Showing posts with label Boeing. Show all posts
Showing posts with label Boeing. Show all posts

Tuesday, April 17, 2018

Trump Becomes America’s Top Arms Dealer In Quest To Boost US Weapons Sales

This report was originally published by Tyler Durden at Zero Hedge



Back in January we reported that president Trump was planning the roll out of a new US weapons sales policy, which could result in a massive uptick in arms proliferation and conflict escalation around the world. What Reuters described then – as part of a new “Buy American” plan – would involve US diplomats and military attaches stationed across the globe essentially playing the role of middle men for American arms contractors and US defense sales, while also encouraging embassy staff to aggressively promote weapons purchases abroad and allowing for much greater leeway in terms of which foreign entities the US does business with.


Though it sounds like the plot from the movie War Dogs – itself based on true events involving Pentagon contractors’ black market East European private gun running scheme – this plan could involve the mainstreaming of just the type of weapons trade previously considered sketchy and illegal, existing at the peripheries legally ambiguous covert ops and off the books contract deals. The plan would take the seedy underbelly of the international arms trade into the light of day as official US policy, and would further deputize American diplomats as at the forefront of arms deals.


There was one problem: it appears that plan did not yield the desired surge in weapons sales by the world’s biggest arms dealer: Uncle Sam. So fast forward to today when Reuters – again – reports that in an attempt to further streamline and fast-track Trump’s plan to “buy American” weapons, the US is rolling out yet another policy aimed at increasing arms sales to US allies, and Trump himself will take an active part in ongoing negotiations, to “close the deal” so to speak.


As Reuters details, in a previously undisclosed phone call with the emir of Kuwait in January, President Trump pressed the Gulf monarch to move forward on a $10 billion fighter jet deal that had been stalled for more than a year.


Trump was acting on behalf of Boeing Co, America’s second-largest defense contractor, which had become frustrated that a long-delayed sale critical to its military aircraft division was going nowhere, several people familiar with the matter said.


In personally working on behalf of a private company, “Trump did something unusual for a U.S. president – he personally helped to close a major arms deal.” In fact, in private phone calls and public appearances with world leaders, Trump has gone further than any of his predecessors to act as a salesman for the U.S. defense industry, analysts said.


It appears Trump has finally found a niche for himself in the White House: calling US “allies” in the hope of selling weapons while promoting war, chaos and death.


Trump’s efforts will be bolstered by the full weight of the U.S. government when Trump’s administration rolls out a new “Buy American” initiative as soon as this week aimed at allowing more countries to buy more and even bigger weapons. It will loosen U.S. export rules on equipment ranging from fighter jets and drones to warships and artillery, the officials said.


Some more details on the new weapons sales policy:


Reuters has learned that the initiative will provide guidelines that could allow more countries to be granted faster deal approvals, possibly trimming back to months what has often taken years to finalize. The strategy will call for members of Trump’s cabinet to sometimes act as “closers” to help seal major arms deals, according to people familiar with the matter. More top government officials will also be sent to promote U.S. weapons at international air shows and arms bazaars.


While human rights and arms control advocates are warning that the proliferation of a broader range of advanced weaponry to more foreign governments could increase the risk of arms being diverted into the wrong hands and fueling violence in regions such as the Middle East and South Asia, this is of little import to an administration obsessed with closing the US trade deficit, even it means closing it by selling nukes to the highest bidder.


The Trump administration stresses that the main aims are to help American defense firms compete better against increasingly aggressive Russian and Chinese manufacturers and give greater weight than before to economic benefits of arms sales to create more jobs at home.


“This policy seeks to mobilize the full resources of the United States government behind arms transfers that are in the U.S. national and economic security interest,” a White House official said, responding to a request for comment on the story.


“We recognize that arms transfers may have important human rights consequences,” the official said. “Nothing in this policy changes existing legal or regulatory requirements in this regard.”


It will probably not come as a surprise to anyone that the main architects of the new policy has been economist Peter Navarro, a China trade skeptic ascendant in Trump’s inner circle. His effort to boost arms exports has drawn little resistance within the White House, Reuters officials said.


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It will also not draw opposition from the military-industrial complex. News of the streamlined policy promptly sent the stock of “defense” companies surging, allowing them to forget the disappointment over the recent improvement in relations with Russia, and the containment of a possible all-out war in the middle east.




Meanwhile, Trump is set to become what Reuters had dubbed “salesman in chief”


While many presidents have helped promote the U.S. defense industry, none is known to have done so as unabashedly as Trump, a former real estate developer who seems sometimes at his most comfortable when he is promoting U.S. goods. Trump regularly discusses specific arms sales with foreign leaders in meetings and on the phone, according to White House statements. And on a trip to Japan last November, he publicly urged Prime Minister Shinzo Abe to buy more American weapons.


More recently, at an Oval Office meeting with Saudi Crown Prince Mohammed bin Salman last month, Trump held up posters with pictures of U.S. jets, ships and helicopters and other armaments sold to Saudi Arabia. “We make the best military product in the world,” he boasted to reporters as the prince sat smiling beside him.


Other presidents, including Richard Nixon, Bill Clinton and George W. Bush stressed the need to strengthen the defense industrial base, but they did it more subtly, said William Hartung, director of the arms and security project at the Center for International Policy, a non-partisan think tank.


“Nobody’s been as blatant about it as Trump,” he added. “Nobody has yelled it from the rooftops.”


Former President Barack Obama would sometimes talk to allied leaders about weapons systems that he felt suited their security needs, but aides said he preferred to keep weapons salesmanship at arm’s length.


The Trump administration’s plan to overhaul the Conventional Arms Transfer policy, the framework for evaluating foreign sales, goes well beyond Obama’s relaxation of rules in 2014 that enabled U.S. arms contractors to sell more overseas than ever before. Obama drew a clear line, however, requiring each sale to meet strict human rights standards – though he was criticized at times for allowing some controversial sales.


Trump has already gone ahead with several deals that Obama blocked, including the sale of $7 billion in precision-guided munitions to Saudi Arabia despite human rights groups’ concerns they have contributed to civilian deaths in the Saudi-led campaign in Yemen’s civil war.


The bottom line is that these weapons will be not only sold, but also used, which also means that many regional conflicts and wars are coming. Which also explains the bitcoin-esque chart of Boeing in the last few years as America doubles down as the world’s biggest arms dealer.


Friday, December 22, 2017

American Purchases Of "Stuff They Don"t Need" Hits 17 Year High

Anyone who has been paying attention to the New York Fed’s Quarterly Report on Household Debt and Credit is probably aware that Americans are drowning in debt...



...Aggregate household debt climbed $116 billion during the third quarter to $12.96 trillion, edging past its previous peak from Q3 2008. But even as millennials struggle to pay down an insurmountable pile of student debt...



...CNBC is reporting that holiday spending this season is on track to hit a 12-year high, according to an annual survey of consumer spending habits. Keep in mind, that survey was taken before Comcast, Boeing, Fifth-Third Bank and AT&T announced they would be handing out last-minute holiday bonuses to rank-and-file employees...


But as both debt and holiday-related spending rise in tandem (suggesting that the former is being utilized to finance the latter), one Bloomberg columnist has estimated that, instead of paying down debt, one-fifth of consumer spending in Q3 went to items that people don’t really need...


