Vietnamese real estate tycoon Truong My Lan was sentenced to death by a court in Ho Chi Minh City in the country’s largest financial fraud case ever, state media Vietnam Net said. The 67-year-old chair of the real estate company Van Thinh Phat was formally charged with fraud amounting to $12.5 billion, or nearly 3% of the country’s 2022 GDP.

Lan illegally controlled Saigon Joint Stock Commercial Bank between 2012 and 2022 and allowed 2,500 loans that resulted in losses of $27 billion to the bank, reported state media VnExpress. The court asked her to compensate the bank $26.9 million.

Despite mitigating circumstances — this was a first-time offense and Lan participated in charity activities — the court attributed its harsh sentence to the seriousness of the case, saying Lan was at the helm of an orchestrated and sophisticated criminal enterprise that had serious consequences with no possibility of the money being recovered, the AP reported.

Her actions “not only violate the property management rights of individuals and organizations but also push SCB (Saigon Joint Stock Commercial Bank) into a state of special control; eroding people’s trust in the leadership of the Party and State,” VnExpress quoted the judgement as saying.

Her niece, Truong Hue Van, the chief executive of Van Thinh Phat, was also sentenced to 17 years in prison for aiding her aunt.

Lan and her family established the Van Thing Phat company in 1992 after Vietnam shed its state-run economy in favor of a more market-oriented approach that was open to foreigners. She had started out helping her mother, a Chinese businesswoman, to sell cosmetics in Ho Chi Minh City’s oldest market, according to state media Tien Phong.

Van Thinh Phat would grow to become one of Vietnam’s richest real estate firms, with projects including luxury residential buildings, offices, hotels and shopping centers. This made her a key player in the country’s financial industry. She orchestrated the 2011 merger of the beleaguered SCB bank with two other lenders in coordination with Vietnam’s central bank.

The court found that she used this approach to tap SCB for cash. She indirectly owned more than 90% of the bank, a charge she denied, and approved thousands of loans to “ghost companies,” according to government documents. These loans then found their way back to her, state media VNExpress reported, citing the court’s findings. She then bribed officials to cover her tracks.

Former central bank official Do Thi Nhan was also sentenced Thursday to life in prison for accepting $5.2 million in bribes.

Lan’s arrest in October 2022 was among the most high-profile in an ongoing anti-corruption drive in Vietnam that has intensified since 2022. The so-called Blazing Furnace campaign has touched the highest echelons of Vietnamese politics. Even former President Vo Van Thuong resigned in March after being implicated in the campaign.

But Lan’s trial shocked the nation. Analysts said the scale of the scam raised questions about whether other banks or businesses had similarly erred, dampening Vietnam’s economic outlook and making foreign investors jittery at a time when Vietnam has been trying to position itself as the ideal home for businesses trying to pivot their supply chains away from China.

Like neighbor China’s, the Vietnamese real estate sector has been hit particularly hard. An estimated 1,300 property firms withdrew from the market in 2023, developers have been offering discounts and gold as gifts to attract buyers, and despite rents for mixed-use properties known in Southeast Asia as shophouses falling by a third in Ho Chi Minh City, many in the city center are still empty, according to state media.

Ukraine’s parliament on Thursday passed an ultra-controversial military mobilization law aimed at drastically boosting the number of its troops at a moment forces are facing severe manpower shortages amid the unrelenting Russian onslaught.

It passed with a clear majority supporting, with 283 votes in favor in the 450-member parliament. The NY Times writes in the wake of the much-anticipated vote, “The law passed by legislators on Thursday addresses the issue of mobilization broadly, and includes provisions that lawmakers said were aimed at making the conscription process more transparent and equitable. The full text of the law was not immediately available.”

But among the most immediately controversial elements will include expanded powers given to Ukrainian authorities to issue draft notices on a larger scale, including using an electronic system. It also reportedly expands the age for draft registration, including for those living abroad.

Recruiters have long sought to stamp out draft evasion, to the point of tackling and arresting young men in the streets, after which they are sent to brief training and then the front lines.

But the most controversial aspect is that a key provision got quashed which assured rotation of servicemen. In many cases the same ground units have been stuck at front line positions since the start of the war. Troops had been promised that reinforcements would soon be rotated from rear positions, but this assurance is no longer the case:

The vote came after parliament’s defense committee removed a key provision from the draft Tuesday that would ensure the rotation of servicemen after 36 months of combat, a move that surprised some lawmakers as it had been a promise of the Ukrainian leadership.

Lawmaker Oleksii Honcharenko said in a Telegram post that he was shocked by the move to remove the provision. It was likely taken out because, considering the scale and intensity of the war against Russia, it would prove difficult to implement. Ukraine already suffers from a lack of trained recruits capable of fighting, and demobilizing soldiers on the front lines now would deprive Ukrainian forces of their most capable fighters.

Thursday’s parliament vote paves the way for another comprehensive defense ministry mobilization policy and law which is to be focused on demobilization, expected to be issued within the next eight months. This appears to be a move to soften the controversy surrounding this fresh mobilization that just passed. 

But by then it could be too late, as all of this could unleash Ukrainian fighting in the streets as recruiters are expected to widen the net of those being drafted into the military. Many young Ukrainian men and their families see the prospect of being shipped off to the front lines as a certain death sentence, as the war grinds on with no prospect of peace negotiations in sight for now.

To the last Ukrainian: Ukraine parliament has rubberstamped law on forced mobilization of Ukrainian men in Ukraine & abroad “literally within half an hour without discussion.” This law requires all Ukrainian men 18 to 60 years old in Ukraine & abroad to register at military draft… pic.twitter.com/VdaUuUwbnR

— Ivan Katchanovski (@I_Katchanovski) April 11, 2024

Back in February, former army Commander in Chief Valery Zaluzhny sparked controversy in saying that Ukraine needs have a half-million more new recruits this year if it hopes to keep up force strength. He had also explained that exhausted men who had served for two years at the front lines needed to be rotated out. President Zelensky, reportedly fearing immense public backlash over the proposed policy, sacked his defense chief and made him ambassador to the UK. But now it appears Kiev has no choice, given Zelensky has abandoned the option of sitting at the negotiating table with Putin.

Authored by Victor Davis Hanson via American Greatness,

When ideology replaces meritocracy or provides immunity from the consequences of illegal behavior, systemic mediocrity follows.

Under toxic National Socialism, Stalinism, and Maoism, millions of cronies and grifters mouthed party lines in hopes that their approved ideology would allow them to advance their careers and excuse their lawbreaking.

The same thing has happened with the woke movement and the now-huge Diversity/Equity/Inclusion conglomerate.

Grifters and opportunists mask their selfish agendas under the cloak of neo-Marxist care for the underprivileged or victimized minorities. Meanwhile, they seek to profit illegally as if they were old-fashioned crony capitalists.

During the disastrous COVID-19 lockdown, California governor Gavin Newsom pontificated about leveraging the quarantine to ensure greater equality: “There is opportunity for reimagining a [more] progressive era as it [relates] to capitalism…We see this as an opportunity to reshape the way we do business and how we govern.”

Meanwhile, Newsom did not seem very “progressive” when he was caught in one of California’s most expensive restaurants dining with sidekick lobbyists while violating the very mask and social distancing rules he had mandated for 40 million others.

Newsom also bragged about social equity when he signed a new California law mandating $20 an hour for fast-food workers—while many of his own employees at his various company-controlled eateries made only $16 an hour.

And he allegedly gave a unique exemption from his wage law to one particular bakery/restaurant chain, Panera, whose owner is an old friend and major campaign contributor.

Newsom apparently feels that the more progressively he postures, the less he’ll be called out for his own hypocrisy and self-interested agendas.

In another egregious case, the now-imprisoned felon, Sam Bankman-Fried, may have been the greatest con artist in American history. He siphoned billions of dollars from his cryptocurrency company, destroying the fortunes of thousands when his multi-billion-dollar Ponzi empire collapsed.

How did Sam and his two Stanford law-professor parents manage to accumulate millions of dollars in resort properties and perks without getting caught until after their empire collapsed?

Answer: Sam showered millions of dollars on left-wing politicians to advance their progressive crusades. His parents justified this family giving as a form of “effective altruism.”

That catchy phrase masked the reality that his crusade for social justice was just an incredibly effective get-rich-quick scheme.

The Bankman-Fried family apparently reasoned that their devotion to this woke form of “altruism” would translate into riches for themselves, albeit bankruptcies for investors.

Another example: in Georgia’s Fulton County, District Attorney Fani Willis ran for office, promising to indict supposed right-wing monster Donald Trump.

She raised campaign money on her woke credentials. Often, when challenged, she played the race victim card.

Meanwhile, Willis hired as a special prosecutor her secret paramour, the incompetent Nathan Wade, although he had never tried a single felony or even criminal case.

She and Wade then went on expensive junkets. She claimed that she reimbursed him with cash that was, of course, unverifiable.

Given their woke ideology, both assumed they were entitled to splurge at taxpayers’ expense, offer likely-false testimony under oath, and violate canons of professional behavior for lawyers.

She wasn’t alone in her corruption. After the death of George Floyd, the founders of the left-wing Black Lives Matter movement went on a house-buying rampage. The more corporations filled their coffers with millions, either from guilt or as protection money, the more new homes the directors purchased.

One co-founder, Patrisse Khan-Cullors, a self-described Marxist, splurged by spending $3.2 million in BLM money to buy herself four upscale residences.

And the most radical Democratic members of Congress—the so-called Squad—apparently feel that the more they level accusations of racism, the more they can profit without fearing any consequences for their wrongdoing.

One squad member, Rep. Ilhan Omar, redirected $2.8 million of her office’s allotted government money to her husband’s political consulting company.

Still another member, the radical leftist Rep. Cori Bush, often harangued the country to defund the police. Now the FBI is investigating her for stealthily paying tens of thousands of campaign dollars to her own husband for “security.”

Woke and DEI activists may not necessarily be any more innately mediocre, corrupt, or conniving than other politicians and activists.

