Something bad is brewing inside the Chinese economy: while most conventional indicators are showing a sharp slowdown to the country’s GDP growth rate, including disappointing retail sales, fixed investment and industrial output, forcing the PBOC last week to ease monetary conditions if nowhere nearly enough to spark a bounce in the economy,  a far more troubling indicator has just hit an all time high – the unemployment rate for China’s youth (those aged 16-24), has more than doubled in the past 4 years, surging to a record 20.8% in May (and anecdotal evidence suggests youth unemployment rate could be even higher than the official estimate), up from the single digits pre-Covid.

And if there is one thing Beijing wants no part of, it is tens of millions of young Chinese sitting idle, doing and earning nothing as they watch their big city pals sport the latest gadget du jour, and getting angry – if not regime changey – thoughts.

But why has China’s youth unemployment soared as much as it has?

According to a recent note from Goldman’s China strategist Maggie Wei (full note available to professional subs), Chinese youth unemployment rates tend to be higher than overall unemployment rates as this group appear particularly vulnerable to economic downcycles, likely due to a lack of experience.

But before we get into the reasons for the jump, first some facts. According to China’s NBS, there are are around 96 million 16-24year-olds in the urban areas; 32 million 16-24 year-olds in the urban labor force (the rest are mainly still studying), 26 million 16-24 year-olds in urban employment (7% of urban employment), and roughly 6 million 16-24 year-olds unemployed (23% of urban unemployed persons). In other words, there are about 3 million additional unemployed 16-24 year-olds now relative to pre-Covid.

The youth population is an important driver for overall consumption: the 15-24 year-old group accounted for 17% of total consumption (2010 data, based on household surveys and academic research). This age group tends to spend more on culture and education, residence (for example paying rents), transportation and communication.

So, again, why is youth unemployment so high?

As the youth accounted for close to 20% of consumption, increasing their employment and restoring their consumption power appear important to consumption recovery post reopening.

As noted above, youth tend to be particularly vulnerable during economic downcycles, probably due to a lack of work experience. Goldman’s analysis suggests that, compared with older workers, the 16-24 age group unemployment rate is more sensitive to fluctuations in the service activity growth. The next chart shows the correlation between unemployment rate and the 3-month lag of output gaps in the services sector for 16-24 age group and the 25-59 age group separately. For each 1pp increase in services sector output gap, youth unemployment rate would rise by 0.6pp, while the unemployment rate for the 25-59 year-olds might be little changed. NBS data on employment suggest services sectors such as hotel and catering, education, and IT industries tend to hire more young employees compared with other sectors.

The services sector shows significant output gaps since last year as Covid outbreaks and related control measures weighed on services activities. Output gap in the services sector narrowed materially in Q1 this year from -7pp in December 2022 to -1.2pp in April 2023, on the back of reopening boost to the economy. This would imply 3pp lower youth unemployment rate in Q2 this year. While the improvement in service activity growth implies rising demand for young workers, this increase in demand could be more than offset by strong supply seasonality. As we enter the graduation season, youth unemployment rate could rise by 3-4% and peak in summertime (usually in July or August) before starting to decline from end of Q3, if we look at the seasonal pattern in 2018 and 2019 (prior to Covid). As a result, we might see youth unemployment continuing its upward trend in the next few months.

Are there structural reasons behind China’s elevated youth unemployment rate

While the above analysis suggests the youth unemployment rate is cyclical and is set to decline as service activity growth improves, there may be other structural headwinds contributing to the high youth unemployment rate. In particular, mismatches between skillset graduates acquired from their higher education and skillset required by employers in industry with booming labor demand might have caused frictions in the labor market and therefore contributed to high youth unemployment rate.

In the chart below, GS plots the number of graduates by discipline and hiring demand by industry, according to NBS’s data. There appears to be misalignment between discipline and business requirement, though graduates could choose jobs that are not directly relevant to their discipline. For example, the number of graduates in education/sports discipline grew by more than 20% in 2021 relative to 2018, while hiring demand of education industry as a whole weakened materially during the same period. Meanwhile, regulation changes in recent years towards IT, education, and property sector might have contributed to the weakening of labor demand in these sectors.

What are the policy solutions?

Here, the answer is two-fold, with the distinction being drawn between the politically correct (if largely irrelevant), and that which is less socially acceptable, yet bears far more profound consequences for the real world.

Starting with the former, Goldman writes that China’s youth unemployment suggest promoting services activity growth to offset the recent surge. “A complete closure of service sector output gap from current level could reduce youth unemployment rate by up to 7% according to the bank’s estimate, although this could overestimate the potential improvement if some of the weakness in sectors such as education and information technology may have become structural on regulatory tightening.”

Blah Blah Blah: China is the world’s most advanced authoritarian economy (although under Biden, the US has been doing everything in its power to dethrone China): if it had an on-off switch to flip as per Goldman’s reco, it would have done so long ago instead of opening up its economic omnipotence to global skepticism and criticism, something which further weakens Beijing’s control at a time when the economy is clearly stalling.

Instead, a more practical and realistic solution comes from Jeffrey Landsberg over at Commodore Research, who writes that in recent months he has often received questions from clients regarding if and when to expect a war will break out between China and Taiwan. In response, Landsberg writes that “it is very difficult to make such a prediction, but lately a depressing thought has been stuck in our mind: War Creates A Lot Of Employment For A Country’s Youth.”

Commodore further notes that “it is becoming increasingly uncomfortable that the world’s concerns of a coming war in Taiwan are intensifying at the very same time that China’s youth unemployment is surging.” And while caveating its prediction, the firm cautions that “the record level of China’s youth unemployment, concerns over Taiwan, and countless Ukrainian and Russian youth already engaged in a European land war all continue to weigh heavily on our mind.”