Back in the 1950s, the economist John Kenneth Galbraith made a bleak argument about modern capitalism: Advertising can create artificial wants -- say, for the latest gadget or skin cream -- that spur ever-greater consumption without actually making people better off. As a result, economies can grow without improving the lot of humanity.


 


Whether or not he’s right -- it remains a matter of debate -- the idea raises an interesting empirical question: How much of what we consume is related to wants rather than needs?


 


This isn’t easy to answer using even the most detailed data on consumer spending, because many categories could go either way. A car, for example, could be pure transportation or a Ferrari. That said, a number of categories -- such as gambling, hairdressers and recreational vehicles -- are pretty clearly nonessential. Following them consistently over time can give at least a sense of trend.


 


So how are we doing? In the third quarter of this year, nonessential items (of my own subjective selection 1) accounted for almost 18.5 percent of total U.S. consumer spending. That’s the highest share since June 2000.



According to the column’s author, Mark Whitehouse, this nonessential spending has reached its highest level in 17 years...



Whitehouse does list one interesting caveat: Because he calculates the value of nonessential goods in nominal dollars, the overall spending on nonessential items may have been constant in real terms...


...Of course, anyone who has sat through one of the Federal Reserve’s press conferences this year understands that inflation has been receding - not advancing - this year. Which means, if anything, 17% is a lowball figure.


To be sure, spending on life’s little luxuries is still far below its post-WWII peak (according to Whitehouse, conspircuous consumption in the US peaked in 1959)...


...But the fact that this subset of discretionary household spending is still growing, even as household debt rockets to all-time highs, is indicative of how consumers are burning the fiscal candle at both ends...
 









Wednesday, December 20, 2017

Boeing Unveils New Drone Which Will "Change The Future Of Air Power"

Boeing’s IR team had been working around the clock for today’s unveiling of the ‘Batmobile’ style unmanned refueling tanker drone. For days, the internet had been in suspense, trying to guess what Boeing’s big surprise would  be. To boost the suspense, the company"s twitter account released a statement last week saying the new aircraft is set to "change the future of air power."



And judging by the hype generated by Boeing, the marketing campaign paid off. Boeing’s MQ-25 unmanned aircraft is currently in engine trials before heading to the flight deck of an aircraft carrier in 2018.  The MQ-25 was specifically made for the Navy to extend the combat range of deployed Boeing F/A-18 Super Hornet, Boeing EA-18G Growler, and Lockheed Martin F-35C fighters.


Don ‘BD’ Gaddis, a retired admiral who leads the refueling system program for Boeing’s MQ-25 said, “Boeing has been delivering carrier aircraft to the Navy for almost 90 years. Our expertise gives us confidence in our approach. We will be ready for flight testing when the engineering and manufacturing development contract is awarded.”



Boeing unveils the U.S. Navy"s MQ-25 unmanned tanker.


In the first half of 2017, Boeing was selected by the Pentagon’s Defense Advanced Research Projects Agency (DARPA) to complete the design work for the agency’s new Experimental Spaceplane (XS-1). And so far, Boeing has released one photo of the aircraft facing head-on to the camera, proving that the company has fabricated a prototype and that — as expected — it has moved away from the flying wing design it considered putting forward to the precursor of the MQ-25 program, when the Navy prioritized strike and ISR capabilities for its first carrier-based drone.


“It’s an aircraft with the mission in mind, and we felt confident that the wing-body-tail design was the best for the refueling mission,” said Boeing spokeswoman Didi VanNierop, who added that the company incorporated lessons from its Phantom Ray unmanned demonstrator and other Boeing unmanned aerial systems.


Jess Sponable, DARPA program manager said, “the XS-1 would be neither a traditional airplane nor a conventional launch vehicle but rather a combination of the two, with the goal of lowering launch costs by a factor of ten and replacing today’s frustratingly long wait time with launch on demand.”


Boeing’s MQ-25 is slated to conduct engine runs by the end of the year at its St. Louis, Missouri, facility before moving on to deck handling demos early next year, the company said in a news release.








During the deck handling demonstrations, the company will take the aircraft to the ramp, which will be marked to the measurements of an aircraft carrier’s flight deck, VanNierop said. There, operators will taxi the aircraft via remote control and move it within the confines of the deck. They will also validate that the aircraft will engage the launch bar of a catapult.


 


However, the aircraft will not fly during those demonstrations, and Boeing has not set a date for first flight, she noted.



“Boeing has been delivering carrier aircraft to the Navy for almost 90 years,” Don Gaddis, who leads the refueling system program for Boeing’s Phantom Works, said in a statement. “Our expertise gives us confidence in our approach. We will be ready for flight testing when the engineering and manufacturing development contract is awarded.”



“We’re very pleased with Boeing’s progress on the XS-1 through Phase 1 of the program and look forward to continuing our close collaboration in this newly funded progression to Phases 2 and 3—fabrication and flight.”



Boeing has stoked conversation about its “mystery aircraft” for about a week. On Dec. 14, the company posted a short video of a stationary aircraft draped in a drop cloth on its Twitter account.


“Robust? Check. Ready? Check. Changing future air power? Check it out!” read the caption, which then implored viewers to come back on Dec. 19 to see the plane’s reveal.



As a result, the internet had speculated these additional prototypes from Boeing could have been released.


Some aviation enthusiasts correctly guessed that Boeing would debut its MQ-25 offering, but others speculated that the new Phantom Works aircraft could be a new version of the Bird of Prey subsonic stealth aircraft, its Phantom Ray unmanned combat drone or even a new collaboration with Aurora Flight Sciences, which the company acquired this year. The XV-24A LightningStrike VTOL (Vertical Take-Off and Landing) plane was acquired last year by Boeing from Aurora Flight Sciences. Applications for the plane include commercial and military purposes.



Aurora Flight Sciences successfully tested the Subscale X-Plane Aircraft for vertical take-off and landing.



The Phantom Swift, a Boeing prototype initially built in less than 30-days, has been accepted into the Defense Advanced Research Project Agency (DARPA) Vertical Takeoff and Landing (VTOL) X-plane program. The aircraft has two large fans in the fuselage and two wingtip fans for stabilization.



“Proving these capabilities in a single aircraft has been the holy grail for tactical military aviation,” said Dan Newman, Boeing Phantom Works Advanced Vertical Lift capture team lead. “We’re confident that Phantom Swift could be the solution.”



And while much the internet guessed wrong about today’s MQ-25 unmanned refueling drone release by Boeing, it signals that the military-industrial complex shows no signs of slowing, as President Trump will soon be able to attack even more targets, at an even further dustance by extending the combat range of some of the Navy’s aircraft. There is one final question: how dangerous is it to fly an unmanned gas tank over hostile territory?









Sunday, December 3, 2017

Bitcoin Hits New All Time High After Burst Of Asian Buying: Market Cap Nears $200 Billion

Whether it was the previously discussed unexpectedly bullish JPM report (which calculated that a mere $6bn in net capital inflows has pushed the crypto market cap to $330 billion), or just the latest unexplained burst of buying out of Asia with another weekend surge in volumes out of Japan and Korea, but last week"s bitcoin mini meltdown and bear market are now long forgotten, and overnight the world"s most popular cryptocurrency has soared again, up $750, or 7%, in the past 24 hours, last trading at a new all time high of $11,795, just $200 away from $12,000.



