Global Trade Growth Slashed Again As Trade Tensions Persist

The World Trade Organization published a new report that shows world trade is projected to “face strong headwinds” into 2020.

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WTO economists expect merchandise trade volume growth to drop to 2.6% in 2019, down from 3% last year. The report said a rebound in global trade is possible if trade tensions dramatically ease.

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The bearish forecast for 2019/2020 marks the second consecutive year that WTO economists revised their outlook and also follows similar warnings from the World Bank and the International Monetary Fund.

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“It is increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in today’s economy – such as the technological revolution and the imperative of creating jobs and boosting development. WTO members are working to do this and are discussing ways to strengthen and safeguard the trading system. This is vital. If we forget the fundamental importance of the rules-based trading system we would risk weakening it, which would be a historic mistake with repercussions for jobs, growth and stability around the world,” Azevedo said.

The report said current forecasts reflect downgraded GDP projections for North America, Europe, and Asia —  mostly due to waning effects of fiscal stimulus by the Trump administration.

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WTO economists noted a “phase-out” of monetary stimulus in Europe and a continuing economic transition of China’s economy from manufacturing to services.

The reported noted that trade growth severely waned in 2H18 by several factors, including several rounds of tariffs and retaliatory tariffs affecting hundreds of goods, an already slowing Chinese economy, volatility in financial markets, and tighter monetary conditions by Central Banks.

Forward-looking trade indicators turned negative in 1Q19, including WTO’s World Trade Outlook Indicator (WTOI). WTOI index dropped to 96.3, below its baseline value of 100, indicating that the global slowdown will persist for some time.

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The sustained loss of trade momentum highlights the urgency of the Trump administration to reduce trade tensions, which together with the rise of nationalism and financial volatility could deepen the synchronized global slowdown well into 2020.

Source: ZeroHedge

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The Hidden Cost Of Losing Local Mom-And-Pop Businesses

What cannot be replaced by corporate chains is neighborhood character and variety.

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There is much more to this article than first meets the eye: In a Tokyo neighborhood’s last sushi restaurant, a sense of loss

“Eiraku is the last surviving sushi bar in this cluttered neighborhood of steep cobblestoned hills and cherry trees unseen on most tourist maps of Tokyo. Caught between the rarified world of $300 omakase dinners and the brutal efficiency of chain-restaurant fish, mom-and-pop shops like it are fast disappearing.

Chef Masatoshi Fukutsuna and his wife, Mitsue, smile without a word. In the 35 years since they opened up shop, the couple has seen many of their friends move away for a job or family, only to return decades later, often without the job or the family, their absence unspoken.

Absence is a part of life here on what remains of the Medaka shopping street, a road so narrow that cars have to drive up onto the sidewalk to let another vehicle pass.

Once the sky turns pink and the sun sets, the street descends into shadow, save for the faintest glow from halogen lamp posts.

It’s a neighborhood in twilight. More like it are scattered across this city, their corner cafes and stores far from the neon blare of the famous shopping districts. The number of independent, family-owned sushi bars in Tokyo has halved to 750 in the last decade, a trade association says, driven out of business by fast-food joints and a younger generation that doesn’t want to inherit them.

“People would rather pay 100 yen for a plate of sushi at a really cheap place or they’d shell out tens of thousands of yen to go to a famous sushi restaurant in Ginza that they heard about on television,” says the chef, absentmindedly changing the channel of the TV. “But places like ours, shops that are right in the middle, we just can’t seem to survive.”

In the U.S., and presumably elsewhere, there are other financial pressures on small businesses: the complexity of compliance with the ever-increasing thicket of regulations is constantly increasing, as are taxes and fees as local government seeks to extract more revenue from the small-business tax donkeys.

These increases in costs while revenues sag as customers seek cheaper chain meals or simply stop going out at all are a double-whammy.

But look at what’s lost in the demise of local small businesses:

— The loss of neighborhood character and variety, replaced by homogenized chains and lifeless shuttered storefronts.

— the loss of food that’s been prepared by hand with real ingredients.

— the loss of neighborhood cohesion and social circles; residents who were once recognized as individuals and who belonged to loose but important social circles are unknown in faceless chain outlets.

— the loss of local employment. Employees in chain outlets commute from distant places, and their hours and locations may change, making it impossible to know local residents.

— the loss of walkable, interesting neighborhoods. What’s there to explore or provide interest in a string of steel and glass chain outlets?

— the loss of local social gathering places. Once local neighborhood places are lost, people Belfast in a monotonous uniformity of menus and spaces.