There’s more: Commodore also writes that “it remains clear to us that the United States and many other nations (excluding China) have already long been in a recession.”

Consensus is only that a recession could come, but in our view a recession has been long underway. The following data is from the United States, but data from many other countries — including much of Europe etc. — all show the same reality: consumer and industrial sectors in the United States and elsewhere are all showing recession. Six out of the last seven months (including every month this year) have seen US retail sales growth come in less than inflation. This is a rare development that only occurs in recession. US consumers are purchasing less actual goods than they did a year ago.

Furthermore, while November is when US purchases of actual goods started to contract on a year-on-year basis, December marked when US manufacturing started to contract.

As Commodore concludes: “the United States (and many other nations) have long been a recession. China is faring better, however, but its
youth unemployment, housing market, and chance of war all remain concerning.”

What was left unspoken, but what is most concerning, is that when the world’s interests all align in the direction of war, a war is usually not far behind. Because while a China-Taiwan war would be a bloody, if quick solution to the problem of soaring youth unemployment, with all of its inherent systemic destabilization, we will also remind readers that the last time US debt/GDP was at the current level – and, worse, was forecast to grow exponentially higher – all else equal…

… was at the end of World War II. As such, it becomes instrumental for the current regime – and by that we mean either manifestation of the uniparty that is in control – to prevent “all else being equal”, which by extension means a radical US debt and economic restructuring similar to that observed in the aftermath of the great war.

All of which is to say that we now live in a world where both the US and China are tacitly looking for a war outcome. It won’t take long before they get it.

Authored by Roger Kimball via American Greatness,

A victory for the administrative state in the war on Donald Trump won’t be a victory for the rule of law…

We hear a lot about the loss of “institutional legitimacy” these days. One of the great ironies attendant on that loss is a revolution in sentiment among many—but by no means all—people who think of themselves as conservative. Hitherto, such people would have been staunch supporters of those institutions that, traditionally, had represented the rule of law, the continuity of our culture, etc. Nowadays, they look with a jaundiced eye upon once-respected institutions like the Department of Justice, the FBI, the CIA, and the rest of the national security/surveillance apparat. 

How could it be otherwise? Recent revelations that scores if not hundreds of figures from that world had insinuated themselves into media, social and otherwise, to push a partisan agenda must give us pause. The stories are legion. Here’s one that just appeared in The Federalist by Margot Cleveland. 

The month before Joe Biden’s inauguration, FBI sources collaborated with the New York Times’ Russia-collusion hoaxer Adam Goldman to falsely portray the investigation into Hunter Biden as a big ole nothingburger. Americans just didn’t know it at the time. However, revisiting Goldman’s article now, in light of recent whistleblower revelations and statements by former Attorney General William Barr, reveals this reality—and more.

That’s bad, right? The FBI fed faked news to our former “newspaper of record” about a partisan matter that might well have determined the outcome of a presidential election. And the response? A little feckless hand-wringing on the Right. Some clucking tongues. At the end of the day, though, expect crickets. 

In one of the very best pieces I have seen about the Horrors!-Trump-had-classified-documents-at-Mar-a-Lago indictment, also published at The Federalist, former Assistant U.S. Attorney Will Scharf minutes several disturbing features of that 37-count farce. Much of what he has to say is broadly exculpatory of Trump, but one of the most disturbing items concerns the 38th item in Special Counsel Jack Smith’s partisan cudgel: the indictment of Trump’s aide Walt Nauta. 

Why was Nauta indicted? Smith alleges he was guilty of “conspiracy to obstruct justice.” What he is being punished for, however, is refusing to betray his employer, Donald Trump. “Just turn state’s evidence on the bad orange man and we’ll let you go.” That, more or less, is what the Feds said.

They came down heavy on Nauta’s lawyer, Stanley Woodward, too. As Scharf explains, Woodward alleged in a court filing that 

during a meeting with prosecutors about his client’s case, the head of the Counterintelligence Section of DOJ’s National Security Division Jay Bratt ‘suggested Woodward’s judicial application [for a DC Superior Court judgeship] might be considered more favorably if he and his client cooperated against Trump.’

Got that? It might have been an out-take from “The Godfather.” But no, it is business as usual in the Department of Justice circa 2023. Of course, we do not yet know that the allegation is true. If it is, Scharf’s description of it as “truly wild misconduct” is an understatement. I think it is very likely true. 

As Scharf notes, “Woodward is a highly accomplished lawyer. He spent a decade at Akin Gump, a top law firm, clerked on the D.C. Circuit, and has very substantial experience in government investigations. This is not some fly-by-night TV lawyer. He is a legal heavyweight, and he is leveling an extremely serious allegation of misconduct against a senior official at DOJ.”

Let’s say his accusation turns out to be true. What then? If past performance is any guide, the erring prosecutor might or might not get a slap on the wrist and the whole thing will be buried. Maybe he will go on to a lucrative TV posting, à la Andrew McCabe or Peter Strzok. Maybe he’ll be shuffled to another department. Don’t expect any real consequences. 

Such cases, and they are legion, bring me back to that irony I mentioned at the outset of this column. The world seems increasingly divided between those who continue to have confidence in our institutions and those who, finding them bankrupt, have withdrawn their support.

This dividing line shows up in many different ways. One prominent fissure shows itself in the commentary on Jack Smith’s indictment. On one side, there are commentators—including such eminences as former Attorney General William Barr—who tell us that Trump’s holding on to those documents at Mar-a-Lago was heinous. On the other side are those (like me) who think it was no big deal. 