That means it is up nearly 40% from last week"s $8,500 flash crash. To those who bought at the lows, congratulations.


As a result of the latest burst higher, the market cap of bitcoin is now $196.5 Billion, and with Ethereum and the rest of the cryptocoin sector moving higher in sympathy, the market cap of all cryptocurrencies has hit a new all time high $350 billion.



Following Sunday"s move, Bitcoin"s YTD return has risen to a staggering 12x, while ethereum is up nearly 50-fold.


Bitcoin"s market cap is now the same as HSBC at $196 billion, and greater than that of Coca Cola, Cisco, Toyota, Comcast, Pepsi, Bank of China, and Boeing as it is fast approaching Citigroup at $200 billion.


While every push higher prompts renewed bubble warnings from skeptics, others such as the head of the Russian Blockchain and Cryptocurrency Association and Cryptocurrency Yury Pripachkin, have prdicted the cryptocurrency could hit $20,000 by the start of 2018. Compared to pioneering Bitcoin investor, Michael Novogratz, the Russian"s forecast seems tame: last week "Novo" said bitcoin will continue its relentless rally, hitting $40,000 by the end of next year, while ethereum will triple to $1,500 or more.









Friday, November 24, 2017

Just 10 Companies Account For 33% Of All Market Gains Since Trump"s Election

Yesterday we laid out the reasons why French bank SocGen unveiled a surprisingly contrarian forecast, according to which the S&P would tumble from its current level over 2,600 to 2,000 in 2018, representing a more than 20% bear market drop...



... the drop catalyzed by rising interest rates pressuring P/E multiples, a late cycle economy nearing recession, equities trading at record valuations, and with everyone short vol begging for a vol short squeeze. Not surprisingly, SocGen"s unspoken advice was to get out now.


And while many of the negative factors highlighted by SocGen had already been discussed here in the past, there were two we warned to bring attention to: the market"s multiple expansion since Trump"s election, and the narrow leadership in the S&P.


As we noted yesterday, contrary to the widely accepted narrative, while the S&P 500 has risen 24% since Trump"s election, only half of this performance has been driven by earnings growth; the other half is from P/E expansion. But why would P/Es rise at a time when the Fed is tightening? As SocGen speculated, assuming that analysts have not factored tax reform into their earnings forecasts, tax reform expectations have been the driver of P/E expansion. There is a problem with this: while the S&P 500 index tax rate is currently 26.6%, assuming that US companies generate 43% of their profits abroad (here) and pay 35% of their US profits on taxes (i.e. with no loopholes for US profits), the average tax rate outside the US would be 15.5%. A decrease in the US tax from 35% to 20% as planned by Trump’s tax reform would thus theoretically boost earnings by 8.5%. The 12-month forward P/E has risen 12% over the last 12 months. In other words, roughly 150% of Trump"s tax cuts have been priced in!



However, another especially interesting observations goes to the leadership of this 24% rally since Trump"s election, which - while hardly a surprise - was largely driven by a handfull of companies, or ten to be precise.


As SocGen calculates, just 10 contributors of the S&P 500’s bull run have accounted for 33% of the S&P 500 performance. Tying to the above, the bank also points out that all of the companies listed below have seen their P/Es expand over the last 12  months, in some cases - like Nvidia, WalMart, Boeing and Amazon - dramatically. In fact, only three companies (Apple and the two banks) have 12-month P/Es that are below the market average (18x). Lastly, keep in mind that except Amazon, all of the companies already pay a  corporate tax rate below the current US federal tax rate (35%), and five companies even pay a tax rate that is below the 20% rate targeted by Trump’s tax reform.



As we asked two days ago when we showed that the bulk of hedge funds gains in 2017 have come from holding this same handful of companies, what happens to hedge fund performance - and the S&P 500 - when, for whatever reason, the tide turns and the winners are the first to be sold?









Another One: Japan"s "Fake Data" Scandal Hits Mitsubishi Materials

So Kobe Steel was not an isolated incident and faking data on manufacturing quality in Japan is quite common, as other lower profile scandals at Nissan Motor and Takata proved. Today another culprit has come to light: Mitsubishi Materials – which may need to re-consider its corporate philosophy “For People, Society and the Earth” and Articles 2 and 3 of its code of conduct “Safety First” and “Compliance”.


The company has admitted to falsifying data on rubber seals, brass strips and aluminum products sold to more than 250 customers in the aerospace and auto sectors. Having hit a two year high earlier this month, Mitsubishi Materials’ share price plunged during the Tokyo trading session, closing 8.1% lower on the day at 3,760 Yen, having traded as low as 3,635 Yen.


More from Bloomberg:


Japan’s reputation for manufacturing prowess took another hit as Mitsubishi Materials Corp. admitted it faked data on some products just weeks after a similar scandal engulfed Kobe Steel Ltd. Buyers of Japanese industrial goods from Boeing Co. to Airbus SE were once again scrambling to confirm whether safety had been compromised after Mitsubishi Materials said three of its units had faked data on products that may have been delivered to more than 250 customers. Its shares plunged as much as 11 percent in Tokyo, the most in eighteen months.



Mitsubishi Cable Industries Ltd. falsified data on rubber seals, while Mitsubishi Shindoh Co. misreported the strength of brass strips for auto parts, according to a statement Thursday. The products may have been shipped to 229 Mitsubishi Cable clients and 29 customers of Mitsubishi Shindoh. A third unit, Mitsubishi Aluminum Co. Ltd., also supplied non-conforming products, although it has already confirmed with customers that they are safe, the company said, adding that its investigation hasn’t uncovered any cases that raise the possibility of legal violations or safety issues.



The number of scandals of this type is a growing embarrassment to Japan’s famed manufacturing excellence and quality control.


The revelation is the latest in a series of scandals to dent the image of Japanese manufacturers and closely resembles recent admissions by Kobe Steel that it falsified data on the strength and durability of its products. In the auto sector, Nissan Motor Co. has said it conducted vehicle inspections that didn’t comply with regulations for almost four decades, while Subaru Corp. allowed uncertified workers to inspect vehicles before shipment. Takata Corp. filed for bankruptcy earlier this year because of faulty airbags.



A disconcerting feature of the breaking scandal at Mitsubishi is that like recent "incidents" at Equifax and Uber, the company was aware of the fake data problem at its Mitsubishi Cable subsidiary in February 2017, but failed to halt shipments until last month.


Japanese Trade Minister Hiroshige Seko called the matter “extremely regrettable” at a briefing Friday, and said the ministry has asked related departments to investigate its causes and is seeking an explanation from Mitsubishi Cable on why it took so long to report its problem. He added that he considers it a matter for the companies and not an industry-wide issue.



According to the statement, Mitsubishi Cable uncovered the misconduct in February and stopped shipping non-conforming products on Oct. 23; the company told its parent two days later. Mitsubishi Shindoh found out about its problem in October and stopped shipments on Oct. 18, alerting Mitsubishi Materials the following day.



As the Financial Times reports, the falsification of data stretches back to 2015 at Mitsubishi Cable and Mitsubishi Shindoh has a joint venture with Kobe Steel.


