November 2016


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Well we had our LLB results. We both passed. As we are already underway with the Bar exam, we carry on now knowing that we can complete the whole process.

The whole thing is a bit of an anti-climax. It will take a little bit of time for it to sink in. It doesn’t help that we are already very busy and under 2 exams-a-week pressure with the Bar.

 

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On Sunday, France’s Republican Party will choose its candidate for the presidential election next spring. Opinion polls say that the Republicans are so far ahead that the party, in effect, is about to name the next president — either Alain Juppe or Francois Fillon, former prime ministers offering not-too-dissimilar conservative programs.

The polls, for once, had better be right. The likely alternative to either of those men would be disastrous — and not just for France.

Support for the Socialist party has collapsed: President Francois Hollande’s approval rating stands (if that’s the right word) at 4 percent. So the Republican nominee is likely to face Marine Le Pen, leader of the populist National Front. She’s France’s answer to Donald Trump, except with more self-discipline, added xenophobia and a clearer sense of purpose. If she wins, the European Union would be badly and perhaps fatally wounded. By comparison, Brexit would be a minor nuisance.

Le Pen celebrated Britain’s vote to quit last June as the beginning of the end for the EU — a project she’s called “objectively a total failure.” An EU without France, which designed and built the EU alongside Germany, is objectively a hard thing to imagine. A National Front victory would shake Europe more violently than Trump’s win has rocked the U.S.

The polls suggest that either Fillon or Juppe ought to beat her easily — but there are many unknowns. It’s unclear who will stand for the Socialists, for example, or whether Emmanuel Macron (who quit the government earlier this year and leads a new party) will gather strong support. Right now, though, the threat from Le Pen looks real.

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The Trump rally raged on this week with all major U.S. indexes hitting record highs, but despite the historic run, David Stockman is doubling down on his call for investors to sell everything.

“This 5 percent eruption is meaningless. It’s some robo machine trying to tag new highs,” Stockman said Tuesday on CNBC’s “Fast Money,” in a dismissal of the S&P 500 rally.

“I see a recession coming down the pike in 2017. The stock market is going to go down and it’s going to stay down long and hard because, for the first time in 25 years, there’s nothing to bail it out.”

This echoed the initial call Stockman made Nov. 3, when he urged investors to sell stocks and bonds before the presidential election.

However, since the Nov. 8 election, the Dow Jones industrial averagehas gained 4 percent en route to surpassing 19,000. Additionally, theS&P 500 and Nasdaq also hit record highs in the same time period, gaining 3 percent and 4 percent, respectively.

Yet Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, reaffirmed that markets are heading for disaster.

“My call stands. Sell the stocks, sell the bonds, get out of the casino,” Stockman explained to CNBC in an off-camera interview. “Bonds have already cratered by nearly $2 trillion worldwide and have miles to go. This isn’t a rotation into stocks, either. It’s the greatest sucker’s rally ever.”

Stockman, author of “Trumped: A Nation on the Brink of Ruin… And How to Bring It Back,” lamented that there will be no Trump stimulus or Reagan-style boom. He further added that he expects “an unprecedented fiscal bloodbath” resulting from the $20 trillion worth of debt that the U.S. currently has on the books.

“This isn’t Ronald Reagan with a clean $1 trillion balance sheet and with a fluke GOP and a Southern Democratic coalition that only materialized because he got shot,” Stockman said in reference to John Hinkley Jr. attempting to assassinate Reagan in Washington, D.C., in 1981. “Nor is it LBJ in 1965 with a thundering electoral mandate and a massive congressional majority for the Great Society.”

On the contrary, Stockman, who initially predicted that Trump would win the election, added that Washington will be in chaos by June. This is because he anticipates ongoing disruptions from the tea party, which Stockman doesn’t foresee as allowing additional deficit increases.

Furthermore, Stockman doesn’t believe that Trump can pass a bipartisan stimulus plan without capitulating on his promise to repeal and replace Obamacare. Additionally, Stockman cast serious doubt over Trump’s ability to enact a meaningful tax cut or to develop a major infrastructure program. If so, Stockman believes that could very well trigger a civil war within the Republican Party.

