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Jan 22, 2019

Keiser Report Video: Keiser Report: Alchemized Digital Gold (E1335)

Review: ‘Twilight of the Elites’ Looks at a France, and a World, Divided

5-7 minutes

Emmanuel Macron’s victory over the far-right National Front party in the French presidential election came only a few months after the ascension of Donald J. Trump to the presidency of the United States, and less than a year after Britain voted to leave the European Union. The outcome, installing a centrist leader, elicited a mixture of euphoria and relief from the establishment. A headline from the day captured this emotion: ”’Phew!’ World reacts as Macron becomes next French president.”
Those hoping that Mr. Macron’s election would reverse the tide of nationalist and authoritarian leaders coming to power were disappointed to learn that his domestic popularity was fleeting. Anyone still rooting for a Macron comeback was rudely awakened by the scale and ferocity of the Yellow Vest movement, whose mass demonstrations began in November. One of the few consistent demands of the protesters has been the resignation of President Macron.
The author Christophe Guilluy — who describes himself as a geographer, although he mostly served as a housing consultant after graduating from college in 1987 — has concerned himself with the growing cultural and economic fissures animating the recent protests. He has written four books on the topic since 2010, and the third of these, originally published in 2016, has just been translated by Yale University Press as “Twilight of the Elites: Prosperity, the Periphery and the Future of France.” Despite the hectoring tone, unfounded generalizations and conspiratorial allusions, the book still manages to provide an indispensable guide to understanding the fears and frustrations of an increasingly permanent underclass — not just in France, but throughout the world.
Mr. Guilluy presents contemporary France as divided between a thriving minority holed up in its 15 largest cities and everybody else. “Everybody else” includes not just the restless immigrant communities living on the outskirts of the “globalized metropolises,” but residents of the hollowed-out second-tier cities and impoverished rural communities. “The medieval citadels,” Mr. Guilluy asserts, “are back.”
Mr. Guilluy’s ultimate put-down is the charge that “France had become an ‘American’ society like all the rest.” The defining characteristics of such societies: “inegalitarian and multicultural.” The underlying culprit, however, is globalization, and the villains are “those who gain from globalization or who are protected against its adverse consequences.” Much of “Twilight of the Elites” is dedicated to demonstrating that the core arguments supporting free markets and cultural diversity are a pretext for maintaining these exclusive benefits.
Take what Mr. Guilluy calls “the lie of the open society.” The elites have cloistered themselves in the cities that are financially out of reach for the rest and “demand greater social diversity” from a “position of moral superiority” as part of a “cynical strategy” to secure low-cost immigrant workers. “The discourse of openness … for people of different backgrounds may now be seen for what it is,” Mr. Guilluy writes, “a smokescreen devised to conceal the emergence of a closed and isolated society whose greatest beneficiaries are the upper classes.”
If one looks past the overblown rhetoric, the portrait of the bleak prospects of the diverse communities outside of France’s largest cities is disturbing and affecting. It also is reminiscent of the economic challenges faced by many living between the coasts of the United States.
While Mr. Guilluy is withering in his criticism of establishment politicians on both the left and right, he does not offer up anything concrete in their place. Besides observing that the working classes have abandoned their previous party attachments and “now count on themselves to build a countersociety that will provide a decent way of life,” he provides little in the way of policy proposals beyond exhorting the elites “to listen to the grievances of lower France and take them seriously.”
Part of the challenge in listening to lower France — what Mr. Guilluy calls “the periphery” — as represented today by the Yellow Vests is that it lacks a unified leadership. The leaders it does have disagree with one another. For someone who is committed to listening as at least part of a solution, Mr. Guilluy has a reputation for refusing to engage with either academics or journalists — both professions are accused repeatedly in “Twilight of the Elites” of furthering the agenda of the traditional upper classes and “the new bourgeoisie that supports them.” This is particularly unfortunate given the urgency of the issues he raises. But one does not need to accept all of the elements of Mr. Guilluy’s diagnosis to sense that he has hit on something profound that extends well beyond the borders of France.
Jonathan A. Knee is professor of professional practice at Columbia Business School and a senior adviser at Evercore. His latest book is “Class Clowns: How the Smartest Investors Lost Billions in Education.”