Mitsubishi Materials said in a statement that its Mitsubishi Cable Industries unit had falsified data since April 2015 on the quality level of rubber O-rings, which are used to prevent leaks in aircraft, cars and other industrial equipment. Another subsidiary, Mitsubishi Shindoh, was found to have delivered metal products with quality levels below that claimed by the company or requested by customers.



Mitsubishi Materials has a 45 per cent stake in a copper tube venture with Kobe Steel, stemming from a partnership formed in 1999 alongside affiliate Mitsubishi Shindoh. That joint venture includes the Hatano plant south-west of Tokyo that has become the focal point of Kobe Steel’s data falsification scandal, and been subsequently stripped of numerous Japanese and international quality certifications.




Mitsubishi Cable employs around 500 workers and Mitsubishi Shindoh over 1,000 out of a group workforce of some 25,000. In the year to March 2,017, group sales were $11.6 billion and net profit $252 million. “Even if Mitsubishi Shindoh and Mitsubishi Cable don’t make up a big portion of the company’s earnings, not just the short-term impact, but the mid and long-term impact on its orders is a cause of concern,” Keiju Kurosaka, senior analyst at Mitsubishi UFJ Morgan Stanley Securities, told Bloomberg.


Naturally, when these "fake something" scandals relate to high precision engineering parts, attention immediately turns to the manufacturers of commercial aircraft. Airbus published a statement saying that it doesn’t directly procure parts from Mitsubishi Materials and is investigating its supply chain. Boeing said that it’s reviewing the matter. Whether it’s a precedent for Mitsubishi Materials, time will tell, but Bloomberg notes that none of Kobe Steel’s customers have reported a safety problem so far.


Kobe Steel’s crisis erupted in early October, collapsing its shares. Although 525 customers were affected, none has yet to report safety issues and no products have been recalled, allowing its stock to recover some of its losses. As of last week, shipments to 484 clients had been given the all-clear.



Kobe blamed lax controls and too much focus on profit for its short-comings, including unrealistically high standards that exceeded clients’ expectations, which encouraged staff to disregard quality guidelines for a decade or more. The company was forced to abandon its profit forecasts and has lost quality assurance certification -- often demanded by customers as a condition of sale -- at seven of its 20 plants.




Mitsubishi Materials has to explain itself to the Japanese government by tonight. Transport Minister, Keiichi Ishii, stated that Mitsubishi Materials will report to his Ministry later on Friday with details on products and customers affected. He said that he will instruct the company to put the highest priority on safety…too late. We are nervously awaiting the next “revelation” on Japanese manufacturing.









Thursday, November 23, 2017

Need A Jumbo Jet? China"s E-bay Can Help You With That...

In a first for not just China, but the entire world, Alibaba"s online auction website, Taobao, has successfully auctioned off two Boeing 747-400 jumbo jets for a combined $49 million.  The jets were bought by Chinese cargo airline SF Airlines after they were seized by courts during Jade Cargo"s bankruptcy proceedings in 2013.  According to the South China Morning Post, the successful online auction was conducted after six failed private auctions.








Two Boeing 747-400 Freighters were sold on Tuesday on Taobao, the online shopping platform owned by Alibaba, for a combined 322.8 million yuan (US$49 million), reflecting the first time such jets were sold via online auction in China, and possibly the first-ever globally at online auction.


 


The sale was concluded after six failed attempts at offline private auctions organised by the seller – a state court – in the past few years.


 


SF Express, China’s largest private courier, bought the jets from the Intermediate People’s Court in the southern city of Shenzhen, which seized them after Jade Cargo International filed for bankruptcy in 2013.


 


Three Boeing 747-400s had been put up for sale on Taobao’s judicial auction arm from Monday to Tuesday. One of the jets parked at the Shenzhen Bao’an International Airport went unsold, with a starting bid of 122.6 million yuan.




According to rules on Taobao’s auction site, bidders were required to make security deposits of 6.1 million yuan, 6.7 million yuan, and 6.8 million yuan for the respective jets before the auction.  The winning bidder now has 15 days to send payment in full according to Taobao auction rules.


Last year, Concord Aerospace, a Florida-based aerospace company, tried to sell a Boeing 747 jumbo jet on eBay, with a starting bid of US$300,000. The aircraft’s four jet engines had been removed and its electrical components had been stripped...needless to say, the plane didn’t sell.


And, for our next item, this entire Chinese Ghost City, complete with dueling horse statues, can be yours for an opening bid of just $10...any takers?


Ghost City









Sunday, November 19, 2017

Back-To-Back Hindenburg Omens

About a week ago, we warned about the infamous bearish stock market pattern developing in US equities coined by some as the ‘Hindenburg Omen’. The pattern is known for its bearish tendencies developed after the Hindenburg disaster of 1937. The key understanding is breadth deterioration, when more stocks hit 52-week lows than 52-highs. Since the warning, a liquidity gap has developed in stocks thwarting any attempt at new all time highs.



Fast forward to this morning and a very ironic situation has unfolded in the skies 50-miles north of London. And no – it’s not a giant penis drawn by US-Navy pilots in F-18s - it’s a true ‘Hindenburg Omen’ as the world’s longest airship crashed early this morning. The £25m airship called ‘Airlander 10’ appeared to “break in two,” a witness told the BBC. Reports suggest the airship broke free from mooring less than 24-hours after a successful test. At the time, no-one was on board of the aircraft, but Bedfordshire police, paramedics and fire crews were alerted and treated a women who suffered minor injuries.



According to the Guardian,




The roads around the airfield were closed amid concerns that aviation fuel and helium could escape from the airship. However, police said they believed the helium would soon dissipate.


 


Hybrid Air Vehicles (HAV), the company that developed the airship confirmed there had been an incident. It said the craft was not on a flight at the time and had since been deflated.


 


An investigation has been launched to find out what happened.




Local residents took to social media and snapped shocking pictures of the crashed airship appearing to be more deflated than Tom Brady’s footballs.



Another concerned resident indicated ground crews rushed to slice open the aircraft to release helium after the crash.



Airship community is in tears this morning...



The Airlander 10 is/was the world’s largest aircraft produced by Hybrid Air Vehicles. The airship is classified as a helium airship powered by four diesel engines driving large propellers on each side of the craft. Hybrid Air Vehicles originally built this aircraft for the United States Army’s Long Endurance Multi-intelligence Vehicle (LEMV) program in 2012, but was cancelled one-year later.


To give perspective of the Airlander’s size, a Boeing 747 can pretty much fit inside the craft.



Perhaps the United States Army made the right decision in 2013, as it appears the Airlander 10 has many kinks that still need to be worked out. In late 2016, the Airlander 10 had a slow motion crash during a landing approach where damage to the cockpit was heavily sustained, but the crew of two was untouched.


Bottomline: Back to back ‘Hidenburg Omens’ for US-stocks and now the largest aircraft in the world crashing this morning is an ominous sign and we hope it’s not a redux of 1937 where markets crashed in excessive around 50%.









Monday, October 30, 2017

President Trump"s Confidence In Missile Defense Is A Dangerous Illusion

Authored by Andrei Akulov via The Strategic Culture Foundation,


The US is pushing ahead with expansion of the nation’s homeland ballistic missile defense (BMD). The effort enjoys strong bipartisan support in Congress and among experts. Many allies place a high value on BMD cooperation with the United States. However, there are ample reasons to question the efficiency of US missile defenses, especially the capability to protect against intercontinental ballistic missiles (ICBMs).



