Wednesday, June 7, 2017

Wednesday, June 7, Morning Global Market Roundup: Asian Stocks Wary Ahead Of Risk Events This Week, Dollar Struggles

By Saikat Chatterjee
June 7, 2017

Asian stocks inched higher on Wednesday but investors remained noticeably risk averse, with gold and sovereign debt set for a second day of solid gains ahead of several major political and economic events later this week.

With UK elections, a European Central Bank policy meeting where policymakers may take a less dovish stance, and former FBI director James Comey's Senate testimony all set for Thursday, market participants will be wary of making big bets.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS crept up 0.1 percent, with Hong Kong and mainland China stocks leading the region higher.

"The sentiment has turned bullish as investors expect mainland investors to keep relatively undervalued Hong Kong property counters," said Alex Wong, a fund manager at Ample Capital Ltd in Hong Kong, with $130 million under management.

Robust purchases by mainland Chinese investors have boosted Hong Kong stock trading volumes in recent days.

Net buying of Hong Kong shares via the Shanghai and Shenzhen connect scheme have now extended into 24 and 26 consecutive weeks, respectively, according to an analysis by Kenneth Chan, a strategist at Jefferies in Hong Kong.

Elsewhere, Japanese stocks .N225 were the main laggards as investors lightened holdings after the key index hit a near-two year high last Friday in thin trading.

"The market is especially focused on Comey's testimony," said Hikaru Sato, a senior technical analyst at Daiwa Securities.

Reports suggest former FBI director Comey plans to disclose on Thursday conversations in which U.S. President Donald Trump allegedly pressured him to drop his investigation into former National Security Adviser Mike Flynn, who was fired for failing to disclose conversations with Russian officials.

The risk-off undertone pushed government bond prices up and yields lower, while propping up gold and the Japanese yen.

Ten-year U.S. Treasury yields US10YT=RR briefly fell to seven-month lows of 2.129 percent, the lowest since Nov. 10, before recovering to 2.15 percent.

In currency markets, the dollar's weakness against major rivals reverberated across markets as shrinking U.S. bond yields further impeded the greenback as it struggles amid heightened political uncertainty.

At its Thursday meeting the ECB may even discuss dropping some of its pledges to ramp up stimulus if needed, four people with direct knowledge of the discussions told Reuters last week. The common currency EUR=EBS held firm at $1.12665 against the greenback.

Gold remained a firm investor favorite ahead of the UK election later this week with the precious metal holding strong XAU= around the $1,294 per ounce line. It has gained nearly 7 percent in the past month.

British Prime Minister Theresa May looks on course to increase her parliamentary majority in Thursday's election, an opinion poll showed on Tuesday, shortly after another survey suggested the race with the opposition Labour Party was neck and neck.

The Australian dollar AUD=D4 hopped to a one-month high of $0.7540 as first-quarter growth numbers beat investors' worst fears, forcing a round of short-covering among bears.

Oil prices dipped, with Brent crude futures struggling around $50 per barrel as global fuel markets remained oversupplied, although rising tension in the Middle East and falling U.S. inventories lent some support.[O/R]

Brent crude futures LCOc1 were trading at $50.07 per barrel, down 5 cents, or 0.1 percent. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $48.13 per barrel, down 5 cents, or 0.1 percent.

Article Link To Reuters:

Oil Dips On Glut Concerns, But Mideast Tension, Falling U.S. Stocks Support

By Henning Gloystein
June 7, 2017

Oil prices dipped on Wednesday, with Brent crude futures around $50 per barrel, as fuel markets remained oversupplied, although tension in the Middle East and falling U.S. inventories lent some support.

Brent crude futures LCOc1 were at $50.08 per barrel, down 4 cents from their last close. Brent is 7 percent below its open on May 25, when OPEC said they, along with producers outside of the group such as Russia, would extend their oil output cuts through to the first quarter of 2018.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $48.14 per barrel, down 5 cents from the previous close, and 6 percent below their May 25 open.

Traders said an ongoing fuel glut was keeping prices under pressure despite a pledge by Organization of the Petroleum Exporting Countries (OPEC) and other producers to cut almost 1.8 million barrels per day (bpd) of output.

"Disappointed that the oil cartel and Russia could not come up with a bolder plan to reduce the global crude surplus, market participants have been selling into every bounce," said Fawad Razaqzada, analyst at futures brokerage Forex.

World fuel production and consumption is roughly in balance, at almost 98 million bpd, although inventories remain bloated, the U.S. Energy Information Administration (EIA) said on Tuesday.

"Where oil (price) ultimately goes is going to be driven by inventories," said Greg McKenna, strategist at AxiTrader, another futures brokerage.

OPEC's efforts to tighten the market could be undermined by U.S. production C-OUT-T-EIA, which the EIA said could hit a record 10 million bpd next year, up from 9.3 million bpd now. That would nearly match the output level of top exporter Saudi Arabia.

In the near-term, however, the market was supported by escalating tensions in the Middle East and by signs of a gradual drawdown of bloated U.S. fuel inventories.

A campaign by leading Arab nations, including Saudi Arabia, Egypt and the United Arab Emirates, to isolate Qatar is disrupting trade, including oil.

"Port restrictions on Qatari flagged vessels are going to cause loading disruptions," said Jeffrey Halley, analyst at brokerage OANDA.

"That said, the disruptions are seen as inconvenient rather than systematic and thus will maybe only put a floor on crude in the short-term rather than starting a panic rally," he added.

In the United States, crude inventories fell by 8.7 million barrels in the week to May 26, data from the American Petroleum Institute showed late on Tuesday.

Official inventory data from the EIA will be published later on Wednesday.

"Any further sharp reductions in US stocks could put a floor under oil prices in the short-term," said Razaqzada.

Article Link To Reuters:

Long Promised, The Global Market For Natural Gas Has Finally Arrived

Liquefied gas, new infrastructure and revamped contracts have changed the calculus for consumers, countries and companies.

By Russell Gold and Alison Sider
The Wall Street Journal
June 7, 2017

One day in March, the Rioja Knutsen tanker, filled with liquefied natural gas, was traveling from the U.S. to Portugal. Suddenly, Mexico’s power company lobbed in a higher bid for its cargo. At the Bahamas, the ship abruptly made a starboard turn and headed south.

How natural gas is bought and sold in the world’s scattered regional markets for the fuel is changing rapidly. Ships such as the Rioja Knutsen are stitching those regions together and a single global market is emerging.

This is already how nearly every other hydrocarbon, from crude oil to obscure petrochemicals, is sold. As gas joins the club, the effects will ripple through energy prices, company profits, the environment and geopolitics.

Behind the evolution is improving technology for moving gas as a liquid, which means it can go to many more places rather than simply where a pipeline runs. In addition, a glut of gas has producers working to develop new consumers all over the world. The result is growing flexibility in once-rigid gas contracts and a convergence in prices long dictated by local factors such as weather.

The share of gas moving by sea reached 40% of total trades in 2015, and the International Energy Agency forecasts that seaborne gas will account for a bigger share of trading than pipelines by 2040.

