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What a difference a month makes.

Back on March 30, with European IG spreads blowing out to levels not seen since the summer of 2017...

Read more.....

What a difference a month makes.

Back on March 30, with European IG spreads blowing out to levels not seen since the summer of 2017...

... we showed that in order to avoid a sharp drop in Europe's corporate bond market, the ECB doubled down on its active intervention in the corporate bond market, and in the week ended March 23, the ECB purchased a whopping 55% more in IG bonds than its YTD weekly average.

The problem is that in order to avoid a March rout, the ECB may have soaked up much of the remaining marketable bonds, and as Deutsche Bank observes, there has been an abrupt slowdown in the ECB's purchases under the CSPP program so far in April, which has prompted the German bank to ask if the ECB has started a stealth CSPP taper at a time when it is also actively tapering its government sector bond purchases.

To be sure, the ECB won't be the first central bank to engage in a stealthy taper, one which is visible to the market but hasn't been officially disclosed due to concerns of explicit messaging, and is a function of the decline in private securities that the central bank can purchase at any price.

As we have discussed over the past year, the BOJ has famously been doing just that since the start of 2017, and just last week, the Nikkei reported  that the BOJ's purchases of JGBs have slowed to a pace not seen since the central bank launched its massive monetary easing program, a development that has not escaped the notice of market watchers.

So what about the ECB? Well, as we discussed one month ago, CSPP buying in Q1 was very solid. However, the CSPP pacefell sharply in absolute terms over the last four weeks as shown in the chart below.

In fact, last week's net volumes in particular were significantly lower than in any week since the CSPP began apart from the typical late-December QE hiatus. This sharp slowdown prompted Deutsche Bank's Michal Jezek to ask if this is a signal that a new CSPP regime has started in Q2, three months earlier than we expected?

And, as the DB strategist answers, it seems increasingly unlikely to be just a temporary blip. He explains:

Contrary to our expectations of steady buying throughout H1, the ECB may well have decided to slow down corporate purchases in Q2 already in order to wean the market off the addictive effects of the CSPP. Mario Draghi may be asked about this at the ECB press conference on Thursday but he is, in our view, unlikely to give up flexibility/optionality by confirming any potential regime change. Nevertheless, if the weekly CSPP data release next Monday confirms this pattern, it will be hard to doubt that it is indeed what has happened.

The sharp regime change is even more obvious in the following chart, which shows that after a sizable jump up in the net CSPP/PSPP ratio in Q1, it plummeted in April.

While it may appear even worse than the historically small but positive net CSPP purchases (€0.4bn), a closer look reveals that in flow terms the CSPP has slowed down more. In particular, April is a month with the lowest CSPP redemptions (€87mn) but highest PSPP redemptions (€22.7bn) between January 2018 and March 2019 (the latter is the farthest we have data for). The massive redemptions drove net PSPP purchases below zero only last week because mere €3.1bn of PSPP bonds matured in the first half of April and the remaining €19.6bn are due in the second half of the month.

To summarize, despite a sharp move following several risk-off events, the average weekly pace of net purchases in Q2 so far has seen a sharp slowdown according to DB calculations, as follows:

• CSPP 50% down: €0.7bn/week in April so far vs. €1.4bn/week in Q1
• PSPP 15% up: €5.9bn/week in April so far vs. €5.1bn/week in Q1

Taking a step back, what might be the possible motivation for such a slowdown? Deutsche lists there:

1. The ECB has committed to conduct €30bn of net QE purchases a month until the end of Q3. Since it has not done any meaningful front-loading so far, one would expect the overall QE to continue at this pace throughout the summer despite seasonally lower liquidity (they managed to buy twice as much in previous summers before the QE was trimmed). However, within the QE, very little trimming has been applied to the CSPP so far and that might be a reason to start a gradual slowdown of corporate purchases a lot earlier in order to avoid too  abrupt a stop when the overall QE is tapered. (In contrast, PSPP has been trimmed a lot already.)
2. Obviously, less (eligible and total) issuance than in March might be another reason for the CSPP slowdown but that would not explain why so much less has been bought than in February with a similarly quiet primary market.
3. Finally, DB proposes that it is possible that the ECB feels less need to buy corporate bonds when credit rallies as has been the case in April (Fig. 6) In fact, despite low CSPP flows eligibles have outperformed ineligibles. (Fig. 8) While there is no definitive answer - so far - it is possible to point to many periods in the past when spreads were rallying and it did not deter the ECB from heavy buying, the most recent example being January (Fig. 3 vs. Fig. 5 & 6). In summary, Jezek thinks that CSPP purchases have historically tended to be relatively price insensitive and do not attribute the recent slowdown to pricing considerations.