There has been a lot of talk about how he had “the nation’s most sensitive secrets” strewn about a closet or lining a bathroom. But nothing I’ve seen—certainly nothing in Smith’s indictment—rings any alarm bells to me. Joe Biden had hundreds of boxes of classified documents strewn about his garage and elsewhere in his house. He took those documents when he was a senator or vice president. Before, that is, he was president with the plenary power to declassify anything he wished and take home or on holiday anything he wished. 

There has been a lot of talk about how the United States is more and more subject to a “two-tier” system of justice, which is to say a system of injustice. It pains me to acknowledge it, but it is true. Henry VIII had his Star Chamber, a similarly unjust form of meting out justice. Through it he got rid of the people who stood in his way or did not do what he wanted them to. 

The functionaries and factota of the administrative state are busy trying to do to Donald Trump what Henry did to his enemies. They might just be able to peck him to death, or to jail. It won’t be a victory for the rule of law. But it will surely increase the rancor and divisions that are tearing apart the governing consensus that once ruled in this country.

The National Hurricane Center is monitoring two tropical waves that formed off Africa in recent days and are heading west across the Atlantic Ocean. One has a very high probability of formation within the next 48 hours. 

Tropical Wave 1, or Invest 92-L, is “midway between Africa and the Lesser Antilles and has become better organized overnight and is close to becoming a tropical cyclone,” NHC wrote in a Monday morning update. The weather agency gives 92-L a 100% probability of formation within the next 48 hours. 

“It’s unusual in June to have a system (Invest #92L) on the verge of developing into a tropical depression or storm, let alone two. 92-L will head in the direction of the Caribbean over the next couple of days, but there are questions,” Fox Weather meteorologist Bryan Norcross tweeted. 

TROPICS UPDATE: It’s unusual in June to have a system (Invest #92L) on the verge of developing into a tropical depression or storm, let alone two. 92-L will head in the direction of the Caribbean over the next couple days, but there are questions. More at pic.twitter.com/l85tml6Pg5

— Bryan Norcross (@bryannorcrosstv) June 19, 2023

Computer models forecast 92-L’s trajectory is likely the Caribbean Sea, but there are still a lot of uncertainties. 

Phil Klotzbach, a hurricane forecaster at Colorado State University, said the early start for deep tropical development between the Caribbean and Cabo Verde off Africa indicates hurricane season could be active this year. 

“[E]arly season activity in deep tropics is often a harbinger of a busy season,” Klotzbach tweeted.

A big question is if warm Atlantic waters can generate strong enough storms to overcome wind shear produced by El Niño. Wind shear tends to tear apart storms.

Authored by Steve Watson via Summit News,

Senator Rand Paul teed off on globalist Bill Gates Sunday, heavily intimating that the billionaire’s obsession with funding research into deadly viruses led directly to the COVID pandemic.

Appearing on Fox News, Paul noted that Gates visited China last week.

“Bill Gates is the largest funder of trying to find these viruses in remote caves and bring them to big cities,” Paul asserted, referring to gain of function research.

“So what happened in China is they went eight to 10 hours south of Wuhan, two to 300ft deep into a cave, found viruses, and took them back to a city of 15 million,” Paul further explained.

“There are many, many scientists who think that Bill Gates is wrong in funding this,” he added.

“We don’t need to be searching for viruses that may never interact with man. And it’s worse than that. They bring viruses that we may never interact with, they bring them back to the lab, but then they manipulate them by combining them with other viruses to create viruses that don’t exist in nature,” Paul continued.

“But this has largely been funded by Bill Gates. He funds the WHO more than most countries do. So there’s a responsibility there… I think he’s inadvertently helped to create something that the biggest danger to mankind right now is something that he’s been funding,” The Senator further noted.

Watch:

Paul was responding to reporting last week by Michael Shellenberger and Matt Taibbi that outlined how the first people to contract COVID were scientists working in the Wuhan virology lab.

“One of them, the one they think that was the first scientist to get sick, the first person to get sick, was one of the ones creating these new viruses, viruses not found in nature. This is the gain of function research. And so this essentially closes the deal,” Paul stated.

“What I’m going to try to pursue now is, whoever revealed this, if there’s documentation of this, it’s all supposed to be declassified tomorrow. And that legislation passed unanimously… if we can get those records, and actually put it out there for all the public to see that the first person that got sick was a scientist at the lab, then it’s a done deal,” the Senator continued.

“We know it came from the lab, and everybody can just admit it, but then we can move to the reform,” Paul further stated, adding “The reform is, we shouldn’t be funding this kind of research in China, but we also shouldn’t be funding this kind of research in the United States.”

“What we need is an international consortium of countries that will voluntarily agree to restrict this,” Paul emphasised, adding “The United States needs to restrict this. There are people estimating that, the next time this happens, the next time we have a leak from a lab, that between 5 and 50 percent of the population could die from another manmade virus.”

“This is very, very serious. This is up there with nuclear arms control. This is up there with the danger of nuclear war. But this is much more insidious,” The Senator urged.

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Over the weekend, Goldman’s head of hedge fund sales Tony Pasquariello, wrote that while the Nasdaq was off to its best start in history…

… the easy money may have been made since “many folks – not all, but many – are now as long as they’ve been all year”, and with many shorts already stopped in, the price indiscriminate buying is largely behind us (more here).

