Sun 25 September, 2016
NEW YORK (Reuters) - Snap Inc, the newly renamed parent company of messaging app Snapchat, plans to start selling camera-equipped sunglasses starting this fall, Chief Executive Evan Spiegel told the Wall Street Journal in an interview. The sunglasses, dubbed Spectacles, will be sold via limited distribution for about $130, said Spiegel, who described the device as a toy. The first hardware to be sold by Snap, the sunglasses will record video from the user's perspective in 10-second increments that can be synched with his or her smart-phone. ...
Sat 24 September, 2016
Following last night's shooting at the Cascade Mall in Burlington, WA mall, when an unidentified gunman killed 5 then managed to slip away from authorities for nearly 24 hours, moments ago the Washington State Patrol tweeted that the shooter has, after a daylong manhunt, been captured.
Gunman captured tonight by authorities, Details forthcoming, Press Conference tonight at 1800 Continental Pl. Time TBA
— WA State Patrol (@wastatepatrol) September 25, 2016
The man was arrested without incident, and is in custody, said Sgt. Keith Leary, of the Washington State Patrol.
Below is a photo of the arrest courtesy of Q13fox
As reported early this morning, the suspect fled the Cascade Mall after the deadly shooting at Macy’s. The motive behind his shooting is still not yet known.
While the police previously described the mall shooter as Hispanic, according to unconfirmed reports - as the police still hasn't released the suspect's name - the identity of the shooter is Arcan Cetin, aged 20...
Le suspect s'appelle Arcan Cetin. Il habite Oak Harbor (là où il a été arrêté). Il a 20 ans et serait originaire de Turquie. pic.twitter.com/Ca8Lsd4t3o
— LesNews (@LesNews) September 25, 2016
.... who according to his Facebook profile is originally Turkish, from the city of Adana.
— DeplorablesF????RTrump (@LHBOSSD) September 25, 2016
Several photos of Cetin's Myspace page were released on twitter, suggesting he had a fascination with weapons:
— Ezra Levant (@ezralevant) September 25, 2016
— Ezra Levant (@ezralevant) September 25, 2016
— Ezra Levant (@ezralevant) September 25, 2016
Some more of his facebook pictures:
— Ezra Levant (@ezralevant) September 25, 2016
And then there was this odd tweet from January 2015:
We win I vote for Hillary Clinton
— Arcan (@ArcanCetin) January 18, 2015
... followed by this one from April, 2015
Country is for Republicans and confused Democrats.
— Arcan (@ArcanCetin) April 22, 2015
Following Trump's earlier tweet, "If dopey Mark Cuban of failed Benefactor fame wants to sit in the front row, perhaps I will put Gennifer Flowers right alongside of him!"; Bill Clinton's old girlfriend confirmed she will indeed be attending the debates on Monday.
In response to Hillary Clinton giving Mark Cuban front row seats at the debate, Trump tweeted:
If dopey Mark Cuban of failed Benefactor fame wants to sit in the front row, perhaps I will put Gennifer Flowers right alongside of him!
— Donald J. Trump (@realDonaldTrump) September 24, 2016
As a reminder, Bill Clinton testified under oath in 1998 that he had a sexual affair with Flowers.
In his January 1998 deposition, the President, though finally confirming a sexual encounter with Ms. Flowers, was precise in denying Ms. Willey's report that he had sought to kiss her and feel her breasts in an encounter in his private dining room off the Oval Office.
Trump said earlier this week that he did not plan to bring up the Clintons’ marriage at the debate.
“I don’t think I’m looking to do that Bill. I don’t know what I’m going to do that exactly,” Trump said during an interview on “The O’Reilly Factor.” “It depends on what level she hits you with, if she’s fair, if it’s unfair, but certainly I’m not looking to do that.”
That may have changed, however. To be sure, Saturday isn't the first time Trump has referenced Bill Clinton's infidelity. He brought the former president's sex scandals into the campaign late last year around the time Hillary Clinton announced her husband would join her on the campaign trail. At the time, she had recently accused Trump of having a "penchant for sexism" over his charge that she had been "schlonged" in the 2008 primary.
"Hillary Clinton has announced that she is letting her husband out to campaign but HE'S DEMONSTRATED A PENCHANT FOR SEXISM, so inappropriate!" Trump tweeted in December. Trump later labeled Clinton "one of the great women abusers of all time."
Sure enough, just to make Monday's debate even more memorable, moments ago Gennifer Flowers confirmed she will be at the debate.
Hi Donald. You know I'm in your corner and will definitely be at the debate!...????
— Gennifer Flowers (@gennflowers) September 24, 2016
Grab your popcorn because the "best. election. ever" just got even better.
Update: Charlotte police have just released the following bodycam footage of the event.
Here is the dashcam footage...
— Christina Watkins (@CWatkinsTV) September 24, 2016
And additionally, the Charlotte Police released evidence images...
— Steven Romo (@stevenromo) September 24, 2016
* * *
As we detailed earlier, having exclaimed "drop the gun" 11 times in the video of the fatal shooting of Keith Scott provided by his mother, Charlotte police have just stated in a press cobnference that they have agreed to release the body-cam video of the event. Despite earlier saying that it wouldn't release police video for fear of compromising its review, the State Bureau of Investigation has succumbed to public pressure despite a lack of "absolute, definitive, visual evidence" that Scott brandished a weapon at the officers.
Keith Scott's mother's view of the event...
OFFICER: Hands up!
RAKEYIA SCOTT: Don’t shoot him. Don’t shoot him. He has no weapon. He has no weapon. Don’t shoot him.
OFFICER: Don’t shoot. Drop the gun. Drop the fucking gun.
RAKEYIA SCOTT: Don’t shoot him. Don’t shoot him.
OFFICER: Drop the gun.
RAKEYIA SCOTT: He didn’t do anything.
OFFICER: Drop the gun. Drop the gun.
RAKEYIA SCOTT: He doesn’t have a gun. He has a T.B.I. (Traumatic Brain Injury).
OFFICER: Drop the gun.
RAKEYIA SCOTT: He is not going to do anything to you guys.
RAKEYIA SCOTT: He just took his medicine.
OFFICER: Drop the gun. Let me get a fucking baton over here. [muffled]
RAKEYIA SCOTT: Keith, don’t let them break the windows. Come on out the car.
OFFICER:Drop the gun.
RAKEYIA SCOTT: Keith! Don’t you do it.
OFFICER: Drop the gun.
RAKEYIA SCOTT: Keith, get out the car. Keith! Keith! Don’t you do it! Don’t you do it! Keith!
OFFICER: Drop the gun.
RAKEYIA SCOTT:Keith! Keith! Keith! Don’t you do it! [SHOTS]
RAKEYIA SCOTT: Fuck. Did you shoot him? Did you shoot him? Did you shoot him? He better not be fucking dead. He better not be fucking dead. I know that fucking much. I know that much. He better not be dead. I’m not going to come near you. I’m going to record, though. I’m not coming near you. I’m going to record, though. He better be alive because ...I come You better be alive. How about that?Yes, we here, over here at 50 ... 50 ...9453 Lexington Court. These are the police officers that shot my husband, and he better live. He better live. Because he didn’t do nothing to them.
OFFICER: Is everybody good? Are you good?
RAKEYIA SCOTT: He good. Nobody ... touch nobody, so they’re all good.
OFFICER: You good?
RAKEYIA SCOTT: I know he better live. I know he better live. How about that I’m not coming to you guys, but he’d better live. He better live. You all hear it, you see this, right? He better live.
RAKEYIA SCOTT: He better live. I swear, he better live. Yep, he better live. He better fucking live. He better live. Where is...He better fucking live, and I can’t even leave the damn...I ain’t going nowhere. I’m staying in the same damn spot. What the fuck. That’s O.K. did you all call the police? I mean, did you all call an ambulance?
Some have argued that there was a gun seen...
* * *
Press Conference has concluded.
The body-cam footage will be released by 1715ET.
During the press conference, Charlotte police chief Putney said "Officers are absolutely not being charged by me, but again, there's another investigation ongoing." Putney said that Scott was "absolutely in possession of a handgun," and that officers also saw marijuana in his car — prompting officers to act.
- There was a crime that Keith Scott had committed that led cops to him and "the gun exacerbated the encounter."
- He can't assure Keith Scott's wife and 7 children that every effort was made to avoid deadly force.
- Officers Are ‘Absolutely Not Being Charged By Me at This Point’
- Keith Scott Had Marijuana and Gun, Prompting Police Encounter
- "No single piece of evidence...proves all the complexities" of Keith Lamont Scott case
- Police have said Scott was shot on Tuesday because he refused commands to drop a handgun. Residents have said he was unarmed. Putney says Scott "absolutely" had a gun but that it's not shown in his hand in the videos.
An fire aboard one of Mexican state oil company Pemex's oil tankers in the Gulf of Mexico on Saturday forced the crew to evacuate, in what is the latest accident to plague the struggling state-run firm.
The 31 people aboard were able to make it off the ship and get back to shore safely and without injury, Pemex said in a statement, adding that there was no risk to the local population.
The cause of the fire remains unknown.
Images tweeted by Pemex showed the vessel giving off plumes of smoke as another boat hosed the tanker. The ship was carrying about 168,000 barrels of gasoline and diesel fuel, well below its capacity of 270,000 barrels
According to Mexican news site Sin Embargo, the load was made up of 80,000 barrels of diesel fuel, 71,000 barrels of unleaded gasoline, and 16,000 barrels of desulfurized gasoline.
Other Mexican navy ships moved into the area to put barriers in place in case of a leak from the tanker, Sin Embargo reported. Four tugboats from Veracruz's port authority also arrived on the scene to with special foams to use to fight the fire.
The fire started just before noon, according to Pemex, and while there were no initial reports of spills from the tanker, a local official said in an interview on Saturday evening that some of the fuel shipment had spilled from the tanker but didn't pose a risk to the environment.
"No other risk [to the environment] exists; the fuel is spilling in the sea and doesn't contaminate because they are light fuels," Juan Ignacio Fernández Carvajal, director of the Veracruz Port Authority, said in an interview with Xeu Noticias. "It's not crude, it's not going to the bottom of the sea, it stays on the surface ..."
"The fire hasn't been controlled, we are working to control it," Fernández Carvajal said, admitting that the ship could still sink; "but [that] is what we're trying to avoid; we are attacking this risk," he added.
The fire follows a series of other mishaps at Pemex, which is coping with major losses, increased competition at home, sharp budget cuts, and lower revenue due to the oil-price rout, according to Reuters.
On land, the state oil company has had to deal with rampant oil theft from pipelines throughout the country by both criminal groups and regular people.
While no deaths have been reported, Pemex has experienced fatal incidents in the recent past, Reuters noted.
In April, more than 30 people died and dozens were injured in an explosion at a petrochemical plant in southeast Veracruz state, a joint venture between Pemex and another firm.
In 2013, at least 37 people were killed by a blast at Pemex's Mexico City headquarters, and 26 people died in a fire at a Pemex natural-gas facility in northern Mexico in 2012.
A 2015 fire at a Pemex platform in the Bay of Campeche affected oil output and cost the company up to $780 million.
(Reporting for Reuters by Natalie Schachar and Noe Torres; Editing by Dave Graham and Matthew Lewis)
It’s really quite embarrassing on a global scale when members of our own government seem to be deliberately trying to pick fights with people who aren’t interested in fighting with us. If you’ve traveled outside of the United States much, you probably know that we Americans have a rather negative reputation off of our own shores. Now, generally speaking, that isn’t our fault as individuals. You and I don’t create headlines that make waves throughout Europe and Asia.
While average Americans aren’t directly responsible for this, our federal officials are. I’ve written recently about President Obama doing things in Syria that are worsening the conflict there. I’ve also written about the fact that he and Russian President Vladimir Putin are starting to butt heads. And finally, I’ve warned time and time again that war is upon us – and everyone knows but the US.
