China Refuses To Confirm Trade Deal As Local Media Stays Dead Silent

Markets are closed in Beijing, the workday is over, and there no official reports in local media of an actual trade deal, that is because, as we explained on Thursday night, the language of the deal will never be made public and there would be no signing event between President Trump and President Xi. One may ask if there is even a "deal"?

As the WSJ writes this morning, China indicated that a near-term trade agreement with the U.S. has yet to be completed despite President Trump’s signoff, highlighting the unpredictability of a negotiation process that has rattled global markets and businesses.

Trump on Thursday approved a so-called phase-one trade pact that will scale back existing tariffs on Chinese imports and eliminate new levies scheduled to take effect on Sunday, in exchange for a written pledge from Beijing to buy tens of billions of dollars worth of U.S. farm products, among other concessions.

While Mr. Trump was “upbeat and enthusiastic about this breakthrough,” in the words of Michael Pillsbury, an adviser to the president during the trade talks, the mood in Beijing has been decidedly more sober.

As noted above, none of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal which according to Trump was finalized.

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Hashrate Domination: China Controls Two-Thirds Of The World's Crypto Network's Processing Power

A new report from Reuters, citing CoinShares, indicates that China's Bitcoin miners now control a whopping 66% of the world's crypto network's processing power. This could be bad news for US miners as it signals China is quickly advancing.

Also known as "hashrate," it's the speed at which a computer is performing an operation in Bitcoin code to unlock coins, China has been steadily gaining hashrate share this year.

In June, China's Bitcoin miners controlled 60% of the global hashrate, and now the figure is up to 66% in December.

Chris Bendkisen, head of research at CoinShares, believes the rapid increase in the Chinese share of hashrate could be due to the deployment of advanced mining technology.

"This is beneficial to the Chinese mining industry," said Bendiksen. "If you are the first to increase your proportion of the hashrate, and you can do that before your competitors, that's generally good."

Mining crypto has become more difficult over the last several years as profitability sags. The overall Bitcoin hashrate has risen 80% since June, which in recent times, has created stronger profitability for miners who have access to cheap energy.

With China controlling more and more of the world's Bitcoin hashrate, some worry that the US could be falling behind the crypto curve, as Beijing is making a state effort to be a leader in blockchain.

Xiao Wunan, an executive vice-chairman of the China-backed Asia Pacific Exchange and Co-operation Foundation (APECF), recently told CNBC that Beijing's crypto initiatives are strategically important to the communist party.

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Aramco Stock Soars Limit Up In Debut After Saudis Force Locals To Buy

Is Jamie Dimon about to get the old bonesaw for leaving $180BN on the table?

Saudi Arabia's oil company Aramco soared 10% limit up on its first day of trading, reaching a valuation of $1.88 trillion, higher than any other publicly traded company in the world. This means that after pricing its IPO at $1.7 trillion, Jamie Dimon left about $180 billion on the table, which will hardly impress the Crown Prince.

The record valuation reflects an oversubscribed book of mostly local investors who bought shares on the Saudi Tadawul stock exchange after they were forced by Riyadh to pump the stock. 

Aramco only sold a tiny 1.5% sliver in the company, meaning that the kingdom and Public Investment Fund of Saudi Arabia (PIF) could easily manipulate the price with such a small fraction of the stock public. Aramco listed on the Tadawul exchange because of other international exchanges and their investors found it hard to value the oil company near the $2 trillion levels. 

"They have had to launch the IPO on their own stock exchange as the valuation was unlikely to be achieved elsewhere," said John Colley, associate dean at Warwick Business School in the U.K, who spoke with Reuters. 

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Small Business Optimism Surges As Plans To Raise Worker Compensation Soar Most In 30 Years

After stagnating for much of the past year following its 2018 all time highs, small business optimism posted the largest month-over-month gain in 19 months, since May 2018, rising 2.3 points to 104.7 in November, up from 102.4, and beating the consensus estimate of 103.0.

The "exceptional" Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings.

Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points. The NFIB Uncertainty Index fell 6 points in November to 72, adding to the 4-point drop in October and the lowest reading since May 2018.

In other words, US small business were swept by the same euphoria they felt when Trump was first elected.

“This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies,” said NFIB Chief Economist William Dunkelberg, who added what will come as music to Trump's ears: “As the two-year anniversary of the Tax Cuts and Jobs Act’s passage approaches this month, small businesses, the world’s third largest economy, are using those savings to power the American economy.”

Earnings, or the frequency that owners report positive profit trends, rose 10 points, 1 point below the record set in May 2018, to a net 2 percent reporting quarter on quarter profit improvements.

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The Next Pearl Harbour? China's Gold-Backed Crypto Currency Will Blindside US Dollar

Indeed, this weekend marks the 78th anniversary of the attack on Pearl Harbor in Hawaii, which opened the door for the United States to enter World War II. Turn on your TV and you will see military mavens rambling on, pontificating about ‘the defense of the realm’, all the while completely aloof and unaware of the American empire’s real Achilles heel.

Recent, financial pundit and TV host Max Keiser outlined such a scenario, and warned that the US will be blind-sided the day that China introduces its gold-backed crypto currency – an absolute game changer which would create a “catastrophic trapdoor opening underneath the US economy,” said Keiser.

Not surprisingly, very few mainstream financial pundits in the West are willing to admit that China possesses gold reserves in excess of 20,000 tons, and by introducing a gold-backed cryptocurrency, it has the ability to “kill the US dollar deader than a door nail …. a new Pearl Harbor-type event and it’s coming in the next six to nine months.”

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Shale's Debt-Fueled Drilling Boom Is Coming To An End

The financial struggles of the U.S. shale industry are becoming increasingly hard to ignore, but drillers in Appalachia are in particularly bad shape.

The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.


But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.

Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said.

Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.

The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.

The outlook is not encouraging. The gas glut is expected to stick around for a few years. Bank of America Merrill Lynch has repeatedly warned that unless there is an unusually frigid winter, which could lead to higher-than-expected demand, the gas market is headed for trouble. “A mild winter across the northern hemisphere or a worsening macro backdrop could be catastrophic for gas prices in all regions,” Bank of America said in a note in October.