Thirty-nine countries now import LNG, up from 17 a decade ago, according to data and analytics firm IHS Markit. Several more, among them Uruguay, Bahrain and Bangladesh, are expected to lift the total to 46 in the next couple of years.

In one sign of how gas is going global, the U.S. and China are working on a trade deal that could send vast quantities of gas pumped in Texas and Pennsylvania to factories in Shanghai and Guangdong. Improved access for U.S. exporters to China’s giant energy markets could boost overall global shipments.

The changes are contributing to rapidly narrowing price differences from place to place. In 2012, Asia spot prices for LNG were $5.74 per million British thermal units higher than natural-gas prices in Europe, according to S&P Global Platts. This year so far, the difference has averaged less than $1, something analysts expect to continue.

Worries by U.S. political leaders that gas exports would drive domestic prices significantly higher haven’t been borne out, at least so far, as Energy Department studies show only marginal effects. The U.S. appears to be exporting its low gas prices rather than importing higher ones from the rest of the world.

As LNG import terminals open in more locations, gas pricing and trading mechanisms are developing as well. Some investors are increasingly using the gas price at a pipeline intersection in Louisiana, called the Henry Hub, as a global benchmark.

Trading in the New York Mercantile Exchange’s Henry Hub gas futures contract is becoming more global, said Peter Keavey, global head of energy at Nymex owner CME Group . In May, Standard & Poor’s and the Intercontinental Exchange launched the first futures contract based on LNG produced in the U.S.

Seaborne gas is reducing some countries’ historic dependence on pipelines that run through potentially unfriendly territory. Poland, for instance, opened its first import terminal a year ago, lessening its reliance on gas piped from Russia.

When global trade in LNG began in the 1960s, the cost of liquefying gas was so high it was a niche product, affordable only by developed countries such as Japan.

As the technology proved reliable, trade in LNG became more common, but contracts to deliver the fuel by ship were decadeslong and had ironclad destination clauses. Gas contracted for Tokyo couldn’t be rerouted to Seoul. Traders called gas tankers “pipelines at sea.”

Now, contracts are getting shorter and starting to allow gas to be diverted to where demand is greatest. Earlier this year, three large LNG buyers in Japan, China and South Korea agreed to work together to push sellers for more contract flexibility and fewer onerous restrictions.

At any given time, there are about 170 tankers filled with LNG on the world’s oceans, up from 150 a year ago, according to a tracker firm called ClipperData. Before long, traders will be able to “make a very quick phone call to get that gas to whatever market is in distress at that particular time,” said Charif Souki, chairman and founder of Tellurian Inc., which is seeking to export gas from the U.S. Gulf Coast.

At the heart of the changes is supply. Huge new discoveries in the U.S., Middle East, East Africa and Australia, along with recovery techniques such as fracking, have expanded the amount of gas available for export. Companies and countries are moving to develop new markets to where they can sell it all.

One pioneer is Houston-based Cheniere Energy Inc. Founded and led for years by Mr. Souki, Cheniere initially developed terminals to import gas along the U.S. Gulf Coast. When U.S. gas production soared in recent years, the company converted its facilities into export terminals. It has spent more than $19 billion on plants at Sabine Pass, La., and Corpus Christi, Texas, that cool gas to minus 260 degrees Fahrenheit, at which point it turns into liquid and can move by tanker.

The U.S. continues to import some gas via pipeline from Canada. By next year, Sabine Pass and other LNG terminals are expected to turn the U.S. into a net gas exporter.

In a quest for customers, Cheniere has invested in a Chilean project to build a power plant, LNG terminal, storage facility and pipeline. The company is willing to put in “early-stage capital, modest amounts of grow the LNG market,” said Anatol Feygin, chief commercial officer.

Oil titans Total SA and Royal Dutch Shell PLC also are offering to build facilities to burn gas. The two and their partners are building an import terminal and pipeline for an estimated $200 million in Ivory Coast, which will feed a power plant in the West African country’s economic hub of Abidjan.

Part of what persuades nations to invest in infrastructure to import and burn gas is a belief its price will stay low. There are no signs supply growth is slowing. Qatar, the longtime LNG leader, recently lifted a self-imposed moratorium on the development of its North Field, the single largest gas reservoir in the world. So far there is little indication Qatar’s diplomatic spat with Arab neighbors will affect the gas market.

The volume of LNG expected to be delivered this year, 294.1 million metric tons, is up 22% in three years. It is likely to rise 21% more by 2020, according to IHS data and forecasts.

“We are going into a period of oversupply, and prices will face downward pressure for some time,” said Gautam Sudhakar, an LNG analyst with IHS Markit.

LNG faces competition even at low prices, because in some places it is cheaper to keep burning coal than to build gas facilities. In India, one of the world’s largest consumers of coal, it is renewables such as solar power, rather than natural gas, that may be mounting the strongest challenge. In nuclear power, Japan recently restarted some idled plants and China is building several new ones.

“LNG is going to have to fight for its place in the global energy mix,” said Keo Lukefahr, general manager of natural gas for the Americas arm of PetroChina International. “It has a narrow window to establish itself as a cost-competitive clean energy resource if it is going to realize its potential in the world’s energy supply.”

To take advantage of the window, producers are looking for new ways to finance gas-burning projects. Virginia-based AES Corp. is building a $1 billion project, including an import dock and gas-burning power plant, near the mouth of the Panama Canal, the recent widening of which has enhanced trading by letting larger tankers pass.

The project is aided by a $150 million loan from the World Bank’s International Finance Corp. It became involved both to provide Panama with needed power and because the plant will displace electricity from dirtier fuels such as diesel.

Helping make gas more accessible is a relatively new technology—floating LNG facilities.

Offshore plants can be built in about half the three years it takes to put up a land-based LNG import terminal. Their mobile nature also is an advantage in certain markets where an importer doesn’t have spotless credit. If it can’t pay, the terminal can weigh anchor and relocate.

The first floating terminal was christened in 2005. Today there are 25, according to the International Group of Liquefied Natural Gas Importers, a trade association. Excelerate Energy, a Houston company that developed this technology, is working on new floating terminals in Namibia, Bangladesh, Pakistan and elsewhere. The equipment to liquefy gas can also now be put on a large vessel that can be anchored offshore.

One sea creature owes its life to this new, interconnected gas market.

When the Rioja Knutsen tanker abandoned its Portugal destination to take advantage of an opportunity in Mexico, the Algerian energy company Sonatrach stepped into the breach, sending a tanker of LNG to Portugal.

That tanker, the Cheikh El Mokrani, returned to Algeria to fill up with a new cargo on April 9. As it idled off the coast, its crew spotted a small whale trapped in a fishing net. A sailor jumped in to untangle it. A video posted online showed the whale swimming free as the rest of the crew cheered.

Article Link To The WSJ:

50 Years After Loving v. Virginia, Colleges Embrace Segregation

Students have demanded free tuition and housing for blacks as well as black-only dorms.

By Jason L. Riley
The Wall Street Journal
June 7, 2017

June 12 marks the 50th anniversary of the Supreme Court’s 1967 ruling in Loving v. Virginia, which held that states could no longer prohibit marriages on racial grounds.