To Deutsche, point 1) seems the most likely answer if it is indeed the case that the ECB has decided to taper the CSPP - at least a bit - while maintaining steady overall QE purchases. There are some caveats:

While we may conclude that some form of CSPP taper is likely given four weeks of significantly lower purchases, two of which were outside any Easter break seasonality, we still need more observations to have greater confidence in that hypothesis or refute it. But as we stated at the start, if the weekly CSPP data release next Monday confirms this pattern, it will be hard to doubt.

The strategist leaves on an interesting question: whatever the reason behind it, "less corporate buying did not seem to undercut the recent rally. Could credit be blasé when the CSPP flows die down for good?"

Perhaps, or maybe the market simply failed to notice until now. A better test will be what happens if there is another blow out in European IG (and HY) spreads, and whether this will push the ECB's bond buying into overdrive. If so, that would explain why the market has so far failed to respond to the ECB's stealth taper: it realizes that the moment any credible selloff emerges, the ECB will be right there, backstopping everyone. Until, of course, it can't, because the simple reason why it is forced to taper purchases is that it will soon run out of both eligible bonds to purchase, and willing sellers, who may not be willing to part with the paper at any price, no matter how much the price-indiscriminate ECB offers.

What traders refer to as the 'liquidity smile' formed by the pattern of trading volumes has recently become more pronounced and turned it into a 'liquidity smirk'...

FT article on the impact of passive stock trading on massive uptick in trading near end-of-dayhttps://t.co/d0O89v767q Read more.....

What traders refer to as the 'liquidity smile' formed by the pattern of trading volumes has recently become more pronounced and turned it into a 'liquidity smirk'...

FT article on the impact of passive stock trading on massive uptick in trading near end-of-dayhttps://t.co/d0O89v767q#TCA #trading #Liquidity pic.twitter.com/vda8ViDtOO

— Carl Carrie (@carlcarrie) April 24, 2018

As The FT's Robin Wigglesworth reports, a seismic shift towards exchange traded funds and other index-tracking investment vehicles has heightened the importance of the last half-hour of the US trading day, from 3.30 to 4pm, when these passive funds typically conduct most of their activity to accurately match their benchmarks.

That has prompted traditional active managers to conduct more of their trading during this window to benefit from greater market “liquidity”.

Some traders and investors complain that the funnelling of activity into the last half-hour of the day - which comprises nearly a quarter of all US stock trading - is sucking liquidity away from the middle of the day, when making large trades can now have a noticeable market impact.

Indeed, what traders refer to as the “liquidity smile” formed by the pattern of trading volumes has recently become more pronounced and turned it into a “liquidity smirk” due to the lopsided importance of the 3.30-4pm trading window.

Some now fret that, with so much money sloshing around in a small window, it increases the risks of market mishaps.

“A lot of trading is concentrated in a very narrow period of time,” said Marco Pirondini, head of US equities at Amundi Pioneer Asset Management.

“It can be a very big technical problem. I would love regulators to start to think about this before there’s a problem, rather than after one.”

And as Wigglesworth notes, given the clear trajectory of the trend, more midday volatility could start to become more apparent in the coming years.

“It’s become a self-fulfilling prophecy. The liquidity feeds on itself,” said Todd Lopez, head of electronic trading for the Americas at UBS.

“The concentration around the close is likely to accelerate as more people try to minimise their market impact.”

A decade ago about 16 per cent of all trading happened in the final 30 minutes, but that rose to more than 20 per cent in 2012, and almost 25 per cent this year. The closing auction alone - when most ETFs do their rebalancing - now accounts for 8.2 per cent of volumes in 2018, up from 3 per cent in 2007.

“It does come with increased operational risk,” Mr Lopez said.