The problem for Appalachian drillers is that Permian producers are not really interested in all of the gas they are producing. That makes them unresponsive to price signals. Gas prices in the Permian have plunged close to zero, and have at times turned negative, but gas production in Texas really hinges on the industry’s interest in oil. This dynamic means that the gas glut becomes entrenched longer than it otherwise might. It’s a grim reality plaguing the gas-focused producers in Appalachia.

With capital markets growing less friendly, the only response for drillers is to cut back. IEEFA notes that drilling permits in Pennsylvania in October fell by half from the same month a year earlier. The number of rigs sidelined and the number of workers cut from payrolls also continues to pile up.

NEVER MISS THE

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China Set To Make History With Record Number Of Bond Defaults In 2019

While China is bracing for what may be a historic D-Day event on December 9, when the "unprecedented" default of state-owned, commodity-trading conglomerate Tewoo with $38 billion in assets may take place, it has already been a banner year for Chinese bankruptcies.

According to Bloomberg data, China is set to hit another dismal milestone in 2019 when a record amount of onshore bonds are set to default, confirming that something is indeed cracking in China's financial system and "testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt."

After a brief lull in the third quarter, a burst of at least 15 new defaults since the start of November have sent the year’s total to 120.4 billion yuan ($17.1 billion), and set to eclipse the 121.9 billion yuan annual record in 2018.

The good news is that this number still represents a tiny fraction of China’s $4.4 trillion onshore corporate bond market; the bad news is that the rapidly rising number is approaching a tipping point that could unleash a default cascade, and in the process fueling concerns of potential contagion as investors struggle to gauge which companies have Beijing’s support. As Bloomberg notes, policy makers have been walking a tightrope as they try to roll back the implicit guarantees that have long distorted Chinese debt markets, without dragging down an economy already weakened by the trade war and tepid global growth.

"The authorities have found it hard to rescue all the companies," said Wang Ying, a Shanghai-based analyst at Fitch Ratings, perhaps envisioning at least two banks that have experienced depositor runs in the month of November in the aftermath of an unprecedented succession of bank failures earlier in the year.

It's not just banks however: this year’s debt woes have spread to a broad array of industries, from property developers and steelmakers to new-energy firms and software makers. The types of borrowers facing repayment difficulties has also expanded from private companies and local state-run firms to business arms of universities, an obscure and loosely regulated corner of China’s corporate world.

China's two latest defaults involved just such a company; on Monday Peking University Founder Group shocked investors after failing to repay a 2 billion yuan bond. The same day, Tunghsu Optoelectronic Technology, a maker of photoelectric display components, also failed to deliver early repayment on both interest and principal for a 1.7 billion yuan note.

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Russian Gas Mega-Pipeline To China Goes Online As Putin & Xi Hail Closer Ties

Late Monday Chinese President Xi Jinping and Russia's Vladimir Putin jointly launched the major unprecedented cooperative project that had been years in the making called the 'Power of Siberia' gas pipeline.

The China-Russia east-route pipeline is now providing China with Russian natural gas, which according to Chinese state media is expected to reach 5 billion cubic meters in 2020 and increase to 38 billion cubic meters annually from 2024.

Crucially, S&P Global Platts estimates that total sales through the pipeline is projected to meet nearly 10% of China's entire gas supply by 2022, ensuring vital energy security as Beijing continues to feel the pressure and uncertainty of the trade war with Washington. 

The ceremony to officially bring the pipeline online was held as a video call between Xi and Putin was underway. Xi told Putin: "The East-route natural gas pipeline is a landmark project of China-Russia energy cooperation and a paradigm of deep convergence of both countries' interests and win-win cooperation."

The deal had been cemented in May 2014 when Russian gas giant Gazprom signed a 30-year contract with China National Petroleum Corp, after which the pipeline agreements were signed with both leaders present in Shanghai in later 2014.

Gazprom CEO Alexei Miller announced to both leaders that the pipeline had been opened via video link. "Gas is flowing to the gas transmission system of the People's Republic of China," he said.

A 30-year deal was signed by Putin and Xi in 2014, and while a final figure has not been announced, it is believed to be worth more than $400 billion. — CNN

Gazprom will oversee operation of the mammoth pipeline which runs more than 8,100 kilometers (5,000 miles) across the two countries.


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The Problem With "Green" Monetary Policy

As an alarming new United Nations report shows, climate change is probably the biggest challenge of our time. But should central banks also be worrying about the issue? If so, what should they be doing about it?

Central-bank representatives who do decide to make public speeches about climate change cannot deny the scale and scope of the problem; to do so would be to risk their own credibility. But the same is true when central bankers feel obliged to discuss the distribution of income and wealth, rising crime rates, or any other newsworthy topic. The more that central banks’ communications strategy focuses on trying to make themselves “popular” in the public’s eyes, the greater the temptation to address topics outside their primary remit.

Beyond communicating with the public, the question, of course, is whether central banks should try to account for environmental considerations when shaping monetary policy. Obviously, climate change and corresponding government policies in response to it can have powerful effects on economic development. These consequences are reflected in all kinds of variables – growth, inflation, employment levels – that will in turn affect central-bank forecasts and influence monetary-policy decisions.

Likewise, natural disasters and other environmental events – actual or potential – can pose implicit risks to entire classes of financial assets. Regulators and supervisors charged with assessing risk and associated capital needs must take this environmental dimension into account. At a minimum, the high uncertainty stemming from these risks implies a huge challenge for assessing the stability of the financial system and corresponding macroprudential measures. And these risk factors are also increasingly relevant for monetary-policy decisions, such as when central banks should buy bonds or (in some cases) equities.

But the growing public demand that central banks contribute more actively to the fight against climate change leads to a different dimension. In theory, central banks could introduce preferential interest rates for “green” activities – thus driving up the prices of “green bonds” – while adopting a more negative attitude toward noxious assets, such as those tied to fossil fuels. And yet, assessing whether and to what extent an asset is environmentally harmful or helpful would be extremely difficult.

Putting aside these more technical issues, the broader question remains: Should central banks assume responsibility for implementing policies to combat climate change? A number of prominent central bankers have already argued that they should. And current proposals for extending central banks’ mandate have come on top of growing concerns about income distribution and other issues tangentially related to monetary policy.