What’s scarce and thus valuable are not fast-food outlets; what’s scarce and valuable are walkable, diverse neighborhoods of locally owned and operated stores and cafes which offer social refreshment and bonds as well as home-cooked meals.

Source: by Charles Hugh Smith | Of Two Minds

The Manhattan Housing Market Is On Its Worst Cold Streak In 30 Years

A confluence of factors ranging from stubborn sellers refusing to budge on their asks, the Trump tax plan’s SALT cap, and a glut of luxury apartments prompted sales of Manhattan real estate to drop again in the fourth quarter, according to reports published by a trio of residential brokers. By one broker’s count, Q1 marked the sixth straight quarterly drop in sales volume, the worst streak in at least 30 years.

Per the FT, sales tumbled by 11%, according to broker Stribling & Associates, by 5%, according to Corcoran, and by 2.7% for co-ops and condominium apartments, according to Douglas Elliman and real estate appraisal firm Miller Samuel.

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While the average sales price for new developments climbed a staggering 89.4% to $7.6 million, that figure was exaggerated by a single purchase: Ken Griffin’s purchase of a $240 million penthouse at 220 Central Park South, which, according to some, was the most expensive home ever sold in America. But depending on the report, the median sales price ranged from 2% lower to 3.2% higher. And although the entry level market in Manhattan – that is, apartments priced at $1 million and below – had held up for most of the past year, it has recently started to suffer.

“It’s like a layer cake,” Jonathan Miller, CEO of Miller Samuel, told CNBC. “When you have softening at the top, it starts to melt into the next layer and the next layer after that, because those buyers further down have to compete on price.”

According to one broker, sellers with unrealistic expectations are the biggest barrier to sales, because they’re refusing to adjust for the fact that listings have been piling up and sitting on the market for longer periods, giving buyers more room to negotiate, and more options. Inventory has climbed 9% over the past nine months, and there’s a glut in new developments that’s only going to get worse.

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And of course, New York City isn’t helping the market by passing an a one-time “mansion tax” on all apartments selling for $1 million or more – which is a large chunk of apartments sold in the borough. But it could have been worse: As one broker put it, the pied-e-terre tax that was briefly considered would have been a “market stopper.”

“The pied-à-terre tax would have been a market stopper, [the mansion tax] is a market dampener,” said Ms Liebman. “I don’t think New York City is acting very friendly right now to the wealthy buyers,” she said, adding that many are opting to buy in Florida and other states with lower taxes than New York.

But although higher taxes are expected to drive more would-be buyers toward rentals, the number of new leases in Manhattan was also down 3% in Q1. Meanwhile, leases climbed a staggering 38% year-over-year in Brooklyn.

As brokers in New York City and other high end markets like Greenwich, Conn. struggle with slowing sales, we imagine brokers in mid-tier markets are watching with a wary eye to see if the weakness spreads.

Source: ZeroHedge

Hedge Fund CIO: “America’s Yield Curve Inversion Can Mean One Of Three Things”

Three Worlds

America’s yield curve inversion can mean one of three things,” said (Eric Peters, CIO of One River Asset Management). “We’re either living in a world of secular stagnation and investors worry that central banks no longer have sufficient policy tools to spur growth and inflation,” he continued. “Or the economy is simply sliding toward recession and the inversion will persist until the Fed panics and spurs a recovery,” he said. “Or we’re living in a world, where the market is moving in ways that defy historical norms because of global QE. And if that’s the case, the curve is sending a false signal.”

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“If we’re sliding toward recession, then it seems odd that credit markets are holding up so well,” continued the same CIO. “So keep an eye on those,” he said. “And if the curve is sending a false signal due to German and Japanese government bonds yielding less than zero out to 10yrs, then the recent Fed pivot and these low bond rates in America may very well spur a blow-off rally in stocks like in 1999.” A dovish Fed in 1998 (post-LTCM) and 1999 (pre-Y2K) provided the liquidity without which that parabolic rally could have never happened.

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“But if investors believe America is succumbing to the secular stagnation that has gripped Japan and Europe, and if they’re growing scared that global central banks are no longer capable of rescuing markets, then we have a real problem,” said the CIO. “Because a recession is bad for markets, but not catastrophic provided that central banks can step in to spur recovery. But with global rates already so low, if investors lose faith in the ability of central banks to do what they have always done, then we’re vulnerable to a stock market crash.”

Sovereignty:

Turkish overnight interest rates squeezed to 300% on Monday. Then 600% on Tuesday. By Wednesday, they hit 1,200%. Downward pressure on the Turkish lira, and the government’s efforts to punish speculators fueled the historic rise. Erdogan allegedly wants to limit lira loses ahead of today’s elections. The pressures that drove the currency lower were mainly of Turkish origin. Of course, the Turks have every right to their own economic policies, but they must bear the consequences. That’s what comes with being a sovereign state.

The Greeks and Turks are neighbors. The Turks began negotiations to join the EU in 2005, with plans to adopt the Euro after their acceptance. Those negotiations stalled in 2016. As they look across the border at their Greek neighbors now, and see their interest rates stuck at -0.40%, are they envious? Perhaps. But having witnessed the 2011 Greek humiliation, would the Turks be willing to forfeit sovereignty for the Euro’s stability and stagnation? And how do the Greeks (and Italians) feel about having forfeited their sovereignty?

Anecdote:

“Only optimists start companies,” I answered. The Australian superannuation CEO had asked if I’m an optimist or pessimist. “I see the potential for technological advances to produce abundance in ways difficult to fathom. But I also see the chance of something profoundly dark,” I continued. He observed that people seemed consumed by the latter but spend so little time on the former. “That’s good. Humans are wonderful at solving problems of our own creation. The more we worry, the less goes wrong,” I said. So he asked what worries me most?

“Not the displacement of human labor by machines, we can solve the resulting social challenges. I worry that the only thing Americans seem to agree on now is that China is our adversary.” And pressing, he asked me to list the things I admire about China. “Okay. I admire China’s work ethic, drive, ambition, economic accomplishments. They’ve overtaken us in many advanced scientific fields. I admire that very much.” He smiled and asked me to carry on. “I’m grateful for their competition. It makes us better. And I admire that they’ve evolved communism to make it work while all others failed. The world is better with diversity of thought, philosophy – diversity increases resiliency, robustness. And democratic free-market capitalism will grow stronger with a formidable competitor.” He smiled.

“But China’s system values the collective over the individual. We value the opposite. And I’m concerned the two systems cannot peacefully coexist now that we’re the world’s two largest economies. I don’t want to live under their system, I don’t want their vision of the future for my children. They probably feel the same way. Both views are valid but incompatible, and increasingly in conflict,” I explained. He nodded and said, “I don’t want that for our children either.”

Source: ZeroHedge

Guess How Much Americans Spend Drunk Shopping Online?

A new survey reveals that nearly 80% of people who drink alcohol have shopped on the web while intoxicated. 

And while the results can be hilarious, drunk shopping is a multi-billion dollar national habit

According to a survey by tech and business newsletter The Hustledrunk Americans spend approximately $45 billion per year, with an average annual spend of $444 per drunk shopper.

Most common? Clothing and shoes, while Amazon remains the shopping platform of choice. 

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The findings are based on a survey of 2,174 alcohol-consuming readers between March 11-18 of this year. The average respondent was 36-years-old, and has an income of $92,000 per year, more than double the national average. Thus, The Hustle‘s wealthier readers may skew the results when extrapolated – but we’re having fun with this one. 

Overall, 79% of all alcohol-consuming respondents have made at least one drunken purchase in their lifetime — though this varies a bit based on demographics. –The Hustle

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Women (80%) are slightly more likely than men (78%) to drunk shop. This makes sense since women generally shop more than men — especially online.

Drunk shoppers also tend to be younger. Millennials outrank baby boomers by 13%, which might be attributed to the rise of e-commerce (we’ll get to this later).

Certain professionals also seem to be more inclined to shop drunk than others. We limited our data to jobs with the highest response rates then parsed out the 5 industries that are most and least likely to shop under the influence. –The Hustle

What’s the alcohol of choice while drunk shopping? Beer, followed by wine, followed by whiskey.

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Another interesting metric is that people who shop while drunk have around 10 drinks per week, while those who typically shop sober consume half as much

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As far as average spent per year: 

Our average respondent reports dropping $444 per year on drunk purchases — from life-size cut-outs of Kim Jong-un to 30-pound bags of Idaho potatoes.

A little back-of-the-napkin math gives us a rough estimate of the drunk shopping market at large: There are ~130m alcohol-consuming adults in the US. In our survey findings, 79% of alcohol-consuming adults shop drunk at an average annual spend of $444. Assuming these rates hold true at a national level (purely speculative), drunk shopping is a ~$45B per year market.

Extrapolating this further, we determined the average lifetime spend on drunk purchases is $4,187 — good for a total drunken expenditure of nearly half a trillion dollars.

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When it comes to drunk shopping by profession, those in the fashion industry are the biggest, richest drunks – at an average of $949 spent per year, followed by writers, medical professionals and those in the fitness industry. 