“If an exchange has an issue, it’s already quite disruptive, but as more trading happens at the close the risks become potentially much worse.”

And finally, perhaps most ominously of all, the flow during those last 30 minutes has turned drastically more bearish in the last few weeks... diverging very negatively from the manufactured price action of the underlying index....

The last time there was a divergence between the so-called SMART Index (Bloomberg's index that measures the last 30 minutes flow relative to the day) was in early 2008 and then more drastically in October 2008... and that did not end well.

Via Southfront.org,

Read more.....

Via Southfront.org,

One unexploded Tomahawk cruise missile and one high accuracy air-launched missile launched by the US and its allies on Syria on April 14 have been brought to Moscow, the chief of the Russian General Staff’s main operations directorate Colonel-General Sergey Rudskoy said during a press briefing on April 25.

“Some of the missiles failed to reach the designated targets apparently due to technical failures, which created the risk of destroying civilian facilities and causing civilian casualties. Two of them, a cruise missile Tomahawk and a high-accuracy air-launched missile, have been brought to Moscow.You can see the Tomahawk’s warhead in this slide,” Colonel-General Rudskoy said.

The colonel-general added that Russian specialists are studying them.

“The results of this work will be used to improve Russian weapon systems,” Rudskoy said.

The Russian military also revealed wreckage of the intercepted missiles.

Wreckage of the intercepted missiles. A screenshot from the video

Wreckage of the intercepted missiles. A screenshot from the video

A part of the Storm Shadow/SCALP EG air-launched cruise missile. A screenshot from the video

Fragments of the SCALP EG air-launched cruise missiles

SF recalls that the Pentagon says that the US, the UK and France launched 105 missile on targets in Syria on April 14. According to the Pentagon, no missiles were intercepted and all of them hit their targets.

The Russian Defense Ministry says that 71 missiles were intercepted by the Syrian Air Defense Forces.

Colonel-General Rudskoy added that according to the updated data only 22 missile hits on targets in Syria can be confirmed.

The Pentagon’s version of the missile attack:

• 76 missiles hit “Barzah Research and Development Center”
• 22 missiles hit “Him Shinshar Chemical Weapons Storage Site”
• 7 missiles hit “Him Shinshar CW Bunker”

Colonel-General Rudskoy further added that no of the attacked objects had been used by the Assad government to develop or to store chemical weapons.

The chief of the Russian General Staff’s main operations directorate added that Russia will supply the Syrian military with more air-defense systems and will continue to train Syrian air defense troops.

“Russian specialists will continue training Syrian military personnel, and will assist in mastering new air defense systems, which will be supplied in the near future,” Rudskoy said.

If yesterday's 2Y auction was ugly, with poor bidside demand, today's 5Y was at worst average.

Moments ago, the Treasury sold $35B in 5Y paper, the most for a single 5Y auction since Jan 2016, at a high yield of 2.837%, stopping through the When Issued 2.838% by 0.1bps and more than 20bps higher than the 2.612% yield in March. This was the highest yield since September 2008, and is where the 10Y yield was trading exactly one week ago.

The internals showed a mo Read more.....

If yesterday's 2Y auction was ugly, with poor bidside demand, today's 5Y was at worst average.

Moments ago, the Treasury sold $35B in 5Y paper, the most for a single 5Y auction since Jan 2016, at a high yield of 2.837%, stopping through the When Issued 2.838% by 0.1bps and more than 20bps higher than the 2.612% yield in March. This was the highest yield since September 2008, and is where the 10Y yield was trading exactly one week ago.

The internals showed a modest improvement, with the Bid to Cover virtually unchanged at 2.49, down from 2.50 last month, if above the 6 auction average of 2.45. What is more interesting is that Direct bidders took down 13.7% of the auction, vs 8.3% last auction, 10.1% in the prior six, and the highest Direct award since August 2014. Indirects, meanwhile, dipped from 63.5% in March to 60.2% (and below the 62.0% 6 month average) leaving Dealers holding 26.2% of the auction, a little below the 6 auction average of 27.9%.

Overall, an average auction, one which had little impact on the rest of the curve, or the pricing of 5Y paper itself in the open market.

Following the arrest (and imprisonment on treason charges over a contract dispute with PDVSA) of two of its workers, Reuters reports, citing four people familiar, that Chevron has evacuated executives from Venezuela.