One is reminded of an ironic comment by the great Chicago School economist Jacob Viner.

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How Inflation, Prudence, And Fundamentals Are Setting Up Gold To Soar

International Man: Governments around the world, including the United States, are printing trillions of currency units. This will continue to significantly devalue these paper currencies and create inflation.

Doug Casey recently said:

With all the money that’s been created by governments and central banks, the chances are excellent we’re going to have a gigantic bull market. Maybe the last one, since I expect the world is going back to using gold as money—at which point we’ll have a stable gold price.

In the meantime, I think mining stocks could go absolutely insane. The prices will have no relation to fundamentals, because everybody will want to own them.

How do you think the situation is going to play out for gold and precious metals?

Dave Forest: Inflation is a given. I see it every day in commodities, although many mainstream investors don’t recognize it. Yet.

In the 2000s, investors were over the moon when gold broke above $1,000 per ounce and copper passed $1.50 per pound. During the previous commodities bear market, those levels were unthinkable.

But now, $1,000 gold is peanuts. Hardcore bullion investors were distraught in 2016 when gold “plunged” close to $1,000. That’s seen as a depressed and unsustainable price.

Same with copper. That sector’s been in the doldrums, because the price fell below $2.50 per pound. If you’d told a copper miner in 1999 they’d have $2.50 copper, they would have popped the champagne! Today, it’s seen as scraping the bottom of the barrel.

The thing is, back in the “old” days, you could mine and process an ounce of gold for $100. Today, production costs are more like $600 per ounce. Closer to $1,000 per ounce if you add in sustaining and expansion capital.

That’s the real reason metals, including gold, have to go higher. The gold price isn’t arbitrary. The price must exceed production costs—or mines will shut down and supply will run out.

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Global Auto Sales Expected To Crash More Than After The Financial Crisis

The global auto industry continues to deteriorate, namely due to broke consumers after a decade of low-interest rates and endless incentives. 

The auto slowdown has sparked manufacturing recessions across the world, including manufacturing hubs in the US, Germany, India, and China. A prolonged downturn will likely result in stagnate global growth as world trade continues to decelerate into 2020. 

The Fitch Ratings economics team published a new report earlier this week, first reported by CNBC, outlining how global auto sales are expected to crash at a rate not seen since the last financial crisis. 

Global auto sales fell to 80.6 million in 2018 from 81.8 million in 2017, which was the first annual decline in nearly a decade. 2019 sales are likely to fall by 3.1 million, or 4%, to 77.5 million, the most significant drop since 2008. The slowdown in auto sales has been one of the largest contributors to the global manufacturing recession. 

"The downturn in the global car market since the middle of 2018 has been a key force behind the slump in global manufacturing, and the car sales picture is turning out a lot worse than we expected back in May," Brian Coulton, Fitch Chief Economist, said in a statement. 

China has been labeled as the primary source of falling demand. YTD auto sales in the country are down 11% versus the first ten months of 2018. There are no signs that a recovery in the industry will be seen in 2020. The US and Western Europe are expected to see declines of 2% this year. Brazil, Russia, and India are expected to record a drop of at least 5.5% YTD. 

"Structurally, environmental concerns about diesel cars — and anticipated regulatory responses — and the growth of ride-hailing and car-sharing schemes are weighing on auto demand," Coulton told CNBC.

Fitch also warned that the global auto industry won't rebound in 2020, and it's also likely the industry has entered a low growth period. 

"While we don't see a further sharp decline in global manufacturing in 2020, the auto outlook is pointing to stabilization at best rather than any sharp rebound," Coulton said.

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European Central Banks Are Slowly Preparing For Plan B: Gold

It was long believed in the gold space that Western central banks are against gold, but things have changed, for quite some years now. Instead of discouraging people from buying gold, or convincing them that gold is an irrelevant asset, many of these central banks are increasingly honest about the true properties of this monetary metal. Stating that gold is the ultimate store of value, that it preserves its purchasing power through time and is a global means of payment. Such statements, combined with actions that will be discussed below, reveal that more and more central banks are preparing for plan B.

The Bundesbank (the German central bank) published a book last year named Germany’s Gold. In the introduction, written by the President of the Bundesbank Jens Weidmann, the view of this bank leaves no room for interpretation. Weidmann writes (emphasis mine):

Ask anyone in Germany what they associate with gold and, more often than not, they will say that it is synonymous with enduring value and economic prosperity.

Ask us at the Bundesbank what our gold holdings mean for us and we will tell you that, first and foremost, they make up a very large share of Germany’s reserve assets ... [and they] are a major anchor underpinning confidence in the intrinsic value of the Bundesbank’s balance sheet.

The Bundesbank produced this publication to give a detailed account, the first of its kind, of how gold has grown in importance over the course of history, first as medium of payment, later as the bedrock of stability for the international monetary system.

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Futures Fade After Algos Sell Latest Burst Of "Trade Deal Optimism"

Is the oldest trick in the Trump market manipulation book finally coming to an end?

12 hours after futures spiked by 10 points to a a new record high, after algos reacted as if stung to the following China headline:

CHINA, U.S. HELD CALL TODAY; AGREED TO CONTINUE PHASE-1 TALKS
... and which said that China’s Vice Premier Liu He, Robert Lighthizer and Steven Mnuchin held a phone call in which they "reached consensus on properly resolving relevant issues" and agreed to stay in contact on the remaining points for a “phase one” trade deal during a phone, yet which if one thinks about it said absolutely nothing new - the US and China agreed to continue talks to reach a deal which Trump already announced back on October 11? - futures have faded the entire move higher and as in danger of rolling over as it suddenly appears that algos are no longer responding to the daily injections of artificial "trade deal optimism."


China's Global Times tweeted later that topics in the call may have included tariff removal, agricultural purchase and a possible face-to-face meeting citing experts close to trade talks. Furthermore, Global Times later reiterated that China and the US have basically reached broad consensus on a phase one trade deal including the removal of tariffs, although some differences remain over how much tariffs should be rolled back citing experts close to the talks. Yet if that is the case why did the two sides agree to continue the talks, and is this just a charade to keep stocks high, Trump happy, and China free to intervene in HK without angering the US president?

"We take any positive pronouncements on a trade deal with healthy skepticism given how long this has dragged out," Rabobank strategists wrote in a note Tuesday. "It would seem that any major progress on the trade deal front will be hindered by the ongoing unrest in Hong Kong." Perhaps this skepticism is starting to rub off on the algos too?

The following "flow" chart shows the most notable moments and comments in the past year of the US-China trade war, whose end continues to remain "just around the corner":

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China's 'Official' Virtual Currency Could Be Arriving "Quite Soon" To "Challenge The U.S."

As if the trade war - and soon to be currency war - between China and the U.S. needed another wrench thrown in its gears...

China sent cryptocurrencies tumbling on Friday after re-cracking-down on exchanges that are operating illegally against authorities' ban.

On Nov. 22, authorities in Shenzhen have identified a total of 39 exchanges falling foul of China’s cryptocurrency trading ban, according to local news outlet Sanyan Finance. 

It remains unknown what consequences the exchanges will face, with Sanyan highlighting a desire to crack down on liquidity.

It appears that China's blockade on non-government-sanctioned crypto trading, could be on its way to launching its own digital currency within the next 6 to 12 months, according to fund manager Edith Yeung, who recently appeared on CNBC. 

The Chinese government has been researching the idea over the last few years and has reportedly identified entities to use for a potential rollout, Yeung says. 

“It’s really been something (that’s) been in the works for the last few years,” she said on Wednesday during an interview. Yeung is a partner at blockchain-focused venture capital fund Proof of Capital. 

When she was asked how long it might be before the launch becomes reality, she responded "Quite soon. So I definitely think within the next 6 to 12 months."

And China has recently embraced blockchain, with state media reporting that President Xi Jinping said the country should look to "take a lead" in the technology. 

Wendy Liu, head of China strategy for UBS, also said that there was greater willingness to work with blockchain and 5G in China because they will help facilitate and manage the world's biggest country by population. 

Liu commented: “Due to its own needs, (China) is going to push in that direction and you see this willingness to back these technologies more so than anywhere else.”

Meanwhile, tensions between China and the U.S. continue to hit new fever pitches, as the trade war standoff between the two countries continues. Yeung says that even thought the dollar remains the world's reserve currency, the wider use of the Yuan could "challenge the U.S."

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UBS Has No Choice In Passing Negative Rate Pain To Customers

There's been talk that the Federal Reserve will slam interest rates to zero or even negative when the next recession strikes. President Trump's support for negative interest rates has quickly increased in the last several months as the latest tracking estimates for Q4 GDP have tumbled to sub 0.4%. 

It seems that policy rates in the US are too high -- and will likely conform to the rest of the world, which is near zero to negative territory. This has undoubtedly alarmed UBS CEO Sergio Ermotti, who said banks have "no choice" but to pass on the negative rate pain to customers. 

Ermotti said UBS "will not pass negative rates to smaller clients, the personal banking clients," that's because if UBS and other EU banks actually passed along negative rates to poor and middle-class families -- that would quickly spark unwanted social unrest that could crash the entire system. 

"Right now, the threshold is very high still," Ermotti said. "It's difficult to make a prediction right now, but we are quite convinced it's not going to go down to smaller investors."

And of course, banking elites are smart enough not to pass on negative rates to poor people, but as per the Bloomberg interview, Ermotti will be targeting high-net-worth investors with more than 500,000 euros or 2 million Swiss francs. 

G4 policy rates are near zero, with the exclusion of the US. But with the Federal Reserve embarking on a new interest rate cut cycle in response to collapsing global growth, it seems that policy rates across the world could go deeper into the negative territory through 2020. 

The ECB and SNB have slammed rates into negative territory in recent years in hopes to stimulate domestic and regional growth by charging banks to deposit funds, rather than lending to consumers or businesses, Bloomberg noted. 

Negative interest rates have been in an absolute disaster in Europe, with Germany teetering on the edge of a recession. 

Though Trump on Twitter has been begging for negative rates for the last several months as the US economy grinds to halt in Q4. Trump could see negative rates, but it will be for all the wrong reasons, and then US banks will have to make the decision that European banks are currently going through, which is how to pass along negative rates to customers. 

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Futures Spike After China's Top Trade Negotiator Says "Cautiously Optimistic" About Phase 1

Futures slumped for just over three hours amid fears that the US-China trade deal was hopelessly lost and in anticipation of Chinese retaliation for Congress voting unanimously to support Hong Kong protesters, before a burst of optimism was injected. Only there was a surprise twist: instead of the optimism coming from Kudlow, or Ross, or even a Trump tweet, this time it was China that did what it could to push up US equity futures.

As Bloomberg reported, China’s chief negotiator and vice premier Lie He, said Wednesday night that he was “cautiously optimistic” about reaching a phase one trade deal with the U.S., even as tensions over Hong Kong soar while trade talks continue to stretch out without even a meeting date still agreed upon.

How do we know this? Because as Bloomberg reports, "Liu He made the comments in a speech in Beijing" although not in public, but rather to an Impeachment-style whistleblower, i.e., "according to people who attended the dinner and asked not to be identified."

It was unclear why, if Liu He was truly "cautiously optimistic", officials wouldn't say so in public, and instead we would have to rely on a deep throat Bloomberg source, who refused give his name. This unnamed source said that He also explained China’s plans "for reforming state enterprises, opening up the financial sector, and enforcing intellectual property rights -- issues which are at the core of U.S. demands for change in China’s economic system."

And while algos focused exclusively on the flashing red Bloomberg headline, reading a bit further into the article reveals that Blomberg's unnamed "source" Lie He told one of the attendees that he was “confused” about the U.S. demands... but was confident the first phase of an agreement could be completed nevertheless.

Credible or not, the Bloomberg report was enough to send S&P futs spiking back over 3,100 now that if not order, then at least trade optimism has been (somewhat) restored...

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"...And You Thought Recession Risk Was A Thing Of The Past..."

Rabbit Season! Duck Season! Rabbit Season! Duck Season!

As the third-quarter earnings season comes to a close with a -2.3% showing on EPS, analysts are more bearish going into the fourth quarter; the weakness looks to spread to six sectors vs. five in the third quarter indicating the industrial slowdown has spread to services

Third quarter revenue growth has slowed to levels not seen since 2016’s third quarter while expectations are that the year’s final three months slow further; as with earnings, the quarter-on-quarter weakness is expected to broaden to health care and consumer discretionary

In the short-run, companies will likely endeavor to cut costs, including labor, to draw a line under earnings as revenues deteriorate; given revenues are a demand proxy, a concurrent slowing in GDP is also foreseeable

Rabbit Fire was a 1951 Looney Tunes cartoon starring Bugs Bunny, Daffy Duck and Elmer Fudd. The Warner Bros. short was the first to feature the classic feud between Bugs and Daffy. In it, Daffy lures Elmer to Bugs’ burrow, calls down to him, then watches as Elmer shoots at the emerged Bugs, parting his ears. As Elmer aims again, Bugs informs him that it’s not rabbit season, but rather duck season. Daffy storms in irate and attempts to convince Elmer that Bugs is lying. Their conversation breaks down into Bugs engaging Daffy in the verbal play illustrated in today’s title. Of course, Daffy fumbles into saying “duck season” and Elmer fires away.


Whether you are a fan of Bugs or Daffy, there’s another season in the financial market world that’s about to come to a close – earnings season.

Ninety-two percent of S&P 500 companies have reported third-quarter earnings results. Last Friday, FactSet reported that earnings per share (EPS) had declined 2.3% versus a year ago. Industry performance was mixed with five sectors – Energy, Materials, Information Technology, Financials and Consumer Discretionary – reporting year-over-year declines and the other six – Utilities, Health Care, Real Estate, Consumer Staples, Industrials and Communication Services – posting year-over-year gains.

Analysts’ fourth-quarter guidance is more bearish for earnings compared to the third quarter. It’s anticipated that six sectors will decline including Energy, Materials, Industrials, Information Technology, Consumer Discretionary and Consumer Staples. This widened breadth carries a broader cyclical narrative beyond the sectors more closely affected by trade war; it bleeds into the entire consumer space. Implicit are hints of contagion from manufacturing to services that introduce broader labor market risks. And you thought recession risk was a thing of the past just because the yield curve un-inverted.

Cue Bugs and Daffy for an encore with a twist: “Earnings season! Revenue season! Earnings season! Revenue season!” The bottom line (earnings) gets all the attention each quarter. But the top line (revenue) should never be overlooked. For cycle chasers and equity strategists alike, revenue growth is the heartbeat of U.S. economic activity. It proxies Gross Domestic Product (GDP).

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Globalist-Endorsed War-On-Cash May Be China's Next Terrifying Weapon

Recent protests in Hong Kong, along with the resulting fall out from international corporations questioned for their relationships with mainland China, has placed a renewed focus on the authoritarianism of the Chinese Communist Party. This has led to several articles identifying ways in which Western countries have learned from the CCP, including Europe's growing embrace of web censorship and growing interest in the social credit system rolled out in 2018. Given that it wasn't that long ago that it was common to see Western leaders and neoliberal commentators openly envy aspects of the Chinese political system, these concerns are certainly worth exploring. What should be of equal interest, however, is the ways China may be learning from the West.

As Joseph Salerno, among others, has noted for years now, a successful War on Cash would represent a new escalation in government's long history of weaponizing currency against the population. Moving far beyond the clipping of coins as a means of stealth tax collection, the purpose of a War on Cash is not simply to strengthen a government's grasp on the wealth of its citizens - but the move becomes a highly effective means of tracking any who find themselves in the crosshairs of the state.

These features make a cashless society attractive for any government - which explains why it has become an increasingly popular goal for politicians, bureaucrats, and central bankers in the West. This is precisely why we've seen the cause promoted from such influential economists as Kenneth Rogoff, former chief economist of the IMF, Marvin Goodfriend, an economics professor at Carnegie Mellon who was once nominated to the Fed by Donald Trump, as well as various economic ministers. The governments of Australia and Sweden have made a cashless society an explicit policy goal within their countries, while some central banks — such as the ECB — have begun phasing out higher denomination bills as an opening move in their own cashless campaigns.

Of course, the international perspective of the Swedish government is quite different than that of China's — and understandably so. For all of Sweden's issues, there are no comparisons to the CCP's brutal child policies or its treatment of religious minorities. What should be understood, however, is that a successful move to a cashless society would give the Swedish government similar tools over its population as those the Communist Party seeks over its dominion. While the former may ground their policy aims in “combating drug trafficking” and “convenience,” the end result in both cases is a new terrifying weapon in the hands of the state.

Luckily, it's easier for the government to desire a cashless society than it is to create it, and we've seen countries like Sweden rethink their approach. There is reason to think that China may be less apprehensive. Not only is the government more powerful, but it is also more desperate.

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National Home Bidding-War Rate Collapses To Decade Low

A new Redfin report specifies that only 10% of all offers written by Redfin agents on behalf of their homebuying clients faced a bidding war in October, down from 39% the same time last year and now at a 10-year low. Not even a plunge in mortgage rates this year could attract new buyers.

Three of the top metropolitan area for bidding wars in October were located in California -- San Francisco (34.8%), San Jose (20.5%), and San Diego (15.6%). On the East Coast, most of the bidding wars across major cities were non-existent, except for Philadelphia (13.8%).



The rate of bidding wars across major metro areas in California have collapsed in the last 12 to 16 months.

For example, 50% to 85% of all Redfin transactions in San Francisco from 2017 through 2Q18 faced fierce competition among buyers. But as soon as summer rolled around, demand plunged, and so did the bids, as the bidding war rate crashed to near zero by 1Q19 -- but has since bounced back to 34.8% in October.

During the same period, the national bidding war rate plummeted, now making a new 10-year low at 10.1% last month.

Seattle's bidding war among homebuyers was just 8.8% of all transactions in October, well below the 10.1% national average, and also at a 10-year low.

"Homebuyers in Seattle know that in the current market, they don't necessarily have to go through the emotional heartburn that comes with bidding wars," said Seattle Redfin agent Jessie Boucher.

"Even though there aren't a ton of homes for sale right now, buyers are able to preserve their contingencies and maybe even get a great deal," Boucher said.

Redfin's report is a warning that homebuyers are beginning to recognize a possible housing market top.

Many homebuyers don't want to pay top dollar for homes that have seen rapid price inflation over the last eight or so years. Also, home prices have risen faster than wages over the same period, so it's possible that a structural high as been put in -- one where the average American can no longer afford a home, hence why fierce bidding has disappeared across the country.

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One Bank Finally Admits The Fed's "NOT QE" Is Indeed QE... And Could Lead To Financial Collapse

After a month of constant verbal gymnastics (and diarrhea from financial pundit sycophants who can't think creatively or originally and merely parrot their echo chamber in hopes of likes/retweets) by the Fed that the recent launch of $60 billion in T-Bill purchases is anything but QE (whatever you do, don't call it "QE 4", just call it "NOT QE" please), one bank finally had the guts to say what was so obvious to anyone who isn't challenged by simple logic: the Fed's "NOT QE" is really "QE."

In a note warning that the Fed's latest purchase program - whether one calls it QE or NOT QE - will have big, potentially catastrophic costs, Bank of America's Ralph Axel writes that in the aftermath of the Fed's new program of T-bill purchases to increase the amount of reserves in the banking system, the Fed made an effort to repeatedly inform markets that this is not a new round of quantitative easing, and yet as the BofA strategist notes, "in important ways it is similar."

But is it QE? Well, in his October FOMC press conference, Fed Chair Powell said "our T-bill purchases should not be confused with the large-scale asset purchase program that we deployed after the financial crisis. In contrast, purchasing Tbills should not materially affect demand and supply for longer-term securities or financial conditions more broadly." Chair Powell gives a succinct definition of QE as having two basic elements: (1) supporting longer-term security prices, and (2) easing financial conditions.

Here's the problem: as we have said since the beginning, and as Bank of America now writes, "the Fed's T-bill purchase program delivers on both fronts and is therefore similar to QE," with one exception - the element of forward guidance.


The upshot to this attempt to mislead the market what it is doing according to Bank of America, is that:

the Fed is continuing to "ease" even though rate cuts are now on hold, which is supportive of growth, higher interest rates and higher equities, and the Fed is loosening financial conditions by increasing the availability of, and lowering the cost of, leverage, which broadly supports asset prices potentially at the cost of increasing systemic financial risk.
Putting the Fed's "NOT QE" in context: so far the Fed has purchased $66bn of Tbills and may purchase $60bn per month through June 2020, which could result in an increase in the Fed's Treasury holdings by about $500bn.

While we have repeatedly written in the past why we think the Fed's latest asset purchase program is, in fact, QE, below we present BofA's argument why we are right.

As Axel writes, there are two basic mechanisms how T-Bill purchases support longer-term security prices: the increase in cash assets and deposit liabilities on bank balance sheets, and the reduction of funding risk for leveraged buyers of Treasuries, MBS and other financed securities.

For those who have forgotten how the "asset reflation" pathway works, recall that the Fed either buys T-bills from investors such as money market funds, or from primary dealers who do not hold T-bills, but can buy them at auction to sell to the Fed. Buying from investors converts their T-bill holdings into new Fed cash, which in turn winds up on deposit in the banking system. If instead a primary dealer buys a Tbill at auction and sells it to the Fed, the transaction results in new Fed cash placed in the Treasury's cash account, while the dealer balance sheet is unchanged, and the banking system balance is also unchanged. But once the Treasury spends the new Fed cash on a social security payment or a medical insurance bill, etc, the cash enters the banking system and increases the aggregate balance sheet of banks.

Either way, bank balance sheets expand and banks will need to (1) hold more HQLA (high quality liquid assets) against those deposits, and (2) put some of their new cash to work in longer-term securities such as mortgage-backed securities (or even stocks)? Although banks can be flexible in how they deploy the new cash, it is likely that a portion of it will go into bonds similar to what banks already hold (currently $1.8TN in MBS securities and $770bn in Treasuries, according to Fed H.8 data). And once bonds are bid, other investors have no choice but to reach for even riskier securities, such as stocks.

Meanwhile, while the Fed does not directly lend to leveraged investors, some of the increased cash on hand at banks will likely go into repo markets to fund overnight loans to potential buyers of long-term securities in Treasuries and mortgages. This, as BofA explains, is how the increase in reserves is designed to calm repo markets. The amount of bank lending in repo has increased by about 50% since the end of 2017.

Focusing just on the increasingly more important repo channel, which is one ingredient within overall financial conditions, is becoming more important as reliance on overnight funding and leverage continues to rise. This is because, as BofA shows in its "chart of the day", while banks and security brokers have greatly reduced reliance on overnight funding as a result of Dodd-Frank, the rest of the market has approximately doubled its reliance on overnight funding since the 2008 crisis.

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Guess Who Is Preparing For A Major Stock Market Crash?

Pessimism is spreading like wildfire on Wall Street, and this is particularly true among one very important group of investors.  And considering how much money they have, it may be wise to listen to what they are telling us.  According to a very alarming survey that was recently conducted by UBS Wealth Management, most wealthy investors now believe that there will be a “significant” stock market decline before the end of next year.  The following comes from Yahoo Finance…

Wealthy people around the globe are hunkering down for a potentially turbulent 2020, according to UBS Global Wealth Management.

A majority of rich investors expect a significant drop in markets before the end of next year, and 25% of their average assets are currently in cash, according to a survey of more than 3,400 global respondents. The U.S.-China trade conflict is their top geopolitical concern, while the upcoming American presidential election is seen as another significant threat to portfolios.

Of course this could ultimately become something of a self-fulfilling prophecy if enough wealthy investors pull their money out of stocks and start increasing their cash reserves instead.  Nobody wants to be the last one out of the barn, and it isn’t going to take too much of a spark to set off a full-blown panic.  Perhaps the most troubling number from the entire survey is the fact that almost 80 percent of the wealthy investors that UBS surveyed believe that “volatility is likely to increase”…

Nearly four-fifths of respondents say volatility is likely to increase, and 55% think there will be a significant market sell-off before the end of 2020, according to the report which was conducted between August and October and polled those with at least $1 million in investable assets. Sixty percent are considering increasing their cash levels further, while 62% plan to increase diversification across asset classes.

During volatile times for the market, stocks tend to go down.

And during extremely volatile times, stocks tend to go down very rapidly.