“So when the recession hits this summer, the Fed will be out of dry powder and fiscal policy will be paralyzed,” concluded Stockman. “This time the market will crash and stay crashed.”

Given this prediction, Stockman re-emphasized that gold and cash will be king and urged investors to shift their portfolios accordingly. He also recommend shorting the S&P 500 through ETFs such as the SH or theSDS.

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NEW YORK — After seven straight draws, we’ve finally witnessed a decisive result at the World Chess Championship.

Sergey Karjakin of Russia, the challenger, claimed the first full-point on Monday against titleholder Magnus Carlsen of Norway.

Game 8 was dense and difficult, and with the white pieces, Carlsen may have pressed too hard beyond what at one juncture looked like another draw.

The opening was a fairly staid and initially symmetrical Queen’s Pawn game — nothing surprising for Carlsen, who has in the WCC so far adopted a strategy of boring openings, aiming to test Karjakin in the middle and endgames.

Carlsen had dodged a few bullets in previous games, but his approach caught up with him in Game 8. Karjakin barely made the so-called “time control,” executing the first 40 moves in 100 minutes with just ten seconds to spare.

Perhaps sensing the challenger’s stress, Carlsen pressed on past several drawing chances, but blunders on both sides made for a tense spectacle until Carlsen’s commitment to the win with white became his undoing on move 52.

Here’s the decisive position:

Carlsen Karjakin Game 8

There’s simply too much for Carlsen to cover: the incoming potential knight check of the white king on g4, the black pawn on a2 tying down the white queen because that pawn threatens to put a second black queen on the board, and the black queen locking down the g1 square.

It’s the definition of a hopeless position and evidence of how a draw can swing to win very quickly at this level. FM Mike Klein and GM Robert Hess break the whole thing down in far more authoritative detail than I can at Chess.com.

Carlsen has real trouble now, and he knows it. He stormed out of the postgame press conference when Karjakin was delayed. With only four games remaining, Carlsen must win one to tie and another to retain his title, without going to tiebreaks. This is the big risk of racking up a lot of draws — the pressure is on the player who’s behind to catch up, with games running out.

It was looking as if they 2016 World Chess Champion would be a drawfest. But just like that, it’s a whole new ball game. Karjakin now leads 4.5-3.5. Luckily for Carlsen, Tuesday is a rest day, with play to resume Wednesday at 2PM ET.

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Like everyone else today, I’m reading Katherine Burton’s amazing inside look at Renaissance Technologies, the greatest hedge fund in history.

Among their secrets – hiring non-finance people with science and math backgrounds, avoiding contact with Wall Street at all costs, constantly developing new edges as old ones grow stale – their ability to stick to what they know works is probably a key one. How did they learn this lesson? By “losing” a billion dollars in a few days, how else?

When rivals and former investors are asked how Renaissance can continue to make such mind-blowing returns, the response is unanimous: They run faster than anyone else. Yet all that running hasn’t always kept them on their feet when everyone else stumbled.

In August 2007, rising mortgage defaults sent several of the largest quant hedge funds, including a $30 billion giant run by Goldman Sachs, into a tailspin. Managers at these firms were forced to cut positions, worsening the carnage. Insiders say the rout cost Medallion almost $1 billion—around one-fifth of the fund—in a matter of days. Renaissance executives, wary that continued chaos would wipe out their own fund, braced to turn down their own risk dial and begin selling positions. They were on the verge of capitulating when the market rebounded; over the remainder of the year, Medallion made up the losses and more, ending 2007 with an 85.9 percent gain. The Renaissance executives had learned an important lesson: Don’t mess with the models.

Sudden, sharp drawdowns will frequently have us second-guessing our portfolios. This is only natural – in the heat of the moment, it always looks like something is wrong or that action must be taken. One of the worst things an investor (or advisor) can do is throw away the playbook in response to temporary volatility or unexpected events.

Renaissance is using leverage in their Medallion fund, so they’ve got considerations beyond performance to consider – like the survival of the company. For most investors, this is not the case, so capitulation is always a wrong move.

Don’t mess with the models.

But, although Renaissance has been around for quite some time and weathered a number of storms, you still have to remember Long Term Capital Management, who were brought down by leverage.

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If President-elect Donald Trump has made anything clear about what he plans to do in his first 100 days in office, it’s that he wants to make some changes to trade.

More specifically, he’s in opposition to the Trans-Pacific Partnership: a trade agreement between Pacific Rim countries for the greater and cheaper movement of goods between them.

The TPP has been a hotly contested trade issue for years now, championed by Obama as an agreement to increase wealth in the US by opening up Asian markets to American goods. Critics say it endangers American workers by making it too tempting for companies to outsource their factories to Asia.

A vote on the bill has still not be held in Congress, and its future is now largely in doubt in the wake of Trump’s historic election. Trump transition team internal documents obtained by Politico say that pulling out of the deal will be at the top of his first 100 days’ agenda.

A large percentage of footwear is made in countries included in the TPP pact. Why does that matter for sneakers? Tariffs are high for footwear, ranging from 5% to 40% depending on the materials used, according to the Office of Textiles and Apparel.

Around 97-99% of sports footwear sold in the US is made elsewhere, accounting for nearly $3 billion in tariffs paid, according to the pro-trade organisation Footwear Distributors and Retailers of America. Nearly half a billion dollars of that comes from TPP countries, chiefly Vietnam and Malaysia.

China — which, with 66% of inventory, is the the largest exporter of shoes to the US — was not involved in TPP negotiations. The second-largest exporter, Vietnam, was. Should TPP have been agreed to, tariffs for shoes imported from Vietnam and other countries into the US would have been reduced or eliminated, reducing the built-in cost to outsource sneaker manufacturing overseas.

This would have meant potentially reducing the cost of sneakers in the US, according to NPD group analyst Matt Powell, and an increase in sports shoe sales overall.

The players

Nike, the largest sportswear maker in the world, made no secret of the fact that it was in support of TPP. It has 26 footwear factories in Vietnam, the majority of which create shoes for the American market. The swoosh promised to bring up to 10,000 jobs to the US should the pact be approved and put into action. Nike said a reduction in tariffs could be used toward more advanced manufacturing.

German sportswear giant Adidas also supported the deal for similar reasons.

New Balance, which manufactures up to 25% of its shoes in the US, notably opposed the trade agreement. The company recently reiterated their stance on the agreement, which some mistook for support of Trump policies. Many began burning or throwing away their New Balance shoes in protest.

The game

In all likelihood, from what Trump has said previously and the documents obtained recently, TPP won’t be on the table in a meaningful way anytime soon.

That means that prices will most likely stay the same for footwear, and any hope for some relief from the problems pressuring giants like Nike will not abate soon. The possibility of greater sales while maintaining similar margins is out the window for sportswear companies who import the vast majority of its footwear.

However, with TPP off the table, initiatives like Adidas’ “speedfactory” in Atlanta seem more important than ever, as more advanced manufacturing methods means that high-tech factories in the US make more economical sense.

There’s a potential for more “made in the USA” written under your shoe’s tongue in the coming decades.

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WHEN Donald Trump vowed to “Make America Great Again!” he was echoing the campaign of Ronald Reagan in 1980. Back then voters sought renewal after the failures of the Carter presidency. This month they elected Mr Trump because he, too, promised them a “historic once-in-a-lifetime” change.

But there is a difference. On the eve of the vote, Reagan described America as a shining “city on a hill”. Listing all that America could contribute to keep the world safe, he dreamed of a country that “is not turned inward, but outward—toward others”. Mr Trump, by contrast, has sworn to put America First. Demanding respect from a freeloading world that takes leaders in Washington for fools, he says he will “no longer surrender this country or its people to the false song of globalism”. Reagan’s America was optimistic: Mr Trump’s is angry.

Welcome to the new nationalism. For the first time since the second world war, the great and rising powers are simultaneously in thrall to various sorts of chauvinism. Like Mr Trump, leaders of countries such as Russia, China and Turkey embrace a pessimistic view that foreign affairs are often a zero-sum game in which global interests compete with national ones. It is a big change that makes for a more dangerous world.

My country right or left

Nationalism is a slippery concept, which is why politicians find it so easy to manipulate. At its best, it unites the country around common values to accomplish things that people could never manage alone. This “civic nationalism” is conciliatory and forward-looking—the nationalism of the Peace Corps, say, or Canada’s inclusive patriotism or German support for the home team as hosts of the 2006 World Cup. Civic nationalism appeals to universal values, such as freedom and equality. It contrasts with “ethnic nationalism”, which is zero-sum, aggressive and nostalgic and which draws on race or history to set the nation apart. In its darkest hour in the first half of the 20th century ethnic nationalism led to war.

Mr Trump’s populism is a blow to civic nationalism (see article). Nobody could doubt the patriotism of his post-war predecessors, yet every one of them endorsed America’s universal values and promoted them abroad. Even if a sense of exceptionalism stopped presidents signing up to outfits like the International Criminal Court (ICC) and the UN Convention on the Law of the Sea (UNCLOS), America has supported the rules-based order. By backing global institutions that staved off a dog-eat-dog world, the United States has made itself and the world safer and more prosperous.

Mr Trump threatens to weaken that commitment even as ethnic nationalism is strengthening elsewhere. In Russia Vladimir Putin has shunned cosmopolitan liberal values for a distinctly Russian mix of Slavic tradition and Orthodox Christianity. In Turkey Recep Tayyip Erdogan has turned away from the European Union and from peace talks with the Kurdish minority, in favour of a strident, Islamic nationalism that is quick to detect insults and threats from abroad. In India Narendra Modi remains outward-looking and modernising, but he has ties to radical ethnic-nationalist Hindu groups that preach chauvinism and intolerance.

Meanwhile, Chinese nationalism has become so angry and vengeful that the party struggles to control it. True, the country depends upon open markets, embraces some global institutions and wants to be close to America (see Banyan). But from the 1990s onwards schoolchildren have received a daily dose of “patriotic” education setting out the mission to erase a century of humiliating occupation. And, to count as properly Chinese you have in practice to belong to the Han people: everyone else is a second-class citizen (see Briefing).

Even as ethnic nationalism has prospered, the world’s greatest experiment in “post-nationalism” has foundered. The architects of what was to become the EU believed that nationalism, which had dragged Europe into two ruinous world wars, would wither and die. The EU would transcend national rivalries with a series of nested identities in which you could be Catholic, Alsatian, French and European all at once.

However, in large parts of the EU this never happened. The British have voted to leave and in former communist countries, such as Poland and Hungary, power has passed to xenophobic ultranationalists. There is even a small but growing threat that France might quit—and so destroy—the EU.

The last time America turned inward was after the first world war and the consequences were calamitous. You do not have to foresee anything so dire to fear Mr Trump’s new nationalism today. At home it tends to produce intolerance and to feed doubts about the virtue and loyalties of minorities. It is no accident that allegations of anti-Semitism have infected the bloodstream of American politics for the first time in decades.

Abroad, as other countries take their cue from a more inward-looking United States, regional and global problems will become harder to solve. The ICC’s annual assembly this week was overshadowed by the departure of three African countries. China’s territorial claims in the South China Sea are incompatible with UNCLOS. If Mr Trump enacts even a fraction of his mercantilist rhetoric, he risks neutering the World Trade Organisation. If he thinks that America’s allies are failing to pay for the security they receive, he has threatened to walk away from them. The result—especially for small countries that today are protected by global rules—will be a harsher and more unstable world.

Isolationists unite

Mr Trump needs to realise that his policies will unfold in the context of other countries’ jealous nationalism. Disengaging will not cut America off from the world so much as leave it vulnerable to the turmoil and strife that the new nationalism engenders. As global politics is poisoned, America will be impoverished and its own anger will grow, which risks trapping Mr Trump in a vicious circle of reprisals and hostility. It is not too late for him to abandon his dark vision. For the sake of his country and the world he urgently needs to reclaim the enlightened patriotism of the presidents who went before him.

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