Source: NYT

EU FX I Currencies: Dollar up as growth worries, trade tensions hurt risk appetite

3 minutes

Reusable twenty dollar bills
Mark Wilson | Getty Images
The dollar rose against a basket of other major currencies on Tuesday, a day after the International Monetary Fund trimmed its global growth forecasts, and as worries about U.S.-Chinese trade tensions drove investors to shun riskier currencies.
The dollar index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was unchanged at 96.30, after earlier reaching 96.484, the highest since Jan. 4.
The IMF on Monday cut its world economic growth forecasts for 2019 and 2020 because of weakness in Europe and some emerging markets, and said failure to resolve trade disputes could further destabilize a slowing global economy.
Pessimism about global growth drove down commodity markets and shares worldwide on Tuesday.
"It's a risk-off kind of undertone to the market that is the main driving force here," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
Lack of signs of progress in trade talks between the United States and China, the IMF downgrade and growing worries over the impact of an extended U.S. government shutdown weighed on risk appetite on Tuesday, said Osborne.
China's economy cooled in the fourth quarter under pressure from faltering domestic demand and bruising U.S. tariffs, dragging 2018 growth to the lowest level in nearly three decades. Growing signs of weakness in China are fueling anxiety about risks to the world economy.
The dollar was 0.36 percent lower against the yen, which tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation.
The Bank of Japan is expected to leave policy unchanged at its Jan. 22-23 meeting. Analysts expect monetary policy to remain accommodative in Japan this year.
In another sign of risk aversion, the Australian dollar, often used as a liquid proxy for China investments, eased 0.59 percent to $0.7116.
The euro struggled near a three-week low as morale among German investors improved slightly in January, but their assessment of the economy's current condition deteriorated to a four-year low, a survey showed on Tuesday, sending mixed signals for the growth outlook of Europe's largest economy.
The single currency was down 0.04 percent at $1.136.
Sterling rose after strong employment data suggested Britain's labor market remained robust despite an economic slowdown ahead of Brexit. The pound was up 0.51 percent at $1.2956.

Bond Yields Closing Report: Treasury yields drop as economic fears resurface amid political concerns

Thomas Franck, Alexandra Gibbs

U.S. government debt yields fell on Tuesday as the U.S. government shutdown and trade fears between Washington and Beijing stoked fears of slower economic growth.
The yield on the benchmark 10-year Treasury note fell about 4 basis points to 2.755 percent at 10:57 a.m. ET, while the yield on the 30-year Treasury bond dropped to 3.074 percent. Bond yields move inversely to prices.
Appetite for government debt rose over the long Martin Luther King Jr. holiday weekend after David MacNaughton, Canada’s ambassador to the U.S., said that the U.S. has told Canada that it will request Huawei executive Meng Wanzhou be extradited. Meng, the daughter of Huawei Technologies founder Ren Zhengfei, was arrested in Canada at the request of the United States over alleged violations of U.S. sanctions on Iran.
Following the arrest, relations between China and the United States turned icy, a potential headwind to a permanent trade agreement between the two economic powerhouses. Huawei is the world’s largest manufacturer of telecommunications equipment.
“Between Brexit, the U.S. government shutdown and the China news, the culmination of the three means trading will be sensitive to political developments,” said Jon Hill, interest rate strategist at BMO Capital Markets. “The political back-and-forth seems well-entrenched.”
International markets are showing a muted to downbeat picture on Tuesday, as global growth concerns weigh, with markets in Asia and Europe, along with U.S. futures, all seeing red.
On Monday, the International Monetary Fund (IMF) announced that it had revised down its estimates for global growth, with it projecting a 3.5 percent growth rate across the globe this year, and 3.6 percent for 2020. In October, the institution slashed its forecasts, due to increased trade tariffs between the States and China; and on Monday, it added that the global economic expansion was showing signs of losing momentum.
In the report, the IMF stated that risks to global growth continue to tilt to the downside, with topics such as Brexit, and escalating trade tensions adding to the pressure.