Could it be possible that many of these wealthy investors have gotten wind of some things that the general public doesn’t know about yet?

Of course the truth is that anyone with half a brain can see that stock valuations are ridiculously bloated right now and that a crash is inevitable at some point.

And as I noted yesterday, corporate insiders are currently selling off stocks at the fastest pace in about two decades.

But why is there suddenly so much concern about 2020?

A different survey of business executives that was recently conducted found that 62 percent of them believe that “a recession will happen within the next 18 months”…

A majority of respondents – 62% – believe a recession will happen within the next 18 months. Private companies are particularly worried that a recession lurks in the near term, with 39% anticipating a recession in the next 12 months. This compares with 33% of public company respondents who felt the same way. About one-quarter – 23% – of respondents do not expect a recession within the next two years.



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"Ridiculous": $1 Trillion In Orders For $7 Billion Chinese Bond

In recent years, hardened bond market cynics snickered when insolvent European nations such as Italy or Greece saw 4, 5, or more times demand for their bond offerings than was for sale, whispering to themselves that such oversubscriptions for potentially worthless debt assure a very unhappy ending. Yet not even the biggest cynics were prepared for what just happened in China.

When Shanghai Pudong Development Bank sold $7 billion in convertible bonds last month, investors placed more than $1 trillion worth of orders, making this a 140 times oversubscribed offering, enough to shock even the most seasoned China investor, the FT reports.

That $1 trillion in bids was almost as large as the entire stock-market capitalisation of Apple or Microsoft — the two biggest companies in the world. "It was a ridiculous amount," said Gerry Alfonso, head of research at Shenwan Hongyuan Securities in Shanghai. It is also a testament to how desperate the world has become in chasing yields and return, as well as just how much excess liquidity there is in the market at the moment

While new issue oversubscriptions have become the norm in recent years, this absurd case had several Chinese market unique characteristics, reflecting a surge in issuance of such equity-linked instruments in China — a rise helped by what the FT called "an unusual embrace of the product by policymakers better known for cracking down on financial innovations to ensure stability."

So far this year, Chinese companies have issued a record $40bn in convertible bonds, up more than 80 per cent from the full-year total in 2018, according to Dealogic.

It now appears that converts have become the latest Chinese bubble due to their hybrid characteristics: while they carry a (lower) coupon payment they also offer investors the right to switch them for equity if a company’s shares rise to a certain price. For companies, convertibles offer a way to raise money more cheaply than by issuing regular debt and do not immediately dilute shareholders’ equity.

Ronald Wan, chief executive at Partners Capital in Hong Kong, said Chinese convertibles had become more attractive to investors thanks to this year’s stock rally, while the government was promoting the instruments as a way to rein in financing done off-balance sheet, or through a fragile shadow banking sector. Naturally, Wan cautioned that convertibles’ performance "depends on the quality of the issuer", with investors typically prefering large banks and big blue-chip companies over small and mid-sized issuers, especially in a time when China's smaller banks are either hit by bank runs or outright getting bailed out.

Shenwan's Alfonso meanwhile warned that while large issuers such as Shanghai Pudong have seen ample liquidity in their convertibles after listing, investors in smaller issuers faced the prospect of taking heavy losses in the event of a sell-off.

"The liquidity is bad but there is liquidity,” he said. “The thing is, the price you’re going to get there is pretty horrendous."

That, however, is not preventing every investor scrambling to be allocated a piece of the original bond in hopes of an early pop which can then be sold.

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Is The ECB Pricing Investors Out Of The Primary Market?

Christmas has come early for Europe, with Mario Draghi’s goodbye present to the market of further quantitative easing (“QE”). The ECB has kicked off its latest round of asset purchases. While this will undoubtedly be supportive for European credit, I feel much of the impact is already priced in to the secondary market. With a large book to fill, a significant part of the ECB’s ammunition is likely to be deployed in the primary market.

The ECB buying will clearly be supportive for corporate bonds, but just how material is the buying going to be? Wolfgang Bauer recently wrote a blog (here) looking at the impact of this latest round of QE. This time, the ECB is buying from a much lower base.

To assess what impact they might have, I think it’s useful to look at the volume of supply we’ve had, and probable ECB participation going forward. Looking at the breakdown by investor type for the recent Daimler new issue (A-rated by Fitch) from 30th Nov as an example, I estimate that around €535m of the €4bn deal was bought by the ECB – a rough exercise admittedly. This is a significant amount of the expected purchases per month (around 10% if we assume higher end of €5bn of purchases per month). And this is 13% of the €4bn deal too.

Shell also issued €3bn on 4th November which priced in line with the existing secondary curve. I estimate ECB participation was around 25% of this deal – a further €750m. If the ECB continues to buy such a significant proportion of issuance, we will likely see investors priced out of new issuance as deals come with zero new issuance premium. This primary participation will be very important dynamic to monitor, and one which investors will be watching for a number of prolific issuers – with VW another likely contender.

We have had a bumper year of corporate supply, largely due to low financing costs in Europe. A large proportion of this has been ‘reverse yankees’ – US issuers taking advantage of low Euro financing costs. I have excluded these from the analysis as the ECB can only purchase European issues. Still, YTD 2019 issuance has been €476bn (up 27% from last year). The chart below shows the total senior corporate supply, ex reverse yankees, for last three months across all credit ratings.


The practice and velocity of ECB buying will be a supportive factor for spreads in November but, in my opinion, this will be reasonably small in absolute terms. The ECB and its buying boots have undoubtedly boosted market sentiment but, after the initial Dealer inventories of high quality eligible paper have been hoovered up by the central bank, the greater extent of the move will be in its effect on wider BBB eligible names and non-eligible paper – so-called beta compression.

I expect the ECB will come out the traps at a good pace. Expectations for supply in November remain healthy, albeit reducing, so the run-rate is likely to be ahead of the long-term rate in the early phase of the programme. Today will be an interesting date as we will have a summary of ECB purchases from last week – so we can see for ourselves how busy the central banks have been!

ECB purchases are expected to increase in 2020 as redemptions from QE round one roll off. This technical tailwind will therefore increase in strength and undoubtedly continue to be supportive for spreads. However the effect of CSPP crowding out investors, particularly in the primary market, seems far more diminished in the face of declining European growth. Investors are cautious on moving down the capital structure with valuations looking ever more stretched versus fundamentals.

