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Daily Digest 11/8 - Strong Dollar Hits China’s Foreign-Exchange Reserves, The U.S. Is Going Broke

Thursday, November 8, 2018, 11:35 AM


Stock Market Facing a 2019 Crash: 70% Correction Warning (Thomas R.)

However, there are also dangers to this approach. Lower consumer spending has a negative impact on the revenue of consumer-facing businesses. Declining revenue then tightens spending across both the consumer and business landscapes. At the same time, higher interest rates make it harder for financially weak companies to meet their debt obligations.

The United States Is Going Broke (thc0655)

The U.S. budget deficit under Trump is approaching $1 trillion per year, similar to what we saw in 2010 and 2011 under Obama. This is the result of tax cuts (that don’t “pay for themselves”), removal of spending caps, snowballing student loan defaults and defective growth estimates by the Office of Management and Budget, or OMB.

And it looks like annual deficits will exceed the trillion dollar level as soon as next year when projected spending is factored in.

What to Expect From Europe’s New Bank Cop (Thomas R.)

Some might hope that his promotion would lead to softer treatment of Italian lenders, many of which are still grappling with bad debts. They are likely to be disappointed. Colleagues joke that Mr. Enria, a former Bank of Italy economist, is sufficiently northern that he may as well be Austrian. His orthodox credentials, and his experience of dealing with large, international financial institutions as chair of the European Banking Authority since 2011, helped him secure the nomination over Sharon Donnery, the deputy governor of Ireland’s central bank.

Starbucks Is Buying the Dip in China, and So Should Investors (Thomas R.)

The volatility in comp sales was on full display this past year. Though Starbucks notched a slight increase globally, it made up lost ground in its fourth quarter -- especially in China where comparable sales fell 2% the quarter prior. Despite that slowdown in traffic and transaction size, though, the country remains Starbucks' key driver of overall growth (China and the Asia Pacific region accounted for 53% of Starbucks' total revenue growth over the last year). That's because increasing customer visits is the name of the game in the U.S., but there is still plenty of room for new construction on the other side of the world.

Merk Research: Fed Chart Book (Axel M.)

The tightening cycle is a reflection of the strength of the economy... it’s almost three years now that we’ve been gradually raising rates. And I think the fact that we have moved quite gradually allows us to carefully watch incoming data in the real economy and the financial markets to see how the economy is processing higher interest rates. And the fact that we’re moving so gradually limits the long and variable lags problem because we’re able to raise rates and then wait and see how the economy absorbs these rate increases. And so far, the economy has performed very well and very much in keeping with our expectations.”

A cryptocurrency millionaire is buying up land in Nevada’s desert to build a utopian village run on Ethereum — here are the design plans (Adam)

"The city aims to showcase how business development, residential living and commerce can flourish alongside world changing technologies," reads a description on the website of Tom Wiscombe Architecture, one of the designers of the community. "Multiple innovative technologies will change the way its residents interact on a daily basis and blockchain technology will be at the center of it all - keeping systems honest, fair and democratic. "

Sorry Tech Billionaires, San Francisco Just Voted for a Tax to Fight the Homelessness Crisis (Thomas R.)

Zynga’s chairman and co-founder Mark Pincus, who previously tweeted that the measure was the “is the dumbest, least thought out prop ever” and advised his followers to vote against it, engaged in a war of words with Benioff over Proposition C on the social platform just days ago. But he appeared to change his tune this week following the proposition’s victory. On Wednesday, he grouped the measure in with a list of “good elections results” and added that “we will all work to make a success for [the city’s] homeless.”

Asymmetrical Warfare and 4GW: How Militia Groups are America’s Domestic Viet Cong (thc0655)

In both cases, nuclear weapons could have been used against the guerilla uprising, but were not. Even assuming the use of nuclear weapons from the position of total desperation, it’s hard to imagine they would have made much of a difference in the final outcome of either conflict. Unlike the invading armies, the local resistance enjoyed both broad-based support as well as knowledge of the local terrain.

CDC director warns that Congo’s Ebola outbreak may not be containable (thc0655)

The outbreak is taking place in a part of Congo that is an active war zone. Dozens of armed militias operate in the area, attacking government outposts and civilians, complicating the work of Ebola response teams and putting their security at risk. Violence has escalated in recent weeks, severely hampering the response. The daily rate of new Ebola cases more than doubled in early October. In addition, there is community resistance and deep mistrust of the government.

UBS expects to be sued by US Justice Department over crisis-era mortgage securities (Thomas R.)

Barclays settled for $2 billion in March after resisting a penalty the U.S. government sought near the end of the Obama administration in 2016. Justice had sought a much higher fine at the time and, when the two sides could not come to terms, the department filed a lawsuit.

Boeing 737 Max 8 safety alert issued after deadly Lion Air crash (Thomas R.)

"We are issuing this [airworthiness directive] because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design," the FAA wrote. "Due to the need to correct an urgent safety of flight situation, good cause exists to make this AD effective in less than 30 days."

Strong Dollar Hits China’s Foreign-Exchange Reserves (Thomas R.)

October’s decrease of $33.93 billion was the largest since December 2016 when Beijing was battling capital flight and burned through $1 trillion to defend the yuan.

Zillow sheds a quarter of its market value as rising interest rates weigh on home sales (Thomas R.)

"The negative feedback received over the past several months has been far greater than the company had anticipated. Management found many Premier Agents were displeased with the lower lead volume, despite leads being higher quality," analysts for Stifel wrote in a note.

Australia Likely to Block Hong Kong Company’s Bid for Gas Pipeline (Thomas R.)

In February, Australia’s Treasury announced it was tightening rules on investments in electricity and agriculture because of questions about China’s influence on such deals. As much as $90 billion in Chinese investment has flowed to Australia since 2007.

Global Dimming and Its Effect on Agriculture (newsbuoy)

Early studies carried out in the 1990s reported a general decrease of solar radiation at widespread locations over the earth between the late 1950s and the late 1980s. Increasing air pollution and associated increase in aerosol concentrations are considered as major cause of the decline of surface solar radiation. Changes in cloud amount and optical properties, which may or may not have been linked to the aerosol changes, have also been proposed to contribute. A direct assessment of the origins of the decline of surface solar radiation is complicated by the lack of adequate long-term observational datasets of major influencing factors such as clouds and aerosols.

U.N. Predicts Disaster if Global Warming Not Checked (newsbuoy)

Shifting climate patterns would bring back 1930s Dust Bowl conditions to Canadian and U.S. wheatlands, while the Soviet Union could reap bumper crops if it adapts its agriculture in time, according to a study by UNEP and the International Institute for Applied Systems Analysis.

Excess carbon dioxide is pouring into the atmosphere because of humanity’s use of fossil fuels and burning of rain forests, the study says. The atmosphere is retaining more heat than it radiates, much like a greenhouse.

Headline-Grabbing Global Warming Study Suffers From A Major Math Error (thc0655)

“Just a few hours of analysis and calculations, based only on published information, was sufficient to uncover apparently serious (but surely inadvertent) errors in the underlying calculations,” Lewis wrote in a blog post published on climate scientist Judith Curry’s website.

Gold & Silver

Click to read the PM Daily Market Commentary: 11/7/18

Provided daily by the Peak Prosperity Gold & Silver Group

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