Krebs Daily Briefing 28 August 2015


China: The new Spanish Empire?

The Chinese turmoil roiling markets right now presents a fresh and profound challenge to the world economy: For the first time, a giant, non-European superpower threatens world financial stability and the powers that be seem at a loss.  If the IMF and World Bank have stumbled with Greece, how are they going to get a hold on the stock market travails of Communist China? What tools do we even have to affect how it plays out? But if the particulars are novel, in the bigger sense this is a movie we’ve seen before. Though China has been the global economic star of the last low-growth decade, it remains a totalitarian dictatorship, with its economy shrouded in state secrecy.  What we’re encountering in this crisis is the spectacle of a closed society colliding with the forces of complex, free-market capitalism. If we look beyond China, we can find a long history of these collisions, dating back hundreds of years, as both closed societies and capitalism evolved and became more complex. And the history has a clear but unsettling lesson to offer: When such a collision happens, it’s a moment to genuinely worry. Since the dawn of capitalism, closed societies with repressive governments have—much like China—been capable of remarkable growth and innovation. Sixteenth-century Spain was a great imperial power, with a massive navy and extensive industry such as shipbuilding and mining. One could say the same thing about Louis XIV’s France during the 17th century, which also had vast wealth, burgeoning industry and a sprawling empire. But both countries were also secretive, absolute monarchies, and they found themselves thrust into competition with the freer countries Holland and Great Britain. Holland, in particular, with a government that didn’t try to control information, became the information center of Europe—the place traders went to find out vital information which they then used as the basis of their projects and investments.  The large empires, on the other hand, had economies so centrally planned that the monarch himself would often make detailed economic decisions.  As these secretive monarchies tried to prop up their economies, they ended up in unsustainable positions that invariably led to bankruptcy, collapse and conflict. In Spain, the result was a slow collapse, which has left it and its former empire suffering from perpetual economic crisis and political instability. In France, an open society would eventually be born through monarchial bankruptcy that pulled down banks around Europe, and ended in violent revolution and the vastly destructive Napoleonic wars.

These Countries Could Get Hit Hard by El Niño

The odds are continuing to rise that one of the strongest El Niño events on record will last until early this spring, and some countries could get slammed. As Bloomberg’s weather expert Brian Sullivan explains, El Niños reduce the hurricane threat in the Atlantic and cause stormier winters in the southern U.S,  while threatening grain crops in Asia and Central America. A team at Nomura, led by Rob Subbaraman, has a note out detailing which countries and companies are set to see the biggest impacts. Subbaraman says countries that will be the most devastated are those that are poor and import most of their food—and a large portion of personal income goes for food. “Such countries may experience a sharp fall in GDP growth, a surge in CPI inflation, worsening fiscal and trade positions, higher interest rates, currency depreciation, and widening credit spreads,” he says. Rich countries, however, could benefit if they are large net exporters of food. Below is a list ranking the world’s 80 largest countries in terms of their macro exposure. Factors that Nomura considered for the rankings include nominal GDP per capita, share of food in household consumption, and net food exports as a percentage of GDP. Countries that could see the biggest negative impacts include NigeriaPakistanPhilippinesHong KongSaudi ArabiaRussiaChinaIndiaMexico, and Portugal. Those that might benefit include New Zealandthe NetherlandsArgentinaNorway, and Denmark. The note adds that it might not take much for an event to cause a large disruption in the global food supply and bring another surge in food prices due to feedback loops such as hoarding and speculation. Which firms will see the largest effects? Nomura cites 71 global stocks that could benefit and 34 that could lose out. Highlights from the beneficiaries list includes Monsanto, Potash, Mosaic, John Deere, Whole Foods, Kroger, and Tesco. Biggest losers were General Mills, Kellogg, Tyson Foods, and Mondelez.

The Bush Leaguers of Bejing

What better way for China to cement its role in the global economy than to be the trigger of a global financial crisis? It was the United States in 2008 and Europe in 2011 and 2012; now it is China that is sending shockwaves through financial markets. Just as Beijing insists, the global economy is now multipolar — no longer an American-dominated block with the dollar at its core. And like it or not, China has become one of these poles — perhaps before it was quite ready. To appreciate how much the world and the role China plays within it have changed, think of various recent financial crises. In 1997, at the time of the Asian financial crisis that devastated a number of economies in the region, from Thailand to South Korea, China remained at the margins of the turmoil. Back then, despite its fast growing economy and strong exports, China was a financially isolated economy with an non-convertible currency and was still at the edge of the international trade system; at that time, the Chinese leadership was busy implementing the reforms necessary to join the World Trade Organization, which finally happened in 2001. In 2008, when the collapse of Lehman Brothers almost brought to a halt the American banking and financial system — which had significant impact on the rest of the world — China, once again, was to a large degree financially isolated, with a non-convertible currency. Thus, like other developing countries, it managed to keep itself largely immune from the financial contagion, but it experienced second-round effects on the real economy — indeed, the crisis in the United States and then in Europe resulted in a drop in Chinese exports. This time is different. China is no longer at the margins as in 1997, nor is it an innocent bystander as in 2008. It is at the core of the current episode of financial instability. With approximately a 16 percent share of the world’s output, China is a key component of the global economy. And, with many advanced countries in the grips of the new normal of low growth and deflationary pressure, a slowdown in Chinese economic growth spells trouble throughout China’s global supply chain.

Google rejects ‘unfounded’ EU antitrust charges of market abuse

Google Inc (GOOGL.O) has rejected EU antitrust charges that it abused its market power, exposing the company to the risk of a hefty fine if it does not alter its business practices. The company’s comments came after the European Commission in April accused it of distorting internet search results to favor its shopping service, harming both rivals and consumers. “Economic data spanning more than a decade, an array of documents and statements from complainants all confirm that product search is robustly competitive,” Kent Walker, Google’s general counsel, wrote in a blog on Thursday. “We believe that the statement of objection’s preliminary conclusions are wrong as a matter of fact, law, and economics.” The comments coincide with the company’s 150-page submission countering the Commission’s charges. Commission spokesman Ricardo Cardoso confirmed the receipt of Google’s response to the charge sheet. “We will carefully consider Google’s response before taking any decision on how to proceed and do not want to prejudge the final outcome of the investigation,” he said. If found guilty, the company could face a fine set at a level sufficient to ensure deterrence, according to the Commission’s charge sheet seen by Reuters. The EU antitrust authority can sanction wrongdoers up to 10 percent of their global turnover. In his blog, Walker said the EU authority had failed to take into account strong competition from online retailers Inc (AMZN.O) and eBay Inc (EBAY.O). He also said internet traffic had risen by 227 percent in the last decade in the countries where the Commission said it had abused its power to the detriment of rivals.

Devil to pay: Taiwan to launch softer than soft porn-star metro cards

Taiwan will roll out “angel” and “devil” metro cards featuring a Japanese porn star next week, despite a public outcry and a previous decision to scrap the project. Japanese adult film actress Yui Hatano will appear on a limited-edition charity series of Taiwan EasyCards, which users swipe to enter metro stations and buy goods at convenience stores. “We will issue the ‘devil’ edition Yui Hatano cards beginning September 1 as originally planned,” EasyCard Corp said in a statement, referring to the sexier of the two cards. The softer “angel” cards will be released after a change in theme after hearing “input from various parties”, it said. “We expect to launch the ‘angel’ edition cards in mid-September, following a redesign.” EasyCard had previously announced it would halt the roll-out following an angry public reaction. Taipei mayor Ko Wen-je said in a statement he didn’t know what motivated recently appointed EasyCard chairman Tai Chi-chuan to “make that kind of business judgment”. Online images of the “angel” card shows Yui smiling, dressed in white. The “devil” version shows her dressed in black and shooting a sultry gaze at the camera. Pornography is conspicuous by its absence. Taiwan is one of Asia’s most liberal societies, though conservative attitudes persist among the older generation and in religious communities. Hatano, 27, was recently ranked the No.9 porn star in Asia, according to erotic video website

While Many Panicked, Japanese Day Trader Made $34 Million

While a lot of investors were hitting the panic button Monday, a Japanese day trader who’d made a big bet against the market timed the bottom almost perfectly and narrated a play-by-play of the trade to his 40,000 Twitter followers. He claims to have walked away with $34 million. As financial markets got crazy this week, many people turned cautious. Some were paralyzed. Not the 36-year-old day trader known by the Internet handle CIS. “I do my best work when other people are panicking,” he said in an interview Tuesday, about an hour after winding up the biggest trade of a long career betting on stocks. He asked that his real name not be used because he’s worried about robbery or extortion. To support his claims, he shared online brokerage statements showing his trades second by second. CIS had been shorting futures on the Nikkei 225 Stock Average since mid-August, wagering it would fall. By the market close on Monday, a paper profit of $13 million was staring him in the face. He kept building the position. When he cashed out late that night, a collapse in New York had caused his profit to double. Instead of celebrating, he kept trading. He started betting the market had bottomed. When he finally took his winnings off the table on Tuesday, he tweeted, “That’s the end of my epic rebound trade.” His profit, he said, had almost tripled. “It was a perfect trade,” said Naoki Murakami, who follows CIS on Twitter and whose markets blog has made him a minor celebrity in his own right.


Lawmakers Taking Closer Look at Litigation Funding

The practice of advancing millions of dollars to help people and companies file lawsuits has had critics for years. While proponents of the “litigation finance” industry say it helps level the playing field for those who would otherwise be unable to pursue lawsuits, critics have long complained that such third-party investors give outsiders undue influence over legal decisions and allow frivolous lawsuits to go forward, driving up the overall cost of litigation. In a typical litigation finance arrangement, a funder will give money to a plaintiff to pay for the cost of litigation, and take a chunk of any recovery in the end. If the case is unsuccessful, the funder usually doesn’t get its money back. But the details of such deals are usually undisclosed. The latest pushback against litigation finance comes from Senate Judiciary Committee Chairman Chuck Grassley (R., Iowa) and Senate Majority Whip John Cornyn (R.,Texas). The pair is calling for more transparency in the litigation finance industry, in part by sending letters to three of the largest litigation funders with a list of demands. The letters, to Burford Capital, Bentham IMF and Juridica Investments Ltd., ask for a slew of information, including a complete list of cases each company has funded from 2009 to 2014, how much money they made, and whether the financing arrangements were disclosed to other parties in the litigation. “It’s vitally important to our civil justice system that litigation decisions aren’t unduly influenced by third parties,” Mr. Grassley said. All three litigation finance companies named in the letters are publicly traded on foreign exchanges, but often invest in U.S. cases. A Burford spokewoman said Thursday that the company is reviewing the letter and noted that Burford’s business “exists at the request of lawyers and businesses to address the ever-increasing burdens of litigation.”


Foes Dive for Discarded Records in Abortion Clinic Dumpsters

This story was co-published with NPR’s Shots blog. The scene in front of abortion clinics is often tense, with clinic workers escorting patients past activists waving signs and taking photographs. But increasingly, another drama is unfolding out back. There, abortion opponents dig through the trash in search of patient information. Using garbage as their ammunition, anti-abortion activists – who have sometimes beenaccused of violating abortion seekers’ privacy – are turning the tables. They claim it’s the clinics that are violating patients’ privacy by discarding medical records in unsecured ways. “Everybody acts like the abortion clinics are this bastion of protection for women’s privacy, and they’re like the chief offenders of just dumping this stuff willy-nilly,” said Cheryl Sullenger, senior policy advisor at Operation Rescue, an anti-abortion group based in Wichita, Kansas. “It’s so hypocritical.” Abortion rights groups counter that while a small number of clinics have improperly disposed of records, the vast majority take strict precautions to protect patient privacy. It’s far more common, they say, for abortion opponents to trespass on private property or try to break into locked dumpsters. “Oftentimes, the dumpsters are not on public property,” said Vicki Saporta, chief executive officer of the National Abortion Federation, the professional association for abortion providers. “These people trespass, their trespasses get reported, and law enforcement doesn’t end up prosecuting that level of criminal activity.” Trash is at the center of several disputes involving patient privacy and abortion. In Kansas City, Operation Rescue says a now-closed clinic improperly discarded records for at least 86 patients. In 2012, the group said it had received files from an informant, some of which included names and phone numbers. The group posted examples on its website. Jeff Pederson, the former manager of the clinic, said the dumpster was located on private property and was locked. He later learned, however, that his waste company used a common key for all of its locked containers, which may have allowed an outsider to open it. Pederson said he filed a complaint with local police about trespassing, which was caught on a low-resolution camera on the property, but it went nowhere. The state’s investigation into Operation Rescue’s complaint against the clinic and its physician remains open, Pederson said. At least some cases involving abortion-clinic dumpster dives have resulted in complaints to the Office for Civil Rights within the Department of Health and Human Services. The office is charged with enforcing the Health Insurance Portability and Accountability Act, or HIPAA, which prohibits patients’ medical information from being shared without their consent.


Blackrock buys a robo advisor


The asset management giant plans to sell the startup’s robo advising to banks and financial institutions. Money management giant BlackRock has acquired financial advisory service FutureAdvisor, which uses algorithms instead of professionals to help manage its clients’ investments. Similar to competitors Betterment and Wealthfront, FutureAdvisor’s computersanalyze customer accounts and recommend investments based on the goals of the account holders. The terms of the deal were not disclosed. FutureAdvisor had raised over $20 million in venture funding from Silicon Valley investors including Canvas and Sequoia Capital. BlackRock  BLK 3.09%  says that FutureAdvisor will operate as a business within BlackRock’s investment and risk management arm, BlackRock Solutions. BlackRock seems to be focused on selling FutureAdvisor’s services to banks, insurers, and other advisory firms so they can offer so-called robo-advisor programs. Robo-advisors have become more popular as millennials and young professionals, in particular, look for alternative ways to invest their savings and for retirement. FutureAdvisor manages $600 million in assets compared withover $2 billion each by Betterment and Wealthfront. Even traditional financial advisors like Charles Schwab    have caught on to the trend and now offer their own versions of algorithm-based financial advisors.

Pro-Clinton group re-ups demand for Gowdy to turn over his emails

An outside rapid-response and research group dedicated to defending the records of Hillary Clinton and other Democrats running for president repeated its call Wednesday for Trey Gowdy, the chairman of the House Select Committee on Benghazi, to release his own work-related and private emails and those of his staff. A letter from Correct the Record founder David Brock, sent Wednesday and shared exclusively with POLITICO, follows another sent March 11 in which Brock also urged Gowdy to release his own private and work-related email as he called for Clinton to turn over her server. Clinton’s campaign earlier this month turned over the server that the former secretary of state used for email correspondence during her time at the State Department, along with a thumb drive containing the work-related emails. “I asked earlier what it is you may have to hide by not releasing your own emails and I recognize that I am unlikely to receive a response,” Brock wrote in a letter to Gowdy (R-S.C.) dated Wednesday. Correct the Record’s website also features a timer counting the days, hours, minutes and seconds since Gowdy received Brock’s initial request. “The Select Committee on Benghazi may have uncovered Hillary Clinton’s unusual and unprecedented email arrangement, but it is the FBI that is investigating it. As such, it would be more appropriate for this group to direct its request to the FBI,” said committee spokesman Jamal Ware. In the letter, Brock goes on to “hazard a few educated guesses” as to why the chairman has not released the emails, speculating that he is “hiding correspondence with GOP presidential candidates, the Republican National Committee or other political committees” that would show a “campaign of character and political assassination against Hillary Clinton in an effort to win a political campaign.” “Perhaps you are hiding emails which would reveal how, after you pledged not to use this investigation to raise money for the GOP, you managed to attend fundraising events where Benghazi was specifically raised in a political context,” Brock wrote. “Almost certainly you and your team are hiding correspondence with numerous media outlets, the New York Times being one, which would show that the committee, and perhaps you personally, has selectively leaked erroneous and dishonest information to smear Hillary Clinton.” Brock then writes: “If these hypotheses seem preposterous to you then the remedy is clear: release your emails and those of your committee staff.” Clinton is set to testify before the Benghazi committee on Oct. 22, while two of her former top aides at State, Cheryl Mills and Jake Sullivan, will appear before the panel privately on Sept. 3 and Sept. 4, respectively.

Labor Board Ruling Eases Way for Fast-Food Unions’ Efforts

WASHINGTON — The National Labor Relations Board, in a long-awaited ruling, made it easier on Thursday for unions to negotiate on behalf of workers at fast-food chains and other companies relying on contractors and franchisees. The ruling, adopted in a 3-to-2 vote along partisan lines, was immediately attacked by business groups, who called on the Republican-controlled Congress to overturn it. Employers like McDonald’s and Yum Brands are also likely to challenge the decision if unions manage to organize a group of employees at one or more of their franchises, if not well before that. The labor board, which is charged with protecting workers’ rights to organize, changed the definition of a crucial employer-employee relationship that had held in some form since the Reagan era of the 1980s. Now, a company that hires a contractor to staff its facilities may be considered a so-called joint employer of the workers at that facility, even if it does not actively supervise them. A union representing those workers would be legally entitled to bargain with the parent company, not just the contractor, under federal labor law. “The decision today could be one of the more significant by the N.L.R.B. in the last 35 years,” said Marshall B. Babson, a lawyer who helped write a brief opposing the rule for the U.S. Chamber of Commerce. “Depending on how the board applies its new ‘indirect test,’ it will likely ensnare an ever-widening circle of employers and bargaining relationships.”

Lawyers plan challenge to arrests based on secret cellphone tracking

Defense lawyers in Baltimore are examining nearly 2,000 cases in which the police secretly used powerful cellphone tracking devices, and they plan to ask judges to throw out “a large number” of criminal convictions as a result. “This is a crisis, and to me it needs to be addressed very quickly,” said Baltimore’s deputy public defender, Natalie Finegar, who is coordinating those challenges. “No stone is going to be left unturned at this point.” The move follows a USA TODAY investigation this week that revealed that Baltimore police have used cellphone trackers, commonly known as stingrays, to investigate crimes as minor as harassing phone calls, then concealed the surveillance from suspects and their lawyers. Maryland law generally requires that electronic surveillance be disclosed in court. Finegar and others said they do not know how many criminal cases they ultimately will seek to reopen because of the secret phone tracking, but she expects it to be “a large number.” The public defender’s office is reviewing a surveillance log published by USA TODAY that lists more than 1,900 cases in which the police indicated they had used a stingray. It includes at least 200 public defender clients who were ultimately convicted of a crime. Stingrays are suitcase-sized devices that allow the police to pinpoint a cellphone’s location to within a few yards by posing as a cell tower. In the process, they also can intercept information from the phones of nearly everyone else who happens to be nearby. At least 53 police departments from Miami to Los Angeles own one of the cell trackers, according to the American Civil Liberties Union. But few have revealed when or how the devices are used, in part because they signed non-disclosure agreements with the FBI.


Hubbard team accuses state of grand jury violations

Attorneys for House Speaker Mike Hubbard Wednesday accused prosecutors of grand jury secrecy violations, and filed a motion to dismiss the case on those grounds. In a 13-page motion, the speaker’s attorneys said prosecutors revealed the names of ten witnesses who testified before the grand jury in an Aug. 6 filing. “This disclosure was an affront to this Court and a blatant violation of the Grand Jury Secrecy Act,” the defense team’s filing said. “The damage caused by this disclosure cannot be ‘repaired.’ Hubbard’s defense team said a May 18, 2015 letter from W. Van Davis, the acting attorney general in the case, contained the names. The letter came as an exhibit in the Aug. 6 filing. In the letter, Davis refers to transcripts of the witnesses given to the defense this year. The attorney general’s office did not immediately have a comment on the filing. Mark White, an attorney for Hubbard, said Thursday he did not know when a ruling might take place. The Aug. 6 filing is no longer available to the public. The Associated Press reported earlier this week the list included former Gov. Bob Riley, businessman Jimmy Rane, former state Rep. Greg Wren and Business Council of Alabama director Billy Canary. Hubbard’s 23-count indictment in October mentioned all three. None face charges. Hubbard’s team moved to have the speaker’s indictment dismissed. Barring that, the defense team asked Lee County Circuit Judge Jacob Walker or the governor’s office to appoint an independent counsel to investigate “the most recent and heinous violation (as well as other violations) or Alabama’s Grand Jury Secrecy Act.” Prosecutors accuse Hubbard of using his position as speaker to steer jobs and investments to companies in which he held an interest; voting on a budget that would benefit a client and lobbying the executive branch on behalf of clients. The speaker denies the charges, and his attorneys say all the transactions were proper. The filing comes amid a dispute between prosecutors and defense attorneys over the speaker’s challenge to the Alabama Ethics Act. Hubbard voted for additions to the law in 2010 which formed the basis of his indictment last year. His attorneys say the challenge concerns the law as applied to the speaker. Hubbard’s team filed the challenge under seal. Defense attorneys said at an Aug. 17 hearing they did so due to the presence of grand jury testimony. But prosecutors accused Hubbard’s team of trying to avoid embarrassment to Hubbard in challenging a law he voted for. Both sides appeared to agree to release the challenge in a redacted form. Walker earlier this week ordered filings referencing grand jury testimony to remain under seal. In a second order issued Thursday morning, Walker wrote that he still intended “to release as much of the Defendant’s motion setting forth his constitutional challenges as possible.”

Alabama One Credit Union taken over by state

The Alabama Credit Union Administration today placed Tuscaloosa-based Alabama One Credit Union into conservatorship. This action does not disrupt Alabama One’s ordinary business, and Alabama One Credit Union members can continue to conduct normal financial transactions, deposit and access funds, and use shares through Alabama One Credit Union’s branches, the state regulators said. Deposits at Alabama One Credit Union remain protected. Administered by the National Credit Union Administration, the Share Insurance Fund insures individual accounts up to $250,000, and a member’s interest in all joint accounts combined is insured up to $250,000. The Share Insurance Fund separately protects IRA and KEOGH retirement accounts up to $250,000. The Share Insurance Fund has the backing of the full faith and credit of the United States. Alabama One is one of the state’s largest credit unions with more than 60,000 members and has assets of approximately $598 million. It formerly operated as BFGoodrich Credit Union.

Ten Alabama counties have more voters than eligible people

An organization called the Public Interest Legal Foundation has notified 10 counties in Alabama that they have more registered voters than voting age population. Alabama Secretary of State John Merrill said he checked the numbers in the counties listed by the foundation and confirmed that all 10 had more registered voters than people 18 and older. The counties are Lowndes, Perry, Greene, Macon, Wilcox, Marengo, Hale, Washington, Conecuh and Choctaw. Merrill said all 10 counties have lost population since 2010 and believes some people who have left the counties remain on the voting rolls. Merrill said there are a couple of initiatives in the works to make the rolls more accurate. “This is just something we inherited, but it’s something we intend to fix,” Merrill said. Former Secretary of State Jim Bennett was also aware of the concern. Last year, Bennett’s office released numbers showing that four counties had more registered voters than voting age population. The 10 Alabama counties listed by the foundation are among 141 nationwide, according to the foundation. Only four other states had more counties on the foundation’s list than Alabama. They were Michigan (24), Kentucky (18), Illinois (17) and Indiana (11).

Officials: Alabama charter schools won’t open until 2017

Alabama won’t see its first charter schools until 2017, state officials said during the first meeting of the Alabama Charter School Commission on Thursday. “It seems to me it’s going to be very difficult for anyone to come along with a successful application within a year,” said Ed Richardson, the newly-elected chair of the 11-member commission. Lawmakers voted earlier this year to pass Alabama’s first charter schools law, which would allow the state to charter schools that run independently but receive state funds. Charter school advocates say the schools give more options to students stuck in low-performing public schools. Opponents say the schools siphon resources away from traditional public schools without a guarantee that they’ll provide a better education. Alabama was a latecomer to the charter school movement — only eight states have no charter schools — due to opposition by the Alabama Education Association and many school superintendents. Now that the charter law is in place, the newly formed commission will have to design ways of assessing those schools almost from scratch. “We’re going to have to come up with academic, performance and financial standards that say this is the way you’re going to have to be,” said Richardson, a former state schools superintendent. Emily Schultz, director of the Alabama Coalition for Public Charter Schools, said that under the law, the commission would have to collect data from schools at least once per year — and would have to close schools that didn’t meet the standards set forth in their charters. “You have to ground your decision on the evidence of the school’s performance under the terms of the charter contract,” she said. “You might love the way that school feels when you walk into it … but you have to ground your decision in the performance of that school.”


The question: Is Alabama House Speaker Mike Hubbard a crook?

Now maybe we can get back to figuring out whether Alabama House Speaker Mike Hubbard is a crook. Which is the real issue, after all. It’s not about workplace beefs and office space. Not about whether prosecutor Matt Hart is a jackass or whether – not when you get down to the crux of it — former prosecutor Gene Sisson was playing for the wrong team. What Alabama needs to know – what Alabamians need to know – is whether the guy who still wields more power than anyone at the body that makes Alabama’s biggest decisions is … a bad guy. Does Mike Hubbard come to the Statehouse with his hand out? Does Mike Hubbard make decisions about what is best for the state based on who is paying his bills? Did Mike Hubbard, like the grand jury in Lee County charged, commit 23 felony violations of the ethics law that he championed and helped to craft. Is Mike Hubbard a crook? That is the question. There have been so many diversions and sideshows in this thing. Freaks and geeks and absurdities that cannot help but draw our attention. Hubbard is trying to have that ethics law he was so proud of declared unconstitutional, and he’s trying to fight that fight in secret, in a judge’s chambers and under seal. It’s like Mark Zuckerberg arguing that Facebook is a pox. No wonder he’s embarrassed to do it in public. And the defense has argued long and hard that Hubbard is the victim of prosecutorial misconduct, based in part on the words and actions of Sisson and his former colleague Henry “Sonny” Reagan. Geesh, it has been Carnival Crazy down there. Reagan accused Hart of stealing his office in the AG’s office, and AG Luther Strange ultimately accused Reagan and Sisson of trying to undermine the very investigation of Hubbard, of sharing information with defense lawyers and publicly rooting for the wrong guys. Reagan resigned after being told he would be fired. Sisson was fired, but challenged the firing and proclaimed he had done nothing wrong. And through all the clowning the issue of Mike Hubbard’s guilt or innocence fell outside the glare of the spotlight. Now, though, it is easier to see past the sideshow. Now some things are clearer. An administrative law judge in Montgomery last week ruled that the firing of Sisson was just and understandable. The guy, after all, once wrote an email to a friend – on Attorney General email — that said “how awesome would it be for the defense to get their hands on a file.” Judge James Jerry Wood, in an order signed last Friday, put it this way:  “In this case, the preponderance of the available testimonial and documentary evidence supports the decision by the Attorney General to terminate the employment of Sisson. Sisson let his differences with Hart color his judgment to the extent that his actions in concert with Reagan were a serious breach of trust with Sisson’s co-workers.” It’s pretty simple, really. You can’t play on the team and root for the other side. You learn it in grade school and it remains true. So it is time to move on, to go forward. The freaks in the sideshow are but a guilty pleasure. They are fun to watch, but they have no real bearing on the main event. Alabamians should be concerned with one issue. Is Mike Hubbard a crook? I guess we’ll have to wait for trial in the Lee County next spring to find the answer. But enough with the sideshows. Let the circus begin.


Morning Money

BEFORE WE GO … SOME ENCOURAGING NEWS! … M.M. goes dark next week through Sept. 8th. Nice to go out with a solid GDP report showing upward revisions to every major category, leading to strong 3.7 percent overall growth, suggesting the winter slowdown really was the result of weather, the West Coast port strike and other transient factors. … The question now is whether continued low oil prices drive increases in spending in the second half which would help sustain the current pace and make the Atlanta Fed’s prediction of 1.3 percent Q3 growth look way off base. Another round of stock market craziness wouldn’t help but there is reason to believe the correction we experienced is now over.

The next big number will come next week with the August jobs report. It’s not expected to be huge so it should further encourage the Fed to hold off until December to raise rates. That should in turn support stock prices, which should further ease fears of the doomsday scenario I wrote about earlier this week. And nobody wants doomsday. But let’s not forget Congress comes back in September with cliffs as far as the eye can see. And if anyone can inflict doomsday on an otherwise rising economy, it’s our August legislative body in cooperation with the White House.

CEA Chair Jason Furman: “Real GDP growth in the second quarter was revised markedly upward, as consumers spent more and businesses invested more than previously estimated. … At this time in the global economy, it is essential that we continue to do everything we can to maintain America’s domestic economic momentum — including avoiding a return to fiscal brinksmanship or unnecessary austerity by passing an on-time budget that reverses the sequester”

GDP CHEAT SHEET via Hamilton Place Strategies:

HOT READ: THE INVINCIBLE TRUMP — POLITICO’s Ben Schreckinger and Hadas Gold: “What hasn’t killed Donald Trump has only made him stronger. Right off the bat, there was the shocking statement about the Mexican government sending over immigrant ‘rapists.’ Then came the challenge to John McCain’s war hero status, a low blow from someone who avoided the draft. Next were the ‘bimbo’ retweet attacks on Fox host Megyn Kelly … His latest rants on “anchor babies” and nasty feuds with the media would have wounded any other mortal presidential candidate. But Trump is more popular than ever. …

“A new poll released by Quinnipiac University on Thursday showed Trump’s lead growing, his favorability rating up and his unfavorability rating down. Trump is rewriting the playbook in which politicians who offend respond by equivocating, clarifying or apologizing. Instead, he goes on offense and takes his message to directly to the heart of his critics’ support. The polls and the ratings don’t lie: Voters and viewers love it.”

TRUMP HEARTS ICAHN — Reuters’ Emily Flitter and Jennifer Ablan: “Donald Trump had to do a bit of damage control on Thursday after repeatedly dropping Carl Icahn’s name in a campaign speech and then saying most good business negotiators were ‘vicious, horrible, miserable human beings.’ Icahn, the billionaire investor, called Trump, the real estate mogul turned U.S. presidential candidate, to ask for an explanation after Trump made the comments in a speech. … After that conversation, Trump told Reuters in a phone interview that he did not mean to include Icahn in his characterization.

“Trump … said he preferred effective dealmakers like Icahn to ‘nice’ people who, he said, were powerless in their roles. ‘Carl Icahn’s one of the best,’ Trump said in the speech. ‘If I put Carl in charge of Japan, ‘Carl: Handle Japan trade deals.’ It’s over, just walk away.’ … Icahn made his fortune and developed a reputation on Wall Street as a ‘corporate raider’ in the 1980s. He is now heralded as one of the best shareholder activists in the world for pushing some of the biggest companies including Apple … to use some of their excess cash for dividends and buybacks.”

CAN WE JUST TAKE A MINUTE … and reflect on how deeply weird it is that Trump’s so hot on naming Icahn to his cabinet? I mean the man is clearly a genius at making money but his advocacy of companies sending piles of cash back to stockholders instead of investing the money in new plants, equipment and workers is arguably one of the biggest problems with the economy. But it’s probably useless to point out individual instances of weirdness in one of the most deeply weird political phenomena in American history. Still, it’s weird. Gordon Gekko for Secretary of State!

GOOD FRIDAY MORNING — Catch you back here Sept.8th. Let’s hope the market stays calm for a few days to let everyone soak up the final days of summer.

DRIVING THE DAY – Personal income and spending at 8:30 a.m. each expected to rise 0.4 percent … Univ. of Michigan Consumer Sentiment at 10:00 a.m. expected to rise to 93.1 from 92.9 …

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Jennifer Liberto on how the Fed’s exclusive Jackson Hole retreat has been invaded by liberal and conservative activists. For Pro’s subscriber-only coverage — and to get Morning Money every day before 6a.m.– please contact Pro Services at (703)341-4600or

CANTOR TO BACK BUSH – POLITICO’s Mike Allen: “Eric Cantor, former House majority leader, will endorse Jeb Bush on Thursday evening and will be named a Virginia state co-chair of his presidential campaign, Republican sources tell POLITICO.
Cantor was courted intensely by other candidates. Cantor retains a strong political network in Virginia, a key primary and swing state. And he has enviable connections among Jewish business leaders who can be key supporters and donors. …

“A Cantor source said: ‘They have known each other for a long time, speak regularly and have great mutual respect for one another. Eric believes he is the only candidate with a real long-term vision for the country who can also actually implement it — not just talk about it.’ Cantor is to introduce Bush on Thursday evening at a fundraiser in Richmond and then will appear with him Friday morning at a VFW post in Norfolk, for a town hall focused on veterans issues”

THE BIG IDEA: NO QE4 — Mohamed A. El-Erian: “The recent financial turmoil already is fueling speculation about a fourth round of quantitative easing by the Federal Reserve, which would again step in to buy financial assets, boosting prices and repressing volatility. This wishful thinking is unsurprising for markets that have been conditioned to view central banks as their best friend. Yet the Fed is unlikely to oblige any time soon, nor should it … With policy interest rates floored at zero in recent years, the Fed has used its balance sheet to normalize financial markets and pursue its dual mandate of promoting employment and stable inflation. …

“[T]he Fed now wants to normalize monetary policy, and not venture even deeper into uncharted territory. The first policy consequence of the market rout is to virtually ensure that the central bank won’t choose September to carry out its first rate increase in nine years. It also reduces the probability of a December hike, though that remains a possibility because not all the consequences of the recent turmoil are negative for the U.S. economy (for example, lower prices for oil and other commodities, and the decline in market interest rates).”

RALLYING BACK — WSJ’s Dan Strumpf and Josie Cox: “Stocks soared for the second day in a row, with the Dow Jones Industrial Average erasing its losses for the week, as renewed optimism about the U.S. economy eased concerns about the pace of global growth. … The gains came amid a broad rebound in financial markets, which had been pummeled by anxiety about China’s slowdown since the world’s second-largest economy shocked investors by devaluing its currency earlier this month.

“The Dow Jones Industrial Average jumped 369.26 points, or 2.3 percent, to 16654.77. Coupled with Wednesday’s 619-point surge, blue chips are now up 1.2 percent for the week.
The gains are the latest in a week of wild swings for stocks. Traders say the deep declines of Monday and Tuesday left investors eager to snap up stocks on the cheap, although many remain concerned that bigger market swings are here to stay as uncertainty mounts over the course of interest-rate increases by the Federal Reserve.”

ASIA RISES EARLY — Bloomberg: “Asian stocks extended gains into a third day and commodities climbed with emerging-market currencies as China’s support for its beleaguered equity market and a strong U.S. growth number bolstered investors’ appetite for riskier assets. … Chinese shares climbed for a second day, while U.S. index futures were steady after the Standard & Poor’s 500 index rose 2.4 percent. Oil, which surged 10 percent in New York on Thursday, climbed above $43 a barrel, while copper and gold advanced. Benchmark Treasury yields headed for the steepest weekly jump since June. …

“China intervened to shore up its volatile equity market late Thursday, according to people familiar with the matter, while a commentary in the official Xinhua News Agency said developed-nation monetary policies were to blame for global financial-market volatility. Global stocks are close to erasing losses for the week.”

TREASURY SECRETARIES LOVE “HAMILTON” — NYT’s Michael Paulson: “Among the parade of power players flocking to see ‘Hamilton’ on Broadway, there is a tiny subset with a special connection to the show’s protagonist: men who have held the job Alexander Hamilton pioneered, secretary of the Treasury. … Early in the musical’s Off Broadway run at the Public Theater, Timothy F. Geithner … showed up. And on Wednesday night, two more Hamilton successors were in the Broadway audience: Robert E. Rubin, the 70th Treasury secretary (1995-99), and Jacob J. Lew, the current one (since 2013); they were at the same performance by coincidence, each drawn by an interest in their shared predecessor.

“‘If you’re secretary of the Treasury, in your outer office is a big picture of Alexander Hamilton, and there is a strong sense of Hamilton in the building,’ Mr. Rubin said Thursday in a telephone interview. ‘His sense of fiscal responsibility is still alive in the Treasury — people do identify with Hamilton.’ … Mr. Lew went to the show in large part to celebrate his wedding anniversary; he said he bought the tickets online himself. He is not the most popular figure in Hamilton land, because he is championing an effort to redesign the $10 bill to feature a woman, which would most likely mean downgrading Hamilton’s prominent position on the currency”

OIL SURGES — FT’s Anjli Raval and David Sheppard: “Oil jumped by the most in six and a half years on Thursday, rebounding from lows last seen during the financial crisis, as a surge in global stock markets and outages in two major Nigerians pipeline sparked a rally. … Royal Dutch Shell declared force majeure on shipments of Nigeria’s Bonny Light crude oil after shutting two pipelines, cutting supplies from Africa’s biggest oil producer. … Brent crude, the international benchmark, jumped by $4.42 a barrel in afternoon trading to settle at $47.56. The 10.2 per cent gain marked its biggest one day advance since December 2008.

“West Texas Intermediate, the US marker, increased 10.3 per cent, or $3.96 a barrel, to $42.56, the largest daily increase since March 2009. Nigeria, an Opec member which produces more than 2 per cent of global supplies, has been plagued by pipeline leaks, sabotage and theft in recent years. Shell Petroleum Development Company of Nigeria, a Shell subsidiary, said the company was fixing a reported leak on the Trans Niger Pipeline and removing “theft points” on the Nembe Creek Trunkline.”

FIRST LOOK: AMERICA’S MOST PROFITABLE PRIVATE INDUSTRIES — Per report from Sageworks going out this a.m.: “Accounting firms, real estate lessors, and auto equipment lesasing were at the top of the list. Companies operating in these three industries are seeing average net profit margins greater than 15 percent, or more than double the private-company average. Also well-represented on the list are companies in the professional services sector and industries related to renting/leasing and health care.”

NEW IPHONE COMING SOON — FT’s Tim Bradshaw: “Apple has scheduled its annual iPhone debut for Wednesday September 9, a year to the day after 2014’s launch of its latest handset alongside Apple Pay and the Watch. … Invitations were sent out to members of the press and analysts on Thursday morning, California time, bearing the teaser: ‘Hey Siri, give us a hint’. … When asked for a “hint”, Siri responds with cryptic comments such as: ‘Well, I hear there’s something big happening on September 9’ and ‘Why don’t you check a rumours blog? That’s what I do.’ Fuelling the hype that inevitably accompanies any such launch, Apple fans posted quirky responses from the iPhone’s virtual assistant to social media.

“Stakes are high for the new device, which is likely to go on sale in the last week of September, as Apple strives to defy slowing growth in the global smartphone market and economic uncertainty in China, its most important source of new customers. Analysts at Morgan Stanley predict that iPhone unit sales next year will grow by just 3 per cent, compared with 35 per cent in its most recent quarter. Unlike last year’s Silicon Valley-based iPhone 6 event, next month’s unveiling will be held at the Bill Graham Civic Auditorium in San Francisco. The large 7,000-person capacity venue is better known for concerts, playing host to musicians including Janet Jackson, Jack White and Ellie Goulding.”

POTUS Events

10:30 am || Receives the Presidential Daily Briefing
2:10 pm || Participate in a live webcast with members of the North American Jewish community; Diplomatic Reception Room – no coverage permitted
4:05 pm || Participates in a DNC fundrasier

All times Eastern
Live stream of White House briefing at noon

Floor Action

Congress is in recess.


Your Health Insurance Company May Ask for Your Social Security Number

Your health insurance company may request that you provide them with the social security numbers for you, your spouse and your children covered by your policy.  This is because the Affordable Care Act requires every provider of minimum essential coverage to report that coverage by filing an information return with the IRS and furnishing a statement to covered individuals. The information is used by the IRS to administer – and individuals to show compliance with – the health care law.

Health coverage providers will file an information return, Form 1095-B, Health Coverage, with the IRS and will furnish statements to you in 2016, to report coverage information from calendar year 2015.

The law requires coverage providers to list social security numbers on this form. If you don’t provide your SSN and the SSNs of all covered individuals to the sponsor of the coverage, the IRS may not be able to match the Form 1095-B with the individuals to determine that they have complied with the individual shared responsibility provision.

Your health insurance company may send a letter that discusses these new rules and requests social security numbers for all family members covered under your policy. The IRS has not designated a specific form for your health insurance company to request this information. The Form 1095-B will provide information for your income tax return that shows you, your spouse, and individuals you claim as dependents had qualifying health coverage for some or all months during the year. You do not have to attach Form 1095-B to your tax return. Keep it with your other important tax documents.

Anyone on your return who does not have minimum essential coverage, and who does not qualify for an exemption, may be liable for the individual shared responsibility payment.

The information received by the IRS will be used to verify information on your individual income tax return. If you refuse to provide this information to your health insurance company, the IRS cannot verify the information you provide on your tax return and you may receive an inquiry from the IRS. You also may receive a notice from the IRS indicating that you are liable for a shared responsibility payment.

For more information, see our Questions and Answers about Reporting Social Security Numbers to Your Health Insurance Company on