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Bank Behind World's Largest Money Laundering Scandal Offered Russians Gold Bars To Hide Their Fortune

When we last looked at Danske Bank, the Danish lender was at the center of what has been dubbed the world's largest, $220 billion money-laundering scandal that allegedly involved Russians transferring funds offshore in violation of European regulations (it also involved the chronically criminal Deutsche Bank). Then, two months ago, the scandal took a lethal turn when the CEO of the bank's Estonia branch was found dead in a still-unexplained suicide. Now, we learn of yet another bizarre twist in what some have dubbed the biggest dirty money scandal of all time: the Danish lender was offering gold bars to wealthy clients to help them keep their fortunes hidden.

According to Bloomberg, the bank’s Estonian branch - whose CEO committed suicide - which was already wiring billions of client dollars to offshore accounts, told a select group of mostly Russian customers some time around 2012, that they could now also convert their money into gold bars and coins.

So for those asking the benefits of holding money in physical gold instead of fiat (or crypto), here is the answer: aside from offering a hedge against risk, Danske presented gold as a way for clients to achieve “anonymity,” according to the documents. More importantly, the bank said that using gold ensured "portability" of assets, according to an internal presentation dated June 2012.

As one would expect, the gold/money-laundering service did not come cheap: Danske charged a fee of 0.5% on larger orders, while smaller orders had a commission of as much as 4%.

This is the first time we learn that Danske offered such "services" - in the bank's own report on its non-resident unit, the bank listed the services it provided to clients. Aside from payments, these included setting up foreign-exchange lines, as well as bond and securities trading. The bank didn’t list the sale of gold bars.

While it’s not known how much gold Danske managed to sell while the now defunct Estonian unit was still running, an internal email seen by Bloomberg revealed that at least some clients used the service. Local private banking clients were also offered the service.

Furthermore, for gold bars weighing 250 grams or more, Danske clients could obtain the precious metal without a sealed pack or paper certificates. Bloomberg adds that anti-money laundering approval was needed before customers could collect the gold, but such approvals weren’t necessary if the gold was kept in long-term storage, according to the documents.

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Global Debt Is Up To $188,000,000,000,000 – This Is Officially The Biggest Debt Bubble The World Has Ever Seen

The world is now 188 trillion dollars in debt, and that number continues to grow rapidly each year.  It is a form of enslavement that is deeply insidious, because most of those living on the planet do not even understand how the system works, and even if they did most of them would have absolutely no hope of ever getting free from it.  The borrower is the servant of the lender, and the global financial system is designed to funnel as much wealth to the top 0.1% as possible.  Of course throughout human history there has always been slavery, and the primary motivation for having slaves is to extract an economic benefit from those that are enslaved.  And even though most of us don’t like to think of ourselves as “slaves” today, the truth is that the global elite are extracting more wealth from all of us than ever before.  So much of our labor is going to make them wealthy, and yet most people don’t even realize what is happening.

Let’s start with a very simple example to help illustrate this.

When you go into credit card debt and you only make small payments each month, you can easily end up paying back more than double the amount of money that you originally borrowed.

So where does all that money go?

Well, of course it goes to the financial institution that you got your credit card from, and in turn that financial institution is owned by the global elite.

In essence, you willingly became a debt slave when you chose to go into credit card debt, and the hard work that it took to earn enough money to pay back that debt with interest ended up enriching others.

On a much larger scale, the same thing is happening to entire nations.

Today, the United States government is nearly 23 trillion dollars in debt.  In essence, we have been collectively enslaved, and we have been obligated to pay back all of that money with interest.  Of course at this point it is literally impossible for us to ever pay back all that debt, and every year we add another trillion dollars or so to the balance.  The global elite are now extracting more than 500 billion dollars in interest from this debt on an annual basis, and it is expected that number will greatly escalate in the years ahead.

It is not an accident that the Federal Reserve and the federal income tax were both instituted in 1913.  The Federal Reserve system was designed to create an endless debt spiral that would get the federal government in as much debt as possible, and since that time the size of our national debt has gotten more than 7000 times larger.  And the federal income tax was needed as the mechanism through which our wealth is transferred to the government to service all of this debt.

It is truly a deeply, deeply insidious system, and the American people should refuse to back any politician that does not favor shutting it down, but at this point this isn’t even a major political issue in our nation.

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As US Moves To Ban Huawei 5G, CEO Says Good Riddance Ahead Of Great Decoupling

The great economic decoupling has started, this is something that we've warned about since the trade war began. Years of elevated financial market volatility will follow as the world is sliced in half, with one side being controlled by the US, and the other side controlled by China.

The latest evidence of decoupling comes from Huawei Technologies CEO Ren Zhengfei, who spoke with The Wall Street Journal and said: "We can survive very well without the US. The China-U.S. trade talks are not something I'm concerned with."

In May, the Commerce Department blacklisted Huawei, the world's largest 5G equipment and smartphone producer, from doing business US firms.

Zhengfei said, "we have virtually no business dealings in the US" since the blacklisting.

Huawei was a major buyer of US semiconductors before it was blacklisted. Sales figures showed the company bought $11 billion of technology from US suppliers in 2018. The blacklisting has forced Huawei to find alternative sourcing.

Zhengfei said the company is rapidly expanding its 5G network products across the world without US chips. He said 5,000 5G base stations are being constructed every month.

Despite the blacklisting, Huawei is still purchasing some chips from US firms that produce offshore, where US restrictions don't apply.

Will Zhang, Huawei's president of corporate strategy, told The Journal that purchasing levels of US chips are at 70% to 80% of its previous level.

The Trump administration has spent at least 15 months creating Sinophobia across the world, by warning countries not to use Huawei 5G equipment because of spying concerns.

Zhengfei has denied the allegations that it spies on its customers or any government, though the Trump administration has labeled Huawei a national security threat.

Beijing views Huawei as a centerpiece of its economic success and is considered an essential piece of any future trade deal between the US.

The next several quarters will be critical for Huawei. That is if it can continue sourcing most of its chips from alternative producers and continue dominating the global smartphone space and the build-out of 5G networks across the world, then that will indicate the great decoupling from West to East is well underway.

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