But they seem so, because they loudly broadcast that they are for “diversity,” “equity,” and “inclusion”—and thus assume themselves to be exempt from all scrutiny and free to profit in any way they please.

The woke/DEI project is enticing thousands of shysters, careerists, and mediocrities, all keen to enrich themselves on the premise that they are noble fighters for social justice who deserve immunity from any scrutiny.

How odd it is that America is wasting billions of dollars hiring DEI czars and electing woke politicians who so often accuse others of a multitude of sins, largely as a way of enriching themselves, hiding their own culpability, and making a mockery of the law.

What started off as another ugly day with stocks tumbling and yields surging following yesterday’s VaR-shock inducing CPI print, quickly reversed after the market – in its infinite stupidity – took what was a hot PPI print (core PPI came in at 2.4% vs Exp. 2.2% and up from 2.0%) but which the Biden BLS massaged just enough to make it appear that headline PPI actually missed (coming at 2.1% vs exp 2.2%), on what we earlier showed was blatant (and literal) gaslighting, with the entire miss the result of seasonal adjustments to gasoline prices which “dropped” by 3.6% even though they actually rose 6.3% to the highest price in 6 months.

And while anyone with half a brain could quickly see through the PPI bezzle, that clearly did not apply to the algos, such as this one…

… who instead ramped spoos and even though a few of them realized just how stupid the initial move had been and dumped the early kneejerk ramp, the remainder – even dumber – went with the flow and shortly after the cash open, stocks went on one of their trademark diagonal ramps higher…

… or maybe it wasn’t the algos, but rather 0DTE mean-reversion momos, who took advantage of the reversal in the first post-PPI kneejerk move and ramped momentum up in a one-way all day trade, via both 0DTE and total option delta, which was enough to drag the broader market higher.

The meltup was facilitated by low volumes (top of book liquidity dropped to $8.8MM, down 33% from the 5DMA), with Mega cap Tech (+115bps), 12M Winners (+107bps), and AI related names (+84bps) all at the top of the screens today, vs 12M Losers (-64bps) & Rate-sensitives Fins (-51bps) in the red.

One consequence of today’s meltup is that stonks which had until recently been left for dead, like AAPL, enjoyed their best day in almost a year: indeed, AAPL’s 4% gain at session highs, was the best intraday performance in over a year…

… and while traditionally AAPL had been used a “carry-trade” funder for other Mag 7 longs, today that was not the case, with NVDA also surging more than 3%, following a similar gain yesterday…

.. as the AI revolution leader came dangerously close to tripping both the 50DMA (at $818) yesterday, and the critical rising support line.

It wasn’t just the Mag7s that saw a flood of buying: investors also rushed for what has become the darling trade in recent weeks, gold, which surged to a fresh all time high above $2,370.

And while many have said it’s only a matter of time before gold restraces most of its recent gains, Pepperstone’s Michael Brown points out that – just like with Bitcoin – there is “still no real spike in news/headline coverage as seen during previous rallies in recent times.” Translation: the move can go on for longer until the euphoria finally sets in.

Taking a step back, the market heatmap was a familiar one: overall momentum names exploded higher once again in a desperate attempt to recapture the fading glory of January and February…

… while mega tech quietly breaks out to a new 2024 high vs unprofitable tech, while the HF VIP names less the most shorted names are barely up on the year.

… while the classical cyclical sectors – energy, banks, healthcare – lagged once again.

A closer look at some sector level highlights:

• Consumer: KVUE: Big move (-4%) on a sell initiation. Feedback from most is story is clearly not perfect, with some organic sales whiffs since coming public, which has kept many on the sidelines, but pushback to an outright sell rating given the valuation/level. Goldman’s desk is very active in this one.
• TMT: SEMIS ACTIVE- MRVL -2%  in focus amidst AI event…traded 1mm+ 2-ways yesterday. other Semis flow + px action mixed w/ MRVL event ongoing. Still seeing demand in QUALITY cohort although magnitude is less than yesterday… Seeing buy tix early in GOOG/L &  AMZN
• RV: ALPN the focus today.  A quick turnaround from a rumored deal yesterday to a definitive situation overnight with Vertex acquiring the business in a nearly $5bn transaction (67% premium; ~4.8x 2023 consensus sales).  The transaction is expected to trade fairly tight to deal terms.

 It is possible that one catalyst behind today’s meltup is to avoid what could be a cascade lower: as Goldman writes in its mid-day market recap, “CTA trigger levels continue to be back in focus.. short term = 5130, med term = 4862, long term = 4607. Over the next 1 month, CTA’s are large sellers of a down tape ($201.5B).” Naturally, the best way to prevent CTAs from selling is to prevent stocks from dropping the first place…

In this context, we found this stat from Goldman Prime interesting: Yesterday’s notional short selling in Macro Products was the largest in over 3 years. ETF shorts increased +4.3%, the largest 1-day increase since Feb ’23.  Translation: we were this close to the bottom falling off from below the market.