“Under our Constitution, the freedom to marry, or not marry, a person of another race resides with the individual and cannot be infringed by the State,” wrote Chief Justice Earl Warren. Like an earlier landmark decision on race, Brown v. Board of Education (1954), the Loving opinion was unanimous and brief—just 10 pages long. It was also unsurprising.

For starters, nearly two decades earlier, in 1948, the California Supreme Court had already ruled that the state’s antimiscegenation law violated the U.S. Constitution’s 14th Amendment. Court rulings aside, polling showed that racial attitudes among whites nationwide had shifted significantly in the postwar period. Between 1942 and 1963, white support for school integration grew to 62% from 30%, and white backing for neighborhood integration jumped to 64% from 35%. By the early 1960s, 79% of whites supported integrated public transportation, up from 44% in the early 1940s.

As Harvard Law Professor Randall Kennedy wrote in “Interracial Intimacies,” his book on the history of cross-racial romance, the high court’s Loving decision helped to further an existing (and welcome) trend. “Although a large majority of whites continued to disapprove of interracial marriage throughout the 1960s—in 1964, 60 percent of adult whites polled declared their support for anti-miscegenation laws—the matrimonial color bar eventually suffered the same fate as all the other customs and laws of segregation.” Nor were white views the only ones evolving. In 1968 only 48% of blacks approved of mixed marriages.

The Loving decision was handed down amid a civil-rights movement in full swing. The 1963 March on Washington had already occurred. The 1964 Civil Rights Act and the 1965 Voting Rights Act had already passed. In 1967 Hollywood released “Guess Who’s Coming to Dinner” about an interracial couple planning to marry, and it became a box-office hit. In 1967 Peggy Rusk, daughter of President Lyndon Johnson’s secretary of state, Dean Rusk, married Guy Smith, a black man. Time magazine called it “a marriage of enlightenment” and featured a wedding photo of the couple on its cover.

The irony is that we will mark the 50th anniversary of Loving at a time when race-consciousness is once again ascendant, not only among “alt-right” types, but more tellingly among self-styled progressives and left-wing institutions that once worked so hard to combat Jim Crow policies. The liberals who are cheering the recent removal of Confederate monuments to racial separatism also indulge the separatist rhetoric of groups like Black Lives Matter. Dr. Martin Luther King Jr. ’s calls for colorblind policies seem as dated as concerns about interracial hookups.

College campuses offer near-daily examples of this liberal devolution on racial matters. The most prominent recent episode involves Bret Weinstein, a biology professor at Evergreen State College in Olympia, Wash., who has come under fire from students and fellow faculty members for criticizing the school’s “Day of Absence” protest, which involved whites quitting campus for the day.

Sadly, these antics have become commonplace in recent years. Students at the University of Wisconsin have demanded free tuition and housing for blacks. At the University of Michigan, a student group that previously complained about the lack of racial “diversity” and “inclusion” at the school has since requested a safe space on campus reserved for students of color to gather. At the University of Missouri, only students of color were invited to participate in a “die-in” protesting the shooting death of Michael Brown in Ferguson.

If the student demands are getting more outrageous, it’s only because the authorities on campus have become more compliant. Last year, at the urging of the school’s black student union, California State University, Los Angeles began offering segregated housing for black students. The University of Connecticut, the University of California, Davis and the University of California, Berkeley are among the colleges that have similar arrangements in place. “While these housing options are technically open to all students,” reported the College Fix, “they’re billed and used as arrangements in which black students can live with one another.”

This year, Harvard held its first-ever commencement ceremony for black graduate students. The New York Times reported that racially segregated end-of-year ceremonies “like the one held at Harvard have become more mainstream, more openly embraced by universities and more common than ever before.”

Many on the left today seem unable to decide whether all those Southern segregationists were wrong—or just ahead of their time. Progressives were more certain of themselves 50 years ago, and the court that decided Loving was right to follow their lead.

Article Link To The Wall Street Journal:

Comey’s Testimony Poised To Be Defining Moment Of Trump’s Presidency

By Michael Goodwin
The New York Post
June 7, 2017

For nearly two weeks, it’s been all quiet on the James Comey front. No government leaks, no friends of his issuing veiled threats, no reports of his memos to himself mysteriously becoming public.

Until yesterday, when the dam sprang a few leaks. The full deluge comes Thursday, when the J. Edgar Hoover wannabe spills to Congress. Then it will be all Comey, all the time.

It also will be all hell breaking loose between Comey and the president who fired him.

The television networks certainly hope so, and smelling blood, they’ve cleared their schedules for what they hope will be a historic event. They’re thinking “Gunfight at the O.K. Corral,” and depending on what the former FBI boss says, and how President Trump responds, their wish could be granted.

The stakes are enormous for both men. Comey left office with few admirers and even fewer friends because of his suspect conduct in last year’s election. Republicans thought he went soft on Hillary Clinton’s ­e-mail case, and Democrats thought he was too hard on her.

Out of office, Comey’s no longer in a position to collect secrets and dole them out based on his own judgment and interests, and is likely to find he has lost the institutional benefit of the doubt from both sides. Instead of blithely asserting his integrity, he’ll have to answer questions with facts, and some of those questions will be hostile, as they should be.

I hope at least one series focuses on leaks — and whether Comey knows who has been disclosing government secrets, and whether he ever did it or authorized it himself. The answer, because he will be under oath, could be surprising.

For Trump, of course, the stakes are monumental. The day is shaping up to be the most important event of his presidency.

Any damaging testimony Comey levels will make it that much harder for the president to push his stalled agenda through Congress as more Republicans pull further away. With his already-low approval numbers, additional declines could put his party at risk in the 2018 midterms.

Then there is the immediate legal risk. Comey clearly aims to damage the president by accusing Trump of asking him to pull the plug on the investigation into former Trump aide, Gen. Michael Flynn.

Perhaps more important, Comey also will be asked why he thinks he was fired. I assume he will cite the Russia probe, and claim he believes that Trump fired him to stop the investigation.

If true, that will be the headline of the day. And if he offers evidence beyond his opinion, Katie bar the door.

Comey may make other charges, too, though it’s not clear we’ll get to hear all of them. Remember, some of his testimony to the Senate intelligence committee will be public, and some will be behind closed doors.

To that end, Comey already met with Robert Mueller, his predecessor at the FBI who was named special counsel and tasked with heading the probe into whether Trump’s campaign colluded with Russia. Mueller reportedly wanted to review Comey’s testimony to make sure none of it compromised the probe.

Trump, then, has to worry about the political consequences of what Comey says publicly, and try to guess what he says privately. Given the complexity, it was wise for the president to hire a lawyer. It would be even wiser for the president to follow the lawyer’s advice.

Presumably, the report that Trump might live-tweet his responses to Comey isn’t part of that advice.

It would make for great TV — but could be a disaster for Trump’s future. Comey is far more experienced at the investigative game, and Trump should be wary of tweeting without knowing key facts, and the legal implications. He could be walking into a trap.