“We have missiles that can knock out a missile in the air 97% of the time,” President Donald Trump said in his interview with Fox News on October 11, adding “and if you send two of them, it’s going to get knocked down.” He was talking about the threat coming from North Korea to be repelled by the Ground-Based Midcourse Defense (GMD) in Alaska and California – the $40 billion project administered by the Missile Defense Agency (MDA).


The US military conducted the first-ever missile defense test involving a simulated attack by an intercontinental ballistic missile in May. The ICBM-type target was fired from the Kwajalein Atoll in the Marshall Islands toward the waters just south of Alaska. The mission was to prepare for countering an intercontinental missile launched by North Korea. The Missile Defense Agency (MDA) described the test as an “incredible accomplishment”. According to Vice Admiral Jim Syring, director of the agency, “This system is vitally important to the defense of our homeland, and this test demonstrates that we have a capable, credible deterrent against a very real threat.” The assessment appears to be exaggerated as the test was not conducted in a realistic environment.


The next test of the GMD system is scheduled for late 2018 and, for the first time, will involve firing two interceptors against one ICBM target. It makes unsubstantiated the president’s affirmation that two interceptors are enough to knock out a North Korean missile as no such tests have been conducted so far.


The US currently deploys 36 interceptors – 32 at Fort Greely, Alaska, and four at Vandenberg Air Force Base, California. By the end of 2017, there will be 44 deployed GBIs. A majority of the interceptors use the CE-I variant of kill vehicle that has scored only two successes in four tests. At least ten interceptors are to be equipped with the CE-II Block I vehicle, which has had two successful intercept tests in three tries.


It is generally believed that it takes at least four-five interceptors to hit the target. It means President Trump is off base saying the hit probability is 97%. Prior to the ICBM test, the GMD system had successfully hit its target in only ten of 18 tests since 1999. A success rate is about 56%, not 97%. But even 56% is almost certainly an overstatement, given the less-than-realistic nature of the tests.


A success rate for four-five interceptors per target may be 97% but the possibility that each successive interceptor’s chance of successful kill might not be independent of the previous one, due to correlated factors such as design shortcomings, leading to a lower overall success rate. Nevertheless, President Trump believes each interceptor has a single-shot probability of kill (SSPK) for a given interceptor of 97% (rather than 56%).


According to the Washington Post, “No single interceptor for ICBMs has demonstrated a 97-percent success rate, and there is no guarantee using two interceptors has a 100-percent success rate. Moreover, the military’s suggestion that it could achieve a 97-percent success rate with four interceptors appears based on faulty assumptions and overenthusiastic math. The odds of success under the most ideal conditions are no better than 50-50, and likely worse, as documented in detailed government assessment.”


Joe Cirincione, the President of Ploughshares Fund and the author of Nuclear Nightmares: Securing the World Before It Is Too Late, investigated anti-missile programs for almost 10 years as professional staff on the House Armed Services and Government Operations Committees. He believes that “If people took a close look at just one of these interceptor tests, they would likely conclude, as I did, that the tests bear little resemblance to real-world conditions.”


If North Korea fired an ICBM - or multiple ICBMs - at the United States, the GMD with its Ground-Based Interceptors (GBIs) is only one system that could take a shot at intercepting and destroying the warhead outside the earth’s atmosphere in midcourse flight. Other missile defense systems such as THAAD and Aegis are in no position to hit ICBMs as they’re designed for other classes of targets.


With only one test against an ICBM, the MDA is not even close to demonstrating that the system works in a real-world setting. The GMD systems have not yet been tested in the range of conditions under which it is expected to operate. No tests have been conducted at night or against complex countermeasures, such as electronic countermeasures and decoys. The tests are always rigged because the intercept team knows the timing and trajectory of the incoming missile. But even the scripted tests have often failed. What has been done so far is insufficient to demonstrate that an operational BMD capability really exists.


The US has not publicly conducted any tests to see whether the missile-defense radars can distinguish a missile from chaff. Even cheap inflatable balloons can make all intercept efforts go down the drain. With no air resistance (or drag) in space, a decoy like a balloon shaped like a nuclear warhead could travel in the same way as the true warhead, making it difficult for a missile to distinguish the real thing from the decoy. Balloons are light enough to enable a sophisticated warhead launch 20 or 30 decoy balloons to obscure the path of the warhead, swamping the defense system with fake signals.


In February and April 2016, the Government Accountability Office (GAO) assessed that the MDA has not “demonstrated through flight testing that it can defend the US homeland against the current missile defense threat,” relying on “a highly optimistic, aggressive schedule” to upgrade the system.


The US abandoned the Anti-Ballistic Missile (ABM) Treaty in 2002, which greatly obstructed arms control process. Efficient or not, the US current and potential BMD capability is taken into consideration to influence Russia’s military planning. It provokes Moscow into taking countermeasures to respond to BMD plans and negatively affects the prospects for future Russia-US arms control agreements. With uncertainties raised about the strict balance of arms agreed upon in New START, a chain reaction is triggered leading to arms race.


Philip Giraldi, a highly respected expert and the Executive Director of the Council for the National Interest, believes that the American people are being fooled by the administration, which tries to make them think that a nuclear war is thinkable. According to him, “If that is the message being sent by the White House, it would encourage further reckless adventurism on the part of the national security state.” Mr. Giraldi hit the nail right on the head. The GMD effort creates a dangerous illusion that a victory in a nuclear conflict is achievable and no money should be spared to spur the implementation of the MDA plans. In reality, the US defense industry is the only benefactor while the taxpayers throw money into the drain. The result: further erosion of arms control and reduced security.









Wednesday, October 18, 2017

Airbus Takes On Boeing By Striking Deal For Bombardier Ownership Stake

Boeing"s battle to crush Bombardier has encountered an unexpected obstacle.


Bloomberg reports that Airbus SE has agreed to acquire a majority stake in Bombardier Inc.’s C Series program, which the Commerce Department slapped with a 300% tariff it ruled in Boeing’s favor in a complaint alleging Bombardier had benefited from anti-competitive government subsidies.


Under the terms of the deal, Airbus won’t pay a dime up front for the C-Series, but will begin assembling the technologically advanced by poor-selling jetliner in the US in what Bloomberg said could be an effort to circumvent the tariffs.  Airbus is adding another final assembly line for the C-Series at its factory in Mobile, Alabama, which will serve US customers and complement production in Canada, according to a company statement late Monday. However, Bloomberg says it’s unclear if the deal will allow the C-Series to avoid the tariffs.





It’s too soon to say if the new Alabama production line would enable the C Series to avoid U.S. tariffs. The duties were applied to C Series planes “regardless of whether they enter the United States fully or partially assembled,” according to a U.S. government fact sheet on the matter. Boeing said Airbus and Bombardier were just trying to get around the restrictions.



As part of the deal, Airbus will assume just over half of the interest in a partnership controlling the C-Series. Bloomberg says the European planemaker’s marketing muscle and production expertise boosts the viability of the all-new aircraft after more than $6 billion in development costs forced Bombardier to rely on government assistance.



The deal also thrusts Airbus into the middle of a trade spat between the two North American aerospace firms. In response to the Commerce Department’s ruling, Canadian Prime Minister Justin Trudeau canceled military equipment orders with Boeing, adding that they wouldn’t be reinstated until Boeing drops its complaint against Bombardier.


Boeing filed its complaint in April after Delta Air Lines agreed to buy 75 of the C-Series in a deal worth some $5 billion. Boeing alleged that the planes had been sold for “absurdly low prices.”


The dispute had crossed the Atlantic even before Airbus"s involvement. UK Prime Minister Theresa May said she personally lobbied President Trump to cancel the tariffs. Bombardier has a large factory in Belfast, a constituency that’s important to the conservatives, which employs 4,000 locals.


The Airbus deal is an embarrassing setback for Boeing, one analyst said.





“This is a program that has been waiting for a deus ex machina, and wow, it really got one,” Richard Aboulafia, an aerospace analyst at Teal Group, said in an interview. The deal casts Airbus as a global player while Boeing comes off as “a bit shortsighted and protectionist. It makes Boeing look like they’ve been playing tic tac toe against a chess master.”



Bombardier shares traded in Toronto climbed 15.7% on Tuesday after the deal was announced.


Trump and Canadian Prime Minister Justin Trudeau discussed the deal Monday evening in a phone call, according to a statement from Trudeau’s office that provided no details of the conversation.


Canadian Innovation Minister Navdeep Bains said the deal will face a review under the Investment Canada Act. But one unnamed government source told Bloomberg that it’s likely to be approved.


Assuming it is approved, the transaction would be expected to close in the second half of next year, at which point Airbus will own 50.01% of the C Series partnership. Bombardier will hold about 31% and the province of Quebec, which controversially invested $1 billion in the C Series after the cost overruns and delays, will own approximately 19%. Quebec will remain an investor in the C Series until at least 2023, said the province’s economy minister, Dominique Anglade.


Bombardier has rejected Boeing’s complaint, saying Boeing doesn’t have grounds to accuse Bombardier of unfair trade practices because Boeing doesn’t make a mid-sized jet comparable to the C-Series.


Unsurprisingly, Boeing criticized the deal, hinting that it could try to expand its complaint to include Airbus if the company tries to avoid the C-Series sanctions.


“This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Boeing, the world’s largest aerospace company, said in an emailed statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”


Of course, Airbus and Boeing are each other"s primary rival. By acquiring the ownership stake in the C-Series, Airbus is killing two birds with one stone. Embarassing and threatening Boeing, while acquiring new technology for cheap that could allow it to cater to a new kind of customer: Chinese airlines looking for more fuel-efficient planes.

Tuesday, October 17, 2017

Dow Hits 23,000 - There's Just One Thing

Just four weeks since The Dow crossed 22,000...but thanks to Goldman, Boeing, Caterpillar, 3M, and JPMorgan (accounting for over 500 Dow points), the mainstream media"s favorite index just topped 23,000 for the first time ever...




With the Top 6 names driving 50% of the index"s move...




However, it seems options traders ain"t buying it...


If everything"s so awesome... why are investors buying Dow protection with both hands and feet?



As retail piles in, so professoinals are hedging to extremes.



Finally - for good measure - "Industrial" Production remains well below 2014 highs... but the "Industrial" Average is soaring...


Monday, October 16, 2017

Hedge Fund CIO: "Never In Human History Have So Many Things That Weigh Nothing Had So Much Value"

Returning to the world of investing and market commentary one week after surgery, One River"s CIO Eric Peters touches on some of the most topical issues, including his latest take on bitcoin and money in particular, and the definition of value (which is increasingly more weightless) in general, the deflationary impact of tech on prices and wages and what the Fed"s inflation target should be in this "new normal", recent trends in R&D spending, and, of course volatility.


Below we present select highlights from Peters" latest letter:


Overall





“Imagine 3,500 elephants,” said Andrew Jones, Exchequer Secretary to the Treasury. “Or consider 900 double decker buses.” And at least one bored American did.  “That is the rough weight of the 1.2bln coins the UK public has handed in over the past six months.” You see the British have introduced a new twelve-sided pound coin, replacing the little round bloke they’ve had since 1983 (no longer legal tender effective today). This reminds us that money is whatever we all agree it is, or what we’re told it is.



Naturally, the people who print our money tell us it is something real, tangible, weighty. Like an elephant, a bus, or even gold. But it’s not. Money is an illusion, swirling in the ether. Imagine 290k Bitcoin ($5,856 record high this week), or consider 4.7mm Ethereum. They’re both worth 1.2bln pound coins, but weigh less than 3,500 elephants. They weigh nothing.  



In fact, never in human history have so many things that weigh nothing had so much value, fueled such vast fortunes. Data weighs nothing. Knowledge weighs nothing. Software weighs nothing. Algorithms weigh nothing. And as the singularity approaches - that point when artificial intelligence surpasses all human intelligence - we struggle to fathom its infinite weight, uncertainty.



As humanity transitions from weight to weightlessness, it seems the gravity that once tethered asset prices to earth is losing its grasp. Perhaps the profound power of weightlessness will accrue in extraordinary commercial ways (and profits) to the companies with the infrastructure to harness it - maybe this is what we are beginning to see. Or perhaps, it is simply that after a decade of unprecedented monetary meddling, our bankers have broken the bond of fiat, shattering the illusion.



And the conditions prompting people to exchange their round blokes for block chains are the same conditions leading people out of money into stocks.



* * *





Destiny: Asia now accounts for 42% of global R&D (public plus private), North America 29% and Europe 21%. 25yrs ago, the US invested roughly 2.5% of GDP on research and development. Today we devote 2.7%, equal to $475bln/yr. China invested 0.7%/GDP in R&D in 1992, but tripled that to 2.1% today, equal to $410bln in PPP dollars. The EU invests 2.0% today, $388bln. Japan invests 3.6% today, $180bln. Germany 2.9%, $110bln. South Korea 4.3%, $91bln. France 2.3%, $60bln. UK 1.7%, $45bln. Russia 1.2%, $43bln. Brazil 1.2%, $35bln. Taiwan 3.0%, $33bln. Italy 1.3%, $27bln. Canada 1.6%, $26bln. Australia 2.1%, $23bln. Turkey 1.0%, $15bln. Sweden 3.2%, $14bln. Switzerland 3.0%, $13bln. Israel 4.0% (global leader), $13bln. Mexico 0.9%, $9bln. South Africa 0.7%, $5bln. Indonesia 0.1%, $2bln. Saudi Arabia 0.3%, $2bln. Vietnam 0.2%, $0.8bln. and Iran 0.7%, $0.7bln.



Destiny II: Corporate R&D stats are hard to pin down but Amazon led the world in R&D last year with roughly $16.1bln spent. Google $13.9bln, Volkswagen $13.6, Intel $12.7bln, Samsung $12.5bln, Microsoft $12.3bln, Roche $11.4bln, Merck $10.1bln, Apple $10bln, Novartis $9.0bln, Johnson & Johnson $9bln, Huawei $8.4bln, General Motors $8.1bln, Toyota $8.0, Pfizer $7.8bln, Ford $7.1bln, Daimler $6.5bln, Oracle $6.2bln, Facebook $5.9bln, Cisco $5.7bln, Honda $5.5bln, IBM $5.4bln, Eli Lilly $5.2bln, Qualcomm $5.1bln, General Electric $4.8bln, Boeing $4.6bln, Celgene $4.5bln, Bristol-Meyers $4.6bln. Tesla spent just $2.8bln in cumulative R&D in the past 7yrs, turning the auto industry on its head. And Alibaba just announced a $15bln 3yr R&D budget.



* * *





Anecdote: “Every single trading decision leads to another,” said Roadrunner. “And when you get offsides in a market, it’s difficult to get back in sync,” explained the biggest market maker in equity volatility. “So I spend my quiet hours going back in time, revisiting the series of events and decisions that led me to the present.” The world rushed past us, a never-ending flow, and I recalled a point far upstream when we first met. A decade ago, early in his journey, with his stake, ambition. “I have lots of traders now, who often get themselves tangled in things. I see so much. I try to help, but often with very little information, without the context, the history.”



Having survived 2008 with capital intact and hubris diminished, he embraced exchange traded volatility products. “When my traders struggle, I get drawn into their markets, their books, the chain of events that led them to their present. I help them see things within, and learn things myself.”



VIX futures traded 4k contracts per day in 2008. Today they trade 300k. The VXX (VIX ETF) didn’t exist in 2008, and now trades 100mm shares on a busy day, as much as the SPY (S&P 500 ETF).



“The source of my success is in reliving the past, then applying that to the future. And I’ve learned that markets turn two weeks from my point of greatest pain; I’m always max long volatility two weeks before it bottoms.”



We laughed, because of course, if you’ve learned to know when you’re too early then you should never be too early. “You can’t fully escape yourself, but you can learn to manage the consequent losses better because you see them approaching. And then when the turn comes, you understand it, you know it, you’re ready. You’ve seen the future unfold in the past.”


Wednesday, October 11, 2017

Kobe Steel Collapses 37% After Admitting Falsifying Data: "Could Destroy International Faith In Japanese Manufacturing"

Japan"s third-biggest steel producer is in trouble. After admitting falsifying data about the quality of aluminum and copper it sold, shares in Kobe Steel have collapsed 37%,  -20% limit down yesterday and another -17% at the open today following news that the falsification also involved iron powder product, in the biggest bloodbath the company has ever seen.


Bloomberg provides a quick Q&A:





1. What exactly did Kobe Steel falsify?
Data related to the products’ strength and durability. Kobe Steel says it discovered the falsification in inspections on goods shipped in the 12 months through August, affecting some 4 percent of shipments of aluminum and copper parts as well as castings and forgings. As yet, the company, which employs about 37,000 people, says there have been no reports of safety issues.



2. Was this a rogue event?
Hardly. The fabrication of figures was found at all four of Kobe Steel’s local aluminum plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years ago, according to executive vice president Naoto Umehara. Details have yet to emerge.



3. What do its customers say?
Here’s a taster. Toyota is “rapidly working to identify which vehicle models might be subject to this situation and what components were used,” according to spokesman Takashi Ogawa. "We recognize that this breach of compliance principles on the part of a supplier is a grave issue.” Toyota found the materials in question in hoods and doors, as did Honda Motor Co. Boeing, which gets some parts from Kobe Steel customer Subaru Corp., said there’s nothing to date that raises any safety concerns. Hitachi Ltd. said trains it has exported to the U.K. contained compromised metal as well as bullet trains in Japan. Mazda Motor Corp. also confirmed it uses aluminum from the company, while Suzuki Motor Corp. and Mitsubishi Motors Corp. all said they were checking whether their vehicles are affected.



After yesterday"s limit down open (and no shift), today"s 17% plunge following a report in the Yomiuri newspaper that Kobe may also have fabricated data on iron powder products used typically in components such as automotive gears, the stock smashed back to 12 month lows (and erased $1.7bn of the company"s $4.5bn market cap as of Friday)...



This is the biggest 2-day drop and the heaviest volume in the history of the stock...



The scandal that is reverberating through the global supply chain...



And casting a new shadow over the country’s reputation for precision manufacturing, and as The New York Times reports, the fallout has the potential to spread to hundreds of companies.





Manufacturers of cars, aircraft and bullet trains have long relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the Japanese economy.



The scandal hits a tender spot for Japan.



The country relies on its reputation for quality manufacturing as a selling point over China and other countries that offer cheaper alternatives. But its reputation has been marred by a series of problems at some of Japan’s biggest manufacturers.



Last week, Nissan Motor said unqualified staff members had carried out inspections at its factories, prompting the carmaker to recall 1.2 million vehicles, though it was not clear if the quality of the vehicles had been affected. Mitsubishi Motors and Suzuki Motor both admitted last year that they had been exaggerating the fuel economy of their vehicles by cheating on tests.



Perhaps the biggest blow to Japan’s reputation for quality has come from Takata, the airbag maker that was at the center of the largest auto safety recall in history, involving tens of millions of vehicles. Its faulty airbags have been blamed for more than a dozen deaths. Takata declared bankruptcy in June.



The extent of the problems at Kobe Steel are still unfolding: "The falsification problem has become an issue that could destroy international faith in Japanese manufacturing,” the Japanese financial newspaper Nikkei said in an article on Tuesday.

Wednesday, September 27, 2017

UK Slams Tariffs On Bombardier: "This Is Not What We Expect From A Long-Term Partner"

It appears the Commerce Department"s preliminary ruling, issued late last night, to slap a 220% tariff on Canadian aircraft manufacturer Bombardier could trigger an all-out trade war between the UK and Canada (on one side) and the US (on the other) as public officials in the UK and Canada blasted the ruling and threatened retaliation should the sanctions, which still need to be approved by the US International Trade Commission, become permanent.


Earlier today, the Commerce Department ruled that Bombardier"s jets should face the levy because the company received anticompetitive government subsidies. The ruling comes after Boeing said the Bombardier C-Series jet would not exist without hundreds of millions of dollars in launch funding from the governments of Canada and Britain, or a $2.5 billion equity infusion from the province of Quebec and its largest pension fund in 2015. Boeing brought the complaint after Delta Air Lines agreed in April 2016 to purchase 75 C-Series jets, an order worth some $5 billion.


The preliminary ruling - which comes as the US, Canada and Mexico are holding their fourth meeting to renegotiate Nafta - has met with praise from Boeing, and criticism from virtually everybody else involved.



The UK, which does a brisk business with Boeing, is threatening to cut ties with the company if the decision against Bombardier is finalized. The reason? Bombardier has a large plant in Belfast, employing some 4,200 people in Northern Ireland, a region that the UK"s ruling conservative party relies on heavily for support. If Bombardier, which is already struggling, takes another hit, those people could lose their jobs, potentially threatening the conservatives" tenuous grip on power after losing their majority in snap elections over the summer, according to Reuters. 


UK Defense Minister Michael Fallon said in a TV interview today that the ruling could jeapordize Boeing"s business relationship with the UK government.





“This is not the behavior we expect from Boeing and it could indeed jeopardize our future relationship with them,” British Defence Secretary Michael Fallon told reporters in Belfast at a briefing in the historic Harland & Wolff shipyard, a few hundred yards from the Bombardier plant.



“Boeing has significant defense contracts with us and still expects to win further contracts. Boeing wants and we want a long term partnership but that has to be two way.”



“Boeing is an important investor in the United Kingdom and an important employer in the United Kingdom but we would prefer this kind of issue to be settled on a negotiated basis,” Fallon said.


“This is not the kind of behavior that we expect from a long-term partner and I’ve made that very clear to Boeing,” Fallon told reporters.




Britain recently ordered the Boeing P-8 maritime surveillance plane and a new fleet of Apache attack helicopters. Its armed forces have deployed Chinook helicopters, the C-17 transport plane and the E-3 Sentry airborne early warning and command post.


Meanwhile, British Business Secretary Greg Clark said on Wednesday he was confident he would be able to have the U.S. anti-subsidy complaint against Bombardier dismissed.





“We’ve been working very closely with the Canadian government to make it clear that this is a complaint that is unjustified,” Clark told Sky TV.



“What needs to happen now by the trade commission is that they look to see whether there has been any detriment to Boeing,” he added.



“There hasn’t been because this aircraft does not compete with Boeing so we’re confident that we will be able to demonstrate that and have this case dismissed.”



Threatening language aside, the Gaurdian points out that Boeing has substantial leverage should the UK act to curtail its business relationship with the defense contractor. Boeing employs or supports more than 10,000 jobs in the UK; any tit-for-tat retaliation could affect them.




Even the labor party, which isn"t politically dependent on Northern Ireland and thus has less of an incentive to care about the potential closure of a Bombardier plant there, has joined in the Boeing bashing. Labour leader Jeremy Corbyn has just told his party conference in Brighton that the tariffs imposed on Bombardier planes threaten “thousands of jobs”. He called on Prime Minister Theresa May to leverage her "special relationship" with the US to try and protect workers in Northern Ireland.





"Thousands of jobs are now at stake...a Prime minister is betting our economic future on a deregulated trade deal with the US might want to take a moment to explain how 220% tarifsf are going to boost our exports from this country."



Of course, once the ITC issues its ruling, the Trump administration will have the final say on tariffs. Will May"s relationship with the president be enough to save Bombardier? Or will Trump side with Boeing and spin the tariffs as a bid to protect US workers - throwing red meat to his base in the process?


What do you think?

Friday, September 8, 2017

Private-Plane Taxes: Another Way The Poor Subsidize The Rich

Wealthy CEOs and athletes have found a loophole that allows them to minimize their tax bills while traveling in style – all at the expense of the everyday traveler who flies commercial and must bear an outsize percentage of aviation taxes in the US.


According to a Bloomberg analysis of government data, operators of private jets pay far less in taxes than airline passengers and other commercial flyers. On a per flight basis, a private jet could generate as little as two percent of the taxes and fees paid by airline passengers on an identical route. Private planes make up about 10 percent of US flights under air-traffic control, yet pay less than 1 percent into a trust fund that finances air-traffic control and other Federal Aviation Administration operations.



Sports teams like the New England Patriots are increasingly investing in private jets to take advantage of these cost-savings, Bloomberg reported.


Of course, after years of declining prices, buyers of private jets can easily get a good deal if they’re willing to buy used. Sales prices for used jets have fallen as much as 35% over the past three years, with the average price falling from $13.7 million in April 2014 to $8.9 million today.


Bloomberg’s analysis prompted some aviation experts to complain that private-jet owners aren’t paying their fair share of taxes.





"By and large, a private aircraft costs the same for the FAA to process as a large aircraft," said Michael Ball, senior associate dean at the University of Maryland’s Robert H. Smith School of business and co-director of an aviation research consortium. "If you look at it from that standpoint, they clearly aren’t paying their due.”



Private-jet owners, unsurprisingly, must have an army of powerful lobbyists in their employ, because, as Bloomberg explains, the US system where private owners are exempt from the bulk of taxes that commercial airlines pay is different from the system used by most of the rest of the world.






“Unlike most of the rest of the world, which charges fees based on aircraft weight and distance flown, the taxes private jets in the U.S. pay are different from the ones imposed on airlines.



Private aircraft operators pay 21.8 cents per gallon of jet fuel. By contrast, airlines and charter operators have three separate taxes: an excise tax of 7.5 percent on tickets or charter charges, a fee of $4.10 per passenger and 4.3 cents per gallon of jet fuel.”



This means that airline passengers are effectively subsidizing some of the world’s largest corporations and wealthiest people under the current system, said Matthew Gardner, a senior fellow at the nonprofit Institute on Taxation and Economic Policy.





"Pretty clearly, we all feel the pain every time we buy an airline ticket and see how big a share of the costs those fees are," Gardner said.



Indeed, the disparity in taxes for comparable private and commercial flights can be staggering:





“A transcontinental flight from New York to Los Angeles on a Virgin America Inc. Airbus SE A320, would be charged about $3,900 in taxes, assuming the plane was 85 percent full and passengers paid the average fare calculated by the Transportation Department’s Bureau of Transportation Statistics.



The tax bill for a flight between the same cities on a privately owned Bombardier Inc. Global 6000, one of the world’s longest range corporate jets, would be about $525. That’s about 87 percent less than the airline flight.”



And the differences can be even larger if the private plane is a smaller model that burns less fuel.





“A trip from Nashville, Tennessee, to Philadelphia by Southwest Airlines Co., which typically uses a Boeing Co. 737-700 on that route, would typically be charged more than $2,000 in taxes. An Embraer SA Phenom 100E, a smaller and more fuel efficient corporate jet, on the same leg would be assessed about $50, or roughly 2 percent of the Southwest plane.”



Putting their total tax contribution in context, private business plane owners contributed just $104 million to the FAA’s trust fund in 2016 – that amounts to just 0.7 percent of the overall aviation taxes paid that year.






“The FAA estimated that these business planes contributed $104 million to the trust fund in 2016. That amounts to just 0.7 percent of the overall aviation taxes. That compares to 92 percent of the tax payments, or more than $13 billion, that came from U.S. carriers, foreign airlines and charter carriers -- most of which were paid directly by passengers.”



And thanks to their army of lobbyists, private jet owners have virtually guaranteed that the tax disparity will persist.





“Any potential changes in the taxes on private aviation were effectively taken off the table this year by the powerful chairman of the House Transportation and Infrastructure Committee, Pennsylvania Republican Bill Shuster.



In order to mute opposition to his plan to create a nonprofit company to operate the air-traffic system, Shuster’s bill would keep the current tax levels for private planes. Shuster’s attempt to mollify private plane owners has had little effect as they continue to oppose his proposal. The bill has passed the committee and is awaiting a vote before the full House.”



As one expert pointed out, if the purpose of the FAA’s tax system was to evenly distribute costs for maintaining the US’s aviation infrastructure among its users, than the current system is an abject failure.





“If the purpose of aviation taxes is to create an equitable way to pay for the air-traffic centers, computers and radars, the existing system is a failure, said Robert Frank, a professor at Cornell University’s Johnson Graduate School of Management.



“It doesn’t sound like this fee structure comes even close to imposing fees on the costs respective users impose on the system,” Frank said."



But hey…like they say, life isn’t fair.