Monday, November 14, 2016

European Stocks To Open Higher As Traders Digest Trump Policies; US Dollar, Bond Yields Rise

By Arjun Kharpal
CNBC
November 14, 2016

European markets are expected to open higher on Monday, shrugging off broadly lower trade in Asia, amid a tick-up in bond yields and the U.S. dollar that is stoking risk appetite.

London's FTSE 100 is called up 49 points at 6,779, the German DAX is expected to open 75 points higher at 10,742, while the French CAC is seen 31 points to the good at 4,520.

The dollar index, which measures the greenback against a basket of currencies, was trading around 99.579 on Monday, up 0.52 percent. It comes on the back of a sell-off in U.S. Treasuries, with yields on the 10-year note up 2.2 percent, their highest level since January.

Chris Weston, chief market strategist at IG Index, said that sentiment towards being short U.S. Treasuries and emerging markets, but long the dollar has been driven by the "central thematic of reflation, nationalism and de-regulation" coming out of U.S. President Donald Trump's administration.

"It seems it is too early to fade this move and as long as you are in assets that are directly reacting to this central thematic then stay with it," Weston told CNBC by email.

Analysts see Trump's policies as leading to higher inflation which would attract inflows into the U.S. dollar and boost expectations that the Federal Reserve could raise interest rates soon. On Friday, Fed vice chair Stanley Fischer said that the case for tightening monetary policy is "quite strong" thanks to a strong economy.

"Early indications would appear to suggest that the Federal Reserve remains on course to hike rates next month after comments by Fed vice Chair Stanley Fischer on Friday that suggested additional fiscal stimulus could alter the rate dynamics for the U.S. economy," Michael Hewson, chief market analyst at CMC Markets, wrote in a note.

"The tone of his remarks suggested that, unlike market expectations of a single rate rise that we could well see additional rate rises follow on quite quickly, if market measures of inflation expectations continue to increase."

In Asia, markets trade mixed with Japan's Nikkei 225 outperforming after the country's third-quarter gross domestic product grew by an annualized 2.2 percent, beating market expectations.

Meanwhile, economic data out of China on Monday were mixed. China's fixed-asset investment rose 8.3 percent in the January-to-October period, beating market expectations, while October industrial output and retail sales growth missed forecasts. The Shanghai Composite and Shenzhen Composite were trading higher.

In the commodities space, oil prices were flat-to-lower on Monday after the OPEC reported record output at the end of last week. And amid the focus on risk assets, the price of gold – a typical safe-haven – fell.


Article Link To CNBC:

Italy's Chance To Buck The Brexit-Trump Trend

By Therese Raphael
The Bloomberg View
November 14, 2016

The politician who ought to be most immune to the populist rage sweeping the world's democracies should be Italy's Prime Minister Matteo Renzi. A former mayor who won election in Florence at the age of 29 as the radical alternative to an establishment candidate, Renzi has solid populist credentials.

Moreover, Italians have already had their Donald Trump. Billionaire businessman Silvio Berlusconi was prime minister for nine years and a political force for some two decades; his legacy was one of countless broken promises of reform, continuous scandal and widespread international derision. And after more than 60 postwar governments, Italians also know the meaning of instability.

And yet, perhaps none of that matters. On Dec. 4, when Italians vote in a referendum Renzi has pitched as make-or-break for his government, he is in danger of being knocked away by the same electoral wrecking ball that crushed the U.K.'s last government and Hillary Clinton's presidential hopes.

Renzi doesn't fit the mold of Clinton or British politicians who lost the argument over whether the U.K. should leave the European Union. Both were establishment forces that represented continuity and the status quo. Both, it might be said, represented the power centers of faded, or declining, empires, while their opponents promised measures to restore their country's greatness. In Italy, ironically, a vote against the referendum is a vote not for change but for political instability and economic stagnation -- two things Italians have plenty of experience with.

Why Italians might reject logic and their own experience is partly down to bad timing and partly to Renzi's own miscalculations in framing the issues and in personalizing the referendum (he has threatened to resign if he loses). It will raise further questions about the utility and wisdom of referendums to decide complex policy issues.

The questions Italians will decide might seem arcane compared to the U.K.'s in-or-out vote or America's epic presidential campaign. But the issues are not only important in their own right (Renzi has, with justification, declared the country ungovernable without the institutional reform he's seeking), the vote has become a proxy for the current government and its reformist vision.

The biggest change is to the composition and role of the Italian Senate. The present system, designed to prevent another Mussolini, gives the two houses of parliament equal powers, which stymied law making as bills had to bounce back and forth between the two chambers, often taking years (even decades) to resolve. The reform would subordinate the Senate's powers and make it an assembly of regional representatives who advise legislative change. The number of senators will be reduced to 100 from 315 and the chamber would comprised members of regional assemblies and mayors, with five presidential appointees. The reform would also abolish layers of government that create overlap between regional and central authorities.

Had Renzi stopped at those changes, his chances might now be better. But he threw in a change to the electoral law that makes it nearly impossible to dethrone a sitting prime minister for his five-year term and makes his own deputies dependent on him for re-election. That worries many Italians who are wary of Renzi's less-than-collaborative approach to policy-making.

Renzi must be ruing his poor luck. He fancies himself the populist reformer Italy needs, but voters are unhappy with a lot of things and want to signal their discontent.

The prime minister's task has been made harder by Italy's economic troubles: stagnating growth, an 11.4 percent unemployment rate, a banking sector plagued with non-performing loans and a debt-to-gross domestic product of 132 percent, well over double the European Union's 60 percent limit. Nearly half of Italian youth are unemployed, and surveys, especially from the cities, show high levels of dissatisfaction. Italy's middle class, like America's, doesn't feel it has reaped the benefits of globalization.

In the past, Italian governments papered over problems through devaluation and deficit spending. Neither is possible under the euro. Italy needs structural reform, but cannot have it under the current constitutional setup. Renzi's bold attempt to reform Italy's labor markets to make dismissal easier were thwarted by entrenched union interests and watered down, leaving him looking ineffective. To his critics, the constitutional reforms will not do much to end the fragmentation and cronyism in Italian politics.

Renzi's main competitor, Italy's Five Star Movement -- founded by the stand-up comedian, blogger and former Communist Beppe Grillo -- has been steadily burnishing its governing credentials and warning voters that the reforms give Renzi too much power. It argues Italy should leave the euro and that its mainstream parties are corrupt and ineffective. Renzi never misses an opportunity to highlight Five Star's lack of governing experience and its incoherent mix of policy proposals. But, as with criticism of Trump, it's not clear that Italians are worried about things like experience or competence. Austerity has hurt, and they are looking for a way to vent their anger.

Renzi and his deputies have been zig-zagging the country to drum up support for the measure. "If the referendum doesn't pass, over the next 30 years, whoever is prime minister will … be a slave to vetoes, blackmail and bureaucracy," he warns voters. It's not clear Italians are listening; the "no" vote was leading by 53 percent to 47 percent in October, according to the Euromedia poll.

Renzi is a skilled campaigner who shouldn't be underestimated, even now. But if the government falls and Italy's political system remains unreformed, the safest assumption is a continuation of chaotic, cronyist politics; and Italy's withdrawal from the euro (a demand of the Five Star Movement and an increasingly popular stance) becomes a real possibility. It's unlikely the euro zone would survive that.

In the few weeks remaining, Italy's government must convince voters somehow not to follow the example of Brexit and the U.S. election. The consequences if they reject that message could be as far-reaching as either of the votes we've seen so far this year.


Article Link To The Bloomberg View:

U.S. Can’t Find ISIS Prisoners

Captured ISIS fighters should be an invaluable source of intelligence in the fight for the terror group’s Iraqi capital. But U.S. forces have only questioned ‘a handful’ of them.


By Nancy A. Youssef
The Daily Beast
November 14, 2016

It’s the most important battle in the war against the self-proclaimed Islamic State to date: the fight to retake Mosul, the terror group’s Iraqi capital. But so far, the U.S. military does not know how many ISIS fighters have been taken prisoner, a senior defense official explained to The Daily Beast.

Iraq’s security forces have allowed the U.S. military to interview fewer than “a handful” of detained fighters under Iraqi control since the Mosul offensive began in mid-October, a U.S. defense official told The Daily Beast. The official could not say if any of those detainees were captured before the Mosul offensive, or after it began.

“We do occasionally get access to detainees that the Iraqis capture,” a second defense official said. “But it’s rare."