Read more.....

Following the arrest (and imprisonment on treason charges over a contract dispute with PDVSA) of two of its workers, Reuters reports, citing four people familiar, that Chevron has evacuated executives from Venezuela.

Tensions have been rising for over a week as OilPrice.com's Julianne Geiger reported two Chevron Corp. workers arrested in Venezuela last week could face treason charges, according to sources quoted by Reuters on Monday.

The draft charges that used the word treason, seen by Chevon’s own lawyers last week, may put Chevron squarely in the middle of the escalating feud between PDVSA and foreign oil companies at best, and between the Trump Administration and Maduro’s socialist regime at worst.

The employees, who oversaw the Petropiar project co-owned by PDVSA and Chevron, were jailed when they allegedly refused to sign supply contracts concocted by PDVSA that skipped the normal competitive bidding process, according to multiple sources. The parts mentioned in the contract were reportedly double the fair market price.

The Petropiar joint venture consists of PDVSA’s 70 percent share, along with Chrevron’s 30 percent. It was reported a year ago that PDVSA had offered Rosneft a 10 percent stake in the project—a stake  worth $600 million-$800 million, according to valuations of similar deals as reported by Reuters back in August.

With Venezuela already in turmoil as oil production continues to fall in the crisis-stricken country, strong-arming the already-dwindling foreign players in-country may prove unwise.

Another foreign oil major doing business in Venezuela, French Total SA, announced just last week that despite the near-economic collapse, it would stick it out there—even as the European Union discussed stricter sanctions on the Latin American country.

Other oil majors have given up on Venezuela already, after in mid-2000, then Venezuelan President Hugo Chavez confiscated a 60-percent share in all oil projects in country and turned them over to PDVSA.

Other oil majors operating there have recently spirited employees out of the country, citing safety concerns—a move that now seems particularly prudent given the treason charges that two Chevron employees may soon find themselves up against.

Chevron did remove an unspecified number of employees from Venezuela back in August 2017.

But now, as Reuters reports, having evacuated a number of executives from Venezuela, Chevron asked other employees to avoid the facilities of its joint venture with the OPEC nation’s oil firm, the sources said.

Chevron’s move to evacuate its expatriate workforce underscores the how arduous it has become for foreign oil firms and their workers to sustain operations through Venezuela’s accelerating political and economic meltdown.

The affected staff numbers about 30 people in the coastal city of Puerto la Cruz, although it is unclear how many people Chevron has already removed from the country.

Chevron refused to comment, advising that these were "personnel matters."

Chevron has no plans to exit the country, Reuters reports according to a company employee familiar with the thinking of its board of directors. The oil company has not pulled out of other tough environments in the past, the person said - citing the jailing of employees in Indonesia in 2013 - and the firm believes Venezuela will eventually stabilize.

As Venezuelan production crashes, the arrests mark an escalation of tensions between PDVSA and foreign companies over control of supply contracts and the joint ventures’ governance, sources familiar with the dispute told Reuters.

It finally happened.

Six months after a group of Chinese scientists warned that the North Korean Punggye-ri nuclear test site was on the verge of collapse, and following reports from Japan's Asahi TV that more than 200 North Koreans had died when Read more.....

It finally happened.

Six months after a group of Chinese scientists warned that the North Korean Punggye-ri nuclear test site was on the verge of collapse, and following reports from Japan's Asahi TV that more than 200 North Koreans had died when a tunnel collapsed at the test site, the South China Morning Post reported today that North Korea’s mountain nuclear test site has completely collapsed, putting China and other nearby nations at unprecedented risk of radioactive exposure, two separate groups of Chinese scientists studying the issue have confirmed.

The collapse also likely explains the sudden willingness of North Korean leader Kim Jong-un to declare last Friday that he would freeze the state’s nuclear and missile tests and shut down the site, a researcher cited by the SCMP said.  

At least five of North Korea's last six nuclear tests all took place under Mount Mantap at the Punggye-ri nuclear test site in North Korea’s northwest; in the process they unleashed artificial earthquakes and destabilized the mountain to the point of no return.

According to the SCMP report, a group of researchers found that the most recent blast tore open a hole in the mountain, which then collapsed upon itself. A second group concluded that the breakdown created a “chimney” that could allow radioactive fallout from the blast zone below to rise into the air.

A research team led by Wen Lianxing, a geologist with the University of Science and Technology of China in Hefei, concluded that the collapse occurred following the detonation last autumn of North Korea’s most powerful thermal nuclear warhead in a tunnel about 700 metres (2,296 feet) below the mountain’s peak. The test turned the mountain into fragile fragments, the researchers found.

The mountain’s collapse, and the prospect of radioactive exposure in the aftermath, confirms a series of exclusive reports by the South China Morning Post on China’s fears that Pyongyang’s latest nuclear test had caused a fallout leak. The scientists warned that radioactive dust could escape through holes or cracks in the damaged mountain.

“It is necessary to continue monitoring possible leaks of radioactive materials caused by the collapse incident,” Wen’s team said in the statement.

As the SCMP notes, the official findings will be published on the website of the peer-reviewed journal, Geophysical Research Letters, likely next month.

North Korea saw the mountain as an ideal location for underground nuclear experiments because of its elevation – it stood more than 2,100 meters (6,888 feet) above sea level – and its terrain of thick, gentle slopes that seemed capable of resisting structural damage.

While the mountain’s surface had shown no visible damage after four underground nuclear tests before 2017, the 100-kilotonne bomb that went off on September 3 vaporised surrounding rocks with unprecedented heat and opened a space that was up to 200 metres (656 feet) in diameter, according to a statement posted on the Wen team’s website on Monday.

And as shock waves tore through and loosened more rocks, a large section of the mountain’s ridge, less than half a kilometre (0.3 mile) from the peak, slipped down into the empty pocket created by the blast, leaving a scar visible in satellite images. Wen concluded that the mountain had collapsed after analysing data collected from nearly 2,000 seismic stations.

Three small earthquakes that hit nearby regions in the wake of the collapse added credence to his conclusion, suggesting the test site had lost its geological stability.

A second team led by Liu Junqing at the Jilin Earthquake Agency with the China Earthquake Administration in Changchun reached similar conclusions to the Wen team.

The “rock collapse … was for the first time documented in North Korea’s test site,” Liu’s team wrote in a paper published last month in Geophysical Research Letters. The breakdown not only took off part of the mountain’s summit but also created a “chimney” that could allow fallout to rise from the blast centre into the air, they said.

Zhao Lianfeng, a researcher with the Institute of Earth Science at the Chinese Academy of Sciences in Beijing, said the two studies supported a consensus among scientists that “the site was wrecked” beyond repair. “Their findings are in agreement to our observations,” he said. “Different teams using different data have come up with similar conclusions,” Zhao said. “The only difference was in some technical details. This is the best guess that can be made by the world outside.”

As we reported previously, speculation grew that North Korea’s site was in trouble when Lee Doh-sik, the top North Korean geologist, visited Zhao’s institute about two weeks after the test and met privately with senior Chinese government geologists. Although the purpose of Lee’s visit was not disclosed, two days later Pyongyang announced it would no longer conduct land-based nuclear tests.

Hu Xingdou, a Beijing-based scholar who follows North Korea’s nuclear programme, said it was highly likely that Pyongyang had received a stark warning from Beijing.

“The test was not only destabilising the site but increasing the risk of eruption of the Changbai Mountain,” a large, active volcano at China-Korean border, said Hu, who asked that his university affiliation not be disclosed for this article because of the topic’s sensitivity.

The mountain’s collapse has likely dealt a huge blow to North Korea’s nuclear programme, Hu said.

Hit by crippling international economic sanctions over its nuclear ambitions, the country might lack sufficient resources to soon resume testing at a new site, he said.  “But there are other sites suitable for testing,” Hu said. “They must be closely monitored.”

Guo Qiuju, a Peking University professor who has belonged to a panel that has advised the Chinese government on emergency responses to radioactive hazards, said that if fallout escaped through cracks, it could be carried by wind over the Chinese border.

“So far we have not detected an abnormal increase of radioactivity levels,” Guo said. “But we will continue to monitor the surrounding region with a large [amount] of highly sensitive equipment and analyse the data in state-of-the-art laboratories.”

Zhao Guodong, a government nuclear waste confinement specialist at the University of South China, said that the North Korean government should allow scientists from China and other countries to enter the test site and evaluate the damage.

* * *

It remains unclear what if any impact the news will have on Trump's eagerness to sit down with Kim and discuss a denculearization of North Korea, if it emerges that the rogue nation only agreed to negotiate because it no longer had the ability to conduct further tests, and thus had no more leverage, as opposed to a voluntary decision by Kim Jong Un.

Reuters reports that The New York Stock Exchange says trading suspended in Amazon (AMZN), Booking Holdings (BKNG), Alphabet (GOOGL) and Zion Oil & Gas (ZNWAA) for the rest of the trading day due to a "price scale code issue."

BREAKING: NYSE says trading suspended in $AMZN, Read more.....

Reuters reports that The New York Stock Exchange says trading suspended in Amazon (AMZN), Booking Holdings (BKNG), Alphabet (GOOGL) and Zion Oil & Gas (ZNWAA) for the rest of the trading day due to a "price scale code issue."

BREAKING: NYSE says trading suspended in $AMZN, $BKNG, $GOOGL, $GOOG, $ZNWAA for balance of the trading day due to price scale code issue pic.twitter.com/yAapOKU74l

— Reuters Business (@ReutersBiz) April 25, 2018

AMZN, GOOGL prices are fading on the headlines (trading on other exchanges)...

As The NYSE explains, it appears be a technical price reporting issue given their $1000-plus price...

Speaking before a joint meeting of Congress on Tuesday, French president Emmanuel Macron reiterated that Paris wants to work on a new nuclear deal with Iran, which as we discussed earlier prompted confusion and anger among his European allies, and that France is not going to withdraw from the Iranian nuclear deal, also known as the Joint Comprehensive Plan of Action, whic Read more.....

Speaking before a joint meeting of Congress on Tuesday, French president Emmanuel Macron reiterated that Paris wants to work on a new nuclear deal with Iran, which as we discussed earlier prompted confusion and anger among his European allies, and that France is not going to withdraw from the Iranian nuclear deal, also known as the Joint Comprehensive Plan of Action, which was signed in 2015 by president Obama and remains his landmark foreign policy achievement.

"France will not leave the JCPOA because we've signed it," Macron said. "We can work on a more comprehensive deal."

WATCH: Macron discusses his position for a “more comprehensive” Iran deal. “Whatever the decision of the United States will be, we will not leave the floor to the absence of law” #tictocnews pic.twitter.com/CyJIwfkysI

— TicToc by Bloomberg (@tictoc) April 25, 2018

Macron's vow followed statement from the US State Department and EU foreign police chief Federica Mogherini, who reiterated their commitment to the agreement.  On Tuesday, Macron prompted a drop in the price of oil, when during a joint presser with Donald Trump he urged the US president not to "tear apart" the current deal, instead advising to build on it to develop a broader deal. He noted that Paris wanted to work on a new nuclear deal with Iran that would include international players like Russia and Turkey.

Macron has pushed for a new approach that would see the United States and Europe agree to block any Iranian nuclear activity until 2025 and beyond, address Iran’s ballistic missile program and generate conditions for a political solution to contain Iran in Yemen, Syria, Iraq and Lebanon.

As a reminder, oil has surged in recent weeks over concerns that should Trump tear up the Iran Nuclear deal, that as much as 1 million barrels of Iranian exports would be eliminated from the market as a result of trade sanctions. It is also the reason why Europe - which has found a cheap source of oil in Tehran - has been fighting hard to preserve the deal.

Trump, who has consistently criticized the 2015 deal and called the accord, which stipulates the gradual lifting of anti-Tehran sanctions in exchange for Iran maintaining the peaceful nature of its nuclear program, the “worst deal ever", last October, Trump refused to re-certify the nuclear deal, accusing Tehran of violating the spirit of the agreement.

"Whatever the decision of the United States will be, we will not leave the floor to the actions of rogues. We will not leave the floor to this conflict of powers in the Middle East," Macron told Congress. "I think we can work together to build this comprehensive deal for the whole region, for our people, because I think it fairly addresses our concerns."

In remarks on Tuesday, Trump said that "nobody knows what I'm going to do on Iran deal" until the deadline on May 12. Not even he.

Separately, Macron also urged the IS to reject narrow nationalism and engage the world, telling U.S. lawmakers on Wednesday that modern economic and security challenges must be a shared responsibility. 

During the same Congressional address, Macron said that isolationism and nationalism were “a tempting remedy for our fears.” But he said international engagement was the only solution. "This requires -- more than ever -- the United States’ involvement as your role was decisive for creating and guarding today’s free world. The United States is the one who invented this multilateralism. You are the one now who has to help preserve and reinvent it,” he said.

Trump has yet to respond.

Via Global Macro Monitor,

I stopped to grab a burger in Marin County today and was kind of shocked to see the following posted on the front door...

Read more.....

Via Global Macro Monitor,

I stopped to grab a burger in Marin County today and was kind of shocked to see the following posted on the front door...

That is a pretty steep starting wage for non-skilled labor, and $5.00 more than the California minimum wage.

In-N-Out does pay their employees well.  The private burger chain pays store managers an average yearly salary of more than $160,000 with no college degree or previous management experience required.   Facebook engineers soon to be flipping burgers.

Nonbinding

It is clear the minimum wage in California is nonbinding — that is irrelevant — and all the bluster about raising it would cause unemployment is just that, bluster.

During softer economic times, when the minimum wage is binding, the story changes.  Not now, however.

Passing It On

Nevertheless,  it did feel prices have risen for a burger, fries, and soda since the last time I was in an In-N-Out.  I think it cost me around $8.50 today.

Does anyone remember the days of a $.35 Big Mac?

Real Minimum Wage Higher 

Here is what is interesting about that $16.00 per hour offer.

In 1980, the minimum wage was $3.10 per hour, which equates to $9.94 in today’s inflation-adjusted dollars.    The minimum wage is $11.00 in California, so a slight increase in the real wage.

If In-N-Out is forced to pay almost 50 percent above that to attract decent burger flippers and the company can pass it on in higher prices,  inflation cometh is here, folks.

Other firms will have to pay higher wages to keep and attract their workers if In-N-Out is going to start bidding up the labor market.

We are happy for the entry-level workers, high school, and college kids that now have a higher return on their labor.   However, that is only half the story.

Many of the lower paid workers are not entry-level.

Some,  reemployed from much higher paying jobs, some are seniors who cannot afford retirement.

We suspect, though wages are raging at the lower end,  companies are laying off older expensive workers and hiring younger cheaper workers to keep labor costs in check, and is one reason why the official wage numbers are not spiking.   We are not certain on this and have to further research it.

Wealth Gap

We haven’t even discussed the pornographic income and wealth gaps,  and will leave that for another day.

But just imagine, if you will,  the inflationary pressures the economy would be experiencing if a decent chunk of the income and wealth generated over the past ten years actually had found its way to those with higher propensities to consume?

Wealth Without Production = Inflation 

If wealth without work is one of Ghandi’s  seven deadly sins, paper wealth without production that is consumed is surely inflationary.  Go no further than than the real estate market to confirm this thesis.

How ironic it is the global central banks that have printed trillions over the last decade to generate the asset inflation to stimulate demand to keep the global economy afloat have not suffered the inflationary consequences of their actions.  At least, not yet.

The rich have become richer and spend proportionally less, and the poor have become poorer and cannot spend more.

Inflation

Rents and housing prices are skyrocketing, though maybe not in Manhattan.

Food prices are rising.

Gas prices are spiking.

My Verizon bill suddenly spiked $150 per month with new surcharges, so off to Sprint.

Moreover, there is no labor to rebuild the housing market in our fire-ravaged county.

So, of course, there is no inflation.

And how the heck do you correctly measure inflation with dynamic pricing anyway?

Do you have any question the methodology the BLS will or is using?

The Disneyland resort raised prices over the weekend, several months before the park plans to unveil a remake of its boardwalk-themed area at the California Adventure Park.

The prices rose the highest for annual pass holders, up as much as 18%. Daily tickets rose nearly 9%. By comparison, the consumer price index rose 2.5% in the 12 months ending January 2017.

Daily tickets for the Anaheim theme parks vary in price, depending on daily demand.A one-day, one-park adult ticket for Disneyland or California Adventure remains $97 for low-demand days, such as weekdays in May.

A ticket for regular-demand days is $117, up from $110. The price of a ticket on peak-demand days is $135, up from $124.  – LA Times,  Feb 11, 2018

Spiking Bond Yields

Why would bond traders ever bid the 10-year over 3 percent?

Sometimes the crowded trades are right.   Higher deficits,  the Fed now a yuuge net Treasury seller, and foreign buyers on strike, and then higher inflation.

Flatter yield curve?

Good luck on that one unless the stock market suffers a 1987-like crash.

Jeff Bezos, the world's richest man, has made Amazon shareholders extremely wealthy and happy in recent years, but when it comes to Amazon's 566,000 employees, it's a different matter entirely.

Last week, Amazon finally disclosed its workers’ median annual salary, which at a paltry $28,446 put Amazon on par with Hershey, slightly above retailer Home Depot, and almost ten Read more.....

Jeff Bezos, the world's richest man, has made Amazon shareholders extremely wealthy and happy in recent years, but when it comes to Amazon's 566,000 employees, it's a different matter entirely.

Last week, Amazon finally disclosed its workers’ median annual salary, which at a paltry $28,446 put Amazon on par with Hershey, slightly above retailer Home Depot, and almost ten times below the $240,430 median annual comp at Facebook, according to recent proxy filings.

This will hardly come as a surprise: after all, most of the roughly half-million blue-collar, part-time employees at Amazon don’t make six figures while spending their workdays writing code, and instead unload trucks, drive forklifts and walk miles collecting products to fill orders—all for around the same pay as workers in other companies’ warehouses. Due to their menial, repetitive task, they are also rapidly being replaced by robots.

Which explains why Amazon CEO Jeff Bezos was booed and received a hostile reception from his own workers, when he arrived in Berlin on April 24 to pick up an innovation award (mercifully, it wasn't for making human workers obsolete.)

According to Bloomberg, around 350 Amazon workers, members of Germany's powerful Ver.di trade union, gathered outside the office of tabloid publisher Axel Springer where the awards ceremony was taking place, carrying posters demanding to "Make Amazon Pay."  The union has been pushing for higher pay for Amazon’s thousands of workers in the country for several years, claiming they receive lower wages than workers in other retail jobs. Amazon workers from other countries, including Poland and Italy, also traveled to Berlin to join the protest.

In a dramatic description of Amazon working conditions, Verdi boss Frank Bsirske said that “we have a boss who wants to impose American working conditions on the world and take us back to the 19th century." Ver.di has for years been a constant thorn in Amazon’s side in Germany, organizing workers strikes to demand improved pay and working conditions according to Bloomberg.

One of the protesters at the event was Thomas Rigol, 37, who joined Amazon as a logistics worker in Leipzig in 2008. Rigol says he would like Bezos to give unions a say in the company, and increase profit sharing opportunities for workers.

"But mostly it’s about respect, which the simple workers aren’t getting from the upper management,” Rigol said. “Mr. Bezos is the richest man in the world and we are being patronized.”

The protest took a political turn, when Andrea Nahles, the new leader of Germany's Social Democrats which is in coalition with the ruling CDU, turned up at the protest, and also had harsh words for Bezos, telling reporters that he didn’t deserve his prize since he treats his employees badly. Amazon employs some 16,000 people in Germany, its biggest market outside the US.

And confirming that Germany will do everything in its power to maximize Amazon's tax receipts - if only in Germany - Nahles labeled Amazon, along with other big tech companies "world champions in tax avoidance" and told reporters that "this does not deserve a prize."

Later, during a fireside chat with Axel Springer CEO Mathias Döpfner on Tuesday evening, Bezos defended Amazon saying he was "very proud of our working conditions, and I’m very proud of the wages we pay,” including in Germany. It was not immediately clear if he discussed his unstated desire to replace all low-paid warehouse workers with zero-paid robots over the next several years.

Separately, when asked a question about whether he was concerned Trump would try to break up Amazon Bezos said he expects to be scrutinized. “The big tech companies have become large enough that they’re going to be inspected,” Bezos said. "It’s fine." In other words, "the world's richest man" does not appear at all concerned about the actions of "the world's most powerful man."