Indeed, both objective and subjective measures of sentiment are starting to look very overbought and lofty: as we noted last week, the Goldman sentiment indicator into stretched territory (1.2), its highest level in years…

… the CNN/Fear greed indicator is in “extreme greed”, the highest rating in well over a year…

… and AAII Bull-Bear spread +22 at 1 year highs.

At the same time, Goldman’s Risk Appetite Indicator (GSRAII Index) has climbed above 0.8, driven by a sharp pro-cyclical repricing across assets, pushing the bank’s PC1 ‘Global Growth factor’ to the highest level since early 2021, but as Goldman’s Cecilia Mariotti cautions, “Markets have moved ahead of macro data – the current gap between PC1 and macro surprises as captured by the global MAP score is large” (full note available to pro subscribers).

Flows in to Goldman’s Prime Brokerage confirm both the directional movement and the frenzy behind it: of all the highlights, perhaps the most startling is the fundamental net length number where “Net leverage +2.2 pts on the week to 54.9% (100th percentile 1-year). Net buying in Macro Products was led by long buys – this week’s long buys were the largest in 3 months (while Single Stocks were modestly net sold for the first time in 6 weeks, led by short sales).” At the same time, fundamental L/S Gross leverage remains unchanged at 187.4% (97th percentile 1-year), indicating a scramble to go long both gross and net (more in the full Prime Insights note available to professional subs).

So is this one giant bull trap? Well, with the big central bank events now behind us – and with the Fed “skipping” if not pausing outright, the key catalyst for the market will be the ongoing focus on liquidity TGA/RRP; here Goldman’s Rich Pirvorotsky notes that things seem to be quite stable and as the bank’s research department puts it “Contrary to our expectations, bill yields (and some repo rates) have been settling above the RRP rate in many instances, incentivizing money funds to allocate away from the RRP facility to these higher yielding alternatives.”

This has resulted in a “sharp decline in RRP balances, taking these balances lower to levels last seen about a year ago”, and effectively funding much of the recent increase in the TGA, reducing the need for banks to drawdown on reserves.

That said, the next few weeks will be key to watch as data has likely been distorted by the June 15 tax payment; even so, to this point the liquidity drain has been pretty well tolerated (even with a sizeable increase in TGA on Friday, up $115BN).

Putting it all together, Goldman’s Privorotsky writes that it has been a “difficult tape for bears and last few weeks has been about level setting expectations from a baseline of 2H recession to soft landing. The relative rally in cyclicality versus defensives and the resurgence in value stocks leaves a show me story on the data while sizeable China stimulus hopes seem somewhat misplaced.”

His conclusion, after the VIX closed 13.54 on June expiry the lowest level since the Covid crash, “I wonder if we will look back on that as a prescient signal of a very durable economy or a local high of exuberance relative the range of uncertainty for the back half of the year.”

More in the full note available to professional subscribers.

Authored by Michael Maharrey via SchiffGold.com,

Dollar doubts continue to grow, threatening the greenback’s perch at the top of the global financial system.

Last week, Kenyan President William Samoei Ruto suggested that African nations should shift away from using the dollar in intercontinental trade.

Ruto made the comments during an address before the Djibouti parliament, saying the two countries should abandon reliance on the dollar in trade.

How is US dollars part of the trade between Djibouti and Kenya? … Why is it necessary for us to buy things in Djibouti and pay in dollars? Why? There’s no reason.”

Ruto emphasized that he is not “against” the US dollar.

We just want to trade much more freely.”

He pointed out that the African Export–Import Bank (Afreximbank) provides a mechanism enabling traders on the continent to engage in trade using local currencies and said Kenya supports using a Pan-African payment and settlement system administered by the bank.

The Pan-African Payments and Settlement System (PAPSS) was launched in January 2022.

Ruto made similar comments in Nairobi earlier in the month

We are all struggling to make payments for goods and services from one country to another because of differences in currencies. And in the middle of all these, we are all subjected to a dollar environment.”

He went on to say that getting rid of the dollar middleman would allow African businessmen to concentrate on moving goods and services, “and leave the arduous task of currencies to Afreximbank.”

While the death of the dollar as the global reserve currency isn’t imminent, there is clearly a growing sentiment toward minimizing reliance on the US dollar worldwide.

For instance, last spring,  China and Brazil announced a trade deal in their own currencies, completely bypassing the dollar. China also has dollarless trade agreements with Russia, Pakistan and Saudi Arabia.

Meanwhile, BRICS nations are reportedly working to develop a “new currency.” According to a Russian spokesperson, the BRICS nations are developing a strategy that “does not defend the dollar or euro” and that “a single currency” would likely emerge within BRICS, pegged to gold or “other groups of products, rare-earth elements, or soil.”

An important BRICS summit will happen in August.

Brazil, Russia, India, China, and South Africa make up the BRICS block. It accounts for about 40% of the global population and a quarter of the global GDP.

While BRICS influence remains relatively small, there is growing interest in the bloc. Russian Deputy Foreign Minister Sergey Ryabkov says that nearly 20 new countries have applied to join the BRICS alliance.

Ryabkov did not mention specific countries but said, “In our view, the Arab world and the Asia-Pacific region have been clearly ‘begging’ to join BRICS, as they have no representation there today.”

Former Goldman Sachs chief economist Jim O’Neill coined the BRIC acronym. In a recent paper published by Global Policy Journal, he urged the expansion of BRICS.

“The US dollar plays a far too dominant role in global finance,” he wrote.

“Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic.”

It’s clear that many countries are trying to minimize their exposure to the dollar. Confidence in the greenback continues to erode thanks to the profligate borrowing, spending and money creation by the US government. America’s use of the dollar as a foreign policy weapon also makes many countries wary of relying solely on dollars.