Yet one place where there was little buying interest is arguably the most important asset for the market: 10Y yields rose as high as 4.59 and continue to trade in the redzone. Any breakout here and the next stop is 4.75%,

Some more stats from Goldman’s trading desk (full analysis available to pro subs):

• Volumes tracking -7% vs the 20dma with macro volumes higher for the second day in a row, capturing 32% of the overall tape.
• The floor is skewed -3% better for sale, with HF’s leading the way (-5.8% net sellers). HF’s are selling HC and Consumer Discretionary names,  + interesting to note their ETF’s short ratio continues to be very elevated, at 75%. HF’s are buying Info Tech.
• LO’s are also skewed -2% better for sale, led by Supply in HC, Info Tech, and Macro Products. They are buyers of Consumer Discretionary but overall notional across the group is very light.

And with today’s pandemonium in the books, we now await the official start of earnings season tomorrow when the big banks report Q1 results.

It’s only appropriate that on the day the BLS reported that prices are once again galloping away from the Fed’s 2% inflation target – and hit fresh monthly record highs – that the Post Office announced stamp prices would also rise to a record high… for the second time this year.

According to the U.S. Postal Service, the price of the woefully misnamed First-Class Mail Forever stamp will increase to 73 cents on July 14, 2024, up by a nickel from the 68 cents one currently costs. When it was first introduced in 2007, a Forever stamp was 41 cents. The stamps were named as such so one knew they could use the stamp “forever,” regardless of when it was purchased.

This is the second time the price of the Forever stamp will increase this year: it rose to 68 cents in January, from 66 cents.

The latest proposed changes also include a nickel hike to the price to mail a 1-ounce metered letter, to 69 cents, the postal service said Tuesday in a news release.

Mailing a postcard domestically will soon cost 56 cents, a 3-cent increase, while the price of mailing postcards and letters internationally are both rising by a dime to $1.65.

All told, the proposed changes represent a roughly 7.8% increase in the price of sending mail through the catastrophically run agency. The silver lining: the price of renting a Post Office Box is not going up, and USPS will reduce the cost of postal insurance 10% when mailing an item, it said. The only problem: virtually nobody rents PO Boxes any more or uses insurance for that matter.

The increases, part of the Postal Service’s 10-year plan toward profitability – which will never be achieved since no government agency has ever managed to not burn through taxpayer funds – are hurting mail volume and USPS’ bottom line, according to Keep US Posted, a nonprofit advocacy group of consumers, nonprofits, newspapers, greeting card publishers, magazines and catalogs.

The group called for the proposed increases to be rejected and for Congress to take a closer look at the Postal Service’s operations, citing findings by NDP Analytics in March. That would mean firing tens of thousands of useless dead weight workers, which of course would be the proper solution because – as with the US deficit itself – the problem is not the revenues, it is the spending.

“If rate increases continue to proceed at this frequency and magnitude without critical review, it risks plummeting volume further and exacerbating USPS’s financial challenges,” according to the report commissioned by the Greeting Card Association and Association for Postal Commerce.

USPS in November reported a $6.5 billion loss for fiscal 2023, and is projecting a $6.3 billion deficit in 2024.

But wait, there’s more, because today we celebrate soaring prices not only through postage stamps but also through mass transit: according to Bloomberg, New Jersey Transit riders can expect higher prices after the system’s board voted to raise fares to help cover a $107 million shortfall. The 15% fare hike, which would go into effect July 1, would be followed by 3% increases each year thereafter to account for inflation (just in case one wonders what the true inflation target is).

Proponents say the higher prices are needed to close the budget deficit for the upcoming fiscal year, while still maintaining current service. The cash-strapped agency last raised fares in 2015.

“While a fare increase is always an option of last resort and we recognize the impact an increase of any size has on all our customers, I remain strongly committed to ensure that the overall service levels are not reduced,” Kevin Corbett, the system’s president and chief executive officer, said at the Wednesday meeting.

Public-transit agencies across the US are struggling as pandemic-era aid sunsets and ridership remains stubbornly below pre-Covid levels with many workers embracing a hybrid work environment. NJ Transit officials acknowledged earlier this year that the raised prices could curb ridership, estimating a potential loss of 1.4% the next fiscal year.

Authored by Katie Spence via The Epoch Times (emphasis ours),

The National Oceanic and Atmospheric Administration (NOAA) predicts July, August, and September will be hotter than usual. And for those who view warmer temperatures as problematic, that’s a significant cause for concern.

“Earth’s issuing a distress call,” said United Nations secretary-general António Guterres on March 19. “The latest State of the Global Climate report shows a planet on the brink.

“Fossil fuel pollution is sending climate chaos off the charts. Sirens are blaring across all major indicators: Last year saw record heat, record sea levels, and record ocean surface temperatures. … Some records aren’t just chart-topping, they’re chart-busting.”

President Joe Biden called the climate “an existential threat” in his 2023 State of the Union address. “Let’s face reality. The climate crisis doesn’t care if you’re in a red or a blue state.”

In his 2024 address he said, “I don’t think any of you think there’s no longer a climate crisis. At least, I hope you don’t.”

When recalling past temperatures to make comparisons to the present, and, more importantly, inform future climate policy, officials such as Mr. Guterres and President Biden rely in part on temperature readings from the United States Historical Climatology Network (USHCN).