U.S. Markets Overview: Treasurys chart

US 3-MOU.S. 3 Month Treasury2.401-0.0030.00
US 1-YRU.S. 1 Year Treasury2.592-0.0020.00
US 2-YRU.S. 2 Year Treasury2.591-0.0210.00
US 5-YRU.S. 5 Year Treasury2.582-0.0360.00
US 10-YRU.S. 10 Year Treasury2.745-0.0370.00
US 30-YRU.S. 30 Year Treasury3.062-0.0340.00
Lawmakers in the U.S. continue to grapple with the longest government shutdown ever. The 32-day closure has resulted in staffing shortages at airport security and hundreds of thousands of federal employees remain without work. Historically, government shutdowns alone do not undermine U.S. GDP in a meaningful way, but they can affect how optimistic consumers and businesses feel and dampen long-term spending.
“The shutdown costs 10 to 15 basis points per week in terms of GDP,” Nathan Sheets, chief economist at PGIM Fixed Income, said on Friday. “There could be a bit of a penalty to consumer and business confidence, maybe people will be a little more constrained than they were before.”
“I think the 800,000 unpaid workers – they eventually all will get paid,” Sheets added. “And a good chunk of the government expenditure that didn’t happen will eventually happen. Still, people aren’t going to eat twice as many meals after they get paid, something is lost.”
A Tuesday report from the National Association of Realtors found U.S. homes sales tumbled to their lowest level in three years in December and house price increases decelerated. The association said existing home sales declined 6.4 percent to an adjusted annual rate of 4.99 million units last month, the lowest level since November 2015.
Economists polled by Reuters had forecast existing home sales falling 1.0 percent to a rate of 5.25 million units in December.
“The existing homes sales data looked really weak, and is concerning because it’s across a variety of types and regions,” BMO’s Hill added. “One of the outstanding questions in the market is that housing looks weak, but the fall in mortgage rates could restart the market.”
“That being said, given declines in consumer sentiment and volatility in the equity market, these will all will be headwinds,” he added.
—CNBC’s Silvia Amaro contributed to this report

Asia, Europe & US Markets Closing Report


Asian stocks slip amid concerns about the global economic outlook

Eustance Huang

Stocks in Asia declined on Tuesday as investor sentiment dipped on concerns about the global outlook, after the International Monetary Fund (IMF) slashed its world economic growth forecast on Monday.
In the Greater China region, the Shanghai composite declined about 1.18 percent to close at around 2,579.70 and the Shenzhen component fell 1.435 percent to finish its trading day at approximately 7,516.79. The Shenzhen composite also shed 1.171 percent to close at about 1,314.58.
Hong Kong’s Hang Seng index slipped almost 1 percent, as of its final hour of trading.
Beijing announced on Monday that the Chinese economy grew 6.6 percent in 2018, which was the slowest pace since 1990. Meanwhile, the official Xinhua News Agency reported that Chinese President Xi Jinping said the country needed to be on guard for “black swan” events while also preventing “grey rhino” events.
A black swan event is an unforeseen occurrence that has dire consequences whereas a grey rhino is an obvious threat that is ignored.
“The grey rhino is very clear, it’s the high level of debt in the whole economy from the government, the local government, and to the privately-owned enterprises and also the state-owned enterprises, this is one thing that nobody can overlook,” Francis Lun, CEO of Geo Securities, told CNBC’s “Street Signs ” on Tuesday.
“For the black swan event, last year we had the U.S.-China trade war and this year we don’t know ... what could happen but maybe ... the black swan can turn into a white swan and then we’ll reach some kind of agreement with the U.S. and ease the trade tensions,” Lun said.
Officials from the U.S. and China are attempting to reach a deal to ease trade tensions between the two economic powerhouses, which rocked global markets for much of 2018.
In Japan, the Nikkei 225 fell 0.47 percent to close at 20,622.91 while the Topix index declined 0.63 percent to finish its trading day at 1,556.43. Shares of index heavyweight Fast Retailing, the company behind the Uniqlo chain of apparel stores, slipped 0.51 percent.
South Korea’s Kospi was lower by 0.32 percent to close at 2,117.77 despite the country’s economic growth for the fourth quarter of 2018 coming in above expectations.
Australia’s ASX 200 declined by 0.54 percent to close at 5,858.8, with the sectors mixed. The heavily-weighted financial subindex Down Under declined 1.18 percent as shares of the country’s so-called Big Four banks saw losses. Australia and New Zealand Banking Group slipped 1.45 percent, Commonwealth Bank of Australia declined 1.19 percent, Westpac fell 1.72 percent and National Australia Bank shed 1.28 percent.
Futures also pointed to a lower open for U.S. stocks on Tuesday. Dow Jones Industrial Average futures implied an opening decline of 178.35 points for the index, as of 2:01 a.m. ET Tuesday. S&P 500 and Nasdaq futures also pointed to losses.