Michael Morell is the director of the CIA. Here’s a little blurb from Wikipedia about him.
Michael Joseph Morell (born September 4, 1958) is an American intelligence analyst. He served as the deputy director of the Central Intelligence Agency as well as its acting director twice, first in 2011 and then from 2012 to 2013. Since November 2013, he has been a Senior Counselor to Beacon Global Strategies LLC. He is a proponent of the CIA’s use of enhanced interrogation techniques which many consider to be torture, and is also a proponent of the CIA’s targeted killings by drones.
Wow, and just think. He’s a guy that has almost unfettered power to call a hit on anyone in the world.
This video shows us how the global situation is being manipulated towards war by our own Central Intelligence Agency. Watch as Michael Morell boasts about how the CIA operates – and then watch as his boasting comes to life.
This is the creepy, sadistic little puppetmaster that is going to deliberately get our sons and daughters sent off to fight the next war “for our freedom.” This is just more proof that nothing we see on the mainstream news is as it seems and that the federal alphabet agencies are never what they present themselves to be.
Immigration has been and will continue to be a hot button topic in the 2016 presidential campaign. Trump has called for a wall along the U.S. southern border with Mexico and a halt to all immigration from certain "countries of concern to national security." Meanwhile, Hillary has called for more relaxed immigration policies that would grant illegal immigrants a path to citizenship and a surge in Syrian refugees.
But, no matter where you stand politically on immigration, a group of the nation's "smartest" professors from the most elite schools in the country recently came together to publish a 500-page study for the "National Academies of Sciences, Engineering and Medicine" on the economic and fiscal impacts of immigration. After what must have been countless months of research, the report seems to confirm what most people could have derived from applying simple logic, namely that while immigration expands the economy it also negatively impacts the employment of low-skilled native workers and places undue burden on federal and state entitlements like food assistance programs and Medicaid.
The full 500-page immigration study can be reviewed at the end of this post but here are the key takeaways...
First, the study finds that the lower median age of immigrants is a positive offset to the aging U.S. population and serves to enlarge the economy but notes that the key beneficiaries are the immigrants themselves and not the native citizens.
Immigration enlarges the economy while leaving the native population slightly better off on average, but the greatest beneficiaries of immigration are the immigrants themselves as they avail themselves of opportunities not available to them in their home countries.
That said, low-skilled immigrants, which represented nearly 50% of the total in 2012, were found to have a higher employment rates than low-skilled natives indicating that U.S. citizens are being displaced at least at the lower bound of the income spectrum.
Shortly after arrival in the United States, immigrant men—especially recent cohorts—experience a disadvantage relative to native-born men in terms of the probability of being employed. However, for cohorts of immigrants arriving since the 1970s, after this initial period of adjustment in which their probability of employment is lower, they became slightly more likely to be employed than their native-born peers. The higher employment rate among immigrant men is mainly represented in the population with education of a high school degree or less.
Finally, first-generation immigrants were found to be more costly for entitlement programs than native-born citizens.
Beyond wage and employment considerations, policy makers and the general public are interested in the impact that an expanding population, and immigration in particular, has on public finances and the sustainability of government programs. All population subgroups contribute to government finances by paying taxes and add to expenditures by consuming public services—but the levels differ. On average, individuals in the first generation are more costly to governments, mainly at the state and local levels, than are the native-born generations; however, immigrants’ children—the second generation—are among the strongest economic and fiscal contributors in the population.
Immigrant households’ use of food assistance programs and Medicaid is much higher than that of native-headed households—not as a result of not working (in 2009, 95 percent of immigrant households with children had at least one person working) but because of lower levels of education and income.
But perhaps, Harvard University’s George Borjas summed up the study best by telling the Wall Street Journal simply that “the impact of immigration on the aggregate wealth of natives is, at best, a wash."
Perplexed global public opinion holds its breath at the (circus) best American “democracy” is able to conjure.
The first cage match this coming Monday between a Queen of War profiting from a mighty (Clinton) Cash Machine and a billionaire uber-narcissist adored by a “basket of deplorables”.
This is a circus quite fitting for a self-described “indispensable nation” where “evil” has been propelled – seriously – to the status of philosophical category.
For the basket of deplorables, and even beyond their circle, the temptation is immense to equate voting for Donald Trump with raising a finger against the establishment.
Ultra-savvy at playing mainstream media for invaluable free publicity, elevating Outrageousness to an art form and being impervious to irony and derision, Trump has been a master at tapping wave after wave of anger against the new liberal elite — including a nomenklatura of crypto-intellectual Ivy league-educated “experts” who could not give a damn about understanding the (real world) consequences of United States Government (USG) policies. The anger is manifested by declassified blue collars, the unemployed, the functionally illiterate, white trash. Whatever you call them, they are the excluded form the Neoliberal Banquet, not only economically but also culturally. But this being Trump, a master of self-promotion, the battle is more like Ego against The Establishment. And it gets juicier when we learn from powerful, discreet New York-based interests – supporters of Trump’s platform — about who’s really winning:
“The Trump campaign is hardly spending any money at all and holding all over. They may use their money in the last month after the debates if Hillary recovers for those debates from what appears to be an attack of Parkinson’s. He has a shot though no matter who wins I predict there will be peace with Russia; the oil price will rise; imports from Asia of military parts will be repatriated and rigging of currencies is over; there will be offsetting measures to stop the flood of immigrants and products under mis-valued currencies. The masters do not lose.”
The “masters” are of course the Masters of the Universe who really run the USG.
And here’s the clincher on how’s in control:
“Both sides are controlled and that explains everything. Lenin said that the way to defeat our opponents is to take over their leadership of the opponent. Look at the Moral Majority which Jerry Falwell disbanded when it became too powerful. Look at Ross Perot who exited when he started making a real dent. Both were taken care of and Ross made money out of it.”
“Their internal lingo for it is the concept of “dynamic silence”. This is a technique by the masters to block out all news coverage of let’s say a Nazi so that he could gain no following. That they could have done to Trump if he were not theirs. Who could have complained? He was just an apolitical real estate operator that no one was interested in.”
“So what do we have in the end? An entertaining gladiatorial contest that they control both sides of and the winner gets all the money — as with the Clinton Foundation. And the public is no wiser.”
The 24/7 Circus Maximus
There are subtle gradations to this scenario. Rothschild interests are not supporting Trump – according to these well-connected sources, because Trump has not been anointed by the club and is thus unreliable. They recall, for instance, how “Greenspan was so incompetent that Wall Street leaders had to give him trades so he could make money before they put him as the head of Federal Reserve. Then he was so out of it that they had to direct his every move as he had no comprehension what they do.” “They”, of course, meaning Rothschild interests. On the Cold War 2.0 front, things are even hazier. Since 2010, when Obama was ordered to keep the US nuclear first-strike strategy, Russia and China know where this is heading. It’s no wonder Trump is being relentlessly attacked as Putin’s own Trojan Horse – because he’s against Cold War 2.0 and the demonization of Russia.
But the Pentagon’s strident Ash Carter, soon out of a job, is one thing; another thing entirely is what the Masters of the Universe really want, according to these Trump-supporting sources; “Hillary would be following Trump’s guidelines should she win, as the US military will explain to her that she has no other options based on Russian military superiority in submarines, and defensive and offensive missiles. Trump’s policies are wise.”
There’s even a P.R. move that could literally devastate the already wobbly Hillary campaign:
“Hillary’s reckless threats against Russia, risking nuclear war, could bring back the Lyndon Johnson TV ads against Goldwater by Donald Trump, where we had a little child in a meadow picking flowers while a nuclear bomb goes off. It was an ad of genius and destroyed Goldwater. The first strike nuclear attack policy and the reckless provocations combine to form an excellent Johnson style ad. This time Trump can use it against the Democrats, who have created almost all the wars in the last 125 years.”
The daisy cutter ad is here.
A Force for Farce?
Even considering that virtually the whole US establishment – from the Beltway nomenklatura to Wall Street — is arrayed against him, the jury is still out on whether Trump is a real threat to their interests.
Because Trump could also be the perfect Trojan Horse. Evidence relies for instance on his appointment of perfect insiders Larry Kudlow and Steven Moore as his senior economic advisors. That’s the Trump as a Force for Farce scenario. So “dynamic silence” seems to be the rule. Here’s how dynamic silence works;
“If you oppose those above the President, the news media blacks you out and the masses do not hear anything, so how can they be stirred up? Donald is an insider and he represents the military industrial complex including the CIA, DIA, etc. They will deny it, of course, so they have deniability and he can say he is against the establishment when he is an insider.”
“That is the first line of defense. If you manage to outsmart them, then they characterize you as a nut. That is the second line of defense.
Now, if you persist in making them uncomfortable, then you end up as William Colby, Vince Forster or Jack Kennedy. Richard Nixon was ousted and he went quietly so that, to quote Tricky Dick, “I am not going to end up as Jack” as he went out the back door of the White House.”
“The key here is Donald is receiving more publicity than Hillary, and by attacking him for being an America Firster his polls have risen dramatically. The public loves it so the Masters of the Universe are helping him. The military industries have to be repatriated as we no longer control the seas and this will require either currency adjustments or tariffs. Hence, Donald’s correct calls for an end to currency rigging which had as part of their purpose the building up of Germany and Japan at the sacrifice of our industries. Absurd that we did that but that is how it was. That is ending now with Donald and the emergency situation of lack of control of the Pacific Ocean for the component transportation by sea for our military production. Japan and Germany will be cut loose.”
“Brzezinski said that if any opponent leaps ahead of the United States militarily, the US ceases to be a global power. That is the case and the military knows it. And Trump knows it or he would not have said that much. They need a crash program to catch up. That costs big money. It will probably require force and base reductions and an increase in technological expenditure in a massive way. That is what the Russians did. They can obtain this from massively reducing the welfare transfers on illegal immigrants. That is what Donald is committed to.”
If this analysis is correct, it ties in with Trump’s push to organize an immediate rapprochement with Russia in case he’s elected, so the US industrial-military-surveillance complex can catch up and at least try to remedy the danger of losing the next war Hillary and her own neocon bag of deplorables are so bullish on.
As we approach the first cage match, the jury is still out on whether the Queen of War may lose the election because millennials absolutely detest her, because the “basket of deplorables” absolutely detests her, or both.
But one thing seems to be certain in the whole Les Deplorables saga – at least for those Masters of the Universe-connected sources; who the real winner will be. So let’s give them the last word, for now; “It will be very difficult for Hillary to beat Trump in a debate as he is quick on his feet and will take no prisoners. Let me say this. If Hillary were to win, and we don’t think she will, she will do what she is told and follow the same policies as Trump would.
No matter the outcome of the presidential election, according to BofA's Chief Investment Strategist, Michael Hartnett, 2017 will likely be a year of small absolute returns as the bank expects higher rates will collide with high bond and equity valuations, but it will be a year of big rotations "as investors shift from ZIRP winners like bonds, US, growth stocks to ZIRP losers like commodities, banks and Japan", where BofA forecasts 20,000 on Nikkei, although for that to happen the currency would have to implode in what may be a terminal loss of faith in the central bank.
Still, with all attention now focused on the key risk event until a potential December rate hike, namely the November 8 presidential election, BofA provides 8 specific election trades for the election.
In a note titled "Eight election trades for Nov 8th", Hartnett shares a variety of trade ideas, some "election-specific and some result-dependent: long VIX futures; long AUDUSD vol; long TIPS; long global E-commerce, short fast restaurants (inequality); long US materials and largecap banks (fiscal); long US small caps, short emerging markets (Trump protectionist); long gold, short EU banks (Trump geopolitics); long Mexican peso (Clinton victory)."