Iraqi officials have said hundreds of ISIS fighters have died so far in the three-week-long battle; U.S. officials estimate a smaller number have fled. It is those fleeing forces that evade capture that are a potentially lost source of intelligence for the U.S. and its allies—and an opening for ISIS fighters to creep back into Mosul, U.S. officials concede.

Asked by The Daily Beast whether the U.S. military knew the number of ISIS fighters that had been captured, the first official replied, “Nope.”

In contrast, the U.S. military during its last war in Iraq had access to thousands of Iraqi prisoners—and the intelligence they provided. But observers said the lack of detainees this time around reflects an ISIS eager to fight. And it shows the limits of a war in a city littered with bombs and tunnels, and home to hundreds of thousands of civilians.

“You can’t do these capture operations in the middle of the urban warfare. It’s too dangerous. We didn’t capture many people in the [U.S.-led] Fallujah battles of 2004,” James Jeffrey, the U.S. ambassador to Iraq from 2010-2012, explained to The Daily Beast.

Jeffrey said the lack of the detainees who could provide intelligence is the cost of not having U.S. troops involved in frontline combat, who could hold suspected ISIS fighters, even temporarily, to interrogate them.

“Some of that intelligence would be helpful not for [learning about] longer term ISIS plans”—the frontline fighters are unlikely to know about such strategic aims—“but for specific intelligence on the fight for Mosul itself,” said Jeffrey, the Philip Solondz distinguished fellow at the Washington Institute for Near East Policy.

Human Rights Watch offered a more troubling explanation for the lack of reported detainees, saying it believes that Iraqi and Kurdish forces have detained “at least 37 men from areas around Mosul and Hawija suspected of being affiliated with the Islamic State” and that government officials have not allowed those detainees to make outside contact.

“Human Rights Watch spoke to 46 relatives and witnesses, who described how security forces took the men from checkpoints, villages, screening centers, and camps for displaced people. Most said that they did not know where the men are being held and all of them said that the men have not been able to contact them while in detention,” the group said in a statement.

In the war against ISIS in Mosul, the number of fighters detained is the dog that doesn’t bark. ISIS repeatedly has urged its troops to fight to the death, declaring anything short of that punishable by execution. On the other side of the battlefield, neither the Iraqis nor the Americans, for their own reasons, are eager to hold detainees. And if HRW is correct, some Iraqi forces don’t want to say how many detainees they are holding.

The status of detained ISIS fighters “is something I have never heard come up in a briefing with the Iraqis,” the second defense official said about briefings between the U.S. and Iraqi military.

To be sure, both Iraqi and Kurdish forces have arrested hundreds of fighters but what it is less clear is how many have remained in custody. One Kurdish official told The Daily Beast that Kurdish forces alone had detained hundreds of militants, but could not say how many remain in their custody, adding that any suspected ISIS fighter would be handed over to the Iraqis. Since most suspected ISIS fighters are Iraqis, they are not considered prisoners of war but detainees in their own country. There are international rules for the treatment of prisoners of war but each nation decides how to treat its own criminals. And therefore it is up to the Iraqi government if it will expend resources to bring a case against a prisoner through its tenuous court system. Releasing or mistreating those in custody, for some, are easier alternatives.

The U.S. military has agreed to notify the International Committee of the Red Cross within two weeks of taking a detainee in Iraq, but it is not clear if the Iraqis have made a similar agreement with the ICRC.

Given the seemingly limited number of ISIS fighters captured, the war against ISIS increasingly appears to end with death or flight. When roughly 100 ISIS fighters launched a surprise attack last month on the Iraqi city of Rutbah, for example, half the ISIS fighters involved were killed in the 36-hour battle, U.S. Air Force Col. John Dorrian told The Daily Beast.

“Most of them were killed in place. Some of them were trying to escape the city and were struck by coalition airstrikes,” Dorrian told reporters during an Oct. 28 briefing.

With ISIS fighters either fleeing or dying, U.S. hopes to glean intelligence through the fight to retake Mosul will hinge on information discovered in documents and electronic files, not through prolonged interrogations. And if enough ISIS fighters are able to flee, as they have so far in Mosul, that could stoke fears among Iraq’s Sunni population that the terror group could return, making it harder for Iraq’s central government to gain the confidence of the population needed to retain control of the city after the battle ends.

“The issue of fleeing ISIS fighters is an indicator of whether local Sunni Arabs or alleged former ISIS fighters feel that their security and interests will be protected by the force that defeats ISIS. If they don’t believe it, they have no incentive to remain in the territory cleared of ISIS or to disarm and re-integrate,” Jennifer Cafarella, a Syria analyst at the Washington-based Institute for the Study of War.

There could be more ISIS detainees in the weeks ahead, as Iraqi Security Forces and Kurdish Peshmerga fighters start the block-by-block clearance of Mosul, Pentagon officials said, as it will be much harder for ISIS militants to flee in that urban environment. Iraqi security forces and Kurdish Peshmerga forces first reached the city borders last week.

Iraqi Prime Minister Haider al-Abadi hinted at the possibility of increased detainees in his comments last week, when he called for ISIS fighters in Mosul to “surrender or die.” There are Iraqi detention centers set up south of the city for such detainees, Pentagon officials said, but no indication the Iraqi forces could handle a large number of detainees.

“We will close in on [ISIS] from all angles and God willing we will cut the snake’s head. They will have no way out and no way to escape,” al-Abadi said on state television, while dressed in combat fatigues.

The belief that ISIS will not surrender has led local forces to conclude that the only way to defeat ISIS fighters is to kill them, Pentagon officials concede. After all, no one is pushing Iraqi security forces to grab fighters that could be laden with explosives and prepared to kill Iraqi troops in suicide missions. Moreover, taking detainees slows down operations and such detainees demand housing, food, and eventually a judicial process.

The U.S. troops joining local forces in the push against Mosul are only there in an advisory role, Pentagon officials have said. And the U.S. has largely gotten out of the detention business in Iraq after a sordid history during the 2003-2011 occupation. Photos of U.S. troops humiliating and mistreating prisoners held in Abu Ghraib become some of the most defining images of a U.S. presence that fell far short of its promise be liberators for Iraqis living under Saddam Hussein’s regime. At its peak in 2007, there were roughly 50,000 Iraqi detainees—half of whom were held by American forces.

In 2015, the U.S. military acknowledged building a makeshift detention center for high-value ISIS detainees, but so far has only admitted to holding one such person: suspected ISIS chemical-weapons expert and Iraqi national Sleiman Daoud al-Afari, who was captured by U.S. special-forces commanders in February; U.S. officials did not acknowledge al-Afari’s capture until a month later.

Officials said then that al-Afari provided so much intelligence, it led to additional strikes on the terror group’s chemical-weapons facilities.

The best-known ISIS detainee was Umm Sayyaf, who was captured during a May 2015 raid that targeted her husband, Abu Sayyaf, a top-level ISIS operative who oversaw gas and oil operations. Umm Sayyaf was initially held by the U.S., but was handed over to Kurdish authorities in August. Like al-Afari, U.S. officials said she provided a tremendous amount of intelligence about internal ISIS operations and its detention of American citizen Kayla Mueller, who according to ISIS, died in February 2015.

Perhaps that’s one reason why ISIS has been so forceful in urging its fighters to not be captured. ISIS declared to its fighters that surrendering is a crime punishable by death. And there is evidence the terror group has followed through on that charge. Earlier this month, the United Nations High Commissioner for Human Rights received reports that ISIS killed 50 of its own militants at the Ghazlani military base in Mosul for “alleged desertion.”


Article Link To The Daily Beast:

Why Strongmen Succeed

By Pankaj Mishra
The Bloomberg View
November 14, 2016

The election of Donald Trump, whose campaign trafficked in racism and misogyny, as the president of the United States is a calamity. But for those who experienced in 2014 the election of Narendra Modi, proud member of a minority-baiting alt-right organization, as India’s prime minister, the ascent of Trump induces deja vu. And to those who have witnessed the subsequent radical makeover of India under Modi, the prospect of Trump assuming supreme power brings on acute foreboding.

For what is threatened now in the U.S. is not just free trade, liberalism or a technocratic and professional class of politician accused of being out of touch with ordinary people. It is democracy itself -- the central project of the modern world, in which people come together to form a political community that defines its shared laws, ensuring dignity and equal rights for each citizen, irrespective of ethnicity, race, religion and gender.

Anguish and despair must quickly give way to a fuller reckoning with the deeper reasons behind Trump’s empowerment. We must ask: Where do we stand, and where do we go from here?

Here the Indian experience can be instructive, if not uplifting. For over a decade, Modi was on the fringes of India’s political and intellectual life. Accused of supervising mass murder and gang rapes in the state of Gujarat in 2002, he was blocked from traveling to the U.S. and Europe. Journalists and pundits hailed technocrats such as former Prime Minister Manmohan Singh, an Oxford-educated economist, for their secular outlook as well as economic wizardry.

Modi’s moment came only when economic growth, which had been largely jobless, began to falter. Corruption scandals exposed the liberal technocrats as a self-aggrandizing and inept elite, and the political party most identified with them -- the Congress Party -- was engulfed by a devastating crisis of legitimacy.

The stage was then set for Modi to rise. And so he did, eerily anticipating Trump with the accusation that his country was run by a foreigner (the Italian-born Congress leader Sonia Gandhi) and traitorous liberals, and overrun by Muslims and immigrants. To complete the analogy with Trump, Modi also boasted about the size of a male body part -- his chest -- while promising to make his country great again.

Modi’s electoral base was among Indians who felt cheated out of nearly double-digit but unevenly distributed growth. He managed to persuade them that the choicest fruits in India were being stolen by an arrogant and deceptive elite that promised meritocracy but perpetuated dynastic rule.

As Tocqueville pointed out long ago, people in the democratic age “have an ardent, insatiable, eternal, invincible passion” for equality, and “will tolerate poverty, enslavement, barbarism, but they will not tolerate aristocracy.” And so in the eyes of the aggrieved, the commonplace liberal accusation against Modi -- that he was menacingly authoritarian -- turned into an asset.

Two years of Modi in power have confirmed that he is a demagogue of a particular kind: one that has periodically emerged, since the 19th century, from a radically disillusioning experience of liberal democracy, from the latter’s failure to confer dignified citizenship or distribute equitably the benefits of economic growth.

It is now Trump’s turn to benefit from this angry disillusionment with oligarchic dynasts. His advent, astoundingly simultaneous with that of other demagogues, confirms that the U.S. has reentered the history of the modern world after its long 20th century exemption from the extensive political chaos that almost all other countries suffered. What happens next depends greatly on how America’s democratic institutions respond to Trump. And, here, India’s example is severely discouraging.

Hindu nationalists are colonizing state and society in India with contemptuous ease, staffing political and cultural institutions with loyalists. “Hinduize all politics and militarize Hindudom,” V.D. Savarkar, the chief ideologue of Hindu supremacism and Modi’s hero, once exhorted. This old fantasy of upper-caste Hindus is now finally being realized under the leader with a 56-inch wide chest. Clamoring for retributive violence against Kashmiri Muslims and Pakistan, the media is “falling like nine pins,” as former Finance Minister P. Chidambaram said last month.

In many ways, the electoral apotheosis of a Hindu supremacist in 2014 has proven to be less shocking than the zeal of many affluent Indians, including former fans of the uber-technocrat Manmohan Singh, to rally to his side. Tocqueville may have been right to say that a “taste for well-being easily comes to terms with any government that allows it to find satisfaction.” In the U.S., much hope rests with those who refuse a similarly craven accommodation with a white supremacist.


Article Link To The Bloomberg View:

Obama’s Imperial Presidency Now Is Trump’s

Liberals let the Obama presidency’s expanded powers go virtually unchecked. Now Trump gets to enjoy them.


By Tim Mak
The Daily Beast
November 14, 2016

For nearly eight years, President Obama massively expanded his authority on national security issues: on the prosecution of whistleblowers, secret surveillance courts, wars without congressional authorization, and drone campaigns without public oversight. During this time the left, with the exception of some civil liberties groups, remained largely silent.

But now this entire apparatus is being handed over to Donald Trump, a president with a penchant for authoritarianism, who will no doubt point to Obama as precedent to justify the continuation, and perhaps broadening, of these national security excesses.

“Many Americans were willing to invest broad power in the presidency because they trusted the president. But obviously the powers that we invest outlast any particular president, and now those powers are available to Trump,” said Jameel Jaffer, the director of the Knight First Amendment Institute at Columbia University. “That was a profound mistake on the part of the Obama administration and Americans generally.”

A President Trump is unlikely to roll back any of the powers of the presidency—in fact, as a candidate, he did everything he could to suggest that the person who occupies the Oval Office had magical powers to fix the economy, destroy ISIS, and suppress crime.

“Part of Trump’s appeal was that he promised to be the kind of president Americans think a president can be… a combination of God and Superman,” said Tom Nichols, a professor at the U.S. Naval War College, and a prominent Never Trumper during the campaign.

Those opposed to Trump’s presidency have already begun street protests in anticipation of highly controversial term. Just wait until they realize what expanded powers Obama administration is leaving for him.

“We should have built the system of a Trump in mind… instead it relies on the good faith and judgment of the people in charge,” Jaffer said.

President Obama is not only leaving behind a set of wars across the Middle East—in Iraq, in Syria, and in Afghanistan—but also the precedent that a president can engage in these wars without Congressional authorization.

“President George W. Bush got the United States into two big wars in Iraq and Afghanistan, but with both wars he went to Congress and got specific authorization… President Obama did not do that,” said Chris Anders, the deputy director at the ACLU Washington Legislative Office. “The United States has been taking very significant military action… without Congress ever declaring war or authorizing the use of military force… it upended the constitution’s delegation of authority to declare war to Congress alone, and Congress allowed that to happen.”

While Obama ended the use of torture, he has continued to use drone strikes against terrorists abroad—authorizing hundreds of strikes that have killed thousands of terrorists, according to estimates cited by The New York Times.

“The Obama administration has built a legal infrastructure for targeting killing that is not subject to any meaningful oversight by other branches,” said Jaffer, who is the author of the book The Drone Memos.

His administration also targeted and killed American citizen Anwar al-Awlaki in Yemen, justifying this because he was an al Qaeda jihadist who was a top propagandist and recruiter for the group. Civil liberty advocates criticized the move, arguing that there had been no judicial process or trial to determine his guilt before the strike occurred.

“The Obama administration has set a whole series of precedents by… targeting American citizens and then claiming the courts have no role to play in evaluating the lawfulness of the killings,” Jaffer said.

To make things worse, the administration then engaged in a drawn out battle with the ACLU and the New York Times to prevent its internal legal justifications from being released. It took years for a federal court to release a secret government memo that the Obama administration had tried to keep from the public.

“It shouldn’t have to be the case that the ACLU or media organizations need to sue the government to get basic legal documents on the government’s view of what the law means, that no government should have a body of secret law on national security matters, including on what authority the president is claiming to kill a United States citizen without trial,” Anders said.

The precedent of “secret laws” and legal justifications hidden from the public preceded President Obama, Anders added, “but he has not taken the transparency to heart that we would hope to see in a president.”

As a candidate, Trump repeatedly went after the press: accusing them of being “rigged” and “unfair,” pointing out particular reporters he didn’t like during rallies, and promising to “open up” libel laws to more easily sue news organizations.

Obama has left him a chilling legacy to continue with regard to the Fourth Estate. In an unusual move, his Justice Department subpoenaed the telephone records of journalists working for the Associated Press to track down a leak. And it investigated a Fox News reporter as a probable “co-conspirator” in another national security case in order to get his emails and phone records.

The Obama administration also used the Espionage Act against whistleblowers who shared secret information with reporters more often than all previous administrations combined.

“It wouldn’t be surprising to see a crackdown to prosecute whistleblowers. The Trump administration without question would be able to say, well, the Obama administration did this all the time. And that’s indisputably true,” said Chris Calabrese, vice president of policy at the Center for Democracy & Technology.

Trump will also have unprecedented snooping abilities that the United States built up after the 9/11 attacks. As president, Trump will inherit powerful, global surveillance systems that has the capability to tap into sensitive communications for millions of people, according to the Electronic Frontier Foundation. And much of it continues to be secret.

“What the Obama administration did was normalize a lot of the surveillance that was started under the Bush administration… gathering lots and lots of information, not just about foreigners but about people in the United States. The controls that they put together were at the executive or agency level that can be wiped away,” Calabrese said.

“We’ve built these huge data collections apparatuses after 9/11, and now we’re relying on the goodwill and the decency and honesty of intelligence officials to make sure they’re not misused,” he added.