This is a big problem for the US government.

Uncle Sam depends on the demand for dollars to underpin its profligate borrowing and spending. The only reason the US can get away with massive budget deficits and an ever-growing national debt to the extent that it does is due to the dollar’s role as the world reserve currency. It creates a built-in global demand for dollars and US Treasuries that absorb the money creation and maintain dollar strength. But what happens if that demand drops? What happens if BRICS develops its own currency and no longer needs dollars to trade?

If the demand for dollars tanks, the greenback’s value will quickly erode away. That means even worse price inflation for Americans. And in the worst-case scenario, it could collapse the dollar completely.

Russia’s foreign ministry announced on Monday that the tactical nuclear weapons controlled by Moscow and placed on Belarusian territory will be stationed there without time limit.

Both Presidents Putin and Lukashenko days ago confirmed delivery of the first batch of nuclear warheads to Belarus. The new deployment is in response to ‘aggressive policies’ from NATO countries, and had been initially announced after months ago the UK said it would supply Ukraine with depleted uranium shells.

Russian foreign ministry official Alexei Polishchuk said the move was a necessary “forced response” to the West upping its involvement in the Ukraine war, particularly through increasing supplies of heavier and heavier weapons systems, most recently tanks.

Polishchuk took the opportunity to once again blast Western nuclear hypocrisy, as other officials have done recently: 

He noted that when the details of the Moscow-Minsk agreement were being ironed out, the two sides considered the “years-long destructive practices” of joint nuclear missions of NATO member states.

Polishchuk stressed, however, that “unlike American warheads in Europe,” Russia’s weapons will be located in close proximity to its own borders and on the territory of the Union State of Russia and Belarus.

But he also affirmed that it’s possible things could deescalate just as quickly as they’ve escalated, given the Russian tactical nukes can hypothetically be withdrawn from Belarus at any moment.

But this option would only be in response to the United States taking definitive action, as according to RT, he explained that “Moscow would only consider such an option if the US eliminated its own nuclear infrastructure in Europe.”

“Of course, such a step on our part would have to be preceded by the complete withdrawal of all American nuclear weapons back to US territory and by the elimination of all relevant infrastructure in Europe,” Polishchuk stated.

Back in March, President Putin said the following…

⚡️Putin: Russia is not transferring its nuclear weapons to Belarus, but is doing what the US has been doing for decades pic.twitter.com/vblLo2pJWI

— War Monitor (@WarMonitors) March 25, 2023

Based on NATO’s nuclear sharing mission, the US currently has nuclear warheads positioned in five non-nuclear weapon states, including Belgium, Germany, Italy, Netherlands, and Turkey.

Authored by Steve Watson via Summit News,

A new Disney Pixar movie that features a non-binary character using they/them pronouns has completely flopped at the box office.

The production titled Elemental, which also features characters ‘tackling’ racism and xenophobia, ranks as one of the lowest box office debuts for a Pixar movie ever.

They spent around $200 million making it. It opened with a $29.5 million recoup.

You do the math(s).

Every. Single. Time. pic.twitter.com/xJN1sn6mPo

— Garbage Human (@GarbageHuman23) June 18, 2023

It again proves that parents just don’t want to subject their kids to identity politics and woke bat shittery.

“Depending on where it falls, this could be the lowest-earning opening weekend Pixar has had since ‘Toy Story’s $29 million take in 1995. Even then, ‘Toy Story’s box office take has not been adjusted for inflation, making ‘Elemental’s box office figures even more disappointing,” ScreenRant notes.

Another problem could also be the monumentally stupid concept of the characters being elements such as fire and water, a way of crowbarring in woke themes.

USA Today described the characters thusly:

“Wade comes from a well-to-do aquatic clan that lives in a fancy high rise, Ember is an immigrant from the world of fire who is bent on honoring her parents by taking over their shop, which peddles things fire people would eat (that would be wood).”

“At one point in the movie, after Ember’s father, Bernie, seems to recognize Wade, Ember says, ‘Not all water people look alike,’ an allusion to the sentiments that many ethnic groups can relate to when being stereotyped. In another scene, Ember is yelled at by Element City citizens who tell her they don’t want fire people around.”

The Hollywood Reporter notes that the production carries a “serious overarching theme about ethnic strife and racial tolerance.”

When will they learn that woke=broke?

Last year Disney faced a $100 million loss from a production called “Strange World,” which features an open gay teen romance.

Disney has been prominently featuring transgender and LGBT characters in productions for some time:

Weird New Disney+ Show ‘Baymax’ Features Transgender Tampon Scene

EXCLUSIVE: I’ve obtained leaked video from Disney’s upcoming show “Baymax,” which promotes the transgender flag and the idea that men can have periods to children as young as two years old.

It’s all part of Disney’s plan to re-engineer the discourse around kids and sexuality. pic.twitter.com/y1ATnKCEce

— Christopher F. Rufo ⚔️ (@realchrisrufo) June 28, 2022

Recall also that back in March last year, leaked video footage revealed Disney executive producer Latoya Raveneau asserting that her team had implemented a “not-at-all-secret gay agenda” that would be “adding queerness” to programmes and films for children.

SCOOP: I’ve obtained video from inside Disney’s all-hands meeting about the Florida parental rights bill, in which executive producer Latoya Raveneau says her team has implemented a “not-at-all-secret gay agenda” and is regularly “adding queerness” to children’s programming. pic.twitter.com/eJnZMpKIXT

— Christopher F. Rufo ⚔️ (@realchrisrufo) March 29, 2022

Disney also angered many parents earlier this year by throwing its weight and funding behind gender reassignment procedures, even for kids:

Disney to help employees, their children obtain ‘gender-affirming’ procedures, per report https://t.co/oQifEZpdDC

— NBC 15 News (@mynbc15) April 8, 2022

During his feud with the company, Florida Governor Ron DeSantis charged that Disney has a “fixation on the sexuality of children” pointing to reports that four employees of the media giant were charged with human trafficking in Florida, with one having allegedly sent sexually explicit texts to an law enforcement agent posing as a teenage child.

Video: DeSantis Accuses Disney Of “Sexualizing Kindergarteners”

The CEO of Disney, Bob Iger, announced Last November that he would seek to “quiet things down” at the company following several high profile controversies, most notably the admission of the executive producer under his predecessor declaring that Disney is operating an open LGBT agenda.

Video: New Disney CEO Wants To “Quiet Things Down” After Company Exec Previously Revealed Open LGBTQ Agenda

That doesn’t appear to have kicked in yet.

Related:

“We’re Not After Your Kids”

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After what was arguably the busiest macro week of the summer, with all major central banks revealing their latest monetary stance, DB’s Jim Reid writes that it’s not easy to find the main highlight this week with a number of events that could be meaningful but could also pass without incident. Powell’s semi-annual testimony to the House and the Senate on Wednesday and Thursday, respectively, should be the key event but coming so soon after the FOMC it’s hard to know what he can say that will be particularly new. Around this there is plenty of Fed and ECB speak where various officials will give their nuances to the policy meetings last week (see day-by-day calendar at the end).

Given an increasing global focus on rising UK rates of late, then UK CPI (Wednesday) and the expected 25bps hike on Thursday, and associated commentary, could have a big impact on Gilts and with it global bonds. There was lots in the weekend papers about the upcoming mortgage refi wave over the next couple of years if rates stay close to current levels. So this is becoming a big topic.

Staying with rates and yields, given how much US yields rallied for a period last week after jobless claims stayed surprisingly high, this Thursday’s release could be one of the data highlights of the week. The recent rise has an element of the fraudulent filings the market discovered a few weeks back, but it’s got slightly more broad-based since so this could be the first area where we see any genuine cracks in the labor markets. So all eyes on this.

Elsewhere, Global flash PMIs on Friday are always a big focus. Back in the US we have a slew of housing data including the NAHB housing market index today, housing starts and building permits tomorrow and existing home sales on Thursday. Housing is still very weak but many are seeing green shoots starting to emerge. The other key highlights are Japanese inflation on Friday and UK retail sales the same day and PPI in Germany tomorrow. In China, markets will focus on domestic banks’ loan prime rates fixings tomorrow following last week’s PBoC reverse repo and MLF rate cuts as well as a round of disappointing economic data amid the broader talk about the need for stimulus to support the waning recovery. The rest of the day-by-day week ahead is at the end as usual.

Asian equity markets are largely struggling at the start of the week, tracking Friday’s fall in US stocks. As I check my screens, the Hang Seng (-1.57%) is the biggest underperformer across the region with the CSI (-0.84%), the Shanghai Composite (-0.54%) and the KOSPI (-0.86%) also trading in the red. The Nikkei (-1.11%) is also down after 10 straight weeks of gains. Elsewhere, the S&P/ASX 200 (+0.66%) is bucking the wider sell off in the region.

On a positive note, US Secretary of State Antony Blinken met China’s president Xi Jinping on Monday to stabilise strained ties between the world’s biggest economies, although the outcome of the meeting was lackluster at best.

A quick look at markets,  S&P 500 rally finally ran out of steam on Friday, down -0.37% after 6 consecutive days of gains. This still marked a +2.58% rise on the week to the highest weekly close since April 2022. At the sector level, the S&P reversal was led by the tech sector (-0.83%) as semiconductor manufacturer Micron Technology announced about half of its China customer revenue was at risk. This followed on from China’s bar on purchases of Micron chip products in late May amid elevated geopolitical tensions. Tech underperformance was reflected in the decline of NASDAQ (-0.68%) and the FANG+ (-1.27%) indices on Friday, though they were still up by +3.25% and +4.03%, respectively, on a weekly basis. The FANG+ Index is now 3% from its all-time highs in November 2021. With the US equities sell-off coming in the latter half of the day, in Europe the STOXX 600 climbed +0.53% on Friday before the US dip (and +1.48% week-on-week).

Lastly, in commodities, oil finished up the week strong off the back of optimism over China demand. This followed a Bloomberg report that the Chinese State Council was considering a sweep of stimulus proposals to boost consumption, as well as support for sectors including property. WTI crude gained +2.29% week-on-week bringing it to $71.78/bbl (+1.64% on Friday), and Brent crude gained +2.43% to $76.61/bbl (+1.24% on Friday). The news from China also lifted copper, which climbed +2.64% in weekly terms (but down a modest -0.31% on Friday), reaching its highest level for over a month.

Here is a day-by-day calendar of events, courtesy of Deutsche:

Monday June 19

• Data: US June NAHB housing market index, Canada May raw materials and industrial product prices
• Central banks: ECB’s Villeroy speaks

Tuesday June 20

• Data: US June Philadelphia Fed non-manufacturing activity, May housing starts, building permits, Japan April capacity utilization, Italy April current account, Germany May PPI, ECB April current account, Eurozone April construction output
• Central banks: Fed’s Williams and Bullard speak, ECB’s Rehn, Simkus and Vujcic speak
• Earnings: FedEx

Wednesday June 21

• Data: UK May CPI, PPI, RPI, public finances, April house price index, EU27 May new car registrations, Canada April retail sales
• Central banks: Fed Chair Powell appears before House Financial Services Panel, Fed’s Goolsbee speaks, BoJ minutes of April meeting, BoJ’s Adachi speaks, BoC’s summary of deliberations, ECB’s Kazimir, Schnabel and Nagel speak

Thursday June 22

• Data: US Q1 current account balance, May leading index, existing home sales, Chicago Fed national activity index, June Kansas City Fed manufacturing activity, initial jobless claims, France June manufacturing, business confidence, Eurozone June consumer confidence
• Central banks: BoE decision, Fed Chair Powell appears before Senate Banking Panel, Fed’s Waller, Bowman, Mester and Barkin speak, BoJ’s Noguchi speaks Earnings: Accenture

Friday June 23

• Data: US, UK, Japan, France, Germany and Eurozone June PMIs, US June Kansas city Fed services activity, UK June GfK consumer confidence, May retail sales, Japan May CPI, nationwide and Tokyo department store sales
• Central banks: Fed’s Bullard and Mester speak, ECB’s Vujcic and De Cos speak
• Earnings: CarMax

* * *

Finally, focusing on the US, Goldman writes that there are no key economic data releases this week, but there are several speaking engagements from Fed officials, including Chair Powell’s semi-annual congressional testimony on Wednesday and Thursday. Governors Barr, Waller, and Bowman and presidents Bullard, Williams, Goolsbee, Mester, and Barkin are also scheduled to speak.

Monday, June 19

• Juneteenth National Independence Day. NYSE will be closed. SIFMA recommends bond markets also remain closed.
• 10:00 AM NAHB housing market index, June (consensus 51, last 50)

Tuesday, June 20

• 06:30 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will speak at the Barcelona School of Economics Summer Forum on “Optimal Macroeconomic Policies in a Heterogeneous World.” Presentation slides are expected to be made available. On May 22, Bullard said, “I think we’re going to have to grind higher with the policy rate in order to put enough downward pressure on inflation and to return inflation to target in a timely manner…I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later.”
• 08:30 AM Housing starts, May (GS -1.5%, consensus -0.1%, last +2.2%): Building permits, May (consensus +0.6%, last -1.4%)
• 11:45 AM New York Fed President Williams (FOMC voter) and Fed Governor Barr speak: New York Fed President John Williams and Fed Governor Michael Barr will discuss culture and leadership at the Fed’s 2023 Governance and Culture Reform Conference. A moderated Q&A is expected. On May 19, Williams said, “The main longer-term consequence from the pandemic period is a reduction in potential output, but the imprint on r-star appears to be relatively modest…Importantly, there is no evidence that the era of very low natural rates of interest has ended.” On May 16, he added, “We’ve got to make our decisions and then watch what happens, get that feedback, see how the economy’s behaving.”

Wednesday, June 21

• 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will deliver his semi-annual congressional testimony before the House Financial Services Committee. During his June FOMC press conference on June 14, Powell said that the main reason for the shift up in the dots is the disappointingly slow decline in core inflation so far this year. The other key takeaway from the June meeting is that FOMC participants see a more moderate pace of tightening as appropriate now that the funds rate is closer to its likely peak. We think this likely means that the FOMC envisions hiking every other meeting instead of at consecutive meetings, though Powell was careful to say that participants had not discussed that approach.
• 12:25 PM Chicago Fed President Goolsbee (FOMC voter) speaks: Chicago Fed President Austan Goolsbee will speak at the WSJ Global Food Forum. A moderated Q&A is expected. On June 16, Goolsbee said, “I think of it as a reconnaissance mission, pausing now to go scope it out before charging up the hill another time…The question really is: Are we on that golden path or not? Whether goods prices start coming down as we expected they were about to, and whether housing prices, the inflation rate starts coming down as we’ve kind of been expecting — those are ones are critical…We’re going to be able to do it. The North Star that the Fed is trying to do is get the inflation rate down without starting a big recession and that will be a triumph.”

Thursday, June 22

• 04:00 AM Fed Governor Waller speaks: Fed Governor Christopher Waller will deliver opening remarks at a conference hosted by the Central Bank of Ireland. Speech text is expected. On June 16, Waller said, “Core inflation is not coming down like I thought it would…Inflation is just not moving and that’s going to require, probably, some more tightening to try to get that going down.” He added, “It is still not clear that recent strains in the banking sector materially intensified the tightening of lending conditions” and that the US economy was “still ripping along for the most part.”
• 08:30 AM Initial jobless claims, week ended June 17 (GS 260k, consensus 255k, last 262k); Continuing jobless claims, week ended June 10 (consensus 1,785k, last 1,775k);
• 08:30 AM Current account balance, Q1 (consensus -$218.0bn, last -$206.8bn):
• 09:55 AM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will deliver opening remarks at a Fed Listens event hosted by the Federal Reserve Bank of Cleveland. Speech text is expected. On May 31, Bowman said, “While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation.”
• 10:00 AM Existing home sales, May (GS -2.5%, consensus -0.7%, last -3.4%)
• 10:00 AM Fed Chair Powell speaks: Fed Chair Jerome Powell will deliver his semi-annual testimony to Congress before the Senate Banking Committee.
• 10:00 AM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will discuss the economic outlook and monetary policy at the Cleveland Fed’s annual policy summit. A Q&A with audience is expected. On May 26, Mester said, “What I’d like to do is get…to a level of the funds rate where I could say, OK, in my mind, there’s [an equal probability the next move is] up or down, whenever that move would be. And I don’t think we’re there yet because I think inflation has just…remained stubborn…I guess I would push back on this waiting until we get more information because … there’s always more information.” She added, “In the banking industry…we have to continue to monitor that, because stress can happen and that can change relatively quickly. So we need to continue to express that, but so far I haven’t seen that, I would call that excess tightening from stress in the banking industry. Most of the tightening I’m seeing in credit standards is just because of the interest-rate environment.”
• 11:00 AM Kansas City Fed manufacturing index, June (consensus -4, last -1)

