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China is to start buying oil for state reserves after sharp drop in prices – report

Bloomberg reports, citing people with knowledge of the matter

Bloomberg reports, citing people with knowledge of the matter

The report says that China is moving forward with plans to buy up oil for its emergency reserves after the epic crash in oil prices over the past few weeks.

Adding that Beijing has asked departments to quickly begin filling tanks and options to lock in the current low prices in the market. Also noting that Beijing may use commercial space for storage as well – in addition to its state-owned reserves.
I don’t think this comes as much of a surprise as China is the biggest crude oil importer in the world, and there has been so much speculation of them doing this already. There were even reports on this as far as three weeks back as seen here at the time.
But at least with China stepping in, it may help to briefly support prices somewhat in the near-term but don’t expect this to change the grand scheme of things.

US stocks jump in a monster bounce — Dow gains most since 1933

The Fed and Congress inspire an equity rally

Closing changes:
  • S&P 500 +9.4% — biggest since 2008
  • DJIA +11.3%
  • Nasdaq +8.0%
It was a great day to buy stocks as the market bets that Congress will come through with some kind of stimulus. There was also some major bargain hunting and short-covering. The four best performers on the S&P 500 were: L Brands, American Airlines, MGM Resorts, Norwegian Cruise Lines. Energy was the top-performing sector.
Every bottom starts with a bounce but not every bounce is a bottom. That said, bottoms are built on skepticism so my skepticism is only adding fuel to the fire.
The rally today is slightly bigger than the one that led Trump to email out this:
The Fed and Congress inspire an equity rally

Full text: Federal Reserve announces extensive new measures to support the economy

Full text of the Federal Reserve announcement

The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time. The coronavirus pandemic is causing tremendous hardship across the United States and around the world. Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.

The Federal Reserve’s role is guided by its mandate from Congress to promote maximum employment and stable prices, along with its responsibilities to promote the stability of the financial system. In support of these goals, the Federal Reserve is using its full range of authorities to provide powerful support for the flow of credit to American families and businesses. These actions include:

  • Support for critical market functioning. The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. The FOMC had previously announced it would purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. In addition, theFOMC will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases.
  • Supporting the flow of credit to employers, consumers, and businesses by establishing new programs that, taken together, will provide up to $300 billion in new financing. The Department of the Treasury, using the Exchange Stabilization Fund (ESF), will provide $30 billion in equity to these facilities.
  • Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
  • Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
  • Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
  • Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.

In addition to the steps above, the Federal Reserve expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.

The PMCCF will allow companies access to credit so that they are better able to maintain business operations and capacity during the period of dislocations related to the pandemic. This facility is open to investment grade companies and will provide bridge financing of four years. Borrowers may elect to defer interest and principal payments during the first six months of the loan, extendable at the Federal Reserve’s discretion, in order to have additional cash on hand that can be used to pay employees and suppliers. The Federal Reserve will finance a special purpose vehicle (SPV) to make loans from the PMCCF to companies. The Treasury, using the ESF, will make an equity investment in the SPV.

The SMCCF will purchase in the secondary market corporate bonds issued by investment grade U.S. companies and U.S.-listed exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. investment grade corporate bonds. Treasury, using the ESF, will make an equity investment in the SPV established by the Federal Reserve for this facility.

Under the TALF, the Federal Reserve will lend on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The Federal Reserve will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. Treasury, using the ESF, will also make an equity investment in the SPV established by the Federal Reserve for this facility. The TALF, PMCCF and SMCCF are established by the Federal Reserve under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary.

These actions augment the measures taken by the Federal Reserve over the past week to support the flow of credit to households and businesses. These include:

  • The establishment of the CPFF, the MMLF, and the Primary Dealer Credit Facility;
  • The expansion of central bank liquidity swap lines;
  • Steps to enhance the availability and ease terms for borrowing at the discount window;
  • The elimination of reserve requirements;
  • Guidance encouraging banks to be flexible with customers experiencing financial challenges related to the coronavirus and to utilize their liquidity and capital buffers in doing so;
  • Statements encouraging the use of daylight credit at the Federal Reserve.

Taken together, these actions will provide support to a wide range of markets and institutions, thereby supporting the flow of credit in the economy.

The Federal Reserve will continue to use it full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.

Read it here.

Trump signs $7.88 emergency coronavirus bill

Trump puts pen to paper

The bill passed through Congress yesterday.
Trump puts pen to paper
Comments from Trump at the signing ceremony:
  • Says he doesn’t know if stimulus is needed (fiscal stimulus presumably)
  • Says Fed should cut rates
  • On coronavirus “we’re taking care of it”
According to Eamonn Javers of CNBC, President Trump just explained to the pool why he cancelled his CDC trip: “We may go – they thought there was a problem with CDC with somebody who had the virus,” he said, adding that the person in question has been tested and it is a negative test, “I may be going,” he added.
More from Javers: Asked by pool reporters if Congress needs to take more action to diminish risk of recession President Trump says: “all we can do is do what we do” “People were shocked” by jobs numbers, he said. He said he didn’t know if a stimulus was needed, per pool.

US president Trump: Fed should ease and cut rate big

Trump calls for Fed rate cuts again after the RBA decision earlier

Powell Trump

“Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown. They reduced to 0.5%, a record low. Other countries are doing the same thing, if not more so. Our Federal Reserve has us paying higher rates than many others, when we should be paying less. Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!”

What else is new. Either way, the market has also already held the Fed hostage ahead of this month’s policy decision. Knowing the Fed, they’ll oblige to cut rates as such and Trump will get his wish – though that policy room is surely getting smaller.

Apple says it doesn’t expect to meet revenue guidance this quarter- Full Report

Apple issues update

Apple says they now expect a slower return to normal conditions in China with demand curbed within the country.
Here is the statement:
Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.
The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province – and while all of these facilities have reopened – they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide.
The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.
Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations.The situation is evolving, and we will provide more information during our next earnings call in April. Apple is fundamentally strong, and this disruption to our business is only temporary.
Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.
How can three things all be your ‘first priority’? Judging by all the Foxcon reports, it’s tough to make the argument that health and safety is exactly the priority.

Charlie Munger warns ‘lots of troubles coming’ – ‘too much wretched excess’

Charlie Munger is Warren Buffett’s longtime business partner and vice chairman of Berkshire Hathaway

CNBC have this report up on his comments at a shareholders meeting.
  • “In China, … they love to gamble in stocks. This is really stupid,” Munger said. “It’s hard to imagine anything dumber than the way the Chinese hold stocks.”
  • To make his point about excess, Munger cited the proliferation of EBITDA as a fake profit metric. “I don’t like when investment bankers talk about EBITDA, which I call bulls— earnings,” 
Here is the link for more.

Michael Bloomberg climbs into 2nd place on PredictIt for Democratic nominee

Michael Bloomberg is going to get a chance to make his case

Michael Bloomberg is going to get a chance to make his case
We’re still waiting for results from the Iowa caucus but it’s expected to be a win for Bernie or Pete Buttigieg. The story in betting markets, however, is the poor performance from Joe Biden. The market is coming around to the idea that he can’t win and that establishment voters may turn elsewhere.
That leaves Klobuchar, who remains distantly behind, and Bloomberg, who is having his moment.
The billionaire has risen to 20% on PredictIt and passed Joe Biden. I think he lacks the charisma and ability to connect with people to sustain any real momentum, but he certainly has the deep pockets to sustain a run.
If he loses to Bernie, he’s ruled out a 3rd party run but I’m sure he will be dogged by those questions.

Pres. Trump proposes 2 state solution for Israel and Palestinians

Mideast peace plan from Pres. Trump

  • Pres. Trump proposes 2 state solution for Israel and Palestinians with Palestinian capital in east Jerusalem
  • Israel has agreed to negotiate on the basis of a detailed proposed the map
  • Israel agreement on statehood for Palestinians is dependent on security arrangement to protect Israelis
  • Israel respect historic role of Al-Aqsa mosque and Jordan’s role with regard to holy sites with the aim of allowing Muslims to visit mosque
  • Palestinian state hold is dependent on Palestinians respecting human rights, freedom of the press, and having a transparent and credible judiciary
  • Israelis West Bank settlements would be recognized by the United States
  • in exchange for Israel’s agreeing to the proposed map, the US will recognize the map
  • Israeli would agree to 4 year freeze on settlement activity while Palestinian statehood negotiated
  • we bought 4 more years for Palestinians to get their act together and negotiate state
  • question for Palestinians. The question is is will they come to the table and negotiate
  • if Palestinians agree to negotiate there are some areas that can be compromised in the future
  • proposed Palestinian state would be connected with roads, bridges and tunnels with connectivity between Gaza and West Bank
  • Trump plan calls for Palestinian refugees to be able to return to a future state of Palestine and creates generous compensation fund.
Israel and Palestinian talks broke down in 2014.  US officials are bracing for initial Palestinian skepticism, but hope that over time they will agree to negotiate.
US plan represent the most dramatic and detailed attempt to break the historic deadlock. The Palestinians are skeptical as they say the US administration is biased toward Israel.

Saudi crown prince himself hacked Jeff Bezos’ phone

MBS targeted Jeff Bezos

MBS targeted Jeff Bezos
Amazon founder Jeff Bezos had malware installed on his mobile phone after receiving a WhatsApp message evidently sent from the personal account of the crown prince of Saudi Arabia, the Guardian reports.
This analysis found it “highly probable” that the intrusion into the phone was triggered by an infected video file sent from the account of the Saudi heir to Bezos, the owner of the Washington Post.
The two men had been having a seemingly friendly WhatsApp exchange when, on 1 May of that year, the unsolicited file was sent, according to sources who spoke to the Guardian on the condition of anonymity.
Large amounts of data were exfiltrated from Bezos’s phone within hours, according to a person familiar with the matter.
The discovery may help to explain (or at least raise questions about) how the National Enquirer received intimate photos of Jeff Bezos and a mistress that contributed to the breakup of his marriage.
Washington Post journalist Jamal Khashoggi was also killed 5 months after the hack.
Aside from the dramatic revelation itself, the news raises questions about Jared Kushner who has revealed that he frequently messaged MBS on WhatsApp.