Many constitutional scholars and politicians on the right have spent the last eight years rallying against the Obama presidency, arguing that he had overstepped his powers, especially with regard to national security.

But this is now likely to yield to protests from the left, with the same criticisms applying to Trump.

“For eight years Republicans have complained that the presidency was too powerful, that President Obama ruled like a dictator, and that the powers of the presidency needed to be curbed,” Nichols said. “My guess is that they’re not going to be very serious about that principle.”

With the shoe on the other foot, the left may soon realize how terrifying some of the president’s authorities can be.

“If you are concerned about overreach of executive authority, and the only thing that was keeping your concerns at bay was that President Obama had that authority… [it’s] going to come back to bite people in the rear, because now a President Trump will rely on those same authorities,” said Bradley Moss, a lawyer specializing in national security law.

Thanks, Obama.


Article Link To The Daily Beast:

Why Obama Should Pardon Hillary Clinton

By Paula Dwyer
The Bloomberg View
November 14, 2016

You may recall this exchange in the Oct. 9 presidential debate, when Hillary Clinton said, “It’s just awfully good that someone with the temperament of Donald Trump is not in charge of the law in our country.” To which Trump replied, “Because you’d be in jail.”

It wasn't clear then if candidate Trump was just grandstanding. Nor is it clear now if President-elect Trump will do what he also pledged then: "If I win, I am going to instruct my attorney general to get a special prosecutor to look into your situation, because there has never been so many lies, so much deception."

In an interview with the Wall Street Journal after he was elected, Trump didn't list prosecuting Clinton among his priorities. Still, half the country now worries, and the other half hopes, that Trump will make good on his threat. More likely, he'll contract the job out to House Republicans salivating over the prospect of televised hearings, starting with Clinton raising her right hand, then taking the Fifth over and over again.

So should President Barack Obama pardon her, preempting the GOP's plans for four years of show trials?

Rudolph Giuliani, mentioned as a possible attorney general, has already warned Obama off a pardon, while revealing to Fox News his firm belief that Obama and Clinton "have completely corrupted the Justice Department and the State Department" and predicting her inevitable indictment.

To assess the wisdom, legality and politics of a pardon, this is where to begin: The incoming administration already has its mind made up that she committed crimes and should be prosecuted. Given that, Obama shouldn't hesitate to pardon her -- even if she says she doesn't want him to.

Without it, Republicans will reopen the 35,000 e-mails turned over to the State Department. Thanks to WikiLeaks, they will rummage through thousands of e-mails to and from her campaign chairman, John Podesta. They will resume the search for the 33,000 e-mails that she said were personal and had deleted. They will second-guess FBI Director James Comey's decision that even if she had been "extremely careless" with her private server, she never intended to commit crimes.

They will also subpoena years of Clinton Foundation documents in search of pay-to-play favors and conflicts of interest during her tenure at the State Department. And they won't hesitate to draw in Bill Clinton and top aides Huma Abedin and Jake Sullivan, or place in legal jeopardy many other longtime associates.

Why would Republicans pursue Clinton, even though she is unlikely to run for office ever again? The simple answer is that "lock her up" energized Trump's campaign and propelled many House members' re-elections.

The question, then, isn't whether Obama should pardon her, but whether he will. His lawyers will look at past presidential pardons for guidance and ask: Would he be tarnishing his legacy if he takes action?

Bill Clinton certainly tarnished his own when, on his last day as president in January 2001, he pardoned fugitive financier Marc Rich, skirting the Justice Department's usual procedures to do so. Rich's ex-wife had recently made a handsome donation to Clinton's library.

The case of Hillary Clinton is entirely different. She has been investigated almost continuously for four years. But in addition to being twice absolved by the FBI, she hasn't been accused of any specific crime, let alone indicted, tried or convicted.

To those Republicans who would say a pardon proves they were right all along, Obama can cite Gerald Ford's 1974 pardon of Richard Nixon. Though Ford's action probably cost him the election of 1976, he acted to bring the country together after two years of the Watergate scandal, congressional hearings, impeachment proceedings, a Supreme Court decision and finally Nixon's resignation.

Obama's lawyers will also look to other last-minute pardons, including President George H. W. Bush's Christmas Day 1992 exoneration of former Defense Secretary Caspar Weinberger and five others. They had been involved in the 1987 Iran-contra arms-for-hostages scandal in the Ronald Reagan administration.

Bush issued the pardons after letting the legal system run its course for six years: An independent prosecutor, Lawrence Walsh, had obtained one conviction and three guilty pleas. Two other cases were about to go to trial. In his anger, Walsh revealed that President Bush was a subject of his probe, based on notes Bush had taken as Reagan's vice president, inviting accusations of a cover-up.

President George W. Bush avoided similar allegations in his 2007 commutation of the 30-month prison sentence of Lewis Libby, an aide to Vice President Dick Cheney. Libby had been convicted of lying and obstructing justice in the investigation into who leaked the name of Valerie Plame, a Central Intelligence Agency operative, to a columnist. Bush waited four years for the case to go through the federal courts before acting.

Obama doesn't have the luxury of waiting, as his predecessors did. The only way to head off a Republican vendetta against someone to whom we owe "a major debt of gratitude for her service to the country" -- as Trump said in his post-election address -- is with a pardon.


Article Link To The Bloomberg View:

Markets Weren’t Spooked By A President Trump

What investors feared was an indecisive election. Once the winner became clear, confidence returned.


By David M. Primo and Trung A. Dang
The Wall Street Journal
November 14, 2016

Less than one day after Donald Trump’s election as president, we could already add one more prediction to the dustbin of history: that a Trump victory would lead to immediate disaster for the financial markets.

The warnings came from every direction in the weeks and months leading up to Nov. 8. An equity analyst told New York magazine that “Trump is widely considered to be reckless and Clinton is widely considered to be a friend to Wall Street.” Two highly cited university economists using advanced statistical techniques estimated that “a Trump victory would reduce the value of the S&P 500, the UK, and Asian stock markets by 10-15%.”

Yet three major stock indexes—the Dow Jones Industrial Average, the S&P 500 and the Nasdaq—were all up on Nov. 9. Not since Bill Clinton’s re-election in 1996 have all three increased simultaneously the day after a presidential election. The Dow gained more than 250 points Wednesday, and closed the week at a record high.

You might wonder: What happened? But there’s a better question: What didn’t happen?

The days before the election were rife with uncertainty. There were fears of terrorist attacks, a contested election, violence in the streets, a breakdown of society—what you might call the end of America. (We exaggerate, but have you seen what disappointed voters are posting on Facebook and Twitter?) These fears—warranted or not—were amplified by journalists who struggled to maintain objectivity. Then they bounced around the echo chamber of social media.

By and large, none of these fears materialized. Mr. Trump gave a conventional victory speech. It was matched by Hillary Clinton’s equally uneventful concession speech. The election is not contested. America has a new president and is on a path toward another peaceful transition of power.

Stock prices reflect millions of individual decisions, so we need to be cautious in attributing intentions to markets. But in the days after the election, investors seemed to be reacting to the stability of America’s democratic institutions. To the extent that anything can be gleaned from the financial rally, it is this: On balance, having the election definitively resolved has outweighed immediate concerns about what President-elect Trump might do in the days ahead.

How can we be so sure? Look at two pieces of data: first, the movement in the futures markets—essentially bets on where stock prices are headed. Early Wednesday morning, when a Trump victory began to seem likely, S&P futures plunged by 5%. That was a decline consistent with analysts’ fears.

Second, consider what happened when U.S. markets opened on Wednesday at 9:30 a.m. It had become clear in the light of day that the country had “survived.” The S&P, for instance, began the trading day within points of where it had closed the day before, and it headed upward from there.

This pattern is strong evidence that what was really rattling investors wasn’t the prospect of President Trump, but rather the fear of what might ensue after a messy, indecisive election. Once that chaos was averted, the worry subsided.

That isn’t to say there are no winners and losers in the markets after a Trump victory. The Mexican peso was off about 8% Wednesday, tied to questions about what President Trump will do regarding trade and the North American Free Trade Agreement. Biotech companies, whose drug-pricing practices Mrs. Clinton had called “outrageous,” jumped about 10% the day after the election.

As many have noted, there are striking parallels with the British vote in June to leave the European Union. There, too, the public was inundated with dire predictions about what would happen to the financial markets if Brexit won. Immediately after the vote stocks nose-dived, with the S&P down more than 3%. But that index fully recovered within a couple of weeks. Perhaps the biggest difference is that the recovery after Mr. Trump’s victory was nearly instantaneous.

There is still significant uncertainty about what President Trump will do, how Brexit will be resolved, and a host of other geopolitical issues. Investors would be wise to expect continued volatility in financial markets. And if Mr. Trump makes good on many of his economic and foreign policy promises, the markets could reverse course. But the financial lesson from last week is that the clarity of elections—having a decisive winner and a gracious loser—may matter nearly as much as, and in some cases more than, the outcome.

This was an exhausting campaign. But those who worry about the country’s future should take solace in the way markets responded to an unexpected Trump victory. America’s political system is more resilient than many experts would have us believe.


Article Link To The Wall Street Journal:

Killing The ‘Sisterhood’: Why Identity Politics Didn’t Work For Clinton

By Naomi Schaefer Riley
The New York Post
November 14, 2016 

Sisterhood is dead. If the left learns nothing else from this election, perhaps they should understand that there’s no such thing as female solidarity — not, at least, as they envision it.

Sure, it was kind of cute to see all the women waiting in line at Susan B. Anthony’s grave to place their “I voted” stickers on the headstone, but it turns out they weren’t a very good gauge of female enthusiasm for the female candidate. Neither, for that matter, are the pantsuit portraits on Facebook.

Rather, in a race between a feminist icon and a man who could generously be called a chauvinist, women voters were remarkably torn. It’s true that the gender gap was about 12 points, the largest since 1972, but, as a report from Pew points out, “it is not dramatically higher than in some other recent elections, including the 2000 contest between Bush and Al Gore.” Neither the fact that Hillary is a woman nor the fact that Donald Trump insults women seemed to have much of an effect.

Hillary lost white women but won women of other races. Which isn’t surprising, because race has long been a better predictor of how people will vote than gender. Black men voted overwhelmingly for Hillary — and black women did, too. Hispanic men voted for Hillary — and so did Hispanic women. Class, level of educational attainment and geography are all better predictors of how you’ll vote than sex, says Karlyn Bowman, a senior fellow at the American Enterprise Institute.

It’s also true that women, as a group, don’t have that much in common. Their experiences in life and their views on policy issues tend to be shaped more by whether they went to college, whether they live in a city or suburb or rural area, whether they live in a blue state or red state, how much money they make and how they identify themselves racially and ethnically.

Women might roll their eyes with strangers about the long lines for the ladies room or the bad behavior of the guy at the bar. They might exchange knowing glances about what it’s like to be pregnant in July, but these aren’t real bonds and they don’t determine how you will vote.

Democrats have for years harped about women’s issues, but women’s issues are really not much different from anyone else’s issues. Women care about taxes and the economy and the cost of health care. They worry about national security and religious freedom and public education.

Republicans have traditionally won married women and Democrats have won single women. While it looks like Hillary may have won the former by a percentage point or two, there’s still a huge gap between them.

Truth be told, your marital status is a much better indicator of your life experience and ideological positions. In her recent book “All the Single Ladies,” Rebecca Traister suggests that this could be a growing voting bloc — since women are getting married later, if at all.

And Democrats will always do well with them because they’re the ones — having no second adult to help support a family — who are most interested in and dependent on government assistance for income, retirement, childcare, etc.

Democrats will always get some significant segment of the women’s vote. But it won’t be because they’re women.

When women were genuinely oppressed — before they could vote, before they could own property, before they could have the same access to education or the same opportunities in the workplace — it might have been possible to appeal to them as a bloc, even as a movement.

But in an era where women get a greater percentage of the college degrees and women without children earn more than their male counterparts, most women don’t see themselves as victims, let alone ones who need to join hands in solidarity.

In Slate, Michelle Goldberg writes that Hillary’s “victory would have been a sign that the gender hierarchy that has always been fundamental to our society . . . was starting to crumble. It would have meant that men no longer rule.” She laments, “I thought my daughter was not going to be consigned to a lesser life than my son. I no longer do.”

Oh, please. If anyone besides a few liberal elites believed that, Hillary would have won.


Article Link To The New York Post:

Trump’s Dueling White House Heads

Priebus and Bannon will be ‘equal partners.’ This will be interesting.


By Review & Outlook
The Wall Street Journal
November 14, 2016

Donald Trump’s success as President will depend on whether he can merge his populist instincts with the reform agenda of Republicans in Congress to form a united and effective government. His choices for his most senior White House aides suggest those two tendencies will compete in his Administration the way they did during the campaign.

Mr. Trump offered something for both camps Sunday with his announcement that Reince Priebus will be his chief of staff while Stephen Bannon will be chief strategist and senior counselor. Mr. Priebus is the head of the Republican National Committee who stuck with Mr. Trump despite the many valleys of the campaign and provided the get-out-the-vote operation that Mr. Trump lacked. Mr. Bannon is a former Goldman Sachs banker, Naval officer and Breitbart News executive who joined the campaign with Kellyanne Conway in August amid one of those valleys.

It’s hard to know whether this is will be a sublime union of yin and yang or “Survivor: Trump White House.” Typically the chief of staff runs the White House and is the President’s most trusted adviser. But it’s notable that the announcement from the Trump transition established no clear hierarchy between the two men. The transition statement said that “Bannon and Priebus will continue the effective leadership team they formed during the campaign, working as equal partners to transform the federal government, making it much more efficient, effective and productive.”

Equal partners? Rarely does any organization run well if there are dueling heads, and one reason the Obama Presidency suffered is that his early chiefs of staff were undermined by the competing influence of White House aide and Obama family friend Valerie Jarrett.

Mr. Trump has sometimes set up competing forces within the Trump Organization, as he did with his Atlantic City casinos. This arrangement can succeed if Messrs. Priebus and Bannon divide responsibilities cooperatively, but it will lead to a mess of leaking dysfunction if they divide into competing factions. Someone will have to be the final word on who gets to see the President and which issues require a presidential decision.

The two men certainly come with different instincts and constituencies. Mr. Priebus is an establishment operative who built the Wisconsin GOP into one of the country’s most effective state parties. He has close ties to House Speaker Paul Ryan and Republicans across the country. He brings knowledge about how Washington works that is essential if Mr. Trump is going to move fast to take advantage of whatever honeymoon he will get.

Mr. Bannon represents the insurgent forces that helped propel Mr. Trump to the GOP nomination. His Breitbart website essentially became an arm of the Trump campaign and targeted other Republicans for attack, often inventing facts along the way. Mr. Ryan has been a frequent target. The site’s main policy preoccupations are hostility to trade and immigration, views that Mr. Bannon will presumably bring to White House debates.

A Washington cliché is that personnel is policy, and that may be more true for Mr. Trump than for most Presidents because his campaign agenda was relatively general and narrow. Mr. Trump assured Americans that he could run the government because he had succeeded in business, and voters gave him the benefit of the doubt. We’ll see how these competing White House forces shake out.


Article Link To The Wall Street Journal:

What America’s Economy Needs From Trump

By Joseph E. Stiglitz
Project Syndicate
November 14, 2016

Donald Trump’s astonishing victory in the United States presidential election has made one thing abundantly clear: too many Americans – particularly white male Americans – feel left behind. It is not just a feeling; many Americans really have been left behind. It can be seen in the data no less clearly than in their anger. And, as I have argued repeatedly, an economic system that doesn’t “deliver” for large parts of the population is a failed economic system. So what should President-elect Trump do about it?

Over the last third of a century, the rules of America’s economic system have been rewritten in ways that serve a few at the top, while harming the economy as a whole, and especially the bottom 80%. The irony of Trump’s victory is that it was the Republican Party he now leads that pushed for extreme globalization and against the policy frameworks that would have mitigated the trauma associated it. But history matters: China and India are now integrated into the global economy. Besides, technology has been advancing so fast that the number of jobs globally in manufacturing is declining.

The implication is that there is no way Trump can bring a significant number of well-paying manufacturing jobs back to the US. He can bring manufacturing back, through advanced manufacturing, but there will be few jobs. And he can bring jobs back, but they will be low-wage jobs, not the high-paying jobs of the 1950’s.

If Trump is serious about tackling inequality, he must rewrite the rules yet again, in a way that serves all of society, not just people like him.

The first order of business is to boost investment, thereby restoring robust long-term growth. Specifically, Trump should emphasize spending on infrastructure and research. Shockingly for a country whose economic success is based on technological innovation, the GDP share of investment in basic research is lower today than it was a half-century ago.

Improved infrastructure would enhance the returns from private investment, which has been lagging as well. Ensuring greater financial access for small and medium-size enterprises, including those headed by women, would also stimulate private investment. A carbon tax would provide a welfare trifecta: higher growth as firms retrofit to reflect the increased costs of carbon dioxide emissions; a cleaner environment; and revenue that could be used to finance infrastructure and direct efforts to narrow America’s economic divide. But, given Trump’s position as a climate change denier, he is unlikely to take advantage of this (which could also induce the world to start imposing tariffs against US products made in ways that violate global climate-change rules).

A comprehensive approach is also needed to improve America’s income distribution, which is one of the worst among advanced economies. While Trump has promised to raise the minimum wage, he is unlikely to undertake other critical changes, like strengthening workers’ collective-bargaining rights and negotiating power, and restraining CEO compensation and financialization.

Regulatory reform must move beyond limiting the damage that the financial sector can do and ensure that the sector genuinely serves society.

In April, President Barack Obama’s Council of Economic Advisers released a brief showing increasing market concentration in many sectors. That means less competition and higher prices – as sure a way to lower real incomes as lowering wages directly. The US needs to tackle these concentrations of market power, including the newest manifestations in the so-called sharing economy.

America’s regressive tax system – which fuels inequality by helping the rich (but no one else) get richer – must also be reformed. An obvious target should be to eliminate the special treatment of capital gains and dividends. Another is to ensure that companies pay taxes – perhaps by lowering the corporate-tax rate for companies that invest and create jobs in America, and raising it for those that do not. As a major beneficiary of this system, however, Trump’s pledges to pursue reforms that benefit ordinary Americans are not credible; as usual with Republicans, tax changes will largely benefit the rich.

Trump will probably also fall short on enhancing equality of opportunity. Ensuring preschool education for all and investing more in public schools is essential if the US is to avoid becoming a neo-feudal country where advantages and disadvantages are passed on from one generation to the next. But Trump has been virtually silent on this topic.

Restoring shared prosperity would require policies that expand access to affordable housing and medical care, secure retirement with a modicum of dignity, and allow every American, regardless of family wealth, to afford a post-secondary education commensurate with his or her abilities and interests. But while I could see Trump, a real-estate magnate, supporting a massive housing program (with most of the benefits going to developers like himself), his promised repeal of the Affordable Care Act (Obamacare) would leave millions of Americans without health insurance. (Soon after the election, he suggested he may move cautiously in this area.)

The problems posed by the disaffected Americans – resulting from decades of neglect – will not be solved quickly or by conventional tools. An effective strategy will need to consider more unconventional solutions, which Republican corporate interests are unlikely to favor. For example, individuals could be allowed to increase their retirement security by putting more money into their Social Security accounts, with commensurate increases in pension benefits. And comprehensive family and sick leave policies would help Americans achieve a less stressful work/life balance.

Likewise, a public option for housing finance could entitle anyone who has paid taxes regularly to a 20% down-payment mortgage, commensurate with their ability to service the debt, at an interest rate slightly higher than that at which the government can borrow and service its own debt. Payments would be channeled through the income-tax system.

Much has changed since President Ronald Reagan began hollowing out the middle class and skewing the benefits of growth to those at the top, and US policies and institutions have not kept pace. From the role of women in the workforce to the rise of the Internet to increasing cultural diversity, twenty-first century America is fundamentally different from the America of the 1980s.

If Trump actually wants to help those who have been left behind, he must go beyond the ideological battles of the past. The agenda I have just sketched is not only about the economy: it is about nurturing a dynamic, open, and just society that fulfills the promise of Americans’ most cherished values. But while it is, in some ways, somewhat consistent with Trump’s campaign promises, in many other ways, it is the antithesis of them.

My very cloudy crystal ball shows a rewriting of the rules, but not to correct the grave mistakes of the Reagan revolution, a milestone on the sordid journey that left so many behind. Rather, the new rules will make the situation worse, excluding even more people from the American dream.


Article Link To Project Syndicate:

Trump’s Mission Impossible?

By Robert J. Samuelson
The Washington Post
November 14, 2016

Donald Trump, it seems, embraces the old dictum: Make no small plans. Already, he has published an agenda for his first 100 days in office, recalling Franklin D. Roosevelt’s launching of the New Deal. Not surprisingly, near the top of Trump’s to-do list is a pledge to double economic growth from its recent desultory rate of 2 percent a year to 4 percent — through massive tax cuts, the relaxation of government regulations and measures that curtail imports.

Who might frustrate Trump?

How about: Donald J. Trump.

A huge contradiction sits at the core of his economic agenda. He wants faster economic growth (who doesn’t?), but his proposed policies would also elevate economic uncertainty — and uncertainty hurts growth. If the president proposes deep tax cuts, what will Congress enact? Who will benefit, who won’t? The same uncertainty applies to regulatory cutbacks and anti-import policies. Until the outlook clarifies, businesses and households postpone some spending. Growth suffers.

Of course, there’s always some uncertainty. What makes this different is the breadth of Trump’s proposals. He advocates wholesale upheavals of existing policies.

For example, his proposed tax cut would radically transform the income tax. It would have only three rates (12, 25 and 33 percent) as opposed to today’s seven rates. Its cost over a decade, according to the nonpartisan Tax Foundation, would be between $4.4 trillion and $5.9 trillion, equal to about 11 percent to 15 percent of present tax revenues over 10 years.

Or consider his trade plans. Trump isn’t pushing marginal changes. He wants to renegotiate the North American Free Trade Agreement, which could dramatically shift trade flows with Mexico and Canada. (In 2015, these two countries absorbed $605 billion of U.S. exports and supplied $642 billion of imports.)

Much is unknown. On regulations, Trump would “cancel every unconstitutional executive action, memorandum and order issued by President Obama,” a sweeping commitment whose actual effect is ambiguous.

These and other controversial proposals (on immigration and Obamacare, for instance) will inspire ferocious lobbying. As long as matters are unsettled, business managers and, probably, consumers may delay spending when they can. The crusade to speed economic growth would — at least temporarily — slow growth.

“Uncertainty is a real risk,” says economist Michael Strain of the American Enterprise Institute, a right-of-center think tank. “I’d be reluctant to start a business now, and if I had one, I’d be reluctant to increase payroll by 15 percent until I saw how things shake out.”

There’s more to this than an educated hunch. Three academic economists recently created an index of “policy uncertainty” to see whether greater uncertainty harmed economic growth. They found that it did. (The index is based on a review of news articles, reports from the Congressional Budget Office and the forecasts of economists.)

Greater U.S. uncertainty “foreshadow[s] declines in investment, output and employment,” write economists Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago, in the Quarterly Journal of Economics.

A Trump presidency faces many paths to greater uncertainty: A clash between the White House and the Federal Reserve or a dispute over budget deficits are obvious possibilities. As Davis notes, some of Trump’s noneconomic pronouncements — questioning the future of NATO, for instance — also increase economic uncertainty.

None of this means that Trump can’t get some or all of his program passed. It does mean that the process will be contentious and that the uncertainties will be at cross- purposes with Trump’s goal of faster growth. “The policy uncertainty is going to drive financial markets crazy,” says economist Mark Zandi of Moody’s Analytics. Stock prices, interest rates and exchange rates may all be especially volatile.

It’s also an open question as to whether Trump’s economic strategy will work as expected. Zandi, for one, is skeptical. Supply and demand are at odds, he says. Trump is stimulating demand with his massive tax cuts but limiting supply by discouraging imports and expelling illegal immigrants. Strong demand will ultimately collide with constricted supply. Inflation and interest rates will rise; a slump might follow.

Under the most favorable circumstances, Trump’s big plan — his quest for faster economic growth — would be a daunting task. Under realistic circumstances, it could be mission impossible.


Article Link To The Washington Post:

Trump Shift Puts Euro Markets Back On Edge As Elections Loom

By Dhara Ranasinghe
Reuters
November 14, 2016

Anti-establishment votes in Britain and the United States have roiled markets twice this year and investors are determined not to be caught off guard again.

In 2017, voters in the Netherlands, France and Germany - and possibly in Italy and Britain too - will vote in elections that could be colored by the triumphs of Donald Trump and supporters of Brexit, and the politics that drove those campaigns.

A litmus test for Europe is around the corner in Italy's referendum on constitutional change on Dec. 4. On the same day, Austria holds a re-run of a presidential election in which one of the two candidates is from the far-right.

