Wednesday, July 26, 2017

Wednesday, July 26, Morning Global Market Roundup: Asia Stocks, Dollar Steady As Investors Await Fed Clues

By Shinichi Saoshiro
July 26, 2017

Asian stocks steadied on Wednesday and the dollar held firm as investors awaited the Federal Reserve's policy decision later in the day for more clues on its tightening plans.

The wait-and-see mood was expected to prevail in the European session, with spreadbetters forecasting Britain's FTSE and France's CAC to open effectively flat while predicting Germany's DAX to inch up 0.05 percent.

The Fed will conclude its two-day meeting later on Wednesday, and is widely expected to keep interest rates unchanged.

With a rate hike not in the picture this time, the focus will be on the Fed's statement, with markets looking for signs of when the central bank will begin paring its massive bond holdings and next raise rates. Its statement is expected at 1800 GMT.

"The stock markets are generally of a view that the Fed is not in too much of a hurry to normalize monetary policy. So equities would be able to take this Fed meeting in stride if the Fed's statement is in line with such views," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Federal funds futures implied traders saw the chance of a Fed rate increase in September at about 8 percent and a December hike possibility at 48 percent.

A more assertive policy message by the Fed, on the other hand, would likely lift U.S. yields and boost the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan was little changed, but drew mild support after the S&P 500 climbed to an all-time high overnight on well-received results from McDonald's and Caterpillar in addition to bank share gains.

Australian stocks gained 1 percent with a smaller-than-expected rise in local inflation supporting views that interest rates will remain at record lows for some time to come. The Australian dollar slipped 0.5 percent to $0.7896.

Japan's Nikkei added 0.5 percent after the dollar rallied against the yen overnight to pull away from seven-week lows.

Shanghai shed 0.4 percent on lingering fears of further regulatory tightening, while South Korea's KOSPI lost momentum after touching a record high the previous day and slipped 0.3 percent.

The dollar regained some ground against major currencies in the previous session after U.S. Treasury yields jumped the most in almost five months in response to Wall Street's rise and on reduced demand for safe-haven bonds.

But the greenback remained hobbled by uncertainty about the progress of healthcare reforms and the prospect of further delays for President Donald's Trump's ambitious stimulus and tax reform polices.

U.S. Senate Republicans narrowly agreed on Tuesday to open debate on a bill to end Democratic President Barack Obama's signature healthcare law, but it still faces significant hurdles.

Indeed, the first of many expected votes this week on repealing or replacing elements of Obamacare failed to get the 60 votes needed for approval Tuesday night.

The dollar has also been kept in check by political uncertainty as lawmakers investigate possible meddling by Russia in the 2016 presidential election and whether there was any collusion by Trump's campaign.

The euro was effectively flat at $1.1639, pulling back from a two-year high of $1.1712 hit on Tuesday on a stronger-than-expected German Ifo business survey.

Expectations that the European Central Bank would begin phasing out its easy monetary policy sooner rather than later have supported the common currency this month.

The dollar index against a basket of major currencies was little changed at 94.143, after managing to put some distance between a 13-month low of 93.638 plumbed on Tuesday.

The dollar was steady at 111.905 yen after surging about 0.7 percent overnight.

"The dollar continues to lack clear direction against the yen. Uncertainty towards U.S. politics is capping the pair. But 'risk on' is also taking place in equities thanks to good corporate results, so dollar/yen is not headed for a big slide either," said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities.

In commodities, crude oil extended its surge after jumping overnight on data showing a sharp fall in U.S. crude stocks last week.

U.S. crude rose 1 percent to $48.38 a barrel and Brent added 0.8 percent to $50.62 a barrel.

Gold struggled as improved investor risk appetite curbed the precious metal's appeal. Spot gold was 0.15 percent lower at $1,246.52 an ounce following its ascent to a one-month peak of $1,258.79 on Monday.

Article Link To Reuters:

Oil Prices Firm On Optimism Over Declining Stocks

By Fergus Jensen
July 26, 2017

Oil prices firmed on Wednesday to hold near eight-week highs hit in the previous session, on expectations of a drawdown in U.S. stocks and as a rise in shale oil production shows signs of slowing.

Brent crude futures had risen 36 cents, or 0.7 percent, to $50.56 a barrel, after rallying more than 3 percent on Tuesday.

U.S. West Texas Intermediate futures climbed 46 cents, or 1 percent, to $48.35 a barrel.

U.S. crude stocks fell sharply last week as refineries boosted output, while gasoline inventories increased and distillate stocks decreased, data from industry group the American Petroleum Institute showed on Tuesday.

Crude inventories declined by 10.2 million barrels in the week ending July 21 to 487 million, compared with expectations for a decrease of 2.6 million barrels.

The market has been buoyed by Saudi Arabia's announcement at a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers on Monday that it would limit crude exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.

"This has seen expectations of further drawdown in inventories increase," ANZ said in a research note, referring to the Saudi plans.

Nigeria also agreed to join a push to rein in production by capping or cutting its output from 1.8 million bpd once it stabilizes at that level.

However, the current uptrend in oil prices could be limited to the low $50 per barrel region, according to Ric Spooner, chief market analyst at CMC Markets in Sydney.

"As we approach $50 and into the low $50s, that's a level that could attract increased U.S. shale oil production if it stays around that level," he said.

On Monday, Anadarko Petroleum Corp said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so, after posting a larger-than-expected quarterly loss.

Oil prices have come under pressure from an oversupply of crude around the globe, brought on in part by rising production from U.S. shale regions.

Indonesia's energy minister said on Tuesday that Southeast Asia's top crude producer would be open to rejoining the Organization of the Petroleum Exporting Countries (OPEC) as long as it is not forced to curb its own crude oil production.

Article Link To Reuters:

Here’s Why Oil Just Scored Its Biggest One-Day Rally Of 2017

WTI oil settle 3.3% higher Tuesday.

By Myra P. Saefong
July 26, 2017

OPEC members can’t take all the credit for oil’s rally Tuesday, which saw prices score their biggest single-session gain of the year.

News of cuts to oil-and-gas exploration spending and signs of a potential slowdown in U.S. output also played roles in the bullish shift in sentiment.

On Tuesday, September West Texas Intermediate crude CLU7, +0.92% rallied by $1.55, or 3.3%, to settle at $47.89 a barrel on the New York Mercantile Exchange, marking the strongest single-day climb since late last year, according to FactSet data.

Prices continued to climb in electronic trading late Tuesday, topping $48 a barrel, after data from an industry group reportedly showed a hefty drop in weekly supplies for U.S. crude. Early Wednesday, oil prices were extending those gains.

On Monday, Saudi Arabia said at a meeting in Russia that it would cut August exports to 6.6 million barrels a day—a million barrels less than a year earlier. Separately, Nigeria, which isn’t part of the production-cut agreement led by the Organization of the Petroleum Exporting Countries, also promised to limit its daily production to 1.8 million barrels.

Traders have taken these developments as bullish for prices, though many do point out that the Saudis normally lower exports at this time of year because of stronger domestic demand for oil, and Nigeria’s output would still have to rise from its current level of just over 1.6 million barrels a day before the West African nation would cap its output.

Still, at the meeting Monday, which include some major non-OPEC nations such as Russia, oil producers were upbeat.

“OPEC and non-OPEC members displayed optimism over the current production cut deal and seemed confident that the path they were treading would eventually rebalance the markets,” said Lukman Otunuga, research analyst at FXTM, in an note Tuesday.

Saudi energy minister Khalid al-Falih said Monday the coalition’s compliance with the production deal was strong, while OPEC Secretary-General Mohammad Barkindo said the rebalancing of oil-market supply and demand is “bound to accelerate in the second half,” according to The Wall Street Journal.

On Tuesday, United Arab Emirates followed Saudi Arabia’s lead, with its energy minister Mohamed al-Mazrouei announcing on Twitter that the state-owned Abu Dhabi National Oil Company will cut its crude exports by about 10% in September.

Adding further support to oil prices, James Williams, energy economist at WTRG Economics, pointed to “Halliburton’s expectation of a flat rig count” as well as “Anadarko Petroleum Corp.’s losses and plans to reduce exploration.”

After posting a larger-than-expected second-quarter loss, oil-and-gas exploration and production company Anadarko Petroleum Corp. APC, +3.42% cut its investment guidance by $300 million for the full year. Al Walker, the company’s chief executive officer, cited “current market conditions [that] require lower capital intensity given the volatility of margins realized in this operating environment.”

Year to date, oil prices, in particular, have dropped by around 11%, while natural-gas prices NGU17, +0.48% have lost nearly 20%.

Meanwhile, David Lesar, Halliburton Co.’s HAL, +0.42% chief executive officer and president, said in an earnings call that “rig count growth is showing signs of plateauing and customers are tapping the brakes.”

That implies a potential slowdown in oil production, market participants said.

Meanwhile, traders are also looking ahead to a weekly report that is expected to reveal a fourth-straight weekly decline in U.S. crude inventories. Analysts polled by S&P Global Platts expect the Energy Information Administration to report on Wednesday a decline of 2.5 million barrels for crude stockpiles in the week ended July 21.

“U.S. oil stocks, while still higher than we need, are down 45 million barrels from the end of March,” said Williams, citing EIA data.

The API’s reported crude-supply ‘draw erases the myth that shale can offset OPEC and non-OPEC cuts barrel for barrel.' -- Phil Flynn, Price Futures Group

Late Tuesday, the American Petroleum Institute, a trade group, reported a whopping 10.2 million-barrel decline in last week’s U.S. crude stockpiles, according to sources. That sent prices to a high well over $48 in electronic trading.

“We are seeing the fact that OPEC cuts are starting to matter,” Phil Flynn, senior market analyst at Price Futures Group, told MarketWatch late Tuesday. The “draw erases the myth that shale can offset OPEC and non-OPEC cuts barrel for barrel.”

Article Link To MarketWatch:

Advisers Battle U.S. Investors' Home Bias As Valuations Soar

S&P 500 index is trading near all-time valuation highs; Japan and U.S. have the priciest stocks among major markets.

By Lee J Miller and Wei Lu
July 26, 2017

American stock investors can’t get enough of the securities that offer some of the worst value for money, both geographically and historically.

U.S. stocks have never been so expensive, aside from two brief periods before some of the biggest market crashes in history. This hasn’t hurt their popularity among U.S. investors, which tend to hold more domestic equities in their portfolio than investors elsewhere, according to a recent white paper by Vanguard.

The S&P 500 index’s cyclically adjusted price-to-earnings ratio of 28.7 trails only Japan among the economies with a gross domestic product of more than $1 trillion, and is tied for third among the 81 markets measured by Bloomberg as of June 30. The 10-year valuation metric is at a record high, aside for certain periods before the Great Depression of 1929 and the dot-com boom of 2000, Robert Shiller, the Nobel Prize-winning economist and the developer of the metric, said during a CNBC interview on June 29.

Diversifying globally is “very important” at current valuations to counter the “home country bias” that most U.S. investors exhibit, said Mebane Faber, co-founder and chief investment officer of Cambria Investment Management LP. “We recommend focusing on the cheapest quartile of stocks, which has a CAPE ratio half that of the expensive stocks, and about one third the valuation of the U.S.”

The price-earnings ratio -- or P/E for short -- says in the simplest sense how much one is paying for each dollar of profit generated by a company, or in this case, a country’s leading companies as a group. The CAPE ratio has been further fine-tuned from this foundation by Shiller, taking multi-year earnings into consideration to help iron out some of the more myopic and volatile aspects.

Some researchers argue the current levels are already past the critical stage. Valentin Dimitrov and Prem C. Jain wrote in a research paper last year that CAPE levels higher than 27.6, or in the upper half of the top decile, are associated with 10-year stock returns below those of 10-year Treasuries.

On the other end of the spectrum, Greece, Russia, Turkey and Pakistan are some of the world’s cheapest stock markets, reflecting political uncertainty and other risks involved.

Straight comparisons across markets can be deceiving, of course. U.S. stocks make up more than half of MSCI World Index’s weight, for example, which provides for a relatively high natural weight. Even so, U.S. investors invest 79 percent of their holdings in domestic equities, a higher proportion than any other major market in the world, according to the study by Vanguard, citing IMF data.

In comparison, Japanese and U.K. investors held 55 and 26 percent of equities holdings in locally-domiciled stocks, respectively, when each market made up for 7.2 percent of the global equities pool. Canadian investors held 59 percent of home stocks, while the local market accounted for only 3.4 percent of the global market.

Convincing investors to go global may require more than just the facts, with suitable presentation going a long way, according to Dan Egan, director of behavioral finance and investment at New York-based online investment adviser Betterment.

Visually breaking out allocations by country rather than asset class and focusing on how much earnings investors are buying with each dollar can “help them get more comfortable with overseas holdings, especially when U.S. markets are expensive,” Egan said. “Would investors rather spend $13 to buy $1 of earnings, or $5?”

Article Link To Bloomberg:

The Boss Wants You Back In The Office

Managers demand more collaboration and greater control over the workday, but bringing workers back isn’t easy.

By John Simons
The Wall Street Journal
July 26, 2017

Big businesses have embraced flexible work practices, but fewer of them seem to favor full-time working from home.

International Business Machines Corp. IBM 0.14% , Aetna Inc.,AET 0.11% Bank of America Corp., Best Buy Co. BBY 0.95% ,Honeywell International Inc. HON -0.33% and Reddit Inc. are among employers that have ended or reduced remote-work arrangements recently as managers demand more collaboration, closer contact with customers—and more control over the workday.

Bringing workers back to the office isn’t easy, managers say. Remote employees often set their own hours and ways of working, and bridle when faced with open-plan offices and set meeting schedules.

A large majority of U.S. employers let staffers telecommute sometimes, according to the Society for Human Resource Management.

Yet the portion of U.S. workers who performed all or some of their work at home fell to 22% last year, from 24% in 2015. Such workers spent an average of 3.1 hours a day toiling at home last year, down slightly from 2015, according to the Labor Department’s American Time Use Survey.

Coming back to the office can be “honestly terrifying” for remote workers, says Andrew Marder, a research analyst with Capterra Inc., a business-software review site owned by Gartner Inc.

Mr. Marder telecommuted for about three years while blogging about investing for the Motley Fool financial website. He was also a full-time caregiver for his newborn during part of that time, and juggled writing and parenting duties by working many evenings.

Moving to an office role at Capterra in 2014, Mr. Marder had to get used to the lack of privacy at work and an hour-plus commute to Arlington, Va. As a telecommuter, he was used to working at any hour to meet deadlines. Once in the office, he struggled with prioritizing tasks and managing his time during work hours, frequently missing deadlines in the first months on the job.

His manager, J.P. Medved, set weekly meetings to plan Mr. Marder’s workflow, arranging his calendar and plotting everything from research phone calls to team meetings and deadlines. Mr. Medved says those changes improved Mr. Marder’s ability to submit work on time.

Bosses acknowledge that remote workers don’t suffer from productivity problems. Research has found telecommuters who can work outside normal office hours and don’t have to spend time commuting often are more productive than their cubicle-bound counterparts. Rather, managers want their teams within view and are willing to trade some efficiency for the serendipity that office-based conversations might yield.

Companies tend to clamp down on telework during periods of turmoil and reinvention, says Ken Matos, vice president of research at Life Meets Work, a workplace consultancy.

“Leaders often say ‘I like my co-located team better than my [remote] team, but the work gets done just as well,’” he adds.

As a finance vice president at Tetra Pak International SA, George Benaroya observed waves of colleagues return to company workspaces when new leaders would take over divisions and rein in remote work.

Office comebacks were often a letdown, recalls Mr. Benaroya, who left the company in 2012. Workers accustomed to personal space and sole use of their equipment at home had to adjust to cramped spaces, full parking lots and jammed printer queues.

The formerly remote employees’ egos were bruised, too: The top managers who made special time for them during office visits paid less attention once those workers were a regular presence, he says. Managers spent extra time hand-holding ex-home workers, leaving less time for other duties.

“You lose efficiency,” Mr. Benaroya says.

Tetra Pak spokeswoman Carol Yang says the issues that Mr. Benaroya describe don’t reflect the company’s current situation.

This spring IBM, long a promoter of remote work, offered thousands of work-from-home employees a choice to follow their position back to an office location or apply for a new role. Those who chose to do neither could leave the company.

Marketing manager Dave Wilson spent a decade working from home in Nashua, N.H. With two young children home during work hours, distractions abounded and Mr. Wilson says he felt isolated from colleagues.

So when his job was relocated to Raleigh, N.C., he took a position marketing the company’s Watson artificial intelligence products at IBM’s Littleton, Mass., campus.

Mr. Wilson says he was eager to return to an office, a better fit for his “water-cooler guy” personality.

He relishes the verbal sparring of the office, too. During a recent meeting to critique IBM’s e-commerce offerings, participants challenged one another and got in each other’s faces to make their points—when he attended similar meetings via conference call, people would disengage unless they were leading the conversation, he recalls.

IBM’s leaders want to provoke those creative tensions, and have spent $750 million to redevelop its workplaces around a new system of teamwork; the company has also trained 160,000 employees on working more nimbly.

As former telecommuters arrive at IBM’s Austin, Texas, location, Joni Saylor will help to integrate them into office culture. Ms. Saylor, a product design director who worked remotely for IBM until 2013, says telecommuters sometimes struggle to adjust to working in teams after operating on their own.

Best Buy’s work-from-home program gave 5,000 headquarters employees free rein to choose where they worked, a perk that complicated tasks like scheduling meetings, says Best Buy spokesman Jeff Shelman.

“There was no control,” he says. “Managers didn’t have the tools to do their jobs.”

The company ended the policy in 2013. Workers now arrange time out of the office with their managers.

The four years since the telework rollback have coincided with Best Buy’s resurgence. Net income has more than doubled in the period and shares have climbed more than 200%, though the company is reluctant to draw a connection between those results and the end of remote work.

“Obviously, there were lots of other things going on,” Mr. Shelman says.

Article Link To The WSJ:

Americans Are Cutting A Shorter And Cheaper Path To Decent Pay

Associate’s degree holders are gaining well-paid work: study; Data challenges idea of college as main pathway to stable job.

By Jordan Yadoo
July 26, 2017

Just because it’s becoming harder to get by in America on a high school diploma doesn’t mean a four-year college degree is the only ticket to a solid salary.

That’s because the number of so-called “good” paying job held by people with an associate’s degree -- which usually takes two years to complete and is offered by community colleges or technical and vocational schools -- rose by 3.2 million from 1991 to 2015, according to a study released Wednesday by Georgetown University’s Center on Education and the Workforce. Over that same period, the number of workers paid at a similar level with just a high school diploma fell by over 1 million, the study showed.

The report defines “good jobs” as those paying an average of $55,000 per year, and a minimum of $35,000 annually. Associate’s degree holders have found such work in blue-collar and skilled-services industries, according to the study, which was conducted in collaboration with JPMorgan Chase & Co.

The study’s findings counter the “dominant narrative” that a traditional four-year college education is the only pathway to a stable, middle-class job, according to Anthony Carnevale, director of the Georgetown Center and lead author of the report.

The report comes as both Republicans and Democrats in Washington are advocating programs that would boost training at community colleges and help Americans pay for apprenticeships. The push is a response to company complaints that they can’t find skilled workers, as well as the rising price tag for higher education. The average cost of tuition and fees at public, four-year universities rose to $9,648 in the latest school year from less than $500 in the early 1970s, according to the College Board.

While Americans used to be able to land assembly-line jobs directly out of high school, today’s manufacturing work requires more specialized skills and at least some post-secondary training, according to Carnevale. Good service-sector jobs such as diagnostic technicians or customer support specialists also demand additional schooling for around the same level of earnings that many high school graduates were once able to make in factories, according to the study.

Meanwhile gains in construction and hospitality positions for those with just a high school diploma have done little to offset more substantial losses to automation or offshoring in manufacturing and transportation, the researchers found.

Still, bachelor’s degree holders as a whole continue to out-earn their less-educated peers. And workers with a four-year university diploma have gained far more jobs since the 2007-2009 recession ended than workers with less schooling, according to previous Georgetown Center research.

Article Link To Bloomberg:

This Is What It Will Take For Bitcoin To Become A Legit Currency

Financial institutions may be the final arbiter in bitcoin’s status.

By Sue Chang
July 26, 2017

As the debate rages on whether bitcoin is a legitimate currency or just imaginary money, one Wall Street analyst stripped down the argument to three simple parameters — safety, liquidity and return.

These attributes are the hallmarks of reserve currencies like the U.S. dollar, the euro or gold, according to Bank of America Merrill Lynch’s head of global commodities and derivatives research, Francisco Blanch.

For now, bitcoin BTCUSD, -3.82% falls short in making the cut even though it is gaining in popularity among a certain class of investors who believe the cryptocurrency will soon come out of the shadows and claim its rightful place as a legal tender.


Of the three criteria, safety remains the biggest problem as the absence of a central governing authority not only makes the digital currency more vulnerable to chaos but also susceptible to hacking, identity theft and fraud, according to Blanch.

“Other issues more specific to the functioning of cryptocurrencies, such as finding an agreement regarding the adoption of certain protocols, are also worth mentioning. For example, should bitcoin split into two digital tokens because miners cannot find common ground, a collapse in confidence and value could follow,” writes Blanch.

Bitcoin’s value nose-dived earlier in July on fears that a possible split could result in multiple versions. That event was averted last week, but investors are now bracing for what is known as a hard fork, which will lead to a splinter blockchain.

The volatile nature of the cryptocurrency also undermines its credibility.

“Volatility is the key parameter to understand the concept of safety in a reserve currency, in our view,” he said. “In that regard, bitcoin’s score has improved in recent years as volatility has continued to drop.”

Even compared to emerging market currencies, bitcoin is viewed as extremely volatile. Some of that, according to Blanch, may be due to the fact that many of these countries — China, Malaysia, Pakistan, Philippines and India — have repressive capital controls in place.

Nonetheless, as the chart shows, on at least two occasions last year, bitcoin’s volatility fell below silver, which was for some 400 years the world’s currency.


Interest in digital currencies has soared recently with daily trading volume in the cryptomarket jumping to $2 billion today from $400 million in 2012.

“For a digital token to become a currency, it must build to a certain scale,” said Blanch. “In some ways, this is exactly what has been happening in recent quarters, with the total market value of digital tokens growing exponentially from $1.5 billion to around $87 billion at present. Put differently, cryptocurrencies have built scale rapidly and are now accepted as a means of payment by some corporations and individuals.”

At last check, companies like Microsoft Corp. MSFT, +0.80% Expedia Inc.EXPE, -0.03% and CVS Health Corp. CVS, +2.35% are among companies accepting bitcoin.


Unlike reserve currencies, bitcoin does not have an interest rate that is set by a central bank so it is difficult to quantify its returns. It also does not offer much in the way of diversification given its lack of correlation to other major currencies, precious metals, bonds or equities.

Still, bitcoin has offered phenomenal returns in terms of absolute value that few assets can come close to matching.

But exceptional returns do not make for a fiat currency and bitcoin’s ultimate test will be whether banks will capitulate and accept it as collateral.

“Most regulated financial institutions allow their clients to borrow against financial or physical assets, but we are not aware of any major institution that takes cryptocurrency as collateral at the moment. Thus, in our view, a key step for bitcoin would be for it to become pledgeable collateral,” said Blanch.

In other words, bitcoin still has a long way to go.

Article Link To MarketWatch:

Wall Street Regulator Sets Sights On Digital Coin Offerings

By Gertrude Chavez-Dreyfuss and Anna Irrera
July 26, 2017

Wall Street's main regulator said on Tuesday that initial coin offerings (ICOs), a means of crowdfunding for blockchain technology companies, should be subject to the same safeguards required in traditional securities sales.

ICOs have become a bonanza for digital currency entrepreneurs, allowing them to raise millions quickly by creating and selling digital "tokens" with no regulatory oversight.

But the Securities and Exchange Commission (SEC) has said that the tokens can be considered securities, and therefore, may need to be registered unless a valid exemption applies.

"The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets," said Stephanie Avakian, the co-director of the SEC's enforcement division.

The decision reminds blockchain startups that they cannot ignore investor protections, and could make some potentially more cautious about fundraising via coin sales in the United States.

By mid-July, tech firms raised about $1.1 billion in 89 coin sales this year, roughly 10 times more than that in the whole of 2016, according to data compiled for Reuters by crypto-currency research firm Smith + Crown.

And this year alone, there are 110 upcoming ICOS, according to, a website that tracks token sales.

"This is a shot across the bow for many of these ICOs," said Preston Byrne, a technology attorney who specializes in virtual currencies. "I think it ruins the party in the U.S. for sure."

Some ICOs have drawn criticism because they failed to accurately disclose token distribution, such as what proportion of tokens would be held by founders or whether the offering would be capped.

As many of these tokens are then listed and traded on virtual currency exchanges, large holders could in theory have the firepower to control the price.

Critics have also warned that projects often lack realistic business plans or are being led by individuals who do not have enough experience.

The SEC's decision was released in an investigative report into a virtual organization known as The DAO. The DAO was created in April 2016 by a blockchain company called

A blockchain is an online ledger of transactions maintained by a network of computers, which gained prominence as the technology that underpinned digital currencies such as bitcoin.

The DAO was designed as a decentralized crowdfunding model in which anyone could contribute ethereum tokens to be a voting member and have an equity stake in the organization. Ethereum is another cryptocurrency.

Although it raised $150 million as of late May last year, an anonymous hacker later funneled $60 million of the tokens into a separate account.

The SEC said in its report it has decided not to bring civil charges at the end of its probe into The DAO, but instead use the case as a cautionary tale for the market.

Article Link To Reuters:

‘Day From Hell’ Looms As $3 Trillion Of Companies Post Earnings

Consumer analysts bear brunt of Thursday’s earnings onslaught; ABI, Nestle kick off day of reporting that ends with L’Oreal.

By Cat Rutter Pooley
July 26, 2017

If you think your Thursday looks bad, spare a thought for James Edwardes Jones. The RBC analyst is bracing for what he calls the busiest earnings day he’s experienced in about 20 years covering the consumer-goods industry.

Edwardes Jones plans to arrive at RBC Europe’s London offices along the River Thames about the time the world’s largest brewer, Anheuser-Busch InBev NV, reports results at 6 a.m. local time. Fifteen minutes later he has Nestle SA, followed by Danone at 6:30. Then come Diageo Plc and British American Tobacco Plc, along with a trading update from Britvic Plc, all before the morning team meeting at 7:15 a.m.

Next up are calls with executives of some of those companies at 8 a.m., 9:30 a.m., 1 p.m. and 2 p.m. Edwardes Jones has client notes to write before his final set of results from L’Oreal SA at 5 p.m. -- 11 hours after the first batch. Other retail or consumer-goods companies reporting Thursday include French grocer Casino SA, U.K. bookmaker Ladbrokes Coral Group Plc and Paris-based luxury conglomerate Kering.

“There has never been a day like that,” Edwardes Jones said. His recipe for getting through the day: “Maybe a quadruple espresso.”

Across London’s financial district, analysts are readying themselves for what Martin Deboo at Jefferies called a “day from hell”: a bumper earnings session in which European companies worth more than $3 trillion are set to report results, according to data compiled by Bloomberg.

Roche, VW

Consumer-sector specialists have it worst, with almost $1 trillion worth of listed companies lined up, ranging from drinks giants to cosmetics makers. But other sectors will be busy, too. Pharmaceutical giants Roche Holding AG, Bayer AG and AstraZeneca Plc are on tap, along with telecommunications providers Orange SA, Telefonica SA and Telecom Italia SpA and transportation giants Volkswagen AG, Airbus SE and Fiat Chrysler Automobiles NV.

While the earnings calendar is replete with busy Thursdays in most quarters, companies in past years have managed to space out their earnings more. In the consumer sector, Nestle used to publish its half-year results in August. AB InBev last year reported a day later than the rest of its peers. Danone, AB InBev and Diageo all have new heads of investor relations this year, which may have contributed to scheduling changes.

It won’t just be a busy day for analysts and baristas. The flurry of earnings, which begins with a mad rush in the morning and barely lets up, means fund managers will be inundated with dozens of broker reports. That could create volatility in share prices as the recipients struggle to digest notes that they use to help make decisions on whether to add or dump shares, said James Amoroso, investor relations consultant and former analyst.

“The buy-side will struggle,” he said. “The sell-side will be going into meltdown.” 

Analyst Notes

With so many companies reporting, Edwardes Jones said analysts will just try to spot results that differ from expectations. Without time for complete analysis, notes will be even more abbreviated than normal, heavy on analyst shorthand like “OG” (organic growth) and “RIG” (real internal growth).

For analysts feeling overburdened on Thursday, there’s at least one upside to so many companies reporting all at once.

“It used to be hard to find a two-week gap in the summer” for a vacation, Jefferies analyst Deboo said. This year, that won’t be a problem.

Article Link To Bloomberg:

Fed Expected To Leave Rates Unchanged; Balance Sheet In Focus

By Jason Lange
July 26, 2017

The Federal Reserve is expected to hold interest rates unchanged on Wednesday and possibly hint that it will start winding down its massive holdings of bonds as soon as September in what would be a vote of confidence in the U.S. economy.

The U.S. central bank will issue its latest rates decision following the end of a two-day policy meeting at 2 p.m. EDT. Economists expect the Fed's benchmark lending rate to remain in a target range of 1.00 percent to 1.25 percent.

That would mark another pause in the monetary tightening campaign that the Fed began in December 2015. The central bank has raised rates twice this year, including at its last policy meeting in June.

Wall Street analysts see little chance the Fed will announce the start of the wind down of its $4.5 trillion balance sheet. However, the Fed's policy statement may provide more visibility on when that might occur.

Citibank economists said in a note to clients that the Fed's rate-setting committee was more likely to say that the trimming would start soon. "(That would) signal that the committee plans to announce balance sheet reduction in September," they said in the note.

Reducing the balance sheet will unwind one of the Fed's most controversial tools used to fight the 2007-2009 financial crisis and its aftermath.

After pushing rates nearly to zero in a bid to boost investment and hiring, the Fed pumped over $3 trillion into the economy through purchases of U.S. Treasury securities and government-backed mortgage debt to further reduce rates. That program drew criticism from Republican lawmakers in Congress.

The subsequent economic recovery, marked by strong and steady job gains, has pushed the U.S. unemployment rate to 4.3 percent, near a 16-year low. Fed policymakers have said labor market strength could eventually push inflation too high.

The Fed recently signaled it would begin to trim its balance sheet this year. Yellen said earlier this month that process could begin relatively soon and economists polled by Reuters expect the announcement will come in September.

But a slowdown in inflation this year has caused jitters among some Fed officials who are already concerned that inflation has been below the central bank's 2 percent target for five years.

The Fed's preferred measure of underlying inflation dropped to 1.4 percent in May. It was 1.8 percent in February.

Article Link To Reuters:

Why The Five Eyes Intelligence Alliance Should Keep Chinese Investors At Bay

It is imperative that the Five Eyes begin a systemic overhaul of what sectors are open to foreign investment.

The National Interest
July 26, 2017

There has been a dramatic shift of investment into the West, which may have a deep impact on U.S. security and the country’s future way of life. According to a report recently published by the Henry Jackson Society, China is making massive investments into Western digital and critical national infrastructure, and Western states are not reacting in a coordinated or rational way. This article argues that those states can and should coordinate a collective reaction through the Five Eyes intelligence alliance. The Five Eyes—arguably one of the strongest and long-lasting intelligence coalitions in history—consists of five of the most robust liberal democracies in the West: the United Kingdom, Canada, Australia, New Zealand and the United States.

Bound by strong cultural links, these five states have seen off authoritarian communist dictatorships and global conspiracy theories from a range of directions. Following the collapse of the Soviet Empire and its satellites, the men and women who worked in the shadows to keep us safe during that time turned their attention toward failed and failing states. They also began defending us from corporate espionage and, now, the rise of domestic-based Islamist terrorism. While the members of this shadow group still work on those issues, a new one has presented itself, and from an unusual and unlikely direction—Chinese malicious investment.

A recent wave of Chinese investment presents the Five Eyes with a new type of threat. China’s state-owned enterprises have been making overseas investments and are shifting away from spending money on commodities in the developing world. They are now focusing on high-tech acquisitions and mergers in the advanced economies. Europe has seen a 44 percent increase in Chinese investment since 2014 and received $20 billion euros in 2016. Simultaneously, private Chinese capital has been ushered back inside the Great Wall, with Beijing imposing capital controls on its private firms. While one would presume that Europe, the United States and Australia would be grateful for these investments, it is the nature of these investments and the intentions behind them that are worrying experts across the West.

Rather than relying purely on internal subversion or hacking, this new wave seeks to displace Western states in the most advanced technologies and to own or control many of their telecommunications systems. Furthermore, there is a total lack of awareness by even the closest allies, desperate for investment. A few case studies illustrate the point: in 2016, a Chinese consortium, which included a major Chinese defense-industrial giant, AVIC, purchased a major stake in the United Kingdom’s largest data center, Global Switch. The UK government approved the deal, only to see Australia’s Department of Defense withdraw its data from Global Switch, citing the change in ownership. Then, in 2017, the Canadian government approved a takeover of Canadian satellite communication company Norsat International by Chinese telecommunications giant Hytera. Within weeks of the announcement by the Trudeau government, the U.S. Department of Defense was compelled to re-examine its contracts with the Canadian firm.

China has announced its intention to become the global leader in artificial intelligence, the primary technology upon which future militaries will depend. The outlines of Beijing’s strategy is backed by strong empirical evidence, ranging from China’s own stated economic strategy, Made in China: 2025, announced in 2014, to its latest cyber laws, which were announced in early July. The first sees a three-part strategy, with strong subsidies for Chinese firms entering foreign markets in artificial intelligence, high-tech developments and telecommunication companies. Although China is encouraging companies to make investments in these foreign-market areas, it is firmly shutting the door to prevent foreign firms from operating inside China—ultimately to gain hegemony over supply chains in the world’s most advanced technologies. The second shuts the door firmly on foreign investment in China’s digital infrastructure. A recent DOD report indicates a surge of Chinese state investment into American start-ups with cutting-edge military applications.

Germany’s decision in early July to restrict China from investing in sensitive parts of its digital economy and infrastructure should be a wake-up call for the Five Eyes nations. As one of the most open economies to foreign investment (according to the Organization for Security and Co-operation in Europe regulatory index), Germany is the last state to close the door to investment. The UK is mulling over the idea of establishing something like the Committee on Foreign Investment to the United States to supplement its current system. However, as it moves in that direction, it is imperative that the Five Eyes begin a systemic overhaul of what sectors are open to foreign investment. Certainly, those sectors are overly vulnerable now and should be protected from aggressive acquisitions by Chinese firms with People’s Liberation Army connections. The Five Eyes should:

• Institute a regular Five Eyes meeting between the heads of investment review boards

• Use that process to build a “common operating picture” of Chinese investment practises and targets

• Share more information on Chinese firms active in their own economies, more information on their owners and past instances of serving Chinese national-security objectives

• Consider an overhaul of the Five Eye working groups in telecommunications and artificial intelligence, give them greater prominence than they now have, and create stronger links between private sector actors and security agencies.

• Develop a better monitoring process for the Ministries of Economy; presently, governments capture statistics without giving much background information. They can and should provide more details to regulatory bodies.

Article Link To The National Interest:

New Challenge To U.S. Power: Chinese Exceptionalism

Once-reticent citizens now see their country as ascendant -- and America in decline.

By Te-Ping Chen and Josh Chin
The Wall Street Journal
July 26, 2017

Li Xiaopeng once idolized the West. While a student, he broke through China’s internet firewall to read news from abroad, revered the U.S. Constitution and saw the authoritarian Chinese government as destined to fade away.

Now the 34-year-old urban consultant, who studied at both Cambridge and Harvard, thinks it’s China that is ascendant and the U.S. that is terminally weakened by income inequality, divided government and a polarized society. He says so volubly to his more than 80,000 followers on social media.

“In the end, China will supplant America to be the world’s No. 1 strong country,” he wrote on Weibo, China’s homegrown version of Twitter .

President Xi Jinping is holding up China as a confident global power at a time when U.S. leadership seems uncertain. Increasingly, his government can count on swelling national pride among its own citizens.

A generation after China’s late reformist leader Deng Xiaoping exhorted his fellow citizens to “keep our light hidden and bide our time,” Chinese exceptionalism is on the rise. While some Chinese still believe the country will need to embrace democracy to reach its full potential, many others are convinced the country has reached this point, not in spite of the government’s crushing of pro-democracy protests in 1989, but because of it.

Annual surveys by the Pew Research Center since 2010 show more than 80% of Chinese are satisfied with the direction of their country. Three-quarters of the Chinese surveyed by Pew last year see China playing a bigger role in global affairs than 10 years ago, and 60% view China’s involvement in the global economy as positive.

On his blog, between digressions on Socrates and Ming Dynasty economic policy, Mr. Li writes at length on the superiority of the Chinese political system. Unlike the U.S., where he says charisma is prized over professionalism and money is needed to win office, he argues that China promotes officials based on their performance in spurring economic growth and managing large cities and bureaucracies.

“Among people in my generation, there aren’t many of us now who think we should totally study the West,” says Mr. Li. “To them, China is already a great country.”

The sense that China is on the right track challenges a decades-old tenet of U.S. foreign policy, one that argued exposure to the West would lead Chinese to embrace Western values.

In the wake of Brexit and Donald Trump’s election, and amid global fears about terrorism, a generation of Chinese patriots like Mr. Li are projecting an assurance about China as a beacon of strength and stability in an uncertain world.

President Xi’s signature slogan, the “China Dream,” appeals to Chinese who aspire to a middle-class lifestyle and cheer China’s return to international prominence. On the global stage, Mr. Xi has portrayed China as an alternative to the West, with a unique political system and culture, and as a leader in areas including trade, inequality and climate change.

“What people are starting to feel is pride. It’s the pride of being listened to, or forcing people to listen to you,” says Orville Schell, director of the Center on U.S.-China Relations at the Asia Society. “The idea of greatness for China—because they’ve experienced weakness—gravitates around the idea of power.”

China’s government exercises near-absolute authority over education, media and the internet. That, along with determined campaigns to quash dissent, give the Communist Party unparalleled power to frame public debate. As a result, patriotism and pro-government views are amplified. Criticisms tend to get drowned out.

After communications professor Deng Xiangchao posted messages on Weibo in December lamenting the millions who died in Mao Zedong’s political campaigns, he was hounded online as a “public enemy,” saw his account deleted and was fired by Shandong Jianzhu University for “erroneous remarks.”

Writer Lu Yang protested the professor’s treatment at the hands of “a gang of ignorant internet goons” in online posts. His Weibo account was also expunged. “The space for free speech in China grows smaller by the day,” says Mr. Lu.

A spokesman for Weibo said he wasn’t clear on the circumstances surrounding the closure of accounts belonging to Deng Xiangchao and Lu Yang.

More-aggressive forms of nationalism are usually directed at foreign countries seen as standing in China’s way. After South Korea agreed to deploy a U.S. antimissile system as protection against North Korea, Beijing condemned the move as endangering Chinese security. Soon some Chinese began posting videos online showing themselves trampling goods from South Korean stores in China. A beef-noodle shop in Beijing advertised that it wouldn’t serve South Koreans.

Chinese businesses, students and tourists crisscross the globe in record numbers, and international news features prominently in the media. More than anything, Chinese say, their current patriotic sentiment is built on pride about how rapidly the country has emerged from poverty and how well its economy compares with others.

In seven out of 10 European countries surveyed by the Pew Research Center, including the U.K. and Germany, China is now considered the world’s leading economic power, according to data released in July. The gap in global popularity between the U.S. and China has also narrowed dramatically in recent years, with 47% of people now expressing a positive view of China, compared to 49% for the U.S., according to Pew.

A record 328,547 Chinese students were enrolled in the U.S. in the 2015-2016 academic year, up 160% from six years prior, drawn to the quality of the higher education system and eager to bypass China’s grueling college-entrance exams. In the past, most would stay on after graduating. Now around 80% choose to return home, where, many say, better job prospects await.

A small survey of 131 Chinese students studying in the U.S., Europe, Australia, Japan and South Korea published in 2014 in the journal China Youth Study found that while most weren’t markedly patriotic before leaving China, close to 80% reported feeling more patriotic after going abroad. Roughly two-thirds said they agreed with Mr. Xi’s “China Dream.”

Chen Hesheng, a 22-year-old recent college graduate, spent a month in a summer study program at the University of Southern California in Los Angeles in 2014. Two Chinese graduate students were gunned down while sitting in a BMW near campus in 2012. He felt scared to go out at night and shocked at the U.S.’s poor public safety.

Mr. Chen resents the preaching from the U.S. and other Western governments about democracy and human rights: “Young people aren’t convinced that the West is better. Who are you to tell us that it is?”

These days, Mr. Chen is part of a generation of patriotic online activists known as “little pinks”—named for the background color of a website known for passionate, patriotic political discussions.

Like others in this mostly millennial cohort, Mr. Chen says the internet and travel enable them to see China more accurately. He leaps internet barriers mostly to watch uncensored videos on YouTube and occasionally to counter what he sees as inaccurate views about China on Facebook .

In 2016 he twice joined swarms of mainland activists in posting tens of thousands of pro-China comments on the Facebook pages of Taiwan’s president and media outlets seen as favoring the democratically ruled island’s formal independence from China—long a hot-button issue for patriotic Chinese.

For Chinese students in the West who take positions that offend their fellow citizens, blowback can be swift. In May, a Chinese graduate at the University of Maryland sparked a furor of online criticism after she praised free speech and America’s air quality in a commencement address. Even the country’s Foreign Ministry weighed in on the controversy, declaring that “any Chinese citizen should be responsible for the remarks he or she makes.” The student later publicly apologized, saying she hadn’t meant to belittle her home country.

For Mr. Li, the urban consultant, his experience overseas was formative.

As a child in rural Sichuan, he lived in a home without running water. Rice was rationed. School closed so students could help with the harvests. Visiting relatives meant walking for hours through fields.

Still, he was raised to be grateful to the Communist Party. His parents, a schoolteacher and a shop worker, gave him Mao’s collected writings to inspire him.

After his high score on the politics portion on the college entrance exam landed him a spot studying law at one of the nation’s top schools, Beijing’s Renmin University, his world view began to change.

His more liberal teachers brought their ideas into classroom discussions. “They’d say China has no rule of law, no human rights,” he recalls. He had internet access in his dorm room and used circumvention software to reach sites outside China to read uncensored news and commentary. “They said that Mao Zedong was a despot, and that China’s ancient history was one of autocratic rule,” he said.

The more Mr. Li learned, the more his certainties about his society crumbled and the more he came to admire the West, with its wealth, its respect for civil liberties and its political checks and balances. He devoured works on the U.S. legal system. The Watergate scandal’s toppling of Richard Nixon impressed him.

“We thought the West’s political system was really good, and that we should use it to change China,” he says. That change would surely come, he says: “We thought it was just a question of time.”

Doubts about the West crept in when he spent a half-year at the University of Cambridge as part of his doctorate in economics. Compared with China’s brand-new infrastructure, the buildings in most British cities looked shabby. Getting a bank card took days.

A year at Harvard University’s Kennedy School as a visiting fellow starting in 2010 accelerated his change in thinking. He was appalled at the number of panhandlers in subway stations and how unsafe he felt.

The U.S. was just emerging from a financial crisis that left China largely unscathed. Amy Chua’s “Battle Hymn of the Tiger Mother,” which extolled the benefits of hard-line Chinese parenting, became a best seller. “If Americans admire China so much, maybe the way we saw China before wasn’t so accurate,” he thought.

He sifted through U.S. census data found online and concluded inequality was weakening America. He saw its divided political system as too in thrall to special interests to serve the broader public.

“For decades, America’s politicians have come and gone, and put forward pleasant-sounding slogans about how they’ll promote the middle class and social equality. But basically, it’s a bad check,” he wrote on his blog in December. In a separate posting, he extolled China’s scientific achievements, including its No. 1 spot in supercomputing, as evidence of the country’s burgeoning strength. “It’s astonishing the world!” he wrote.

Seeing the West up close, Mr. Li says, was a defining experience for him. He’s fond of citing an expression now common among Chinese youth: Once you leave your country, you love your country. “If you don’t go abroad, you don’t actually know how great China is,” says Mr. Li.

Article Link To The WSJ:

Geek Fight! Musk Says Zuckerberg Naive About Killer Robots

By David Ingram
July 26, 2017

Silicon Valley baron Elon Musk insulted rival billionaire Mark Zuckerberg on Tuesday, escalating a tech wizard war of words over whether robots will become smart enough to kill their human creators.

"His understanding of the subject is limited," Musk said in a tweet about the Facebook Inc (FB.O) founder whose algorithms and other technology revolutionized social media and won 2 billion monthly active users.

Previously, Zuckerberg was asked about Musk's views on the dangers of robots. In his response, Zuckerberg chided "naysayers" whose "doomsday scenarios" were "irresponsible."

Zuckerberg and Musk, who is chief executive of electric car maker Tesla Inc (TSLA.O) and rocket company SpaceX, have been waging a debate at a distance over the past few days on the dangers of artificial intelligence.

The two sharply disagree on whether tougher government regulation is needed for the technology.

Facebook did not immediately respond to a request for comment on the tweet, which Musk sent at 3:07 a.m. California time (1007 GMT) from his verified account, @elonmusk.

The term artificial intelligence, or AI, is used to describe machines with computer code that learns as it goes. The technology is becoming widely used in sectors such as healthcare, entertainment and banking.

Fear that machines could become so intelligent that they might rise up and overthrow humanity is a common theme in science fiction.

Musk told a gathering of U.S. governors this month that the potential dangers are not so imaginary, and that they should move to regulate AI.

"I keep sounding the alarm bell, but until people see robots going down the street killing people, they don't know how to react, because it seems so ethereal," Musk said, according to a video of the event.

"AI is a fundamental risk to the existence of human civilization," he added.

On Sunday, Zuckerberg was streaming video live on Facebook while grilling brisket at home and answering viewers' questions when someone asked him to weigh in on Musk's comments.

"I'm really optimistic," Zuckerberg countered, "and I think that people who are naysayers and try to drum up these doomsday scenarios, I don't understand it.

"It's really negative, and in some ways I actually think it's pretty irresponsible."

Zuckerberg said AI could result in better diagnoses of diseases and the elimination of car wrecks, and he said he did not see how "in good conscience" people could want to slow down the development of AI through regulation.

Article Link To Reuters:

Apple Ordered To Pay $506 Million To University In Patent Dispute

By Jan Wolfe
July 26, 2017

A U.S. judge on Monday ordered Apple Inc to pay $506 million for infringing on a patent owned by the University of Wisconsin-Madison's patent licensing arm, more than doubling the damages initially imposed on Apple by a jury.

U.S. District Judge William Conley in Madison added $272 million to a $234 million jury verdict the Wisconsin Alumni Research Foundation won against Apple in October 2015. Conley said WARF is owed additional damages plus interest because Apple continued to infringe the patent, which relates to computer processor technology, until it expired in December 2016.

Apple is appealing Conley's ruling, according to court papers. An Apple spokesman did not immediately return a request for comment.

WARF sued Apple in 2014, alleging processors found in some versions of the iPhone infringe on a patent describing a "predictor circuit," which improves processor performance by predicting what instructions a user will give the system. University of Wisconsin computer science professor Gurindar Sohi and three of his students obtained the patent in 1998.

Cupertino, California-based Apple denied any infringement during a 2015 jury trial and argued the patent is invalid. Apple also urged the U.S. Patent and Trademark Office to review the patent's validity but the agency rejected that bid.

WARF brought a separate lawsuit against Apple in 2015, alleging chips in later versions of the iPhone infringe the same patent. Conley said he would not rule in that case until Apple has had an opportunity to appeal the 2015 jury verdict.

Article Link To Reuters:

House Panel Wants Google, Facebook, AT&T CEO's To Testify On Internet Rules

By David Shepardson
July 26, 2017

The chairman of the U.S. House Energy and Commerce Committee on Tuesday asked chief executives from companies representing the two sides of the net neutrality debate, including Alphabet, Facebook, AT&T and Verizon, to testify at a Sept. 7 hearing.

The U.S. Federal Communications Commission is considering tossing out 2015 Obama administration net neutrality rules that reclassified internet service like a public utility. The current rules bar providers from blocking or slowing websites, or allowing websites to pay for "fast lanes" over competitors.

Internet providers and major tech companies have been sharply divided over the rules. Many internet providers want Congress to step in and write permanent rules, while websites say the Obama era rules are critical to preserving the open internet.

The outcome of the debate could have a major impact on the future of the internet economy and potentially profits of the companies involved.

Other chief executives asked to testify include the heads of Comcast Corp, Netflix Inc and Charter Communications Inc.

Several companies said they were reviewing the letter but none immediately said if they will testify.

Comcast said it welcomed the hearing and "believes the best way to stop the regulatory ping-pong on this important issue is for Congress to enact bipartisan legislation."

"A strong consensus is forming across party lines and across industries that it’s time for Congress to call a halt on the back-and-forth and set clear net neutrality ground rules for the internet,” said Representative Greg Walden, a Republican, who chairs the committee. "The time has come to get everyone to the table and get this figured out."

Democrats on the committee want Republicans to invite small businesses and consumers, not just the CEOs from some of the "largest corporations in the world with a combined market capitalization of nearly $2.5 trillion," said a statement from Energy and Commerce Committee Ranking Member Frank Pallone, Jr. and Communications and Technology Subcommittee Ranking Member Mike Doyle, both Democrats. Democrats have so far refused to work with Republicans on internet legislation.

A group representing major technology firms last week urged the FCC to abandon plans to rescind the rules barring internet service providers from hindering consumer access to web content or offering paid "fast lanes."

Major internet service have urged the FCC, however, to reverse the rules, even as they vowed not to hinder internet access.

In May, the FCC voted 2-1 to advance Republican FCC Chairman Ajit Pai's plan to withdraw the former Obama administration's order reclassifying internet service providers as if they were utilities.

The FCC is considering whether it has the authority to limit internet providers' ability to block, throttle or offer "paid prioritization," and, if so, whether it should keep any regulations in place.

More than 12 million public comments have been filed on the proposal.

The Internet Association, a group representing Facebook, Google, Microsoft Corp and Twitter Inc, said last week it was "open to alternative legal bases for the rules, either via legislative action codifying the existing net neutrality rules or via sound legal theories offered by the commission."

Article Link To Reuters:

From The Garden Of England To Poland, UK Farmers Look Abroad After Brexit

By Cassandra Garrison
July 26, 2017

For 70 years, Tim Chambers' family has harvested fruit in south-east England, but after Britain's vote last year to leave the European Union he expanded into Poland and is ready to sell some of his land if a shortage of migrant workers worsens.

His firm, W. B. Chambers & Son, has relied heavily on seasonal staff from eastern Europe for the past two decades as it focused on growing raspberries and blackberries that require laborious harvesting by hand.

Typically, at the height of the summer season, 1,200 migrant workers from other EU states pick the delicate berries from more than 520 kilometers (320 miles) of rows of bushes planted across rolling land in Kent, a county known as the Garden of England.

This year, Chambers found it harder to recruit workers at the start of the season in June. Many workers hesitated about coming to Britain after the fall in the value of the pound since the vote for Brexit in the June 2016 referendum.

Although he eventually filled his rosters, for the first time he does not have a waiting list of candidates hoping to come to his farm in August to work until the spring.

Chambers invested this year in raspberry production with a partner in Poland to avoid possible barriers to exporting fruit to the EU from Britain when Brexit happens in 2019.

If the shortage in migrant labor gets worse and pushes up his costs, he is prepared to shift more of his business to Poland and might even sell some of his family's land in England, he said.

"If we don't get a secure supply of labor, we will have to adjust the size of our business and restructure to make us more efficient in the new economic situation and look to produce product abroad," he said on a clear-skied July afternoon, as teams of Bulgarian workers made their way up and down rows of raspberry bushes.


Employers in other sectors have said they are seeing signs that Britain has become less attractive to foreign workers who often fill jobs that Britons are unwilling to do for low wages.

Forty-three percent of employers in education and 49 percent in healthcare said staff from other EU countries had considered leaving Britain, according to the Chartered Institute of Personnel and Development.

The government has said it will use a transition period to ensure employers are not left without workers after Brexit, but so far there is no clear sign of how it plans to do that.

While some farmers might move production abroad, others could give up if they can't hire the staff, an industry representative said.

"Not all farmers are capable of going across the water to mainland Europe," said Laurence Olins, chairman of British Summer Fruits, a trade body. "If there is no labor, most of the businesses will close."

Nick Ottewell, farming director for Laurence J Betts, a Kent-based salad grower, said the family-owned farm he works for was not big enough for relocation to be a viable option.

"The worst-case scenario is that we don't have enough people, and then we don't have a business," said Ottewell, whose company employs 120 seasonal workers to pick 10,000 tonnes of lettuce a year.

At least four of his seasonal workers are considering finding jobs in other EU countries, he said.

"We never really had a problem with people wandering off and going to different jobs," Ottewell said. "But that's now happening more."

Price Pressure

The National Farmers' Union reported a 17 percent drop in seasonal workers coming to work on British farms from the start of 2017 through May, leaving unfilled 1,500 of the 9,411 seasonal jobs needed for horticulture that month.

Of the 29,000 seasonal workers required annually for the soft fruit industry, almost all of them are from eastern European members of the EU such as Bulgaria, Romania and Poland.

Olins of British Summer Fruits said the proportion of workers currently in Britain and who want to return in future had slumped from 70 percent to 35 percent.

"For every job, we used to have 10 applicants. Now, we've had three," he said.

British Summer Fruits says that if a significant number of farmers relocate outside the UK to ensure access to labor, British consumers will have to pay more for foreign fruit.

The cost of strawberries and raspberries could jump by 37 and 50 percent respectively, the group said.

"Generally, food is quite cheap anyway if you looked at people's percentage spend compared to other parts of the world," Ottewell said. "I think the British public have to expect food cost rises in the next few years."

Farmers are growing frustrated with the lack of government guidance on how it plans to allow seasonal workers into Britain after Brexit.

They said they are hoping for a revival of a seasonal agricultural labor scheme which allowed workers from countries including Russia and Ukraine to stay in Britain for six months of farm work. The government ended the scheme in 2013, saying there were enough British and EU workers to fill the jobs.

Even if the government does allow access for seasonal farm workers, Ottewell said, he is worried it won't be ready in time for 2019, given the political uncertainty after Prime Minister Theresa May's ruling Conservatives lost their parliamentary majority in last month's election.

"The political instability going on is just pushing back any real action being taken," Ottewell said. "Farmers are going to potentially be staring over the cliff face in 2019."

Article Link To Reuters:

The U.K. Should Be Wary Of A Trump Trade Deal

Chlorinated chicken might be all that Britons would get out of it.

By Leonid Bershidsky
The Bloomberg View
July 26, 2017

President Donald Trump tweeted on Tuesday that he was working on a potentially "very big & exciting" trade deal with the U.K. that would shame the "very protectionist" European Union. He's right that such a deal could be politically advantageous for both governments. For U.K. consumers, though, it might deliver little more than chlorinated chicken.

U.K. International Trade Secretary Liam Fox, whose talks with U.S. trade officials prompted Trump's tweet, estimates that a deal could boost trade between the two countries by 40 billion pounds ($52.2 billion) a year by 2030. That's ambitious but not outlandish: Back in 2013, when the U.S. was negotiating the ill-starred Transatlantic Trade and Investment Partnership with the EU, a U.K.-commissioned study found that it would increase trade between the two countries by some 38 billion pounds a year by 2027.

The TTIP is a logical template for any new deal. The U.K. hasn't negotiated a trade agreement since it joined the EU, so piggybacking on the experience of the bloc's master negotiators makes sense. That said, achieving Fox's trade-volume goal will require going to the limit of what the TTIP contemplated. That means removing all tariffs and 50 percent of all "actionable non-tariff barriers," including 75 percent of restrictions on chemicals, vehicles and business and technology services. Among the highest non-tariff barriers are those for food: They increase U.S. importers' cost of accessing the U.K. market by an estimated 46 percent.

The food issue is likely to be the most controversial. The TTIP died in part because Europeans -- Germans in particular -- feared a drop in quality standards and the growing power of U.S. multinationals. In the U.K., EU membership has raised the quality of local produce and -- at least in London -- improved the availability good food from Italy, France and Spain. Anyone who has had a chance to compare the food in the average European store -- including a Tesco in the U.K. -- with its U.S. counterpart knows how obvious the quality and taste gap is.

Understandably, the public discussion of a potential deal with the U.S. has focused on food, and specifically on the American practice of washing chicken carcasses in a chlorine solution (banned in the EU since 1997). Pressed by pro-EU campaigners to eat chlorinated chicken on his U.S. trip, an irate Fox remarked that the media were "obsessed" with an issue that wouldn't come up until a late stage in the talks. But Brits can be forgiven for worrying about U.S. chicken flooding their supermarket shelves: Even if it is is safe and 20 percent cheaper than poultry produced in the U.K. to EU standards, many Britons would rather stick with the kind of food to which they have become accustomed. And no matter how many scientists defend genetic modification and the various additives that are permissible in the U.S., freeing up the markets for these imports won't be popular.

Meanwhile, the balance of power in the negotiations doesn't bode well for the U.K. side. It's the smaller market, accounting for less than 3 percent of U.S. trade, and the government of Prime Minister Theresa May needs a quick success with a major trading partner. Fox has already been building up expectations: In a recent article in The Sunday Times, he promised that the U.S. deal would be "just the beginning" of opening up post-Brexit U.K. to global trade.

Trump, by contrast, is in no hurry. A deal makes sense for him only if he wins in zero-sum terms. U.S. negotiators might not take Trump's urge to stick it to the EU too seriously, given that annoying the world's largest economic bloc isn't in the country's strategic interests. But they won't be able to ignore Trump's desire to do only deals that improve the U.S. trade balance. Trump likes imagining trade in terms of tangible objects, such as cars or, yes, chickens. So, perhaps for a better deal on services, the U.K. will need to give on things like cars and food -- and the U.K. government won't rule out changing some quality regulations to do a deal.

Weak as the U.K. may be in the Brexit talks, it has a stronger hand than with the U.S. It's a bigger trading partner, absorbing between 8 and 17 percent of the exports of the remaining 27 EU nations (depending on the measurement method). And EU negotiators haven't attended the Trump school of economics: They aren't aiming to increase their trade balance with the U.K. at any cost.

The U.K. ought to concentrate on the more important trade relationship with the EU. With the right concessions, it can still get a good deal. Hoping for a victory with the outwardly friendly Trump administration is delusional.

Article Link To The Bloomberg View:

Trump Praises Work On British Trade Deal, Says EU 'Protectionist'

July 26, 2017

U.S. President Donald Trump on Tuesday praised ongoing work on a post-Brexit trade deal with Britain while sharply criticizing the European Union's trade relationship with the United States.

"Working on major Trade Deal with the United Kingdom. Could be very big & exciting. JOBS! The E.U. is very protectionist with the U.S. STOP!" Trump wrote on Twitter without offering any other details.

Representatives for the White House and the U.S. Department of Commerce could not be immediately reached for comment.

The Republican U.S. president earlier this month assured quick action on a trade deal between the United States and Britain even as some British officials expressed skepticism.

Trump met with British Prime Minister Theresa May on the sidelines of the G20 meeting in Hamburg earlier this month, describing the bilateral trade deal as "a very, very big deal, a very powerful deal, great for both countries."

A deal would follow Britain's 2016 decision to withdraw from the European Union, a major trading bloc. The British government has since touted its ability to strike one-on-one deals with other countries.

Still, some British officials and businesses have remained skeptical that a trade deal with the United States would make up for leaving the EU.

Trump on Tuesday offered no specific actions that he wanted the EU to halt, but a series of trade issues over steel and other products have raised tensions.

The Trump administration has launched a review of the steel industry and is weighing tariffs on imports that could spark retaliatory action.

While such tariffs would primarily take aim at China, EU officials fear steel headed for the United States would instead be redirected to European nations, upending the industry there.

Article Link To Reuters:

Trump’s Sessions Abuse

His demand that his AG prosecute Clinton crosses a red line.

By The Editorial Board
The Wall Street Journal
July 26, 2017

Donald Trump won’t let even success intrude on his presidential ego, so naturally he couldn’t let the Senate’s health-care victory stand as the story of Tuesday. Instead he continued to demean Jeff Sessions, and in the process he is harming himself, alienating allies, and crossing dangerous legal and political lines.

For a week President Trump has waged an unseemly campaign against his own Attorney General, telling the New York Times he wished he’d never hired him, unleashing a tweet storm that has accused Mr. Sessions of being “beleaguered” and “weak.”

Mr. Trump is clearly frustrated that the Russia collusion story is engulfing his own family. But that frustration has now taken a darker turn. This humiliation campaign is clearly aimed at forcing a Sessions resignation. Any Cabinet appointee serves at a President’s pleasure, but the deeply troubling aspect of this exercise is Mr. Trump’s hardly veiled intention: the commencement of a criminal prosecution of Hillary Clinton by the Department of Justice and the firing of special prosecutor Robert Mueller.

On Tuesday morning Mr. Trump tweeted that Mr. Sessions “has taken a very weak position on Hillary Clinton crimes. ” This might play well with the red-meat crowd in Mr. Trump’s Twitterverse, but Sen. Lindsey Graham was explicit and correct in describing the legal line Mr. Trump had crossed.

“Prosecutorial decisions should be based on applying facts to the law without hint of political motivation,” Sen. Graham said. “To do otherwise is to run away from the long-standing American tradition of separating the law from politics regardless of party.” Republican Sen. Thom Tillis also came to Mr. Sessions’ defense, citing his “unwavering commitment to the rule of law,” and Sen. Richard Shelby called him “a man of integrity.”

We will put the problem more bluntly. Mr. Trump’s suggestion that his Attorney General prosecute his defeated opponent is the kind of crude political retribution one expects in Erdogan’s Turkey or Duterte’s Philippines.

Mr. Sessions had no way of knowing when he accepted the AG job that the Russia probe would become the firestorm it has, or that his belated memory of brief, public meetings with the Russian ambassador in 2016 would require his recusal from supervising the probe. He was right to step back once the facts were out, not the least to shelter the Trump Administration from any suspicion of a politicized investigation.

If Mr. Trump wants someone to blame for the existence of Special Counsel Robert Mueller, he can pick up a mirror. That open-ended probe is the direct result of Mr. Trump’s decision to fire FBI Director James Comey months into his Russia investigation and then tweet that Mr. Comey should hope there are no Oval Office tapes of their meeting. That threat forced Deputy Attorney General Rod Rosenstein to appoint a special counsel.

As a candidate, Mr. Trump thought he could say anything and get away with it, and most often he did. A sitting President is not a one-man show. He needs allies in politics and allies to govern. Mr. Trump’s treatment of Jeff Sessions makes clear that he will desert both at peril to his Presidency.

No matter how powerful the office of the Presidency, it needs department leaders to execute policy. If by firing or forcing out Jeff Sessions Mr. Trump makes clear that his highest priority is executing personal political desires or whims, he will invite resignations from his first-rate Cabinet and only political hacks will stand in to replace them. And forget about Senate confirmation of his next AG.

Even on the day that Senate Majority Leader Mitch McConnell was scraping together enough Republican votes to avoid a humiliating defeat for the President on health care, Mr. Trump was causing Senators to publicly align themselves with Mr. Sessions. Past some point of political erosion, Mr. Trump’s legislative agenda will become impossible to accomplish. Mr. Trump prides himself as a man above political convention, but there are some conventions he can’t ignore without destroying his Presidency.

Article Link To The WSJ:

Cohn And Yellen Are Among Trump’s Contenders To Lead Fed

The president says ‘two or three’ other candidates also are under consideration.

By Kate Davidson
The Wall Street Journal
July 26, 2017

President Donald Trump is considering renominating Janet Yellen as Federal Reserve chairwoman but also views his economic adviser Gary Cohn as a top candidate, he told The Wall Street Journal in an interview Tuesday.

Mr. Trump reiterated that he thinks Ms. Yellen is doing a good job and he has “a lot of respect for her,” and said she is still in the running to serve a second four-year term as leader of the central bank. But he said he also is considering replacing Ms. Yellen with Mr. Cohn, who became Mr. Trump’s National Economic Council director after a 26-year career at Goldman Sachs Group Inc.

“He doesn’t know this, but yes he is,” he said, when asked if Mr. Cohn, who was present during the interview, was a candidate for the job. “I actually think he likes what he’s doing right now.”

Mr. Cohn has been managing the search for the next Fed chief and has emerged as a key intermediary in the administration’s relationship with the central bank.

“I’ve known Gary for a long time, but I’ve gained great respect for Gary working with him, so Gary certainly would be in the mix,” Mr. Trump said.

Mr. Cohn and other White House officials have said he is focused on his current job. But former colleagues have said he has developed an appreciation for the power of the Fed during his long career on Wall Street, and for the central bank’s relative independence during his current stint in Washington.

As for Ms. Yellen, Mr. Trump said, “She is in the running, absolutely.”

“I like her; I like her demeanor. I think she’s done a good job,” he said. “I’d like to see rates stay low. She’s historically been a low-interest-rate person.”

Mr. Trump said there are “two or three” other contenders in the mix, but declined to name any other potential candidates and said he probably wouldn’t announce a nominee until the end of the year. “It’s early to make the decision,” he said, noting Ms. Yellen’s term doesn’t expire until February. He said he expected the confirmation process for the Fed job would move quickly.

Mr. Trump’s fierce criticism of the Fed and Ms. Yellen in the final weeks of his campaign led many to conclude he was unlikely to reappoint her. But the two have forged an amicable relationship since he took office, reflected in part by his willingness to consider her for the job.

Mr. Trump has offered contrasting views of Ms. Yellen during the campaign and his first months in office.

In May 2016 Mr. Trump said Ms. Yellen was doing a good job, but he likely would replace her when her term expires. Four months later, he accused the Fed chairwoman of being “highly political” and keeping interest rates low to help President Barack Obama.

In an April interview with the Journal, he left open the possibility of nominating Ms. Yellen for another four-year term as chairwoman. “I like her; I respect her,” he said at the time.

Since taking office, the president and his advisers haven’t publicly questioned the Fed’s actions—including its decision to raise short-term interest rates in March and June, and pencil in another rate increase this year.

The Fed is expected to leave rates unchanged at its two-day meeting that ends Wednesday.

Ms. Yellen hasn’t said whether she would like to serve another term as chairwoman, or whether she intends to step down from the Fed board of governors when her term as chairwoman expires.

“I absolutely intend to serve out my term,” she told lawmakers on Capitol Hill earlier this month. “I’m very focused on trying to achieve our congressionally mandated objectives, and I really haven’t had to give further thought at this point to this question.”

Later, when asked what she would say if Mr. Trump asked her to serve another term, she said, “It is certainly something that I would discuss with the president, obviously.”

If Mr. Trump doesn’t renominate Ms. Yellen, it would be highly unusual. The tenure of Fed chairmen is staggered, by design, to end the year following a new president’s inauguration. But most presidents have chosen to keep the central bank chief on for another term.

The last time a Fed chairman wasn’t renominated by a new president was in 1978, when President Jimmy Carter replaced Arthur Burns with William Miller. Mr. Miller lasted for 17 months at the central bank before Mr. Carter nominated him to be Treasury secretary, and replaced him with Paul Volcker.

Mr. Trump entered office with two vacancies on the Fed board, and a third slot opened up in April when Fed governor Daniel Tarullo, the Fed’s point man on Wall Street regulation, stepped down.

Mr. Trump nominated Randal Quarles, an investment-fund manager who served in the Treasury Department in both Bush administrations, to be Fed vice chairman for supervision earlier this month. The Senate Banking Committee has scheduled a hearing on his confirmation Thursday, and he is expected to receive broad Republican support.

The White House also has been considering economist Marvin Goodfriend to fill a second vacancy on the Fed board, according to people familiar with the matter. It isn’t clear when his nomination might be announced and submitted to the Senate.

The White House also has been searching for a community banker to fill the third vacancy, the result of a new requirement that someone on the Fed board have experience dealing with small banks. But officials have had trouble finding a nominee willing to comply with strict federal ethics rules, which require Fed governors to divest of their interest in financial firms.

Article Link To The WSJ: