Commentary No. 984

(SGS Subscription required) • UPDATED ALERT: New Recession Breaks into the Open, with an Annual Decline in Freight Activity Not Seen Since the Great Recession, May 2019 Zero Net Payroll Growth and Quarterly Contractions in Key Series
• As the Downturn Intensifies, So Too Should U.S. Dollar Selling and Flight to Gold, With the Stock Market Vulnerable to Massive Selling
• Fed Chair Powell Hinted at Possible Later Easing, but Current Conditions Justify Greater Accommodation Now; New Quantitative Easing Is Possible by September
• With FOMC Easing Hinted, U.S. Stocks Rose to New Highs; but a Greater Dollar Plunge and a Greater Gold Price Surge Each More Than Offset the Stock Gains
• Excessive FOMC Tightening and Rate Hikes Triggered the New Downturn
• When the Fed Shifted to Its Restrictive Monetary Stance, Much of the U.S. Still Had Not Recovered from Its Collapse into 2009; That Exacerbated Already Heavily Negative Consumer Financial Conditions
• Tightening Has Continued, With the May 2019 Monetary Base at a Six-Year Low, Down 3.2% (-3.2%) From December 2018
• Full Economic Recovery Requires More than Interest Rate Cuts and FOMC Easing
• Also Needed Are Meaningful Tax Cuts for Main Street U.S.A., and Stimulative Government Spending, Despite the Ongoing Budget-Deficit Disaster
• In Response to Such Deficit-Busting Stimulus, Global Markets Likely Would Savage the Dollar, Unless the U.S. Government First Could Put in Place a Credible Plan for Balancing Its Finances Once Economic Conditions Had Stabilized
• Government Action Is Unlikely, Though, Shy of Response to a Financial Crisis or Panic

iPhone X Sales Collapse Triggers Serious Breach Of Contract With Samsung 

In an exclusive, ChannelNews reveals Apple is facing hundreds of millions of dollars in penalty payments to Samsung because iPhone demand has fallen.

Apple “demanded” that Samsung construct one of the world’s biggest OLED manufacturing facilities exclusively for iPhone screens.

Overconfidence of Tim Cook, not adjusting forecasts for trade wars nor a structural decline in global growth, has crushed Apple iPhone demand across the world and breached the contract of 100M OLED iPhone screens per year with Samsung.

“Although Apple requested Samsung Display to extend its plant believing that it would use about 100 million OLED panels annually, actual market demand was far lower than Apple’ prediction.” said a Samsung media executive.

“Samsung Display took a huge blow as a result and requested a penalty from Apple in accordance with the contract.” they added.

While trade wars and lower global growth negatively weighed on iPhone demand, the price of the iPhone X also deterred consumers from upgrading.

Sources told ChannelNews the contract between both companies had significant “penalty clauses,” which Apple is currently trying to finagle itself out of. Another source told the Australian news outlet that Apple had already made one tranche of payments covering part of the fine.

Apple responded by announcing the supplied Samsung OLED were “faulty” which sources say is a stalling tactic as lawyers are negotiating the fines.

In a separate report, ETNews says the Samsung A3 plant, can deliver 105,000 6th generation flexible OLED panels per month, is working under 50% capacity.

ETNews says Apple will likely skip out on paying the complete fine to Samsung. Instead, the company will upgrade iPhone XR, iPads, and MacBooks with OLED panels to compensate for the loss of the iPhone X.

“Apple made some suggestions such as guaranteeing the supply of OLED panels for other Apple products. Samsung Display was also levied a small penalty due to faulty performance of few panels that were supplied to Apple and they are looking into many options as they both have to pay each other a penalty,” an industry source said.

The drop in units for Apple iPhone X with an OLED screen is occurring at the same time the smartphone bubble is deflating. Even Samsung Galaxy smartphones are experiencing declining sales.

ETNews said Apple has started to work with LG Display for OLED panels, but analysts believe the move will result in less production capacity and more expensive OLED panels than Samsung.

Apple has also invested in JDI (Japan Display) who will be manufacturing the company’s LED panels in the near future.

It’s hard to imagine how the largest corporation in the world [Apple] could make such a careless sales forecast of one of its most popular products that resulted in hefty fines. Nevertheless, what’s more, baffling is how Apple couldn’t see the cycle down of the global economy that started in 1Q18. 

EIA Warns “Limited Options To Bypass” Straits Of Hormuz


The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The Strait of Hormuz is the world’s most important oil chokepoint because of the large volumes of oil that flow through the strait. In 2018, its daily oil flow averaged 21 million barrels per day (b/d), or the equivalent of about 21% of global petroleum liquids consumption.

Chokepoints are narrow channels along widely used global sea routes that are critical to global energy security. The inability of oil to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices. Although most chokepoints can be circumvented by using other routes that add significantly to transit time, some chokepoints have no practical alternatives.

Volumes of crude oil, condensate, and petroleum products transiting the Strait of Hormuz have been fairly stable since 2016, when international sanctions on Iran were lifted and Iran’s oil production and exports returned to pre-sanctions levels. Flows through the Strait of Hormuz in 2018 made up about one-third of total global seaborne traded oil. More than one-quarter of global liquefied natural gas trade also transited the Strait of Hormuz in 2018.

Source: U.S. Energy Information Administration, based on Short-Term Energy Outlook (June 2019), ClipperData, Saudi Aramco bond prospectus, Saudi Aramco annual reports, Saudi Ports Authority, International Group of Liquefied Natural Gas Importers, and U.N. Conference on Trade and Development
Note: LNG is liquefied natural gas; Tcf is trillion cubic feet

There are limited options to bypass the Strait of Hormuz.

Only Saudi Arabia and the United Arab Emirates have pipelines that can ship crude oil outside the Persian Gulf and have the additional pipeline capacity to circumvent the Strait of Hormuz. At the end of 2018, the total available crude oil pipeline capacity from the two countries combined was estimated at 6.5 million b/d. In that year, 2.7 million b/d of crude oil moved through the pipelines, leaving about 3.8 million b/d of unused capacity that could have bypassed the strait.

Source: U.S. Energy Information Administration, based on ClipperData, Saudi Aramco bond prospectus (April 2019)
Note: Unused capacity is defined as pipeline capacity that is not currently used but can be readily available.

Based on tanker tracking data published by ClipperData, Saudi Arabia moves the most crude oil and condensate through the Strait of Hormuz, most of which is exported to other countries (less than 0.5 million b/d transited the strait in 2018 from Saudi ports in the Persian Gulf to Saudi ports in the Red Sea).

EIA estimates that 76% of the crude oil and condensate that moved through the Strait of Hormuz went to Asian markets in 2018. China, India, Japan, South Korea, and Singapore were the largest destinations for crude oil moving through the Strait of Hormuz to Asia, accounting for 65% of all Hormuz crude oil and condensate flows in 2018.

Source: U.S. Energy Information Administration, based on tanker tracking data published by ClipperData, Inc.

In 2018, the United States imported about 1.4 million b/d of crude oil and condensate from Persian Gulf countries through the Strait of Hormuz, accounting for about 18% of total U.S. crude oil and condensate imports and 7% of total U.S. petroleum liquids consumption.

Pakistanis Boycott Proctor & Gamble After Feminist Detergent Ad Insults Islam 

Proctor & Gamble has come under fire in Pakistan after running a commercial for their Ariel soap brand which encourages women to break free of conservative norms and pursue careers, according to Gulf News

In the ad, several women representing different professions – including a journalist and doctor – are seen pushing dirty sheets hanging on a clothesline off the screen.

The sheets are printed with common refrains used to reinforce the oppression of women in Pakistan, including the question “What will people say?”, which heralds scandal every time a woman chooses to challenge gender norms.

The commercial ends with a close-up shot of the Pakistan women’s cricket team captain Bismah Maroof saying: “Stay within the house… these are not only sentences but stains”. –Gulf News

The ad, according to Pakistanis, is an insult to Islam – and has been accordingly assigned the hashtag “#Boycott Ariel” over Twitter. 

آئیے ہم سب ایک بات طے کرلیں۔#BoycottAriel

— Faizan Akhtar (@FaizanAkhtar313) June 24, 2019

They (are) insulting Islamic teaching in their advertising,” wrote Binte Suleman on Twitter. 

Another critic, Ahmed, wants Proctor & Gamble punished “for such conspiracy against our Islamic values.” 

We demand to remove/ban the cheap advertise immediately on media & to punish the company for such conspiracy against our Islamic values.#BoycottAriel#BanAriel

— Ahmed (@imMhboob) June 22, 2019

After Aurat march another stupidity, goofines,cheapness is here…
Please take action against🚫 these liberals, who promoting liberalism in Pakistan. They destroy the teaching of Islam & promoting fitna. Really the end is near…🙏

— S🆎🅰️ KhAn 🇸🇦 🇵🇰 (@SabaKhan18sabs) June 22, 2019

As Gulf News notes: “Much of society lives under a patriarchal, outdated code of so-called “honour” that systemises the oppression of women who defy tradition by, for example, choosing their own husband or working outside the home.” 

As We Face Armageddon, Paul Craig Roberts Warns The Western World Is Leaderless

Authored by Paul Craig Roberts,

According to news reports, the validity of which cannot be ascertained by the general public, a crazed US government came within 10 minutes of igniting a general conflagration in the Middle East, the consequences of which could have been catastrophic for all. 

The moronic warmongers in high office – Bolton, Pompeo, and Pence – and their Israel Lobby masters are determined, and they have not abandoned their campaign for war with Iran.  Of course, the liars say that Iran will just accept its punishment for defending its territory and there will be no war.  But this is not what Iran says.  I believe Iran.

Some of the tiny percentage of people in the Western World who are still capable of thought regret that Trump called off the insane plan.  They think the consequences would have been the destruction of the Saudi and Israeli governments—two of the most evil in history—and the cut-off of oil to the US and Europe, with the resulting depression causing the overthrow of the Western warmonger governments.  They believe that catastrophic American defeat is the only way peace can be restored to the world.  

In other words, it is not clear whether Trump calling off the attack saved us or doomed us.  The Israel Lobby and their neoconservative agents have not been taught a lesson.  Trump has not fired Bolton and Pompeo for almost igniting a conflagration, and he has not dressed down his moronic vice president.  So, it can all happen again.  

And likely will.  The lesson that Bolton and Israel have learned is that the fake news about an Iranian attack on a Japanese freighter, denied by the Japanese, was not sufficient to lock Trump into “saving face” by attacking Iran.  So be prepared for a larger orchestrated provocation. Bolton and Israel know that the Western presstitutes will lie for them.  Watch for a provocation that allows Trump no alternative to an attack.

Washington’s use of fake news and false flag attacks to launch military attacks goes back a long way.  In the 21st century we have had a concentrated dose—Saddam Hussein’s weapons of mass destruction, Assad’s use of chemical weapons, Iranian nukes, Russian invasions, Maduro starving his own people, the endless lies about Gaddafi.  Yes, I know there are more.  I am writing an article, not an encyclopedia.

Washington has grown accustomed to attacking countries on false pretenses and getting away with it.  Therefore, there is nothing to discourage the Israel Lobby and its Washington puppets from continuing to set-up Iran for an attack.  Success breeds incaution.  The attack on Iraq was stage-managed by a credible US Secretary of State before the UN.  The attack on Libya was stage-managed by a UN resolution that a deceived Russia and China failed to block.  In situations such as these, Washington arranged a green light for its war crimes.  However, Washington has failed to stage-manage a green light for an attack on Iran. Moreover, Iran is a more powerful military force than Iraq and Libya, and the extent of the depth of Russian and Chinese support for Iran is unknown to Washington.

If Israel succeeds in having its Washington puppet attack Iran, Israel and its neoconservative agents will not welcome failure of their objective.  They will fight against failure with more dangerous moves.  I can easily imagine the fanatics having Trump “save face” by destroying the world and issuing some kind of ultimatums to Russia and China or resorting to the use of nuclear weapons against Iran.  

The insouciant American – indeed, Western – people are kept unaware by design.  It is the function of the presstitutes to control the explanations given to the people.  The US Congress is bought and paid for by the Israel Lobby, as are most important politicians in the UK and Europe.  What I am telling you is that it is very easy for fanatics to produce Armageddon.

Stephen Cohen and I, and a few surviving others, lived through the 20th century Cold War. In recent years we both have reported on numerous occasions that the threat of nuclear war today is far higher than during the Cold War.  One reason is that during the Cold War US and Soviet leaders worked to defuse tensions and to build trust.  In contrast, since the Clinton regime the US has worked consistently to build tensions.  Both Cohen and I have listed on many occasions the tension-building activities pursued by all post-Reagan/George H.W. Bush administrations.

The Russians no longer trust Washington, and neither do the Chinese.  Washington has lied to, and about, Russia so often in the 21st century that Russian trust of Washington is exhausted.  No matter how earnestly the Russian government wants to trust Washington, it dare not do so.

Therefore, it takes very little miscalculation for the morons in Washington to cause a threat-ending response from Russia as Washington has convinced the Russian government that the US intends to destroy them.  

The orchestration of Russiagate by the Democratic Party, military/security complex, and their media whores has, as Stephen Cohen has emphasized, forced President Trump in an act of self-preservation to adopt the neoconservative attitude toward Russia and other “non-compliant” governments.  This attitude is dangerous enough in the best of times.  It is extremely dangerous after trust has been destroyed by years of lies and false accusations.  

Perhaps there is someone in the Trump administration who has the intelligence to understand the dangerous situation and who has Trump’s confidence.  But I do not know who that person is.

We have to face the fact that as we face Armageddon the Western World is leaderless.

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