No wonder then, that in a general bond market sell-off since Tuesday's U.S. election, some of the heaviest selling has hit France and Italy as investors brace for the potential of another anti-establishment drubbing in two big regional economies.

Top-rated German 10-year bond yields DE10YT=TWEB, which move in the opposite direction to the price, have risen about 17 basis points this week as investors bet protectionist policies and extra spending under President Trump will boost inflation.

But French and Italian equivalents have soared roughly 25 bps as investors also price in greater political risks. French yields are poised for their biggest weekly rise since June 2015 when a euro zone bond sell-off was at its peak.

"We've had an anti-establishment vote in the UK, one in the U.S. and now everyone's looking at the euro zone and thinking, where do we have elections next year? Yes, France, so people are trying to zoom in on those countries that may be at risk," said Martin Van Vliet, a senior rates strategist at ING.

France has a presidential system and the chances of Marine Le Pen, leader of the far-right National Front, winning are seen as slim. But polls suggest she will win more support than any other politician in the first round of the election.

Having been caught out by Britain's shock decision to leave the European Union in June and Trump's surprise election win, markets are unlikely to take polls for granted in the future.

Populist Tsunami

Investors are also waking up to the fact that a populist tsunami that seemed unthinkable a few months ago has potentially huge consequences for Europe's political landscape.

French 10-year bond yields, at 0.72 percent FR10YT=TWEB, are near their highest levels since January.

In a sign that investors have turned more bearish toward French debt, the gap or spread between French and German bond yields has widened to around 44 bps - levels last seen in July 2015.

As this graphic tmsnrt.rs/2fItTCG shows, similar moves have been seen in the Netherlands and Italy - other euro zone countries where the rise of populism risks upsetting the traditional order in looming elections.

It is not just bond investors that feel uneasy about a change in the political climate away from the status quo that often equates with stability for financial markets.

While any immediate fears over a rise in populism and protectionist policies in Europe have so far been overshadowed by a scramble to get in on the ‘reflation’ trade, European equities saw $1.64 billion of outflows in the week ending Wednesday, according to data from Bank of America Merrill Lynch.

Some analysts also argue that a recovery for the currency market's 2016 whipping boy, sterling GBP=D4, points to growing concerns about upcoming elections in Europe.

"The UK Brexit vote will no longer be viewed as some kind of outlier vote but perhaps the beginning of a global shift toward more populist voting," said Derek Halpenny, European Head of Global Market Research with Bank of Tokyo-Mitsubishi UFJ.

"The fall in the euro should then be viewed as a sign of a shift of the political risk premium from the UK to Europe."

Spotlight On Italy, Australia


In addition to France, Italy -- the euro area's third biggest economy -- is also feeling the heat of rising political uncertainty.

Trump's unexpected victory in the U.S. presidential election is likely to make it even harder for Italian Prime Minister Matteo Renzi to win next month's referendum on constitutional reform .

Renzi has said he will resign if he loses the ballot and almost every opinion poll over the past two months has put the 'No' camp ahead.

Against this backdrop, Italy's borrowing costs at auction jumped to their highest in more than a year on Friday.

The gap between Italian and Spanish 10-year bond yields - a bellwether of political risk - is at 45 bps at its widest since the 2012 debt crisis.

"We really have to consider that the consensus and the conventional wisdom of the past two big elections have gone against the conventional wisdom and the expectations of the majority, and so that could certainly happen in Europe," Chris Dyer, director of global equity at asset manager Eaton Vance, said.


Article Link To Reuters:

Monday, November 14, Morning Global Market Roundup: Dollar Climbs As U.S. Yields Spike; Asia Shares Divided

By Wayne Cole 
Reuters
November 14, 2016

The U.S. dollar hit a nine-month peak in Asia on Monday as the risk of faster domestic inflation and wider budget deficits sent Treasury yields ever higher, a painful mix for assets in many emerging market countries.

The reflation trade saw E-mini futures for the S&P 500 ESc1 add another 0.5 percent and spread betters pointed to solid opening gains for the major European bourses.

The dollar bounded above 107 yen in brisk trade to hit 107.43 JPY=, while the euro touched its lowest since January around $1.0773 EUR=. It also made a nine-month high against a basket of currencies .DXY.

The dollar has been on a tear since the victory of Republican Donald Trump in the U.S. presidential election on Nov. 8 triggered a massive sell off in Treasuries.

Yields on the U.S. 10-year Treasury notes climbed to their highest since January on Monday at 2.21 percent US10YT=RR, while 30-year paper reached 3 percent.

Just two days of selling last week wiped out more than $1 trillion across global bond markets, the worst rout in nearly 1-1/2 years, according to Bank of America Merrill Lynch.

The jump in yields on safe-haven U.S. debt threatened to suck funds out of emerging markets, while the risk of a trade war between the United States and China soured the mood in Asia.

"There are signs that higher bond yields and the knock of a stronger US dollar are having a domino impact, taking down the weakest risky assets first, before moving on to the next," said Alan Ruskin, global co-head of forex at Deutsche.

"There is only so much financial conditions tightening that risky assets can take when fiscal stimulus is still 'a promise' that lies some way in the future."

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was off 1 percent having suffered its lowest close since mid-July on Friday. Indonesia led the losses with a drop of 2.6 percent .JKSE.

In contrast, Japan's Nikkei .N225 jumped 1.7 percent on the weakening yen to reach its highest in nine months.

It got an added fillip from data showing Japan's economy grew at an annualized rate of 2.2 percent in the third quarter, handily beating forecasts.

The Dow .DJI romped up 5.4 percent last week in its best performance since 2011. The S&P 500's .SPX 3.8 percent gain for the week was its strongest in two years.

Investors have favored drug and bank stock to reflect Trump's campaign promises to simplify regulation in the health and financial sectors.

Markets Spy Inflation


The stampede from bonds has seen 30-year yields post their biggest weekly increase since January 2009.

With the Republicans controlling Congress, there was a real prospect Trump could enact deficit-financed tax cuts and infrastructure spending, ending years of policy deadlock.

The resulting boost to inflation would only be heightened should Trump go through with plans for slapping tariffs on imports and deporting migrants.

The result was a surge in inflation expectations.

One market rate, measuring expected inflation over the five-year period that begins five years from today, shot up 30 basis points to 2.46 percent USIL5YF5Y=R last week, the highest since late 2014. It had been as low as 1.84 percent in June.

Fed fund futures <0> in turn imply a better-than-70 percent probability the Fed will hike rates in December.

Yet rising bond yields are tightening financial conditions at a pace that might appear premature to policymakers.

This was a point underlined by Fed Vice Chair Stanley Fischer on Friday, saying the central bank was monitoring long-term U.S. government borrowing costs even as the economy appeared strong enough to proceed with gradual rate rises.

Elsewhere, the New Zealand dollar eased after a powerful earthquake rocked the island nation early on Monday, killing at least two people and prompting a tsunami warning that sent thousands fleeing to higher ground.

The currency dipped to $0.7092 NZD=D4, with losses limited by talk rebuilding work would support an already strong economy and lessen the need for further interest rate cuts.

In commodities, the rampant U.S. dollar pressured gold which lost 0.8 percent to $1,215 an ounce. Yet industrial metals extended their bull run, with copper adding 1.2 percent CMCU3.

In the oil market, Brent crude LCOc1 added a single cent to $44.76 a barrel, while U.S. crude CLc1 eased 7 cents to $43.34. [O/R]


Article Link To Reuters:

American Apparel To File For Bankruptcy

By Jessica DiNapoli
Reuters
November 14, 2016

American Apparel LLC plans to file its second bankruptcy in just over a year as soon as Monday, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder, according to people familiar with the matter.

A second bankruptcy would come as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Dov Charney.

American Apparel has been trying to find a buyer for the company, and began discussing a possible sale with brand licensor Sequential Brands Group Inc (SQBG.O) and financial services company B. Riley Financial Inc (RILY.O) after talks with brand licensor Authentic Brands Group LLC stalled.

It could not be immediately determined if American Apparel has found a buyer. If it files for bankruptcy without a buyer in hand, it will look for one through a court-supervised process, a source has previously said.

American Apparel declined to comment. The sources, who cautioned that the bankruptcy plans may change or be delayed, asked not to be identified because the information was confidential.


Article Link To Reuters:

Oil Steady Near Multi-Month Lows On OPEC Output Record, U.S. Rig Count

By Osamu Tsukimori
Reuters
November 14, 2016

Oil prices were little changed on Monday near multi-month lows, dragged down by worries about oversupply as OPEC saw record output last month and as the U.S. rig count rose again.

London Brent crude for January delivery was trading down 3 cents at $44.72 a barrel after settling down $1.09 on Friday. The benchmark on Friday hit its lowest since Aug. 11 at $44.19.

NYMEX crude for December delivery was down 8 cents at $43.33 a barrel. The contract closed down $1.25 on Friday after dropping as low as $43.03, its weakest since Sept. 20.

Oil has been under pressure since before the Organization of the Petroleum Exporting Countries (OPEC) said on Friday that its output rose to a record 33.64 million barrels per day (bpd) in October, up 240,000 bpd from the previous month.

OPEC plans to cut or freeze output, but investors are skeptical such a deal will be reached during the cartel's Nov. 30 meeting and are concerned that whatever agreement reached would not be effective.

BMI Research said in a note that the most likely scenario at the OPEC meeting will be no deal, as the election victory of Republican President-elect Donald Trump - a strong advocate of U.S. energy independence - has altered its expectations.

Any agreement to cut output and support prices would now be seen by some OPEC members as a victory for U.S. shale producers, BMI said.

Still, Saudi Energy Minister Khalid al-Falih has said it was imperative for OPEC members to reach a consensus on activating a deal made in September in Algiers to cut oil production, according to Algeria's state news agency on Sunday.

Iran opened three oilfields with a total production of more than 220,000 bpd on Sunday, as the country continues to ramp up its production after the lifting of sanctions.

Adding to bearish sentiment was Baker Hughes data showing active U.S. drilling rigs rose by two to 452 in the week to Nov. 11, an increase in 21 out of the last 24 weeks.

Bolstering the market against further decline, China's October's crude oil output fell 11.3 percent from a year ago to 3.78 million bpd, while October crude oil runs rose 5.5 percent on year to 11.08 million bpd, highest since at least 2011, data from the statistics bureau showed.

Also, state-run oil company Petrobras' production of oil and natural gas in Brazil fell 2.5 percent from a record high in September to 2.68 million barrels of oil equivalent per day in October due to maintenance stoppages, it said.


Article Link To Reuters:

Trump Saw The Economic Crisis The Others Didn’t

The Great Recession changed everything, and the leading figures in both parties failed to grasp how deeply. And so we got what we’ve got.


By Nicole Gelinas
The Daily Beast
November 14, 2016

Donald Trump could not have won the presidency in 2016 were it not for what happened eight years before: the global financial meltdown. To this day, political elites do not grasp how the crisis shattered Americans' perceptions of their economic security. This top-level failure has gradually claimed the Republican Party as we've known it since the Reagan era. On Tuesday, the same failure claimed the Democratic Party as we've known it since the Bill Clinton era.

Cyclical recessions have cost presidents their jobs before. In 1980, Ronald Reagan ended Jimmy Carter's bid for a second term as inflation and high interest rates claimed 1.3 million private jobs in the months before November. In 1992, George H. W. Bush lost to Bill Clinton in part because of Bush's seeming lack of empathy for the 1.7 million Americans who had lost their private-sector jobs since 1990.

In both cases, a superficial short-term political formula worked. “Are you better off than you were four years ago?” Reagan asked debate-watchers. Clinton surrogates kept to James Carville's mantra: it's the economy, stupid. Also in both cases, employers finished replacing their lost jobs in the earliest months of the new president's term.

Both parties moved toward a consensus reinforced by their respective successes: free global trade and free global financial markets were unalloyed goods. American workers could quickly withstand any short-term disruptions that an ever-globalized economy sometimes caused.

The Lehman Brothers bankruptcy in September 2008 changed all that. The investment firm's failure exposed the West's financial system for what it was: not strong, but fragile. The U.S. government had to step in with trillions of dollars in guarantees for the financial system. AIG, Citigroup, and Bank of America each needed rescues worth hundreds of billions of dollars.

The bailouts may have prevented a depression. But they did not prevent the deepest and longest recession most Americans had ever seen: About 8.8 million people in the private sector lost their jobs. The country wouldn't replace those lost jobs – often with lower-paying positions – for nearly seven years.

Much of the previous generation's growth had been an illusion – an illusion built on ever-higher levels of consumer debt. Global financial firms provided the credit to make up for the wage stagnation that global trade helped cause. Between 1983 and 2007, mortgage debt nearly quintupled (after inflation). Other household debt – credit cards, auto loans, and the like – grew by nearly threefold. (The U.S. population didn't quintuple or triple; it grew by a third.)

Most people didn't understand these statistics. They did understand, though, after 2008, that something was wrong – and they came to understand, too, that supposedly marquee-level politicians had no practical ideas on how to fix it, only rarified theories.

The Republican Party was the first to fall victim to its leaders' lack of practical relevance. In 2008, 10 days after the Lehman collapse, John McCain suspended his campaign to rush back to Washington – only to reveal that he had no idea what he might do to revive the financial system. In his first debate with Barack Obama, he had little to say on the economy other than to praise “the goodness and strength of the American worker.”

Four years later, Mitt Romney, like McCain, was economically irrelevant. He couldn't grasp that Americans were still upset about bailouts and job losses. When he spoke about banks, it was to defend their bailouts, in sharp contrast to his position on the auto bailouts.

Romney and his surrogates were also perplexed that Reagan's famous 1980 question no longer worked. People knew they weren't better off in 2012 than they had been in 2008. But they also knew that the crash was so cataclysmic that this failure wasn't Obama's fault.

This year, traditional GOP candidates such as Marco Rubio and Jeb Bush had little to say about the nation's economic woes. On trade, both agreed in a January debate that America's trade deficit with China results in lower prices for shirts and ties – hardly the biggest concern on the part of workers afraid for their jobs. Critics said Trump's trade narrative was simplistic. But his position on Chinese steel imports, also outlined in a GOP debate, was far more sophisticated than those of his Republican rivals.

Republicans fell down so badly on national economic policy over eight years that people barely noticed that Hillary Clinton was about the worst candidate to go up against Donald Trump in an environment of acute economic anxiety.

Policy-wise, Clinton's instinct was to rely on the past. “I think may husband did a pretty good job in the 1990s,” she said in her first debate with Trump. That statement led to a devastating Trump rejoinder: “Your husband signed NAFTA, which … is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country. … You go to Ohio, Pennsylvania” – states Trump would win – “and you will see devastation.”

Trump's reading of NAFTA is superficial, as the experts always point out. But it is far less superficial than ignoring the fact that globalization has left many Americans behind.

Personally, Clinton enriched herself after her years at the State Department by taking money from the same global financial-services industry that exposed itself as so weak in 2008. She gave $4.1 million worth of speeches to Goldman Sachs, Deutsche Bank, UBS, Bank of America, and Morgan Stanley, among others.

Clinton was not aware – or did not care – that taking millions from banks even as Americans remained resentful of bailouts and fearful about future financial crises would become a political liability. The young adults who supported Bernie Sanders in the primary in part because they were aghast at Clinton's speech fees may have been Occupy Wall Street sympathizers leftover from the previous election cycle. But Occupy Wall Street has left an indelible mark on our politics, a change that Clinton, like Romney, missed.

And politically, Clinton relied on scare tactics. As she merrily told The New York Times Magazine, “I'm the last thing standing between you and the apocalypse.” To people who experienced 2008, plus Hurricane Katrina and the Iraq war and 9/11 – all under supposedly responsible politicians – this threat sounded hollow.

As Trump liked to say after the primaries, he beat 16 Republican opponents. In doing so, he tore apart the economic orthodoxy to which those opponents clung. He had one task left: to demolish the Democratic Party, and its similar economic orthodoxy.

Either party could have saved itself – by acknowledging that what is good for big global banks and big global corporations isn't always good for the American worker. In admitting that global trade and global finance have their rather obvious drawbacks, they could have preserved their sometimes less obvious benefits. It wasn't that hard. But it was, apparently, impossible.

In the coming months, we'll hear about how the democratic system failed. The reality is that it worked. In debate after debate, candidates exposed themselves not only as unprepared to deal with Americans' quite rational economic perceptions, but as ignorant of them.

Clinton was the last woman standing until she, too, fell to the self-professed billionaire from Fifth Avenue who saw what no one else saw. No one, that is, but the voters. Be angry and frustrated that Trump will be our next president, if you will. But be angrier and more frustrated at the elites whose eight-year vacuum created him.


Article Link To The Daily Beast: