China’s Finance Minister: ‘Trump is Irrational’; Trade Proposals Violate WTO

America, you are not permitted to protect your businesses or shift the balance of trade in your favor. The World Trade Organization deems it to be illegal. Moreover, according to China’s Finance Minister, you do not deserve to be a world power should you follow Trump’s irrational policies.

Chinese Finance Minister Lou Jiwei criticized Republican presidential front-runner Donald Trump, calling him “an irrational type” due to his proposal that tariffs on imported Chinese goods be increased to up to 45 percent.

In an interview with the Wall Street Journal published on Sunday, Lou said, “Trump is an irrational type. If he were to do this, that would be in violation of the rules set by the World Trade Organization.”

Lou said that if the United States put Trump’s proposal into effect, it “would not be entitled to its position as the world’s major power. The U.S. needs to recognize that the U.S. and China are mutually dependent on each other. Our economic cycles are intertwined.”

Intertwined. Is this what he calls ‘intertwined?’

The Japanese yield curve continues to flatten. Long duration yields are now at record lows. Their currency is up 10% since rates were taken into negative territory. And, finally, yields up to 13 year duration are now negative.

The Bank of Japan made a woeful mistake, thinking negative yields would spur inflation. The exact opposite has occurred. They thrusted negative rates onto an aging, saver, populous. The response has been records sales for home vaults and safes. People are embracing the deflationary vortex and the Japanese government do not know what to do.

The flight to safety intensified as crude tumbled after oil-producing nations failed to reach an accord to freeze supplies. The yen rose towards a 17-month high against the dollar after members of the Group of 20 nations signaled opposition last week to any efforts from Japan to directly halt the yen’s 11 percent climb this year.

“The yen’s appreciation in the wake of the G-20 meeting is putting the BOJ in a position where it has to do something,” said Genji Tsukatani, Tokyo-based fund manager at JPMorgan Asset Management Inc. “The JGB yield curve is flattening on views inflationary pressure is waning further, strengthening demand for super-long bonds. Investors are losing places to park money so they have to buy even as yields fall.”

Interesting times.

The price of brent is off by 4% tonight, up from the lows of -6%. In case you’re wondering what to expect for tomorrow’s trade in the oil patch, I took the liberties to scour the prices of energy shares traded in Asia.

This is what I’ve found.

Australia

Beach Energy -6.5%

Santos -6.1%

Origin Energy -5.1%

Hong Kong

CNOOC -4.5%

Petrochina -2.4%

China Petro -2.4%

Japan

Inpex -5%

JX Holdings -2.2%

DAX futs are off by 0.5%.

Based off these numbers, I’m guessing XLE open up at $61.5, down by 3%.

The Sunday Times is reporting the executives from Astrazeneca are holding ‘secret’ talks to acquire MDVN, who just rebuffed an ‘inadequate’ bid from Sanofi. I never quite understood how these rumors get leaked. Perhaps one of the idiot secretaries, or receptionist, at AZN sold the info for 10 bucks to the Sunday Times, effectively costing her company millions in potential expenditures for making an elevated bid for MDVN?

Either way, this so called bid has not been proposed to the lads at Medivation just yet.

In March, MDVN hired JP Morgan to explore ‘strategic alternatives.’

The dollar is losing pace v the yen, off by 0.5%. But that’s more of a side effect of risk off than crude related.The Australian dollar and

The Australian dollar is off by  1.05% v the dollar.

The Canadian dollar is getting poleaxed v the dollar, off by 1.3%.

Finally, the dollar is up 2.1% v the Russian ruble.

It’s worth noting, the dollar is unch v the Saudi Riyal.

This is hardly what I’d describe as ‘tumultuous’. If the desired outcome of the chatter leading up to Doha was to put a bid under the price of crude, consider this excursion into idiocy a great big satanic success. All of the House of Saud members are celebrating tonight’s mild 5% drop in crude at their harems, as they sashay from one room of decadence to the next.

Over here in the states, S&P futures are off 9ish, all very boring indeed. In order to get me excited, I’d need to see crude down 10% and SPY futs off by 3% to get me out of my seat. There is nothing desirable about the current state of crude. But the bulls seem to be intent on holding it up for a little while longer.

God willing, as the night matures, true sellers of an ominous nature take control of this cartoonish response and enact punitive measures against all of the green-shooters littering the markets with pestilent buy orders.

This week inside Exodus, the algorithms went apeshit for crude, suggesting in the strongest of terms that crude oil was overbought and a sundry of crude based ETFs were overdue for a sharp rebuke.

Having made a commitment to follow the algorithms to the strictest of terms in 2016, by the end of the week I found myself 125% exposed to the market, of which 100% of my assets placed in a short position against XLE.

Naturally, the algos had no idea that oil talks were to be held in Doha. It only detected a very perverse bullishness in crude oil, supported by scores of overzealous traders. Should the talks in Doha fail, there is a strong chance that the recent rally in oil will be unwound and the trades suggested by Exodus proved inexorably correct.

The above were my blogs inside Exodus for the week which has passed. Below are the unprecedented oversold signals in the inverse ETF DUG.

My preference, of course, is to be short XLE, as it poses far less risk through a marked deceased volatility thanks to the mega cap status of its members.

It’s worth noting, this is the boldest position of mine for 2016. Having 100% of my assets short XLE and another 25% long TLT, it’s fair to assume the tone and measure of my performance, for the first half of 2016, is going to be defined and sorted out over the next two weeks.

We all knew this would be the outcome to these preposterous meetings, did we not? It was concocted by an immature 30 year old Saudi Prince, after all. This is a young man, who grew up with palatial privilege, totally unfamiliar with how to deal with hard men who’d rather blow themselves up in Doha than to cede power to a monarchy of self-righteous, greedy, boys.

As such, the talks have ended without an agreement.

The summit in the Qatari capital, which dragged on for more than ten hours beyond its initially scheduled conclusion, finished with no final accord, Nigeria’s Petroleum Minister Emmanuel Kachikwu told reporters. Discussions stumbled over whether the agreement should extend to other producers such as Iran, which wasn’t present, according to a person familiar with the matter. The inability to reach consensus will lead to a “severe” drop in prices, Citigroup Inc. predicted before the meeting.

Brent crude, which sank to a 12-year low in January, has climbed almost 30 percent in the past two months as Saudi Arabia and Russia worked on the plan to cap crude production. While analysts doubted that any accord would have a significant impact on the global oil surplus, the inability to agree on a limit undermines any prospect of coordinated action to solve the oil crisis.

“The Doha meeting was an opportunity for OPEC to polish its tarnished image,” Miswin Mahesh, an analyst at Barclays Plc in London, said on April 15. “After the failure of OPEC’s December meeting, the market was uneasy about its cohesion and Doha was a chance for the group to reassert its relevance and build a circle of trust.”

Unlike many others out there, I don’t think the price of crude will drop much when futures open for trade. These talks never stood a chance to begin with and it’s not like freezing production at all time highs was ever going to have a meaningful impact on the oversupply situation that plagues oil prices.

If oil should drop, however, I’ll be pleased–as I am leveraged short XLE.

Thus far, the 18 nations attending the Doha meetings have managed to scarf down lots of harissa and kunafa; but very little progress has been made in the field of making a deal for proposed oil production levels.

It’s worth noting, Iran hasn’t bothered to partake in these meetings, for they are too busy drilling for oil–attempting to steal Saudi market share.

Ministers started talks after 1230 GMT and were still debating the draft more than two hours later.
The prospects of a comprehensive deal, which would be the first between OPEC and non-OPEC countries in 15 years, looked slim.

“I am not sure you can call it a freeze,” one OPEC source said.
A senior oil industry source said: “The problem now is to come up with something that excludes Iran, makes the Saudis happy and doesn’t upset Russia.”

Failure to reach a global deal would signal the resumption of a battle for market share between key producers and likely halt a recent recovery in prices.

“If there is no deal today, it will be more than just Iran that Saudi Arabia will be targeting. If there is no freeze, that would directly affect North American production going forward, perhaps something Saudis might like to see,” said Natixis oil analyst Abhishek Deshpande.

The good folks from OPEC have been deal-less (extra Trump) for about 10 hours now. The clock is ticking and crude futures will open in about 5 hours.

This is called extortion, in the criminal world. Naturally, the Obama administration is lobbying congress to stop a bill that would implicate the Saudi government in being complicit in the 9/11 attacks. It would pave the way to allow the families of the victims to sue the Sauds. This is an inconvenience the Kingdom would like to avoid.

As such, reported by the NY times, they sent a hatchet man to Washington to inform them that if this were to occur, they’d scorch the fucking earth we walk upon, sell off American assets ad hoc, and release a firestorm of financial pain upon us never scene before in the history of man.

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

The administration, which argues that the legislation would put Americans at legal risk overseas, has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated. In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot.

“It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation.

President Obama will arrive in Riyadh on Wednesday for meetings with King Salman and other Saudi officials. It is unclear whether the dispute over the Sept. 11 legislation will be on the agenda for the talks.

A spokesman for the Saudi Embassy did not respond to a message seeking comment.

Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.” But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role.

Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot.

Those conclusions, contained in 28 pages of the report, still have not been released publicly.

The dispute comes as bipartisan criticism is growing in Congress about Washington’s alliance with Saudi Arabia, for decades a crucial American ally in the Middle East and half of a partnership that once received little scrutiny from lawmakers. Last week, two senators introduced a resolution that would put restrictions on American arms sales to Saudi Arabia, which have expanded during the Obama administration.

Families of the Sept. 11 victims have used the courts to try to hold members of the Saudi royal family, Saudi banks and charities liable because of what the plaintiffs charged was Saudi financial support for terrorism. These efforts have largely been stymied, in part because of a 1976 law that gives foreign nations some immunity from lawsuits in American courts.