed. "And the FBI is not the only Obama agency who came at the campaign,” Caputo continued.

“I know because they came at me. And I’m looking for clearance from my attorney to reveal this to the public."

Trump Fights to Protect Chinese Jobs

21st Century: 转机!中兴通讯销售禁令有望取消!或成下周中美重要议题,8万员工31万股东可稍松口气
CNBC: UPDATE 3-U.S., China nearing deal to remove U.S. sales ban against ZTE -sources
Washington and Beijing are nearing a deal that would remove an existing U.S. order banning American companies from supplying Chinese telecommunications equipment maker ZTE Corp , two people briefed on the talks told Reuters.

The people, who declined to be identified because negotiations are confidential, said the deal could include China removing tariffs on imported U.S. agricultural products, as well as buying more American farm goods.
Flawless Chinese victory.
White House advisors have said previously the ban against ZTE is being reexamined, and that the firm would still face "harsh" punishment, including enforced changes of management and at board level.
There will be no change to the real upper management of the Chinese state-owned enterprise.

The Chinese trade issue isn't going away. Trump could revive the trade issue at any moment and he probably will. If he doesn't, someone else will. Negative social mood will guarantee it.


Chinese Govt Spends Big to Develop Memory Chip Companies

An article discusses Wuhan Xinxin Semiconductor Manufacturing Corp and the Chinese government's plan to spend billions on chip technology. Wuhan Xinxin is still unprofitable after 11 years.

21st Century: 中国芯”艰难突围路:武汉新芯十一年终扭亏
Following the investment in the first phase of the IC Fund, which amounted to RMB138.7 billion, the second phase of the Chinese government's large capital investment has once again focused on the market. Relevant media reports indicate that the second phase of the brewing fund is expected to be no less than 150 billion to 200 billion yuan in size.

How will the national team support the chip industry? On the morning of April 26th, when General Secretary Xi Jinping came to Wuhan Xinxin Research under the Yangtze River Storage Store of the Ziguang Group, he mentioned that the core technology with independent intellectual property rights is where the company’s “Gate of Life” lies. The chip of equipment manufacturing industry is equivalent to the heart of people. The heart is not strong, and the body size is not too strong. It is necessary to speed up major breakthroughs in chip technology and bravely climb the peak of semiconductor storage technology in the world.

The 21st Century Business Herald reporter recently interviewed relevant stakeholders of Wuhan Xinxin, taking samples of issues such as Wuhan's efforts to develop IC industry and Wuhan Xinxin's development over the past decade and beyond, to restore the difficult breakthroughs of the central government and enterprises in the chip field.

From 2006 to the present, the central government has continued to invest heavily in Wuhan Xinxin. The integrated circuit industry has a intensive and long-term investment cycle. This company, which continued to lose money before 2017, is also struggling to break through the controversy.
Wuhan Xinxin was launched more than a decade ago as part of an effort to develop domestic chip suppliers:
The chip is called "industrial food". China still has gaps in chip design, manufacturing capabilities, and talent teams. China is the world's largest chip consumer, with 90% relying on imports and imports exceeding $250 billion a year.

The representative company of the Wuhan Xinxin Central Government who made efforts to develop the chip industry was incorporated in April 2006. It is invested by Hubei Province, Wuhan City and Donghu High-tech Zone. The investment scale for the first phase reached 10.7 billion yuan, which is the first time in the Central Region in these years. A 12-inch integrated circuit production line project.

As of now, Wuhan Xinxin is the only memory-based IC manufacturing company in China. Wuhan Xinxin is facing an urgent task of catching up with technology. Behind it is the continued investment of the Central Government. On August 5, 2015, the Hubei integrated circuit industry investment fund with a total size of not less than 30 billion yuan was established, of which Wuhan Xinxin is the investment focus. The first phase of the national integrated circuit fund of 138.7 billion investment, one of its investment priorities is the memory.
Experts who participated in the new core project told the reporter of the 21st Century Business Herald that Xinxin did achieve losses in 2017. On the one hand, the international market conditions were relatively good. In the past 20 years, the global semiconductor factory was much more involved. In addition, with mobile communications and the Internet of Things, With the development of the chip, the demand for chips has greatly increased and it is good for Xinxin. Of course there is another reason. From the financial report, the depreciation of the equipment is over.

The loss of data in the financial report does not mean that the real dawn has come. According to the data provided by Tanshui, at present, the global memory market is highly monopolized and the market and key technologies are in the hands of several oligopolistic companies such as Samsung, Toshiba and Hynix. Samsung, Hynix and Micron monopolized 95% of the DRAM memory market. Samsung, Toshiba, Micron and Hynix monopolized 99% of the NAND memory market. The top six manufacturers monopolized 90% of the NOR memory market. Wuhan Xinxin still has a long way to go.
"Although it is a state-owned enterprise, unlike many monopolized state-owned enterprises, Wuhan Xinxin is faced with global market competition. This industry is a globally transparent market, and there is no designated unit procurement for the product. State-owned enterprises are not good at doing it." A practitioner from Wuhan Xinxin told a 21st Century Business Herald reporter.

A good in-depth view at Semiconductor Engineering that sees high hurdles for China: Will China Succeed In Memory?
IP issues are just one of the challenges. China’s memory makers also face stiff competition in a tough market. “I look at this at maybe almost like what China did in the foundry industry. They have 10% market share. Maybe China will get 10% of the memory market,” IC Insights’ McClean said. “I don’t think it would be zero. But I don’t see big chunks of market share coming out of Samsung, Micron and Hynix anytime soon.”
Asia Times: China has too few chips to play in high stakes tech game
China.org: Xi calls for maintaining new development philosophy, winning 'three tough battles'
"Businesses must unceasingly make breakthroughs in core technology, mastering more key technologies with self-owned intellectual property rights and building up the ability to dominate industrial development. The country needs you to pick up the pace," Xi said.

Xi then visited Wuhan Xinxin Semiconductor Manufacturing Corp. to inspect a national memory production base and assembly lines of integrated circuits.

In workshops, he listened to reports about smart manufacturing of chips and accelerating chip localization progress.

Referring to chips as like the human heart, Xi said, "No matter how big a person is, he or she can never be strong without a sound and strong heart," he said, urging businesses to make major breakthroughs in chip technology and challenge the new heights in global semiconductor industry.