Asia-Pacific Market Indexes Chart

NIKKEINikkei 225 IndexNIKKEI20622.91-96.42-0.47
HSIHang Seng IndexHSI27005.45-191.09-0.70
ASX 200S&P/ASX 200ASX 2005858.80-31.60-0.54
KOSPIKOSPI IndexKOSPI2117.77-6.84-0.32
CNBC 100CNBC 100 ASIA IDXCNBC 1007622.28-56.64-0.74
IMF cuts global forecast
The IMF reduced its estimate for global growth on Monday, cautioning that the economic momentum seen in recent years is slowing.
The IMF now projects a 3.5 percent growth rate worldwide for 2019 and 3.6 percent for 2020. These are 0.2 and 0.1 percentage points below its last forecasts in October — making it the second downturn revision in three months.
“A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given high levels of public and private debt,” the Fund said.
These potential triggers include a “no-deal” Brexit for the U.K. and a deeper-than-envisaged slowdown in China. The IMF report comes on the back of China reporting its slowest economic growth in almost three decades.
Speaking at the World Economic Forum in Davos, Christine Lagarde, managing director of the IMF, said: “After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising. But even as the economy continues to move ahead ... it is facing significantly higher risks.”
The latest cut from the IMF “is just a confirmation of existing concerns of a slower 2019,” Singapore’s OCBC Treasury Research said in a morning note.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.430 after touching an earlier low of 96.305.
The Japanese yen, widely viewed as a safe-haven currency, traded at 109.39 against the greenback after seeing an earlier low of 109.69. The Australian dollar was at $0.7129 after slipping from highs of about $0.717 yesterday.
— Reuters and CNBC’s Silvia Amaro contributed to this report.


European markets slide close lower on global growth concerns; UBS shares fall 3% after earnings

Holly Ellyatt,Alexandra Gibbs

European stock markets ended in negative territory on Tuesday amid concerns on slowing global growth.
The pan-European Stoxx 600 Index came under renewed pressure in afternoon trade, closing provisionally down 0.41 percent with all major bourses falling into the red.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE6901.39-69.20-0.99583471973
Stocks in Europe extended losses after Wall Street started Tuesday off on a negative note, with the Dow posting triple-digit loss in its morning session.
The bulk of sectors traded lower, with banks and miners both down over 1 percent. Looking closer at individual stocks, UBS shares sank by a little over 3  percent after fresh earnings on Tuesday missed estimates, as it noted outflows worth nearly $8 billion at its wealth management division.
Sticking with Europe’s biggest losers, IG Group tumbled over 8.5 percent after posting its latest corporate earnings, which saw pretax profit fall to £113 million ($146 million) in the six months to November-end, compared to £136.2 million the year before. The group added that it expects revenue for 2019 to be lower than 2018.
Meanwhile, shares of U.K. airline easyJet soared to the top of Europe’s benchmarks, up 6.2 percent despite receiving a trading update which highlighted that operations had been affected by the 2018 drone disruption at Gatwick.
IMF cuts global growth outlook
More broadly, sentiment remains weak in Europe after some recent warnings on global growth. The International Monetary Fund (IMF) cut its forecast for global growth in 2019 on Monday. It now expects 3.5 percent growth this year and 3.6 percent in 2020, down 0.2 and 0.1 percentage points from its last forecasts in October.
The Fund said it had lowered its forecast for a number of reasons including trade tariffs between China and the United States and weakness in the German auto industry.
Meanwhile, Beijing announced Monday that the Chinese economy grew 6.6 percent in 2018, the slowest pace since 1990. Stocks in Asia traded lower Tuesday afternoon on the back of the IMF’s latest outlook.
The forecasts were released on the eve of the World Economic Forum (WEF) in Davos. Heads of state, government officials, business leaders and policymakers are gathered in the Swiss resort this week to discuss the world’s most pressing problems with this year’s theme focusing on how to make globalization more inclusive.