The network was established to provide an “accurate, unbiased, up-to-date historical climate record for the United States,” NOAA states, and it has recorded more than 100 years of daily maximum and minimum temperatures from stations across the United States.

The problem, say experts, is that an increasing number of USHCN’s stations don’t exist anymore.

“They are physically gone—but still report data—like magic,” said Lt. Col. John Shewchuk, a certified consulting meteorologist.

“NOAA fabricates temperature data for more than 30 percent of the 1,218 USHCN reporting stations that no longer exist.”

He calls them “ghost” stations.

Mr. Shewchuck said USHCN stations reached a maximum of 1,218 stations in 1957, but after 1990 the number of active stations began declining due to aging equipment and personnel retirements.

NOAA still records data from these ghost stations by taking the temperature readings from surrounding stations, and recording their average for the ghost station, followed by an “E,” for estimate.

The addition of the ghost station data means NOAA’s “monthly and yearly reports are not representative of reality,” said Anthony Watts, a meteorologist and senior fellow for environment and climate at the Heartland Institute.

“If this kind of process were used in a court of law, then the evidence would be thrown out as being polluted.”

Critical Data

NOAA’s complete record of USHCN data is available on its website, making it a vital tool for scientists examining temperature trends since before the Industrial Revolution.

Jamal Munshi, emeritus professor at California’s Sonoma State University, wrote in a 2017 paper that because many of the stations in the USHCN, and their data, date back to the 1800s, they’ve been “widely used in the study of global warming.”

“The fear of anthropogenic global warming has generated a great interest in temperature trends such that even minute changes in the temperature record are scrutinized, and controversial implications for their effects on climate, extreme weather, and sea level rise are weighed against the cost of reducing emissions as a way of moderating these changes,” Mr. Munshi wrote.

“Energy and development policy around the world are impacted by these evaluations.”

Mr. Shewchuk said the USHCN data is the only long-term historical temperature data the United States has.

“In these days of apparent ‘climate crisis,’ you would think that maintaining actual temperature reporting stations would be a top priority—but they instead manufacture data for hundreds of non-existent stations. This is a bizarre way of monitoring a climate claimed to be an existential threat,” he said.

“Observed data is real. Altered and fabricated data is not real. Period.”

The website, noaacrappy, lists all of the ghost, or “zombie” stations, their location, how long they’ve been closed and then links to NOAA’s recordings.

Significantly, the map shows, not all of the stations used to interpolate temperature data are near the closed station. Thus, hypothetically, it’s possible that since Oklahoma City’s stations are all “zombies,” interpolation data is coming from as far away as Gainesville, Texas, which is more than 136 miles away, and Enid, Oklahoma, which is more than 100 miles away.

“For various reasons, NOAA feels the need to alter this data instead of fixing equipment problems they think exist,” Mr. Shewchuk said.

“Fixing temperature reporting stations is not rocket science. If we can go up to space to fix the Hubble telescope, we can surely come down to earth to fix a few thermometers.”

Read more here…

We previously reported that Iran now considers Israel’s embassies and diplomatic sites abroad as essentially fair game in the wake of Israel’s April 1st airstrikes on Iran’s embassy in Damascus, which killed two high-ranking IRGC generals and at least five others.

An analyst from the Middle East Institute, Jason Brodsky, observed last week that “There are reports Iran’s regime may be eyeing hitting an Israel diplomatic compound in a third country via drones & missiles. Israel maintains embassies in Bahrain; UAE; Jordan; Egypt; Azerbaijan; & Turkey. I would keep an eye on Jordan.”

Russia’s Foreign Ministry had underscored in reacting to the Israeli strike on the Iranian consular compound “the inviolability of which is guaranteed by the relevant Vienna Conventions, to be categorically unacceptable.” Indeed it was unprecedented for a nation’s military to intentionally attack another state’s sovereign embassy. Iran is outraged at the UN Security Council’s silence.

Iran on Thursday is making noise over this at the UN Security Council in New York. Iran’s permanent mission to the UN has blasted the council for failing to condemn Israel’s “reprehensible act of aggression” on Iran’s diplomatic premises in Syria. Al Jazeera reports the Iranian ambassador’s fresh statement as follows: 

It said in a statement on X that if the perpetrators had been brought to justice, “the imperative for Iran to punish this rogue regime [Israel] might have been obviated.”

Iran’s Supreme Leader Ali Khamenei and other top officials have promised retaliation for the attack on the consulate building that killed members of the Islamic Revolutionary Guard Corps, including two generals.

So Iran is now saying that in light of UN inaction, which has not so much resulted in verbal censure of Israeli actions, it will be ‘forced’ to respond militarily. 

All of this could spark a major war in the Middle East, possibly including US military intervention on behalf of Israel as well well, with President Biden having just promised “ironclad support” in defense of Israel. “As I told Prime Minister Netanyahu, our commitment to Israel’s security against these threats from Iran and its proxies is ironclad,” Biden said Wednesday. “Let me say it again — ironclad. We’re going to do all we can to protect Israel’s security.” He explained this is in response to Tehran “threatening to launch a significant attack on Israel.”

IRAN🇮🇷 PREPARES TO STRIKE ISRAEL:

According to The Intercept, Iran told the White House that if the US defends Israel against the coming retaliation strike for the Damascus Embassy bombing, then the United States will become a legitimate target

White House Middle East Czar… pic.twitter.com/x3Ze8PcCX8

— Going Underground (@GUnderground_TV) April 11, 2024

Iran appears to be taking its time, waiting patiently while it plans a response. Israel has made very clear that any attack launched from Iranian soil will be met with a stronger response against the territory of the Islamic Republic. There are fresh reports saying Tehran has so far delayed its retaliation due to Washington threats that it will join Israel in hitting back against any strikes.

Below is commentary on what could happen next submitted by Avi Melamed, a former Israeli intelligence official who went on to serve as deputy and then as senior Arab affairs adviser to Jerusalem Mayors Teddy Kollek and Ehud Olmert, operating as a negotiator during the first and second intifadas. 

* * *

As the world braces for the Iranian response to the last week’s strike on Quds force commander Brig. Gen. Mohammad Reza Zahedi, it’s likely Tehran is weighing the use of its proxies versus a direct strike. Iran’s proxy warfare strategy is a shield the regime uses to avoid direct retaliation.

This calculated and sophisticated tactic allows Tehran to continue its aggression through intermediaries without facing any consequences. The ongoing assaults orchestrated by Iranian proxies underscore the regime’s influence — and ability — to shape the Middle Eastern geopolitical landscape but come at the cost of navigating local politics and civil strife. Iran’s largest proxy in the region is Hezbollah in Lebanon.

Since the start of Israel’s counteroffensive in Gaza, Hezbollah has launched salvo after salvo of rockets against Israel’s evacuated northern communities. While rhetoric would point to Hezbollah escalating to the point of a full-fledged war on Israel’s northern border, it has yet to target Haifa or significant Israeli infrastructure, a move that would launch a massive war between Israel and Hezbollah, likely triggering a dissolution of Lebanon through a civil war, which Hezbollah would need to allocate resources to fighting in addition to its battles with Israel.

Most recently a senior coordinator for the Hezbollah-rival and Christian-affiliated Lebanese Forces, Pascal Suleiman, was kidnapped in Lebanon and his body was found in Syria. While the official statement is that the attack was prosecuted by “car thieves,” all signs seem to point to Hezbollah involvement.

#BREAKING: @ynetnews: Iran postponed an attack against Israel at the last minute due to American warnings, but it is still expected

— Israel War Room (@IsraelWarRoom) April 11, 2024

Syria is the second Achilles heel that Tehran must consider. Any attack by a proxy force could be countered by an Israeli response that threatens or collapses Assad’s regime and with it the Iranian land corridor from Iran to Hezbollah in Lebanon and ultimately to the Mediterranean. Finally, Tehran must consider the potential response that would be triggered by a direct attack on Israel.

On X, Israeli Foreign Minister Israel Katz threatened very clearly today that “If Iran attacks from its own territory, Israel will respond and attack in Iran.” Even with Katz’s statement, there is no guarantee that Israel will continue to dance to the tune of Iran and its proxy model, and any future attack launched by Iran or its proxies could ultimately trigger a direct response against the Iranian homeland.

UN Security Council Fails to Condemn Damascus Strike

The US, Britain & France on Wednesday opposed a Russian-drafted U.N. Security Council statement condemnING an attack on Iran’s embassyhttps://t.co/x540vQdOkD via @observesyria pic.twitter.com/PW5FDWipfG

— Joshua Landis (@joshua_landis) April 5, 2024

While the world sits on edge waiting for the inevitable Iranian response, it’s important to note that the regime has thus far acted strategically, that it will respond in order to send a message of strength and restore its deterrence capacity, but that it will do so at the time it calculates will best achieve its successful return of deterrence.”

By Michael Every of Rabobank

Yesterday’s US CPI was radioactive. Headline and core were both 0.4% m-o-m, and 3.5% and 3.8% y-o-y. Energy prices were higher, which is bad. Shelter inflation was stuck at 5.7%, which is worse. But worst of all, services excluding shelter were 0.8% m-o-m and 4.8% y-o-y. In short, this is ammo for those who warned inflation risked getting stuck at 3-4%, especially against the backdrop of other data, including the small business survey earlier this week where inflation was seen as the #1 problem again.

Market reactions were extreme because it has been so very wrong this year – again. US 2-year yields shot up 23bp, and this morning are 4.97%. US 10-year yields soared 21bp, not helped by an ugly auction, and are 4.56% at time of writing. Stocks fell, and the dollar soared, with USD/JPY over 153 for the first time since 1990. Commodities were generally hit.

Then the Fed minutes’ tone, and that of President Biden, remained that rates are going to fall anyway at some point soon: I like the Seinfeld meme about that.

ladies and gentlemen, BRRRRANDON:
“Before the year is out, there’ll be a rate cut” pic.twitter.com/nZ5qjNEMQ8

— zerohedge (@zerohedge) April 10, 2024

Our Fed-watcher Philip Marey has now shifted his first expected Fed cut from June to September, with only two cuts seen in 2024. Moreover, if Trump wins the US election and introduces tariffs, Philip sees only another two cuts before the Fed has to stop. In other words, the Fed Funds floor would be 4.50%, where the US 10-year is trading, implying no term premium.

For markets drinking their own saliva for rate cuts in January, then spring, then summer, the prospect of having to wait until fall/autumn is awful: it’s almost a nuclear fallout for some. But it can be worse, as a cacophony of jaw-dropping rates commentary shows.

We just saw a call for a 50bp Fed cut in June, suggesting economic collapse; that shelter inflation can’t come down unless the Fed cut rates to free up the US housing market (Turkish President Erdogan will be feeling proud); Larry Summers warns the Fed should hike; and Mohammad El-Erian says it should raise its CPI target to 2-3% in a supply-constrained world.

Two years ago, I argued if we couldn’t keep past levels of goods deflation in a de/re-globalising world at war, which looked hard, more disinflation would have to come from services, which nobody would want to see when it actually had to happen, so very hard choices would loom. That’s very much the dynamic we appear to be facing, even if not all of us are facing up to it.

Will that stop other central banks from cutting, as their economies underperform the US? The Bank of Canada left rates at 5%, as expected, and Christian Lawrence notes they are still minded to start cuts in June or July. Today it’s the ECB, where Elwin de Groot and Bas van Geffen expect no change, and President Lagarde’s comments are seen keeping the door open to begin cuts in June. The BOE will follow: Stefan Koopman says in August. (Please also see his fantastic Bank of England review preview: the points he raises about how policy decisions are made apply to all central banks.) Then again, the BOJ are now predicting 2% CPI ahead, so they should presumably be hiking much more than just another 10bps.

Obviously, that rates dynamic favours USD vs. EUR, CAD, and GBP: and one also wonders how far any divergence can be pushed before G7 FX crosses start looking like JPY. On which, the Japanese authorities are not ruling out intervention: but what can that really do?   

Meanwhile, the real-world backdrop I was warning is not inflation-friendly risks getting far worse.

Both US and Israeli officials expect an imminent Iranian attack on Israel, which has made clear will see it retaliate directly against Iran; and there are suggestions the US might join Israel in a counterstrike as the US CENTCOM commander heads to Israel to coordinate. US President Biden, critical of Israel’s war in Gaza, has stressed an “ironclad” promise to stand behind Jerusalem if Tehran attacks it. Also, recall Iran is also a threshold nuclear state. Understandably, Brent oil, after dipping post-CPI, went straight back up again to $91. If we get escalation, where does one place US CPI? And Fed Funds? Or other central banks’ rates?

On another geopolitical front, the US is to deepen its defence pact with Japan. For one example, US Navy vessels will now be repaired in Japanese shipyards. Japan, a leading middle-power advocate for the “rules-based order”, is now part of “Team US”, and so stands behind the Philippines in its continued tense stand-off against China in the South China Sea. Bloomberg today refers to this pact, plus Australia (where the PM says, “Make more things here”), as NATO 2.0 for the Indo-Pacific: meanwhile, Russia and China warn NATO 1.0 to stay out of it. If you want a reason for the US to provide FX support for JPY, it would be this realpolitik – not the recent market dynamic.

China set CNY fixing at 7.0968, a record 1,579 pip spread to expectations. Clearly, Beijing doesn’t want to get into competitive FX devaluation under US CPI-related pressure. *If* it is going to act on the currency, expect it to happen when everyone is focused on something else. Yet as Chinese CPI rose only 0.1% y-o-y vs. 0.4% expected, and PPI was -2.8%, there seems to be a need to do something – and real stimulus has so far been ruled out despite Yellen telling China that’s what they should do when she was there: stimulate consumer demand, while the US stimulates its own supply. If only the world economy was coordinated like that, and the way the Chinese FX market clearly is!

Relatedly, Europe made a geopolitical splash in a bureaucratic way via a 703-page tome that shows China is not a market-based, but a state-capitalist economy: as 2/3rds of German firms in China complain they face unfair competition from locals. The report will likely open the door to far more EU trade actions against China, and subsidies to counteract it; that’s as the European Commission, the top EU competition regulator, approved a €2.2bn German state aid scheme for industry. So, yes, industrial policy and protectionism are here to stay; and they are both inflationary long before they are deflationary.

To conclude, the US CPI data were a shock; the flurry of wild rates commentary we have seen since underlines how tricky the path forward is for traditional thinkers and central banks alike; and geopolitics risks going from bad to much worse.

Spring – Summers – Nuclear Fall(out) – or Winter?

President Joe Biden has promised “ironclad” support for Israel at a moment US intelligence believes that Iranian reprisals for the April 1st Damascus embassy attack are imminent. The only question that remains is whether it will be a direct attack launched from Iranian soil, or via proxies like Hezbollah.

“As I told Prime Minister Netanyahu, our commitment to Israel’s security against these threats from Iran and its proxies is ironclad,” Biden said Wednesday. “Let me say it again — ironclad. We’re going to do all we can to protect Israel’s security.” He explained this is in response to Tehran “threatening to launch a significant attack on Israel.”