Friday, June 23

• 05:15 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will speak at a conference hosted by the Central Bank of Ireland again on the topic of “Optimal Macroeconomic Policies in a Heterogeneous World.” Speech text and slides are expected to be made available.
• 09:45 AM S&P Global US manufacturing PMI, June preliminary (consensus 48.5, last 48.4): S&P Global US services PMI, June preliminary (consensus 54.0, last 54.9)
• 01:40 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will deliver closing remarks at the bank’s annual policy summit. Speech text and a Q&A with the audience are expected.

Sunday, June 25

• 09:15 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at the Bank for International Settlements in Basel, Switzerland. The event is closed press. The lecture and panel discussion will be posted on the bank’s website following the event.

Source: DB, Goldman, BofA

Authored by Dave DeCamp via AntiWar.com,

Russian President Vladimir Putin on Saturday met with African leaders in St. Petersburg and displayed a document that he said was a draft treaty on Ukrainian neutrality that was drawn up during negotiations in Istanbul in March 2022.

“As you know, a string of talks between Russia and Ukraine took place in Turkey so as to work out both the confidence-building measures you mentioned and to draw up the text of the agreement,” Putin told the African delegation, according to TASS.

“We did not discuss with the Ukrainian side that this treaty would be classified, but we have never presented it, nor commented on it. This draft agreement was initialed by the head of the Kiev negotiation team. He put his signature there. Here it is,” he added.

According to RT, the treaty, titled “Permanent Neutrality and Security Guarantees for Ukraine,” required Ukraine to enshrine “permanent neutrality” in its constitution. The US, Britain, Russia, China, and France are listed as guarantors. Since the treaty was a draft, it indicates that it wasn’t finalized and more details needed to be worked out.

Putin’s claim reflects an article published in Foreign Affairs last year that cited multiple former senior US officials who said Russia and Ukraine tentatively agreed on a peace deal in April 2022. They said the agreement would have involved a Ukrainian promise not to join NATO in exchange for a Russian withdrawal to the pre-invasion lines, and Ukraine would have received security guarantees from several countries.

Russian and Ukrainian officials met face-to-face in Istanbul on March 29, 2022, which was followed up with virtual consultations. After the meeting, Russia’s lead negotiator described the talks as “constructive,” and the Russian Defense Ministry announced it would “drastically” reduce military activity near the northern cities of Kyiv and Chernihiv, which led to a full Russian withdrawal from the north.

Putin said after the Russian withdrawal, Ukraine abandoned the treaty. “After we pulled our troops away from Kiev — as we had promised to do — the Kiev authorities… tossed [their commitments] into the dustbin of history,” he said. “They abandoned everything.”

Ukraine accused Russian troops of intentionally killing civilians in the northern areas it withdrew from, most notably in the Kyiv suburb of Bucha. But if Putin’s account is true, Western pressure could have also led to Ukraine scuttling the treaty.

Then-British Prime Minister Boris Johnson visited Kyiv on April 9, 2022, a few days after Russia completed its withdrawal from the north. According to a report from Ukrainska Pravda, Johnson urged Ukrainian President Volodymyr Zelensky not to negotiate with Russia and that even if Ukraine was ready to sign a deal with Putin, Kyiv’s Western backers were not.

The Ukrainska Pravda report said at the time, Russia was ready for a Putin-Zelensky meeting, but two factors stopped it from happening: the discovery of dead Ukrainian civilians and Johnson’s visit.

Then-Israeli Prime Minister Naftali Bennet was trying to mediate between Putin and Zelensky in March 2022 and gave a similar account of the West’s position. He said the US and its allies “blocked” his mediation effort and that he thought there was a “legitimate decision by the West to keep striking Putin” and not negotiate.

Regime change in Moscow is the goal of the Ukraine war and sanctions on Russia. You can see how poorly it’s been thought out. https://t.co/OCEhzKSg5n

— Max Abrahms (@MaxAbrahms) June 18, 2023

After peace talks were scuttled in April 2022, Turkish Foreign Minister Mevlut Cavusoglu said he expected the conflict to end after the Istanbul talks but then realized some countries in NATO wanted to prolong the war to “weaken” Russia. A few days after Cavusoglu’s comments, Secretary of Defense Lloyd Austin admitted that one of the US’s goals in supporting Ukraine is to see Russia “weakened”.

As the war has dragged on, the Biden administration has come out explicitly against a ceasefire. Secretary of State Antony Blinken outlined the position earlier this month and said the US would continue building up Ukraine’s military rather than push for peace.

The African leaders who met with Putin on Saturday traveled to Russia and Ukraine to push for peace talks and an end to the war, but the chances of new negotiations between the warring sides are slim. The delegation included the presidents of Comoros, Senegal, South Africa, and Zambia, the prime minister of Egypt, and the foreign ministers of the Republic of Congo and Uganda.

The African delegation was in Ukraine on Friday, but Zelensky did not seem open to their proposals and reiterated his position that peace talks can’t happen until a full Russian withdrawal. In Moscow, the Kremlin said that the peace initiative presented by the African delegation “is very difficult to implement, difficult to compare positions.”