This is what he says:
On November 8th, the US Presidential election will take place. Below we list eight trades, all specific to the election, some applicable to whoever wins, some dependent on the election result:
Long VIX futures. It seems an obvious trade, but the election is likely to be close (see latest projected electoral college result - Chart 4). There could even be a statistical tie in the Electoral College if Trump wins FL, OH, NC, WI, IA, and Clinton wins PA, VA, CO, NV, MI, NH, arguably the most volatility-inducing event of all. VIX futures are the most liquid expression of volatility, and ahead of the first Presidential debate, the cost of a Nov’16 hedge has fallen to the 19th percentile vs. the past year.
Long AUDUSD volatility. One way to invest in a risk-off scenario in the event of a Trump victory is long AUDUSD volatility. In our most recent FMS, a Republican victory was seen as a much greater “tail risk” for markets than a Democratic win. Trump has a more protectionist stance, and has threatened import tariffs against China, a stance that would unsettle Asian FX markets. David Woo recommends buying AUDUSD volatility to hedge election uncertainty. AUDUSD volatility is correlated with quant-fund selloffs: it is a top hedge for our BofAML MAST index.
Long TIPS. Populism is on the rise across the globe and both candidates have redistributive policies targeted at raising wages and reducing inequality. This could lead to higher inflation. It could lead to stagflation. Either way, it will likely be positive for TIPS.
Long Main Street, short Wall Street. Both candidates want to boost Main Street rather than Wall Street and thus propose higher minimum wages, paid family leave and higher taxation on the rich. This would be positive for US municipal bonds (U0A0). Main Street-Wall Street pair trades: long global E-commerce (BIGECOM), short fast restaurants (BINAFCRC); long mass retailers (BRUSMASS), short luxury goods makers (SPGLGUP).
Long fiscal stimulus. Best way to leverage fiscal stimulus under either president is via infrastructure spending and defense spending. Clinton has proposed $1.65tn of additional fiscal spending and Trump has proposed $2tn, according to the justreleased Committee for a Responsible Federal Budget report; Congress-approved budgets are likely to be significantly lower. Nonetheless, the direction is clearly toward more fiscal stimulus. Long US aerospace & defense (S5AEROX), US materials (S5MATR), and large-cap banks (S5BANKX). Fiscal stimulus is the primary reason our rates strategists see higher US bond yields in 2017.
Protectionism pair-trade: anti-globalization is on the rise, and Trump has a more isolationist/protectionist agenda; our economists believe that the Trans-Pacific Partnership is at greater risk under Trump; a reduction in global trade would likely be most negative for EM and the mercantilist economies of Germany and Japan; should US protectionism lead to a bout of inflation in the US, we think US small caps would benefit from inflation and have less foreign exposure. In our view, the best protectionist pair trade: long US small caps (RTY), short emerging markets (MXEF).
Geopolitical pair-trades: a Trump win could mean lower capital flows to the US, a rise in Treasury yields, and a weaker US dollar, all of which would be positive for gold. A Trump victory would also raise expectations that populist parties in Europe in 2017 could rise to power and increase the European Union disintegration risk premium. Long gold, short European banks (SX7E).
Short USD/MXN on a Clinton victory as MXN appears 15% undervalued after better Trump polls. Long health care services (SPSIHPTR), short biotech (XNBI). Best way to leverage a Clinton win, with promised tax break for health care services versus higher pharmaceutical regulation.
Colorado has been a key swing state in recent presidential elections after flip-flopping back and forth between support for Democratic and Republican candidates. Obama won the state in the past two elections but George Bush prevailed for the two preceding contests while Bob Dole narrowly eked out a victory against Clinton in 1996.
That said, the margin of victory has often been very tight in Colorado which is what makes the recent discovery of voter fraud there so concerning. An investigation by CBS Denver recently found that dozens of deceased Colorado citizens continued voting multiple years after their death...even though Colorado Secretary of State Wayne Williams assured CBS that “it is impossible to vote from the grave legally.” While we're disturbed by the voter fraud in Colorado, we're so glad that the legality of the issue could be cleared up so easily.
According to CBS, one of the most glaring cases of voter fraud they found was of Sara Sosa who lived in Colorado Springs. Sosa died on Oct. 14, 2009 but CBS found that she continued to cast her ballot in 2010, 2011, 2012 and 2013. Likewise, her husband, Miguel, died on Sept. 26, 2008 but voted later in 2009.
Colorado's Secretary of State confirmed the cases of voter fraud discovered by CBS, saying:
“We do believe there were several instances of potential vote fraud that occurred. It shows there is the potential for fraud. It’s not a perfect system. There are some gaps."
Of course Colorado isn't the only place where voter fraud occurs. Project Veritas recently recorded a series videos in Michigan showing just how easy it is to vote as someone else. In the following video, the Project Veritas journalist claims she is Jocelyn Benson, the Dean of Wayne State University Law School, but that she lost her ID. The "Poll Supervisor" is quick to reassure Mrs. Benson that as long as she signs the affidavit on the back of the ballot she is free to vote. When the journalist pushes back and insists that she feels an obligation to prove her identity the Poll Supervisor reassures her that "nobody can vote twice" because if the real Jocelyn Benson subsequently comes in she won't be able to vote "because you already voted." Perfect logic if we understand it correctly. So just to clarify, each registered voter only gets one ballot...great, this seems reasonable...but it doesn't necessarily matter so much who casts that ballot...wait, what?
PV Journalist: "I feel like I should prove that I am who I am."
Poll Supervisor: "Your word is your proof is right here."
PV Journalist: "And that's fine?"
Poll Supervisor: "Yup. Because if somebody else comes in and says that they're you, they can't because you already voted. So, you can't vote twice, nobody can vote twice. So once you vote, I don't care who you are."
PV Journalist: "You guys are fine with me just voting."
Poll Supervisor: "Yup I'm fine. You're not the first one that's left you ID at home.
All signs point to a very interesting 2016 election. Which candidate do you think appeals to dead voters the most?
China's favorite offshore money laundering hub is officially no longer accepting its money.
According to data released by British Columbia’s Ministry of Finance on Thursday, foreign investors officially disappeared from Vancouver’s property market last month after the local government imposed a 15% surcharge to curb a record-shattering surge in home prices. Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value.
According to the latest data overseas buyers snapped up C$2.3 billion of homes in the seven weeks before the tax was imposed, and less than C$50 million in the next four weeks. The government began collecting data on citizenship in home purchases on June 10. The ministry said auditors are checking citizenship or permanent residency declarations made by buyers and also reviewing transactions to determine if any were structured to avoid tax (spoiler alert: most of them were).
Across the province, the participation of foreigners dropped to 1.4% of transactions by value in August, from 13% in the preceding seven weeks.
Prior to the new real estate tax home prices were almost double the national average of C$473,105; however we expect a sharp corretion in the coming weeks - as we pointed out at the beginning of September, the average price of detached Vancouver properties promptly crashed following the news tax, dropping 17% on the month, and 0.6% on the year, to C$1.47 million ($1.13 million) in August, wiping away one year of gains in a few weeks.
As Bloomberg notes, the plunge in foreign participation joins other signs of a slowdown in Canada’s most expensive property market.
The silver lining is that while transactions may have ground to a halt, the government did pick up some extra tax revenues: British Columbia has raised C$2.5 million in revenue from the new levy since it took effect. Budget forecasts released last week indicated that the Pacific coast province expects foreign investors to scoop up about C$4.5 billion of real estate through March 2019.
That may prove optimistic, because as reported two weeks ago as Chinese buyers wave goodbye to Vancouver, they have set their sights on another Canadian city: Toronto.
According to the Star, sales of $1-million-plus Toronto-area single-family homes rose 83% year over year in July and August. That’s 3,026 homes, with 55 per cent of them inside Toronto’s borders. That’s not entirely surprising given that the average cost of a detached home in Toronto was about $1.2 million, said Sotheby’s CEO Brad Henderson.
“While $1 million is still a considerable amount of money, it’s difficult to find a single-family home in the city of Toronto for less than $1 million and it is not uncommon to find homes in the $2-million, $3-million or even $4-million-plus range,” he said.
Sotheby’s says sales of homes in the $4-million-and-up category rose 74 per cent in the region and 58 per cent in the city in July and August. Sotheby’s said it expects Toronto’s luxury market to take the lead among Canada’s cities, outpacing Montreal, which probably will become a target for investors from Europe, China and the Middle East.
“What the (Vancouver) tax introduced is . . . some uncertainty as to what other policy issues the city or the province may introduce, which would adversely affect investors,” Henderson said, adding that investors are looking elsewhere, including cities outside Canada.
“But, if they are looking in Canada, we believe Toronto will be the most logical place for people to consider. Montreal and Calgary will probably also get a look-see,” Henderson said.
Or maybe not.
As CBC reported earlier this week, economist Benjamin Tal of CIBC said that Ontario will have little choice but to copy Vancouver and implement a tax on foreign house buyers. In a recent note to clients, the economist said the biggest problem facing policymakers with regard to hot housing markets in Toronto and Vancouver is a limit on the supply of new homes.
"The main reason behind higher prices in the [Greater Toronto Area] is a policy-driven lack of land supply," Tal said. "And with no change on that front, policymakers have to use demand tools to deal with what is essentially a supply problem."
Tal doesn't speculate how much of a tax could be under consideration for Toronto, nor does he have any insight as to when and how it might be implemented.
A foreign buyer tax is not the only possible response to the problem of high house prices. Among other possibilities, Tal cites:
- Compelling banks to tighten their lending practices by making them pay for their own mortgage insurance.
- Raising the down payment minimum to 10 per cent, even for homes under $1 million,
- Closer monitoring of lending to subprime buyers.
- Offering tax incentives to developers to make more purpose-built rental buildings, including more flexible rent control rules, as ways of cooling Toronto's housing market.
Tal says Toronto's housing market has been inflated by cheap lending to people who would have no business getting a mortgage if rates returned to more typical levels.
Of course, if Toronto does what Vancouver did and tries to spook away foreign buyers, the housing bubble will simply keep jumping city to city, first in Canada, then in move to the US, and back over to Europe, until soon the entire world makes it clear that China's $30 some trillion in deposits that are just itching to be parked offshore are no longer welcome, forcing the Chinese government to finally deal with the alarming consequences of its own unprecedented monetary injections, which now amount to some $4 trillion in new money creation mostly by way of bank "loans" (and thus deposits) every single year.
Alan Greenspan is confused – again. The man who admitted to the world a decade ago he didn’t know much if anything about interest rates is now trying to change that reputation by suggesting yet again interest rates are set to rise. In testimony before Congress in February 2005, the then-Chairman of the Federal Reserve actually said:
For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum. Bond price movements may be a short-term aberration, but it will be some time before we are able to better judge the forces underlying recent experience.
To an economist, it was a “conundrum” especially where econometrics and statistics and take the dominant view (if it can be called that). That is one facet to the Greenspan story that is so odd yet so compelling in all the wrong ways. Though he was an economist by schooling, he had more practical experience in the “real” world. He served on boards of such illustrious companies as Alcoa, General Foods, even Mobil. But he was also a director for JP Morgan and Morgan Guaranty.
He should have known better, as his infamous 1966 essay on gold reveals. Thus, we can reasonably assume that what transformed his worldview was not economics (small “e”) but rather power. Not only had he been appointed to major corporate boards, he was heavily involved in politics, including the kinds that are the stuff of conspiracy theories.
By 1995, as Fed Chairman, Greenspan was widely and wildly credited as guiding the US economy through what he claimed was an existential crisis with the Savings & Loan industry bust. Though George HW Bush would blame Greenspan’s Fed in part for his 1992 election lost because of the first “jobless recovery” (a major clue no economist or policymaker investigated honestly), by the middle 1990’s it was believed he had created the recovery itself and then tamed it when he raised rates in 1994 and engineered what many still call a “soft landing.” There have been many who have been dubbed the “bond market king”, but for a long time Dr. Greenspan’s status in that regard was a cut above.
His confusion and “conundrum” in the 21st century belies the reputation that had been given him in the 20th. The US (and global) economy of the middle 1990’s didn’t bother about rate hikes because there were other processes at work, especially with the S&L’s no longer a further restraint on finance (yes, restraint). With traditional banking all but relegated to second tier status, wholesale finance of the eurodollar had been given an unrestricted path to all marginal growth – money as well as credit.
And Alan Greenspan knew it, or at least he knew of it and what it was doing. Many times during this period he would acknowledge the changing nature of money including in his “irrational exuberance” speech. By the dawn of the new millennium, that’s all there was – eurodollars were the dominant setting. The real world got a close look at what it was doing first with the dot-com bubble and then the mania of the coincident housing bubble. Overseas, the eurodollar system was financing the EM “miracles” in what might fairly be called the third major bubble (the one yet to be fully reckoned with, though in some places like Brazil it has started to be).
By the middle 2000’s, monetary behavior was no longer as economists had come to expect and what they had encoded in their econometric models. In trying to reconcile the bond market with those models, Greenspan had his conundrum which Ben Bernanke put into the concept of a “global savings glut.” It was the final signal that economics, especially mainstream monetary economics, had lost all connection with actual, operative finance.
Because, however, his pedigree and credentials remain impeccable, his opinion still carries some weight; that is the world we live in, especially where the media is concerned. It doesn’t matter how much you failed, it matters where you went to school and what jobs you held while you failed. Appearing on BloombergTV yesterday Dr. Greenspan claimed yet again that the treasury bull market is over with, and once more demonstrating his confusion.
“Whenever you have a bull market, it looks as though it is never going to turn,” Greenspan, the second-longest serving Fed chairman, said in an interview on Bloomberg Television. “This is a classic case of a peak in a speculative security.”
I doubt there was any mention of his other such “calls” between his “conundrum” and now, including one just last year. Speaking at a private conference in DC in May 2015 before “global turmoil” erupted globally (it was only “overseas turmoil” at that time), Greenspan said:
Just remember we had the taper tantrum. And we are going to get another one.
He made that proclamation as interest rates were, in fact, rising. In late January, the 10-year UST yield had fallen all the way below 1.70%; but from that point through the spring interest rates had been increasing again as Janet Yellen’s “transitory” theme seemed to gain evidence. By the time Greenspan spoke of this next “tantrum”, the 10s had moved back up in yield to around 2.30%. Rather than continue toward 3.30% as he was suggesting, the benchmark bond yield would be nearly 1.30% by this July and proving yet again he is nothing more than an empty suit with a filled out resume.
It’s not just that he has been wrong about the direction of interest rates, it is why he has been wrong but more so because it perpetuates this same, very basic financial misunderstanding. In putting together the story on Greenspan’s BloombergTV appearance, the article’s authors clearly share the former Fed Chair’s muddled misunderstanding.
Investors globally have regarded monetary policy with growing skepticism that there’s more central banks can do to stoke inflation and economic growth. Asset-purchase programs and negative interest rates have pushed yields on more than $9 trillion of government securities worldwide below zero, according to Bloomberg Barclays index data. The European Central Bank triggered a global selloff this month after signaling it wouldn’t pursue further stimulus.
This is all demonstrably false and backward. The bond market hasn’t sold off because it is just now losing faith in central banks; bond rates have been falling for years as that market no longer has any faith in them whatsoever. The history of UST yields since 2007 is, pardon the pun, unyielding on this score. Bond rates rose in the aftermath of the panic because of ZIRP and all throughout QE1 as bond market participants didn’t understand what QE actually was. Believing it to be actual money printing, bond rates reflected both increased inflation and economic growth that were judged likely to result – only to stumble into shocking illiquidity in early 2010.
To that, the Fed responded with QE2 and the process started all over again. Treasury rates rose once more, not fell, while the Fed was purchasing UST’s – only to stumble all over again into even more shocking illiquidity in the middle of 2011 that finally registered as the realization of this eurodollar chasm between money and the actual role of bank reserves. Yet, despite all that, the bond market gave the Fed one more chance, though this time it was after QE3 and QE4, waiting to act in the same manner only when the Fed was willing to taper them. In other words, the bond market on the third try demanded some confirmation first that QE had worked before reflecting expectations of inflation and growth. The idea of taper itself was that confirmation; thus, the “tantrum” of 2013 wasn’t that the Fed was no longer buying bonds (at least as far as the treasury market was concerned) but that the bond market judged the success of QE at that point in time the most likely.
It didn’t last, of course, and ever since the bond market no longer has much faith in “stimulus”, harkening back to the questions about money and balance sheet expansion exposed by the 2011 crisis. Declining yields and a flattening curve leave no doubt as to the scenario that has been expected, one that has already been proved true. These periodic, almost regular selloffs that occur are not “growing skepticism” of global monetary policy, rather they are the brief and comparatively subdued flirtations with renewed faith that policy might achieve some results. And, as usual, those hopes are dashed in relatively quick fashion by reality.
Economists view everything in finance through the filter of monetary policy, and therefore attribute all results to that perspective no matter how illogical and strained. That is why their view of the world is so often upside down and/or backward. It is the legacy of the myth of the “maestro.” There is no reason, however, for that to have become and further remain the mainstream view propagated through the media. Greenspan’s credentials say nothing; his track record is all that should matter when judging the worth of his opinions. He doesn’t know what he is talking about and there is a mountain of evidence, including his own words, that show that he never did.
We are stuck in this economic depression not just because of his past tenure, but more so now because constant reverence prevents acceptance of these facts. The recovery doesn’t start until the “maestro’s” legend dies, and with it all the confusion and misconstruction about how markets and the economy actually work.
Hedge funds are in a sorry state, so funds that show impressive profits are real standouts.
Last month, the track record of one such fund came across my desk.
It was flagged by a hedge fund investor because the performance was so good that the investor expressed disbelief about it. I wondered how the fund made money like this.
It turns out, it's a difficult question to answer because the fund in question doesn't want to explain how. And that tells you a lot about how hedge funds work.
While there are high-profile investors, such as activists, whose every move is known, for most of the industry secrecy is an important part of the game. Particularly if they are small, hedge funds don't have to tell regulators much about their strategies, even if they have outside investors. These strategies can be so complicated that it's impossible to work out from the outside. It's one reason that hedge fund investments aren't open to just anyone; you've got to meet certain thresholds for income or assets that basically ensure you've got money to lose.
The fund manager in question is called (appropriately, perhaps) BlackBox Group. BlackBox is based in New York, but few people — among the hedge fund managers and the consultants who help big investors find funds — have heard of it. That might be because it's tiny. The fund manages $17 million — peanuts in the world of hedge funds — according to a regulatory filing.
As for the performance that caught the potential investor's eye? In 90 months of reported returns, the fund has had only four down months. On average, BlackBox's fund posted 12.3% a year from March 2009 through August 2016, according to documents sent to potential investors. By comparison, the median hedge fund returned 6.1% net a year over the same period, according to the Absolute Return composite index.
The people running BlackBox — Brian Jones, the firm's chief technology officer, and Michael Salemi, a portfolio manager for the firm — aren't interested in talking about it. They didn't return emails or phone calls seeking comment. A lawyer who represents BlackBox, Mark Ruddy, declined to comment and said that BlackBox has a policy of not speaking with the press.
One person I spoke with, who claimed to be an investor in the fund but asked not to be identified, says he didn't know how it makes money.
BlackBox describes its strategy (somewhat) in its documents, though it's not enough for anyone to be able to replicate. The kinds of trading it refers to — black-box and gray-box — are basically driven by computers that find opportunities in the market to exploit. That is not, on its own, unusual. Black-box trading is entirely computer-driven, and gray-box means a human is involved in the process.
"BlackBox specializes in multi-frequency systematic and algorithmic trading of equities and futures using statistical-arbitrage and relative-value strategies spread across a portfolio of uncorrelated strategies. The firm engages in both pure black-box and grey-box trading, utilizing the strengths of human research skills and risk management and a systematic, computer driven approach to strategy execution."
"The trading platform has been in development for over a decade. Strategies include structural equity pairs, futures relative value, and intra-day directional equities and futures momentum and mean reversion. Currently AUM allocation is 80% equities and 20% commodity futures."
Hedge funds closely guard their strategies. For instance, the world's biggest hedge fund, $150 billion Bridgewater Associates, is said to keep its strategy close to only a few people. Bridgewater's external PR firm didn't respond to a request for comment on its strategy.
There's a good reason for the opacity. The funds don't want to give up their secret sauce, which can then be replicated by competitors. Yet it underlies a frustration that some investors in the funds have, in that they don't really know how their money is being invested.
As for BlackBox, the performance is eye-catching, and it caught the people we asked about it by surprise. "Some of the best minds on Wall Street trade in these markets, and no one has figured out how to make 1,200 [basis points] over LIBOR and never lose money,” says Andrew Beer, managing partner at Beachhead Capital Management, an investment adviser.
Despite the consistent returns, BlackBox says it has lagged behind the S&P 500, but it did so with less volatility.
BlackBox's documents show that it has a Sharpe ratio of 4.7. Sharpe ratios measure returns while considering the risk taken to produce those returns; anything above 1 is a decent return, and a Sharpe ratio of over 3 is seen as very difficult to attain.
Benn Eifert, a volatility portfolio manager who previously worked at Mariner Investment Group, says that's only plausible if the fund is investing in niche markets where it'll never be able to deploy substantial amounts of capital. In other words, BlackBox won't be able to keep this up if it grows any larger.
"Overall I'm skeptical," Eifert says. "These guys are showing 4.7 over long periods of time. That is getting into territory that is really only plausible for highly capacity-constrained market-making strategies and pure high-frequency."
BI EXPLAINS: What is a hedge fund?
A new, high-profile hedge fund has made some big hires.
Ben Melkman, a former partner at Brevan Howard, is launching a new fund called Light Sky Macro in New York.
The fund is targeting $400 million and a launch date in the first quarter of next year, Business Insider previously reported in our roundup of upcoming launches.
Melkman is known for his lead role at Brevan's $500 million Argentina fund, which delivered an 18% return since its inception.
Melkman's new hires include Barry Schachter, who is joining as chief risk officer and a partner. Schachter previously held the same role at hedge funds Caxton Associates, SAC Advisors, Balyasny Asset Management, and Moore Capital. His most recent hedge fund job was at 40 North Management, which he left at the end of last year, according to a LinkedIn profile.
Alberto Ades is joining the new launch as head of research. He was previously cohead of global economics and head of global emerging-markets fixed-income strategy at Bank of America Merrill Lynch from 2010 through March of this year, according to a LinkedIn page. He has also held macro research roles at Citigroup and Goldman Sachs.
Douglas Spiegel is joining as CFO and CCO, and he previously held the same roles at Realm Partners, an event-driven hedge fund, from 2009 through last year, according to a LinkedIn page. Before that, he held the same roles at Sanno Point, a credit relative-value hedge fund, from 2004 through 2009.
Joseph Mauro, a Goldman Sachs partner, is joining the fund October 1. Mauro previously headed Goldman's European hedge fund coverage across fixed income, emerging markets, FX, credit, and commodities. Business Insider reported his departure in June.
While he was at Goldman, Mauro wrote a memorable memo to junior staff that put the industry's troubles in perspective.
The story of John McAfee going from an antivirus-software mogul to a man fleeing Belize on questions about a murder has been chronicled numerous times, but exactly why he had to leave paradise in 2012 is still shrouded in mystery.
Oscar-nominated documentary filmmaker Nanette Burstein ("On the Ropes," "The Kid Stays in the Picture") went down to Central America to find the truth in her new movie, but as with many things related to McAfee, it's layered with more questions than answers.
"Gringo: The Dangerous Life of John McAfee," which recently had its world premiere at the Toronto International Film Festival and will air on Showtime on Saturday, is a revealing look at McAfee's time in Belize from the locals who were there alongside him and some who claim they committed violent acts on McAfee's orders — including murder.
In 2012, a neighbor of McAfee's in Belize, Gregory Faull, was murdered. Sought for questioning as a "person of interest," McAfee fled to Guatemala, and after being arrested there on accusations of entering the country illegally, he suffered heath-related issues and ultimately was expelled from Guatemala and sent back to the US, where he has lived since.
The murder case of Faull has never been solved.
In "Gringo," Burstein travels to Belize and gains the trust of McAfee's associates, members of his security detail, and numerous women to learn of McAfee's alleged involvement in not just the Faull case but other crimes.
McAfee (who has contributed to Business Insider in the past) declined to be filmed for the movie, but Burstein does include correspondence the two had via email.
"I've always been fascinated by people who are under the spotlight of coming from fame, money, power, and how that affects them," Burstein told Business Insider at the Toronto festival. "So John is someone I read about when he was escaping to Guatemala, and there was tons of press, but I still had a lot to learn. There were a lot of surprises along the way."
In October of last year, Showtime approached Burstein with the idea to do a story about the Belize episode in McAfee's life. (A year earlier, Spike TV asked her whether she wanted to make a film with McAfee's involvement, for which she would follow him around for a year. She declined. It has since been made into the series "The McAfee Project.")
An executive producer for the Showtime doc, Jeff Wise, who has written numerous stories about McAfee, and fellow producer Michael Hirschorn presented Burstein with a promo tape of interviews they put together of revelations about McAfee from his associates in Belize.
"I was like, 'Now, this is interesting,'" Burstein said.
She jumped on a plane and went down to Belize to begin work. One of the first people she met was through Wise. That person was Eddie McKoy, a local who is known for his ties to gangs in Belize and who goes by the nickname "Mac 10" (like the gun). Having at one time planned to kill McAfee, he ended up being a part of his security detail, according to the film and stories by Wise.
And in the towns of San Pedro and Orange Walk, McAfee's old stomping grounds, Burstein quickly stood out as the woman who was doing a story on the eccentric millionaire who once lived there.
Though the setting was extremely intimidating, Burstein says being a woman in that environment was actually a huge advantage.
"Tough guys like Eddie McKoy saw me as a sister and they were nice to me and respectful," Burstein said. "They would speak to me in a different way than if I was a guy. And the women, because they were younger than me, this maternal thing was happening."
After a few weeks on the ground, Burstein began to get into McAfee's inner sanctum in the country and found some chilling revelations.
The alleged $5,000 hitman
Burstein uncovers allegations about the Faull murder. Most notably, McAfee's caretaker, Cassian Chavarria, claims on camera that McAfee ordered him to wire $5,000 to McKoy with instructions to kill Faull because McAfee thought Faull poisoned his dogs. When Burstein confronts McKoy in the movie with this information, however, he denies it.
She also learned that the allegations about McAfee's time in Belize don't end there.
A man named David Middleton, whom subjects in the film say McAfee suspected of breaking into his house in Belize, was beaten to death. Men who claim to have been involved in the beating speak in "Gringo" about the incident, saying McAfee hired them.
Then there's a disturbing recollection by microbiologist Allison Adonizio, who was working for McAfee developing antibiotics derived from jungle plants in Orange Walk. She alleges McAfee drugged her one night and raped her.
The director acknowledges she had to be careful not to be susceptible to the rumormongering in Belize, however.
"That was one of the hardest parts of this film, trying to decide what is true and what is an exaggeration, because there's definitely a huge rumor mill in Belize," Burstein said.
In the film, Burstein attempts to ask McAfee questions about what happened in Belize by cornering him at a debate for the American Libertarian Party in New York (McAfee was a 2016 presidential candidate). Once he realizes who she is, however, he walks away. This leads back to an email conversation, one in which McAfee calls Burstein "Satan."
'If I'm going to be crucified, I want to have some fun out of it'
If spending months in Belize trying to gain the trust of people to talk about potentially criminal details weren't stressful enough for Burstein, once in postproduction and faced with a July deadline to lock the movie for Showtime, she endured continued correspondence with McAfee and others in his inner circle.
"As soon as I found out Jeff Wise was involved, at that point I decided I would just start messing with" the film, McAfee recently told Business Insider over the phone of his side of the events. "If I'm going to be crucified, I want to have some fun out of it."
McAfee claims that the email correspondence between Burstein and him featured in the film was not authentic because he never wrote any of the emails. According to McAfee, he hired a group of people to impersonate him in emails with Burstein.
Asked why he didn't just refuse to communicate with Burstein at all, McAfee told us: "Here's the issue, Nanette and Jeff Wise had their minds made up before they even went down there, so why not? I knew it was a film that, without anything from me, what would it be? Seriously, what's a documentary about John McAfee with nothing from John McAfee?"
Burstein, on the other hand, told Business Insider that when she got involved with the film, McAfee was willing to be interviewed but only if he got a share of the film's profits. McAfee says this is false.
Burstein is convinced that McAfee was the author of all the emails she received.
"I would be shocked if I was catfished," Burstein said, using the term for someone duped by a false identity online. "I really would, given that the people that were coming out pretending to have impersonated him did not sound like they could actually pull that off."
Burstein believes her theory was confirmed when McAfee's daughter called her.
"She wanted to make sure she wasn't in the film — she's not," Burstein said. "And I don't know if she was trying to find out stuff for him. She was like, 'My dad is really worried that there's more than one murder [featured] in the film,' and I just didn't say anything."
But when Burstein brought up to McAfee's daughter the suggestion that the emails were not really from her father, according to Burstein, she said, "That's ridiculous, he would never do that, he's a total control freak, he has to do everything himself."
But that's not the only way in which McAfee has picked at the legitimacy of "Gringo."
Before finishing the film, Burstein got word that McAfee posted a video on his YouTube channel that features people from her movie stating on camera that Showtime paid them to say McAfee was behind the crimes discussed in the movie.
The video posted by McAfee includes McKoy and Chavarria saying Showtime paid them.
Burstein, who said she and Showtime did not pay anyone for interviews (but did pay some subjects a nominal fee for use of photos they had of McAfee after the interviews took place), quickly called Chavarria, the man who in the film says he's the one who paid McKoy on the orders of McAfee to kill Faull, after seeing him in the YouTube video.
"I called Cassian and recorded it on my phone. I asked why he would say this," Burstein said, "and he said John paid him $1,200 to say it. That he needed the money. I said, 'Did you lie to me? I cannot put in the film something that's not true.' And he said, 'I swear to God, put it in the film. I would not lie to you — I want to get this out.'"
When contacted by Business Insider, Chavarria did not corroborate Burstein's story. Instead, he said Burstein paid him to lie about McAfee in the movie. When asked to present proof of payment, he didn't respond.
Showtime sent Business Insider the following statement about the accusations that subjects in the film were paid for their stories: "Showtime Documentary Films does not pay subjects for their interviews. We fully support 'Gringo' filmmaker Nanette Burstein and applaud the bravery of those interviewed in the film."
Burstein also sent the following statement: "I am confident that all the interviews I present in 'Gringo' are true. None of my subjects were paid by me or Showtime Documentary Films for their interviews. The people in the film voluntarily came forward to share their stories with me. I truly admire their courage, but understand that under duress, and in light of the vast resources available to John McAfee, these subjects could be pressured to recant their statements."
I swear to God, put it in the film. I would not lie to you — I want to get this out.
McAfee, for his part, told us, "Showtime has done the most disgraceful things to these people in Belize, and I'm trying to bring this to light."
He then sent Business Insider photos of documents from the Supreme Court of Belize in which locals interviewed for the movie say they were paid for what they said.
McAfee also posted more government documents from Belize authorities saying the information in the movie isn't valid in a post on the site for the cybersecurity technology company MGT Capital Investments, of which he is the CEO. In the post, he addresses the rape allegation by Adonizio, which he denies. (The Belize government did not immediately respond to Business Insider's request for comment.)
Burstein told us of the official Belize documents: "What can you do? The guy pays people to do s---."
The 'threatening' texts from McAfee
Burstein calls "Gringo" the most bizarre movie she's ever made and acknowledges that at one point it got very scary for her.
After trying to get McAfee on camera at the Libertarian Party debate, she says, she started receiving emails for the next 24 hours from McAfee that she calls "threatening." Afterward, Burstein says, she received a text message from McAfee stating: "I want to send you something very precious to me. I need an address where you can sign for something."
"My husband was away, I was alone, and the last [email] before the text he called me Satan, which I put in the film," Burstein said. "I didn't know if he was still in New York and he's got an armed security guard who is licensed to carry. I was scared at that moment."
Nothing ever came of it. When asked about the text, McAfee told Business Insider he did text her but only to inform her about the video in which people said Showtime paid them to lie about him. He denies ever asking for Burstein’s address.
But after McAfee first spoke with Business Insider about the text, Burstein sent us a screenshot of the text he sent her asking for her address. When confronted with this, McAfee changed his story and admitted asking for her address but said he did so only to send her back a jar of Marmite that she had sent to him. (Marmite is a food spread common in the UK and Australia.)
"I had already told her how precious Marmite was to me," he said. He believed she was trying to poison him with the Marmite. (This is not the first time McAfee has apparently misled a reporter, having previously sent journalists phones with malware trying to convince them that he had hacked the encryption used on WhatsApp, according to Gizmodo.)
Regardless of whether "Gringo" convinces you that John McAfee is a murderer, as some say, or that he's a victim of a Belizean government plot to kill him, as he claims, it is certainly not short on stories.
In fact, Burstein says that while in Belize she heard McAfee's name tied to more killings than she highlights in the movie.
"I didn't put those [allegations] in the film because I couldn't substantiate enough," Burstein said. "But there were others that were talking, but I didn't know if they were true, and didn't find the people who were directly involved, like the murders in the film."
So would McAfee — who denied on numerous occasions to Business Insider that he was responsible for the deaths of either Faull or Middleton — be shocked if in the future he is linked to other murders in Belize?
"I wouldn't be shocked at all," he told us. "The governor of Belize is certainly not a friend of mine, and I'm certain they would use whatever comes out in Showtime to their advantage, so I wouldn't be shocked at all."
Deutsche Bank's top European equity strategists published a big note on Tuesday examining the risks of a US recession.
In short, all the warnings signs that preceded the previous three recessions are here.
This time, however, there may not be reason for all-out panic.
"We agree with our economist's projection of a 30% recession probability over the coming 12 months," Sebastian Raedler, head of European equity strategy, and his team wrote in the note.
Here are the four indicators that popped up before the recessions in 1990, 2001, and 2008, according to Deutsche Bank:
- There's already a recession for US profits. They've been sliding since they peaked in the second quarter of 2014.
- The Fed's Labor Market Conditions Index, a tracker of multiple indicators, turned negative in August. A subzero reading was followed by a recession five times in the last 40 years.
- Capital-expenditure growth has turned negative, down 2% over the past year.
- Default rates are rising.
Like Deutsche Bank's strategists, the rest of the market is not worried that these things would cause an immediate recession either. In fact, they are pricing in a 1986-style scenario. That year, all the same recession indicators were present, but the recovery continued for another four years.
The consensus forecast is for US earnings growth to rebound next year, and measures of stock-market volatility are low.
Raedler noted a few other things that made the absence of a recession in 1986 look unique. It was the only year in the previous 60 when US corporate margins declined without this leading to a recession. It was also the only period in 40 years when a recession did not happen even though capital-expenditure growth declined.
But there are a number of reasons to be cautious, the strategists said.
For one, that 30% probability of a recession could rise if indexes measuring the services and manufacturing sectors fall any further, Raedler said. In August, the Institute of Supply Management's manufacturing index showed that the sector contracted.
Besides that, Raedler said corporate profit growth is likely to remain weak, as the cost of labor continues to rise. Monetary policy also may not be as supportive of the economy as it was in 1986. The Federal Reserve's readiness to raise rates could nudge the dollar higher — a move that would make US exports less attractive.
If market predictions are correct, the Federal Reserve is unlikely to announce an interest rate increase after its two-day policy meeting concluding on Wednesday.
But the Fed could use its statement and press conference to indicate that it plans to continue raising rates, possibly in December.
David Rosenberg, chief economist at Gluskin Sheff, is one of a number of economists who think the Fed has no business raising rates right now.
He described it as cyclically sensitive GDP, which includes consumer spending on durable goods, housing construction, business capital expenditure, and inventory investment. It excludes spending by the government, on services, nondurable goods, and net exports.
"There may be a slate of reasons for the Fed to raise rates — to cure financial excesses, to assist savers, to ease the pressure in the pension fund and insurance industries, and to help banks expand their tight margins — but if it is about data dependency, we have a barometer here that has an 80% track record in predicting recessions.
"No slam dunk, there is no such thing, but the Fed seems willing to play with fire."
He noted that the indicator shrank at a 3.2% annual rate in the second quarter — the biggest drop since the end of the Great Recession in 2009.
Only twice since the 1960s has this kind of contraction not led to a recession, he noted.
"The big difference? In those two other such episodes, the Fed was cutting rates — by 150 basis points both times — as opposed to raising them (or threatening to do so)," he said.
Man AHL, a London-based quant hedge fund that manages about $19 billion, is trying to "demystify" how it makes money.
The new video, which you can watch below, explains "breakout trading," one of the most popular systematic trading strategies. Anthony Ledford, Man AHL's chief scientist, says in the video that the strategy is used to trade cash equities, futures, and FX markets.
The release follows an earlier set of videos made available last year, and is the first of several other videos that will go live later this fall. These videos are part of a broader trend, where once secretive hedge funds look to explain to potential recruits what they do.
Bridgewater recently released a series of videos that looks like something Facebook or Google would produce, while the giant quant fund Two Sigma released a video showcasing its annual artificial-intelligence competition.
"We hope that our new set of videos, which approaches fundamental concepts in an accessible and engaging way, will further demystify quantitative investing and provide an insight into what we do at Man AHL," Sandy Rattray, CEO of Man AHL and CIO of Man Group, said in a statement.
Quant investing has become one of the hedge fund industry's hottest areas, and those who have the right skill set are in high demand.
DON'T MISS: A hot new hedge fund just made some big hires
Twitter, which was once a darling of the tech industry and went public almost three years ago in an eye-popping IPO, appears to be up for sale.
We've seen this story with an internet company before.
In fact, the parallels between Twitter and Yahoo are rather striking:
A rotating cast of CEOs and executives with little direction; a powerful platform once seen as the future of the internet struggling with an identity crisis; questionable strategies for growth.
If it doesn't sell soon, Twitter risks setting itself up for Yahoo's fate: a decade-long stagnation in which no progress is made and company focus and morale are slowly drained by never ending takeover talks. The story ends with a desperate sale for a tiny fraction of its peak valuation.
Right now, Twitter seems to think it can fetch as much as $30 billion in a sale, about double its market cap as of Friday, Kara Swisher of Recode reports. Yahoo, which once had a market cap of about $125 billion, agreed to sell to Verizon for $4.8 billion this year. That was eight years after Microsoft offered to buy Yahoo for $42 billion — an offer that Yahoo's leadership stubbornly rebuffed.
If CEO Jack Dorsey and the Twitter board pull a Yahoo from 2008, they're setting themselves up for a drama vortex like the one Yahoo went through.
Looking for a miracle
Twitter would also be taking a gamble if it doesn't sell and tries to make it on its own. As The New York Times reported, one option the company is considering other than a sale is a restructuring that could include layoffs. But we've seen Twitter go through that before, and it hasn't helped solve its user-growth problems. As the saying goes — and as Yahoo proved through many rounds of layoffs and endless restructurings — you can't cut your way to growth.
Despite its many problems, Twitter is still an attractive asset.
It's an invaluable tool for news gatherers, celebrities, world leaders, activists, and marketers.
It has a treasure trove of untapped data, which probably looks pretty tasty to companies like Google and Salesforce. Twitter was the platform that a reality-TV star and real-estate tycoon used to promote himself all the way to the GOP nomination for the presidency.
No one can deny the power and influence Twitter wields, even with its relatively small base of active users.
But Twitter's company culture has always prided itself on being fiercely independent. The company turned down an offer from Facebook in its early days.
And while Dorsey, who is also a cofounder, doesn't control a majority of Twitter's voting shares (as Facebook's Mark Zuckerberg and Google's Larry Page and Sergey Brin do), it's not clear how amenable he might be to selling out — or how vigorously he might try to oppose a deal.
Depending on who the buyer is, an acquisition might not be at odds with Twitter's mission. Unlike Yahoo, which seems destined to be stripped-mined for valuable resources and left unrecognizable once Verizon gains jurisdiction over it, Twitter's service could actually flourish under a parent company that provides additional resources and leeway.
Unless Twitter has some miracle up its sleeve that the company is confident will supercharge growth to Facebook-scale, it won't be able to get a sweeter deal down the road than the one it can get now. Yahoo's "lost decade" could be Twitter's future.
Fixed-income investors would be doing a lot better if interest rates — and the yields on their investments — were higher.
As of September 12, the total global stock of negative-yielding sovereign debt was $10.9 trillion, according to a note on Tuesday from Fitch Ratings.
"Weighted average sovereign yields for the 14 countries with negative-yielding debt remain near all-time lows," wrote Robert Grossman, the head of macro credit, in the note.
The huge bond-buying programs of some of the world's largest economies along with investors' desire for a reliable and steady source of income has driven bond prices higher. And when bond prices rise, their yields fall.
This table shows that since 2011, investors that lent to the largest issuers of investment grade (the most reliable) sovereign bonds have seen their yield shrink by $487 billion in aggregate.
"As yields have fallen over the past five years, investors dependent on sovereign debt securities for income have suffered," Grossman said.
This chart below shows that if yields in 2011 still held today on negative-yielding bonds, investors would have earned annual returns of $125 billion, versus a current loss of $33 billion.
Japan still has the most negative-yielding debt for any country, Fitch noted, with $6.9 trillion outstanding as of September 12. That's 63% of the total $10.9 trillion global negative yield stock.
On Wednesday, the yield on Japan's 10-year bond rose to as high as 0.005% after the Bank of Japan announced that it would shift its policy strategy from expanding the money supply to managing interest rates.
It's been a rough year for mutual funds.
Goldman Sachs' equity strategists on Wednesday published an in-depth look into the year-to-date performance of 435 mutual funds that collectively oversee $1.5 trillion in assets.
Even after a stock-market rebound to all-time highs in the third quarter, most mutual funds, which manage various pools of money from 401(k) plans to college endowments, still lag their benchmarks.
Only 16% of large-cap mutual funds are outperforming their benchmarks year-to-date, Chief US Equity Strategist David Kostin and his team found.
That's below the 10-year average of 37%.
Just 9% of large-cap growth funds are outperforming the Russell 1000 Growth Index, versus the 10-year average of 39%, Kostin said.
Admittedly, nine months of 2016 is a very short time horizon to judge mutual funds on. But Goldman's note shows that the main reason for this underperformance has been managers investing in sectors that underperformed the market and shying away from those that did well this year.
Sectors that were most favored, like financial services, have seen the worst underperformance relative to the market.
However, strong sectors like utilities and telecoms — so-called "bond proxies" because of their reliable returns — were among the least loved by big-money managers.
The utilities sector is the biggest year-to-date outperformer on the S&P 500 and has gained 17% this year. The S&P 500 is up almost 6%.
The chart below shows that the stocks that mutual funds are overweight have underperformed those they are underweight relative to the S&P 500. This same misstep by fund managers can be seen at the individual stock level.
Small-cap mutual funds increased their holdings of J2 Global, a tech and media company, by the most for any stock, Goldman said. J2 Global shares have fallen 19% this year.
And the funds decreased their position in homebuilder Cavco Industries by the most; its shares are up 14% year-to-date.
Kostin wrote that investors have preferred domestic Exchange-Traded Funds (ETFs) over international ones in the past few months, amid the uncertainty around China and the UK referendum. But that could soon change.
"We expect rising political uncertainty in the US and a more stable environment in China and Europe compared with 1H 2016 will tilt investor preference towards international equity funds vs. domestic during the remainder of 2016," Kostin wrote.
The US Bureau of Labor Statistics just released its monthly report on unemployment rates for the 50 states and DC in August.
According to the report, six states had statistically significantly higher unemployment rates in August than in July, three states had lower rates, and the other 41 states and DC were statistically unchanged.
South Dakota had the lowest unemployment rate in the country at just 2.9%, while Alaska had the highest at 6.8%.
The map shows each state's August unemployment rate. Darker red states had higher rates.
SEE ALSO: 22 maps that explain America
A changing of the guard is taking place at Goldman Sachs.
The securities division, which houses the bank's equities and fixed income, currencies, and commodities units, has seen at least 18 partner-level departures from key roles in the US and Europe in 2016.
They include the heads of trading for equities, US interest-rate products and mortgages, and coheads of sales for fixed income, currencies, and commodities.
(You can see a full list of partner-level departures at the bottom of this page.)
These exits represent just a small fraction of Goldman's partner pool, which stands at more than 450, and the three coheads of securities — Pablo Salame, Isabelle Ealet and Ashok Varadhan — remain in place. But the high-level departures speak to numerous concurrent challenges for the firm, current and former executives say.
The securities division, which generated about half of Goldman's first-half revenues, is in a difficult environment, and it has been assigned a new "mission" to do more business with existing clients.
Of course, some familiar workplace issues — like questions of performance, office politics, and shifts in influence — are also at play here. And it's not coincidental that moves to bring through the next generation of leaders at Goldman Sachs are taking place ahead of a biennial decision about who becomes a partner.
Goldman Sachs first announced a shake-up in the securities division back in February, naming Jim Esposito, a London-based executive, as head of strategy. His role, according to the memo announcing his appointment, is to help the bank work "more deeply and expansively with an even larger set of clients."
"Our mission is to adjust our practices and aspirations in a way that takes into account structural developments and our strong market position," the memo said.
The "structural developments" are most pronounced in fixed income, currencies, and commodities, or FICC, a business that is in the doldrums. Industry-wide revenues have fallen by a third since 2011.
That business remains key to Goldman's profitability, however, generating about a quarter of the bank's first-half revenue.
The bank has responded by launching a plan to "deepen" relationships and sell more products to existing clients. It has been a recurring theme in Goldman Sachs' internal memos and conversations with Wall Street analysts.
Now, banks embark on these kinds of cross-selling initiatives all the time. They always want to do as much business with their best clients as possible.
But it seems that Goldman's push is a little bit more strategic. It also seems to have led to a fundamental revamp in the FICC sales team.
The two coheads of FICC sales at the start of the year, Dalinc Ariburnu and Tom Cornacchia, are gone. Cornacchia's departure was especially noteworthy, as he had discussed a culture shift at Goldman earlier in the year and is said to be close to Goldman Sachs No. 2 Gary Cohn. Several partners in sales in London and New York who were considered close to Ariburnu and Cornacchia have also left.
Esposito now coheads sales in addition to his strategy role, with John Willian, the former global head of prime services, taking the spot as cohead. The appointment of Willian is telling, Goldman insiders say, as it again points to the bank's plan to have deeper relationships with clients.
Since 2007, Willian has headed the prime brokerage, clearing, and futures business, a unit that focuses not on making millions through big-ticket trades but on picking up thousands on the plumbing behind them.
"Our ability to deliver effectively the range of our services to clients across fixed income, currencies, and commodities will only become more important and valuable to our clients," Goldman Sachs said in an internal memo announcing Willian's appointment.
The rationale here is clear: Do more business with existing clients to boost revenue.
It's the market
That is going to be key as the bank faces tough market conditions. Goldman Sachs, like every other bank, has been suffering from a weak environment for trading.
The bank had a terrible first quarter, with fixed income, currencies, and commodities revenue down by almost half versus a year earlier, and equities revenue down close to a quarter.
The second quarter, while an improvement, was hardly anything to cherish. The bank said in its second-quarter earnings that FICC "continued to operate in a challenging environment." In equities, Goldman lost ground to its archrival Morgan Stanley.
Goldman Sachs' FICC revenue in the first half of the year was down 24% from the first six months of 2015, with total markets revenues down 18%.
"In the capital markets, I've never known a time when it hasn't been hard," one former Goldman partner said. "It is the same for everybody. It takes a toll. People who have options, they've exercised them."
The challenging revenue environment makes it that much harder for Goldman Sachs to hit a 12% return-on-equity target, a key measure of financial performance that is embedded in the long-term incentive plan for CEO Lloyd Blankfein and his key lieutenants.
Goldman Sachs had a return on equity of 7.5% for the first half of 2016.
One way to hit that 12% target is by boosting revenue through efforts like its cross-sell mantra. The other is by cutting costs. Total operating expenses in the first half came in at $10.2 billion, down 27%. The bulk of that reduction came via a $2.3 billion drop in compensation and benefits.
The bank has been firing traders, with the cuts going deeper than is typical, and partners have not been spared.
In fact, the upper echelons of the bank have been shrinking in recent years, with the bank's population of managing directors and partners falling by 2% from the beginning of 2012. The number of analysts, associates, and vice presidents increased by 17% in the same time.
The shrinking partnership pool makes it that much harder to attain the lofty rank. Goldman Sachs will, later this year, announce a list of new partners.
That's a process that takes place every two years, and the "retirement" of many long-time executives in a partner year isn't coincidental.
Older partners are often encouraged to move on to make space for newcomers. Many of those who have departed this year have been at the firm for over 15 years and have had a run of six to 10 years as partner.
"This always happens in a partner year," one Goldman employee told Business Insider.
Given the smaller pool, the bank puts a huge amount of time in to deciding who will attain the lofty rank, with just 25 individuals from the securities division making the list in 2014.
Here are all the changes that we know of:
Departures in fixed income, currencies, and commodities:
- Anne Brennan — a former head of investment grade credit sales, left in February.
- Peeyush Misra — head of US interest rate products trading, left in March.
- Carsten Schwarting — head of agency mortgage-backed securities trading, left in March.
- Dalinc Ariburnu — cohead of FICC sales, left in April.
- Antonio Esteves — a partner in London, left around the same time.
- Atosa Moini — cohead of credit sales in Europe, the Middle East, and Africa, left around the same time.
- Jon Meltzer — chief operating officer of the fixed-income division's sales team in the Americas, left in May.
- Michael Swenson — head of US mortgage trading, left in May.
- Joseph Mauro — head of fixed income, currencies, and commodities European hedge fund sale, left in June to join a hedge fund.
- Charles McGarraugh — global head of metals trading, left in July.
- Tom Cornacchia — cohead of FICC sales left earlier this month.
- Lorin Radtke — a partner in FICC in Dallas, also left.
- Lora Robertson — a partner who at one time headed FX sales and was most recently cohead of Americas corporate derivatives, also left.
Departures in equities:
- Ronnie Morgan — head of global execution services, left in March.
- Pete Selman — cohead global equities trading and execution services, left earlier this month.
- Peter Seccia — a former head of North American derivative sales named partner in 2008, has also left the bank.
Rebecca Shaghalian — a former cohead of the North American equity derivative sales business named a partner in 2005, has also left the bank.
Leland Hensch — A former head of the equity index volatility desk in New York, has also left the bank.
- Jim Esposito — named head of strategy for the securities division.
- Phil Berlinski — cohead global equities trading and execution services, working with Brian Levine.
- John Willian — cohead of FICC sales.
- Sean Hoover and Raj Mahajan — coheads of global execution services.
- Jeff Nedelman — global head of prime services.
- Jack Sebastian and Tony Pasquariello — named coheads of US equity sales.
- Jeremy Taylor — joined from Mercuria as cohead of commodities trading, working with Ed Emerson. They report to global head of commodities Greg Agran.
- Don Casturo — named global head of metals trading.
Wall Street dealmakers used to be sent to Hong Kong or London to win new business. Now they're being sent to Seattle, Atlanta, and Denver.
Bank of America, JPMorgan, and Citigroup have been taking steps to do more business with midsize companies in regional centers in the US, outside the traditional hubs like New York, Houston, and San Francisco.
They have moved and hired dealmakers there, and they have them focused on so-called middle-market companies. The potential rewards are significant: Middle-market companies in the US and Canada paid $8.2 billion in deal fees in 2015, according to a Bank of America Merrill Lynch presentation.
That's more than the fees netted in most of Asia, the Middle East, and Latin America combined.
"This is a key focus for us as we have developed the other areas of our investment bank," Christian Meissner, the head of global corporate and investment banking at Bank of America Merrill Lynch, told Business Insider. "Relatively speaking, this represents a greater opportunity than some traditional avenues of growth."
Each bank cuts it slightly differently, but broadly speaking the largest multinational corporations are serviced by the corporate banking divisions within big global banks. These companies — think Apple, GE, Ford, and the like — have bankers crawling over them, trying to win every last piece of business they have to offer.
The commercial banking divisions typically serve tens of thousands of smaller (but by no means small) companies, and it is the commercial banking clients that the banks are hoping to do more business with.
"The premise behind regional investment banking starts from extending relationships from the commercial bank," James Roddy, who oversees the regional investment banking and M&A business at JPMorgan, told Business Insider.
JPMorgan drew up plans in 2012 to focus on middle-market banking and now has about 50 people in the investment bank dedicated to this group of clients, having hired local, senior, experienced bankers in a handful of regional centers over the past three or four years. Each location — including Atlanta, Dallas, and Washington, DC — will typically have a managing director, an executive director, a vice president, and an associate on the ground.
"This isn't about doing smaller deals," Roddy said. "It is working with people where we're already providing treasury services or commercial banking, and we have an opportunity to provide a full service that includes investment banking."
The effort is paying off. Doug Petno, the chief executive of JPMorgan's commercial bank, cited growing investment-banking revenue from commercial banking clients at the bank's investor day in February. Revenue from this client segment hit $2.2 billion in 2015, and the bank has a long-term target of $3 billion.
It's a similar story at Bank of America Merrill Lynch. Many of the bank's clients told the bank they felt that it wasn't local enough and that they would get only occasional coverage from investment bankers who would fly in from New York or another major city. To remedy that, the bank has assigned about two dozen bankers over the past couple of years to focus on this segment of clients.
"These are almost always existing clients of the firm," Meissner told Business Insider. "We have the commercial bank, the midmarket lending business, where we have something like 30,000 clients across the US. What's new is whereas previously they would have gotten episodic investment-banking attention, now they have a dedicated investment banker in addition to their existing relationship banker from commercial banking."
Citigroup, meanwhile, is reviewing plans to put a banker in Denver as part of its energy coverage team, in addition to its existing presence in New York, Chicago, Houston, San Francisco, and Los Angeles.
An opportunity that was always there
The opportunity to win business in these regional cities isn't new — it's just that banks had been more focused chasing opportunities elsewhere. The renewed interest in less glamorous clients and locations comes at a time when many of these more exotic growth markets are slowing.
The $8.2 billion fee pool for US and Canadian middle-market companies is comparable with the fees paid by companies in Latin America, Central and Eastern Europe, the Middle East and Africa, and Asia Pacific excluding Japan put together.
"This isn't a new idea; it's a different approach," Meissner said.
Given the challenging market conditions, any area showing growth is sure to become competitive. And sure enough, the middle-market investment-banking business is now more keenly fought over than in the past, Roddy said.
"It is happening right now," he said. "People are waking up to it. We've been doing it for a while, so it is nice to be ahead of the curve."
Last week, rumors circulated that Apple was investigating an investment in or an acquisition of British supercar maker and Formula 1 powerhouse McLaren.
McLaren said that the reporting was off the mark, but it's obvious to anyone paying attention that something is going on with Apple and its interest in transportation.
Earlier this year, the Cupertino colossus invested $1 billion of its $200-billion-plus cash hoard in Didi Chuxing, a Chinese ride-hailing service.
Then, of course, there's the mysterious "Project Titan," Apple car experiment that is either going to remake mobility as we know it — or is falling apart at the seams.
My take is that Apple is gradually turning itself into a sort of stealth holding company; it can't figure out what to do will all that excess moolah, so like a person with a bulging bank account, it's going on a shopping spree and will sort it all out later. Drop $3 billion on Beats in 2014, throw a billion at Didi, pick up McLaren for something in the same pricing ballpark — the synergies will eventually appear.
The McLaren news also revived an idea that's often been bandied about: Apple should buy Tesla. The notion, daffy as I think it is, makes more sense than getting mixed up with a manufacturer of high-tech sports cars. The tech world is very attracted to an Apple-Tesla tie-up because it would combine two of the most beloved brands that Silicon Valley has yet produced. For many, Tesla CEO Elon Musk is the new Steve Jobs.
But that's the problem. Apple has grown so large that it's become a company that's less about innovation and more about managing its achievements, which are considerable. In commenting on the Apple-should-buy-Tesla argument in the past, I've usually asked why Apple isn't yet doing a stand-alone TV, the best opportunity to completely reinvent the user experience for a familiar product. I think it's because they've talked themselves out of it — something that wouldn't have happened when innovation was on the ascent at the company, before Jobs' death.
For all its stumbles and growing pains, Tesla is rapidly innovating. Just last week, the automaker released a major software update for its vehicles that contains at least one totally new technology for cars: Cabin Overheat Protection, which enables a Tesla to use its large battery packs to cool itself off when the car isn't on, making the interior safer for small children and pets.
Apple, meanwhile, is busy screwing up EarPods and the headphone port on the new iPhone 7, telling customers that should be courageous about these needless tweaks to a product that's getting long in the tooth.
There is some logic to Apple buying Tesla. Project Titan appears rudderless — Is it a real car? An in-car interface? A self-driving technology? — so at least by acquiring Tesla, Apple would center the undertaking.
But then Apple would need to figure out what to do with Elon Musk. And therein would lie the challenge, as Musk and Apple CEO Tim Cook are the two most dissimilar leaders in modern business: mercurial visionary versus a modest caretaker. Cook inherited a world that Apple had already changed, while Musk is in the thick of trying to change it again.
Additionally, even if Apple figured that it could swallow Tesla's $30-billion-ish market cap without developing managerial heartburn, it would be adding the Palo Alto carmaker as Musk and his team are headed into a deeply challenging period.
It would be one thing if the only major objective to achieve were Musk's goal of delivering 500,000 vehicles annually by 2018, or launching the Model 3 mass-market vehicle on time in 2017. But there's so much more: Complete an acquisition of struggling solar-panel leaser and installer SolarCity; get the Nevada Gigafactory up and running and cranking out lithium-ion battery cells in huge numbers; establish Tesla Energy as a viable power-storage business; continue to expand the Supercharger network, especially in China; grapple with the blowback from a spate of Autopilot accidents, one of them fatal; hit up Wall Street for another capital raise; and execute the post-Model 3 agenda, which includes developing an electric semi-truck, a compact SUV, and maybe even a pickup.
That's a lot of problems to buy for a lot of money, even by Apple's standards.