Who spends the least while shopping drunk? Government workers, engineers and – in last place, those working in retail.

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Geographically speaking Kentucky is oddly at the top along with Connecticut. Though, the survey may have had one really rich respondent in each state that skewed the results. Who knows. 

Kentuckians top the charts with a $742 annual spend. In fact, the entire South — a region known for its fine bourbon — is a blanket of red. California, the country’s wine capital, is the lone over-achiever on the otherwise mediocre West Coast.

This bears little semblance to the CDC’s analysis of the heaviest binge-drinking states (in fact, it’s almost opposite). But it shows that the economics of drunk shopping is a more complex matter than simply parsing out where people drink the most.

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As far as platform of choice, Amazon leads the pack, followed by Ebay, Etsy, Target and Walmart. At least two of those are worth an intervention if you ever catch your friends drunk shopping at Walmart, for example.

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Clothing and shoes are the goods of choice while drunk.

Studies have shown that people who base their self-worth on appearance are more likely to imbibe alcohol, so there is some tenuous linkage here. But this also ties in with the rapid rise of the direct-to-consumer fashion industry.

Entertainment (movies, games) and tech gadgets are also popular choices — though the party train seems to abruptly halt at software (if you’ve purchased a copy of Microsoft Excel drunk, we need to talk.)

Weirdest purchases, according to The Hustle‘s readers?

  • 200 pounds of fresh, 10-foot tall bamboo
  • A World War 2-era bayonet
  • A full-size inflatable bouncy castle (“For my living room”)
  • A breast pump (“I’m a dude”)
  • A splinter that was removed from the foot of former NBA Star, Olden Polynice
  • The same vest Michael J. Fox had on in Back to the Future
  • A $2,200 pair of night vision goggles
  • Tons of international fights (Azerbaijan, Iceland, Ukraine, Tunisia)
  • An NRA membership
  • A trilogy of Satanic religious books

Who could regret $2,200 night vision goggles?

Source: ZeroHedge

70% Of Consumers With Credit Cards Say They Can’t Pay It Off This Year

Zerohedge readers who follow our monthly consumer credit updates already knew, aggregate household debt balances jumped in 4Q18. As of late December, total household indebtedness was at a staggering $13.54 trillion, $32 billion higher than 3Q18.

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More troubling is that 37 million Americans had a 90-day delinquent strike added to their credit report last quarter, an increase of two million from the fourth quarter of 2017. These 37 million delinquent accounts held roughly $68 billion in debt, or roughly the market cap of BlackRock, Inc.

* * *

New evidence this week points to a further deterioration in consumer creditworthiness.

To understand the American credit card debt crisis, real estate data company Clever surveyed 1,000 credit card users earlier this month.

Using Consumer Financial Protection credit card complaint data and other forms of consumer metrics, the company was able to gain tremendous insight into the average American’s purchasing habits, dependence on credit cards, and feelings about their debt situation.

The survey found that 47% of Americans have a monthly balance on their credit card. About 30% of respondents with credit card debt believe they’ll extinguish the debt this year, leading many of the respondents stuck in an endless debt cycle.

Fifty-six percent of the respondents say they’ve had credit card debt for more than a year. About 20% estimate their debt will be paid off by 2022, while 8% were unsure about a timeline.

“It’s a big issue,” Ted Rossman, credit industry expert for CreditCards.com, tells CNBC. With credit card APR soaring to about 17.64%, a new high, the interest accrued on monthly balances can quickly add up and trap unsuspecting consumers with insurmountable debt.

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The U.S. recovery has been the slowest since WWII. Consumers have been stuck in the gig-economy with low wage and skill jobs. Their wages have not been able to outpace rapid inflation in groceries and rent. So many have resorted to credit cards to supplement their daily expenses. This is especially prevalent with lower-income families, defined here as those earning less than $50,000 a year. Buying groceries” ranked as the top expense that racked up people’s balances, the survey said.

About 28% of respondents say they’re fully dependent on credit cards to pay rent and utilities.

Emergency expenses were also a major contributor to credit card balances. About 30% cite medical bills and 40% say automobile repairs have moved their balances higher.

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Surprisingly, there is some good news. Sixty-two percent of millennials indicate they pay their balance every month. That’s compared to just 48% of Generation X and Baby Boomers.

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Credit cards are an integral part of developing credit and proving creditworthiness. Multiple reports show the consumer is on the cusp of a dangerous deleveraging, an ominous sign that the credit cycle has likely turned. Winter is here.

Source: ZeroHedge

“Recap & Release” – Trump Unveils Plan To End Govt Control Of Fannie, Freddie

After months (or years) of on-again, off-again headlines, President Trump is expected to sign a memo on an overhaul of Fannie Mae and Freddie Mac this afternoon, kick-starting a lengthy process that could lead to the mortgage giants being freed from federal control.

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The White House has been promising to release a plan for weeks, and its proposal would be the culmination of months of meetings between administration officials on what to do about Fannie and Freddie.

Bloomberg reports that while Treasury Secretary Steven Mnuchin has said it’s a priority to return the companies to the private market, such a dramatic shift probably won’t happen anytime soon.

In its memo, the White House sets out a broad set of recommendations for Treasury and HUD, such as increasing competition for Fannie and Freddie and protecting taxpayers from losses.

The memo itself has a worryingly familiar title (anyone else thinking 2007 housing bubble?):

President Donald J. Trump Is Reforming the Housing Finance System to Help Americans Who Want to Buy a Home

“We’re lifting up forgotten communities, creating exciting new opportunities, and helping every American find their path to the American Dream – the dream of a great job, a safe home, and a better life for their children.”

President Donald J. Trump

REFORMING THE HOUSING FINANCE SYSTEM: The United States housing finance system is in need of reform to help Americans who want to buy a home.

  • Today, the President Donald J. Trump is signing a Presidential memorandum initiating overdue reform of the housing finance system.
  • During the financial crisis, Fannie Mae and Freddie Mac suffered significant losses and were bailed out by the Federal Government with billions of taxpayer dollars.
    • Fannie Mae and Freddie Mac have been in conservatorship since September 2008.
  • In the decade since the financial crisis, there has been no comprehensive reform of the housing finance system despite the need for it, leaving taxpayers exposed to future bailouts.
    • Fannie Mae and Freddie Mac have grown in size and scope and face no competition from the private sector.
    • The Department of Housing and Urban Development’s (HUD) housing programs are exposed to high levels of risk and rely on outdated business processes and systems.

PROMOTING COMPETITION AND PROTECTING TAXPAYERS: The Trump Administration will work to promote competition in the housing finance market and protect taxpayer dollars.

  • The President is directing relevant agencies to develop a reform plan for the housing finance system. These reforms will aim to:
    • End the conservatorship of Fannie Mae and Freddie Mac and improve regulatory oversight over them.
    • Promote competition in the housing finance market and create a system that encourages sustainable homeownership and protects taxpayers against bailouts.
  • The President is directing the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.
    • Treasury will prepare a reform plan for Fannie Mae and Freddie Mac.
    • HUD will prepare a reform plan for the housing finance agencies it oversees.
  • The Presidential memorandum calls for reform plans to be submitted to the President for approval as soon as practicable.
  • Critically, the Administration wants to work with Congress to achieve comprehensive reform that improves our housing finance system.

HELPING PEOPLE ACHIEVE THE AMERICAN DREAM: These reforms will help more Americans fulfill their goal of buying a home.

  • President Trump is working to improve Americans’ access to sustainable home mortgages.
  • The Presidential memorandum aims to preserve the 30-year fixed-rate mortgage.
  • The Administration is committed to enabling Americans to access Federal housing programs that help finance the purchase of their first home.
  • Sustainable homeownership is the benchmark of success for comprehensive reforms to Government housing programs.

*  *  *

Because what Americans need is more debt and more leverage at a time when home prices are at record highs and rolling over.

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Hedge funds that own Fannie and Freddie shares have long called on policy makers to let the companies build up their capital buffers and then be released from government control.

It’s unclear whether the White House would be willing to take such a significant step without first letting lawmakers take another stab at overhauling the companies.

But not everyone is excited about the recapitalizing Fannie Mae and Freddie Mac. Edward DeMarco, president of the Housing Policy Council, warned that releasing them from conservatorship would do nothing to fix the mortgage giants’ charters or alter their implied government guarantee:

“I’m not sure what is good about recap and release,” DeMarco, a former acting director of the Federal Housing Finance Agency, said in a phone interview.

DeMarco also noted that the government stepped in to save the companies in 2008, and they continue to operate with virtually no capital. On Tuesday, DeMarco told the Senate, during the first of two hearings on the housing finance system that “recap and release should not even be on the table.”

But shareholders in the firms were excitedly buying… once again.

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Deciding the fate of Fannie and Freddie, which stand behind about $5 trillion of home loans, remains the biggest outstanding issue from the 2008 financial crisis.

Source: ZeroHedge