Dow snaps 4-day winning streak as fears of an economic slowdown intensify

Fred Imbert

Stocks fell on Tuesday, the first trading day of the week, as weak data out of China and lower global growth estimates from the International Monetary Fund renewed fears of the global economy slowing down.
The Dow Jones Industrial Average dropped 375 points, led by losses in Goldman Sachs and Caterpillar. The S&P 500 pulled back 1.7 percent as the communications services and industrials sectors lagged. The Nasdaq Composite declined 2.14 percent. U.S. markets were closed on Monday due to the Martin Luther King Jr. Day holiday.
The Chinese economy grew by 6.6 percent last year, according to official numbers released by China’s government. That growth matched analyst expectations. However, it was also China’s slowest growth pace in 28 years.
“That’s confirmation of what we’re concerned about. The last thing we need is have actual data confirming our greatest fears,” said Art Hogan, chief market strategist at National Alliance. “Now, is some of that tied to trade talks with China and could some of that dissipate if we have a deal done? Absolutely, but it’s impossible to untangle those two things right now. That’s our reality.”
Combination of file photos showing U.S. President Donald Trump and Chinese President Xi Jinping.
Mandel Ngan, Nicolas Asfouri | AFP | Getty Images
Stocks fell to their lows of the day after the Financial Times reported the U.S. canceled a trade meeting with Chinese officials. CNBC later confirmed the report through a source. White House economic advisor Larry Kudlow denied the reports, saying the meetings are not canceled. China and the U.S. are trying to strike a permanent trade deal with the U.S. Both countries have been in a trade war since last year, slapping tariffs on billions of dollars worth of their goods.
“In the end, it will all depend on how Trump decides between a short-term outcome and longer-term aims,” Jonathan Fenby, chairman of the China team at TS Lombard, said in a note Sunday. “If Trump wants a deal for his own purposes, he can side with those in the administration who think a broader agreement can be constructed to enable the two countries to revert to a less confrontational relationship which will spare US companies from further trade war damage and cheer markets while setting Beijing on a more resolute path of reform.”
The IMF, meanwhile, said Monday the global economic expansion is losing momentum. This led the institution to trim its 2019 growth forecast to 3.5 percent from 3.7 percent. The IMF also cut its 2020 growth outlook to 3.6 percent from 3.7 percent.
The major indexes added to their losses after the National Association of Realtors said U.S. existing housing sales fell to their lowest level in three years. The iShares U.S. Home Construction ETF (ITB) pulled back 2 percent.
“Volatility is going to persist,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “Not much has changed in the world, in my opinion, since December.”
“The global situation is uncertain on several areas. On top of that, you have policy uncertainty coming from Washington. We don’t know what the U.S. government policy is going to be on various issues. That uncertainty is going to cause more fluctuations in the market.”
Stocks came into Tuesday’s session riding a four-week winning streak, their longest since August, as investors have largely shrugged off fears of a slowdown in earnings growth as well as an ongoing U.S. government shutdown. The S&P 500 is also up more than 10 percent since Dec. 24.
“As impressive as the recovery has been, there is still growing concern over the current V-shaped recovery due to correction lows historically being retested, as was the case in ’11 and ’16,” said Craig Johnson, chief market technician at Piper Jaffray, in a note. “While recent history and an overcrowded consensus suggest the market may revisit the December lows, we believe there is sufficient evidence that also suggests a double-bottom is not mandatory for the current recovery process.”
Arconic fell about 16 percent after announcing it would abandon the pursuit of a company sale.
Shares of eBay jumped 6.1 percent after hedge fund Elliott Management revealed a $1.4 billion stake in the company. Elliott also sent extensive recommendations to the company’s management team.
— CNBC’s Eustance Huang and Silvia Amaro contributed to this report.

Source: CNBC

Crude Oil Prices Closing Report: Oil prices drop 3 percent amid fresh signs of global economic slowdown

Tom DiChristopher

Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images
Oil prices tumbled 3 percent on Tuesday as China posted its weakest economic expansion in nearly three decades and the IMF revised its global growth forecast lower, raising fresh concerns about fuel demand.
Crude futures and equities came under renewed pressure in afternoon trading after the Trump administration canceled a meeting with Chinese counterparts to advance trade negotiations.
U.S. West Texas Intermediate crude futures fell $1.62, or 3 percent, to $52.18 around 1:15 p.m. ET. Brent crude, the international benchmark for oil prices, dropped $2, or 3.2 percent, to $60.74.

WTI earlier touched a fresh six-week high above $54 a barrel. Both WTI and Brent have posted three straight weeks of gains, rising 18 percent and 20 percent, respectively, through last Friday.
But futures gave back some of last week’s gains on Tuesday as trading got back underway following the Martin Luther King Jr. holiday in the United States.
The IMF on Tuesday cut its outlook for global economic growth in 2019 to 3.5 percent, down from an early forecast of 3.7 percent.
“It seems a distinct amount of economic concern is rising up, compounded by the IMF report that came out showing downward revision to economic growth,” said Matt Smith, head of commodities research at tanker-tracking firm ClipperData.
Fears of a slowing global economy have stoked concern about faltering demand for fuel. The fears have largely been driven by an ongoing trade dispute between the United States and China, the world’s two biggest economies and top oil consumers.
The Trump administration has canceled a meeting among the U.S. Treasury Department, the United States Trade Representative and Chinese vice minister of finance scheduled for this week, a source told CNBC. The move came as progress on negotiations over intellectual property protections stalled and Washington sought a better deal from Beijing, the source said.
On Monday, China reported its official economic growth rate was 6.6 percent in 2018, the weakest reading since 1990. Meanwhile, South Korea’s economy grew by 2.7 percent last year, the slowest pace in six years.
China’s demand for crude remains robust, according to Smith, but the country’s growing role in refining oil into fuels is contributing to an oversupply of petroleum products, particularly gasoline, in Asia.
“You continue to see China pulling in more crude, but at the same time as well, they’re’ pushing out more products,” he said.
“China is a real concern and you are starting to see that showing up in the flows data.”
Despite the IMF revision and Chinese data, BP expects oil demand to grow by 1.4 million barrels a day this year, CEO Bob Dudley told CNBC on Tuesday.
Dudley says he sees the market tightening and oil prices stabilizing following last quarter’s spike to four-year highs and subsequent drop to 18-month lows.
OPEC and 10 other oil exporting nations, including Russia, aim to drain oversupply in the oil market by holding back a combined 1.2 million barrels per day through June. Last week, OPEC reported that output from the 14-nation producer group dropped sharply in December.
Craig Erlam, senior market analyst at brokerage firm OANDA, said traders appear to be taking advantage of negative headlines to take some profits off the table following crude’s recent run-up.
“While in skittish markets this may be enough to further exacerbate downward moves, this looks like nothing more than profit taking with these headlines another convenient reason to do so,” he said in a briefing.

Source: CNBC