The limits of tech
Finally, it's worth thinking about whether tech companies, generally speaking, are really equipped to play a role in the transformation of mobility. We have this idea that Apple and Google, simply because they're Apple and Google, can use their brainpower and cash mountains to deliver earth-shattering, insanely great progress.
But so far, the only tech company that's had a massive impact on transportation is Uber, and that's because it's always been in the mobility business. Sure, Tesla has made its contribution, but on balance the overall effect has been marginal; the vast majority of cars on the road are still powered by gas engines, and, in any case, Tesla is increasingly becoming a hybrid of a technology company and an old-school automaker.
The companies that are starting to move the needle are actually the traditional carmakers. They have the scale to get new products into the market quite rapidly, as GM has done with its Chevy Bolt electric car. Optimistically, GM could sell as many Bolts in the next two years — production starts next month — as Tesla has sold in its entire existence, about 150,000 vehicles.
So maybe Apple should forget about the Teslas and McLarens of the world. If it really wants to do something with cars, Detroit could be the place to go for its shopping spree.
The US housing market looks very different from its shape in 2008.
It reached a breaking point and nearly cratered the financial system after mortgages were approved for too many people that were least likely to pay back on time.
The crash left a lot of homeowners with negative equity — a situation where the value of their homes became less than the balance of the mortgage.
But from the start of 2010 through the second quarter of 2016, the percentage of homes with a mortgage that went underwater — when the outstanding loan becomes higher than the value of the home — plunged from 25.9% to 7.1%, noted Jonathan Woloshin, a strategist at UBS.
This happened as home prices recovered from their trough in the early 2010s and could hold the key to solving the housing market's current problem.
The resurgence in home prices underscored a broader issue in the market — there aren't enough homes. As the economy recovered and the unemployment rate fell, the demand for housing rose, putting even more upward pressure on house prices. This supply shortfall and affordability constraint is a "new crisis" for housing.
"A number of factors have likely contributed to the paucity of available inventory," Woloshin said.
"Of those factors, the one that poses the most significant conundrum (at least to us) has been the steep decline in negative equity not freeing up more inventory."
That's because homeowners can't sell when the money they owe the bank is more than their property's value.
"We believe the significant degree of negative equity that developed after the housing bubble burst was a huge
impediment to home sales," Woloshin said.
So as more homes recover from being underwater, Woloshin argues, the inventory on the market could improve.
Negative equity is improving even in the states that suffered the most in the housing crash. In the four so-called sand states — Nevada, California, Arizona, and Nevada — which suffered the most in the housing crisis, it has sharply fallen. California, Woloshin noted, had a lower percentage of mortgaged homes underwater than the national level in the second quarter.
"We believe many homeowners did not want to suffer the stigma and negative credit implications of defaulting on their loans," Woloshin said.
"We are hopeful that the combination of declining negative equity and continued job creation will increase the mobility of homeowners, which should ultimately lead to increased supply."
Zillow noted in a report in March that underwater homes were most prevalent among lower-priced homes.
That also happens to be the end of the market where demand is strongest. But the incomes of prospective homebuyers there have not risen at the same pace as shelter costs.
Ultimately, the best-case scenario would be to finally see a decent pickup in wage growth alongside the drop in negative equity.
"It's the economy, stupid."
Those are the now famous words of James Carville, a former strategist for President Bill Clinton, during the 1992 election; they narrowed down just how important Americans' feelings about their economic future were to the outcome of the election.
Once again, with Democratic nominee Hillary Clinton and Republican nominee Donald Trump facing off in the 2016 presidential race, it appears that the economy will be a central debate point of the election.
We've broken down the two candidates' policy proposals for the economy on everything from Wall Street regulation to fiscal policy. Using the campaigns' official positions as well as statements from the candidates themselves, we look closely at the details, and what economists have said about their potential impact.
Trump's plan would move all Americans into three tax brackets, down from the current seven. The top bracket for married joint filers making more than $225,000 a year would pay 33%; the $75,000-to-$225,000 bracket would pay 25%; and the under-$75,000 bracket would pay 12%. Right now, people who make under $75,00o pay a 15% rate, while the top bracket — made up of those making $466,950 — pays 39.6%.
Trump would cut the corporate tax rate to 15%. It now sits at 39%, but many companies pay much less in their effective tax rate. The average effective tax rate for S&P 500 companies is 29%, according to research by Goldman Sachs.
According to the Tax Policy Center, Trump's plan would incentivize investment by businesses and individuals, but the benefits would be offset unless there was a significant decrease in federal spending. Currently, Trump's plans indicate that he would increase spending.
"However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts," said the Tax Policy Center's report.
Clinton's plan calls for increasing taxes for people who make over $5 million a year by 4%, in what her campaign calls the "Fair Share Surcharge." Additionally, Clinton would make it so that people making more than $1 million a year do not pay an effective tax rate (after deductions) under 30%.
For corporations, Clinton plans to prevent "inversions," in which companies move their headquarters overseas in order to pay a lower rate, and charge an "exit fee" on companies moving their businesses outside the country.
According to the Tax Policy Center, Clinton's plan would decrease investment from the top earners but would also significantly reduce the federal deficit.
"And the proposals would raise marginal tax rates on labor and capital, thus reducing incentives to work, save, and invest among high-income households," said the report. "The proposals would increase federal revenues by $1.1 trillion over the next 10 years and would therefore reduce future deficits and slow, somewhat, the accumulation of public debt."
Clinton has introduced a number of measures to try to produce job growth. In addition to investing in infrastructure and manufacturing, Clinton has emphasized ending "quarterly capitalism," which focuses on returns to shareholders. Clinton aims to get businesses to focus on labor and capital investment by modifying capital-gains taxes, giving tax credits for long-term investments and new hires, and "shedding a light" on excessive stock buybacks.
"And here’s something that you don’t always hear enough of from Democrats: a big part of our plan will be unleashing the power of the private sector to create more jobs at higher pay," Clinton said in a speech on August 11. "And that means for us, creating an infrastructure bank to get private funds off the sidelines and complement our private investments."
Trump does not have a specific plan on creating job growth, but his policy positions are designed to increase jobs in the US. For instance, Trump wants to decrease regulation on energy production to create mining and energy-related jobs, which have been decreasing in recent years.
"We are also going to fully capture America’s tremendous energy capacity," said Trump in a speech on June 28. "This will create vast profits for our workers and begin reducing our deficit. Hillary Clinton wants to shut down energy production and shut down the mines."
Also, Trump has said he wants to repeal Obamacare, which he said would save 2 million jobs over the next 10 years. Trump has also stated that his trade polices will lead to more manufacturing and goods-based jobs in America.
Regulation on Wall Street
Clinton has said that she would strengthen regulation on financial institutions and also crack down on nonfinancial lending from the "show banking" sector. Additionally, Clinton's plan calls for reducing compensation to executives at financial institutions in the event of fines from regulators.
"While institutions have paid large fines and in some cases admitted guilt, too often it has seemed that the human beings responsible get off with limited consequences — or none at all, even when they’ve already pocketed the gains," said Clinton in a speech on July 13. "This is wrong, and on my watch, it will change."
Trump, on the other hand, has called for a repeal of the Dodd-Frank regulation that grew out of the financial crisis, saying it has prevented banks from lending money to average Americans. Additionally, Trump has called for a "pause in all new regulation" and a review of existing regulation, which would appear to include regulation on Wall Street. Trump has been critical of hedge fund managers, saying they "get away with murder." But it is unclear what he would do to address the issue. In his economic vision on the campaign website, there is no mention of either Wall Street or Dodd-Frank.
"Dodd-Frank has made it impossible for bankers to function," said Trump told Reuters in May. "It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop."
One of the largest differences between the candidates has been their ideas on global trade.
Trump has been mostly protectionist, saying that existing trade deals have taken manufacturing out of the country while railing against free-trade agreements like the North American Free Trade Agreement (NAFTA) and the proposed Trans-Pacific Partnership (TPP). At one point in the campaign, Trump suggested a 45% tariff on all Chinese imports. While he later went back on the idea, Trump has been adamant in his assertion that China is "sucking us dry."
"When Donald J. Trump is president, China will be on notice that America is back in the global leadership business and that their days of currency manipulation and cheating are over," reads the Trump campaign's website. "We will cut a better deal with China that helps American businesses and workers compete."
Trump believes that negotiating new deals could be beneficial, and the US could "win" at trade under his presidency.
Meanwhile, Clinton does not have a specific trade plan but has pledged to fight the TPP, a deal she once helped to create. In general, Clinton has shifted from pro free trade to something of a trade skeptic.
"My message to every worker in Michigan and across America is this: I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership," said Clinton during a speech in Michigan in August. "I oppose it now, I'll oppose it after the election, and I'll oppose it as president. As a senator, I fought to defend New York's manufacturers and steel makers from unfair Chinese trading practices."
Both candidates have emphasized the importance of investing in American infrastructure and spending federal money on projects. Trump has said that the country needs to rebuild "crumbling" roads and bridges, while Clinton has similarly said that rebuilding infrastructure is key to America's future.
Clinton's plan calls for a five-year, $275 billion investment into a variety of projects, including airport modernization and Wi-Fi accessibility in rural areas.
"So we have to rebuild the infrastructure we have, and we have to build a stronger future together because every community in our country, every single one of them, deserves clean water, clean air, clean energy, and think of the millions of people we can put to work, including some of those laborers right down there in the front," said Clinton during a speech in California in July.
Trump's campaign does not provide a full infrastructure plan, but he has said that he will spend $500 billion on infrastructure to stimulate the economy and provide growth.
"[Twenty-eight] percent of our roads are in substandard condition and 24 percent of bridges are structurally deficient or worse," reads the website. "Trump’s plan will provide the growth to boost our infrastructure, Hillary Clinton’s will not."
What economists say
A number of Wall Street researchers have weighed in on the economic plans of Clinton and Trump. The consensus is that Clinton's plan would roughly maintain the status quo from President Obama's tenure.
"Our expectations for a Clinton presidency do not require changing our outlook for growth, policy, earnings, and inflation," said James Sweeney, chief fixed-income economist at Credit Suisse.
If Clinton is able to follow through on all her stated goals, however, it could put pressure on business investment and keep economic uncertainty high enough to curb some growth.
"How left of center Clinton is once in office will determine the degree to which uncertainty drag diminishes post-election," wrote Dana Peterson, a North American economist at Citi in a note to clients in August. "Uncertainty could remain elevated or even increase if Clinton pursues the more populist aspects of her campaign platform (e.g. 'America First' attitude towards trade, aggressively higher taxes, more intense regulation of the financial sector, leaning too hard on China)."
Economists have taken a more extreme view of Trump's plans. Most economists have warned that there could be serious negative shocks to the country's economy under a Trump economic plan.
Kevin Logan, chief US economist at HSBC, said that the implementation of Trump's trade policies would lower exports and increase the cost of goods in the US, which would be a serious shock to economic growth.
"While tax cuts that were implemented in the first year of a Trump administration might give GDP a short-term boost for a year or so, the combined supply shock from a contraction in the labor force and from the disruption to international trade would likely put the economy into a recession after a year or two," said Logan in a note to clients.
Both Mark Zandi, chief economist at Moody's analytics, and William Buiter, chief economist at Citi, agreed that the combined trade shock and increased deficit from the full implementation of Trump's plans would lead to a recession.
Oxford economists estimated that Trump's plans would lose the US $1 trillion, and the Wharton School of Business at the University of Pennsylvania said Trump's immigration plan would cost the US 4 million jobs.
On the other hand, Larry Kudlow, an economist and commentator for CNBC, has said that Trump's tax plans would be stimulative for the economy. Kudlow has compared Trump's tax cuts to those under President John F. Kennedy and President Ronald Reagan, noting that both of those instances led to 5% GDP growth. Kudlow has, however, criticized Trump's immigration and trade policies.