Israeli Foreign Minister Israel Katz has vowed swift and strong retaliation: “If Iran attacks from its territory, Israel will respond and attack Iran,” he said in a statement on X, echoing prior similar words of Prime Minister Netanyahu.

The US administration has also said it is not ruling out launching joint retaliatory strikes with Israel in a scenario it is attacked by Iran or its proxies, we detailed previously.

Also, Biden appeared to walk back a call for Israel to declare a six-to-eight-week ceasefire in Gaza. In an interview given to Univision which aired Tuesday, Biden had said, “So what I’m calling for is for the Israelis to just call for a ceasefire, allow for the next six, eight weeks, total access to all food and medicine going into the country.”

But on Wednesday Biden said it is “up to Hamas” to be willing to release the hostages as a condition for achieving ceasefire, contradicting the prior unilateral ceasefire remarks.

According to the new statement: “It’s now up to Hamas. They need to move on the proposal that has been made [so we can] get these hostages home where they belong,” Biden said during a press conference on Wednesday. “It also brings back a six-week ceasefire that we need now.”

Israel on Thursday once again blamed Hamas for “walking away” in ceasefire talks. Hamas has this week told negotiators that it cannot immediate locate 40 of the hostages, as they appear to be scattered at different locations across the strip – held in some cases by various militants and families.

Meanwhile former US president Donald Trump has claimed Biden “totally abandoned Israel” and that “Any Jewish person that votes for a Democrat or votes for Biden should have their head examined.”

PM Benjamin Netanyahu has reiterated Thursday regarding the Iran threat, “We set a simple principle: Anyone who hits us, we hit them.”

“We set a simple principle: Anyone who hits us, we hit them,” Netanyahu said at an F-15 base in apparent reference to #Iran‘s threats to carry out strikes against #Israel. “We are ready to fulfill our responsibilities…in defense and attack.”https://t.co/G7wdLb53fZ

— Jason Brodsky (@JasonMBrodsky) April 11, 2024

Biden is not just feeling the pressure from the GOP frontrunner for president, but also from within his own base, as Progressives continue to express outrage at his Gaza policy and the soaring death toll. Hundreds of thousands of Democrat voters, some in key swing states, have declared they will not vote for Biden this time around.

Authored by Samantha Flom via The Epoch Times,

Sen. John Kennedy (R-La.) suggested on April 10 that the Biden administration is facilitating illegal immigration to help Democrats politically.

The senator’s remarks came amid his questioning of Homeland Security Secretary Alejandro Mayorkas during a Senate Appropriations Committee hearing on April 10.

Mr. Kennedy, noting the “bleeding” southern border, suggested that the secretary’s border policies had an ulterior political motive.

“Isn’t in fact, Mr. Secretary, that the number of illegal immigrants that you and the president allow into our country counts for congressional district reapportionment?” he asked.

“Senator, I’m not sure I understand your question, but I can surely share with you that I disagree with its phrasing,” Mr. Mayorkas replied.

The senator continued:

“Isn’t it true, Mr. Secretary, that the number of illegal immigrants that you and President Biden have allowed into our country counts for allocating electoral votes?”

Mr. Mayorkas repeated that he didn’t understand the question. He then called the senator’s insinuation “nothing short of preposterous” and “disrespectful” to administration and Department of Homeland Security personnel.

Mr. Kennedy, however, charged that the secretary was well aware of the political ramifications of the border crisis, unintended or otherwise.

“And you’ve done nothing for four years—zero, absolutely zilch. And, in fact, the only people I know in this country who are better off today than they were four years ago are illegal immigrants. And that’s a result of your policy.”

Mr. Mayorkas became only the second presidential cabinet member ever to be impeached in U.S. history on Feb. 13. The charges against him included “willfully and systematically” refusing to enforce existing immigration laws and breach of public trust. The 214–213 vote split along party lines, with all but three Republicans voting in favor and all Democrats voting against.

Initially, House Speaker Mike Johnson (R-La.) planned to send the impeachment articles to the Senate on the day of the hearing. But on April 9, he announced that he would delay the move until next week as Republicans fight for a full trial.

The Democrat-controlled Senate is expected to table the trial, though Sen. Chuck Schumer (D-N.Y.), the chamber’s majority leader, has yet to announce his plans. A conviction would require a two-thirds majority vote.

Democrats have said the charges against Mr. Mayorkas fail to meet the constitutional threshold of “high crimes and misdemeanors.” But Senate Republicans say Democrats fear the political consequences of a trial.

“This issue is so toxic to Senate Democrats, to House Democrats, and to Joe Biden that they do not want this to be the issue of the day,” Sen. Roger Marshall (R-Kan.) said at an April 9 press conference.

Mr. Kennedy, during the hearing, said that he also expects his Democrat colleagues to dismiss the impeachment “and violate 200 years of Senate precedent in doing it.” He added, however, that the border crisis was likely to remain at the forefront regardless.

“I don’t think that they will be able to sweep the issue—maybe your impeachment, but not the issue—under a rug as big as the United States of America,” he told the secretary.

Read more here…