Already, the president has been on a tweeting tear, fighting with the mayor of London and criticizing both federal courts and his own Justice Department. He’s clearly aggravated, and is in danger of overheating just when he needs to remain ice cool.

Comey is a formidable foe, and he’s coming with his guns loaded and is determined to use them. We know this because a friend, Benjamin Wittes, suggested Comey was going for the kill.

“This is a guy with a story to tell,” Wittes told CNN late last month. “I think if I were Donald Trump, that would scare me a lot.”

At the very least, it should scare Trump into being smart and disciplined with his response.

Article Link To The New York Post:

The War On E-Cigs Is Now National

By Betsy McCaughey
The New York Post
June 7, 2017

Hypocrisy has reached new heights, even by Washington’s standards. The same left-wing senators who support needle-exchange and methadone programs to reduce harm to drug addicts and demand condoms for high-schoolers are waging war against the most effective harm reducer of all — e-cigarettes.

Sens. Al Franken (D-Minn.), Elizabeth Warren (D-Mass.), Patty Murray (D-Wash.) and other Democrats are demanding new FDA Commissioner Scott Gottlieb crack down on e-cigarettes without delay. Across the aisle, Sen. Ron Johnson (R-Wis.) is urging Gottlieb to examine the compelling evidence that vaping saves lives by helping smokers quit the deadly habit.

Some 480,000 people in the United States die each year from smoking. But quitting is hard. E-cigarettes are far more effective than any patch, coach or gum at weaning addicts off their cancer sticks. And they’re diverting teens from even starting smoking.

But facts be damned. Senate Democrats are politicizing the issue, claiming that “special interests” lie behind the FDA’s decision to delay pending regulations drafted by the Obama administration.

The new regs, originally scheduled to go into effect by now, would compel all e-cigarette devices and flavors to be pre-approved by the FDA before being sold. The cost of pre-approval would crush all but the biggest producers. The Trump administration wisely put these rules on hold to look at the facts. Johnson wants the FDA to junk the regs altogether.

The FDA should be facilitating, not impeding, the use of e-cigarettes.

New research from the United Kingdom shows over half of UK e-cigarette users have quit smoking entirely. England’s most prestigious medical group, the Royal College of Physicians, endorses “large-scale substitution of e-cigarettes” for smoking. The country’s National Health Service urges patients who smoke to switch to vaping.

In Europe, 6 million ex-smokers report that e-cigarettes helped them quit, according to EU data, yielding impressive improvements in health. Smokers with hypertension who switch to vaping show significant decreases in systolic blood pressure after 12 months, better results than with medications. Asthmatics who switch from smoking to vaping gain better lung function and relief from coughing, reports Riccardo Polosa, director of the Institute of Internal Medicine and Clinical Immunology in Italy.

What about teens? Vaping isn’t a gateway to smoking in adults or teens, contrary to what the Democratic senators claim. But they prefer fearmongering to facts, accusing manufacturers of predatory marketing by luring adolescents with candy-like flavors.

In fact, vaping appears to be responsible for the dramatic drop in teen smoking since 2010, down more than 50 percent. Teens are vaping instead.

Would it be better if they did neither? Yes, but human beings have been sticking things in their mouths since the beginning of time. Vaping is harm reduction.

That’s not the same as harmless. There may be traces of toxins, metals and carcinogens in vapor. But vaping is 95 percent less harmful than smoking cigarettes, researchers conclude.

The more smokers switch to vaping, the more lives will be saved.

As for secondhand smoke, it contains 60 carcinogens and is far more dangerous than the low levels of toxins in secondhand vapor.

New scientific evidence drawn from four countries — the United States, Canada, Australia and England — shows that the more restrictive a country’s vaping regulations, the less likely smokers are to put out their cigarettes and take up vaping. The FDA should heed this life-and-death information.

Both the European Union and the United Kingdom have set quality and safety standards for e-cigarettes without imposing a costly pre-approval regimen. The United States should do the same.

Millions of lives hinge on how the US regulates e-cigarettes. Sadly, the left is making it tougher for smokers and teens prone to smoking to choose the harm-reducing alternative.

Liberals have long mocked the “just say no” approach, but that’s what they’re telling smokers — that harm reduction is a good idea for heroin addicts but not cigarette addicts.

Article Link To The New York Post:

Apple's First TV Series Shows What It Takes To Build An App

By Lisa Richwine
June 7, 2017

Apple Inc's long-awaited move into original television series starts Tuesday, with a reality show about a universe that is key to the technology giant's business: the world of app developers trying to bring their ideas to the masses.

The 10-episode "Planet of the Apps," an unscripted show with similarities to ABC's "Shark Tank," is part of an effort to add exclusive video programing to Apple's music streaming service to help attract new subscribers. The first episode will be available for streaming around the globe starting at 9 p.m. PDT on Tuesday (midnight EDT/0400 GMT).

Hollywood has been awaiting the entry of deep-pocketed Apple into original TV series, a field crowded with award-winning dramas and comedies from outlets such as Netflix and Time Warner Inc's HBO.

The first "Apps" episode will be free to anyone who wants to see it on iTunes and the show's website. Subsequent episodes will be released each Tuesday on Apple Music and available only to the streaming service's subscribers.

On the show, developers try to interest celebrity mentors with a 60-second pitch on an escalator. The advisers help contestants build their products and prepare appeals for funding from Lightspeed Venture Partners, the first investor in Snapchat.

"The question when you have ideas is how to take those to fruition," Eddy Cue, Apple's senior vice president of Internet software and services, said in an interview. "Sometimes you may not know how, you might be afraid of what's involved. This really shows how that's possible."

Apple's future programing plans include an adaptation of comedian James Corden's "Carpool Karaoke" segment from his CBS show that will begin airing in August, as well as a documentary about Sean Combs in June and another about Clive Davis in a few months, Cue said.

"Planet of the Apps" came from musician, who with producer Ben Silverman had shopped the series to traditional TV players before approaching Apple. appears as a judge alongside entrepreneur Gary Vaynerchuk and actresses Gwyneth Paltrow and Jessica Alba, who have started businesses.

"I felt like this was a great way to show that app developers or business people are not just white dudes in suits, or white dudes coding," Alba said.

In the first two episodes, developers present apps for online shopping, campus safety and a school backpack. One team tries to adapt after Google announces a feature similar to its own concept. Another developer feels overwhelmed by's rapid-fire list of ideas.

At the show's end, viewers are told they can download the apps from Apple's App Store. The show itself will be promoted on the home page, on iTunes and elsewhere.

"All of our customers are going to be exposed to this in one way or another," Cue said.

Article Link To Reuters:

Uber Still Doesn't Look Like The Next Facebook

The ride-hailing service lacks the powerful network effects that compel customers to stick with it.

By Noah Smith
The Bloomberg View
June 7, 2017

Uber has been in the news a lot lately, and most of it hasn’t been pretty. Allegations of a sexist workplace culture, a high-profile legal battle with Alphabet Inc. (Google) over self-driving car technology, reports of attempts to skirt local laws, an anti-Uber Twitter campaign, and an exodus of top talent have put the ride-hailing giant on the back foot. But so far, these problems don’t seem to have put a huge dent in Uber’s market share -- as the website TXN found in March, even after many of these problems hit the news Uber was still providing almost four times as many rides as its biggest rival, Lyft Inc.

Negative publicity and management squabbles are not helpful, but in the end, it will probably be the strength of the ride-hailing business model that determines if Uber -- and rivals such as Lyft -- live or die. And it’s here that Uber and its investors should be worried. Basic economics shows some cracks in Uber’s model. Those weaknesses might not be catastrophic, but they probably deserve more attention than they’re getting.

A company’s value depends on how much money it can make. Competition limits profitability, so to protect their margins, companies need what Warren Buffett calls a “moat” -- a source of market power that provides an enduring advantage over new entrants to the market. The moat can be a valuable brand name, such as Gucci or Apple. It can be technological superiority or government-granted patents. It can be economies of scale, as with the auto industry -- it’s hard to get the money to start a company big enough to compete with Toyota Motor Corp. and Ford Motor Co.

But the most powerful kind of moat is a network effect. I’m on Facebook because my friends are on it, and the same is true for them -- we can’t easily switch to a new social network, since no one is there yet. When the value of being in the network increases with the size of the network, it’s a powerful source of market power. Technology companies, which take advantage of the connectivity of the internet, tend to have strong network effects, often resulting in winner-take-all markets.

Uber undoubtedly has a network effect. Each rider has an incentive to use the hailing app that has the most drivers on nearby roads, since that will minimize wait times. And each driver wants to use the app that has the most customers ordering rides, because that will minimize the time to find a fare. This is known as a thick market. Imagine a ride-hailing app with only three drivers and 100 users -- it would usually take a long time to order a ride, because chances are that the car and rider would be far apart. But with 300 drivers and 10,000 users, wait times will tend to be low. Having a larger network is valuable.

But there are reasons to believe that this network effect may not be overwhelmingly strong in Uber’s case. First, as my colleague Justin Fox has pointed out, dominating one city doesn’t help that much in dominating another city, since only travelers order rides in both cities. Second, most Uber drivers also drive for Lyft or other Uber competitors, and many users have multiple hailing apps on their phones. The ease of switching between two apps means that Uber is unlikely to ever be able to force Lyft and other rivals out of the market.

This may be a big reason that Uber has failed to achieve profitability. In a long series of blog posts, consultant Hubert Horan documents Uber’s enormous financial losses, and provides some evidence to support the theory that these are due to operating losses, rather than investments intended to help the company grow. Most tellingly, Uber’s losses haven't improved much as the company has grown, meaning that unlike tech companies such as Facebook Inc. and Inc. with strong global network effects, Uber and other ride-hailing services may not be able to grow their way to profitability.

One thing Uber could do is to raise prices. If Uber and Lyft are locked in a destructive and ultimately futile price war, they could potentially improve their bottom lines by simply ending that war and accepting that neither will ever be a monopoly. But that might choke off demand for their services, as people decide to switch to public transportation or drive their own cars. Some economists have estimated that demand for Uber’s services is very inelastic -- that is, customers would be willing to pay higher prices. But as Horan points out, the study focused on short-term demand by frequent Uber users -- in the long-term and across the whole economy, demand is likely to be much more sensitive to higher prices.

Another thing Uber could do is use self-driving cars, as it is currently attempting to do. But as asset manager Hamish Douglass has noted, this could make matters even worse if it succeeds. A human driver can fairly easily switch back and forth between two ride-hailing apps, but an automated vehicle can effortlessly manage a hundred at once. That immediately knocks out one side of Uber’s network effect, since every app will be able to hail every car. In addition, self-driving cars will take away much of the rationale for using ride-hailing apps in the first place, since people’s own cars will start to function as their own private taxi cabs -- the stress and time of driving yourself around and finding parking will be gone, and your car will even be able to drive you home after you've had one too many.

So it may be that investors, and much of the business press, have overestimated the profit-earning capability of companies like Uber and Lyft. They or something like them will undoubtedly survive, but they may be more of a low-margin business than their investors have hoped.

Article Link To Reuters:

Uber Fires 20 Employees After Harassment Probe

By Joseph Menn and Heather Somerville
June 7, 2017

Uber Technologies Inc [UBER.UL] said on Tuesday it fired 20 employees and was improving management training following an investigation by a law firm into sexual harassment allegations and other claims at the ride-hailing company.

Uber fired the staff following a report by law firm Perkins Coie, which Uber hired to look into claims of harassment, discrimination, bullying and other employee concerns.

The law firm has been working in parallel with a broader investigation by former U.S. Attorney General Eric Holder into company culture and practices.

Perkins Coie investigated 215 staff complaints going back as far as 2012, Uber said, taking action in 58 cases and no action on 100 more. Other investigations are continuing.

Of the 215 claims, Uber said 54 were related to discrimination, 47 related to sexual harassment, 45 to unprofessional behavior, 33 to bullying and 36 to other types of claims.

It said the majority of the claims came from employees based at Uber's San Francisco headquarters.

The world's highest-valued venture-backed company - worth $68 billion at its last funding round - also told staff on Tuesday it would expand its employee relations unit to better investigate claims and that it would dramatically increase management training since most Uber managers were first-time bosses, a person familiar with the matter said.

On Monday, Uber said it hired Harvard Business School professor Frances Frei to train all managers, reporting to Uber Chief Executive Travis Kalanick. On Tuesday, it said Bozoma Saint John, prominent in some Apple Inc (AAPL.O) product launches, joined the company as chief brand officer.

Uber also said it is offering a confidential helpline for employees to report concerns and has implemented a system to log and track all complaints.

Year Of Questions

Uber's firing of employees comes after a series of events this year that have raised questions about Uber's business model and leadership.

In February, former Uber engineer Susan Fowler said in a widely read blog post that managers and human resources officers had not punished her manager after she reported his unwanted sexual advances.

In addition, Uber was caught using technology to avoid regulator crackdowns, a video surfaced showing Kalanick berating an Uber driver, and the company is caught up in legal battles around the world over the way its ride-services business operates.

Uber is also facing a lawsuit from Alphabet Inc's (GOOGL.O) self-driving car division, Waymo, alleging trade secret theft.

The company declined to comment further on the move to fire staff. Some saw it as a step in the right direction for Uber to repair its tarnished reputation.

"They are heading the right way, both with action and reaction," said Jason Hanold, manager partner at human resources executive recruitment firm Hanold Associates. He added it was "not nearly a complete and final surgery to heal a troubled culture."

The move follows a string of executive departures at Uber, including the company president, heads of finance and product, an East Coast general manager and several high-level engineers.

For the last three months, Uber has been seeking a chief operating officer to work alongside Kalanick, who has earned a reputation as a pugnacious leader. Uber board member Bill Gurley is overseeing the search.

Uber has also been under the microscope of Holder and Tammy Albarran, partners at the law firm Covington & Burling, who were asked to conduct a broad review of sexual harassment at Uber as well as general questions about diversity and inclusion. Their report was completed at the end of May and has been shared with a subcommittee of the Uber board of directors, a company representative said.

In March, Uber board member Arianna Huffington pledged to make the findings of Holder's investigation available to the public. Initially, the company had expected to make a public announcement this week, but that timing has been pushed back.

Uber is expected to discuss it with staff next week, a person familiar with the matter said.

Article Link To Reuters:

U.S., Mexico Reach Sugar Pact Despite U.S. Producer Resistance

By David Lawder and Chris Prentice
June 7, 2017

Mexico on Tuesday conceded to U.S. demands for changes in the terms of Mexican access to the lucrative U.S. sugar market, striking a deal with Washington that will likely lift prices of the sweetener to U.S. food processors and consumers.

Sugar producers in the United States refused to endorse the agreement in principle between the two governments after pushing for even more concessions from Mexico, raising the possibility that the deal could collapse.

The agreement in principle between U.S. Commerce Secretary Wilbur Ross and Mexican Economy Minister Ildefonso Guajardo aims to resolve a long-standing trade dispute between the two countries.

Without it, the United States could have reimposed steep import duties on its southern neigbour and risked the prospect of a retaliation from Mexico just as the two countries and Canada prepare to renegotiate the North American Free Trade Agreement this year.

Under the deal, Mexico would sharply reduce the share of refined sugar it exports to the United States and increase raw sugar exports.

"We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners," Ross told a news conference.

Still, Ross said the U.S. sugar producers had told him that they could not accept the deal in its current form, but he hoped that they would agree to some changes in a final drafting of the agreement in the next several days.

He did not elaborate on what action the Commerce Department would take if there were no final agreement with the U.S. producers. It was unclear if Ross would impose the settlement if U.S. producers did not sign onto it.

The agreement lifts the minimum prices for Mexican imports, which will likely be passed on by U.S. sugar refiners to food companies and beverage and confectionary producers and ultimately to consumers.

A trade group that represents a coalition of U.S. sugar buyers and other firms that are critics of the U.S. program said the deal favored the interests of U.S. sugar producers, and estimated the cost to the consumers in higher prices for food, drinks and confectionary at around $1 billion.

"Today's announcement is a bad deal for hardworking Americans, and exemplifies the worst form of crony capitalism," the U.S. Coalition for Sugar Reform said in a statement.

The negotiations were an attempt to settle an anti-dumping and anti-subsidy case brought by a coalition of cane and beet farming groups and ASR Group, the maker of Domino Sugar that is owned by the politically well-connected Fanjul family of Florida.

While the limits on refined sugar from Mexico at 30 percent were significantly below the previous 53 percent limit, these groups had initially pushed for a 15 percent limit.

Sources on both sides of the border had said on Monday that the U.S. sugar industry had added new demands outside of the terms agreed on earlier yesterday by the two governments.

The American Sugar Alliance said it objected to the new deal because Mexico would still be able to ship in refined sugar to meet additional U.S. demand above quota. The alliance wants the U.S. Department of Agriculture to have the final say on the type of sugar to be imported.

Long-Standing Feud, NAFTA Looms

The agreement, if finalized, was expected to avert potential retaliation from Mexico on imports of U.S. high-fructose corn syrup which had worried corn growers and refiners.

The potential for an escalation in the dispute would have soured the relations between the two countries ahead of NAFTA renegotiations. Agriculture is typically one of the most sensitive areas in trade negotiations.

Representatives of some of the world's biggest grain traders, Archer Daniels Midland Co and Cargill Inc [CARG.UL] joined Cocal-Cola Co and others to lobby against the U.S. sugar producers in the dispute.

"Avoiding a trade war will benefit everyone, and I'm glad that this years-long trade dispute is finally reaching its end," said Republican Senator Chuck Grassley of Iowa, adding that Ross balanced all interests in the negotiations.

U.S. refiners wanted even more stringent terms on imports from Mexico. They have complained that high-quality Mexican raw sugar was going straight to sugar consumers, rather than passing through U.S. refineries. Mexican producers would have been happy with a rollover of existing terms.

The deal would mark the culmination of a multi-year dispute between the countries over sugar, after U.S. groups in 2014 asked the government for protection from subsidized exports from Mexico. In 2014, the U.S. government slapped large duties on Mexican sugar but hammered out a deal with Mexico that suspended those levies. Factions of the U.S. industry have said that the deal failed to eliminate harm to U.S. producers from Mexican imports.

ASR Group and fellow cane refiner Imperial Sugar, owned by commodities firm Louis Dreyfus Company BV [AKIRAU.UL], have said they are being starved of raw supplies under the current deal. They have asked the U.S. government to terminate the pact.

The latest talks began in March, two months after U.S. President Donald Trump took office vowing a tougher line on trade to protect U.S. industry and jobs.

Article Link To Reuters:

Pound Is Seen Losing The Most If U.K. Vote Delivers No Winner

Sterling seen rallying to $1.31 if May wins a large majority; Currency may slump up to 7% if there is no clear verdict.

By Anooja Debnath and John Ainger
June 7, 2017

The pound could plunge to as low as $1.20 on Friday, a level last seen in January, should the U.K. snap election lead to a hung parliament, according to a Bloomberg poll of analysts.

Such an outcome, though seen as unlikely, would be marginally more negative than even an electoral upset that sees the Labour Party defying odds to emerge the winner, according to the survey of 11 banks and brokerages. That suggests investors don’t share Prime Minister Theresa May’s view that when it comes to Brexit, not having a deal is better than a bad one. A victory for May’s Conservative Party would be supportive of the pound, and this outcome is more or less already priced in, the analysts say.

That suggests investors don’t share May’s view that no deal is better than a bad one when it comes to this week’s U.K. election. Of all the potential outcomes, including a win by the Labour party, a hung parliament would be the worst one for the pound, according to analysts surveyed by Bloomberg.

Analysts also highlighted that the shorter- and longer-term effects on the currency could be different. While a strong Tory win lends markets near-term certainty and helps sterling, over a longer period it could “increase the odds of a harder Brexit, which would probably be consistent with the pound being lower,” Andrew Sheets, chief cross-asset strategist, said at a press conference in London on Monday.

Below is a compilation of analyst views on the election outcomes and potential pound reactions in the spot market:

Conservative Win (Large Majority)

-- As a Tory win seems already priced in, there’s limited scope for sterling to rally on the news; still, this outcome is seen as the most positive for the pound immediately after the vote
-- Sterling is seen reaching $1.3100, according to the median of analyst estimates, with one predicting it to reach $1.3300, a level last seen in September 2016
-- “In the markets there is a very simple rule of thumb: the larger the Conservative majority becomes, the more positive it is for sterling,” says Adam Cole, London-based head of global foreign-exchange strategy at RBC

Conservative Win (Small Majority)

-- This outcome, which was once seen as a tail risk, is now very much on the market’s radar as Labour is slowly chipping away at the Tory lead in polls
-- Yet, the pound isn’t expected to slide as a Conservative victory will still likely mean investors would wait for the Brexit negotiations to start for a better sense of how to trade the currency
-- The definition of what a small majority is also differs from analyst to analyst
-- The pound is seen at $1.3025, not far from current levels

Hung Parliament

-- This could be particularly damaging for the pound as it throws not only the future of the government in question but could also complicate and possibly delay the start of Brexit negotiations
-- The range of forecasts is the widest under this scenario with RBC’s Cole seeing the pound falling to as low as $1.20. The median signaled a drop to $1.2350
-- With all the risks of a hung parliament, “being underweight the pound makes sense,” says Andrew Balls, chief investment officer at Pimco

Labour Party Win

-- A Labour win will hurt the pound in the short term, but could boost it further down the line as markets welcome the prospect of a softer Brexit and a boost to fiscal spending
-- “I think once the dust settles, the market will not see Labour as such a bad result,” said Jordan Rochester, a foreign-exchange strategist in London at Nomura Holdings Plc
-- While an outright Labour win seems unlikely, a coalition with the Scottish National Party or the Liberal Democrats is considered possible
-- The median projection was $1.2484, which is slightly higher than the prediction for a hung-parliament scenario
-- The forecasts ranged from $1.33 to $1.23, with analysts divided on whether the prospect of a soft Brexit under a Labour government will support the pound or the ensuing uncertainty weigh on it

Article Link To Bloomberg:

Split Britain? A Tale Of Two Kensingtons

By Hannah McKay 
June 7, 2017

Just 48 hours ahead of a national election, two districts of the same name illustrate the yawning political and economic divisions between different parts of Britain.

In the Kensington area of the northern city of Liverpool, a two-bedroom terraced house costs around 50,000 pounds ($64,600). In glitzy Kensington, London, a similar property could cost 100 times more.

"What I know of Kensington in London is very different from the rough and tumble of here," said Barbara Tickner, 87, who works in a church in Liverpool.

The British capital's Kensington is famous for its parks, upmarket shops and museums that attract millions of tourists each year. Its multi-million-pound mansions house a cosmopolitan population, while royalty lives behind the gilded gates of Kensington Palace.

The district in Liverpool receives few international visitors, although cheap housing has made it popular with students. Ahead of Thursday's election, locals there expressed worries over the economy and immigration.

As they have for decades, the two neighborhoods are likely to vote in opposite ways.

London's Kensington has voted Conservative since the 1970s, and a precursor seat, Kensington South, was one of the party's safest seats in the years after World War II.

"I'm voting Conservative, and being in Kensington, hopefully it's a sure vote. It always has been ... and I'm sure it will be," said Sheena Williams, speaking in the bustling Churchill Arms pub.

She praised the area's quality of life: "We've got a very good police force, very good ambulance service. We're very lucky."

Williams also backed Prime Minister Theresa May's approach to Britain's forthcoming exit from the European Union, and said she hoped May would get on with leaving. Brexit negotiations with the bloc are due to begin at the end of June.

In the referendum held a year ago, the London Borough of Kensington and Chelsea and the city of Liverpool both voted strongly to remain in the EU. But the districts are otherwise poles apart politically.

Liverpool Wavertree is a safe seat for the opposition Labour party and equally unlikely to change hands on Thursday, although some more marginal seats close to the city are being targeted by May's Conservatives.

Drinkers in the Sheil Pub are less optimistic than their London counterparts, however, and local residents expressed disaffection with their circumstances.

"Over the last 10 years, there's been a very big change around here," said Steven Thomas, who owns a locksmiths on the high street.

"I'm not against immigration, but it's just a culture change, and then the pubs go down, because no-one is using the pubs, and there's a knock-on effect."

Thomas said that while the local Labour party listened and did good work in the area, he was unconvinced by party leader Jeremy Corbyn, a socialist who has been accused of being out of touch with the party's core voters. "He's not really a leader," he said.

Ricky Gray, a customer of the Sheil, said he used to support Labour but hadn't voted for about 25 years.

"I have voted before, but I would never vote again in my life. They don't do nothing for anyone."

Notting Hill

London's Kensington has become increasingly affluent in recent decades, but not everyone is happy about the changes.

"It's changed enormously. The area over there, Notting Hill, was a slum when I first got here," said Pierce Carlson, 87, a U.S. citizen who moved to Britain in 1971. "You didn't want to live in Notting Hill back then. That's been improved."

But he said the main beneficiaries of government policies were the richest, who benefit from lower taxes, when more should be put into public services.

"It depends on who they're doing it for. If they're doing it for Russian millionaires -- they're very happy. But the post office, the health service, they aren't sufficient, and they should spend money on them."

Even London's Kensington, where Russian and Middle Eastern billionaires have poured money into the property market, has pockets of poverty. The borough of Kensington and Chelsea contains areas that are among the 10 percent of most deprived neighborhoods in the country.

A woman who makes her living cleaning some of the upscale houses, and who declined to be named, said that politicians did not take people like her into account when making decisions.

"If you're rich and you've got the money, they'll do anything," she said. "We've just had enough. Everything we work for is taken away."

Article Link To Reuters:

The Trump Idea Liberals Should Like

Privatizing air traffic control has worked well for countries like Canada.

By Adam Minter
The Bloomberg View
June 7, 2017

On Monday, Donald Trump kicked off his infrastructure drive with a proposal to privatize the sprawling U.S. air traffic control system. It's a free-market big idea that U.S. Republicans have long embraced and Democrats have generally resisted, fearing that all but the biggest airports will suffer in quality and coverage.

They shouldn't be so worried. In fact, Trump is following in the footsteps of an unlikely and, indeed, quite liberal model: Canada, which privatized its air traffic control system in 1996 and hasn't looked back since. Two decades on, Canada's system is unquestionably more advanced, efficient and cost-effective than the one operated by the U.S. government.

Even the U.S. system's champions would hardly deny that it has major flaws. The chaotic federal budget process has dragged out expensive technological upgrades. A bloated workforce and complicated government procurement rules further impede change. And political interference can undermine the independence of regulators.

The FAA's troubles don't differ significantly from those Canada faced before 1996, except perhaps in terms of scale. Nav Canada, the user-financed, non-profit corporation that purchased Canada's air traffic control system for $1.1 billion, has solved most of those problems by introducing private-sector efficiency and incentives where none had existed before.

Freed of burdensome government contracting rules, Nav Canada is able to hire quickly and pay competitively, and set strict deadlines for tasks to be accomplished. The company has also been able to take advantage of new navigation technologies more quickly than the U.S. government has.

For example, Canadian controllers now use satellite-based GPS to track aircraft that are outside radar coverage, whereas their American counterparts still often rely on paper-and-pencil. Canadian controllers can space in-flight planes more closely and thus develop more efficient routes. This allows airlines to schedule flights more flexibly and improve on-time performance -- not to mention reduce fuel use, improve margins and shrink carbon emissions.

Given the glacial pace at which the U.S. has adopted such technologies, U.S airlines and passengers will wait more than a decade to experience similar improvements. In 2004, the U.S. Department of Transportation announced NextGen -- a series of multibillion-dollar upgrades that included a shift from ground-based radars to satellite-based navigation. According to recent testimony from the department's inspector general, the Federal Aviation Administration still hasn't revealed the total costs or completion schedules for any component of the system.

Deploying new technologies can dramatically bring down costs. Simply removing air traffic control from the federal budget will save billions, of course. On top of that, Canadian controllers have proven more efficient than their American counterparts, managing 1,760 flight hours annually on average, compared to 1,725 for the FAA. In 2014, Nav Canada spent $340 per flight hour, while the FAA spent $450.

Most importantly, privatization should make the skies safer. For years, in order to keep air traffic control free from political influence, the International Civil Aviation Organization has recommended that countries separate aviation regulators from air traffic providers. That arms-length relationship ensures that politicians can't as easily interfere with investigations or decisions on where to locate air traffic control facilities. A 2014 study commissioned by the FAA found no evidence that separation had degraded safety in any of the dozens of countries that had tried it.

Privatization won't make everyone happy. In its early years, Nav Canada dramatically downsized its work force -- a trend that will likely continue as technology takes over more tasks in the control tower. But the long-term benefits to U.S. passengers and airlines should outweigh any disadvantages -- regardless of who's proposing the idea.

Article Link To The Bloomberg View:

War On Leakers Is Off To A Bad Start For Trump

Prosecuting the release of an NSA document on Russian hacking will only raise more questions.

By Noah Feldman
The Bloomberg View
June 7, 2017

The prosecution of intelligence contractor Reality Leigh Winner under the Espionage Act is a sure sign that the Trump administration’s war on leakers has begun. But as the opening battle, it’s poorly chosen, and a serious mistake in prosecutorial discretion by Deputy Attorney General Rod Rosenstein, who should know better. Winner has the wrong profile -- and the leak is very much on the wrong subject -- for a headline-grabbing prosecution by an administration in which the president is already the leaker in chief.

The only good news for the Justice Department is that, if the evidence pans out the way it’s been reported, they have Winner dead to rights. The National Security Agency document she is accused of printing and sending to the Intercept is classified, and passing it along was a felony. Barack Obama’s administration also aggressively prosecuted leakers, so ideally, the critique of the Winner prosecution shouldn’t be partisan.

But the choice of Winner obviates that advantage. The topic of the leaked NSA document is the greatest problem: It's on Russian hacking around the 2016 vote that elected Donald Trump, who selected Attorney General Jeff Sessions and Rosenstein. Sessions isn’t involved because, well, he’s recused from Russia-related matters because of his contacts with the Russians.

It goes without saying that the Russian hacking is the third rail of politics so far in the Trump administration -- and the issue isn’t going away. Targeting Winner for this leak makes it look as if the Justice Department is colluding with the White House to hide damning information about whether Russian President Vladimir Putin actually succeeded in giving the election to Trump, as he clearly would have loved to do.

When you add that Trump has already been in the hot seat for leaking classified intelligence to the Russian government, the optics seem even less positive for the prosecution.

To make matters worse, the actual document, while providing more detail than was previously publicly revealed, doesn’t seriously deepen the story as we knew it. We know the Russians used spear-phishing techniques. We know they aimed at election-related technologies and businesses.

Thus, it appears that Winner is being prosecuted for revealing something that, generally, was already in the news. This is totally unlike the Chelsea Manning or Edward Snowden leaks, or even the prosecution of Scooter Libby for leaking CIA officer Valerie Plame’s name in the George W. Bush administration. Those leaks were substantive and new -- and major.

Further underscoring how of Winner’s leak was relatively minor: There is no raw intelligence in the document. It’s just an account of American intelligence assessments. We would likely have gotten that information at some point in some way from congressional testimony.

Then there is Winner herself, a potentially sympathetic defendant. News reports say she’s only worked at the defense contractor Pluribus International Corp. since February. She’s just 25 years old.

And, from what we've seen in the complaint, Winner is no criminal mastermind. She apparently used her own work computer to contact the news outlet and search for classified material, and printed out the classified document directly. (Who prints anything out anymore? We now have our answer.)

The result is that Winner can be depicted by a skilled defense attorney as a newcomer to government contracting work who didn’t appreciate the seriousness of her offense.

Alternatively, her lawyers may want to make her out as an anti-Trump crusader, outraged that information about how Putin helped Trump steal the election was being kept from the public.

Either defense is unlikely to keep her from being convicted. But the publicity-oriented version could well make her a folk hero. That’s the last thing the Trump administration needs.

Winner stands to be sentenced to as many as 10 years in prison under the Espionage Act for a crime that, to much of the public, won’t sound anything like espionage. A draconian punishment would make things worse for the Trump administration. But if the Justice Department settles for a slap on the wrist, the whole prosecution will look silly -- and that will look bad for Rosenstein.

So why did a seasoned prosecutor like Rosenstein go ahead with the case? One possibility is that he liked its open-and-shut nature: He wants a fast plea bargain and the story to go away. That would please the president without prolonging what could be political agony.

Another theory is that Rosenstein is such a straight-shooter that when this crime was presented to him, he couldn’t help but prosecute it. If that’s true, it would be a nice thing -- but also a reason to think the deputy attorney general isn’t up to the job of running the department on all things Russia-related.

When it comes to prosecuting, the government lawyer’s job demands constant and subtle exercise of discretion -- in charging, negotiation and sentencing. Wise discretion here would have held off on the Winner case, at least as the kickoff to a campaign against leaking by an administration already under fire for Russian election interference.

Article Link To The Bloomberg View:

Goldman Sachs Boost Rates For Savers In Bid To Attract Deposits

By Olivia Oran
June 7, 2017

U.S. savers who routinely scour personal finance sites for the best deposit rates are soon going to see an unusual bank at the top of the list: Goldman Sachs Group Inc (GS.N).

The Wall Street bank's consumer arm, Goldman Sachs Bank USA, plans on Wednesday to raise the rate it offers customers on deposits to 1.2 percent, slightly higher than rivals Synchrony Bank, CIT Bank and New York Community Bank's My Banking Direct.

Goldman had previously offered savers 1.05 percent. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.

The move makes Goldman the highest interest paying bank, according to personal finance website The firm is aggressively trying to boost its deposit base and attract Main Street clients.

Goldman's online deposits from individuals total $12 billion, a small but growing fraction of the $128 billion in overall deposits on the firm's overall balance sheet. Still, that is far less than large commercial banks like JPMorgan Chase & Co (JPM.N) with $1.4 trillion in deposits.

Goldman hopes increasing its deposit base will help it boost profits if it can find ways to lend them profitably. The bank is looking to make further inroads into lending broadly across wealth management and investment banking, as businesses like trading struggle to generate the type of returns they once did.

Deposits also represent a more stable type of funding and are less likely to disappear during times of stress than other funding sources. Regulators may have been pushing banks to rely more on deposits since the 2008 financial crisis.

Last year, the bank launched Marcus, its first major foray into consumer lending. It also acquired Honest Dollar, an online retirement savings platform for small businesses and startups.

Article Link To Reuters: